UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



ý☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2018~~2019



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-1169

THE TIMKEN ~~COMPANY~~COMPANY

(Exact name of registrant as specified in its charter)



~~OHIO~~Ohio		34-0577130
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4500 Mount Pleasant Street NW
North Canton	Ohio	44720-5450
(Address of principal executive offices)		(Zip Code)

~~234.262.3000~~234.262.3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý☒	Accelerated filer	o☐

Non-accelerated filer	o☐	Smaller reporting company	o☐

		Emerging growth company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o☐ No ý☒

Indicate the number of shares outstanding of each of the issuer's classes of common shares, as of the latest practicable date.



	Class		Outstanding at September 30, ~~2018~~2019
	Common Shares, without par value		~~76,860,854~~75,324,189 shares

THE TIMKEN COMPANY

INDEX TO FORM 10-Q REPORT



			PAGE
I.	PART I.
	Item 1.	Financial Statements	1
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2927
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4744
	Item 4.	Controls and Procedures	4744
II.	PART II.
	Item 1.	Legal Proceedings	4845
	Item1A.	Risk Factors	4845
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4845
	Item 6.	Exhibits	4946

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TIMKEN COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
(Dollars in millions, except per share data)
Net sales	$	881.3		$	771.4		$	2,670.7		$	2,225.8		$	914.0		$	881.3		$	2,893.7		$	2,670.7
Cost of products sold	628.0			555.3			1,885.1			1,626.4			636.5			628.0			2,007.9			1,885.1
Gross Profit	253.3			216.1			785.6			599.4			277.5			253.3			885.8			785.6
Selling, general and administrative expenses	142.0			134.0			432.4			375.5			148.0			142.0			459.4			432.4
Impairment and restructuring charges	2.6			1.3			3.1			3.8			1.6			2.6			3.5			3.1
Operating Income	108.7			80.8			350.1			220.1			127.9			108.7			422.9			350.1
Interest expense	(12.5		)	(10.1		)	(33.2		)	(26.5		)	(18.2		)	(12.5		)	(55.5		)	(33.2		)
Interest income	0.6			0.7			1.5			2.0			1.1			0.6			3.5			1.5
Non-service pension and other postretirement (expense) income													(14.4		)	(3.2		)	(14.1		)	2.5
Other income, net	0.5			3.8			9.8			7.1			5.8			3.7			10.5			7.3
Income Before Income Taxes	97.3			75.2			328.2			202.7			102.2			97.3			367.3			328.2
Provision for income taxes	25.0			21.1			83.5			28.5			35.5			25.0			110.4			83.5
Net Income	72.3			54.1			244.7			174.2			66.7			72.3			256.9			244.7
Less: Net income attributable to noncontrolling interest	0.7			0.6			1.9			—			2.5			0.7			8.3			1.9
Net Income Attributable to The Timken Company	$	71.6		$	53.5		$	242.8		$	174.2		$	64.2		$	71.6		$	248.6		$	242.8

Net Income per Common Share Attributable to The Timken Company Common Shareholders
Basic earnings per share	$	0.93		$	0.69		$	3.14		$	2.24		$	0.85		$	0.93		$	3.28		$	3.14

Diluted earnings per share	$	0.91		$	0.68		$	3.09		$	2.21		$	0.84		$	0.91		$	3.23		$	3.09

Dividends per share	$	0.28		$	0.27		$	0.83		$	0.80

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
(Dollars in millions)
Net Income	$	72.3		$	54.1		$	244.7		$	174.2		$	66.7		$	72.3		$	256.9		$	244.7
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(24.2		)	10.9			(62.5		)	42.8			(63.0		)	(24.3		)	(62.1		)	(62.5		)
Pension and postretirement liability adjustment	—			0.1			—			0.2			76.7			—			76.6			—
Change in fair value of derivative financial instruments	(0.4		)	(2.0		)	4.0			(4.2		)	1.9			(0.4		)	0.5			4.0
Other comprehensive (loss) income, net of tax	(24.6		)	9.0			(58.5		)	38.8
Other comprehensive income (loss), net of tax													15.6			(24.7		)	15.0			(58.5		)
Comprehensive Income, net of tax	47.7			63.1			186.2			213.0			82.3			47.6			271.9			186.2
Less: comprehensive (loss) income attributable to noncontrolling interest	(5.0		)	0.5			(6.8		)	1.9
Less: comprehensive income (loss) attributable to noncontrolling interest													0.7			(5.1		)	8.1			(6.8		)
Comprehensive Income Attributable to The Timken Company	$	52.7		$	62.6		$	193.0		$	211.1		$	81.6		$	52.7		$	263.8		$	193.0

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Balance Sheets


	(Unaudited)						(Unaudited)
	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	153.7		$	121.6		$	181.4		$	132.5
Restricted cash	1.3			3.8			0.5			0.6
Accounts receivable, less allowances (2018 – $21.1 million; 2017 – $20.3 million)	548.6			524.9
Accounts receivable, less allowances (2019 – $17.8 million; 2018 – $21.9 million)							548.3			546.6
Unbilled receivables	137.3			—			151.6			116.6
Inventories, net	841.0			738.9			805.3			835.7
Deferred charges and prepaid expenses	28.4			29.7			30.1			28.2
Other current assets	76.0			81.2			90.2			77.0
Total Current Assets	1,786.3			1,500.1			1,807.4			1,737.2
Property, Plant and Equipment, net	886.8			864.2			906.8			912.1
Operating Lease Assets							115.0			—
Other Assets
Goodwill	965.4			511.8			954.7			960.5
Other intangible assets	743.1			420.6			702.8			733.2
Non-current pension assets	21.7			19.7			11.8			6.2
Non-current other postretirement benefit assets							23.5			—
Deferred income taxes	52.3			61.0			27.3			59.0
Other non-current assets	43.9			25.0			16.0			37.0
Total Other Assets	1,826.4			1,038.1			1,736.1			1,795.9
Total Assets	$	4,499.5		$	3,402.4		$	4,565.3		$	4,445.2
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt	$	37.0		$	105.4		$	34.8		$	33.6
Current portion of long-term debt	11.4			2.7			61.8			9.4
Short-term operating lease liabilities							28.0			—
Accounts payable, trade	282.8			265.2			265.2			273.2
Salaries, wages and benefits	133.5			127.9			116.9			174.9
Income taxes payable	19.2			9.8			23.2			23.5
Other current liabilities	172.7			160.7			174.7			171.0
Total Current Liabilities	656.6			671.7			704.6			685.6
Non-Current Liabilities
Long-term debt	1,681.7			854.2			1,553.5			1,638.6
Accrued pension cost	171.6			167.3
Accrued postretirement benefits cost	134.0			122.6
Accrued pension benefits							167.8			161.3
Accrued postretirement benefits							36.9			108.7
Long-term operating lease liabilities							72.3			—
Deferred income taxes	152.4			44.0			131.7			138.0
Other non-current liabilities	62.8			67.7			81.0			70.3
Total Non-Current Liabilities	2,202.5			1,255.8			2,043.2			2,116.9
Shareholders’ Equity
Class I and II Serial Preferred Stock, without par value:
Authorized – 10,000,000 shares each class, none issued	—			—			—			—
Common shares, without par value:
Authorized – 200,000,000 shares
Issued (including shares in treasury) (2018 – 98,375,135 shares; 2017 – 98,375,135 shares)
Issued (including shares in treasury) (2019 – 98,375,135 shares; 2018 – 98,375,135 shares)
Stated capital	53.1			53.1			53.1			53.1
Other paid-in capital	945.1			903.8			945.5			951.9
Earnings invested in the business	1,595.4			1,408.4			1,815.0			1,630.2
Accumulated other comprehensive loss	(88.8		)	(38.3		)	(80.1		)	(95.3		)
Treasury shares at cost (2018 – 21,514,281 shares; 2017 – 20,758,013 shares)	(924.9		)	(884.3		)
Treasury shares at cost (2019 – 23,050,946 shares; 2018 – 22,421,213 shares)							(988.7		)	(960.3		)
Total Shareholders’ Equity	1,579.9			1,442.7			1,744.8			1,579.6
Noncontrolling Interest	60.5			32.2			72.7			63.1
Total Equity	1,640.4			1,474.9			1,817.5			1,642.7
Total Liabilities and Equity	$	4,499.5		$	3,402.4		$	4,565.3		$	4,445.2

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2019			2018
(Dollars in millions)
CASH PROVIDED (USED)
Operating Activities
Net income attributable to The Timken Company	$	242.8		$	174.2
Net income attributable to noncontrolling interest	1.9			—
Net income							$	256.9		$	244.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	105.9			102.5			120.4			105.9
Impairment charges	0.6			—			0.8			0.6
Loss (gain) on sale of assets	0.2			(2.6		)
(Gain) loss on sale of assets							(1.0		)	0.2
Gain on disposal of lease assets							(0.4		)	—
Loss on divestiture	0.6			—			—			0.6
Deferred income tax provision	2.2			7.5			1.7			2.2
Stock-based compensation expense	25.5			18.2			20.7			25.5
Pension and other postretirement expense	8.5			12.6			23.2			8.5
Pension contributions and other postretirement benefit contributions	(12.4		)	(16.3		)
Pension and other postretirement benefit contributions and payments							(37.1		)	(12.4		)
Operating lease expense							27.7			—
Operating lease payments							(26.8		)	—
Changes in operating assets and liabilities:
Accounts receivable	(65.7		)	(61.6		)	(6.4		)	(65.7		)
Unbilled receivables	(37.6		)	—			(35.0		)	(37.6		)
Inventories	(94.3		)	(85.4		)	37.8			(94.3		)
Accounts payable, trade	(9.9		)	55.7			(7.4		)	(9.9		)
Other accrued expenses	10.2			15.9			(28.7		)	10.2
Income taxes	(0.5		)	(59.6		)	9.0			(0.5		)
Other, net	17.0			(18.2		)	(0.6		)	17.0
Net Cash Provided by Operating Activities	195.0			142.9			354.8			195.0
Investing Activities
Capital expenditures	(62.8		)	(62.5		)	(82.9		)	(62.8		)
Acquisitions, net of cash received	(765.4		)	(347.2		)	(82.7		)	(765.4		)
Proceeds from disposal of property, plant and equipment	1.1			6.8
Proceeds from divestitures	14.0			—			—			14.0
Investments in short-term marketable securities, net	2.3			(4.2		)
Other	0.5			(0.3		)	3.4			3.9
Net Cash Used in Investing Activities	(810.3		)	(407.4		)	(162.2		)	(810.3		)
Financing Activities
Cash dividends paid to shareholders	(64.2		)	(62.4		)	(63.8		)	(64.2		)
Purchase of treasury shares	(63.0		)	(41.0		)	(56.1		)	(63.0		)
Proceeds from exercise of stock options	12.7			27.7			9.9			12.7
Shares surrendered for taxes	(5.4		)	(10.8		)
Payments related to tax withholding for stock-based compensation							(9.3		)	(5.4		)
Accounts receivable facility borrowings	145.2			51.2			25.0			145.2
Accounts receivable facility payments	(114.9		)	(25.3		)	—			(114.9		)
Proceeds from long-term debt	1,286.1			862.7			451.0			1,286.1
Payments on long-term debt	(533.1		)	(574.4		)	(481.7		)	(533.1		)
Deferred financing costs	(0.9		)	(1.1		)	(1.9		)	(0.9		)
Short-term debt activity, net	(3.9		)	12.8			(10.2		)	(3.9		)
Other	(1.3		)	(2.6		)	(0.3		)	(1.3		)
Net Cash Provided by Financing Activities	657.3			236.8
Net Cash (Used in) Provided by Financing Activities							(137.4		)	657.3
Effect of exchange rate changes on cash	(12.4		)	16.6			(6.4		)	(12.4		)
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	29.6			(11.1		)
Increase in Cash, Cash Equivalents and Restricted Cash							48.8			29.6
Cash, cash equivalents and restricted cash at beginning of year	125.4			151.6			133.1			125.4
Cash, Cash Equivalents and Restricted Cash at End of Period	$	155.0		$	140.5		$	181.9		$	155.0

See accompanying Notes to the Consolidated Financial Statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions, except per share data)

Note 1 - Basis of Presentation

The accompanying Consolidated Financial Statements (unaudited) for The Timken Company (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by the accounting principles generally accepted in the United States ("U.S. GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018.

Note 2 - Significant Accounting Policies

The Company's significant accounting policies are detailed in "Note 1 - Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2014-09, "Revenue from Contracts with Customers~~2016-02, "Leases (Topic ~~606)~~842)", which was adopted by the Company on January 1, ~~2018. Also, in March~~2019. In August 2017, the FASB issued ASU ~~2017-07, “Compensation - Retirement Benefits~~2017-12, "Derivatives and Hedging (Topic ~~715)~~815): ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost"~~Targeted Improvements to Accounting for Hedging Activities", which was adopted by the Company on January 1, ~~2018. Significant changes~~2019. Updates to the Company's accounting policies as a result of adopting ASU ~~2014-09 (the “new revenue standard”)~~2016-02 and ASU ~~2017-07~~2017-12 are discussed ~~below:~~

~~Revenue:~~

A contract exists when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Revenue is recognized when performance obligations under the terms of a contract with a customer of the Company are satisfied. A majority of the Company's revenue is from short-term, fixed-price contracts and continues to be recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later point in time when control of the products transfers to the customer. Revenue was previously recognized for services and certain sales of customer-specific product at the point in time when the shipping terms were satisfied. Under the new revenue standard, the Company now recognizes revenue over time as it satisfies the performance obligations because of the continuous transfer of control to the customer, supported as follows:

For certain service contracts, this continuous transfer of control to the customer occurs as the Company's service enhances assets that the customer owns and controls at all times and the Company is contractually entitled to payment for work performed to date plus a reasonable margin.

For United States ("U.S.") government contracts, the customer is allowed to unilaterally terminate the contract for convenience, and is required to pay the Company for costs incurred plus a reasonable margin and can take control of any work in process.

For certain non-U.S. government contracts involving customer-specific products, the customer controls the work in process based on contractual termination clauses or restrictions on the Company's use of the product and the Company possesses a right to payment for work performed to date plus a reasonable margin.

As a result of control transferring over time for these products and services, revenue is recognized based on progress toward completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company has elected to use the cost-to-cost input measure of progress for these contracts because it best depicts the transfer of goods or services to the customer based on incurring costs on the contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.

The pricing and payment terms for non-U.S. government contracts is based on the Company's standard terms and conditions or the result of specific negotiations with each customer. The Company's standard terms and conditions require payment 30 days from the invoice date, but the timing of payment for specific negotiated terms may vary. The Company also has both prime and subcontracts in support of the provision of goods and services to the U.S. government. Certain of these contracts are subject to the Federal Acquisition Regulation ("FAR") and are priced commercially based on a competitive market. Under the payment terms of those U.S. government fixed-price contracts, the customer pays the Company performance-based payments, which are interim payments of up to 80% of the contract price for costs incurred to date based on quantifiable measures of performance or on the achievement of specified events or milestones. Because the customer retains a portion of the contract price until completion of such contracts, certain of these U.S. government fixed-price contracts result in revenue recognized in excess of billings, which is presented within "Unbilled Receivables" on the Consolidated Balance Sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. As a practical expedient, the Company may exclude an assessment of whether promised goods or services are performance obligations, if they are immaterial in the context of the contract with the customer, and combine these with other performance obligations. The Company has elected to recognize incremental costs incurred to obtain contracts, which primarily represent commissions paid to third-party sales agents where the amortization period would be less than one year, as "Selling, general and administrative ("SG&A") expenses" in the Consolidated Statement of Income as incurred. The Company has also elected not to adjust the promised amount of consideration for the effects of any significant financing component where the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Finally, the Company's policy is to exclude performance obligations resulting from contracts with a duration of one year or less from its disclosures related to remaining performance obligations.

The amount of consideration to which the Company expects to be entitled in exchange for the goods and services is not generally subject to significant variations. However, the Company does offer certain customers rebates, prompt payment discounts, end-user discounts, the right to return eligible products, and/or other forms of variable consideration. The Company estimates this variable consideration using the expected value amount, which is based on historical experience. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company adjusts the estimate of revenue at the earlier of when the amount of consideration the Company expects to receive changes or when the consideration becomes fixed. The Company recognizes the cost of freight and shipping when control of the products or services has transferred to the customer as an expense in "Cost of products sold" on the Consolidated Statement of Income, because those are costs incurred to fulfill the promise recognized, not a separate performance obligation. To the extent certain freight and shipping fees are charged to customers, the Company recognizes the amounts charged to customers as revenues and the related costs as an expense in "Cost of products sold" when control of the related products or services has transferred to the customer.

Contracts are occasionally modified to account for changes in contract specifications, requirements, and pricing. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Substantially all of the Company's contract modifications are for goods or services that are distinct from the existing contract. Therefore, the effect of a contract modification on the transaction price and the Company's measure of progress for the performance obligation to which it relates is generally recognized on a prospective basis.

~~Accounts Receivable, Less Allowances:~~

"Accounts receivable, less allowances" on the Consolidated Balance Sheet include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance for doubtful accounts, which represents an estimate of the losses expected from the accounts receivable portfolio, to reduce accounts receivable to their net realizable value. The allowance is based upon historical trends in collections and write-offs, management's judgment of the probability of collecting accounts and management's evaluation of business risk. The Company extends credit to customers satisfying pre-defined credit criteria. The Company believes it has limited concentration of credit risk due to the diversity of its customer base.

Prior to the adoption of the new revenue standard, the Company recognized a portion of its revenues on the percentage-of-completion method measured on the cost-to-cost basis. As of December 31, 2017, revenue recognized in excess of billings of $67.3 million related to these revenues were included in "Accounts receivable, less allowances" on the Consolidated Balance Sheet. In accordance with the new revenue standard, $88.9 million of revenue recognized in excess of billings related to these revenues are included in "Unbilled receivables" on the Consolidated Balance Sheet at September 30, 2018.

~~Unbilled Receivables:~~

"Unbilled receivables" on the Consolidated Balance Sheet primarily include unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized, the revenue recognized exceeds the amount billed to the customer and the right to payment is primarily just subject to the passage of time. Amounts may not exceed their net realizable value.

~~Pension and Other Postretirement Benefits:~~

With the adoption of ASU 2017-07 on January 1, 2018, service cost is included in other employee compensation costs within operating income and is the only component of net periodic benefit cost that may be capitalized when applicable. The other components of net periodic benefit cost are presented separately outside of operating income. Also, actuarial gains and losses are excluded from segment results, while all other components of net periodic benefit cost will continue to be included within segment results.below.

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:

~~Revenue recognition~~

~~The new revenue standard introduces a five-step revenue recognition model in which an entity should recognize revenue~~In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 was issued to ~~depict~~increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue standard also requires disclosures sufficient to enable users to understand the nature, amount, timingbalance sheet and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments and assets recognized from the costs to obtain or fulfill a contract. For furtherdisclosing key information about ~~the Company's revenues from contracts with customers, refer to~~ ~~Note 11 - Revenue~~.

~~On January 1, 2018, the~~lease arrangements. The Company adopted the new ~~revenue~~leasing standard on January 1, 2019 using the cumulative-effect adjustment transition method. The Company also elected several practical expedients to not asses the following as part of adoption: (1) whether any expired or existing contracts contain leases; (2) the lease classification between finance and ~~all~~operating leases for any expired or existing leases; and (3) the recognition of initial direct costs for existing leases. The Company also elected to not recognize leases with a term of 12 months or less on the Consolidated Balance Sheets. The adoption of the ~~related amendments using~~lease standard had no impact to the ~~modified retrospective method and applied those provisions to all open contracts.~~Company's consolidated results of operations or the captions on the consolidated statements of cash flows. The ~~Company recognized the~~ cumulative effect of ~~initially applying~~ the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

~~The cumulative effect of~~ changes made to the balance sheet as of January 1, ~~2018~~2019 for the adoption of the new ~~revenue~~lease standard was as follows:



	Balance at December 31, 2018		Effect of Accounting Change			Balance at January 1, 2019
Operating lease assets	$	—	$	114.1		$	114.1
Other intangible assets	733.2		0.7			733.9
Other non-current assets ⁽¹⁾	37.0		(15.3		)	21.7
Total Assets	4,445.2		99.5			4,544.7

Short-term operating lease liability	—		29.8			29.8
Long-term operating lease liability	—		69.7			69.7
Total Liabilities	$	2,802.5	$	99.5		$	2,902.0

Balance at December 31, 2017 Effect of Accounting Change Balance at January 1, 2018
ASSETS
     Accounts receivable, less allowances $ 524.9
$ (67.3 ) $ 457.6
     Unbilled receivables —
100.5
100.5
     Inventories, net 738.9
(22.9 ) 716.0
     Other current assets 81.2
3.0
84.2
     Deferred income taxes 61.0
(2.6 ) 58.4
LIABILITIES
     Other current liabilities 160.7
3.0
163.7
EQUITY
     Earnings invested in the business 1,408.4
7.7
1,416.1

~~The tables below reflect changes~~⁽¹⁾Due to ~~financial statement line items as a result of adopting~~ the ~~new revenue standard. The~~ adoption of the new ~~revenue~~leasing standard, ~~did not have an impact on "Net cash used in~~the Company recognized operating ~~activities"~~lease assets and corresponding operating lease liabilities on the Consolidated ~~Statement~~Balance Sheet. In conjunction with the adoption of ~~Cash Flows for~~ the ~~nine~~ ~~months ended September 30, 2018.~~

~~Consolidated Statement~~new leasing standard, the Company reclassified $15.3 million of ~~Income for~~lease assets related to purchase accounting adjustments from the ABC Bearings Limited ("ABC Bearings") acquisition from Other assets to Operating lease assets. These assets do not have material corresponding lease liabilities.~~three~~ ~~months ended September 30, 2018:~~

Previous Accounting Method Effect of Accounting Change As Reported
Net sales $ 875.6
$ 5.7
$ 881.3
Cost of products sold 623.2
4.8
628.0
Selling, general, and administrative expenses 141.3
0.7
142.0
Income before income taxes 97.1
0.2
97.3
Provision for income taxes 25.0
—
25.0
Net income 72.1
0.2
72.3
Net income attributable to The Timken Company $ 71.4
$ 0.2
$ 71.6
Basic earnings per share $ 0.93
$ —
$ 0.93
Diluted earnings per share $ 0.91
$ —
$ 0.91

~~Consolidated Statement of Income for the~~ ~~nine~~ ~~months ended September 30, 2018:~~

Previous Accounting Method Effect of Accounting Change As Reported
Net sales $ 2,653.7
$ 17.0
$ 2,670.7
Cost of products sold 1,874.2
10.9
1,885.1
Selling, general, and administrative expenses 430.6
1.8
432.4
Income before income taxes 323.9
4.3
328.2
Provision for income taxes 82.5
1.0
83.5
Net income 241.4
3.3
244.7
Net income attributable to The Timken Company $ 239.5
$ 3.3
$ 242.8
Basic earnings per share $ 3.10
$ 0.04
$ 3.14
Diluted earnings per share $ 3.05
$ 0.04
$ 3.09

~~Consolidated Balance Sheet as of September 30, 2018:~~

Previous Accounting Method Effect of Accounting Change As Reported
ASSETS
     Accounts receivable, less allowances $ 637.5
$ (88.9 ) $ 548.6
     Unbilled receivables —
137.3
137.3
     Inventories, net 874.8
(33.8 ) 841.0
     Other current assets 72.5
3.5
76.0
     Deferred income taxes 55.9
(3.6 ) 52.3
LIABILITIES
     Other current liabilities 169.2
3.5
172.7
EQUITY
     Earnings invested in the business 1,584.4
11.0
1,595.4

~~Pension and other postretirement benefits~~

As mentioned above, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” in March 2017. The Company ~~adopted ASU 2017-07~~determines if any arrangement is a lease at the inception of a contract. For leases where the Company is the lessee, it recognizes lease assets and related lease liabilities at the lease commencement date based on ~~January 1, 2018 on a retrospective basis, which resulted in~~ the ~~reclassification~~present value of ~~certain amounts from "Cost~~lease payments over the lease term. Most of ~~products sold" and "Selling, general and administrative expenses" to "Other income (expense)" in~~ the ~~Consolidated Statement of Income.~~Company’s leases do not provide an implicit interest rate. As a result, ~~prior period amounts impacted have been revised accordingly.~~

~~The following tables reflect the changes to financial statement line items resulting from the adoption of ASU 2017-07:~~

~~For the~~ ~~three~~ ~~months ended September 30, 2017:~~

As Previously Reported Effect of Accounting Change As Adjusted
Cost of products sold $ 554.4
$ 0.9
$ 555.3
Selling, general, and administrative expenses 134.0
—
134.0
Operating income 81.7
(0.9 ) 80.8
Other income, net 2.9
0.9
3.8

~~For the~~ ~~nine~~ ~~months ended September 30, 2017:~~

As Previously Reported Effect of Accounting Change As Adjusted
Cost of products sold $ 1,626.5
$ (0.1 ) $ 1,626.4
Selling, general, and administrative expenses 377.4
(1.9 ) 375.5
Operating income 218.1
2.0
220.1
Other income (expense), net 9.1
(2.0 ) 7.1

~~For the year ended December 31, 2017:~~

As Previously Reported Effect of Accounting Change As Adjusted
Cost of products sold $ 2,193.4
$ (1.7 ) $ 2,191.7
Selling, general, and administrative expenses 521.4
(13.1 ) 508.3
Operating income 284.7
14.8
299.5
Other income (expense), net 9.4
(14.8 ) (5.4 )

~~For the year ended December 31, 2016:~~

As Previously Reported Effect of Accounting Change As Adjusted
Cost of products sold $ 2,001.3
$ (37.8 ) $ 1,963.5
Selling, general, and administrative expenses 470.7
(30.5 ) 440.2
Pension settlement charges 1.6
(1.6 ) —
Operating income 174.5
69.9
244.4
Other expense, net (0.9 ) (69.9 ) (70.8 )

~~For the year ended December 31, 2015:~~

As Previously Reported Effect of Accounting Change As Adjusted
Cost of products sold $ 2,052.8
$ 15.7
$ 2,068.5
Selling, general, and administrative expenses 457.7
26.9
484.6
Pension settlement charges 119.9
(119.9 ) —
Operating income 255.9
77.3
333.2
Other expense, net (7.5 ) (77.3 ) (84.8 )

~~Other new accounting guidance adopted~~

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires that a statement of cash flows explain the change in the total of cash, cash equivalents, and restricted cash during the period. On January 1, 2018, the Company ~~adopted~~uses its incremental borrowing rate based on the ~~provisions~~information available at the commencement date in determining the present value of ~~ASU 2016-18~~lease payments. The lease assets also consist of amounts for favorable or unfavorable lease terms related to acquisitions. Lease expense for operating leases is recognized on a ~~retrospective~~straight-line basis ~~which resulted in~~over the ~~addition~~lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of ~~restricted cash balances~~recognition. A lease asset and ~~movements in~~lease liability are not recorded for leases with an initial term of less than 12 months or less and the ~~Company’s Statement of Cash Flows for all periods presented. As a result, for~~lease expenses related to these leases is recognized as incurred over the ~~nine~~ ~~months ended September 30, 2018 and 2017, restricted cash balances of $1.3 million and $3.3 million, respectively, were included in the Company's ending balance on the Statement of Cash Flows.~~lease term.

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows for certain tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”) to be reclassified from accumulated other comprehensive income (or loss) to retained earnings. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. Also, ASU 2018-02 may be applied in the period of adoption or retrospectively to each period in which the effect of the change in the statutory income tax rate in the U.S. Tax Reform is recognized. On January 1, 2018, the Company early adopted the provisions of ASU 2018-02, with the related impact applied in the period of adoption. In doing so, the Company elected to reclassify $0.7 million of related income tax effects from accumulated other comprehensive loss to retained earnings in the first quarter of 2018.

~~New Accounting Guidance Issued and Not Yet Adopted:~~

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which impacts both designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 amends and clarifies the requirements to qualify for hedge accounting, removes the requirement to recognize changes in fair value from certain hedges in current earnings, and specifies the presentation of changes in fair value in the income statement for all hedging instruments. ASU 2017-12 is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ~~Early adoption is permitted, including in any interim period for which financial statements have not yet been issued, but~~The Company adopted ASU 2017-12 effective January 1, 2019, and the ~~effect~~impact of adoption ~~is required~~was not material to ~~be reflected as of the beginning of the fiscal year of adoption. The Company currently does not expect the adoption of ASU 2017-12 to materially impact~~ the Company's results of operations and financial condition.

~~In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill~~New Accounting Guidance Issued and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” Prior to the issuance of this new accounting guidance, entities first assessed qualitative factors to determine whether a two-step goodwill impairment test was necessary. When entities bypassed or failed the qualitative analysis, they were required to apply a two-step goodwill impairment test. Step 1 compared a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment. If the carrying amount of a reporting unit exceeded its fair value, Step 2 was required to be completed. Step 2 involved determining the implied fair value of goodwill and comparing it to the carrying amount of that goodwill to measure the impairment loss, if any. ASU 2017-04 eliminates Step 2 of the current goodwill impairment test, and instead will require that a goodwill impairment loss be measured at the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for public companies for years beginning after December 15, 2019, with early adoption permitted, and must be applied prospectively. The Company will adopt ASU 2017-04 on October 1, 2018 in conjunction with the Company's annual goodwill impairment test. The Company currently does not expect the adoption of ASU 2017-04 to materially impact the Company's results of operations and financial condition in the current year.Not Yet Adopted:

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is ~~currently~~continuing to advance its analysis and evaluating the effect that the adoption of ASU 2016-13 will have on the Company's results of operations and financial condition.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 was issued to increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. ASU 2016-02 is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company plans to adopt the new standard on January 1, 2019 using the cumulative-effect adjustment transition method and has created a cross-functional implementation team to identify all leases involved, determine which, if any, practical expedients to utilize, and perform all data gathering required. Additionally, the Company is continuing to advance in implementing an enterprise-wide lease management system to assist in the related accounting and is evaluating additional changes to the related processes and internal controls to ensure requirements are met for reporting and disclosure purposes. While the assessment of the impact this new standard will have on the consolidated financial statements is ongoing, the Company expects to recognize a material right-to-use asset and lease liability for its operating lease commitments on the Consolidated Balance Sheet, but does not expect the new standard to have a material impact on its consolidated results of operations or cash flows.

Note 3 - Acquisitions ~~and Divestitures~~

On April 1, 2019, the Company completed the acquisition of The Diamond Chain Company ("Diamond Chain"), a leading supplier of high-performance roller chains for industrial markets. Diamond Chain serves a diverse range of market sectors, including industrial distribution, material handling, food and beverage, agriculture, construction and other process industries. Diamond Chain, located in Indianapolis, Indiana, operates primarily in the United States and China and had sales of approximately $60 million for the twelve months ended March 31, 2019. The purchase price for this acquisition was $84.6 million, excluding $1.9 million for cash acquired. During the nine months ended September 30, 2019, the Company incurred acquisition-related costs of $1.4 million to complete this acquisition. Based on markets and customers served, the results for Diamond Chain are reported in the Process Industries segment. The following table presents the preliminary purchase price allocation at fair value, net of cash acquired, for the Diamond Chain acquisition:



	Purchase Price Allocation
Assets:
Accounts receivable, net	$	6.7
Inventories, net	23.6
Other current assets	2.4
Property, plant and equipment, net	17.2
Operating lease assets	2.8
Goodwill	18.6
Other intangible assets	28.1
Other non-current assets	0.5
Total assets acquired	$	99.9
Liabilities:
Accounts payable, trade	$	5.7
Other current liabilities	4.8
Long-term operating lease liabilities	2.1
Other non-current liabilities	0.9
Total liabilities assumed	$	13.5
Noncontrolling interest acquired	1.8
Net assets and noncontrolling interest acquired	$	84.6

The following table summarizes the preliminary purchase price allocation for intangible assets acquired in 2019:



	Purchase Price Allocation
			Weighted - Average Life
Trade names (indefinite life)	$	12.3	Indefinite
Technology and know-how	5.2		14 years
Customer relationships	10.6		17 years
Total intangible assets	$	28.1

The above preliminary purchase price allocation for Diamond Chain, including the residual amount allocated to goodwill, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations is obtained. This purchase price allocation is preliminary as a result of the continued evaluation of working capital accounts and contingent liabilities, as well as the finalization of the Company's review pertaining to a limited set of valuation calculations and inputs. The primary areas of the Diamond Chain preliminary purchase price allocation that have not been finalized relate to the fair value of net property, plant, and equipment and other intangible assets, and the related impacts on deferred income taxes and goodwill. During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.

Note 3 - Acquisitions (continued)

During 2018, the Company completed three ~~acquisitions in 2018.~~acquisitions. On September 18, 2018, the Company completed the acquisition of Rollon S.p.A. ("Rollon"), a leader in engineered linear motion products, specializing in the design and manufacture of linear guides, telescopic rails and linear actuators used in a wide range of industries such as passenger rail, aerospace, packaging and logistics, medical and automation. On September 1, 2018, the Company completed the acquisition of Apiary Investments Holdings Limited ("Cone Drive"), a leader in precision drives used in diverse markets including solar, automation, aerial platforms, and food and beverage. On August 30, 2018, the Company's majority-owned subsidiary, Timken India Limited ("Timken India"), completed the acquisition of ABC ~~Bearings Limited ("ABC Bearings").~~Bearings. Timken India issued its shares as consideration for the acquisition of ABC Bearings. R~~efer to~~ ~~Note 8 - Equity~~ ~~for more information on the acquisition of ABC Bearings.~~ ABC Bearings is a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings in India. ~~Expected aggregate annual sales for these companies is approximately~~ ~~$270 million. The total purchase price for these acquisitions, net of cash acquired of $30.1 million, was $831.4 million. The Company incurred acquisition-related costs~~ ~~of $7.3 million~~ ~~to complete these acquisitions. The~~ ~~2018 acquisitions are subject to post-closing purchase price allocation adjustments. Based on markets and customers served, substantially all of~~Hereafter, the ~~results for Rollon and~~ABC Bearings, Cone Drive, ~~are reported in~~and Rollon acquisitions will be referred to collectively as the ~~Process Industries segment and substantially all of the results for ABC Bearings are reported in the Mobile Industries segment.~~"2018 Acquisitions".

~~The following table presents~~In January 2019, the ~~preliminary~~Company paid a working capital adjustment of $2.9 million in connection with the Cone Drive acquisition, which was accrued and reflected in the purchase price ~~allocation at fair value~~in 2018. In May 2019, the Company received a $4.8 million payment from escrow related to an indemnification settlement for the ~~2018 acquisitions at the date of acquisition:~~

Preliminary Purchase
Price Allocation
Assets:
Accounts receivable, net $ 43.3
Inventories, net 58.3
Other current assets 7.2
Property, plant and equipment, net 68.3
Goodwill 468.2
Other intangible assets 366.0
Other non-current assets 18.8
Total assets acquired $ 1,030.1
Liabilities:
Accounts payable, trade $ 34.5
Salaries, wages and benefits 9.2
Income taxes payable 1.6
Other current liabilities 9.2
Short-term debt 1.8
Long-term debt 1.7
Accrued pension cost 7.0
Accrued postretirement benefits cost 11.8
Deferred income taxes 113.0
Other non-current liabilities 8.9
Total liabilities assumed $ 198.7
Net assets acquired $ 831.4

~~The following table summarizes the preliminary~~Cone Drive acquisition, which is reflected as a purchase price ~~allocation for identifiable intangible assets acquired in 2018:~~

Preliminary Purchase
Price Allocation
Weighted -
Average Life
Trade names (indefinite life) $ 47.4
Indefinite
Trade names (finite life) 1.8
15 years
Technology and know-how 127.2
17 years
Customer relationships 189.6
19 years
Total intangible assets $ 366.0

~~The Company completed three acquisitions in 2017. On~~ ~~July 3, 2017, the Company completed the acquisition of Groeneveld Group ("Groeneveld"), a leading provider of automatic lubrication solutions used in on- and off-highway applications. On~~ ~~May 5, 2017, the Company completed the acquisition of the assets of PT Tech, Inc. ("PT Tech"), a manufacturer of engineered clutches, brakes, hydraulic power take-off units and~~adjustment. This adjustment, as well as other ~~torque management devices used in the mining, aggregate, wood recycling and metals industries. On~~ ~~April 3, 2017~~, the Company completed the acquisition of Torsion Control Products, Inc. ("Torsion Control Products"), a manufacturer of engineered torsional couplings used in the construction, agriculture and mining industries.

~~Certain~~ measurement period adjustments ~~were~~ recorded in ~~2018, resulting~~2019, resulted in a ~~$3.2~~$1.8 million ~~reduction~~increase to ~~Goodwill.~~goodwill. The following table presents the purchase price allocation at fair value, net of cash acquired, for the ~~2017 acquisitions:~~2018 Acquisitions:



	Initial Purchase Price Allocation		Adjustments			Purchase Price Allocation
Assets:
Accounts receivable, net	$	42.5				$	42.5
Inventories, net	61.6		(0.1		)	61.5
Other current assets	8.5		1.0			9.5
Property, plant and equipment, net	71.7		(6.3		)	65.4
Goodwill	468.2		1.8			470.0
Other intangible assets	372.6		2.8			375.4
Other non-current assets	20.2		(4.1		)	16.1
Total assets acquired	$	1,045.3	$	(4.9	)	$	1,040.4
Liabilities:
Accounts payable, trade	$	35.2				$	35.2
Salaries, wages and benefits	9.1					9.1
Income taxes payable	2.5		0.4			2.9
Other current liabilities	8.2		0.2			8.4
Short-term debt	2.5		(0.6		)	1.9
Long-term debt	3.0		(2.9		)	0.1
Accrued pension benefits	5.7					5.7
Accrued postretirement benefits	11.7					11.7
Deferred income taxes	116.2		(0.6		)	115.6
Other non-current liabilities	16.9		3.4			20.3
Total liabilities assumed	$	211.0	$	(0.1	)	$	210.9
Net assets acquired	$	834.3	$	(4.8	)	$	829.5

Preliminary Purchase
Price Allocation
Adjustment
Purchase
Price Allocation
Assets:
Accounts receivable, net $ 27.6
$ 27.6
Inventories, net 29.4
29.4
Other current assets 3.3
$ 2.7
6.0
Property, plant and equipment, net 31.5
31.5
Goodwill 149.7
(3.2 ) 146.5
Other intangible assets 173.6
173.6
Other non-current assets 1.8
1.8
Total assets acquired $ 416.9
$ (0.5 ) $ 416.4
Liabilities:
Accounts payable, trade $ 9.5
$ 9.5
Salaries, wages and benefits 5.8
5.8
Other current liabilities 8.6
$ (0.1 ) 8.5
Short-term debt 0.1
0.1
Long-term debt 2.9
2.9
Deferred income taxes 42.2
(0.7 ) 41.5
Other non-current liabilities 1.0
0.3
1.3
Total liabilities assumed $ 70.1
$ (0.5 ) $ 69.6
Net assets acquired $ 346.8
$ —
$ 346.8

~~Divestiture:~~

~~On September 19, 2018,~~In determining the fair value of the amounts above, the Company ~~completed the sale of Groeneveld Information Technology Holding B.V. (the "ICT Business"), located in Gorinchem, Netherlands. The Company acquired the business in July 2017 as part~~utilized various forms of the ~~Groeneveld acquisition.~~income, cost and market approaches depending on the asset or liability being valued. The ~~ICT Business is separate from~~estimation of fair value required significant judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors. Inputs were generally determined by taking into account independent appraisals and historical data, supplemented by current and anticipated market conditions.

Note 3 - Acquisitions (continued)

On September 16, 2019, the ~~Groeneveld lubrications solutions business and~~Company announced it had reached an agreement to acquire BEKA Lubrication ("BEKA"), a leading global supplier of automatic lubrication systems, for approximately $165 million. With expected 2019 annual sales of approximately ~~$15~~$135 million, ~~for~~BEKA serves a diverse range of industrial sectors, including wind, food and beverage, rail, on- and off-highway and other process industries. Headquartered in Pegnitz, Germany, BEKA has manufacturing and research and development based in Germany, and assembly facilities and sales offices around the ~~twelve months ended September 30, 2018.~~world. This transaction is subject to customary closing conditions and is expected to close during the fourth quarter of this year.

Note 4 - Inventories

The components of inventories at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
Manufacturing supplies	$	32.1		$	29.0		$	31.9		$	32.4
Raw materials	109.2			90.4			102.4			102.4
Work in process	290.6			245.2			289.0			287.7
Finished products	454.2			404.3			426.5			452.7
Subtotal	886.1			768.9			849.8			875.2
Allowance for obsolete and surplus inventory	(45.1		)	(30.0		)	(44.5		)	(39.5		)
Total Inventories, net	$	841.0		$	738.9		$	805.3		$	835.7

Inventories are valued at net realizable value, with approximately 56% valued byon the first-in, first-out ("FIFO") method and the remaining 44% valued byon the last-in, first-out ("LIFO") method. The majority of the Company's domestic inventories are valued byon the LIFO method and all of the Company's international inventories are valued byon the FIFO method.

The LIFO ~~reserves~~reserve at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 ~~were $172.4~~was $173.3 million and ~~$167.6~~$173.9 million, respectively. An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation.

Note 5 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, ~~2018~~2019 were as follows:


	Mobile Industries			Process Industries			Total			Mobile Industries			Process Industries			Total
Beginning balance	$	254.3		$	257.5		$	511.8		$	349.7		$	610.8		$	960.5
Acquisitions	16.2			448.8			465.0			0.7			19.7			20.4
Divestiture	(5.1		)	—			(5.1		)
Foreign currency translation adjustments and other changes	(6.2		)	(0.1		)	(6.3		)	(10.9		)	(15.3		)	(26.2		)
Ending balance	$	259.2		$	706.2		$	965.4		$	339.5		$	615.2		$	954.7

The ~~$16.2~~$20.4 million addition of goodwill from acquisitions includes $18.6 million of goodwill recognized in the Process Industries segment for the ~~Mobile Industries segment resulted primarily from the ABC Bearings~~Diamond Chain acquisition, ~~goodwill of $19.4 million, partially offset by~~as well as certain measurement period adjustments ~~of $3.2 million~~ recorded in 2018 for the 2017 acquisitions. In addition, goodwill for the Mobile Industries segment was reduced by $5.1 million as a result of the divestiture of the ICT Business. The Cone Drive and Rollon acquisitions added $448.8 million of goodwill2019 related to the ~~Process Industries segment. The Company does not expect the goodwill from the~~ 2018 ~~acquisitions to be tax deductible, but it is still evaluating the tax deductibility of goodwill from the ABC Bearings acquisition. Refer to~~ ~~Note 3 - Acquisitions and Divestitures~~ ~~for further information.~~Acquisitions.

The following table displays intangible assets as of September 30, ~~2018~~2019 and December 31, ~~2017:~~2018:


	Balance at September 30, 2018						Balance at December 31, 2017						Balance at September 30, 2019						Balance at December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	503.3	$	119.1	$	384.2	$	324.6	$	103.0	$	221.6	$	481.7	$	120.6	$	361.1	$	481.5	$	99.8	$	381.7
Technology and know-how	254.0		39.3		214.7		128.7		33.8		94.9		244.9		50.7		194.2		245.0		40.4		204.6
Trade names	9.5		4.7		4.8		8.6		4.3		4.3		11.9		5.6		6.3		11.3		4.8		6.5
Capitalized software	262.8		233.9		28.9		261.5		226.5		35.0		268.6		243.6		25.0		266.4		236.5		29.9
Other	9.6		5.9		3.7		10.3		6.2		4.1		41.1		37.2		3.9		40.8		35.2		5.6
	$	1,039.2	$	402.9	$	636.3	$	733.7	$	373.8	$	359.9	$	1,048.2	$	457.7	$	590.5	$	1,045.0	$	416.7	$	628.3
Intangible assets not subject to amortization:
Trade names	$	98.1			$	98.1	$	52.0			$	52.0	$	103.6			$	103.6	$	96.2			$	96.2
FAA air agency certificates	8.7				8.7		8.7				8.7		8.7				8.7		8.7				8.7
	$	106.8			$	106.8	$	60.7			$	60.7	$	112.3			$	112.3	$	104.9			$	104.9
Total intangible assets	$	1,146.0	$	402.9	$	743.1	$	794.4	$	373.8	$	420.6	$	1,160.5	$	457.7	$	702.8	$	1,149.9	$	416.7	$	733.2

Amortization expense for intangible assets was ~~$32.4~~$43.3 million and ~~$29.2~~$32.4 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expense for intangible assets is projected to be ~~$44.5 million in 2018; $51.9~~$55.8 million in 2019; ~~$47.7~~$52.2 million in 2020; ~~$44.2~~$48.3 million in 2021; ~~and $40.1~~$43.7 million in ~~2022.~~2022; and $40.8 million in 2023.

Note 6 - Leasing

The Company enters into operating and finance leases for manufacturing facilities, warehouses, sales offices, information technology equipment, plant equipment, vehicles and certain other equipment.

Lease expense for the three and nine months ended September 30, 2019 was as follows:



	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Operating lease expense	$	9.0	$	27.7
Amortization of right-of-use assets on finance leases	0.3		0.9
Total lease expense	$	9.3	$	28.6

The following tables present the impact of leasing on the Consolidated Balance Sheet.



Operating Leases	September 30, 2019
Lease assets:
Operating lease assets	$	115.0
Lease liabilities:
Short-term operating lease liabilities	$	28.0
Long-term operating lease liabilities	72.3
Total operating lease liabilities	$	100.3



Finance Leases	September 30, 2019
Lease assets:
Property, plant and equipment, net	$	3.6
Lease liabilities:
Current portion of long-term debt	$	0.3
Long-term debt	2.5
Total finance lease liabilities	$	2.8

Future minimum lease payments under non-cancellable leases at September 30, 2019 were as follows:



	Operating Leases			Finance Leases
Year Ending December 31,
2019	$	8.5		$	0.3
2020	29.3			0.9
2021	20.5			0.9
2022	15.0			0.7
2023	11.2			0.2
Thereafter	26.6			—
Total future minimum lease payments	111.1			3.0
Less: imputed interest	(10.8		)	(0.2		)
Total	$	100.3		$	2.8

The following tables present other information related to leases:



	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.1	$	26.8
Financing cash flows from finance leases	0.2		1.3
Lease assets added in the period:
Operating leases	$	14.6	$	54.0
Finance leases	0.3		1.1



	September 30, 2019
Weighted-average remaining lease term:
Operating leases	5.4 years
Finance leases	3.4 years
Weighted-average discount rate:
Operating leases	3.90	%
Finance leases	2.70	%

Note 67 - Financing Arrangements

Short-term debt at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 was as follows:

September 30,
2018 December 31,
2017
Variable-rate Accounts Receivable Facility with an interest rate of 2.15% at December 31, 2017 $ —
$ 62.9
Borrowings under variable-rate lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.33% to 9.45% at September 30, 2018 and 0.32% to 2.22% at December 31, 2017 37.0
42.5
Short-term debt $ 37.0
$ 105.4



	September 30, 2019		December 31, 2018
Variable-rate Accounts Receivable Facility with an interest rate of 3.09% at September 30, 2019	$	12.8	$	—
Borrowings under variable-rate lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.23% to 2.28% at September 30, 2019 and 0.29% to 1.00% at December 31, 2018	22.0		33.6
Short-term debt	$	34.8	$	33.6

The lines of credit for certain of the Company’s foreign subsidiaries provide for short-term borrowings up to $261.9 million in the aggregate. Most of these lines of credit are uncommitted. At September 30, 2019, the Company’s foreign subsidiaries had borrowings outstanding of $22.0 million and bank guarantees of $0.3 million, which reduced the aggregate availability under these facilities to $239.6 million.

Long-term debt at September 30, 2019 and December 31, 2018 was as follows:



	September 30, 2019		December 31, 2018
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 3.26% and Euro of 1.00% at September 30, 2019 and 3.40% and 1.10%, respectively, at December 31, 2018	$	69.3	$	43.9
Variable-rate Euro Term Loan⁽¹⁾, maturing on September 18, 2020, with an interest rate of 1.13% at September 30, 2019 and December 31, 2018	52.8		107.1
Variable-rate Accounts Receivable Facility, with an interest rate of 3.09% at September 30, 2019 and 3.22% at December 31, 2018	87.2		75.0
Variable-rate Term Loan⁽¹⁾, maturing on September 11, 2023, with an interest rate of 3.17% at September 30, 2019 and 3.77% at December 31, 2018	340.7		347.1
Fixed-rate Senior Unsecured Notes⁽¹⁾, maturing on September 1, 2024, with an interest rate of 3.875%	348.3		347.7
Fixed-rate Euro Senior Unsecured Notes⁽¹⁾, maturing on September 7, 2027, with an interest rate of 2.02%	163.0		171.4
Fixed-rate Senior Unsecured Notes⁽¹⁾, maturing on December 15, 2028, with an interest rate of 4.50%	396.1		395.8
Fixed-rate Medium-Term Notes, Series A⁽¹⁾, maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76%	154.6		154.6
Other	3.3		5.4
	1,615.3		1,648.0
Less: Current maturities	61.8		9.4
Long-term debt	$	1,553.5	$	1,638.6

~~On September 28, 2018, the~~⁽¹⁾Net of discounts and fees

The Company ~~extended the maturity date of its~~has a $100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility") to, which matures on November 30, 2021. Under the terms of the Accounts Receivable Facility, the Company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a ~~wholly owned~~wholly-owned consolidated subsidiary that, in turn, uses the trade receivables to secure borrowings that are funded through a vehicle that issues commercial paper in the short-term market. Borrowings under the Accounts Receivable Facility may be limited by certain borrowing base limitations; however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at September 30, ~~2018.~~2019. As of September 30, ~~2018,~~2019, there were outstanding borrowings of ~~$93.2~~$100.0 million under the Accounts Receivable Facility, which reduced the availability under this facility to ~~$6.8 million.~~0. $12.8 million of the outstanding borrowings under the Accounts Receivable Facility was classified as short-term and reflects the Company's expectations over the next 12 months relative to the minimum borrowing base. The cost of this facility, which is the prevailing commercial paper rate plus facility fees, is considered a financing cost and is included in "Interest expense" in the Consolidated Statements of Income.

The lines of credit for certain of the Company’s foreign subsidiaries provide for short-term borrowings up to $284.5 million in the aggregate. Most of these lines of credit are uncommitted. At September 30, 2018, the Company’s foreign subsidiaries had borrowings outstanding of $37.0 million and bank guarantees of $0.5 million, which reduced the aggregate availability under these facilities to $247.0 million.

~~Long-term debt at September 30, 2018 and~~On ~~December 31, 2017~~June 25, 2019 ~~was as follows:~~

September 30,
2018 December 31,
2017
Fixed-rate Medium-Term Notes, Series A⁽¹⁾, maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76%
$ 154.6
$ 154.5
Fixed-rate Senior Unsecured Notes⁽¹⁾, maturing on September 1, 2024, with an interest rate of 3.875%
347.5
346.9
Variable-rate Senior Credit Facility with a weighted-average interest rate of 2.43% at September 30, 2018 and 1.83% at December 31, 2017 65.2
52.0
Variable-rate Accounts Receivable Facility with an interest rate of 3.05% at September 30, 2018 93.2
—
Fixed-rate Euro Senior Unsecured Notes⁽¹⁾, maturing on September 7, 2027, with an interest rate of 2.02%
173.4
179.3
Variable-rate Euro Term Loan⁽¹⁾ with an interest rate of 1.13% at September 30, 2018 and December 31, 2017
108.3
119.7
Fixed-rate Senior Unsecured Notes⁽¹⁾, maturing on December 15, 2028, with an interest rate of 4.50%
396.0
—
Variable-rate Term Loan⁽¹⁾ with an interest rate of 3.38% at September 30, 2018
349.2
—
Other 5.7
4.5
1,693.1
856.9
Less: Current maturities 11.4
2.7
Long-term debt $ 1,681.7
$ 854.2

⁽¹⁾~~Net of discounts and fees~~

~~The~~, the Company ~~has~~entered into a ~~$500 million~~Fourth Amended and Restated Credit Agreement ("Senior Credit Facility"),. The Senior Credit Facility amends and restates the Company's previous credit agreement, dated as of June 19, 2015. The Senior Credit Facility is a $650.0 million unsecured revolving credit facility, which matures on June ~~19, 2020~~25, 2024. At September 30, ~~2018,~~2019, the Company had ~~$65.2~~$69.3 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to ~~$434.8~~$580.7 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. ~~At September 30, 2018, the Company was in full compliance with both of these covenants.~~

On September 6, 2018, the Company issued $400 million aggregate principal amount of fixed-rate 4.50% senior unsecured notes that mature on December 15, 2028 (the "2028 Notes"). On September 11, 2018, the Company entered into a $350 million variable-rate term loan that matures on September 11, 2023 (the "2023 Term Loan"). Proceeds from the 2028 Notes and the 2023 Term Loan were used to fund the acquisitions of Cone Drive and Rollon, which closed on September 1, 2018 and September 18, 2018, respectively. On July 12, 2019, the Company amended the 2023 Term Loan agreement to, among other things, align covenants and other terms with the Senior Credit Facility.

On September 7, 2017, the Company issued €150 million aggregate principal amount of fixed-rate 2.02% senior unsecured notes that mature on September 7, 2027 (the "2027 Notes"). On September 18, 2017, the Company entered into a €100 million variable-rate term loan that matures on September 18, 2020 (the "2020 Term Loan"). ~~On June 14, 2018,~~During the third quarter, the Company repaid ~~€6.5~~€23.5 million under the 2020 Term Loan ~~reducing~~bringing the total paid to-date to €51.5 million, which reduced the principal balance to ~~€93.5~~€48.5 million as of September 30, ~~2018. Proceeds from the 2027 Notes and the~~2019. The 2020 Term Loan ~~were used to repay amounts drawn from the Senior Credit Facility to fund the acquisition~~was classified as current portion of ~~Groeneveld, which closed on~~ ~~July 3, 2017~~.long-term debt at September 30, 2019.

All of these debt instruments, except the 2028 Notes, have two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. These covenants are similar to those in the Senior Credit Facility. At September 30, ~~2018,~~2019, the Company was in full compliance with ~~both of these covenants.~~all applicable covenants on its outstanding debt.

Note 78 - Contingencies

The Company and certain of its subsidiaries have been identified as potentially responsible parties for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), known as the Superfund, or similar state laws with respect to certain sites. Claims for investigation and remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation.

On December 28, 2004, the United States Environmental Protection Agency (“USEPA”) sent Lovejoy, Inc. ("Lovejoy") a Special Notice Letter that identified Lovejoy as a potentially responsible party, together with at least 14 other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”). The Company acquired Lovejoy in 2016. Lovejoy’s Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and the Illinois Environmental Protection Agency (“IEPA”) allege there have been one or more releases or threatened releases of hazardous substances, allegedly including, but not limited to, a release or threatened release on or from Lovejoy's property, at the Site. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of response costs. Lovejoy’s allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against Lovejoy related to the Site have been settled or dismissed.

The Company had total environmental accruals of ~~$5.6~~$5.3 million and ~~$5.0~~$5.5 million for various known environmental matters that are probable and reasonably estimable ~~as of~~at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, which includes the Lovejoy matter discussed above. These accruals were recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company’s liability in proportion to other responsible parties.

In October 2014, the Brazilian government antitrust agency, Administrative Council for Economic Defense, or CADE, announced that it had opened an investigation of alleged antitrust violations in the bearing industry. The Company’s Brazilian subsidiary, Timken do Brasil Comercial Importadora Ltda. ("Timken do Brasil"), was included in the investigation. In May 2019, the investigation division of CADE issued a report on the alleged antitrust violations and recommended that Timken do Brasil, among others, be found to have violated certain provisions of the Brazil Competition Law. The case has now moved to the tribunal level of CADE. The Company is continuing to advance its interests in this case. Based on management's evaluation of the findings contained in the CADE investigation report, the Company recorded expense in the second quarter of 2019to establish a liability that represents management’s best estimate of the probable loss. While no assurance can be given as to the ultimate outcome of this case, the Company does not believe that the final resolution will have a material effect on the Company's consolidated financial position or liquidity, however, the effect of any such future outcome may be material to the results of operations of any particular period in which costs in excess of amounts provided, if any, are recognized.

The Company is a defendant in a 2017 lawsuit filed in the U.S. by a former employee asserting workplace-related negligence by the Company's medical personnel. The Company’s defense is ongoing and, while the incurrence of a liability is not considered probable at this point, management believes the low end of the range of the reasonably possible outcomes would be immaterial to the Company.

In addition, the Company is subject to various other lawsuits, claims and proceedings, which arise in the ordinary course of its business. The Company accrues costs associated with legal and non-income tax matters when they become probable and reasonably estimable. Accruals are established based on the estimated undiscounted cash flows to settle the obligations and are not reduced by any potential recoveries from insurance or other indemnification claims. Management believes that any ultimate liability with respect to these actions, in excess of amounts provided, will not materially affect the Company’s Consolidated Financial Statements.

In October 2014, the Brazilian government antitrust agency announced that it had opened an investigation of alleged antitrust violations in the bearing industry. The Company’s Brazilian subsidiary, Timken do Brasil Comercial Importadora Ltda, was included in the investigation. While the Company is unable to predict the ultimate length, scope or results of the investigation, management believes that the outcome will not have a material effect on the Company’s consolidated financial position. However, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Based on current facts and circumstances, the low end of the range for potential penalties, if any, would be immaterial to the Company.

Product Warranties:

In addition to the contingencies above, the Company provides limited warranties on certain of its products. The ~~following table is a rollforward of the warranty liability for the~~ ~~nine~~ ~~months ended September 30, 2018 and the twelve months ended December 31, 2017:~~

September 30,
2018 December 31,
2017
Beginning balance, January 1 $ 5.8
$ 6.9
Additions 3.3
2.7
Payments (1.6 ) (3.8 )
Ending balance $ 7.5
$ 5.8

~~The~~ product warranty liability ~~at September 30, 2018 and December 31, 2017 was~~ included in "Other current liabilities" on the Consolidated Balance ~~Sheets.~~

Sheets was $5.6 million and $7.1 million at September 30, 2019 and December 31, 2018, respectively. The Company ~~currently is evaluating~~continues to evaluate claims raised by certain customers with respect to the performance of bearings sold into the wind energy sector. ~~Accruals related to this matter are included in the table above.~~ Management believes that the outcome of these claims will not have a material effect on the Company’s consolidated financial position; however, the effect of any such outcome may be material to the results of operations of any particular period in which costs in excess of amounts provided, if any, are recognized.

Note 89 - Equity

The following tables present the changes in the components of equity for the three and nine months ended September 30, ~~2018~~2019 ~~were as follows:~~and 2018, respectively:

The Timken Company Shareholders
Total
Stated
Capital
Other
Paid-In
Capital
Earnings
Invested
in the
Business
Accumulated
Other
Comprehensive
(Loss)
Treasury
Stock
Non-
controlling
Interest
Balance at December 31, 2017 $ 1,474.9
$ 53.1
$ 903.8
$ 1,408.4
$ (38.3 ) $ (884.3 ) $ 32.2
Cumulative effect of the new revenue standard
(net of income tax benefit of $2.6 million) 7.7
7.7

Cumulative effect of ASU 2018-02 —
0.7
(0.7 )
Net income 244.7
242.8
1.9
Foreign currency translation adjustment (62.5 ) (53.8 ) (8.7 )
Change in fair value of derivative financial
instruments, net of reclassifications 4.0
4.0

Shares issued for the acquisition of ABC
Bearings 66.0
30.9
35.1
Dividends – $0.83 per share (64.2 ) (64.2 )
Stock-based compensation 25.5
25.5

Stock purchased at fair market value (63.0 ) (63.0 )
Stock option exercise activity 12.7
(3.7 ) 16.4

Restricted share activity —
(11.4 ) 11.4

Shares surrendered for taxes (5.4 ) (5.4 )
Balance at September 30, 2018 $ 1,640.4
$ 53.1
$ 945.1
$ 1,595.4
$ (88.8 ) $ (924.9 ) $ 60.5



				The Timken Company Shareholders
	Total			Stated Capital		Other Paid-In Capital			Earnings Invested in the Business			Accumulated Other Comprehensive (Loss)			Treasury Stock			Non controlling Interest
Balance at June 30, 2019	$	1,783.6		$	53.1	$	941.3		$	1,772.0		$	(97.5	)	$	(957.6	)	$	72.3
Net income	66.7								64.2									2.5
Foreign currency translation adjustment	(63.0		)									(61.2		)				(1.8		)
Pension and other postretirement liability adjustments (net of income tax expense of $25.4 million)	76.7											76.7
Change in fair value of derivative financial instruments, net of reclassifications	1.9											1.9
Dividends paid to noncontrolling interest	(0.3		)															(0.3		)
Dividends – $0.28 per share	(21.2		)						(21.2		)
Stock-based compensation expense	5.8					5.8
Stock purchased at fair market value	(32.5		)												(32.5		)
Stock option exercise activity	1.0					(1.0		)							2.0
Restricted share activity	—					(0.6		)							0.6
Payments related to tax withholding for stock-based compensation	(1.2		)												(1.2		)
Balance at September 30, 2019	$	1,817.5		$	53.1	$	945.5		$	1,815.0		$	(80.1	)	$	(988.7	)	$	72.7



				The Timken Company Shareholders
	Total			Stated Capital		Other Paid-In Capital			Earnings Invested in the Business			Accumulated Other Comprehensive (Loss)			Treasury Stock			Non controlling Interest
Balance at December 31, 2018	$	1,642.7		$	53.1	$	951.9		$	1,630.2		$	(95.3	)	$	(960.3	)	$	63.1
Net income	256.9								248.6									8.3
Foreign currency translation adjustment	(62.1		)									(61.9		)				(0.2		)
Pension and other postretirement liability adjustments (net of income tax expense of $25.3 million)	76.6											76.6
Change in fair value of derivative financial instruments, net of reclassifications	0.5											0.5
Dividends paid to noncontrolling interest	(0.3		)															(0.3		)
Noncontrolling interest acquired	1.8																	1.8
Dividends – $0.84 per share	(63.8		)						(63.8		)
Stock-based compensation expense	20.7					20.7
Stock purchased at fair market value	(56.1		)												(56.1		)
Stock option exercise activity	9.9					(4.4		)							14.3
Restricted share activity	—					(22.7		)							22.7
Payments related to tax withholding for stock-based compensation	(9.3		)												(9.3		)
Balance at September 30, 2019	$	1,817.5		$	53.1	$	945.5		$	1,815.0		$	(80.1	)	$	(988.7	)	$	72.7

~~On August 30, 2018, the Company's majority-owned subsidiary, Timken India, issued 7.2 million shares to complete the acquisition of ABC Bearings. The fair value~~For further discussion of the ~~shares issued was $66.0 million. The issuance of shares diluted the Company's controlling interest in Timken India from 75% to 67.8%. Refer to~~ pretax pension and other postretirement liability adjustments, see Note 314 - ~~Acquisitions~~Retirement Benefit Plans and ~~Divestitures~~ ~~for more information on the preliminary purchase accounting for the acquisition of ABC Bearings.~~Note 15 - Other Postretirement Benefit Plans.

Note 9 - Equity (continued)



				The Timken Company Shareholders
	Total			Stated Capital		Other Paid-In Capital			Earnings Invested in the Business			Accumulated Other Comprehensive (Loss)			Treasury Stock			Non controlling Interest
Balance at June 30, 2018	$	1,552.3		$	53.1	$	907.2		$	1,545.3		$	(69.9	)	$	(913.9	)	$	30.5
Net income	72.3								71.6									0.7
Foreign currency translation adjustment	(24.3		)									(18.5		)				(5.8		)
Change in fair value of derivative financial instruments, net of reclassifications	(0.4		)									(0.4		)
Shares issued for the acquisition of ABC Bearings	66.0					30.9												35.1
Dividends – $0.28 per share	(21.5		)						(21.5		)
Stock-based compensation expense	7.7					7.7
Stock purchased at fair market value	(13.4		)												(13.4		)
Stock option exercise activity	2.1					(0.6		)							2.7
Restricted share activity	—					(0.1		)							0.1
Payments related to tax withholding for stock-based compensation	(0.4		)												(0.4		)
Balance at September 30, 2018	$	1,640.4		$	53.1	$	945.1		$	1,595.4		$	(88.8	)	$	(924.9	)	$	60.5



				The Timken Company Shareholders
	Total			Stated Capital		Other Paid-In Capital			Earnings Invested in the Business			Accumulated Other Comprehensive (Loss)			Treasury Stock			Non controlling Interest
Balance at December 31, 2017	$	1,474.9		$	53.1	$	903.8		$	1,408.4		$	(38.3	)	$	(884.3	)	$	32.2
Cumulative effect of the new revenue standard (net of income tax benefit of $2.6 million)⁽¹⁾	7.7					—			7.7
Cumulative effect of ASU 2018-02	—								0.7			(0.7		)
Net income	244.7								242.8									1.9
Foreign currency translation adjustment	(62.5		)									(53.8		)				(8.7		)
Change in fair value of derivative financial instruments, net of reclassifications	4.0											4.0
Shares issued for the acquisition of ABC Bearings	66.0					30.9												35.1
Dividends – $0.83 per share	(64.2		)						(64.2		)
Stock-based compensation expense	25.5					25.5
Stock purchased at fair market value	(63.0		)												(63.0		)
Stock option exercise activity	12.7					(3.7		)							16.4
Restricted share activity	—					(11.4		)							11.4
Payments related to tax withholding for stock-based compensation	(5.4		)												(5.4		)
Balance at September 30, 2018	$	1,640.4		$	53.1	$	945.1		$	1,595.4		$	(88.8	)	$	(924.9	)	$	60.5

⁽¹⁾On January 1, 2018, the Company recognized the cumulative effect of adopting the revenue recognition guidance in ASU 2014-09 and related amendments as an adjustment to the opening balance of earnings invested in the business for the year ended December 31, 2018. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for further information.

Note 910 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive ~~loss~~income (loss) for the three and nine months ended September 30, 2019 and 2018, ~~and 2017,~~ respectively:

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at June 30, 2018 $ (70.4 ) $ (0.4 ) $ 0.9
$ (69.9 )
Other comprehensive (loss) income before
reclassifications and income taxes (24.2 ) —
1.0
(23.2 )
Amounts reclassified from accumulated other
comprehensive (loss) income, before income tax —
—
(1.5 ) (1.5 )
Income tax expense —
—
0.1
0.1
Net current period other comprehensive loss, net of
income taxes
(24.2 ) —
(0.4 ) (24.6 )
Noncontrolling interest 5.7
—
—
5.7
Net current period comprehensive loss, net
of income taxes and noncontrolling interest (18.5 ) —
(0.4 ) (18.9 )
Balance at September 30, 2018 $ (88.9 ) $ (0.4 ) $ 0.5
$ (88.8 )



	Foreign currency translation adjustments			Pension and other postretirement liability adjustments			Change in fair value of derivative financial instruments			Total
Balance at June 30, 2019	$	(96.3	)	$	(0.1	)	$	(1.1	)	$	(97.5	)
Other comprehensive income (loss) before reclassifications and income taxes	(63.0		)	103.7			3.2			43.9
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—			(1.6		)	(1.0		)	(2.6		)
Income tax expense	—			(25.4		)	(0.3		)	(25.7		)
Net current period other comprehensive income (loss), net of income taxes	(63.0		)	76.7			1.9			15.6
Noncontrolling interest	1.8			—			—			1.8
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(61.2		)	76.7			1.9			17.4
Balance at September 30, 2019	$	(157.5	)	$	76.6		$	0.8		$	(80.1	)

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at December 31, 2017 $ (35.1 ) $ (0.3 ) $ (2.9 ) $ (38.3 )
Cumulative effect of ASU 2018-02 —
(0.1 ) (0.6 ) (0.7 )
Balance at January 1, 2018 (35.1 ) (0.4 ) (3.5 ) (39.0 )
Other comprehensive (loss) income before
reclassifications and income tax (62.5 ) —
5.0
(57.5 )
Amounts reclassified from accumulated other
comprehensive (loss) income, before income tax —
—
0.3
0.3
Income tax benefit —
—
(1.3 ) (1.3 )
Net current period other comprehensive (loss)
income, net of income taxes (62.5 ) —
4.0
(58.5 )
Noncontrolling interest 8.7
—
—
8.7
Net current period comprehensive (loss) income,
net of income taxes, noncontrolling interest and
cumulative effect of accounting change
(53.8 ) (0.1 ) 3.4
(50.5 )
Balance at September 30, 2018 $ (88.9 ) $ (0.4 ) $ 0.5
$ (88.8 )



	Foreign currency translation adjustments			Pension and other postretirement liability adjustments			Change in fair value of derivative financial instruments			Total
Balance at December 31, 2018	$	(95.6	)	$	—		$	0.3		$	(95.3	)
Other comprehensive income (loss) before reclassifications and income tax	(62.1		)	103.7			3.4			45.0
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—			(1.8		)	(2.9		)	(4.7		)
Income tax expense	—			(25.3		)	—			(25.3		)
Net current period other comprehensive income (loss), net of income taxes	(62.1		)	76.6			0.5			15.0
Noncontrolling interest	0.2			—			—			0.2
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(61.9		)	76.6			0.5			15.2
Balance at September 30, 2019	$	(157.5	)	$	76.6		$	0.8		$	(80.1	)

For further discussion of pension and other postretirement liability adjustments, see Note 14 - Retirement Benefit Plans and Note 15 - Other Postretirement Benefit Plans.

Note 10 - Accumulated Other Comprehensive Income (Loss)(continued)

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at June 30, 2017 $ (49.9 ) $ 1.6
$ (1.8 ) $ (50.1 )
Other comprehensive income (loss) before
reclassifications and income taxes 10.9
—
(4.0 ) 6.9
Amounts reclassified from accumulated other
comprehensive income (loss), before income tax —
0.1
0.9
1.0
Income tax expense —
—
1.1
1.1
Net current period other comprehensive
income (loss), net of income taxes 10.9
0.1
(2.0 ) 9.0
Noncontrolling interest 0.1
—
—
0.1
Net current period comprehensive income (loss), net
of income taxes and noncontrolling interest 11.0
0.1
(2.0 ) 9.1
Balance at September 30, 2017 $ (38.9 ) $ 1.7
$ (3.8 ) $ (41.0 )



	Foreign currency translation adjustments			Pension and other postretirement liability adjustments			Change in fair value of derivative financial instruments			Total
Balance at June 30, 2018	$	(70.4	)	$	(0.4	)	$	0.9		$	(69.9	)
Other comprehensive (loss) income before reclassifications and income taxes	(24.3		)	—			1.0			(23.3		)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—			—			(1.5		)	(1.5		)
Income tax benefit	—			—			0.1			0.1
Net current period other comprehensive loss, net of income taxes	(24.3		)	—			(0.4		)	(24.7		)
Noncontrolling interest	5.8			—			—			5.8
Net current period comprehensive loss, net of income taxes and noncontrolling interest	(18.5		)	—			(0.4		)	(18.9		)
Balance at September 30, 2018	$	(88.9	)	$	(0.4	)	$	0.5		$	(88.8	)

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at December 31, 2016 $ (79.8 ) $ 1.5
$ 0.4
$ (77.9 )
Other comprehensive income (loss) before
reclassifications and income taxes 42.8
—
(7.1 ) 35.7
Amounts reclassified from accumulated other
comprehensive income (loss), before income tax —
0.3
0.4
0.7
Income tax expense (benefit) —
(0.1 ) 2.5
2.4
Net current period other comprehensive
income (loss), net of income taxes 42.8
0.2
(4.2 ) 38.8
Noncontrolling interest (1.9 ) —
—
(1.9 )
Net current period comprehensive income (loss),
net of income taxes and noncontrolling interest
40.9
0.2
(4.2 ) 36.9
Balance at September 30, 2017 $ (38.9 ) $ 1.7
$ (3.8 ) $ (41.0 )



	Foreign currency translation adjustments			Pension and other postretirement liability adjustments			Change in fair value of derivative financial instruments			Total
Balance at December 31, 2017	$	(35.1	)	$	(0.3	)	$	(2.9	)	$	(38.3	)
Cumulative effect of ASU 2018-02	—			(0.1		)	(0.6		)	(0.7		)
Balance at January 1, 2018	(35.1		)	(0.4		)	(3.5		)	(39.0		)
Other comprehensive (loss) income before reclassifications and income taxes	(62.5		)	—			5.0			(57.5		)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—			—			0.3			0.3
Income tax expense	—			—			(1.3		)	(1.3		)
Net current period other comprehensive (loss) income, net of income taxes	(62.5		)	—			4.0			(58.5		)
Noncontrolling interest	8.7			—			—			8.7
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(53.8		)	(0.1		)	3.4			(50.5		)
Balance at September 30, 2018	$	(88.9	)	$	(0.4	)	$	0.5		$	(88.8	)

Other comprehensive income (loss) before reclassifications and income taxes includes the effect of foreign currency.

Note 1011 - Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018, respectively:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Numerator:
Net income attributable to The Timken Company	$	71.6	$	53.5	$	242.8	$	174.2	$	64.2	$	71.6	$	248.6	$	242.8
Less: undistributed earnings allocated to nonvested stock	—		—		—		—		—		—		—		—
Net income available to common shareholders for basic and diluted earnings per share	$	71.6	$	53.5	$	242.8	$	174.2	$	64.2	$	71.6	$	248.6	$	242.8
Denominator:
Weighted average number of shares outstanding - basic	76,903,395		77,694,974		77,332,209		77,766,828		75,628,410		76,903,395		75,864,544		77,332,209
Effect of dilutive securities:
Stock options and awards - based on the treasury stock method	1,524,710		1,109,322		1,313,294		1,123,102		964,284		1,524,710		1,037,882		1,313,294
Weighted average number of shares outstanding, assuming dilution of stock options and awards	78,428,105		78,804,296		78,645,503		78,889,930
Weighted average number of shares outstanding assuming dilution of stock options and awards									76,592,694		78,428,105		76,902,426		78,645,503
Basic earnings per share	$	0.93	$	0.69	$	3.14	$	2.24	$	0.85	$	0.93	$	3.28	$	3.14
Diluted earnings per share	$	0.91	$	0.68	$	3.09	$	2.21	$	0.84	$	0.91	$	3.23	$	3.09

The exercise prices for certain stock options that the Company has awarded exceeded the average market price of the Company’s common shares during each period presented. Such stock options are antidilutive and were not included in the computation of diluted earnings per share. The antidilutive stock options outstanding during the three months ended September 30, 2019 and 2018 were 1,445,986 and ~~2017 were~~ 923,588, ~~and 473,694,~~ respectively. ~~During~~The antidilutive stock options outstanding during the nine months ended September 30, 2019 and 2018 were 1,355,247 and ~~2017, the antidilutive stock options outstanding were~~ 852,318, ~~and 529,020,~~ respectively.

Note 1112 - Revenue

The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three and nine months ended September 30, 2019 and 2018, ~~and 2017,~~ respectively:


	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	September 30, 2018						September 30, 2017						September 30, 2019						September 30, 2018
	Mobile		Process		Total		Mobile⁽¹⁾		Process⁽¹⁾		Total⁽¹⁾		Mobile		Process		Total		Mobile		Process		Total
United States	$	255.3	$	192.9	$	448.2	$	231.6	$	163.0	$	394.6	$	245.8	$	196.0	$	441.8	$	255.3	$	192.9	$	448.2
Americas excluding United States	51.6		42.9		94.5		48.1		37.5		85.6		54.7		41.1		95.8		51.6		42.9		94.5
Europe / Middle East / Africa	89.3		86.0		175.3		84.2		70.7		154.9		85.3		120.2		205.5		89.3		86.0		175.3
Asia-Pacific	68.0		95.3		163.3		58.9		77.4		136.3		69.3		101.6		170.9		68.0		95.3		163.3
Net sales	$	464.2	$	417.1	$	881.3	$	422.8	$	348.6	$	771.4	$	455.1	$	458.9	$	914.0	$	464.2	$	417.1	$	881.3



	Nine Months Ended						Nine Months Ended
	September 30, 2019						September 30, 2018
	Mobile		Process		Total		Mobile		Process		Total
United States	$	778.1	$	632.6	$	1,410.7	$	774.4	$	561.5	$	1,335.9
Americas excluding United States	160.4		125.5		285.9		160.3		132.0		292.3
Europe / Middle East / Africa	288.2		374.3		662.5		292.5		266.4		558.9
Asia-Pacific	222.1		312.5		534.6		214.6		269.0		483.6
Net sales	$	1,448.8	$	1,444.9	$	2,893.7	$	1,441.8	$	1,228.9	$	2,670.7

Nine Months Ended Nine Months Ended
September 30, 2018 September 30, 2017
Mobile Process Total
Mobile⁽¹⁾
Process⁽¹⁾
Total⁽¹⁾
United States $ 774.4
$ 561.5
$ 1,335.9
$ 707.2
$ 490.0
$ 1,197.2
Americas excluding United States 160.3
132.0
292.3
133.3
110.0
243.3
Europe / Middle East / Africa 292.5
266.4
558.9
213.8
196.7
410.5
Asia-Pacific 214.6
269.0
483.6
159.9
214.9
374.8
Net sales $ 1,441.8
$ 1,228.9
$ 2,670.7
$ 1,214.2
$ 1,011.6
$ 2,225.8

⁽¹⁾ ~~Prior period amounts have not been adjusted under the modified retrospective adoption method.~~

When reviewing ~~revenues~~revenue by sales channel, the Company separates net sales to original equipment manufacturers from sales to distributors and end users. The following table presents the percent of ~~revenues~~revenue by sales channel for the nine months ended September 30, ~~2018:~~2019 and 2018, respectively:



	~~Nine Months Ended~~
~~Revenue by sales channel~~	~~September 30, 2018~~
~~Original equipment manufacturers~~	~~58%~~
~~Distribution/end users~~	~~42%~~



	Nine Months Ended	Nine Months Ended
Revenue by sales channel	September 30, 2019	September 30, 2018
Original equipment manufacturers	56%	58%
Distribution/end users	44%	42%

In addition to disaggregating revenue by segment and geography and by sales channel as shown above, the Company believes information about the timing of transfer of goods or services, type of customer and distinguishing service revenue from product sales is also relevant. During the nine months ended September 30, 2019 and September 30, 2018, approximately 11% and 9%, respectively, of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time. The payment terms with the U.S. government or its contractors, which represented approximately 8% and 7% of total net sales during the nine months ended September 30, 2019 and September 30, 2018, respectively, differ from those of non-government customers. Finally, approximately 2%5% and 6% of total net sales represented service ~~revenue.~~revenue during the nine months ended September 30, 2019 and September 30, 2018, respectively.

Remaining Performance Obligations:

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract ~~in the new revenue standard~~ for which work has not been performed and excludes unexercised contract options. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately ~~$146~~$231 million at September 30, ~~2018.~~2019.

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the nine months ended September 30, ~~2018:~~2019:


	September 30, 2018			September 30, 2019
Beginning balance, January 1	$	100.5		$	116.6
Additional unbilled revenue recognized	229.1			320.0
Less: amounts billed to customers	(192.3		)	(285.0		)
Ending balance	$	137.3		$	151.6

There were no impairment losses recorded on unbilled receivables for the nine months ended September 30, ~~2018.~~2019.

Note 1213 - Segment Information

The primary measurement used by management to measure the financial performance of each segment is earnings before interest and taxes ("EBIT").


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net sales:
Mobile Industries	$	464.2		$	422.8		$	1,441.8		$	1,214.2		$	455.1		$	464.2		$	1,448.8		$	1,441.8
Process Industries	417.1			348.6			1,228.9			1,011.6			458.9			417.1			1,444.9			1,228.9
Net sales	$	881.3		$	771.4		$	2,670.7		$	2,225.8		$	914.0		$	881.3		$	2,893.7		$	2,670.7
Segment EBIT:
Mobile Industries	$	50.6		$	35.0		$	156.2		$	102.0		$	52.0		$	50.6		$	172.5		$	156.2
Process Industries	81.8			61.7			254.0			166.0			95.6			81.8			304.8			254.0
Total EBIT, for reportable segments	$	132.4		$	96.7		$	410.2		$	268.0		$	147.6		$	132.4		$	477.3		$	410.2
Corporate expenses	(17.9		)	(12.1		)	(47.2		)	(36.4		)	(11.4		)	(17.9		)	(41.1		)	(47.2		)
Pension-related charges	(5.3		)	—			(3.1		)	(4.4		)
Corporate pension and other postretirement benefit related charges													(16.9		)	(5.3		)	(16.9		)	(3.1		)
Interest expense	(12.5		)	(10.1		)	(33.2		)	(26.5		)	(18.2		)	(12.5		)	(55.5		)	(33.2		)
Interest income	0.6			0.7			1.5			2.0			1.1			0.6			3.5			1.5
Income before income taxes	$	97.3		$	75.2		$	328.2		$	202.7		$	102.2		$	97.3		$	367.3		$	328.2

Note 1314 - Retirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans. The amounts for the three and nine months ended September 30, ~~2018~~2019 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of the respective period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2018~~2019.

U.S. Plans International Plans Total
Three Months Ended
September 30, Three Months Ended
September 30, Three Months Ended
September 30,
2018 2017 2018 2017 2018 2017
Components of net periodic benefit cost:
Service cost $ 3.3
$ 3.1
$ 0.4
$ 0.4
$ 3.7
$ 3.5
Interest cost 6.0
6.2
1.8
1.9
7.8
8.1
Expected return on plan assets (7.6 ) (7.0 ) (2.9 ) (2.9 ) (10.5 ) (9.9 )
Amortization of prior service cost 0.4
0.3
0.1
0.1
0.5
0.4
Recognition of actuarial losses 4.8
—
—
—
4.8
—
Net periodic benefit cost $ 6.9
$ 2.6
$ (0.6 ) $ (0.5 ) $ 6.3
$ 2.1



	U.S. Plans						International Plans						Total
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Components of net periodic benefit cost:
Service cost	$	2.6		$	3.3		$	0.4		$	0.4		$	3.0		$	3.7
Interest cost	5.7			6.0			1.8			1.8			7.5			7.8
Expected return on plan assets	(6.4		)	(7.6		)	(2.4		)	(2.9		)	(8.8		)	(10.5		)
Amortization of prior service cost	0.4			0.4			—			0.1			0.4			0.5
Recognition of actuarial losses	7.0			4.8			—			—			7.0			4.8
Net periodic benefit cost	$	9.3		$	6.9		$	(0.2	)	$	(0.6	)	$	9.1		$	6.3


	U.S. Plans						International Plans						Total						U.S. Plans						International Plans						Total
	Nine Months Ended September 30,																		Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017			2019			2018			2019			2018			2019			2018
Components of net periodic benefit cost:
Service cost	$	9.7		$	9.2		$	1.2		$	1.2		$	10.9		$	10.4		$	7.8		$	9.7		$	1.2		$	1.2		$	9.0		$	10.9
Interest cost	17.7			18.5			5.5			5.6			23.2			24.1			17.7			17.7			5.5			5.5			23.2			23.2
Expected return on plan assets	(22.2		)	(21.0		)	(8.8		)	(8.3		)	(31.0		)	(29.3		)	(19.2		)	(22.2		)	(7.6		)	(8.8		)	(26.8		)	(31.0		)
Amortization of prior service cost	1.2			1.0			0.1			0.1			1.3			1.1			1.2			1.2			0.1			0.1			1.3			1.3
Recognition of actuarial losses	2.4			4.4			—			—			2.4			4.4			7.0			2.4			—			—			7.0			2.4
Net periodic benefit cost	$	8.8		$	12.1		$	(2.0	)	$	(1.4	)	$	6.8		$	10.7		$	14.5		$	8.8		$	(0.8	)	$	(2.0	)	$	13.7		$	6.8

The Company currently expects to make contributions and payments related to its global defined benefit pension plans totaling approximately $34.0 million in 2019. Approximately $24.0 million of this amount related to the 2019 payout of deferred compensation in July 2019 to a former executive officer of the Company. The payment triggered a pension remeasurement for one of the Company’s U.S. defined benefit pension plans during the third quarter of 2019. As a result of this remeasurement, the Company recognized an actuarial loss of $7.0 million during the three months ended September 30, 2019.

During the three and nine months ended September 30, 2018, the Company recognized actuarial losses of $4.8 million and $2.4 million, respectively. ~~During~~The remeasurement was required during the~~nine~~ ~~months ended September 30, 2017, the Company recognized actuarial losses of $4.4 million. The remeasurements were required in each~~ period as a result of lump sum payments to new retirees exceeding service and interest costs for one of the Company's U.S. defined benefit ~~pension~~ plans.

Note 1415 - Other Postretirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s other postretirement benefit plans. The amounts for the three and nine months ended September 30, ~~2018~~2019 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of the respective period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2018.~~2019.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Components of net periodic benefit cost:
Service cost	$	—		$	—		$	0.1		$	0.1		$	—		$	—		$	0.1		$	0.1
Interest cost	1.9			2.3			5.6			6.8			1.2			1.9			5.0			5.6
Expected return on plan assets	(0.9		)	(1.4		)	(2.8		)	(4.2		)	(0.8		)	(0.9		)	(2.4		)	(2.8		)
Amortization of prior service credit	(0.4		)	(0.3		)	(1.2		)	(0.8		)	(2.0		)	(0.4		)	(3.1		)	(1.2		)
Recognition of net actuarial losses													9.9			—			9.9			—
Net periodic benefit cost	$	0.6		$	0.6		$	1.7		$	1.9		$	8.3		$	0.6		$	9.5		$	1.7

During July 2019, the Company announced changes to the medical plan offerings for certain of its postretirement benefit plans, effective January 1, 2020, which will impact the benefits provided to certain retirees. This plan amendment (1) resulted in a $103.5 million reduction in the postretirement benefit obligation and a corresponding pretax adjustment to accumulated other comprehensive loss; and (2) triggered a remeasurement of the postretirement benefit obligation, and as a result the Company recognized an actuarial loss of $9.9 million during the three months ended September 30, 2019. Starting with the three months ended September 30, 2019, the pretax adjustment of $103.5 million will be amortized from accumulated other comprehensive loss into net periodic benefit cost (as a benefit) over the next twelve years.

Note 1516 - Income Taxes

The Company's provision for income taxes in interim periods is computed by applying the estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items are recorded during the period(s) in which they occur.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Provision for income taxes	$	25.0		$	21.1		$	83.5		$	28.5		$	35.5		$	25.0		$	110.4		$	83.5
Effective tax rate	25.7		%	28.1		%	25.4		%	14.1		%	34.7		%	25.7		%	30.1		%	25.4		%

The income tax expense for the three and nine months ended September 30, ~~2018~~2019 was calculated using the forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the projected mix of earnings in international jurisdictions with relatively higher tax rates ~~losses in jurisdictions with no tax benefit due to valuation allowances~~ and U.S. state and local income taxes. It was further impacted by additional discrete accruals recorded primarily for uncertain tax positions related to the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform").

The effective tax rate of ~~25.7%~~34.7% for the three months ended September 30, ~~2018~~2019 is ~~lower~~higher than the three months ended September 30, ~~2017~~2018 primarily due to a projected increase in the ~~reduction~~mix of earnings in international jurisdictions with relatively higher tax rates. The effective tax rate also increased due to higher discrete tax benefits recorded in the federal statutory rate from 35% to 21% from U.S. Tax Reform beginning in 2018, partially offset by other U.S. Tax Reform provisions that reduced certain federal income tax deductions and created new foreign income inclusions.prior year period.

The effective tax rate of ~~25.4%~~30.1% for the first nine months ~~ended September 30, 2018~~of 2019 is higher than the first nine months ~~ended September 30, 2017~~of 2018 primarily due to higher discrete tax expense in the ~~reversal of accruals~~current year for uncertain tax positions ~~in 2017 along with~~related to U.S. Tax Reform, ~~impacts~~as well as due to higher discrete tax benefits recorded in ~~2018 that reduced certain federal income tax deductions and created new foreign income inclusions. This was partially offset by~~ the ~~reduced federal statutory rate from 35% to 21% beginning in 2018.~~prior year period.

U.S. Tax Reform was enacted on December 22, 2017 and significantly revised U.S. corporate income tax law, including reducing the U.S. federal statutory rate from 35% to 21%. U.S. Tax Reform requires companies to pay a one-time net charge related to the taxation of unremitted foreign earnings and creates new taxes, including a tax on certain foreign sourced earnings known as the global intangible low-taxed income (“GILTI”) tax. In addition, on December 22, 2017, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of U.S. Tax Reform. In accordance with SAB 118, the accounting for the tax effects of U.S. Tax Reform is not complete as of September 30, 2018; however, provisional estimates have been made.

Provisional estimates of $25.2 million for the one-time net charge related to the taxation of unremitted foreign earnings and $10.1 million related to the remeasurement of U.S. deferred tax balances to reflect the new U.S. corporate income tax rate were recognized as components of income tax expense in the year ended December 31, 2017. For the nine months ended September 30, 2018, the Company recorded $1.9 million of tax benefit for remeasurement of net U.S. deferred tax balances as a result of additional federal and state regulatory guidance issued, for adjustments to finalize the purchase accounting for Groeneveld and adjustments to provisional estimates of U.S. deferred tax assets included in the 2017 U.S. federal income tax return. Over the same period, the Company recorded $2.5 million of tax expense for changes in the provisional estimate of the 2017 one-time net charge related to the taxation of unremitted foreign earnings as a result of additional federal and state regulatory guidance issued and the filing of the Company's 2017 U.S. federal income tax return.

The Company continues to analyze the effects of U.S. Tax Reform during the one-year SAB 118 measurement period and the final conclusions may materially differ from the provisional estimates. Additional information including refined computations and evaluation of future treasury regulations, tax law technical corrections and other notices and rulings are still needed to prepare a more complete analysis related to the provisional estimates. Subsequent adjustments to the Company’s provisional estimates will be recorded in current tax expense in the fourth quarter of 2018 when the analysis is complete.

A provisional estimate for the GILTI provisions was not recognized as a component of income tax expense in the year ended December 31, 2017 as the Company had not completed its assessment or made an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to record it as a period cost if and when incurred. At September 30, 2018, given the complexity of the GILTI provisions, the Company is still evaluating the effects and determining projections of future taxable income that are subject to the GILTI provisions. The Company has included GILTI related to current-year operations only in the forecasted annual effective tax rate and has not provided additional GILTI as a deferred amount.

No additional income tax provision has been made on any remaining undistributed foreign earnings not subject to the one-time net charge related to the taxation of unremitted foreign earnings or any additional outside basis difference as these amounts continue to be indefinitely reinvested in foreign operations. The Company will continue to evaluate the need to change its indefinite reinvestment assertion and will account for the change in the quarter when the analysis is complete.

Note 1617 - Fair Value

Fair value is defined as the price that would be expected to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure fair value into the following hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 – Unobservable inputs for the asset or liability.

The following tables present the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2018~~2019 and December 31, ~~2017:~~2018:


	September 30, 2018								September 30, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	132.4	$	130.9	$	1.5	$	—	$	134.6	$	133.2	$	1.4	$	—
Cash and cash equivalents measured at net asset value	21.3								46.8
Restricted cash	1.3		1.3		—		—		0.5		0.5		—		—
Short-term investments	16.5		2.1		14.4		—		20.8		—		20.8		—
Short-term investments measured at net asset value	0.1								0.1
Foreign currency hedges	6.3		—		6.3		—		11.7		—		11.7		—
Total Assets	$	177.9	$	134.3	$	22.2	$	—	$	214.5	$	133.7	$	33.9	$	—
Liabilities:
Foreign currency hedges	$	1.1	$	—	$	1.1	$	—	$	0.3	$	—	$	0.3	$	—
Total Liabilities	$	1.1	$	—	$	1.1	$	—	$	0.3	$	—	$	0.3	$	—


	December 31, 2017								December 31, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	108.5	$	107.3	$	1.2	$	—	$	105.9	$	104.4	$	1.5	$	—
Cash and cash equivalents measured at net asset value	13.1								26.6
Restricted cash	3.8		3.8		—		—		0.6		0.6		—		—
Short-term investments	16.2		—		16.2		—		21.8		—		21.8		—
Short-term investments measured at net asset value	0.2
Foreign currency hedges	1.3		—		1.3		—		4.6		—		4.6		—
Total Assets	$	143.1	$	111.1	$	18.7	$	—	$	159.5	$	105.0	$	27.9	$	—
Liabilities:
Foreign currency hedges	$	7.1	$	—	$	7.1	$	—	$	0.7	$	—	$	0.7	$	—
Total Liabilities	$	7.1	$	—	$	7.1	$	—	$	0.7	$	—	$	0.7	$	—

Cash and cash equivalents are highly liquid investments with maturities of three months or less when purchased and are valued at the redemption value. Short-term investments are investments with maturities between four months and one year and generally are valued at amortized cost, which approximates fair value. A portion of the cash and cash equivalents and short-term investments are valued based on net asset value. The Company uses publicly available foreign currency forward and spot rates to measure the fair value of its foreign currency forward contracts.

~~The Company does not believe it has significant concentrations of risk associated with the counterparties to its financial instruments.~~

Additionally, the Company remeasures certain assets toat fair value, using Level 3 ~~measurements,~~inputs, as a result of the occurrence of triggering events such as purchase accounting for acquisitions. See Note 3 - Acquisitions ~~and Divestitures~~ for further discussion.

No other material assets were measured at fair value on a nonrecurring basis during the nine months ended September 30, 2019 and 2018, ~~and 2017,~~ respectively.

Financial Instruments:

The Company’s financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, trade accounts payable, short-term borrowings and long-term debt. Due to their short-term nature, the carrying value of cash and cash equivalents, short-term investments, accounts receivable, trade accounts payable and short-term borrowings are a reasonable estimate of their fair value. Due to the nature of fair value calculations for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable estimate of its fair value. The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was ~~$1,080.2~~$1,157.2 million and ~~$720.3~~$1,077.5 million at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The carrying value of this debt was ~~$1,073.6~~$1,062.6 million and ~~$682.4~~$1,070.7 million at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The fair value of long-term fixed-rate debt was measured using Level 2 inputs.

The Company does not believe it has significant concentrations of risk associated with the counterparties to its financial instruments.

Note 1718 - Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk and interest rate risk. Forward contracts on various foreign currencies are entered into in order to manage the foreign currency exchange rate risk associated with certain of the Company's commitments denominated in foreign currencies. From time to time, interest rate swaps are used to manage interest rate risk associated with the Company’s fixed and floating-rate borrowings.

The Company designates certain foreign currency forward contracts as cash flow hedges of forecasted revenues and certain interest rate hedges as cash flow hedges of fixed-rate borrowings.

The Company does not purchase or hold any derivative financial instruments for trading purposes. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had ~~$347.6~~$230.9 million and ~~$386.9~~$218.8 million, respectively, of outstanding foreign currency forward contracts at notional value. Refer to Note 1617 - Fair Value for the fair value disclosure of derivative financial instruments.

Cash Flow Hedging Strategy:

For certain derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the ~~effective portion of the~~ gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. ~~The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), or hedge components excluded from the assessment of effectiveness, are recognized in the Consolidated Statement of Income during the current period.~~

To protect against a reduction in the value of forecasted foreign currency cash flows resulting from export sales, the Company has instituted a foreign currency cash flow hedging program. The Company hedges portions of its forecasted cash flows denominated in foreign currencies with forward contracts. When the dollar strengthens significantly against foreign currencies, the decline in the present value of future foreign currency revenue is offset by gains in the fair value of the forward contracts designated as hedges. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by losses in the fair value of the forward contracts.

The maximum length of time over which the Company hedges its exposure to the variability in future cash flows for forecast transactions is generally eighteen months or less.

Purpose for Derivative Instruments not designated as Hedging Instruments:

For derivative instruments that are not designated as hedging instruments, the instruments are typically forward contracts. In general, the practice is to reduce volatility by selectively hedging transaction exposures including intercompany loans, accounts payable and accounts receivable. Intercompany loans between entities with different functional currencies typically are hedged with a forward contract at the inception of the loan with a maturity date corresponding to the maturity of the loan. The revaluation of these contracts, as well as the revaluation of the underlying balance sheet items, is recorded directly to the income statement so the adjustment generally offsets the revaluation of the underlying balance sheet items to protect cash payments and reduce income statement volatility.

The following table presents the fair value of the Company's derivative instruments at September 30, 2018 and December 31, 2017. Those balances are presented within "Other non-current assets" and "Other non-current liabilities" in the Consolidated Balance Sheets.

Asset Derivatives Liability Derivatives
Derivatives designated as hedging instruments: September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Foreign currency forward contracts $ 3.4
$ 0.5
$ 0.3
$ 2.1

Derivatives not designated as hedging instruments:
Foreign currency forward contracts 2.9
0.8
0.8
5.0
Total Derivatives $ 6.3
$ 1.3
$ 1.1
$ 7.1

~~The following tables present the~~ impact of derivative instruments not designated as hedging instruments for the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and their location within the Consolidated Statements of Income:

Amount of gain or (loss) recognized in
Other Comprehensive Loss
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives in cash flow hedging relationships: 2018 2017 2018 2017
Foreign currency forward contracts $ 1.0
$ (1.6 ) $ 5.0
$ (4.7 )
Interest rate swaps —
(2.4 ) —
(2.4 )
Total $ 1.0
$ (4.0 ) $ 5.0
$ (7.1 )



		Amount of gain or (loss) recognized in income
		Three Months Ended September 30,					Nine Months Ended September 30,
Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2019		2018			2019		2018
Foreign currency forward contracts	Other income (expense), net	$	6.3	$	(0.8	)	$	9.0	$	6.4

Amount of gain or (loss) reclassified from Accumulated Other Comprehensive Loss into income (effective portion)
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives in cash flow hedging relationships: Location of gain or (loss) recognized in income 2018 2017 2018 2017
Foreign currency forward contracts Cost of products sold $ 1.6
$ (0.9 ) $ 0.2
$ (0.2 )
Interest rate swaps Interest expense (0.1 ) —
(0.5 ) (0.2 )
Total $ 1.5
$ (0.9 ) $ (0.3 ) $ (0.4 )

Amount of gain or (loss) recognized in income
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives not designated as hedging instruments: Location of gain or (loss) recognized in income 2018 2017 2018 2017
Foreign currency forward contracts Other income (expense), net $ (0.8 ) $ 2.7
$ 6.4
$ (5.6 )

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Overview

Introduction:

The Timken Company ~~engineers, manufactures~~designs and ~~markets~~manages a growing portfolio of engineered bearings gear drives, automated lubrication systems, belts, chain, couplings, industrial clutches and brakes and linear motion products and offers a spectrum of powertrain rebuild and repair services. The leading authority on tapered roller bearings, Timken today applies its deep knowledge of metallurgy, tribology and power transmission ~~across~~products. With more than a ~~variety~~century of ~~bearings~~innovation and ~~related systems to improve~~increasing knowledge, the Company continuously improves the reliability and efficiency of global machinery and equipment ~~all around~~to move the ~~world.~~world forward. The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, Fafnir®, Philadelphia Gear®, ~~Lovejoy®~~Cone Drive®, ~~Groeneveld®~~Diamond Chain®, Drives®, Rollon®, Lovejoy® and ~~Cone Drive®~~Groeneveld®. ~~Known for its quality products and collaborative technical sales model,~~ Timken ~~posted $3 billion in sales in 2017. With~~employs more than ~~17,000 employees operating from 33 countries, Timken makes the world more productive and keeps industry~~18,000 people globally in ~~motion.~~35 countries. The Company operates under two reportable segments: (1) Mobile Industries and (2) Process Industries. The following further describes these business segments:

•

Mobile Industries serves OEM customers that manufacture off-highway equipment for the agricultural, mining and construction markets; on-highway vehicles including passenger cars, light trucks, and medium- and heavy-duty trucks; rail cars and locomotives; outdoor power equipment; rotorcraft and fixed-wing aircraft; and other mobile equipment. Beyond service parts sold to OEMs, aftermarket sales and services to individual end users, equipment owners, operators and maintenance shops are handled directly or through the Company's extensive network of authorized automotive and heavy-truck distributors.

•

Process Industries serves OEM and end-user customers in industries that place heavy demands on the fixed operating equipment they make or use in heavy and other general industrial sectors. This includes metals, cement and aggregate production; ~~coal~~ power generation and renewable energy sources; oil and gas extraction and refining; pulp and paper and food processing; automation and robotics; and health and critical motion control equipment. Other applications include marine equipment, gear drives, cranes, hoists and conveyors. This segment also supports aftermarket sales and service needs through its global network of authorized industrial distributors and through the provision of services directly to end users.

Timken creates value by understanding customer needs and applying its know-how ~~in attractive market sectors, serving~~to serve a broad range of customers in attractive markets and industries across the globe. The Company’s business strengths include its product technology, end-market diversity, geographic reach and aftermarket mix. Timken collaborates with OEMs to improve equipment efficiency with its engineered products and captures subsequent equipment replacement cycles by selling largely through independent channels in the aftermarket. Timken focuses its international efforts and footprint in regions of the world where strong macroeconomic factors such as urbanization, infrastructure development and sustainability create demand for its products and services.

The ~~Timken Business Model~~ ~~is the specific framework for how the Company evaluates opportunities and differentiates itself in the market.~~

Company's strategy has three primary elements:

Outgrowing Our Markets. The Company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy, friction management and mechanical power transmission to create value for Timken customers. Using a highly collaborative technical selling approach, the Company places particular emphasis on creating unique solutions for challenging and/or demanding applications. The Company intends to grow in attractive market sectors around the world, emphasizing those spaces that are highly fragmented, demand high service and value the reliability and efficiency offered by Timken products. The Company also targets those applications that offer significant aftermarket demand, thereby providing product and services revenue throughout the equipment’s lifetime.

Operating With Excellence. Timken operates with a relentless drive for exceptional results and a passion for superior execution. The Company embraces a continuous improvement culture that is charged with increasing efficiency, lowering costs, eliminating waste, encouraging organizational agility and building greater brand equity to fuel future growth. This requires the Company’s ongoing commitment to attract, retain and develop the best talent across the world.

Deploying Capital to Drive Shareholder Value. The Company is intently focused on providing the highest returns for shareholders through its capital allocation framework, which includes: (1) investing in the core business through capital expenditures, research and development and other organic growth initiatives; (2) pursuing strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products and related services; ~~and~~ (3) returning capital to shareholders through dividends and share ~~repurchases.~~repurchases; and (4) maintaining a strong balance sheet and sufficient liquidity. As part of this framework, the Company may also restructure, reposition or divest underperforming product lines or assets.

The following highlights the Company's recent significant strategic accomplishment:

On September ~~19, 2018,~~16, 2019, the Company ~~divested the ICT Business, located in Gorinchem, Netherlands. The Company acquired the business in July 2017 as part~~announced it had reached an agreement to acquire BEKA, a leading global supplier of ~~the Groeneveld acquisition. The ICT Business, a non-core telematics business, is separate from the Groeneveld lubrications solutions business and employed~~automatic lubrication systems, for approximately ~~70 people. The ICT Business had sales of approximately $15 million for the twelve months ended September 30, 2018.~~

•

~~On September 18, 2018,~~ the Company completed the acquisition of Rollon, a leader in engineered linear motion products, specializing in the design and manufacture of linear guides, telescopic rails and linear actuators used in a wide range of attractive applications such as passenger rail, aerospace, packaging and logistics, medical and automation. Rollon, located near Milan, Italy, has manufacturing operations in Italy, Germany and the U.S. with expected annual sales of approximately $140 million.

On September 1, 2018, the Company completed the acquisition of Cone Drive, a leader in precision drives used in diverse markets including solar, automation, aerial platforms and food and beverage. Cone Drive, located in Traverse City, Michigan, operates in the U.S. and China with$165 million. With expected 2019 annual sales of approximately ~~$100 million.~~


•	~~On August 30, 2018, the Company~~'s majority-owned subsidiary, Timken India, completed the acquisition of ABC Bearings. ABC Bearings is a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings in India with expected annual sales of approximatel~~y $30 million~~.

$135 million, BEKA serves a diverse range of industrial sectors, including wind, food and beverage, rail, on- and off-highway and other process industries. Headquartered in Pegnitz, Germany, BEKA has manufacturing and research and development based in Germany, and assembly facilities and sales offices around the world. This transaction is subject to customary closing conditions and is expected to close during the fourth quarter of this year.

Overview:



	Three Months Ended September 30,
	2019		2018		$ Change			% Change
Net sales	$	914.0	$	881.3	$	32.7		3.7	%
Net income	66.7		72.3		(5.6		)	(7.7	)%
Net income attributable to noncontrolling interest	2.5		0.7		1.8			257.1	%
Net income attributable to The Timken Company	$	64.2	$	71.6	$	(7.4	)	(10.3	)%
Diluted earnings per share	$	0.84	$	0.91	$	(0.07	)	(7.7	)%
Average number of shares – diluted	76,592,694		78,428,105		—			(2.3	)%



	Nine Months Ended September 30,
	2019		2018		$ Change		% Change
Net sales	$	2,893.7	$	2,670.7	$	223.0	8.3	%
Net income	256.9		244.7		12.2		5.0	%
Net income attributable to noncontrolling interest	8.3		1.9		6.4		336.8	%
Net income attributable to The Timken Company	$	248.6	$	242.8	$	5.8	2.4	%
Diluted earnings per share	$	3.23	$	3.09	$	0.14	4.5	%
Average number of shares – diluted	76,902,426		78,645,503		—		(2.2	)%

Three Months Ended
September 30,
2018 2017 $ Change % Change
Net sales $ 881.3
$ 771.4
$ 109.9
14.2 %
Net income 72.3
54.1
18.2
33.6 %
Net income attributable to noncontrolling interest 0.7
0.6
0.1
16.7 %
Net income attributable to The Timken Company $ 71.6
$ 53.5
$ 18.1
33.8 %
Diluted earnings per share $ 0.91
$ 0.68
$ 0.23
33.8 %
Average number of shares – diluted 78,428,105
78,804,296
—
(0.5 )%

Nine Months Ended
September 30,
2018 2017 $ Change % Change
Net sales $ 2,670.7
$ 2,225.8
$ 444.9
20.0 %
Net income 244.7
174.2
70.5
40.5 %
Net income attributable to noncontrolling interest 1.9
—
1.9
NM
Net income attributable to The Timken Company $ 242.8
$ 174.2
$ 68.6
39.4 %
Diluted earnings per share $ 3.09
$ 2.21
$ 0.88
39.8 %
Average number of shares – diluted 78,645,503
78,889,930
—
(0.3 )%

The increase in net sales for the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 compared with the ~~third~~ ~~quarter~~three months ended September 30, 2018 was primarily driven by the benefit of ~~2017~~acquisitions partially offset by lower organic revenue mainly in the Mobile Industries segment and the unfavorable impact of foreign currency exchange rate changes. The decrease in net income for the three months ended September 30, 2019 compared with the three months ended September 30, 2018 was primarily due to ~~organic revenue growth~~higher net actuarial losses for defined benefit pension and postretirement plans, lower volume, and a higher tax rate, partially offset by the impact of favorable price/mix, the net benefit of acquisitions, and lower material costs (including tariffs).

The increase in net sales for the first nine months of 2019 compared with the first nine months of 2018 was primarily driven by ~~improved end-market demand,~~the benefit of acquisitions and the impact of higher pricing and higher organic revenue in the ~~benefit of acquisitions, primarily~~Process Industries segment, partially offset by the unfavorable impact of foreign currency exchange rate changes. The increase in net income for the ~~third~~ ~~quarter~~first nine months of ~~2018~~2019 compared with the ~~third~~ ~~quarter~~first nine months of ~~2017~~2018 was primarily due to ~~improved performance across~~ the ~~business, driven by~~net benefit of acquisitions, the impact of ~~higher volume and~~ favorable price/mix, and improved manufacturing utilization, partially offset by higher ~~material and logistics costs (including tariffs),~~interest expense, a higher ~~pension actuarial losses ("mark-to-market charges")~~tax rate, and higher ~~acquisition-related charges.~~

~~The increase in~~ net ~~sales for the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ ~~months of 2017 was primarily due to organic revenue growth driven by improved end-market demand, the benefit of acquisitions~~actuarial gains and ~~the favorable impact of foreign currency exchange rate changes. The change in net income for the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ months of 2017 was primarily due to improved performance across the business, driven by the impact of higher volume, favorable price/mix, improved manufacturing performance and the net benefit of acquisitions. These factors were partially offset by the impact of higher material and logistics costs (including tariffs), as well as higher SG&A, income tax and interest expenses.losses.

Outlook:

The Company expects ~~2018~~2019 full-year sales to increase approximately ~~19.5%~~5% to 6% compared with ~~2017~~2018 primarily due to ~~increased demand across most end-market sectors and~~ the benefit of acquisitions, ~~including~~partially offset by the ~~recently completed ABC Bearings, Cone Drive and Rollon acquisitions.~~unfavorable impact of foreign currency exchange rate changes. The Company's earnings are expected to be higher in ~~2018~~2019 compared with ~~2017,~~2018, primarily due to ~~the impact of higher volume,~~ favorable price/mix, the benefit of acquisitions, ~~improved manufacturing performance, and the impact of~~ lower ~~mark-to-market charges,~~material costs, partially offset by ~~higher material, logistics and SG&A costs,~~the unfavorable impact of foreign currency exchange rate changes, as well as higher income tax and interest expenses. The ~~2018~~2019 outlook does not account for pension and other post retirement mark-to-market charges ~~that will be recognized in the fourth quarter of 2018~~after September 30, 2019, because ~~the amount~~such amounts will not be known until ~~incurred.~~triggered or until the annual remeasurement in the fourth quarter.

The Company expects to generate operating cash of approximately ~~$375~~$525 million in ~~2018,~~2019, an increase from ~~2017~~2018 of approximately ~~$138~~$193 million or 58%., as the Company anticipates higher net income and lower working capital requirements. The Company expects capital expenditures of approximately ~~$115~~$150 million in ~~2018,~~2019, compared with ~~$105~~$113 million in ~~2017.~~2018.

The Statement of Income

Sales:



	Three Months Ended September 30,
	2019		2018		$ Change		% Change
Net Sales	$	914.0	$	881.3	$	32.7	3.7	%



	Nine Months Ended September 30,
	2019		2018		$ Change		% Change
Net Sales	$	2,893.7	$	2,670.7	$	223.0	8.3	%

Three Months Ended
September 30,
2018 2017 $ Change % Change
Net Sales $ 881.3
$ 771.4
$ 109.9
14.2 %

Nine Months Ended
September 30,
2018 2017 $ Change % Change
Net Sales $ 2,670.7
$ 2,225.8
$ 444.9
20.0 %

Net sales increased for the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 compared with the ~~third~~ ~~quarter of 2017,~~three months ended September 30, 2018, primarily due to ~~higher organic revenue of $106 million and~~ the benefit of acquisitions of ~~$18~~$70 million, partially offset by lower organic revenue of $26 million and the unfavorable impact of foreign currency exchange rate changes of $12 million. The decrease in organic revenue was primarily driven by reduced demand mainly in the Mobile Industries segment, partially offset by improved pricing.

Net sales increased for the first nine months of 2019 compared with the first nine months of 2018, primarily due to the benefit of acquisitions of $239 million and higher organic revenue of $46 million, partially offset by the unfavorable impact of foreign currency exchange rate changes of ~~$14~~$65 million. The increase in organic revenue was driven primarily by improved demand ~~across most of~~in the ~~Company's end-market sectors,~~Process Industries segment, as well as the impact of ~~higher~~improved pricing.

~~Net sales~~

Gross Profit:



	Three Months Ended September 30,
	2019			2018			$ Change		Change
Gross profit	$	277.5		$	253.3		$	24.2	9.6	%
Gross profit % to net sales	30.4		%	28.7		%			170	bps



	Nine Months Ended September 30,
	2019			2018			$ Change		Change
Gross profit	$	885.8		$	785.6		$	100.2	12.8	%
Gross profit % to net sales	30.6		%	29.4		%			120	bps

Gross profit increased ~~for~~in the ~~first~~ ~~nine~~three months ~~of 2018~~ended September 30, 2019 compared with the ~~first~~ ~~nine~~three months ~~of 2017,~~ended September 30, 2018, primarily due to ~~higher organic revenue of $326 million,~~ the benefit of acquisitions of ~~$99~~$23 million and favorable price/mix of $15 million, partially offset by the impact of lower volume of $16 million.

Gross profit increased in the first nine months of 2019 compared with the first nine months of 2018, primarily due to the benefit of acquisitions of $77 million, favorable price/mix of $40 million, and lower logistics costs of $9 million. These factors were partially offset by the unfavorable impact of foreign currency exchange rate changes of ~~$21 million. The increase in organic revenue was driven by improved demand across most~~$11 million, higher material costs (including tariffs) of ~~the Company's end-market sectors, as well as the impact of higher pricing.~~

~~Gross Profit:~~

Three Months Ended
September 30,
2018 2017 $ Change Change
Gross profit $ 253.3
$ 216.1
$ 37.2
17.2 %
Gross profit % to net sales 28.7 % 28.0 %

70 bps

Nine Months Ended
September 30,
2018 2017 $ Change Change
Gross profit $ 785.6
$ 599.4
$ 186.2
31.1 %
Gross profit % to net sales 29.4 % 26.9 % 250 bps

~~Gross profit increased in the~~ ~~third~~ ~~quarter of 2018 compared with the~~ ~~third~~ ~~quarter of 2017, primarily due to the impact of higher volume of $36 million, favorable price/mix of $9~~$10 million and ~~the benefit~~property loss of ~~acquisitions of $6~~$7 million. ~~These factors were partially offset by higher material and logistics costs of $12 million (including tariffs).~~

~~Gross profit increased in the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ months of 2017, primarily due to the impact of higher volume of $113 million, favorable price/mix of $45 million, the benefit of acquisitions of $39 million, and improved manufacturing performance of $19 million. These factors were partially offset by higher material and logistics costs of $33 million (including tariffs).

Selling, General and Administrative Expenses:



	Three Months Ended September 30,
	2019			2018			$ Change		Change
Selling, general and administrative expenses	$	148.0		$	142.0		$	6.0	4.2	%
Selling, general and administrative expenses % to net sales	16.2		%	16.1		%			10	bps



	Nine Months Ended September 30,
	2019			2018			$ Change		Change
Selling, general and administrative expenses	$	459.4		$	432.4		$	27.0	6.2	%
Selling, general and administrative expenses % to net sales	15.9		%	16.2		%	—		(30	) bps

Three Months Ended
September 30,
2018 2017 $ Change Change
Selling, general and administrative expenses $ 142.0
$ 134.0
$ 8.0
6.0%
Selling, general and administrative expenses % to net sales 16.1 % 17.4 % (130) bps

Nine Months Ended
September 30,
2018 2017 $ Change Change
Selling, general and administrative expenses $ 432.4
$ 375.5
$ 56.9
15.2%
Selling, general and administrative expenses % to net sales 16.2 % 16.9 % (70) bps

The increase in selling, general and administrative ("SG&A&A") expenses inwhen comparing the ~~third~~ ~~quarter~~three and ~~first~~ nine months of ~~2018 compared~~2019 with the ~~third~~ ~~quarter~~three and ~~first~~ nine months of ~~2017~~2018 was primarily due to the $6.7 million and $38.1 million impact of acquisitions, partially offset by lower compensation expense of $7$5.3 and $10.2 million, ~~and $26 million, respectively, higher incentive compensation expenses and other spending increases to support the current level of business activity.~~respectively.

Interest Income and Expense:



	Three Months Ended September 30,
	2019			2018			$ Change			% Change
Interest expense	$	(18.2	)	$	(12.5	)	$	(5.7	)	45.6	%
Interest income	$	1.1		$	0.6		$	0.5		83.3	%


	Three Months Ended September 30,											Nine Months Ended September 30,
	2018			2017			$ Change			% Change		2019			2018			$ Change			% Change
Interest expense	$	(12.5	)	$	(10.1	)	$	(2.4	)	23.8	%
Interest (expense)												$	(55.5	)	$	(33.2	)	$	(22.3	)	67.2	%
Interest income	$	0.6		$	0.7		$	(0.1	)	(14.3	)%	$	3.5		$	1.5		$	2.0		133.3	%

Nine Months Ended
September 30,
2018 2017 $ Change % Change
Interest expense $ (33.2 ) $ (26.5 ) $ (6.7 ) 25.3 %
Interest income $ 1.5
$ 2.0
$ (0.5 ) (25.0 )%

The increase in interest expense infor the ~~third quarter~~three and ~~first~~ nine months ~~of 2018~~ended September 30, 2019 compared with the ~~third quarter~~three and ~~first~~ nine months ~~of 2017~~ended September 30, 2018 was primarily due to an increase in outstanding debt to fund ~~the acquisitions of Groeneveld, Rollon and Cone Drive.~~acquisitions.

Other Income (Expense):



	Three Months Ended September 30,
	2019			2018			$ Change			% Change
Non-service pension and other postretirement expense	$	(14.4	)	$	(3.2	)	$	(11.2	)	350.0	%
Other income, net	5.8			3.7			2.1			56.8	%
Total other (expense) income, net	$	(8.6	)	$	0.5		$	(9.1	)	NM



	Nine Months Ended September 30,
	2019			2018		$ Change			% Change
Non-service pension and other postretirement (expense) income	$	(14.1	)	$	2.5	$	(16.6	)	(664.0	)%
Other income, net	10.5			7.3		3.2			43.8	%
Total other (expense) income, net	$	(3.6	)	$	9.8	$	(13.4	)	(136.7	)%

Three Months Ended
September 30,
2018 2017 $ Change % Change
Other income, net $ 0.5
$ 3.8
$ (3.3 ) (86.8 )%

Nine Months Ended
September 30,
2018 2017 $ Change % Change
Other income, net $ 9.8
$ 7.1
$ 2.7
38.0 %

~~The decrease~~Non-service pension and other postretirement expense increased in ~~other income, net for~~ the ~~third quarter of 2018~~three and nine months ended September 30, 2019 compared with the ~~third quarter of 2017 was~~three and nine months ended September 30, 2018, primarily due to higher ~~mark-to-market charges~~actuarial losses of ~~$4.8~~$12 million ~~recognized in the third quarter of 2018, partially offset by higher foreign currency exchange gains of $2.5 million.~~and $14 million, respectively. The ~~increase in other income, net for the first nine months of 2018 compared with the first nine months of 2017 was primarily~~actuarial losses were due to ~~lower mark-to-market charges of $2.0 million. Refer to~~ a pension and other postretirement benefit remeasurement. See Note 1314 - Retirement Benefit Plans and Note 15 - Other Postretirement Benefit Plans for more information. The mark-to-market charges were required in each period as a result of lump sum payments to new retirees exceeding service and interest costs for one of the Company's U.S. defined benefit pension plans.further discussion.

Income Tax Expense:


	Three Months Ended September 30,										Three Months Ended September 30,
	2018			2017			$ Change		% Change		2019			2018			$ Change		% Change
Provision for income taxes	$	25.0		$	21.1		$	3.9	18.5	%	$	35.5		$	25.0		$	10.5	42.0	%
Effective tax rate	25.7		%	28.1		%			(240) bps		34.7		%	25.7		%			900 bps


	Nine Months Ended September 30,										Nine Months Ended September 30,
	2018			2017			$ Change		Change		2019			2018			$ Change		Change
Provision for income taxes	$	83.5		$	28.5		$	55.0	193.0	%	$	110.4		$	83.5		$	26.9	32.2	%
Effective tax rate	25.4		%	14.1		%			NM		30.1		%	25.4		%			470 bps

Income tax expense increased $4$10.5 million for the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 compared with the ~~third~~ ~~quarter of 2017~~three months ended September 30, 2018 primarily due to a projected increase in the mix of earnings in international jurisdictions with relatively higher ~~pre-tax earnings and U.S. Tax Reform regulations which reduced certain federal income~~ tax ~~deductions and created new foreign income inclusions. This was partially offset by the reduced U.S. federal statutory rate from 35% to 21% beginning in 2018.~~

~~Income tax expense increased $55 million for the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ ~~months of 2017 primarily due to the reversal of $34 million of accruals for uncertain tax positions (including related interest) during 2017 based on the expiration of various statutes of limitations.~~rates. Income tax expense also increased due to higher ~~pre-tax~~discrete tax benefits in the prior year period.

Income tax expense increased $26.9 million for the first nine months of 2019 compared with the first nine months of 2018 primarily due to higher projected pretax earnings ~~and~~in international jurisdictions with relatively higher tax rates. Income tax expense also increased due to higher discrete tax expense in the current year period primarily related to additional accruals for uncertain tax positions related to U.S. Tax Reform, ~~regulations which reduced certain federal income~~as well as higher discrete tax ~~deductions and created new foreign income inclusions. This was partially offset by~~benefits recorded in the ~~reduced U.S. federal statutory rate from 35% to 21% beginning in 2018.~~prior year.

Refer to Note 1516 - Income Taxes for more information on the computation of the income tax expense in interim periods.

Business Segments

The Company's reportable segments are business units that serve different industry sectors. While the segments often operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. The primary measurement used by management to measure the financial performance of each segment is EBIT. Refer to Note 1213 - Segment Information for the reconciliation of EBIT by segment to consolidated income before income taxes.

The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S. GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2019and2018 ~~and 2017~~ and foreign currency exchange rate changes. The effects of acquisitions, divestitures and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.

The following items highlight the Company's acquisitions and divestitures completed in ~~2017~~2019 and ~~the first~~ ~~nine~~2018 ~~months of 2018~~ by segment based on the customers and underlying markets served:

The Company acquired ~~ABC Bearings,~~Diamond Chain during the second quarter of 2019. Substantially all of the results for Diamond Chain are reported in the Process Industries segment.

The Company acquired Rollon, Cone Drive and ~~Rollon~~ABC Bearings during the third quarter of 2018. ~~Substantially all of the results for ABC Bearings are reported in the Mobile Industries segment.~~ Substantially all of the results for Cone Drive and Rollon are reported in the Process Industries segment.

~~The Company acquired Groeneveld during the third quarter of 2017.~~ Substantially all of the results for ~~Groeneveld~~ABC Bearings are reported in the Mobile Industries segment.

The Company ~~acquired Torsion Control Products and PT Tech during~~divested Groeneveld Information Technology Holding B.V. (the "ICT Business") on September 19, 2018. Results for the ~~second quarter of 2017. Substantially all of the results for Torsion Control Products are~~ICT Business were reported in the Mobile Industries segment. ~~Results for PT Tech are reported in the Mobile Industries and Process Industries segments based on customers served.~~

Mobile Industries Segment:


	Three Months Ended September 30,										Three Months Ended September 30,
	2018			2017			$ Change		Change		2019			2018			$ Change			Change
Net sales	$	464.2		$	422.8		$	41.4	9.8	%	$	455.1		$	464.2		$	(9.1	)	(2.0	%)
EBIT	$	50.6		$	35.0		$	15.6	44.6	%	$	52.0		$	50.6		$	1.4		2.8	%
EBIT margin	10.9		%	8.3		%			260	bps	11.4		%	10.9		%				50	bps



	Three Months Ended September 30,
	2019			2018		$ Change			% Change
Net sales	$	455.1		$	464.2	$	(9.1	)	(2.0	%)
Less: Acquisitions	20.2			—		20.2			NM
Divestitures	(2.0		)	—		(2.0		)	NM
Currency	(5.2		)	—		(5.2		)	NM
Net sales, excluding the impact of acquisitions, divestitures and currency	$	442.1		$	464.2	$	(22.1	)	(4.8	%)

Three Months Ended
September 30,
2018 2017 $ Change % Change
Net sales $ 464.2
$ 422.8
$ 41.4
9.8 %
Less: Acquisitions 3.5
—
3.5
NM
Currency (7.8 ) —
(7.8 ) NM
Net sales, excluding the impact of acquisitions and currency $ 468.5
$ 422.8
$ 45.7
10.8 %



	Nine Months Ended September 30,
	2019			2018			$ Change		% Change
Net sales	$	1,448.8		$	1,441.8		$	7.0	0.5	%
EBIT	$	172.5		$	156.2		$	16.3	10.4	%
EBIT margin	11.9		%	10.8		%	—		110	bps

Nine Months Ended
September 30,
2018 2017 $ Change Change
Net sales $ 1,441.8
$ 1,214.2
$ 227.6
18.7 %
EBIT $ 156.2
$ 102.0
$ 54.2
53.1 %
EBIT margin 10.8 % 8.4 % 240 bps


	Nine Months Ended September 30,								Nine Months Ended September 30,
	2018		2017		$ Change		% Change		2019			2018		$ Change			% Change
Net sales	$	1,441.8	$	1,214.2	$	227.6	18.7	%	$	1,448.8		$	1,441.8	$	7.0		0.5	%
Less: Acquisitions	77.3		—		77.3		NM		67.0			—		67.0			NM
Divestitures									(8.5		)	—		(8.5		)	NM
Currency	6.9		—		6.9		NM		(32.7		)	—		(32.7		)	NM
Net sales, excluding the impact of acquisitions and currency	$	1,357.6	$	1,214.2	$	143.4	11.8	%
Net sales, excluding the impact of acquisitions, divestitures and currency									$	1,423.0		$	1,441.8	$	(18.8	)	(1.3	%)

The Mobile Industries segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, decreased $22.1 million or 4.8% in the three months ended September 30, 2019 compared with the three months ended September 30, 2018, reflecting lower shipments in the off highway and heavy truck sectors, partially offset by organic growth in the rail and automotive sectors, as well as higher pricing. EBIT increased by $1.4 million or 2.8% in the three months ended September 30, 2019 compared with the three months ended September 30, 2018, primarily due to favorable price/mix, lower material and logistics costs, the benefit of acquisitions, net of divestitures, partially offset by the impact of lower volume and related manufacturing utilization.

The Mobile Industries segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, decreased $18.8 million or 1.3% in the first nine months of 2019 compared with the first nine months of 2018, reflecting lower shipments in the off highway and heavy truck sectors, partially offset by organic growth in the aerospace, automotive and rail sectors, as well as higher pricing. EBIT increased by $16.3 million or 10.4% in the first nine months of 2019 compared with the first nine months of 2018, primarily due to the net benefit of acquisitions, lower logistics costs, lower SG&A and favorable price/mix. These factors were partially offset by the impact of lower volume, as well as property losses and related expenses from flood damage at a Company facility in Tennessee and fire damage at its facility in China.

Full-year sales for the Mobile Industries segment are expected to be approximately flat to down 1% in 2019 compared with 2018. This reflects slightly lower organic revenue in off-highway and heavy truck and the unfavorable impact of foreign currency exchange rate changes, partially offset by the growth in the aerospace and rail sectors, as well as benefit of acquisitions net of divestitures. EBIT for the Mobile Industries segment is expected to increase in 2019 compared with 2018 primarily due to the impact of favorable price/mix, lower logistics and SG&A costs, and the impact of acquisitions, partially offset by the impact of lower volume and unfavorable foreign currency exchange rate changes.

Process Industries Segment:



	Three Months Ended September 30,
	2019			2018			$ Change		Change
Net sales	$	458.9		$	417.1		$	41.8	10.0	%
EBIT	$	95.6		$	81.8		$	13.8	16.9	%
EBIT margin	20.8		%	19.6		%			120 bps



	Three Months Ended September 30,
	2019			2018		$ Change			% Change
Net sales	$	458.9		$	417.1	$	41.8		10.0	%
Less: Acquisitions	52.1			—		52.1			NM
Currency	(6.5		)	—		(6.5		)	NM
Net sales, excluding the impact of acquisitions and currency	$	413.3		$	417.1	$	(3.8	)	(0.9	)%



	Nine Months Ended September 30,
	2019			2018			$ Change		Change
Net sales	$	1,444.9		$	1,228.9		$	216.0	17.6	%
EBIT	$	304.8		$	254.0		$	50.8	20.0	%
EBIT margin	21.1		%	20.7		%			40	bps



	Nine Months Ended September 30,
	2019			2018		$ Change			% Change
Net sales	$	1,444.9		$	1,228.9	$	216.0		17.6	%
Less: Acquisitions	181.0			—		181.0			NM
Currency	(32.0		)	—		(32.0		)	NM
Net sales, excluding the impact of acquisitions and currency	$	1,295.9		$	1,228.9	$	67.0		5.5	%

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, ~~increased $46~~decreased $3.8 million or ~~10.8%~~0.9% in the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 compared with the ~~third~~ ~~quarter of 2017, reflecting organic growth~~three months ended September 30, 2018. The decrease was primarily driven by lower demand across most sectors, including industrial services and general industrial, partially offset by increased demand in the ~~automotive, aerospace, off-highway~~wind and ~~heavy truck sectors.~~marine sectors, as well as positive pricing. EBIT increased ~~by $16~~$13.8 million or ~~44.6%~~16.9% in the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 compared with the ~~third~~ ~~quarter of 2017,~~three months ended September 30, 2018 primarily due to ~~higher volume~~favorable price/mix, the net benefit of ~~$15 million~~acquisitions, and ~~favorable price/mix.~~lower tariff costs. These factors were partially offset by ~~higher material and logistics costs of $7 million.~~

~~The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased$143 million or11.8% in the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ ~~months of 2017, reflecting organic growth across all market sectors. EBIT increased by $54 million or 53.1% in the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ months of 2017, primarily due to higher volume of $46 million, improved manufacturing performance of $12 million, the benefit of acquisitions of $11 million, favorable price/mix of $11 million and lower restructuring charges of $8 million. These factors were partially offset by higher material and logistics costs of $20 million and higher SG&A expenses of $11 million.

Full-year sales for the Mobile Industries segment are expected to be up approximately 16% in 2018 compared with 2017. This reflects expected growth across most end-market sectors, led by off-highway, rail and heavy truck, as well as the benefit of acquisitions. EBIT for the Mobile Industries segment is expected to increase in 2018 compared with 2017 primarily due to the impact of ~~higher volume, favorable price/mix, the impact of acquisitions, and improved manufacturing performance, partially offset by higher material, logistics and SG&A costs.~~lower volume.

~~Process Industries Segment:~~

Three Months Ended
September 30,
2018 2017 $ Change Change
Net sales $ 417.1
$ 348.6
$ 68.5
19.7 %
EBIT $ 81.8
$ 61.7
$ 20.1
32.6 %
EBIT margin 19.6 % 17.7 % 190 bps

Three Months Ended
September 30,
2018 2017 $ Change % Change
Net sales $ 417.1
$ 348.6
$ 68.5
19.7 %
Less: Acquisitions 14.5
—
14.5
NM
Currency (6.2 ) —
(6.2 ) NM
Net sales, excluding the impact of acquisitions and currency $ 408.8
$ 348.6
$ 60.2
17.3 %

Nine Months Ended
September 30,
2018 2017 $ Change Change
Net sales $ 1,228.9
$ 1,011.6
$ 217.3
21.5 %
EBIT $ 254.0
$ 166.0
$ 88.0
53.0 %
EBIT margin 20.7 % 16.4 % 430 bps

Nine Months Ended
September 30,
2018 2017 $ Change % Change
Net sales $ 1,228.9
$ 1,011.6
$ 217.3
21.5 %
Less: Acquisitions 21.6
—
21.6
NM
Currency 13.7
—
13.7
NM
Net sales, excluding the impact of acquisitions and currency $ 1,193.6
$ 1,011.6
$ 182.0
18.0 %

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$60~~$67.0 million or ~~17.3%~~5.5% in the ~~third~~ ~~quarter~~first nine months of ~~2018~~2019 compared with the ~~third~~ ~~quarter~~first nine months of ~~2017.~~2018. The increase was primarily driven by increased demand across ~~the~~most sectors, led by wind energy, heavy industries, marine, and industrial ~~sectors, including original equipment, services and~~ distribution, as well as ~~higher~~positive pricing. EBIT increased ~~$20~~$50.8 million or ~~32.6%~~20.0% in the ~~third~~ ~~quarter~~first nine months of ~~2018~~2019 compared with the ~~third~~ ~~quarter~~first nine months of ~~2017~~2018 primarily due to the ~~impact~~net benefit of ~~higher volume of $23 million and~~acquisitions, favorable price/mix, ~~of $5 million.~~and higher volume. These factors were partially offset by higher material ~~and logistics~~ costs ~~of $5 million~~ (including tariffs) ~~and~~, higher SG&A ~~expenses.~~

~~The Process Industries segment's net sales, excluding~~costs, and the ~~effects of acquisitions and foreign currency exchange rate changes, increased $182 million or 18.0% in the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ months of 2017. The increase was primarily driven by increased demand across the industrial sectors, including original equipment, distribution and services, as well as higher pricing. EBIT increased $88 million or 53.0% in the first ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ ~~months of 2017 primarily due to the impact of higher volume of $68 million, favorable price/mix of $34 million, improved manufacturing performance of $7 million and the~~negative impact of foreign currency exchange rate changes. ~~These factors were partially offset by higher material and logistics costs of $11 million (including tariffs) and higher SG&A expenses of $14 million.~~

Full-year sales for the Process Industries segment are expected to be up approximately ~~24%~~12% to 13% in ~~2018~~2019 compared with ~~2017.~~2018. This reflects the expected ~~growth across most industrial sectors, including distribution, original equipment and service sectors,~~benefit of acquisitions, as well as organic growth in the ~~benefit~~renewable energy and marine market sectors, partially offset by a decline in industrial services and the unfavorable impact of ~~acquisitions.~~foreign currency exchange rate changes. EBIT for the Process Industries segment is expected to increase in ~~2018~~2019 compared with ~~2017~~2018 primarily due to favorable price/mix, the benefit of acquisitions, the impact of higher volume, ~~favorable price/mix,~~and related improved manufacturing ~~performance, and the impact of acquisitions,~~utilization, partially offset by higher SG&A ~~expenses~~expense, the negative impact of foreign currency exchange rate changes, and higher material ~~and logistics costs.~~costs (including tariffs).

Corporate:


	Three Months Ended September 30,									Three Months Ended September 30,
	2018			2017			$ Change		Change	2019			2018			$ Change			Change
Corporate expenses	$	17.9		$	12.1		$	5.8	47.9%	$	11.4		$	17.9		$	(6.5	)	(36.3%)
Corporate expenses % to net sales	2.0		%	1.6		%			40 bps	1.2		%	2.0		%				(80) bps


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			$ Change		Change	2019			2018			$ Change			Change
Corporate expenses	$	47.2		$	36.4		$	10.8	29.7%	$	41.1		$	47.2		$	(6.1	)	(12.9%)
Corporate expenses % to net sales	1.8		%	1.6		%			20 bps	1.4		%	1.8		%				(40) bps

Corporate ~~expense increased~~expenses decreased in the ~~third quarter~~three and ~~first~~ nine months ~~of 2018~~ended September 30, 2019 compared with the ~~third quarter~~three and ~~first~~ nine months ~~of 2017~~ended September 30, 2018, primarily due to ~~the impact of acquisition-related costs.~~

higher transaction costs related to acquisitions in 2018.

The Balance Sheet

The following discussion is a comparison of the Consolidated Balance Sheets at September 30, ~~2018~~2019 and December 31, ~~2017~~2018.

Current Assets:


	September 30, 2018		December 31, 2017		$ Change			% Change		September 30, 2019		December 31, 2018		$ Change			% Change
Cash and cash equivalents	$	153.7	$	121.6	$	32.1		26.4	%	$	181.4	$	132.5	$	48.9		36.9	%
Restricted cash	1.3		3.8		(2.5		)	(65.8	)%	0.5		0.6		(0.1		)	(16.7	)%
Accounts receivable, net	548.6		524.9		23.7			4.5	%	548.3		546.6		1.7			0.3	%
Unbilled receivables	137.3		—		137.3			NM		151.6		116.6		35.0			30.0	%
Inventories, net	841.0		738.9		102.1			13.8	%	805.3		835.7		(30.4		)	(3.6	)%
Deferred charges and prepaid expenses	28.4		29.7		(1.3		)	(4.4	)%	30.1		28.2		1.9			6.7	%
Other current assets	76.0		81.2		(5.2		)	(6.4	)%	90.2		77.0		13.2			17.1	%
Total current assets	$	1,786.3	$	1,500.1	$	286.2		19.1	%	$	1,807.4	$	1,737.2	$	70.2		4.0	%

Refer to the "Cash Flows" section for discussion on the change in Cash and cash equivalents. ~~Accounts receivable~~Unbilled receivables increased primarily due to higher ~~sales~~marine production and related revenue recognized over time in September ~~2018~~2019 compared to December ~~2017 and~~2018. Inventories primarily decreased due to the Company's efforts to reduce inventory to meet current ~~year acquisitions, partially offset by the reclassification of revenue recognized in excess of billings to Unbilled receivables under the new revenue standard~~demand and the impact of foreign currency exchange rate ~~changes. Unbilled receivables increased~~changes, partially offset by inventory related to recent acquisitions. The increase in other current assets was primarily due to the ~~adoption~~increase in the fair value of ~~the new revenue standard, including the reclassification of revenue recognized in excess of billings of $67 million at December 31, 2017 from accounts receivable. Refer to~~ ~~Note 2 - Significant Accounting Policies~~ for additional information. Inventories increased due to the impact of higher production to meet anticipated customer demand and $56 million from the businesses acquired during the third quarter, partially offset by the impact of foreign currency exchange rate changes.derivative instruments outstanding.

Property, Plant and Equipment, Net:

September 30,
2018 December 31,
2017 $ Change % Change
Property, plant and equipment $ 2,448.2
$ 2,405.6
$ 42.6
1.8 %
Less: accumulated depreciation (1,561.4 ) (1,541.4 ) (20.0 ) 1.3 %
Property, plant and equipment, net $ 886.8
$ 864.2
$ 22.6
2.6 %



	September 30, 2019		December 31, 2018		$ Change			% Change
Property, plant and equipment, net	$	906.8	$	912.1	$	(5.3	)	(0.6	)%

The ~~increase~~decrease in net property, plant and equipment in("PP&E") for the first nine months of ~~2018~~2019 was primarily due to ~~$68 million from the businesses acquired during the third quarter and capital expenditures~~depreciation in 2019 of ~~$59 million, partially offset by current-year depreciation of $74~~$77 million and the net impact of foreign currency exchange rate changes of ~~$30~~$19 million, partially offset by capital expenditures of $81 million and the addition of PP&E related to recent acquisitions of $11 million.

Operating Lease Assets



	September 30, 2019		December 31, 2018		$ Change		% Change
Operating lease assets	$	115.0	$	—	$	115.0	NM

The increase in operating lease assets in the first nine months of 2019 was primarily due to the adoption of the new lease accounting standard. The increase also includes the reclassification of $15.3 million of lease assets from non-current assets to operating lease assets related to purchase accounting adjustments from the ABC Bearings acquisition. These assets do not have corresponding lease liabilities. Refer to Note 2 - Significant Accounting Policies in the Notes to the Consolidated Financial Statements for further discussion.

Other Assets:


	September 30, 2018		December 31, 2017		$ Change			% Change		September 30, 2019		December 31, 2018		$ Change			% Change
Goodwill	$	965.4	$	511.8	$	453.6		88.6	%	$	954.7	$	960.5	$	(5.8	)	(0.6	)%
Other intangible assets										702.8		733.2		(30.4		)	(4.1	)%
Non-current pension assets	21.7		19.7		2.0			10.2	%	11.8		6.2		5.6			90.3	%
Other intangible assets	743.1		420.6		322.5			76.7	%
Non-current other postretirement benefit assets										23.5		—		23.5			NM
Deferred income taxes	52.3		61.0		(8.7		)	(14.3	)%	27.3		59.0		(31.7		)	(53.7	)%
Other non-current assets	43.9		25.0		18.9			75.6	%	16.0		37.0		(21.0		)	(56.8	)%
Total other assets	$	1,826.4	$	1,038.1	$	788.3		75.9	%	$	1,736.1	$	1,795.9	$	(59.8	)	(3.3	)%

The ~~increase in goodwill was primarily due to current-year acquisitions. The increase~~decrease in other intangible assets was primarily due to current-year ~~acquisitions of $366 million, partially offset by current-year~~ amortization of ~~$32~~$43 million and the unfavorable impact of foreign currency exchange rate changes of $8$21 million, partially offset by current-year acquisitions of $31 million.

~~Current Liabilities:~~

September 30,
2018 December 31,
2017 $ Change % Change
Short-term debt $ 37.0
$ 105.4
$ (68.4 ) (64.9 )%
Current portion of long-term debt 11.4
2.7
8.7
322.2 %
Accounts payable 282.8
265.2
17.6
6.6 %
Salaries, wages and benefits 133.5
127.9
5.6
4.4 %
Income taxes payable 19.2
9.8
9.4
95.9 %
Other current liabilities 172.7
160.7
12.0
7.5 %
Total current liabilities $ 656.6
$ 671.7
$ (15.1 ) (2.2 )%

During the third quarter, the Company made changes to the medical plan offerings for certain Company postretirement benefit plans, effective January 1, 2020, which will impact the benefits provided to certain retirees. The plan amendment triggered a remeasurement, which resulted in a reduction in the postretirement benefit obligation and a corresponding pretax adjustment to accumulated other comprehensive loss. In addition, as a result of the remeasurement, certain postretirement benefit plans became overfunded by $23.5 million. The remeasurement also resulted in a reduction in deferred income taxes of $25 million for the first nine months of 2019. See Note 15 - Other Postretirement Benefit Plans for further discussion. The decrease in ~~short-term debt~~other non-current assets was primarily due to the reclassification of ~~borrowings under the Company's Accounts Receivable Facility~~$15.3 million of lease assets from ~~short-term debt~~non-current assets to ~~long-term debt due~~operating lease assets related to the ~~recent renewal of the Accounts Receivable Facility for a period of three years (until November 30, 2021).~~ ABC Bearings acquisition.

Current Liabilities:



	September 30, 2019		December 31, 2018		$ Change			% Change
Short-term debt	$	34.8	$	33.6	$	1.2		3.6	%
Current portion of long-term debt	61.8		9.4		52.4			557.4	%
Short-term operating lease liabilities	28.0		—		28.0			NM
Accounts payable	265.2		273.2		(8.0		)	(2.9	)%
Salaries, wages and benefits	116.9		174.9		(58.0		)	(33.2	)%
Income taxes payable	23.2		23.5		(0.3		)	(1.3	)%
Other current liabilities	174.7		171.0		3.7			2.2	%
Total current liabilities	$	704.6	$	685.6	$	19.0		2.8	%

The increase in ~~accounts payable~~the current portion of long-term debt was primarily due to ~~current-year acquisitions.~~the 2020 Term Loan being reclassified to current portion of long-term debt as it matures on September 18, 2020.

The increase in short-term operating lease liabilities was primarily due to the adoption of the new lease accounting standard. Refer to Note 2 - Significant Accounting Policies in the Notes to the Consolidated Financial Statements for further discussion.

The decrease in accrued salaries, wages and benefits was primarily due to timing as the payments for 2018 performance-based compensation exceeded accruals for 2019 performance-based compensation expense during the first nine months of the year. In addition, the current pension liability decreased due to the payout of deferred compensation to a former executive of the Company.

Non-Current Liabilities:


	September 30, 2018		December 31, 2017		$ Change			% Change		September 30, 2019		December 31, 2018		$ Change			% Change
Long-term debt	$	1,681.7	$	854.2	$	827.5		96.9	%	$	1,553.5	$	1,638.6	$	(85.1	)	(5.2	)%
Accrued pension cost	171.6		167.3		4.3			2.6	%
Accrued postretirement benefits cost	134.0		122.6		11.4			9.3	%
Accrued pension benefits										167.8		161.3		6.5			4.0	%
Accrued postretirement benefits										36.9		108.7		(71.8		)	(66.1	)%
Long-term operating lease liabilities										72.3		—		72.3			NM
Deferred income taxes	152.4		44.0		108.4			246.4	%	131.7		138.0		(6.3		)	(4.6	)%
Other non-current liabilities	62.8		67.7		(4.9		)	(7.2	)%	81.0		70.3		10.7			15.2	%
Total non-current liabilities	$	2,202.5	$	1,255.8	$	946.7		75.4	%	$	2,043.2	$	2,116.9	$	(73.7	)	(3.5	)%

The ~~increase~~decrease in long-term debt was primarily due to the ~~issuance~~2020 Term Loan being reclassified to current portion of ~~$400~~long- term debt as it matures on September 18, 2020. In addition, $13 million ~~aggregate principal amount~~ of ~~2028 Notes and $350 million of~~the outstanding borrowings under the ~~2023 Term Loan used~~Accounts Receivable Facility was classified as short-term and reflects the Company's expectations relative to ~~finance~~ the ~~Rollon~~minimum borrowing base at September 30, 2019.

The decrease in accrued postretirement benefits was primarily due to changes to the medical plan offerings for certain of the Company's postretirement benefit plans, effective January 1, 2020, which will impact the benefits provided to certain retirees. The plan amendment triggered a remeasurement, which resulted in a $103.5 million reduction in the postretirement benefit obligation and ~~Cone Drive acquisitions,~~a corresponding pretax adjustment to accumulated other comprehensive loss. This reduction was partially offset by a reclassification of $22.6 million to a non-current postretirement benefit asset as one of the Company’s plans became over-funded, as well as the ~~reclassification~~recognition of ~~borrowings under the Company's Accounts Receivable Facility from short-term debt to long-term debt~~actuarial losses of $9.9 million due to the ~~recent renewal~~remeasurement of ~~this agreement for a period of three years (until November 30, 2021).~~ plan assets and obligations.

The increase in ~~accrued postretirement benefit costs is~~long-term operating lease liabilities was primarily due to the ~~acquisition~~adoption of ~~Cone Drive of $12 million. The increase~~ the new lease accounting standard. Refer to Note 2 - Significant Accounting Policies in ~~deferred income taxes is primarily due~~the Notes to the ~~acquisitions of Rollon, Cone Drive and ABC Bearings.~~Consolidated Financial Statements for further discussion.

Shareholders’ Equity:


	September 30, 2018			December 31, 2017			$ Change			% Change		September 30, 2019			December 31, 2018			$ Change			% Change
Common shares	$	998.2		$	956.9		$	41.3		4.3	%	$	998.6		$	1,005.0		$	(6.4	)	(0.6	)%
Earnings invested in the business	1,595.4			1,408.4			187.0			13.3	%	1,815.0			1,630.2			184.8			11.3	%
Accumulated other comprehensive loss	(88.8		)	(38.3		)	(50.5		)	131.9	%	(80.1		)	(95.3		)	15.2			(15.9	)%
Treasury shares	(924.9		)	(884.3		)	(40.6		)	4.6	%	(988.7		)	(960.3		)	(28.4		)	3.0	%
Noncontrolling interest	60.5			32.2			28.3			87.9	%	72.7			63.1			9.6			15.2	%
Total shareholders’ equity	$	1,640.4		$	1,474.9		$	165.5		11.2	%	$	1,817.5		$	1,642.7		$	174.8		10.6	%

Earnings invested in the business in the first nine months of ~~2018~~2019 increased by net income attributable to the Company of ~~$243~~$248.6 million, partially offset by dividends declared of ~~$64~~$63.8 million.

The ~~increase~~decrease in accumulated other comprehensive loss was primarily due to a reduction in the postretirement benefit obligation due to a plan amendment that had a corresponding after-tax impact of $78 million ($103.5 million pretax) to accumulated other comprehensive loss, partially offset by foreign currency adjustments of ~~$54~~$61 million. See "Other ~~Matters~~Disclosures - Foreign Currency" for further discussion regarding the impact of foreign currency translation.

The increase in treasury shares was primarily due to the Company's purchase of ~~1,371,515~~1.3 million of its common shares for ~~$63~~$56.1 million, partially offset by ~~$22~~$35 million of ~~net~~new shares issued for stock compensation plans ~~during the first~~ ~~nine~~ ~~months of 2018. The increase in noncontrolling interest was primarily due to the shares issued~~ for ~~the acquisition of ABC Bearings. Refer to~~ ~~Note 8 - Equity~~ ~~for more information on the acquisition of ABC Bearings.~~2019.

Cash Flows


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			$ Change			2019			2018			$ Change
Net cash provided by operating activities	$	195.0		$	142.9		$	52.1		$	354.8		$	195.0		$	159.8
Net cash used in investing activities	(810.3		)	(407.4		)	(402.9		)	(162.2		)	(810.3		)	648.1
Net cash provided by financing activities	657.3			236.8			420.5
Net cash (used in) provided by financing activities										(137.4		)	657.3			(794.7		)
Effect of exchange rate changes on cash	(12.4		)	16.6			(29.0		)	(6.4		)	(12.4		)	6.0
Increase in cash, cash equivalents and restricted cash	$	29.6		$	(11.1	)	$	40.7		$	48.8		$	29.6		$	19.2

Operating Activities:

~~Operating activities provided net cash of $195 million~~The increase in ~~the first~~ ~~nine~~ ~~months of 2018, compared with $143 million of~~ net cash provided inby operating activities for the first nine months of ~~2017. The increase~~2019 compared with the first nine months of 2018 was primarily due to a decrease in cash used for working capital items of $157.6 million, higher net income of ~~$71~~$12.2 million, and the favorable impact of income taxes on cash of ~~$54 million and the impact of foreign currency exchange rate changes of $22 million,~~$9.0 million. These favorable items were partially offset by an increase in ~~cash used for working capital items~~pension and other postretirement benefit contributions and payments of ~~$122~~$24.7 million. Refer to the ~~table~~tables below for additional detail of the impact of each line item on net cash provided by operating activities.

The following table displays the impact of working capital items on cash during the first nine months of 2019 and 2018, ~~and 2017,~~ respectively:


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			$ Change			2019			2018			$ Change
Cash (Used) Provided:
Accounts receivable	$	(65.7	)	$	(61.6	)	$	(4.1	)	$	(6.4	)	$	(65.7	)	$	59.3
Unbilled receivables	(37.6		)	—			(37.6		)	(35.0		)	(37.6		)	2.6
Inventories	(94.3		)	(85.4		)	(8.9		)	37.8			(94.3		)	132.1
Trade accounts payable	(9.9		)	55.7			(65.6		)	(7.4		)	(9.9		)	2.5
Other accrued expenses	10.2			15.9			(5.7		)	(28.7		)	10.2			(38.9		)
Cash used in working capital items	$	(197.3	)	$	(75.4	)	$	(121.9	)	$	(39.7	)	$	(197.3	)	$	157.6

The following table displays the impact of income taxes on cash during the first nine months of 2019 and 2018, ~~and 2017,~~ respectively:


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			$ Change			2019			2018			$ Change
Accrued income tax expense	$	83.5		$	28.5		$	55.0		$	110.4		$	83.5		$	26.9
Income tax payments	(82.0		)	(77.2		)	(4.8		)	(97.5		)	(82.0		)	(15.5		)
Other miscellaneous items	0.2			(3.4		)	3.6			(2.2		)	0.2			(2.4		)
Change in income taxes	$	1.7		$	(52.1	)	$	53.8		$	10.7		$	1.7		$	9.0

Investing Activities:

Net cash used in investing activities of ~~$810~~$162.2 million in for the first nine months of ~~2018 increased $403~~2019 decreased $648.1 million from the same period in ~~2017~~2018 primarily due to ~~the increase of $418~~a $682.7 million reduction in cash used for acquisitions ~~when compared to the prior year,~~in 2019, partially offset by a $20.1 million increase in cash used for capital expenditures and a $14 million decrease in cash proceeds from the divestiture of the ICT ~~Business.~~Business completed in 2018.

Financing Activities:

~~Net~~The cash ~~provided~~used by financing activities ~~was $657 million~~for the first nine months of 2019 compared with the cash provided in the first nine months of 2018 ~~compared with $237 million of net cash provided by financing activities in the first~~ ~~nine~~ ~~months of 2017. The increase in cash provided by financing activities~~ was primarily due to ~~an increase~~a decrease in net borrowings of ~~$452~~$795.3 million. Net borrowings decreased $15.9 million ~~during~~for the first nine months of ~~2018 compared with~~2019. Net borrowings increased $779.4 million for the ~~first~~ ~~nine~~ ~~months of 2017, primarily needed~~same period in 2018 to fund the Cone Drive and Rollon ~~acquisitions in 2018, partially offset by an increase in cash used for share repurchases of $22 million and a reduction in proceeds from stock option activity of $15 million during the first~~ ~~nine~~ ~~months of 2018 compared with the first~~ ~~nine~~ ~~months of 2017.~~acquisitions.

Liquidity and Capital Resources:

Reconciliation of total debt to net debt and the ratio of net debt to capital:

Net Debt:


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
Short-term debt	$	37.0	$	105.4	$	34.8	$	33.6
Current portion of long-term debt	11.4		2.7		61.8		9.4
Long-term debt	1,681.7		854.2		1,553.5		1,638.6
Total debt	$	1,730.1	$	962.3	$	1,650.1	$	1,681.6
Less: Cash and cash equivalents	153.7		121.6		181.4		132.5
Restricted cash	1.3		3.8		0.5		0.6
Net debt	$	1,575.1	$	836.9	$	1,468.2	$	1,548.5

Ratio of Net Debt to Capital:


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
Net debt	$	1,575.1		$	836.9		$	1,468.2		$	1,548.5
Total equity	1,640.4			1,474.9			1,817.5			1,642.7
Net debt plus total equity (capital)	$	3,215.5		$	2,311.8		$	3,285.7		$	3,191.2
Ratio of net debt to capital	49.0		%	36.2		%	44.7		%	48.5		%

The Company presents net debt because it believes net debt is more representative of the Company's financial position than total debt due to the amount of cash and cash equivalents held by the Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.

At The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2021. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic accounts receivable of the Company. Borrowings under the Accounts Receivable Facility were not reduced by any such borrowing base limitations at September 30, 2019. As of September 30, 2019, the Company had $100.0 million in outstanding borrowings, which reduced the availability under the facility to zero. The interest rate on the Accounts Receivable Facility is variable and was 3.09% as of September 30, 2019, which reflects the prevailing commercial paper rate plus facility fees.

On June 25, 2019, the Company entered into the Senior Credit Facility, which is a $650.0 million unsecured revolving credit facility that matures on June 25, 2024. At September 30, 2019, the Senior Credit Facility had outstanding borrowings of $69.3 million, which reduced the availability to $580.7 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0 (increasing for a limited time period following qualifying acquisitions). As of September 30, 2019, the Company's consolidated leverage ratio was 2.3 to 1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of September 30, 2019, the Company's consolidated interest coverage ratio was 10.4 to 1.0.

The interest rate under the Senior Credit Facility is variable and with a spread based on the Company's debt rating. This average rate on outstanding U.S. Dollar borrowings was 3.26% and the average rate on outstanding Euro borrowings was 1.00% as of September 30, 2019. In addition, the Company pays a facility fee based on the consolidated leverage ratio multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility.

Other sources of liquidity include short-term lines of credit for certain of the Company's foreign subsidiaries, which provide for borrowings of up to approximately $261.9 million. Most of these credit lines are uncommitted. At September 30, 2019, the Company had borrowings outstanding of $22.0 million and bank guarantees of $0.3 million, which reduced the aggregate availability under these facilities to approximately $239.6 million.

On September 6, 2018, the Company issued the 2028 Notes in the aggregate principal amount of $400 million. On September 11, 2018, the Company entered into the 2023 Term Loan and borrowed $350 million. Proceeds from the 2028 Notes and 2023 Term Loan were used to fund the acquisitions of Cone Drive and Rollon, which closed on September 1, 2018 and September 18, 2018, respectively. On July 12, 2019, the Company amended the terms of the 2023 Term Loan to among other things, align covenants and other terms with the Company’s Senior Credit Facility. Refer to ~~, $142~~Note 7 - Financing Arrangements to the Notes to the Consolidated Financial Statements for additional information.

On September 7, 2017, the Company issued the 2027 Notes in the aggregate principal amount of €150 million. On September 18, 2017, the Company entered into the 2020 Term Loan and borrowed €100 million. During the second quarter of 2019, the Company repaid €23.5 million under the 2020 Term Loan bringing the total paid to-date to €52 million, which reduced the principal balance to €49 million as of September 30, 2019. Refer to Note 7 - Financing Arrangements to the Notes to the Consolidated Financial Statements for additional information.

At September 30, 2019, $172.2 million of the Company's ~~$154~~$181.4 million of cash and cash equivalents resided in jurisdictions outside the U.S. It is the Company's practice to use available cash in the U.S. to pay down its Senior Credit Facility or Accounts Receivable Facility in order to minimize ~~total~~ interest expense. Repatriation of non-U.S. cash could be subject to taxes and some portion may be subject to governmental restrictions. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the U.S. This strategy includes making investments in facilities, equipment and potential new acquisitions. The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.

The Company expects that any cash requirements in excess of cash on hand and cash generated from operating activities will be met by the committed funds available under its Accounts Receivable Facility and Senior Credit Facility. Management believes it has sufficient liquidity to meet its obligations through the term of the Senior Credit ~~Facility and expects to renew the Senior Credit Facility prior to its maturity.~~Facility.

In September 2018, the Company renewed its $100 million Accounts Receivable Facility, which now matures on November 30, 2021. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic accounts receivable of the Company. Borrowings under the Accounts Receivable Facility were not reduced by any such borrowing base limitations at September 30, 2018. As of September 30, 2018, the Company had $93.2 million in outstanding borrowings, which reduced the availability under the facility to $6.8 million. The interest rate on the Accounts Receivable Facility is variable and was 3.05% as of September 30, 2018, which reflects the prevailing commercial paper rate plus facility fees.

~~The Company has a $500 million Senior Credit Facility, which matures on June 19, 2020.~~ At September 30, 2018, the Senior Credit Facility had outstanding borrowings of $65.2 million, which reduced the availability to $434.8 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0 (3.75 to 1.0 for a limited period up to four quarters following an acquisition with a purchase price of $200 million or greater). As of September 30, 2018, the Company's consolidated leverage ratio was 2.57 to 1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0. As of September 30, 2018, the Company's consolidated interest coverage ratio was 16.03 to 1.0.

The interest rate under the Senior Credit Facility is variable and represents a blended U.S. Dollar and Euro rate with a spread based on the Company's debt rating and outstanding borrowings. This weighted-average rate on outstanding borrowings was 2.43% as of September 30, 2018. In addition, the Company pays a facility fee based on the consolidated leverage ratio multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility.

Other sources of liquidity include short-term lines of credit for certain of the Company's foreign subsidiaries, which provide for borrowings of up to approximately $285 million. Most of these credit lines are uncommitted. At September 30, 2018, the Company had borrowings outstanding of $37 million and bank guarantees of $1 million, which reduced the aggregate availability under these facilities to approximately $247 million.

On September 6, 2018, the Company issued the 2028 Notes in the aggregate principal amount of $400 million. On September 11, 2018, the Company entered into the 2023 Term Loan and borrowed $350 million. Proceeds from the 2028 Notes and 2023 Term Loan were used to fund the acquisitions of Cone Drive and Rollon, which closed on September 1, 2018 and September 18, 2018, respectively. Refer to ~~Note 6 - Financing Arrangements~~ ~~to the Notes to the Consolidated Financial Statements for additional information.~~

On September 7, 2017, the Company issued the 2027 Notes in the aggregate principal amount of €150 million. On September 18, 2017, the Company entered into the 2020 Term Loan and borrowed €100 million. On June 14, 2018, the Company repaid approximately €6.5 million, reducing the principal balance to approximately €93.5 million as of September 30, 2018. Proceeds from the 2027 Notes and 2020 Term Loan were used to repay amounts drawn from the Senior Credit Facility to fund the Groeneveld acquisition. Refer to ~~Note 6 - Financing Arrangements~~ ~~to the Notes to the Consolidated Financial Statements for additional information.~~

All of these debt instruments, except the 2028 Notes and the short-term lines of credit, have two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. At September 30, 2018,2019, the Company was in full compliance with ~~these covenants. The~~all applicable covenants on its outstanding debt, and the Company expects to remain in full compliance with its debt covenants. However, the Company may need to limit its borrowings under the Senior Credit Facility or other facilities from time to time in order to remain in compliance. As of September 30, ~~2018~~2019, the Company could have borrowed the full amounts available under the Senior Credit Facility and Accounts Receivable Facility and still would have been in compliance with its debt covenants.

The Company expects cash from operations of approximately ~~$375~~$525 million in ~~2018,~~2019, an increase from ~~2017~~2018 of approximately ~~$138~~$193 million or 58%., as the Company anticipates higher net income and lower working capital requirements. The Company expects capital expenditures of approximately ~~$115~~$150 million in ~~2018,~~2019, compared with ~~$105~~$113 million in ~~2017.~~2018.

Financing Obligations and Other Commitments:

During the first nine months of ~~2018,~~2019, the Company made cash contributions and payments of $9$33.3 million to its global defined benefit pension plans and $3$3.8 million to its other postretirement benefit plans. ~~The Company currently expects to make~~Approximately $24 million of the total contributions ~~to its~~and payments for the Company's global defined benefit pension plans ~~totaling approximately $10 million in 2018.~~related to the 2019 payout of deferred compensation to a former executive officer of the Company, which triggered a pension remeasurement during the third quarter of 2019. The Company ~~also~~ expects to make additional payments of approximately $5 million to its other postretirement benefit plans in ~~2018.~~the fourth quarter of 2019. During July 2019, the Company announced changes to the medical plan offerings for certain of its postretirement benefit plans, effective January 1, 2020, which will impact the benefits provided to certain retirees. These plan amendments triggered a remeasurement during the third quarter of 2019. Excluding mark-to-market charges, the Company expects slightly lower pension and other postretirement benefits expense. ~~Mark-to-market~~Future pension and other postretirement mark-to-market charges are not accounted for in the ~~2018~~2019 outlook because ~~the amount~~such amounts will not be known until ~~incurred.~~the fourth quarter of 2019.

The Company does not have any off-balance sheet arrangements with unconsolidated entities or other persons.

Critical Accounting Policies and Estimates:

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the ~~U.S.~~United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company reviews its critical accounting policies throughout the year. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates, as described in its Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018, during the nine months ended September 30, ~~2018~~2019 ~~other than the change in accounting principles described below.~~.

Effective January 1, 2018, the Company adopted the new revenue standard. Prior to the adoption of the new revenue standard, the Company generally recognized revenue when title passed to the customer. This occurred at the shipping point except for goods sold by certain foreign entities and certain exported goods, where title passed when the goods reached their destination. The Company also recognized a portion of its revenues on the percentage-of-completion method measured on the cost-to-cost basis.

Under the new revenue standard, the Company recognizes revenue when performance obligations are satisfied under the terms of a contract with the customer. Approximately 9% of 2018 net sales is recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later point in time when control of the products transfers to the customer. As a result of control transferring over time for these products and services, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company has elected to use the cost-to-cost input measure of progress for its contracts because it best depicts the transfer of goods or services to the customer based on incurring costs on the contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.

The amount of consideration that the Company expects to be entitled in exchange for its goods and services is not generally subject to significant variations. However, the Company does offer certain customers rebates, prompt payment discounts, end-user discounts, the right to return eligible products, and/or other forms of variable consideration. The Company estimates this variable consideration using the expected value amount, which is based on historical experience. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company adjusts its estimate of revenue at the earlier of when the amount of consideration the Company expects to receive changes or when the consideration becomes fixed.

Other Matters

Foreign Currency:

Assets and liabilities of subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the reporting period. Related translation adjustments are reflected as a separate component of accumulated other comprehensive loss. Foreign currency gains and losses resulting from transactions, and the related hedging activity, are included in the Consolidated Statements of Income.

For the nine months ended September 30, ~~2018,~~2019, the Company recorded negative foreign currency translation adjustments of ~~$54~~$61.9 million that decreased shareholders' equity, compared with ~~positive~~negative foreign currency translation adjustments of ~~$41~~$35.3 million that ~~increased~~decreased shareholders' equity for the first nine months ended September 30, ~~2017.~~2018. The foreign currency translation adjustments for the first nine months ended September 30, ~~2018~~2019 were negatively impacted by the strengthening of the U.S. dollar relative to other foreign currencies, including the Euro, Chinese ~~Yuan, Indian Rupee~~Renminbi (Yuan), and ~~Brazilian Real.~~Romanian Leu.

Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the ~~third~~ ~~quarter of 2018~~three months ended September 30, 2019 totaled ~~$3.0~~$2.2 million of net gains, compared with ~~$1.2~~$3.0 million of net ~~losses~~gains during the ~~third~~ ~~quarter of 2017.~~three months ended September 30, 2018. Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the first nine months of ~~2018~~2019 totaled ~~$1.7~~$5.3 million of net gains, compared with ~~$2.6~~$1.7 million of net ~~losses~~gains during the first nine months of ~~2017.~~2018.

Forward-Looking Statements

Certain statements set forth in this Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 that are not historical in nature (including the Company's forecasts, beliefs and expectations) are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management's Discussion and Analysis contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. The Company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the Company due to a variety of factors, such as:

deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown, terrorism or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which the Company or its customers or suppliers conduct business, changes in currency valuations and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;

the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which the Company operates. This includes: the ability of the Company to respond to rapid changes in customer demand, the effects of customer or supplier bankruptcies or liquidations, the impact of changes in industrial business cycles and whether conditions of fair trade continue in the Company's markets;

competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products by existing and new competitors and new technology that may impact the way the Company’s products are sold or distributed;

changes in operating costs. This includes: the effect of changes in the Company’s manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability and cost of raw materials and energy; changes in the expected costs associated with product warranty claims; changes resulting from inventory management and cost reduction initiatives; the effects of unplanned plant shutdowns; and changes in the cost of labor and benefits;

the success of the Company’s operating plans, announced programs, initiatives and capital investments; the ability to integrate acquired companies; and the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings;

the Company’s ability to maintain appropriate relations with unions or works councils that represent Company associates in certain locations in order to avoid disruptions of business;

unanticipated litigation, claims, investigations or assessments. This includes: claims or problems related to intellectual property, product liability or warranty, environmental issues and taxes;

changes in worldwide financial and capital markets, including availability of financing and interest rates on satisfactory terms, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;

the Company's ability to satisfy its obligations under its debt agreements, as well as its ability to renew or refinance borrowings on favorable terms;

the impact on the Company's pension obligations and assets due to changes in interest rates, investment performance and other tactics designed to reduce risk;

~~the actual impact of U.S. Tax Reform on the full-year 2018 global effective tax rate;~~ and

those items identified under Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Additional risks relating to the Company's business, the industries in which the Company operates, or the Company's common shares may be described from time to time in the Company's filings with the Securities and Exchange Commission. All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the Company's control.

Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to information appearing under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q. Furthermore, a discussion of market risk exposures is included in Part II, Item 7A. Quantitative and Qualitative Disclosure about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018. There have been no material changes in reported market risk since the inclusion of this discussion in the Company’s Annual Report on Form 10-K referenced above.

ITEM 4. CONTROLS AND PROCEDURES


(a)	Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.


(b)	Changes in Internal Control Over Financial Reporting

During the Company’s most recent fiscal quarter, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In the ~~third~~second quarter of the fiscal ~~2018,~~year 2019, the Company acquired ~~Rollon, Cone Drive, and ABC Bearings.~~Diamond Chain. The scope of the Company's assessment of the effectiveness of internal control over financial reporting will not include ~~these acquisitions.~~this acquisition. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from the Company's scope in the year of the acquisition.

During the ~~Company’s most recent fiscal~~third quarter ~~there have been no other changes~~of 2018, the Company acquired ABC Bearings, Cone Drive and Rollon. The results of these acquisitions are included in the Company’s consolidated financial statements for the first nine months of 2019. The combined total and net assets of ABC Bearings, Cone Drive, and Rollon represent 23% and 45% of the Company’s total and net assets, respectively as of September 30, 2019. The combined net sales and net income of ABC Bearings, Cone Drive, and Rollon represented 8% of the Company’s consolidated net sales and 10% of the Company’s consolidated net income for the first nine months of 2019. The Company is currently integrating these acquisitions into its internal control framework and processes, and as prescribed by U.S Securities and Exchange Commission rules and regulations, the Company will include ABC Bearings, Cone Drive, and Rollon in the internal control over financial reporting ~~that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.~~assessment as of December 31, 2019.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, included a detailed discussion of our risk factors. There have been no material changes to the risk factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Common Shares

The following table provides information about purchases by the Company of its common shares during the quarter ended September 30, ~~2018~~.2019.

Period
Total number
of shares
purchased ⁽¹⁾

Average
price paid
per share ⁽²⁾

Total number
of shares
purchased as
part of publicly
announced
plans or
programs

Maximum
number of
shares that
may yet
be purchased
under the plans
or programs ⁽³⁾

7/1/18 - 7/31/18 276,897
$ 44.07
276,897
7,725,493
8/1/18 - 8/31/18 27,812
47.42
25,008
7,700,485
9/1/18 - 9/30/18 4,227
51.19
—
7,700,485
Total 308,936
$ 44.47
301,905



Period	Total number of shares purchased ⁽¹⁾	Average price paid per share ⁽²⁾		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs ⁽³⁾
7/1/19 - 7/31/19	250,328	$	48.54	250,000	6,010,710
8/1/19 - 8/31/19	456,649	40.90		452,500	5,558,210
9/1/19 - 9/30/19	47,500	39.85		47,500	5,510,710
Total	754,477	$	43.37	750,000


(1)	Of the shares purchased in July and August, 328 and ~~September, zero, 2804 and 4227,~~4,149, respectively, represent common shares of the Company that were owned and tendered by employees to exercise stock options and to satisfy withholding obligations in connection with the exercise of stock options or vesting of restricted shares.

(2)

For shares tendered in connection with the vesting of restricted shares, the average price paid per share is an average calculated using the daily high and low of the Company's common shares as quoted on the New York Stock Exchange at the time of vesting. For shares tendered in connection with the exercise of stock options, the price paid is the real-time trading stock price at the time the options are exercised.

(3)

On February 6, 2017, the Company announced that its Board of Directors approved a share purchase plan pursuant to which the Company may purchase up to ten million of its common shares in the aggregate. This share repurchase plan expires on February 28, 2021. The Company may purchase shares from time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans.

Item 6. Exhibits



~~10.1~~	~~Form of Nonqualifed Stock Option Agreement (U.S), as adopted September 24, 2018.~~

~~10.2~~	~~Form of Nonqualifed Stock Option Agreement (Non-U.S), as adopted September 24, 2018.~~

~~10.3~~	~~Form of Deferred Shares Agreement (three year cliff vesting), as adopted September 24, 2018.~~

~~10.4~~	~~Form of Deferred Shares Agreement (five year cliff vesting), as adopted September 24, 2018.~~

~~10.5~~	~~Amended and Restated supplemental pension plan of The Timken Company, effective as of June 30, 2014.~~

~~10.6~~	~~Amendment No. 1 to the Amended and Restated supplemental pension plan of The Timken Company, effective as of June 30, 2014.~~

~~10.7~~	~~Amended and Restated supplemental pension plan of The Timken Company, effective as of October 1, 2018.~~

12	~~Computation of Ratio of Earnings to Fixed Charges.~~

31.1	Certification of Richard G. Kyle, President and Chief Executive Officer (principal executive officer) of The Timken Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Philip D. Fracassa, Executive Vice President and Chief Financial Officer (principal financial officer) of The Timken Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certifications of Richard G. Kyle, President and Chief Executive Officer (principal executive officer) and Philip D. Fracassa, Executive Vice President and Chief Financial Officer (principal financial officer) of The Timken Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Financial statements from the quarterly report on Form 10-Q of The Timken Company for the quarter ended September 30, ~~2018,~~2019, filed on October ~~30, 2018,~~31, 2019, formatted in Inline XBRL: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		THE TIMKEN COMPANY
Date: October ~~30, 2018~~31, 2019		By: /s/ Richard G. Kyle
		Richard G. Kyle President and Chief Executive Officer (Principal Executive Officer)

Date: October ~~30, 2018~~31, 2019		By: /s/ Philip D. Fracassa
		Philip D. Fracassa Executive Vice President and Chief Financial Officer (Principal Financial Officer)

5047



	Previous Accounting Method		Effect of Accounting Change		As Reported
Net sales	$	875.6	$	5.7	$	881.3
Cost of products sold	623.2		4.8		628.0
Selling, general, and administrative expenses	141.3		0.7		142.0
Income before income taxes	97.1		0.2		97.3
Provision for income taxes	25.0		—		25.0
Net income	72.1		0.2		72.3
Net income attributable to The Timken Company	$	71.4	$	0.2	$	71.6
Basic earnings per share	$	0.93	$	—	$	0.93
Diluted earnings per share	$	0.91	$	—	$	0.91



	As Previously Reported		Effect of Accounting Change			As Adjusted
Cost of products sold	$	554.4	$	0.9		$	555.3
Selling, general, and administrative expenses	134.0		—			134.0
Operating income	81.7		(0.9		)	80.8
Other income, net	2.9		0.9			3.8



	Preliminary Purchase Price Allocation
Assets:
Accounts receivable, net	$	43.3
Inventories, net	58.3
Other current assets	7.2
Property, plant and equipment, net	68.3
Goodwill	468.2
Other intangible assets	366.0
Other non-current assets	18.8
Total assets acquired	$	1,030.1
Liabilities:
Accounts payable, trade	$	34.5
Salaries, wages and benefits	9.2
Income taxes payable	1.6
Other current liabilities	9.2
Short-term debt	1.8
Long-term debt	1.7
Accrued pension cost	7.0
Accrued postretirement benefits cost	11.8
Deferred income taxes	113.0
Other non-current liabilities	8.9
Total liabilities assumed	$	198.7
Net assets acquired	$	831.4



	Preliminary Purchase Price Allocation		Adjustment			Purchase Price Allocation
Assets:
Accounts receivable, net	$	27.6				$	27.6
Inventories, net	29.4					29.4
Other current assets	3.3		$	2.7		6.0
Property, plant and equipment, net	31.5					31.5
Goodwill	149.7		(3.2		)	146.5
Other intangible assets	173.6					173.6
Other non-current assets	1.8					1.8
Total assets acquired	$	416.9	$	(0.5	)	$	416.4
Liabilities:
Accounts payable, trade	$	9.5				$	9.5
Salaries, wages and benefits	5.8					5.8
Other current liabilities	8.6		$	(0.1	)	8.5
Short-term debt	0.1					0.1
Long-term debt	2.9					2.9
Deferred income taxes	42.2		(0.7		)	41.5
Other non-current liabilities	1.0		0.3			1.3
Total liabilities assumed	$	70.1	$	(0.5	)	$	69.6
Net assets acquired	$	346.8	$	—		$	346.8



	Asset Derivatives				Liability Derivatives
Derivatives designated as hedging instruments:	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Foreign currency forward contracts	$	3.4	$	0.5	$	0.3	$	2.1

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	2.9		0.8		0.8		5.0
Total Derivatives	$	6.3	$	1.3	$	1.1	$	7.1

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, without par value

The New York Stock Exchange