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	2521
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4336
	Item 4.	Controls and Procedures	4336
II.	PART II.
	Item 1.	Legal Proceedings	4437
	Item1A.	Risk Factors	4437
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4537
	Item 6.	Exhibits	4538

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 March 31,
		2020		2019		2020		2019			2021		2020
(Dollars in millions, except per share data)	(Dollars in millions, except per share data)									(Dollars in millions, except per share data)
Net sales	Net sales	$	894.6	$	914.0	$	2,621.5	$	2,893.7	Net sales	$	1,025.4	$	923.4
Cost of products sold	Cost of products sold	630.9		636.5		1,848.6		2,007.9		Cost of products sold	726.2		644.5
Gross Profit	Gross Profit	263.7		277.5		772.9		885.8		Gross Profit	299.2		278.9
Selling, general and administrative expenses	Selling, general and administrative expenses	132.7		148.0		398.1		459.4		Selling, general and administrative expenses	144.5		153.6

Impairment and restructuring charges	Impairment and restructuring charges	12.0		1.6		18.7		3.5		Impairment and restructuring charges	4.0		3.6

Operating Income	Operating Income	119.0		127.9		356.1		422.9		Operating Income	150.7		121.7
Interest expense	Interest expense	(16.3)		(18.2)		(52.3)		(55.5)		Interest expense	(14.9)		(17.1)
Interest income	Interest income	0.9		1.1		3.0		3.5		Interest income	0.5		1.5

Non-service pension and other postretirement income (expense)		15.3		(14.4)		13.4		(14.1)
Other income (expense), net		(1.0)		5.8		1.1		10.5
Non-service pension and other postretirement income										Non-service pension and other postretirement income	4.0		3.4
Other income, net										Other income, net	1.0		4.1
Income Before Income Taxes	Income Before Income Taxes	117.9		102.2		321.3		367.3		Income Before Income Taxes	141.3		113.6
Provision for income taxes	Provision for income taxes	26.6		35.5		84.2		110.4		Provision for income taxes	25.3		29.6
Net Income	Net Income	91.3		66.7		237.1		256.9		Net Income	116.0		84.0
Less: Net income attributable to noncontrolling interest	Less: Net income attributable to noncontrolling interest	2.5		2.5		5.7		8.3		Less: Net income attributable to noncontrolling interest	2.7		3.3
Net Income Attributable to The Timken Company	Net Income Attributable to The Timken Company	$	88.8	$	64.2	$	231.4	$	248.6	Net Income Attributable to The Timken Company	$	113.3	$	80.7

Net Income per Common Share Attributable to The Timken Company Common Shareholders	Net Income per Common Share Attributable to The Timken Company Common Shareholders									Net Income per Common Share Attributable to The Timken Company Common Shareholders
Basic earnings per share	Basic earnings per share	$	1.18	$	0.85	$	3.07	$	3.28	Basic earnings per share	$	1.49	$	1.07

Diluted earnings per share	Diluted earnings per share	$	1.16	$	0.84	$	3.04	$	3.23	Diluted earnings per share	$	1.47	$	1.06

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 March 31,
		2020		2019		2020		2019			2021		2020
(Dollars in millions)	(Dollars in millions)									(Dollars in millions)
Net Income	Net Income	$	91.3	$	66.7	$	237.1	$	256.9	Net Income	$	116.0	$	84.0
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	63.5		(63.0)		9.2		(62.1)		Foreign currency translation adjustments	(44.4)		(78.8)
Pension and postretirement liability adjustments	Pension and postretirement liability adjustments	(1.2)		76.7		(4.0)		76.6		Pension and postretirement liability adjustments	(1.6)		(1.3)
Change in fair value of marketable securities	Change in fair value of marketable securities	(0.1)		0		0		0		Change in fair value of marketable securities	0		(0.4)
Change in fair value of derivative financial instruments	Change in fair value of derivative financial instruments	(1.8)		1.9		(0.2)		0.5		Change in fair value of derivative financial instruments	2.2		4.2
Other comprehensive income, net of tax		60.4		15.6		5.0		15.0
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(43.8)		(76.3)
Comprehensive Income, net of tax	Comprehensive Income, net of tax	151.7		82.3		242.1		271.9		Comprehensive Income, net of tax	72.2		7.7
Less: comprehensive income (loss) attributable to noncontrolling interest	Less: comprehensive income (loss) attributable to noncontrolling interest	3.0		0.7		(0.1)		8.1		Less: comprehensive income (loss) attributable to noncontrolling interest	2.3		(4.2)
Comprehensive Income Attributable to The Timken Company	Comprehensive Income Attributable to The Timken Company	$	148.7	$	81.6	$	242.2	$	263.8	Comprehensive Income Attributable to The Timken Company	$	69.9	$	11.9

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Balance Sheets


		(Unaudited)					(Unaudited)
(Dollars in millions)	(Dollars in millions)	September 30, 2020		December 31, 2019		(Dollars in millions)	March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	313.1	$	209.5	Cash and cash equivalents	$	302.3	$	320.3
Restricted cash	Restricted cash	0.9		6.7		Restricted cash	0.8		0.8
Accounts receivable, less allowances (2020 – $17.1 million; 2019 – $18.1 million)		571.5		545.1
Accounts receivable, less allowances (2021 – $16.8 million; 2020 – $16.5 million)						Accounts receivable, less allowances (2021 – $16.8 million; 2020 – $16.5 million)	712.3		581.1
Unbilled receivables	Unbilled receivables	141.1		129.2		Unbilled receivables	113.3		110.9
Inventories, net	Inventories, net	789.9		842.0		Inventories, net	864.8		841.3
Deferred charges and prepaid expenses	Deferred charges and prepaid expenses	32.7		36.7		Deferred charges and prepaid expenses	40.3		39.9
Other current assets	Other current assets	115.3		105.4		Other current assets	109.8		106.0

Total Current Assets	Total Current Assets	1,964.5		1,874.6		Total Current Assets	2,143.6		2,000.3
Property, Plant and Equipment, net	Property, Plant and Equipment, net	980.2		989.2		Property, Plant and Equipment, net	1,020.6		1,035.6
Other Assets	Other Assets					Other Assets
Goodwill	Goodwill	1,021.1		993.7		Goodwill	1,028.4		1,047.6
Other intangible assets	Other intangible assets	737.2		758.5		Other intangible assets	712.6		741.4
Operating lease assets	Operating lease assets	105.4		114.1		Operating lease assets	113.1		118.2
Non-current pension assets	Non-current pension assets	9.0		3.4		Non-current pension assets	0.1		2.0
Non-current other postretirement benefit assets		0		36.6

Deferred income taxes	Deferred income taxes	72.9		71.8		Deferred income taxes	69.8		77.0
Other non-current assets	Other non-current assets	18.8		18.0		Other non-current assets	18.0		19.5

Total Other Assets	Total Other Assets	1,964.4		1,996.1		Total Other Assets	1,942.0		2,005.7
Total Assets	Total Assets	$	4,909.1	$	4,859.9	Total Assets	$	5,106.2	$	5,041.6
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Short-term debt	Short-term debt	$	64.8	$	17.3	Short-term debt	$	167.5	$	119.8
Current portion of long-term debt	Current portion of long-term debt	10.8		64.7		Current portion of long-term debt	10.8		10.9
Short-term operating lease liabilities	Short-term operating lease liabilities	26.6		28.3		Short-term operating lease liabilities	26.2		27.2
Accounts payable, trade	Accounts payable, trade	306.7		301.7		Accounts payable, trade	362.6		351.4
Salaries, wages and benefits	Salaries, wages and benefits	116.7		134.5		Salaries, wages and benefits	120.2		135.7
Income taxes payable	Income taxes payable	23.3		17.8		Income taxes payable	24.9		16.1

Other current liabilities	Other current liabilities	191.5		172.3		Other current liabilities	204.6		186.9

Total Current Liabilities	Total Current Liabilities	740.4		736.6		Total Current Liabilities	916.8		848.0
Non-Current Liabilities	Non-Current Liabilities					Non-Current Liabilities
Long-term debt	Long-term debt	1,533.0		1,648.1		Long-term debt	1,423.7		1,433.9
Accrued pension benefits	Accrued pension benefits	161.5		165.1		Accrued pension benefits	157.4		163.0
Accrued postretirement benefits	Accrued postretirement benefits	44.8		31.8		Accrued postretirement benefits	52.1		41.3
Long-term operating lease liabilities	Long-term operating lease liabilities	66.0		71.3		Long-term operating lease liabilities	70.9		75.5
Deferred income taxes	Deferred income taxes	162.3		168.2		Deferred income taxes	138.3		148.7
Other non-current liabilities	Other non-current liabilities	102.1		84.0		Other non-current liabilities	96.9		106.0

Total Non-Current Liabilities	Total Non-Current Liabilities	2,069.7		2,168.5		Total Non-Current Liabilities	1,939.3		1,968.4
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Class I and II Serial Preferred Stock, without par value:	Class I and II Serial Preferred Stock, without par value:					Class I and II Serial Preferred Stock, without par value:
Authorized – 10,000,000 shares each class, none issued	Authorized – 10,000,000 shares each class, none issued	0		0		Authorized – 10,000,000 shares each class, none issued	0		0
Common shares, without par value:	Common shares, without par value:					Common shares, without par value:
Authorized – 200,000,000 shares	Authorized – 200,000,000 shares					Authorized – 200,000,000 shares
Issued (including shares in treasury) (2020 – 98,375,135 shares; 2019 – 98,375,135 shares)
Issued (including shares in treasury) (2021 – 76,729,850 shares; 2020 – 75,834,668 shares)						Issued (including shares in treasury) (2021 – 76,729,850 shares; 2020 – 75,834,668 shares)
Stated capital	Stated capital	53.1		53.1		Stated capital	40.7		40.7
Other paid-in capital	Other paid-in capital	930.6		937.6		Other paid-in capital	761.3		740.7
Earnings invested in the business		2,073.4		1,907.4
Accumulated other comprehensive loss		(39.3)		(50.1)
Treasury shares at cost (2020 – 23,018,947 shares; 2019 – 22,836,180 shares)		(989.7)		(979.8)
Retained earnings						Retained earnings	1,429.0		1,339.5
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(2.1)		41.3
Treasury shares at cost (2021 – 746,378 shares; 2020 – 158,836 shares)						Treasury shares at cost (2021 – 746,378 shares; 2020 – 158,836 shares)	(53.4)		(9.3)
Total Shareholders’ Equity	Total Shareholders’ Equity	2,028.1		1,868.2		Total Shareholders’ Equity	2,175.5		2,152.9
Noncontrolling Interest	Noncontrolling Interest	70.9		86.6		Noncontrolling Interest	74.6		72.3
Total Equity	Total Equity	2,099.0		1,954.8		Total Equity	2,250.1		2,225.2
Total Liabilities and Equity	Total Liabilities and Equity	$	4,909.1	$	4,859.9	Total Liabilities and Equity	$	5,106.2	$	5,041.6

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Cash Flows

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
(Dollars in millions)	(Dollars in millions)					(Dollars in millions)
CASH PROVIDED (USED)	CASH PROVIDED (USED)					CASH PROVIDED (USED)
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	237.1	$	256.9	Net income	$	116.0	$	84.0
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	125.2		120.4		Depreciation and amortization	43.0		42.3
Impairment charges	Impairment charges	0.1		0.8		Impairment charges	3.4		0.1
Loss (gain) on sale of assets		1.7		(1.0)
Loss on sale of assets						Loss on sale of assets	0.3		1.2

Deferred income tax (benefit) provision		(6.7)		1.7
Acquisition-related gain						Acquisition-related gain	(0.6)		0
Deferred income tax benefit						Deferred income tax benefit	(2.0)		(5.1)
Stock-based compensation expense	Stock-based compensation expense	19.2		20.7		Stock-based compensation expense	6.5		5.6
Pension and other postretirement (income) expense		(3.9)		23.2
Pension and other postretirement income						Pension and other postretirement income	(1.0)		(0.3)
Pension and other postretirement benefit contributions and payments	Pension and other postretirement benefit contributions and payments	(12.9)		(37.1)		Pension and other postretirement benefit contributions and payments	(2.5)		(5.5)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(27.6)		(6.4)		Accounts receivable	(138.9)		(47.6)
Unbilled receivables	Unbilled receivables	(11.9)		(35.0)		Unbilled receivables	(2.5)		(8.3)
Inventories	Inventories	47.9		37.8		Inventories	(33.3)		0.3
Accounts payable, trade	Accounts payable, trade	2.8		(7.4)		Accounts payable, trade	19.9		0
Other accrued expenses	Other accrued expenses	49.4		(28.7)		Other accrued expenses	17.0		(34.3)
Income taxes	Income taxes	12.4		9.0		Income taxes	3.6		12.5
Other, net	Other, net	24.4		(0.1)		Other, net	2.8		11.3

Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	457.2		354.8		Net Cash Provided by Operating Activities	31.7		56.2
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(85.7)		(82.9)		Capital expenditures	(29.4)		(31.8)
Acquisitions, net of cash received		(6.7)		(82.7)

Investments in short-term marketable securities, net	Investments in short-term marketable securities, net	(10.4)		0.1		Investments in short-term marketable securities, net	(9.9)		0.2
Other	Other	1.4		3.3		Other	(0.1)		0

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(101.4)		(162.2)		Net Cash Used in Investing Activities	(39.4)		(31.6)
Financing Activities	Financing Activities					Financing Activities
Cash dividends paid to shareholders	Cash dividends paid to shareholders	(65.0)		(63.8)		Cash dividends paid to shareholders	(23.8)		(22.9)
Purchase of treasury shares	Purchase of treasury shares	(42.3)		(56.1)		Purchase of treasury shares	(26.3)		(42.3)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	18.2		9.9		Proceeds from exercise of stock options	14.1		7.5
Payments related to tax withholding for stock-based compensation	Payments related to tax withholding for stock-based compensation	(12.0)		(9.3)		Payments related to tax withholding for stock-based compensation	(17.8)		(10.2)
Accounts receivable facility borrowings	Accounts receivable facility borrowings	10.0		25.0		Accounts receivable facility borrowings	66.1		10.0
Accounts receivable facility payments	Accounts receivable facility payments	(110.0)		0		Accounts receivable facility payments	(24.1)		(10.0)
Proceeds from long-term debt	Proceeds from long-term debt	550.0		451.0		Proceeds from long-term debt	70.0		200.0
Payments on long-term debt	Payments on long-term debt	(635.2)		(481.7)		Payments on long-term debt	(73.4)		(37.9)
Deferred financing costs		(1.6)		(1.9)

Short-term debt activity, net	Short-term debt activity, net	46.0		(10.2)		Short-term debt activity, net	8.8		72.3
Noncontrolling interest dividends paid		(15.8)		(0.3)

Net Cash Used in Financing Activities		(257.7)		(137.4)

Net Cash (Used in) Provided by Financing Activities						Net Cash (Used in) Provided by Financing Activities	(6.4)		166.5
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(0.3)		(6.4)		Effect of exchange rate changes on cash	(3.9)		(13.3)
Increase in Cash, Cash Equivalents and Restricted Cash		97.8		48.8
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash						(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(18.0)		177.8
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	216.2		133.1		Cash, cash equivalents and restricted cash at beginning of year	321.1		216.2
Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	314.0	$	181.9	Cash, Cash Equivalents and Restricted Cash at End of Period	$	303.1	$	394.0

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" or "Timken") 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, ~~2019.~~2020.

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, ~~2019.~~2020.

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting ~~Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement~~for Income Taxes,” which is intended to reduce complexity in the accounting for income taxes while maintaining or improving the usefulness of ~~Credit Losses on Financial Instruments," which was subsequently updated with ASU 2019-04 in April 2019. These ASUs change how entities will measure credit losses for most~~information provided to financial ~~assets and~~statement users. The guidance amends 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 appliesexisting provisions under ASC 740 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 lettersaddress a number 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 requires significant judgment. ASU 2016-13distinct items. This standard is effective for public companies in fiscal years beginning after December 15, ~~2019,~~2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company adopted ASU ~~2016-13~~2019-12 effective January 1, ~~2020,~~2021, and the impact of the adoption was not material to the Company's results of operations and financial condition. ~~Refer to~~ ~~Note 12 - Equity~~ ~~for the cumulative effect of initially applying ASU 2016-13.~~

New Accounting Guidance Issued and Not Yet Adopted:

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. The Company is currently assessing which of its various contracts will require an update for a new reference rate and will determine the timing for implementation of this guidance after completing that analysis.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes,” which is intended to reduce complexity in the accounting for income taxes while maintaining or improving the usefulness of information provided to financial statement users. The guidance amends certain existing provisions under ASC 740 to address a number of distinct items. This standard is effective for public companies in fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company is currently assessing the impact of this standard on its results of operations and financial conditions.

Note 3 - Acquisitions

~~During 2019, the~~The Company completed ~~two acquisitions.~~1 acquisition in 2020. On November ~~1, 2019,~~30, 2020, the Company completed the acquisition of ~~BEKA Lubrication~~the assets of Aurora Bearing Company ("~~BEKA"~~Aurora")~~, a leading global supplier~~. With annual sales of ~~automatic lubrication systems. BEKA~~approximately $30 million, Aurora serves a diverse range of industrial sectors, including ~~wind, food~~aerospace and ~~beverage, rail, on-~~defense, racing, off-highway equipment and ~~off-highway~~packing. Aurora is headquartered in Montgomery, Illinois. The total purchase price for this acquisition was $17.3 million, including a post-closing net working capital adjustment. Based on markets and ~~other process industries. Headquartered~~customers served, results for Aurora are reported in ~~Pegnitz, Germany, BEKA has manufacturing~~both the Mobile Industries segment and ~~research and development facilities in Germany, and assembly facilities and sales offices around~~ the world. On April 1, 2019, the Company completed the acquisition of 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 operates primarily in the United States and China. These acquisitions are collectively referred to hereafter as the "2019 Acquisitions."Process Industries segment.

The following table presents the purchase price allocation at fair value, net of cash acquired, for the ~~2019 Acquisitions~~Aurora acquisition as of ~~September 30, 2020:~~March 31, 2021:

Initial Purchase
Price Allocation Adjustments Purchase
Price Allocation
Assets:
Accounts receivable, net $ 26.3 $ (0.1) $ 26.2
Inventories, net 62.9 (0.4) 62.5
Other current assets 4.9 0.2 5.1
Property, plant and equipment, net 57.4 (0.1) 57.3
Operating lease assets 4.7 (0.1) 4.6
Goodwill 44.2 6.6 50.8
Other intangible assets 84.4 0 84.4
Other non-current assets 0.7 0 0.7
   Total assets acquired $ 285.5 $ 6.1 $ 291.6
Liabilities:
Accounts payable, trade $ 10.8 $ (0.2) $ 10.6
Salaries, wages and benefits 6.8 0 6.8
Income taxes payable 2.1 0 2.1
Other current liabilities 6.7 0.4 7.1
Short-term debt 0.8 0 0.8
Long-term debt 17.2 0 17.2
Accrued pension benefits 0.5 0 0.5
Accrued postretirement benefits 0.1 0 0.1
Long-term operating lease liabilities 4.1 (0.1) 4.0
Deferred income taxes 5.1 (0.7) 4.4
Other non-current liabilities 1.1 0 1.1
   Total liabilities assumed $ 55.3 $ (0.6) $ 54.7
Noncontrolling interest acquired 1.8 0 1.8
   Net assets acquired $ 228.4 $ 6.7 $ 235.1


	Initial Purchase Price Allocation		Adjustments		Purchase Price Allocation
Assets:

Accounts receivable, net	$	2.7	$	0	$	2.7
Inventories, net	16.4		0		16.4
Other current assets	0.1		0.2		0.3
Property, plant and equipment, net	10.9		0		10.9




Total assets acquired	$	30.1	$	0.2	$	30.3
Liabilities:
Accounts payable, trade	$	0.8	$	0	$	0.8


Other current liabilities	0.9		(0.4)		0.5







Total liabilities assumed	1.7		(0.4)		1.3

Net assets acquired	$	28.4	$	0.6	$	29.0

~~In March 2020,~~As a result of applying the accounting rules on business combinations, the Company ~~accrued $6.6~~recognized a bargain purchase gain of $11.7 million ~~for a~~on the acquisition of Aurora. The Company recognized $0.6 million of the bargain purchase price gain during the first three months of 2021 primarily due to the working capital ~~adjustment~~adjustment. The Company believes it was able to ~~the~~negotiate a bargain purchase price for ~~BEKA in accordance with~~ the ~~purchase agreement, which was paid during the second quarter of 2020 in the amount of $6.7 million. This adjustment,~~business due to some historic operational performance challenges, as well as ~~other measurement period adjustments recorded~~the seller's desire to exit the business in ~~2020, resulted~~an expedited manner in ~~a $6.6 million increase to goodwill.~~an exclusive process with the Company.

In determining the fair value of the amounts above, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being valued. The 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)~~

The above purchase price allocation, 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. The purchase price allocation for BEKA 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 BEKA purchase price allocation that have not been finalized relate to the fair value of inventory, net property, plant, and equipment and other intangible assets, and the related impacts on deferred income taxes and goodwill. During the 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 4 - 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,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively:

Three Months Ended Three Months Ended
September 30, 2020 September 30, 2019
Mobile Process Total Mobile Process Total
United States $ 220.7 $ 163.2 $ 383.9 $ 245.8 $ 196.0 $ 441.8
Americas excluding United States 45.1 36.0 81.1 54.7 41.1 95.8
Europe / Middle East / Africa 92.7 114.3 207.0 85.3 120.2 205.5
Asia-Pacific 70.1 152.5 222.6 69.3 101.6 170.9
Net sales $ 428.6 $ 466.0 $ 894.6 $ 455.1 $ 458.9 $ 914.0


		Nine Months Ended						Nine Months Ended							Three Months Ended						Three Months Ended
		September 30, 2020						September 30, 2019							March 31, 2021						March 31, 2020
		Mobile		Process		Total		Mobile		Process		Total			Mobile		Process		Total		Mobile		Process		Total
United States	United States	$	645.5	$	529.5	$	1,175.0	$	778.1	$	632.6	$	1,410.7	United States	$	242.9	$	186.2	$	429.1	$	238.2	$	192.6	$	430.8
Americas excluding United States	Americas excluding United States	120.7		100.3		221.0		160.4		125.5		285.9		Americas excluding United States	48.8		43.2		92.0		48.8		35.0		83.8
Europe / Middle East / Africa	Europe / Middle East / Africa	280.2		342.8		623.0		288.2		374.3		662.5		Europe / Middle East / Africa	127.1		127.2		254.3		108.7		115.6		224.3
Asia-Pacific		191.5		411.0		602.5		222.1		312.5		534.6
China														China	34.4		124.3		158.7		21.8		81.0		102.8
Asia-Pacific excluding China														Asia-Pacific excluding China	51.3		40.0		91.3		49.2		32.5		81.7
Net sales	Net sales	$	1,237.9	$	1,383.6	$	2,621.5	$	1,448.8	$	1,444.9	$	2,893.7	Net sales	$	504.5	$	520.9	$	1,025.4	$	466.7	$	456.7	$	923.4

When reviewing revenue by sales channel, the Company separates net sales to original equipment manufacturers ("OEMs") from sales to distributors and end users. The following table presents the percent of revenue by sales channel for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively:

Nine Months Ended

Three Months Ended

Revenue by sales channel

September 30, 2020

September 30, 2019

Revenue by sales channel

March 31, 2021

March 31, 2020

Original equipment manufacturers

60%

56%

Original equipment manufacturers

61%

59%

Distribution/end users

40%

44%

Distribution/end users

39%

41%

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~~three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019, approximately~~ approximatel~~12%~~y 9% and ~~11%~~12%, 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. Approximately 4% and 5% of total net sales represented service revenue during each of the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019,~~ respectively. Finally, the United States ("U.S.") government or its contractors represented approximately 9%7% and 8% of total net sales during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~and September 30, 2019,~~ respectively.

~~Note 4 - Revenue (continued)~~

Remaining Performance Obligations:

Remaining performance obligations represent the transaction price of orders meeting the definition of a contract 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~~approxim ~~$246~~ately $388.5 million at ~~September 30, 2020.~~March 31, 2021.

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:


	~~September 30, 2020~~March 31, 2021
Beginning balance, January 1	$	~~129.2~~110.9
Additional unbilled revenue recognized	~~310.0~~91.3
Less: amounts billed to customers	~~(298.1)~~(88.9)

Ending balance	$	~~141.1~~113.3

There were no impairment losses recorded on unbilled receivables for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

Note 5 - Segment Information

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net sales:	Net sales:									Net sales:
Mobile Industries	Mobile Industries	$	428.6	$	455.1	$	1,237.9	$	1,448.8	Mobile Industries	$	504.5	$	466.7
Process Industries	Process Industries	466.0		458.9		1,383.6		1,444.9		Process Industries	520.9		456.7
Net sales	Net sales	$	894.6	$	914.0	$	2,621.5	$	2,893.7	Net sales	$	1,025.4	$	923.4
Segment EBITDA:	Segment EBITDA:									Segment EBITDA:
Mobile Industries	Mobile Industries	$	64.0	$	70.1	$	177.9	$	227.4	Mobile Industries	$	79.6	$	75.1
Process Industries	Process Industries	109.2		116.5		343.0		369.8		Process Industries	131.0		107.5
Total EBITDA, for reportable segments	Total EBITDA, for reportable segments	$	173.2	$	186.6	$	520.9	$	597.2	Total EBITDA, for reportable segments	$	210.6	$	182.6
Corporate EBITDA		(10.6)		(11.2)		(28.2)		(40.6)
Unallocated corporate expense										Unallocated corporate expense	(11.6)		(11.1)

Corporate pension and other postretirement benefit related income (expense) (1)		11.9		(16.9)		3.1		(16.9)
Corporate pension and other postretirement benefit related expense (1)										Corporate pension and other postretirement benefit related expense (1)	(0.9)		0
Acquisition-related gain (2)										Acquisition-related gain (2)	0.6		0
Depreciation and amortization	Depreciation and amortization	(41.2)		(39.2)		(125.2)		(120.4)		Depreciation and amortization	(43.0)		(42.3)
Interest expense	Interest expense	(16.3)		(18.2)		(52.3)		(55.5)		Interest expense	(14.9)		(17.1)
Interest income	Interest income	0.9		1.1		3.0		3.5		Interest income	0.5		1.5
Income before income taxes	Income before income taxes	$	117.9	$	102.2	$	321.3	$	367.3	Income before income taxes	$	141.3	$	113.6

(1) Corporate pension and other postretirement benefit related ~~income (expense)~~expense represents actuarial gains and (losses) that resulted from the remeasurement of pension and other postretirement plan assets and obligations as a result of changes in ~~assumptions.~~assumptions or experience.

(2) The acquisition-related gain represents measurement period adjustments to the bargain purchase gain on the acquisition of Aurora, which closed on November 30, 2020. See Note 3 - Acquisitions for additional information.

Note 6 - 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 March 31,
		2020			2019			2020			2019				2021			2020
Provision for income taxes	Provision for income taxes	$	26.6		$	35.5		$	84.2		$	110.4		Provision for income taxes	$	25.3		$	29.6
Effective tax rate	Effective tax rate	22.6		%	34.7		%	26.2		%	30.1		%	Effective tax rate	17.9		%	26.1		%

Income tax expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was calculated using 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 release of accruals for uncertain tax positions from the settlement of the 2017 and 2018 U.S. federal tax years, and favorable U.S. permanent book-tax differences. This is partially offset by the projected mix of earnings in international jurisdictions with relatively higher tax ~~rates and unfavorable U.S. permanent differences.~~rates.

The effective tax rate of ~~22.6%~~17.9% for the three months ended ~~September 30, 2020 was~~March 31, 2021 was lower than the rate for the three months ended ~~September 30, 2019~~March 31, 2020 primarily due to the ~~projected decrease in the mix~~release of earnings in international jurisdictions with relatively higher tax rates. Income tax expense also decreased due to discrete tax benefit in the current year compared to discrete tax expense in the prior year.

The effective tax rate of 26.2% for the nine months ended September 30, 2020 was lower than the rate for the nine months ended September 30, 2019. Income tax expense was lower due to the projected decrease in the mix of earnings in international jurisdictions with relatively higher tax rates. In addition, income tax expense decreased due to additional accruals ~~recorded discretely~~ for uncertain tax positions ~~in the prior year related to the~~and favorable U.S. permanent book-tax differences, including new elective Global Intangible Low Tax ~~Cuts and Jobs Act of 2017~~Income ("~~U.S. Tax Reform"~~GILTI"). high tax exemption rules.

Note 7 - 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,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Numerator:	Numerator:									Numerator:
Net income attributable to The Timken Company	Net income attributable to The Timken Company	$	88.8	$	64.2	$	231.4	$	248.6	Net income attributable to The Timken Company	$	113.3	$	80.7
Less: undistributed earnings allocated to nonvested stock	Less: undistributed earnings allocated to nonvested stock	0		0		0		0		Less: undistributed earnings allocated to nonvested stock	0		0
Net income available to common shareholders for basic and diluted earnings per share	Net income available to common shareholders for basic and diluted earnings per share	$	88.8	$	64.2	$	231.4	$	248.6	Net income available to common shareholders for basic and diluted earnings per share	$	113.3	$	80.7
Denominator:	Denominator:									Denominator:
Weighted average number of shares outstanding - basic	Weighted average number of shares outstanding - basic	75,223,462		75,628,410		75,288,567		75,864,544		Weighted average number of shares outstanding - basic	75,820,157		75,461,254
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Stock options and awards - based on the treasury stock method	Stock options and awards - based on the treasury stock method	1,062,674		964,284		843,353		1,037,882		Stock options and awards - based on the treasury stock method	1,444,484		847,302
Weighted average number of shares outstanding assuming dilution of stock options and awards	Weighted average number of shares outstanding assuming dilution of stock options and awards	76,286,136		76,592,694		76,131,920		76,902,426		Weighted average number of shares outstanding assuming dilution of stock options and awards	77,264,641		76,308,556
Basic earnings per share	Basic earnings per share	$	1.18	$	0.85	$	3.07	$	3.28	Basic earnings per share	$	1.49	$	1.07
Diluted earnings per share	Diluted earnings per share	$	1.16	$	0.84	$	3.04	$	3.23	Diluted earnings per share	$	1.47	$	1.06

The exercise prices for certain stock options that the Company has awarded exceeded the average market price of the Company’s common shares during certain periods 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,~~March 31, 2021 and 2020 ~~and 2019~~ were0 and ~~1,445,986,~~1,367,821, ~~respectively. The antidilutive stock options outstanding during the nine months ended September 30, 2020 and 2019 were~~ ~~902,169~~ an~~d 1,355,247,~~ respectively.

Note 8 - Inventories

The components of inventories at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Manufacturing supplies	Manufacturing supplies	$	34.7	$	34.2	Manufacturing supplies	$	35.2	$	34.8
Raw materials	Raw materials	98.3		100.0		Raw materials	107.3		99.5
Work in process	Work in process	304.2		308.9		Work in process	332.9		320.3
Finished products	Finished products	401.6		439.0		Finished products	444.4		441.2
Subtotal	Subtotal	838.8		882.1		Subtotal	919.8		895.8
Allowance for obsolete and surplus inventory	Allowance for obsolete and surplus inventory	(48.9)		(40.1)		Allowance for obsolete and surplus inventory	(55.0)		(54.5)
Total Inventories, net	Total Inventories, net	$	789.9	$	842.0	Total Inventories, net	$	864.8	$	841.3

Inventories are valued at net realizable value, with approximately ~~60%~~61% valued on the first-in, first-out ("FIFO") method and the remaining ~~40%~~39% valued on the last-in, first-out ("LIFO") method. The majority of the Company's domestic inventories are valued on the LIFO method, and all the Company's international inventories are valued on the FIFO method.

The LIFO reserve at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019 wa~~2020~~s $161.8~~ was $179.6 million and ~~$164.6~~$172.1 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. ~~The prior year balances have been revised to align to the current year classification of the LIFO reserve and the allowance for obsolete and surplus inventory.~~

Note 9 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were as follows:

Mobile
Industries Process
Industries Total
Beginning balance $ 361.3 $ 632.4 $ 993.7
Acquisitions 4.4 2.2 6.6
Foreign currency translation adjustments and other changes 7.8 13.0 20.8
Ending balance $ 373.5 $ 647.6 $ 1,021.1

~~The addition of~~ ~~$6.6 million~~ ~~of goodwill from acquisitions represents measurement period adjustments recorded in 2020 primarily for the 2019 acquisition of BEKA.~~


	Mobile Industries		Process Industries		Total
Beginning balance	$	384.6	$	663.0	$	1,047.6


Foreign currency translation adjustments and other changes	(8.1)		(11.1)		(19.2)
Ending balance	$	376.5	$	651.9	$	1,028.4

The following table displays intangible assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		Balance at September 30, 2020						Balance at December 31, 2019							Balance at March 31, 2021						Balance at December 31, 2020
		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:	Intangible assets subject to amortization:													Intangible assets subject to amortization:
Customer relationships	Customer relationships	$	519.8	$	(152.3)	$	367.5	$	510.9	$	(128.8)	$	382.1	Customer relationships	$	523.6	$	(168.6)	$	355.0	$	532.2	$	(161.9)	$	370.3
Technology and know-how	Technology and know-how	270.2		(66.7)		203.5		265.1		(54.7)		210.4		Technology and know-how	272.4		(75.3)		197.1		277.2		(72.0)		205.2
Trade names	Trade names	12.7		(6.7)		6.0		12.7		(6.1)		6.6		Trade names	14.2		(9.0)		5.2		14.2		(8.8)		5.4
Capitalized software	Capitalized software	274.0		(252.0)		22.0		270.3		(245.8)		24.5		Capitalized software	276.5		(256.1)		20.4		276.4		(254.6)		21.8
Other	Other	14.0		(9.8)		4.2		13.8		(9.1)		4.7		Other	4.6		(3.8)		0.8		4.7		(3.7)		1.0
		$	1,090.7	$	(487.5)	$	603.2	$	1,072.8	$	(444.5)	$	628.3		$	1,091.3	$	(512.8)	$	578.5	$	1,104.7	$	(501.0)	$	603.7
Intangible assets not subject to amortization:	Intangible assets not subject to amortization:													Intangible assets not subject to amortization:
Trade names	Trade names	$	125.3			$	125.3	$	121.5			$	121.5	Trade names	$	125.4			$	125.4	$	129.0			$	129.0
FAA air agency certificates	FAA air agency certificates	8.7				8.7		8.7				8.7		FAA air agency certificates	8.7				8.7		8.7				8.7
		$	134.0			$	134.0	$	130.2			$	130.2		$	134.1			$	134.1	$	137.7			$	137.7
Total intangible assets	Total intangible assets	$	1,224.7	$	(487.5)	$	737.2	$	1,203.0	$	(444.5)	$	758.5	Total intangible assets	$	1,225.4	$	(512.8)	$	712.6	$	1,242.4	$	(501.0)	$	741.4

Amortization expense for intangible assets was ~~$42.1~~$14.1 million and ~~$43.3~~$14.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Amortization expense for intangible assets is projected to be ~~$55.4 million in 2020; $53.0~~$55.7 million in 2021; ~~$48.1~~$48.7 million in 2022; ~~$45.1~~$45.6 million in 2023; ~~and $43.3~~$43.1 million in ~~2024.~~2024; and $42.5 million in 2025.

109

Note 10 - Financing Arrangements

Short-term debt at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was as follows:

September 30,
2020 December 31,
2019
Variable-rate Accounts Receivable Facility with an interest rate of 2.77% at December 31, 2019 $ 0 $ 1.8
Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.15% to 1.75% at September 30, 2020 and 0.27%to 1.75% at December 31, 2019 64.8 15.5
Short-term debt $ 64.8 $ 17.3


	March 31, 2021		December 31, 2020
Variable-rate Accounts Receivable Facility with an interest rate of 0.96% at March 31, 2021 and of 0.96% at December 31, 2020	$	100.0	$	58.0
Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.50% to 1.75% at March 31, 2021 and 0.24% to 1.75% at December 31, 2020	67.5		61.8
Short-term debt	$	167.5	$	119.8

The Company has a $100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2021. The Company currently intends to renew or replace the Accounts Receivable Facility prior to its maturity. 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 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 byto certain borrowing base ~~limitations. As of September 30, 2020, there were no outstanding borrowings under the Accounts Receivable Facility and the~~limitations; however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at ~~$100.0 million.~~March 31, 2021. As of March 31, 2021, there were outstanding borrowings of $100 million under the Accounts Receivable Facility, which reduced the availability under this facility to 0. All of the borrowings under the Accounts Receivable Facility were classified as short-term due to its upcoming maturity in November 2021. 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"~~interest expense in the Consolidated Statements of Income.

The ~~Company also maintains uncommitted~~ lines of credit atfor certain of the Company's foreign subsidiaries ~~which~~ provide for short-term borrowings up to ~~$278.3~~$270.6 million in the aggregate. Most of these lines of credit are uncommitted. At ~~September 30, 2020,~~March 31, 2021, the Company’s foreign subsidiaries had borrowings outstanding of ~~$64.8~~$67.5 million and bank guarantees of ~~$0.7~~$0.5 million, which reduced the aggregate availability under these facilities to ~~$212.8~~$202.6 million.

Long-term debt at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was as follows:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 2.29% and Euro of 1.10% at September 30, 2020 and 2.85% and Euro of 1.00% at December 31, 2019		$	114.3	$	132.7
Variable-rate Euro Term Loan(1), matured on September 18, 2020, with an interest of 1.13% at December 31, 2019		0		54.4
Variable-rate Accounts Receivable Facility with an interest rate of 2.77% at December 31, 2019		0		98.2
Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 2.11% at September 30, 2020 and 2.92% at December 31, 2019		331.7		338.5
Fixed-rate Senior Unsecured Notes(1), maturing on September 01, 2024, with an interest rate of 3.875%		348.9		348.5
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 07, 2027, with an interest rate of 2.02%		175.4		167.7
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 1.43% and Euro of 1.48% at March 31, 2021 and U.S. Dollar of 2.01% and Euro of 1.48% at December 31, 2020						Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 1.43% and Euro of 1.48% at March 31, 2021 and U.S. Dollar of 2.01% and Euro of 1.48% at December 31, 2020	$	9.3	$	9.7

Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 1.63% at March 31, 2021 and 1.63% at December 31, 2020						Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 1.63% at March 31, 2021 and 1.63% at December 31, 2020	327.5		329.6
Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%						Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%	349.2		349.0
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%						Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%	175.6		182.9
Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%	Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%	396.4		396.1		Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%	396.6		396.5
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%	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		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%	154.7		154.7
Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%	Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%	18.4		18.0		Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%	17.7		18.8
Other	Other	4.1		4.1		Other	3.9		3.6
		1,543.8		1,712.8			1,434.5		1,444.8
Less: Current maturities	Less: Current maturities	10.8		64.7		Less: Current maturities	10.8		10.9
Long-term debt	Long-term debt	$	1,533.0	$	1,648.1	Long-term debt	$	1,423.7	$	1,433.9

(1) Net of discounts and fees

1110

Note 10 - Financing Arrangements (continued)

~~On June 25, 2019, the~~The Company entered into athe Fourth Amended and Restated Credit Agreement ("Senior Credit Facility"). on June 25, 2019. The Senior Credit Facility is a $650.0 million unsecured revolving credit facility, which matures on June 25, 2024. At ~~September 30, 2020,~~March 31, 2021, the ~~Company~~Company had ~~$114.3~~$9.3 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to ~~$535.7 million.~~$640.7 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. On May 27, 2020, the Senior Credit Facility was amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio. As amended, the consolidated leverage ratio is calculated using a net debt construct, netting unrestricted cash in excess of $25 million, instead of total debt. This change to the consolidated leverage ratio calculation is effective through June 30, 2021, after which the calculation of the consolidated leverage ratio under the Senior Credit Facility will revert back to using a total debt construct.

On November 1, 2019, the Company assumed certain fixed-rate debt of €16 million associated with the BEKA Lubrication ("BEKA") acquisition that matures on June 30, 2033.

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 2023 Term Loan were used to fund the acquisitions of Apiary Investments Holding Limited ~~("Cone Drive")~~ and Rollon S.p.A. ~~("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 May 27, 2020, the 2023 Term Loan agreement was further amended to align the calculation of the consolidated leverage ratio and other terms with the Senior Credit Facility.

On September 18, 2017, the Company entered into a €100 million variable-rate term loan that matured on September 18, 2020 (the "2020 Term Loan"). Upon the final payment during the third quarter of 2020, the Company fully repaid the 2020 Term Loan.

At ~~September 30, 2020,~~March 31, 2021, the Company was in full compliance with all applicable covenants on its outstanding debt.

In the ordinary course of business, the Company utilizes standby letters of credit issued by financial institutions to guarantee certain obligations, most of which relate to insurance contracts. At ~~September 30, 2020,~~March 31, 2021, outstanding letters of credit ~~totaled $40.0~~totaled $41.2 million, most with expiration dates within 12 months.

1211

Note 11 - 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 were settled or dismissed prior to our acquisition of Lovejoy.

The Company had total environmental accruals of ~~$5.1~~ $5.3 million ~~and $5.2 million~~ for various known environmental matters that are probable and reasonably estimable at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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.

Product Warranties:

In addition to the contingencies above, the Company provides limited warranties on certain of its products. The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was ~~$9.7~~$10.2 million and ~~$7.5~~$9.4 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The increase in the liability since year end primarily relates to accruals that are based on the best estimate of costs for future claims based on products sold that are still under warranty. The estimate of these accruals is based on historical claims and expected trends that continue to mature. Any significant change to these assumptions may be material to the results of operations in any particular period in which that change occurs.

1312

Note 12 - Equity

The following tables present the changes in the components of equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ 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 June 30, 2020 $ 1,967.6 $ 53.1 $ 924.4 $ 2,005.7 $ (99.2) $ (1,000.4) $ 84.0
Net income 91.3 88.8 2.5
Foreign currency translation adjustment 63.5 63.0 0.5
Pension and other postretirement liability
adjustments (net of income tax benefit
of $0.4 million)
(1.2) (1.2)
Unrealized gain on marketable securities (0.1) (0.1)
Change in fair value of derivative financial
instruments, net of reclassifications (1.8) (1.8)
Dividends declared to noncontrolling interest (16.1) (16.1)
Dividends – $0.28 per share (21.1) (21.1)
Stock-based compensation expense 7.8 7.8
Stock option exercise activity 10.7 (1.5) 12.2
Restricted share activity 0 (0.1) 0.1
Payments related to tax withholding for
stock-based compensation (1.6) (1.6)
Balance at September 30, 2020 $ 2,099.0 $ 53.1 $ 930.6 $ 2,073.4 $ (39.3) $ (989.7) $ 70.9


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non controlling Interest
Balance at December 31, 2020	$	2,225.2	$	40.7	$	740.7	$	1,339.5	$	41.3	$	(9.3)	$	72.3

Net income	116.0						113.3						2.7
Foreign currency translation adjustment	(44.4)								(44.0)				(0.4)
Pension and other postretirement liability adjustments (net of income tax benefit of $0.6 million)	(1.6)								(1.6)

Change in fair value of derivative financial instruments, net of reclassifications	2.2								2.2





Dividends – $0.29 per share	(23.8)						(23.8)


Stock-based compensation expense	6.5				6.5
Stock purchased at fair market value	(26.3)										(26.3)
Stock option exercise activity	14.1				14.1

Payments related to tax withholding for stock-based compensation	(17.8)										(17.8)
Balance at March 31, 2021	$	2,250.1	$	40.7	$	761.3	$	1,429.0	$	(2.1)	$	(53.4)	$	74.6


				The Timken Company Shareholders															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			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, 2019	Balance at December 31, 2019	$	1,954.8	$	53.1	$	937.6	$	1,907.4	$	(50.1)	$	(979.8)	$	86.6	Balance at December 31, 2019	$	1,954.8	$	53.1	$	937.6	$	1,907.4	$	(50.1)	$	(979.8)	$	86.6
Cumulative effect of ASU 2016-13 (net of income tax benefit of $0.2 million)	Cumulative effect of ASU 2016-13 (net of income tax benefit of $0.2 million)	(0.4)						(0.4)								Cumulative effect of ASU 2016-13 (net of income tax benefit of $0.2 million)	(0.4)						(0.4)
Net income	Net income	237.1						231.4						5.7		Net income	84.0						80.7						3.3
Foreign currency translation adjustment	Foreign currency translation adjustment	9.2								15.0				(5.8)		Foreign currency translation adjustment	(78.8)								(71.3)				(7.5)
Pension and other postretirement liability adjustments (net of income tax benefit of $1.4 million)		(4.0)								(4.0)

Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)																Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)	(1.3)								(1.3)
Unrealized loss on marketable securities																Unrealized loss on marketable securities	(0.4)								(0.4)
Change in fair value of derivative financial instruments, net of reclassifications	Change in fair value of derivative financial instruments, net of reclassifications	(0.2)								(0.2)						Change in fair value of derivative financial instruments, net of reclassifications	4.2								4.2
Change in ownership of noncontrolling interest	Change in ownership of noncontrolling interest	0.5												0.5		Change in ownership of noncontrolling interest	0.5												0.5
Dividends declared to noncontrolling interest		(16.1)												(16.1)
Dividends – $0.84 per share		(65.0)						(65.0)
Dividends – $0.28 per share																Dividends – $0.28 per share	(22.9)						(22.9)
Stock-based compensation expense	Stock-based compensation expense	19.2				19.2										Stock-based compensation expense	5.6				5.6
Stock purchased at fair market value	Stock purchased at fair market value	(42.3)										(42.3)				Stock purchased at fair market value	(42.3)										(42.3)
Stock option exercise activity	Stock option exercise activity	18.2				(2.4)						20.6				Stock option exercise activity	7.5				(0.9)						8.4
Restricted share activity	Restricted share activity	0				(23.8)						23.8				Restricted share activity	0				(22.2)						22.2
Payments related to tax withholding for stock-based compensation	Payments related to tax withholding for stock-based compensation	(12.0)										(12.0)				Payments related to tax withholding for stock-based compensation	(10.2)										(10.2)

Balance at September 30, 2020		$	2,099.0	$	53.1	$	930.6	$	2,073.4	$	(39.3)	$	(989.7)	$	70.9
Balance at March 31, 2020																Balance at March 31, 2020	$	1,900.3	$	53.1	$	920.1	$	1,964.8	$	(118.9)	$	(1,001.7)	$	82.9

~~Note 12 - 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, 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 (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 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 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 0 (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

1513

Note 13 - Impairment and Restructuring Charges

Impairment and restructuring charges by segment are comprised of the following:

For the three months ended ~~September 30, 2020:~~March 31, 2021:


		Mobile Industries		Process Industries		Corporate		Total			Mobile Industries		Process Industries		Unallocated Corporate		Total

Impairment charges										Impairment charges	$	0.1	$	3.3	$	0	$	3.4
Severance and related benefit costs	Severance and related benefit costs	$	5.9	$	5.6	$	0.4	$	11.9	Severance and related benefit costs	0		0.5		0		0.5
Exit costs	Exit costs	0.1		0		0		0.1		Exit costs	0.1		0		0		0.1
Total	Total	$	6.0	$	5.6	$	0.4	$	12.0	Total	$	0.2	$	3.8	$	0	$	4.0

For the ~~nine~~three months ended ~~September 30,~~March 31, 2020:


		Mobile Industries		Process Industries		Corporate		Total			Mobile Industries		Process Industries		Unallocated Corporate		Total
Impairment charges	Impairment charges	$	0	$	0.1	$	0	$	0.1	Impairment charges	$	0	$	0.1	$	0	$	0.1
Severance and related benefit costs	Severance and related benefit costs	7.5		9.8		0.5		17.8		Severance and related benefit costs	0.1		2.5		0.1		2.7
Exit costs	Exit costs	0.4		0.4		0		0.8		Exit costs	0.6		0.2		0		0.8
Total	Total	$	7.9	$	10.3	$	0.5	$	18.7	Total	$	0.7	$	2.8	$	0.1	$	3.6

The following discussion explains the impairment and restructuring charges recorded for the periods presented; however, it is not intended to reflect a comprehensive discussion of all amounts in the tables above.

~~Coronavirus ("COVID-19") Pandemic Cost Reduction Initiatives:~~

During the three months and nine months ended September 30, 2020, the Company recorded $9.5 million and $11.5 million in severance and related benefit costs to eliminate approximately 200 salaried positions to align current employment levels with customer demand. Of the $9.5 million charge, $4.9 million related to the Mobile Industries segment, $4.2 million related to the Process Industries segment and $0.4 million related to Corporate. Of the $11.5 million charge, $5.5 million related to the Mobile Industries segment, $5.6 million related to the Process Industries segment and $0.4 million related to Corporate.

Mobile Industries:

On October 16, 2019, the Company announced the reorganization of its bearing plant in Gaffney, South Carolina. The Company transferred its high-volume bearing production and roller production to other Timken manufacturing facilities in the U.S. The transfer of these operations was substantially completed by the end of the third quarter of 2020 and ~~is expected to affect~~affected approximately 150 employees. The Company expected to incur approximately $8 million to $10 million of pretax costs in total related to this reorganization. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, the Company recognized ~~severance and related benefits of $0.3 million and~~ exit costs of ~~$0.4~~$0.6 million related to this reorganization. The Company ~~has~~ incurred cumulative pretax costs related to this reorganization of ~~$7.2~~$7.7 million as of ~~September 30, 2020,~~March 31, 2021, including rationalization costs recorded in cost of products sold.

Process Industries:

On February 4, 2020, the Company announced the closure of its chain plant in Indianapolis, Indiana. This plant was part of the Diamond Chain Company ("Diamond Chain") acquisition completed on April 1, 2019. The Company will be transferring the manufacturing of its Diamond Chain product line to its chain facility in Fulton, Illinois. The chain plant is expected to close by the end of the fourth quarter of 2021 and is expected to affect approximately 240 employees. The Company expects to hire approximately 130 full-time positions in Fulton, Illinois and expects to incur approximately $10 million to $12 million of expenses related to this closure. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and March 31, 2020, the Company recorded severance and related benefit costs of ~~$0.4~~$0.3 million and ~~$2.6~~$1.9 million, respectively, related to this closure. The Company has incurred cumulative pretax costs related to this closure of ~~$4.3~~$7.3 million as of ~~September 30, 2020,~~March 31, 2021, including rationalization costs recorded in cost of products sold.

In addition, the Company recorded impairment charges of $3.3 million related to certain engineering-related assets used in the business during the three months ended March 31, 2021. Management concluded no further investment would be made in these assets and as a result, reduced the value to zero.

1614

Note 13 - Impairment and Restructuring Charges (continued)

~~On September 3, 2020, the Company announced the reorganization of its bearing plant in Canton, Ohio. The Company will be transferring~~ Consolid~~production for certain product lines to other Timken locations in order to streamline resources and better align capacity with demand.~~ The transfer of these operations is expected to occur by early 2021 and is expected to affect approximately 40 employees. The Company expects to incur approximately $2.0 million to $2.5 million of pretax costs related to this reorganization. During the three months ended September 30, 2020, the Company recognized severance and related benefits of $0.6 million related to this reorganization. The Company has incurred cumulative pretax costs related to this reorganization of $0.6 million as of September 30, 2020, including rationalization costs recorded in cost of products sold.

~~Consolidated~~ated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and twelve months ended December 31, 2020:


	September 30, 2020
~~Beginning balance, January 1~~	$	~~2.7~~
~~Expense~~	~~18.6~~
~~Payments~~	~~(13.5)~~
~~Ending balance~~	$	~~7.8~~


	March 31, 2021		December 31, 2020
Beginning balance, January 1	$	8.0	$	2.7
Expense	0.6		20.8
Payments	(1.2)		(15.5)
Ending balance	$	7.4	$	8.0

The restructuring accrual at ~~September 30, 2020~~March 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

Note 14 - 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, 2020~~March 31, 2021 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of that period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2020.~~2021.


		U.S. Plans				International Plans				Total					U.S. Plans				International Plans				Total
		Three Months Ended September 30,													Three Months Ended March 31,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020		2021		2020
Components of net periodic benefit cost:
Components of net periodic benefit cost (credit):														Components of net periodic benefit cost (credit):
Service cost	Service cost	$	2.7	$	2.6	$	0.5	$	0.4	$	3.2	$	3.0	Service cost	$	2.5	$	2.7	$	0.5	$	0.4	$	3.0	$	3.1
Interest cost	Interest cost	5.2		5.7		1.4		1.8		6.6		7.5		Interest cost	4.4		5.2		1.1		1.5		5.5		6.7
Expected return on plan assets	Expected return on plan assets	(6.3)		(6.4)		(2.2)		(2.4)		(8.5)		(8.8)		Expected return on plan assets	(6.1)		(6.3)		(2.5)		(2.2)		(8.6)		(8.5)
Amortization of prior service cost	Amortization of prior service cost	0.4		0.4		0		0		0.4		0.4		Amortization of prior service cost	0.3		0.4		0		0		0.3		0.4
Recognition of net actuarial (gains) losses		(12.8)		7.0		0		0		(12.8)		7.0
Curtailment loss		0.9		0		0		0		0.9		0
Net periodic benefit (credit) cost		$	(9.9)	$	9.3	$	(0.3)	$	(0.2)	$	(10.2)	$	9.1
Recognition of net actuarial losses														Recognition of net actuarial losses	0.9		0		0		0		0.9		0

Net periodic benefit cost (credit)														Net periodic benefit cost (credit)	$	2.0	$	2.0	$	(0.9)	$	(0.3)	$	1.1	$	1.7

U.S. Plans International Plans Total
Nine Months Ended
September 30, Nine Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019 2020 2019
Components of net periodic
benefit cost:
Service cost $ 8.1 $ 7.8 $ 1.3 $ 1.2 $ 9.4 $ 9.0
Interest cost 15.7 17.7 4.2 5.5 19.9 23.2
Expected return on plan assets (19.0) (19.2) (6.5) (7.6) (25.5) (26.8)
Amortization of prior service cost 1.2 1.2 0.1 0.1 1.3 1.3
Recognition of net actuarial (gains)
losses (4.0) 7.0 0 0 (4.0) 7.0
Curtailment loss 0.9 0 0 0 0.9 0
Net periodic benefit cost (credit) $ 2.9 $ 14.5 $ (0.9) $ (0.8) $ 2.0 $ 13.7

~~In September 2020, the~~The Company ~~announced the reorganization~~currently expects to make lump sum payments to new retirees in 2021 in excess of ~~its bearing plant in Canton, Ohio, which is expected to affect approximately 40 employees. The announcement of the reorganization triggered a curtailment of one~~annual interest and service costs for three of the Company's U.S. defined benefit pension ~~plans. The Company recognized a curtailment loss~~plans as of ~~$0.9 million and an actuarial gain of $0.7 million during the three months ended September 30, 2020.~~

~~The Company's lump sum payments to new retirees in 2020 exceeded annual interest and service costs for one of the Company's U.S. defined benefit pension plans.~~March 31, 2021. This expectation triggered a remeasurement of assets and obligations for ~~this plan at June 30, 2020 and September 30, 2020.~~these plans. As a result of this remeasurement, the Company recognized net actuarial ~~gains~~losses of ~~$12.1 million and $3.3 million during the three and nine months ended September 30, 2020, respectively.~~

In July 2019, the Company made a payment of approximately $24.0 million of deferred compensation 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$0.9 million during the three months ended ~~September 30, 2019.~~March 31, 2021.

1815

Note 15 - 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, 2020~~March 31, 2021 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of that period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2020.~~2021.

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Components of net periodic benefit (credit) cost:
Service cost $ 0 $ 0 $ 0.1 $ 0.1
Interest cost 0.6 1.2 1.6 5.0
Expected return on plan assets (0.1) (0.8) (0.3) (2.4)
Amortization of prior service credit (2.4) (2.0) (7.3) (3.1)
Recognition of net actuarial losses 0 9.9 0 9.9
Net periodic benefit (credit) cost $ (1.9) $ 8.3 $ (5.9) $ 9.5


	Three Months Ended March 31,
	2021		2020
Components of net periodic benefit credit:

Interest cost	$	0.4	$	0.5
Expected return on plan assets	0		(0.1)
Amortization of prior service credit	(2.5)		(2.4)



Net periodic benefit credit	$	(2.1)	$	(2.0)

In January ~~2020,~~2021, the Company ~~established a second~~transferred the remaining $11.1 million in the existing Voluntary Employee Beneficiary Association ("VEBA") trust for certain ~~active employees’~~retiree medical ~~benefits. The Company transferred $50 million from an existing~~benefits to a second VEBA trust to fund this new VEBA trust. The $50 million that was transferred was primarily classified as other current assets based on the portfolio of the assets in the trust. The Company expects to fully utilize the assets of the trust in 2020 for the payment of certain active employees’ medical benefits. ~~As of September 30, 2020, the~~The Company ~~had~~ utilized ~~$38 million~~all of the ~~new VEBA trust.~~

In July 2019, the Company announced changes to the medical plan offerings of certain of its postretirement benefit plans, effective January 1, 2020, which impacted the benefits provided to certain retirees. The plan amendment: (1) resulted in a $92.8 million reductionassets in the postretirement benefit obligation and a corresponding pretax adjustment to accumulated other comprehensive loss; and (2) triggered a remeasurement of the postretirement obligation, and as a result, the Company recognized an actuarial loss of $9.9 millionsecond trust during the three months ended September 30, 2019. Beginning in third quarter of 2019, the Company began amortizing the pretax adjustment of $92.8 million from accumulated other comprehensive loss into net periodic benefit cost (as a benefit) over the next twelve years.March 31, 2021.

1916

Note 16 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive income (loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively:

Foreign currency translation adjustments Pension and other postretirement liability adjustments Unrealized gain (loss) on marketable securities Change in fair value of derivative financial instruments Total
Balance at June 30, 2020 $ (163.3) $ 64.1 $ 0.1 $ (0.1) $ (99.2)
Other comprehensive income (loss) before
reclassifications and income taxes 63.5 (0.2) 0 (1.9) 61.4
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes (1.4) (0.2) (0.7) (2.3)
Income tax benefit 0.4 0.1 0.8 1.3
Net current period other comprehensive
income (loss), net of income taxes 63.5 (1.2) (0.1) (1.8) 60.4
Noncontrolling interest (0.5) (0.5)
Net current period comprehensive income (loss),
net of income taxes and noncontrolling
interest 63.0 (1.2) (0.1) (1.8) 59.9
Balance at September 30, 2020 $ (100.3) $ 62.9 $ 0 $ (1.9) $ (39.3)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2020	$	(18.0)	$	63.4	$	0	$	(4.1)	$	41.3
Other comprehensive (loss) income before reclassifications and income taxes	(44.4)		0		0		1.4		(43.0)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(2.2)		0		1.7		(0.5)
Income tax (expense) benefit	0		0.6		0		(0.9)		(0.3)
Net current period other comprehensive (loss) income, net of income taxes	(44.4)		(1.6)		0		2.2		(43.8)
Noncontrolling interest	0.4		0		0		0		0.4
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(44.0)		(1.6)		0		2.2		(43.4)
Balance at March 31, 2021	$	(62.0)	$	61.8	$	0	$	(1.9)	$	(2.1)

Foreign currency translation adjustments Pension and other postretirement liability adjustments Unrealized gain (loss) on marketable securities Change in fair value of derivative financial instruments Total
Balance at December 31, 2019 $ (115.3) $ 66.9 $ 0 $ (1.7) $ (50.1)
Other comprehensive (loss) income before
reclassifications and income taxes 9.2 0 0.5 2.3 12.0
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes (5.4) (0.5) (2.6) (8.5)
Income tax benefit 1.4 0 0.1 1.5
Net current period other comprehensive
(loss) income, net of income taxes 9.2 (4.0) 0 (0.2) 5.0
Noncontrolling interest 5.8 5.8
Net current period comprehensive (loss) income,
net of income taxes and noncontrolling
interest 15.0 (4.0) 0 (0.2) 10.8
Balance at September 30, 2020 $ (100.3) $ 62.9 $ 0 $ (1.9) $ (39.3)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2019	$	(115.3)	$	66.9	$	0	$	(1.7)	$	(50.1)
Other comprehensive (loss) income before reclassifications and income taxes	(78.8)		0.2		(0.5)		6.4		(72.7)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(2.0)		0		(0.6)		(2.6)
Income tax (expense) benefit	0		0.5		0.1		(1.6)		(1.0)
Net current period other comprehensive (loss) income, net of income taxes	(78.8)		(1.3)		(0.4)		4.2		(76.3)
Noncontrolling interest	7.5		0		0		0		7.5
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(71.3)		(1.3)		(0.4)		4.2		(68.8)
Balance at March 31, 2020	$	(186.6)	$	65.6	$	(0.4)	$	2.5	$	(118.9)

~~Note 16 - Accumulated Other Comprehensive Income (Loss) (continued)~~

Foreign currency translation adjustments Pension and other postretirement liability adjustments Unrealized gain (loss) on marketable securities Change in fair value of derivative financial instruments Total
Balance at June 30, 2019 $ (96.3) $ (0.1) $ 0 $ (1.1) $ (97.5)
Other comprehensive income (loss) before
reclassifications and income taxes (63.0) 103.7 0 3.2 43.9
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes 0 (1.6) 0 (1.0) (2.6)
Income tax expense 0 (25.4) 0 (0.3) (25.7)
Net current period other comprehensive
income (loss), net of income taxes (63.0) 76.7 0 1.9 15.6
Noncontrolling interest 1.8 0 0 0 1.8
Net current period comprehensive income (loss),
net of income taxes and noncontrolling
interest (61.2) 76.7 0 1.9 17.4
Balance at September 30, 2019 $ (157.5) $ 76.6 $ 0 $ 0.8 $ (80.1)

Foreign currency translation adjustments Pension and other postretirement liability adjustments Unrealized gain (loss) on marketable securities Change in fair value of derivative financial instruments Total
Balance at December 31, 2018 $ (95.6) $ 0 $ 0 $ 0.3 $ (95.3)
Other comprehensive income before
reclassifications and income taxes (62.1) 103.7 0 3.4 45.0
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes 0 (1.8) 0 (2.9) (4.7)
Income tax expense 0 (25.3) 0 0 (25.3)
Net current period other comprehensive
(loss) income, net of income taxes (62.1) 76.6 0 0.5 15.0
Noncontrolling interest 0.2 0 0 0 0.2
Net current period comprehensive loss,
net of income taxes and noncontrolling
interest (61.9) 76.6 0 0.5 15.2
Balance at September 30, 2019 $ (157.5) $ 76.6 $ 0 $ 0.8 $ (80.1)

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

2117

Note 17 - 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, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		September 30, 2020									March 31, 2021
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	313.0	$	310.2	$	2.8	$	0	Cash and cash equivalents	$	302.3	$	301.4	$	0.9	$	0
Cash and cash equivalents measured at net asset value		0.1

Restricted cash	Restricted cash	0.9		0.9		0		0		Restricted cash	0.8		0.8		0		0
Short-term investments	Short-term investments	48.6		11.6		37.0		0		Short-term investments	47.2		0		47.2		0

Foreign currency forward contracts	Foreign currency forward contracts	1.1		0		1.1		0		Foreign currency forward contracts	1.1		0		1.1		0
Total Assets	Total Assets	$	363.7	$	322.7	$	40.9	$	0	Total Assets	$	351.4	$	302.2	$	49.2	$	0
Liabilities:	Liabilities:									Liabilities:
Foreign currency forward contracts	Foreign currency forward contracts	$	4.9	$	0	$	4.9	$	0	Foreign currency forward contracts	$	2.0	$	0	$	2.0	$	0

Total Liabilities	Total Liabilities	$	4.9	$	0	$	4.9	$	0	Total Liabilities	$	2.0	$	0	$	2.0	$	0


		December 31, 2019									December 31, 2020
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	160.7	$	158.2	$	2.5	$	0	Cash and cash equivalents	$	320.3	$	318.6	$	1.7	$	0
Cash and cash equivalents measured at net asset value		48.8

Restricted cash	Restricted cash	6.7		6.7		0		0		Restricted cash	0.8		0.8		0		0
Short-term investments	Short-term investments	25.7		0		25.7		0		Short-term investments	37.6		0		37.6		0
Short-term investments measured at net asset value		0.1

Foreign currency forward contracts	Foreign currency forward contracts	7.6		0		7.6		0		Foreign currency forward contracts	1.1		0		1.1		0
Total Assets	Total Assets	$	249.6	$	164.9	$	35.8	$	0	Total Assets	$	359.8	$	319.4	$	40.4	$	0
Liabilities:	Liabilities:									Liabilities:
Foreign currency forward contracts	Foreign currency forward contracts	$	1.4	$	0	$	1.4	$	0	Foreign currency forward contracts	$	8.1	$	0	$	8.1	$	0
Total Liabilities	Total Liabilities	$	1.4	$	0	$	1.4	$	0	Total Liabilities	$	8.1	$	0	$	8.1	$	0

Cash and cash equivalents are highly liquid investments with maturities of three months or less when purchased and are valued at the ~~redemption~~redemption value. Short-term investments are investments with maturities between four months and one year, and ~~include $37.0 million of held-to-maturity debt securities~~generally are valued at amortized cost, ~~as well as available-for-sale equity securities having an amortized cost of $11.5 million and a~~which approximates fair ~~value of $11.6 million.~~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~~forward and spot rates to measure the fair value of its foreign currency forward contracts.

~~Note 17 - Fair Value (continued)~~

In addition, the Company remeasures certain assets at fair value, using Level 3 inputs, as a result of the occurrence of triggering events such as purchase accounting for acquisitions. See Note 3 - Acquisitions for further discussion.

No other material assets were measured at fair value on a nonrecurring basis during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Note 17 - Fair Value (continued)

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~~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 ~~$1,193.6~~$1,184.0 million and ~~$1,185.8~~$1,220.7 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The carrying value of this debt was ~~$1,096.8~~$1,096.7 million and ~~$1,086.5~~$1,103.2 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The fair value of long-term fixed-rate debt ~~was~~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 18 - 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.

On September 8, 2020, the Company entered into a $100 million floating-to-fixed rate swap on the 2023 Term Loan, which hedges the change in the 1-month LIBOR rate between October 30, 2020 ~~through~~and September 11, 2023 to a fixed rate. The Company’s risk management objective is to hedge the risk of changes in the monthly interest expense attributable to changes in the benchmark interest rate.

On September 15, 2020, the Company designated €54.5 million of its €150.0 million fixed-rate senior unsecured notes, maturing on September ~~07,~~7, 2027 ~~(2027 Notes)~~(the "2027 Notes") as a hedge against its net investment in one of its European affiliates. The objective of the hedge transaction is to protect the net investment in the foreign operations against changes in the exchange rate between the US dollar and the Euro. The net impact for the three months ended ~~September 30, 2020~~March 31, 2021 was to record a gain of ~~$0.7~~$2.6 million to accumulated comprehensive loss ~~wit~~hwith a corresponding offset to other (expense) income, which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The Company does not purchase or hold any derivative financial instruments for trading purposes. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had ~~$155.3~~$122.0 million ~~and $295.7~~and $173.2 million, respectively, of outstanding foreign currency forward contracts at notional value. Refer to Note 17 - Fair Value for the fair value disclosure of derivative financial instruments.

~~Note 18 - Derivative Instruments and Hedging Activities (continued)~~

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 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.

Note 18 - Derivative Instruments and Hedging Activities (continued)

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,~~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. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had ~~$81.1~~$82.9 million and ~~$87.9~~$86.9 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

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.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, the Company had ~~$74.2~~$39.1 million and ~~$207.8~~$86.2 million, respectively, of outstanding foreign currency forward contracts at notional value that were not designated as hedging instruments. The following table presents the impact of derivative instruments not designated as hedging instruments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and the related location within the Consolidated Statements of Income:


			Amount of gain or (loss) recognized in income										Amount of gain recognized in income
			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2020		2019		2020		2019		Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2021		2020

Foreign currency forward contracts	Foreign currency forward contracts	Other income (expense), net	$	(2.9)	$	6.3	$	(1.1)	$	9.0	Foreign currency forward contracts	Other income (expense), net	$	0.2	$	5.5

2420

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

(Dollars in millions, except per share data)

~~Overview~~OVERVIEW

Introduction:

The Timken Company designs and manages a growing portfolio of engineered bearings and power transmission products. With more than a century of innovation and increasing knowledge, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward. The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, Philadelphia Gear®, Drives®, Cone Drive®, Rollon®, Lovejoy®, Diamond®, BEKA® and Groeneveld®. Timken employs more than 17,000 people globally in 42 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; 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 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 Company's strategy has three primary elements:

Profitable Growth. The Company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy, friction management and 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 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 growth. This requires the Company’s ongoing commitment to attract, retain and develop the best talent across the world.

Capital Deployment 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; (3) returning capital to shareholders through dividends and share 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.

Overview:

Three Months Ended
September 30,
2020 2019 $ Change % Change
Net sales $ 894.6 $ 914.0 $ (19.4) (2.1) %
Net income 91.3 66.7 24.6 36.9 %
Net income attributable to noncontrolling interest 2.5 2.5 — — %
Net income attributable to The Timken Company $ 88.8 $ 64.2 $ 24.6 38.3 %
Diluted earnings per share $ 1.16 $ 0.84 $ 0.32 38.1 %
Average number of shares – diluted 76,286,136 76,592,694 — (0.4) %


		Nine Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Net sales	Net sales	$	2,621.5	$	2,893.7	$	(272.2)	(9.4)	%	Net sales	$	1,025.4	$	923.4	$	102.0	11.0	%
Net income	Net income	237.1		256.9		(19.8)		(7.7)	%	Net income	116.0		84.0		32.0		38.1	%

Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	5.7		8.3		(2.6)		(31.3)	%	Net income attributable to noncontrolling interest	2.7		3.3		(0.6)		(18.2)	%
Net income attributable to The Timken Company	Net income attributable to The Timken Company	$	231.4	$	248.6	$	(17.2)	(6.9)	%	Net income attributable to The Timken Company	$	113.3	$	80.7	$	32.6	40.4	%

Diluted earnings per share	Diluted earnings per share	$	3.04	$	3.23	$	(0.19)	(5.9)	%	Diluted earnings per share	$	1.47	$	1.06	$	0.41	38.7	%
Average number of shares – diluted	Average number of shares – diluted	76,131,920		76,902,426		—		(1.0)	%	Average number of shares – diluted	77,264,641		76,308,556		—		1.3	%

The ~~decrease~~increase in net sales for the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019~~March 31, 2020 was primarily driven by ~~lower~~ higher organic revenue ~~partially offset by~~across most market sectors, as well as the ~~benefit~~favorable impact of ~~acquisitions.~~ foreign currency exchange rate changes and the Aurora acquisition. The increase in net income for the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019 was primarily due to~~ pension and other postretirement plan remeasurement income (versus expense in the same period a year ago), lower operating expenses reflecting the impact of cost reduction initiatives, favorable manufacturing utilization and a lower income tax rate, partially offset by the unfavorable impact of lower volume, price/mix, currency exchange rate changes, and higher restructuring charges. Refer to Note 14 – Retirement Benefit Plans and Note 15 – Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information on pension and other postretirement plan remeasurement income/expense inMarch 31, 2020 ~~and 2019.~~

~~The decrease in net sales for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019 was primarily driven by lower organic revenue and the unfavorable impact of foreign currency exchange rate changes, partially offset by the benefit of acquisitions. The decrease in net income for the nine months ended September 30, 2020~~ ~~compared with the nine months ended September 30, 2019~~ was primarily due to the impact of ~~lower~~higher volume and related manufacturing ~~utilization, the unfavorable impact of foreign currency exchange rate changes~~performance, and ~~higher restructuring charges. The decrease was~~lower selling, general and administrative ("SG&A") expenses, partially offset by ~~lower operating expenses, reflecting cost reduction initiatives, pension~~unfavorable mix and ~~other postretirement plan remeasurement income (versus expense in the same period a year ago), lower~~higher material and logistics ~~costs and favorable price/mix. Results for the nine months ended September 30, 2020 also benefited from favorable~~costs. In addition, discrete tax ~~adjustments~~items and the tax rate were favorable ~~property losses and related recoveries.~~in 2021 compared to 2020.

Outlook:

The world continues to be impacted by the COVID-19 pandemic. ~~Throughout the pandemic, the~~The Company ~~has been~~is adhering to mandates and other guidance from local governments and health authorities, including the World Health Organization and the Centers for Disease Control and Prevention. ~~The Company~~Timken has implemented risk mitigation plans across the enterprise to protect employees and reduce the risk of spreading the virus, while continuing to operate where permitted and to the extent practicable. ~~Timken’s~~The Company’s main priority iscontinues to be the health of its employees and others in the communities where it does business.

~~Throughout~~While the Company’s operations and financial results were adversely impacted during 2020 due to the COVID-19 pandemic, ~~Timken has continued~~conditions began to operate and fill customer orders, and has adjusted production as required by local government directives and to reflect changes in global demand. For most of the second quarter, the Company's operations were adversely impacted by lower global demand caused by the ongoing spread of COVID-19 around the world, which included various customer shut-downs and government imposed operating restrictions in places like India and Italy. Government restrictions on Timken's operations were mostly lifted by the end of the second quarter. During the third quarter, Timken was able to operate with no major restrictions, and production levels improved from the second quarter.

During the second quarter, the Company took steps to reduce costs by implementing temporary salary reductions, work furloughs and other actions to align its costs with near-term demand expectations. During the third quarter, Timken continued certain temporary cost reduction actions and expanded and accelerated certain structural cost reduction initiatives to align its costs with near-term demand expectations and to improve ~~the profitability of the Company longer term. Timken expects these structural cost reduction actions, in aggregate, to generate approximately $55 million to $60 million of total year-on-year savings~~ in the second half of ~~2020.~~

~~Given~~ the year. During the first quarter of 2021, operations continued to be challenged by COVID-19 related supply chain disruptions and, in a few instances, staffing issues; however, revenue for the quarter was stronger than expected at the beginning of the year. The Company will continue to monitor, assess and seek to manage the uncertainty surrounding the COVID-19 ~~pandemic,~~pandemic. Timken’s outlook for 2021 assumes that COVID-19 conditions around the world will continue to improve as the year progresses.

The Company ~~is not providing detailed sales and earnings guidance at this time. Timken~~ expects ~~fourth quarter 2020~~2021 full-year revenue to be ~~below the third quarter~~up approximately 18% compared to 2020, primarily due to ~~seasonality~~higher organic revenue across both the Mobile Industries and ~~below~~Process Industries segments, the ~~fourth quarter~~impact from foreign currency exchange rates and the benefit of ~~2019~~acquisitions. The Company's earnings are expected to be up significantly in 2021 compared with 2020, primarily due to ~~reduced demand, mainly due to COVID-19.~~ the impact of higher volume and related manufacturing performance, the favorable impact of foreign currency exchange rate changes and lower restructuring and other special items (net), partially offset by unfavorable mix, higher material costs and higher SG&A expenses.

The Company expects to generate ~~positive~~ cash ~~flow during~~from operating activities in the ~~fourth quarter~~range of $475 million to $500 million in 2021, down from $577.6 million in 2020, ~~and improve operating margins~~as the impact of higher earnings is expected to be more than offset by the changes in working capital (i.e. a use of cash in 2021 versus a source of cash in 2020). The Company expects capital expenditures to be approximately $150 million (approximately 3.6% of sales) in 2021, compared ~~to the fourth quarter of 2019 due to better cost performance.~~with $122 million in 2020.

~~The Statement of Income~~THE STATEMENT OF INCOME

Sales:

Three Months Ended
September 30,
2020 2019 $ Change % Change
Net Sales $ 894.6 $ 914.0 $ (19.4) (2.1) %

Nine Months Ended
September 30,
2020 2019 $ Change % Change
Net Sales $ 2,621.5 $ 2,893.7 $ (272.2) (9.4) %


	Three Months Ended March 31,
	2021		2020		$ Change		% Change
Net Sales	$	1,025.4	$	923.4	$	102.0	11.0	%

Net sales ~~decreased~~increased for the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~decrease was~~ primarily due to lower organic revenue of $47 million, partially offset by the benefit of acquisitions of $29 million. The lower organic revenue was driven by lower demand across most end markets, partially offset by significant growth in renewable energy.

~~Net sales decreased for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019. The decrease was primaril~~y due to lower organic revenue of $336 million and the unfavorable impact of foreign currency exchange rate changes of $44 million, partially offset by the benefit of acquisitions of $107 million. The lower organic revenueincrease was primarily due to ~~the impact~~higher organic revenue of ~~the COVID-19 pandemic that impacted most end markets, partially offset by growth in renewable energy.~~

~~Gross Profit:~~

Three Months Ended
September 30,
2020 2019 $ Change Change
Gross profit $ 263.7 $ 277.5 $ (13.8) (5.0 %)
Gross profit % to net sales 29.5 % 30.4 % (90) bps

Nine Months Ended
September 30,
2020 2019 $ Change Change
Gross profit $ 772.9 $ 885.8 $ (112.9) (12.7 %)
Gross profit % to net sales 29.5 % 30.6 % (110) bps

~~Gross profit decreased for the three months ended September 30, 2020 compared with the three months ended September 30, 2019, primarily due to~~ the impact of lower volume of $24 million and the unfavorable impact of foreign currency exchange rate changes of $6 million, partially offset by favorable manufacturing performance of $10 million, and the net benefit of acquisitions of $8 million.

~~Gross profit decreased for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019, primarily due to~~ ~~the impact of lower volume of $152~~$69 million, the ~~unfavorable~~favorable impact of foreign currency exchange rate changes of $25 million and the ~~related~~benefit of the Aurora acquisition of $8 million. The higher organic revenue was driven by higher demand across most end markets, led by the renewable energy and off-highway sectors.

Gross Profit:


	Three Months Ended March 31,
	2021			2020			$ Change		Change
Gross profit	$	299.2		$	278.9		$	20.3	7.3	%
Gross profit % to net sales	29.2		%	30.2		%			(100)	bps

Gross profit increased for the three months ended March 31, 2021 compared with the three months ended March 31, 2020, primarily due to the impact of higher volume of $27 million, the favorable impact of foreign currency exchange rate changes of $7 million, favorable manufacturing ~~utilization~~performance of ~~$14~~$9 million and the favorable impact of acquisitions of $6 million. These ~~items~~increases were partially offset by ~~the net benefit~~unfavorable price/mix of ~~acquisitions of $29~~$18 million ~~lower~~and higher material and logistics costs of ~~$25 million, and favorable price/mix of $16~~$11 million. ~~In addition, the Company recognized net insurance proceeds of $4 million for the first nine months of 2020 after incurring property losses of $6 million in the first nine months of 2019.~~

Selling, General and Administrative Expenses:

Three Months Ended
September 30,
2020 2019 $ Change Change
Selling, general and administrative expenses $ 132.7 $ 148.0 $ (15.3) (10.3 %)
Selling, general and administrative expenses % to net sales 14.8 % 16.2 % (140) bps


		Nine Months Ended September 30,											Three Months Ended March 31,
		2020			2019			$ Change		Change			2021			2020			$ Change		Change
Selling, general and administrative expenses	Selling, general and administrative expenses	$	398.1		$	459.4		$	(61.3)	(13.3	%)	Selling, general and administrative expenses	$	144.5		$	153.6		$	(9.1)	(5.9	%)
Selling, general and administrative expenses % to net sales	Selling, general and administrative expenses % to net sales	15.2		%	15.9		%			(70)	bps	Selling, general and administrative expenses % to net sales	14.1		%	16.6		%			(250)	bps

SG&A expenses decreased in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019, primarily~~March 31, 2020, primarily due to lower ~~employee costs~~discretionary and ~~related benefits, including temporary salary reductions and permanent headcount reductions, and lower discretionary~~other controllable spending. ~~Performance-based compensation was also lower in the third quarter of 2020.~~

~~SG&A expenses decreased in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019, primarily due~~ to lower employee costs and related benefits and lower discretionary spending as the Company implemented cost reduction initiatives, including temporary salary reductions, work furloughs and permanent headcount reductions, to reduce costs to combat the impact of the COVID-19 pandemic and lower demand. Performance-based compensation was also lower for the nine months ended September 30, 2020.

2823

Impairment and Restructuring:

Three Months Ended
September 30,
2020 2019 $ Change % Change
Impairment charges $ — $ 0.1 $ (0.1) (100.0) %
Severance and related benefit costs 11.9 0.8 11.1 1,387.5 %
Exit costs 0.1 0.7 (0.6) (85.7) %
Total $ 12.0 $ 1.6 $ 10.4 650.0 %


		Nine Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Impairment charges	Impairment charges	$	0.1	$	0.8	$	(0.7)	(87.5)	%	Impairment charges	$	3.4	$	0.1	$	3.3	NM
Severance and related benefit costs	Severance and related benefit costs	17.8		1.6		16.2		1,012.5	%	Severance and related benefit costs	0.5		2.7		(2.2)		(81.5)	%
Exit costs	Exit costs	0.8		1.1		(0.3)		(27.3)	%	Exit costs	0.1		0.8		(0.7)		(87.5)	%
Total	Total	$	18.7	$	3.5	$	15.2	434.3		Total	$	4.0	$	3.6	$	0.4	11.1	%

Impairment and restructuring charges of $4.0 million during the three months ended March 31, 2021 were comprised primarily of impairment charges related to certain engineering-related assets used in the business during the three months ended March 31, 2021. Management concluded no further investment would be made in these assets and as a result, reduced the value to zero. In addition, severance and related benefits are associated with initiatives to reduce headcount and right-size the Company's manufacturing footprint, including the planned closure of the Company's Indianapolis, Indiana chain plant.

Impairment and restructuring charges of ~~$12.0 million and $18.7~~$3.6 million during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 were comprised primarily of severance and related benefits associated with initiatives to reduce headcount and right-size the Company's manufacturing footprint, including ~~the~~ planned ~~closure~~closures of the Company's Indianapolis, Indiana chain plant and the reorganization of the Company's ~~Canton, Ohio and~~ Gaffney, South Carolina bearing ~~facilities. In addition, the Company recognized severance and related benefits as it began to accelerate and expand cost reduction initiatives.~~

Impairment and restructuring charges of $1.6 million and $3.5 million during the three and nine months ended September 30, 2019 were primarily due to severance and related benefits associated with a variety of initiatives to reduce headcount.

The Company expects to generate approximately $55 million to $60 million in year-over-year cost savings during the second half of 2020 as a result of company-wide cost reduction initiatives, including the above mentioned actions.facility.

Refer to Note 13 - Impairment and Restructuring Charges in the Notes to the Consolidated Financial Statements for additional information.

Other Income (Expense):

Three Months Ended
September 30,
2020 2019 $ Change % Change
Non-service pension and other postretirement
income (expense) $ 15.3 $ (14.4) $ 29.7 (206.3) %
Other (expense) income, net (1.0) 5.8 (6.8) (117.2) %
Total other income (expense), net $ 14.3 $ (8.6) $ 22.9 (266.3) %

Nine Months Ended
September 30,
2020 2019 $ Change % Change
Non-service pension and other postretirement
income (expense) $ 13.4 $ (14.1) $ 27.5 (195.0) %
Other income, net 1.1 10.5 (9.4) (89.5) %
Total other income (expense), net $ 14.5 $ (3.6) $ 18.1 (502.8) %


	Three Months Ended March 31,
	2021		2020		$ Change		% Change

Non-service pension and other postretirement income	$	4.0	$	3.4	$	0.6	17.6	%
Other income	1.0		4.1		(3.1)		(75.6)	%
Total other income	$	5.0	$	7.5	$	(2.5)	(33.3)	%

~~The Company recognized non-service~~Non-service pension and other postretirement income increased for the three months ended March 31, 2021 compared with the three months ended March 31, 2020. The increase was primarily due to lower interest costs for the Company's defined benefit pension plans. The increase was partially offset by actuarial losses due to pension remeasurement in the three ~~and nine~~ months ended ~~September 30, 2020 compared~~ ~~to pension and other postretirement expense in~~March 31, 2021. The remeasurement was triggered by the three and nine months ended September 30, 2019, primarily due to pension actuarial gains in 2020 compared to pension and other postretirement plan actuarial losses in 2019. The actuarial gains in 2020 were primarily due to a pension plan remeasurement triggered byexpectation that lump sum payments to new retirees ~~exceeding~~will exceed annual service and interest costs for ~~one~~three of the Company’s U.S. defined benefit pension plans, and actuarial losses in 2019 were due to a pension plan remeasurement triggered by the payment of deferred compensation to a former executive officer, as well as the remeasurement triggered by a plan amendment of the Company’s other postretirement benefit plans. ~~In addition, there was higher amortization of prior service credit in the current year due to a plan amendment for the Company's postretirement benefit plans in the second half of 2019.~~ Refer to Note 14 - Retirement Benefit Plansand ~~and~~ Note 15 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information.

Other ~~(expense)~~ income ~~net~~ decreased infor the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019,~~March 31, 2020, primarily due to ~~higher~~lower foreign currency exchange losses and lower royalty income. Other income, net decreased in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019, primarily due to higher losses on the disposal of fixed assets, lower foreign currency gains and lower ~~royalty income.~~insurance recoveries.

Income Tax Expense:

Three Months Ended
September 30,
2020 2019 $ Change % Change
Provision for income taxes $ 26.6 $ 35.5 $ (8.9) (25.1) %
Effective tax rate 22.6 % 34.7 % (1,210) bps


		Nine Months Ended September 30,											Three Months Ended March 31,
		2020			2019			$ Change		% Change			2021			2020			$ Change		% Change
Provision for income taxes	Provision for income taxes	$	84.2		$	110.4		$	(26.2)	(23.7)	%	Provision for income taxes	$	25.3		$	29.6		$	(4.3)	(14.5)	%
Effective tax rate	Effective tax rate	26.2		%	30.1		%			(390) bps		Effective tax rate	17.9		%	26.1		%			(820) bps

Income tax expense decreased ~~$8.9~~$4.3 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019~~March 31, 2020, primarily due to the ~~projected decrease in the mix~~release of ~~the earnings in international jurisdictions with relatively higher tax rates and other discrete tax benefits in 2020, compared to discrete tax expense in the prior year.~~

Income tax expense decreased $26.2 million for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019 primarily due to lower pre-tax earnings. Income tax expense was also lower due to the projected decrease in the mix of earnings in the international jurisdictions with relatively higher tax rates and additional accruals ~~recorded discretely~~ for uncertain tax positions infrom the ~~prior year related~~settlement of the 2017 and 2018 U.S. federal tax years, and favorable U.S. permanent book-tax differences, including new elective GILTI high tax exemption rules. This impact was partially offset by increased income taxes due to ~~U.S. Tax Reform.~~

higher pre-tax earnings. Refer to Note 6 - Income Taxes for more information on the computation of the income tax expense in interim periods.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), enacted by the U.S. on March 27, 2020, did not have a material impact on the Company's provision for income taxes for the nine months ended September 30, 2020. The Company is continuing to analyze the ongoing impact of the CARES Act.

~~Business Segments~~BUSINESS SEGMENTS

The Company's reportable segments are business units that serve different industry sectors. While the segments operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. Beginning in the fourth quarter of 2019, the main operating income metric used by management to measure the financial performance of each segment was EBITDA. The Company made this change because recent acquisitions have resulted in an increased amount of purchase accounting amortization expense that affects comparability of results across periods and versus other companies. The primary measurement used by management to measure the financial performance of each segment prior to the fourth quarter of 2019 was earnings before interest and taxes ("EBIT"). Segment results have been revised for all periods presented to be consistent with the new measure of segment performance.is EBITDA. Refer to Note 5 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of EBITDA 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 completed in ~~2020~~2021 and ~~2019~~2020 and foreign currency exchange rate changes. The effects of acquisitions 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~~item highlights the Company's ~~acquisitions~~acquisition completed in ~~2019~~2020 by segment based on the customers and underlying markets served:

•The Company acquired ~~BEKA~~Aurora during the fourth quarter of ~~2019. The majority of the results~~2020. Results for ~~BEKA~~Aurora are reported in the Mobile Industries ~~segment.~~

•~~The Company acquired Diamond Chain during the second quarter of 2019. The majority of the results for Diamond Chain are reported in the~~and Process Industries ~~segment.~~segments based on customers and underlying market sectors served.

Mobile Industries Segment:


		Three Months Ended September 30,											Three Months Ended March 31,
		2020			2019			$ Change		Change			2021			2020			$ Change		Change
Net sales	Net sales	$	428.6		$	455.1		$	(26.5)	(5.8	%)	Net sales	$	504.5		$	466.7		$	37.8	8.1	%
EBITDA	EBITDA	$	64.0		$	70.1		$	(6.1)	(8.7	%)	EBITDA	$	79.6		$	75.1		$	4.5	6.0	%
EBITDA margin	EBITDA margin	14.9		%	15.4		%			(50)	bps	EBITDA margin	15.8		%	16.1		%			(30)	bps

Three Months Ended
September 30,
2020 2019 $ Change % Change
Net sales $ 428.6 $ 455.1 $ (26.5) (5.8 %)
Less: Acquisitions 19.8 — 19.8 NM
Currency (2.6) — (2.6) NM
Net sales, excluding the impact of acquisitions and currency $ 411.4 $ 455.1 $ (43.7) (9.6 %)

Nine Months Ended
September 30,
2020 2019 $ Change Change
Net sales $ 1,237.9 $ 1,448.8 $ (210.9) (14.6 %)
EBITDA $ 177.9 $ 227.4 $ (49.5) (21.8 %)
EBITDA margin 14.4 % 15.7 % (130) bps


		Nine Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Net sales	Net sales	$	1,237.9	$	1,448.8	$	(210.9)	(14.6	%)	Net sales	$	504.5	$	466.7	$	37.8	8.1	%
Less: Acquisitions	Less: Acquisitions	67.5		—		67.5		NM		Less: Acquisitions	4.2		—		4.2		NM

Currency	Currency	(24.0)		—		(24.0)		NM		Currency	9.4		—		9.4		NM
Net sales, excluding the impact of acquisitions and currency	Net sales, excluding the impact of acquisitions and currency	$	1,194.4	$	1,448.8	$	(254.4)	(17.6	%)	Net sales, excluding the impact of acquisitions and currency	$	490.9	$	466.7	$	24.2	5.2	%

The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, ~~decreased $43.7~~increased $24.2 million or ~~9.6%~~5.2% in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019~~,March 31, 2020, reflecting organic growth in the off-highway, heavy truck and automotive sectors. These increases were partially offset by lower shipments ~~across most market~~in the rail and aerospace sectors. EBITDA ~~decreased~~increased by ~~$6.1~~$4.5 million or ~~8.7%~~6.0% in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019,~~March 31, 2020, primarily due to the impact of ~~lower~~higher volume and ~~higher restructuring charges. The decrease was~~lower SG&A expenses, partially offset by ~~the favorable impact of cost-reductions, improved manufacturing performance, lower material~~unfavorable mix and higher materials and logistics ~~costs and the favorable impact of acquisitions.~~

The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $254.4 million or 17.6% in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019, reflecting lower shipments across most market sectors, partially offset by higher pricing. EBITDA decreased by $49.5 million or 21.8% in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019, primarily due to the impact of lower volume and related manufacturing performance, as well as the unfavorable impact of foreign currency exchange rate changes. These decreases were partially offset by the favorable impact of cost reductions and price/mix, lower material and logistics costs, and the favorable impact of acquisitions.costs.

3226

Process Industries Segment:


		Three Months Ended September 30,											Three Months Ended March 31,
		2020			2019			$ Change		Change			2021			2020			$ Change		Change
Net sales	Net sales	$	466.0		$	458.9		$	7.1	1.5	%	Net sales	$	520.9		$	456.7		$	64.2	14.1	%
EBITDA	EBITDA	$	109.2		$	116.5		$	(7.3)	(6.3	%)	EBITDA	$	131.0		$	107.5		$	23.5	21.9	%
EBITDA margin	EBITDA margin	23.4		%	25.4		%			(200) bps		EBITDA margin	25.1		%	23.5		%			160 bps

Three Months Ended
September 30,
2020 2019 $ Change % Change
Net sales $ 466.0 $ 458.9 $ 7.1 1.5 %
Less: Acquisitions 8.9 — 8.9 NM
Currency 1.1 — 1.1 NM
Net sales, excluding the impact of acquisitions and currency $ 456.0 $ 458.9 $ (2.9) (0.6) %

Nine Months Ended
September 30,
2020 2019 $ Change Change
Net sales $ 1,383.6 $ 1,444.9 $ (61.3) (4.2 %)
EBITDA $ 343.0 $ 369.8 $ (26.8) (7.2 %)
EBITDA margin 24.8 % 25.6 % (80) bps


		Nine Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Net sales	Net sales	$	1,383.6	$	1,444.9	$	(61.3)	(4.2	%)	Net sales	$	520.9	$	456.7	$	64.2	14.1	%
Less: Acquisitions	Less: Acquisitions	39.7		—		39.7		NM		Less: Acquisitions	3.7		—		3.7		NM
Currency	Currency	(19.9)		—		(19.9)		NM		Currency	15.9		—		15.9		NM
Net sales, excluding the impact of acquisitions and currency	Net sales, excluding the impact of acquisitions and currency	$	1,363.8	$	1,444.9	$	(81.1)	(5.6)	%	Net sales, excluding the impact of acquisitions and currency	$	501.3	$	456.7	$	44.6	9.8	%

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, ~~decreased $2.9~~increased $44.6 million or ~~0.6%~~9.8% in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~decrease~~increase was primarily driven ~~by lower demand across most industrial sectors, partially offset~~ by increased demand in the renewable energy, ~~sector~~distribution and ~~higher pricing.~~general industrial sectors. These increases were partially offset by lower marine revenue. EBITDA ~~decreased $7.3~~increased $23.5 million or ~~6.3%~~21.9% in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019~~March 31, 2020 primarily due to higher volume, favorable manufacturing performance, and lower ~~volume and the unfavorable impact of price/mix and foreign currency exchange rate changes, as well as higher restructuring charges,~~SG&A expenses, partially offset by ~~the favorable impact of cost reductions~~unfavorable mix and ~~improved manufacturing performance.~~

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $81.1 million or 5.6% in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019. The decrease was primarily driven by lower demand across most industrial sectors, partially offset by increased demand in the renewable energy sector, as well as higher pricing. EBITDA decreased $26.8 million or 7.2% in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019 primarily due to the impact of lower demand and the impact of unfavorable foreign currency exchange rate changes, partially offset by the favorable impact of cost reductions, lower materialmaterials and logistics ~~costs and the favorable impact of acquisitions.~~costs.

Unallocated Corporate:

Three Months Ended
September 30,
2020 2019 $ Change Change
Corporate EBITDA $ (10.6) $ (11.2) $ 0.6 (5.4%)
Corporate EBTIDA % to net sales (1.2) % (1.2) % — bps

Nine Months Ended
September 30,
2020 2019 $ Change Change
Corporate EBITDA $ (28.2) $ (40.6) $ 12.4 (30.5%)
Corporate EBTIDA % to net sales (1.1) % (1.4) % 30 bps


	Three Months Ended March 31,
	2021			2020			$ Change		Change
Unallocated corporate expense	$	(11.6)		$	(11.1)		$	(0.5)	4.5%
Unallocated corporate expense % to net sales	(1.1)		%	(1.2)		%			10 bps

~~Corporate EBITDA~~Unallocated corporate expense increased in the three months ended ~~September 30, 2020~~March 31, 2021 compared with the three months ended ~~September 30, 2019, primarily due to~~ ~~the favorable impact of cost reductions.~~

~~Corporate EBITDA increased in the nine months ended September 30,~~March 31, 2020, ~~compared with the nine months ended September 30, 2019,~~ primarily due to the ~~favorable impact of cost reductions, lower performance-based compensation and lower transaction costs related to acquisitions.~~

~~The Balance Sheet~~

~~The following discussion is a comparison of the Consolidated Balance Sheets at September 30, 2020 and December 31, 2019.~~

~~Current Assets:~~

September 30,
2020 December 31,
2019 $ Change % Change
Cash and cash equivalents $ 313.1 $ 209.5 $ 103.6 49.5 %
Restricted cash 0.9 6.7 (5.8) (86.6) %
Accounts receivable, net 571.5 545.1 26.4 4.8 %
Unbilled receivables 141.1 129.2 11.9 9.2 %
Inventories, net 789.9 842.0 (52.1) (6.2) %
Deferred charges and prepaid expenses 32.7 36.7 (4.0) (10.9) %
Other current assets 115.3 105.4 9.9 9.4 %
Total current assets $ 1,964.5 $ 1,874.6 $ 89.9 4.8 %

~~Refer to the~~ ~~"Cash Flows"~~ section for a discussion on the change in Cash and cash equivalents. Accounts receivable increased primarily due to higher net sales in August and September 2020 as compared to net sales in November and December 2019. The increase in unbilled receivables was primarily due to an increase of revenue recognized for marine contracts in 2020.

~~Inventories, net decreased primarily due to a~~ decrease in finished goods inventory as a result of higher sales volume for the last two months of third quarter of 2020, compared with the last two months of fourth quarter of 2019, as well as inventory management efforts to reduce inventory levels.

~~Property, Plant and Equipment, Net:~~

September 30,
2020 December 31,
2019 $ Change % Change
Property, plant and equipment, net $ 980.2 $ 989.2 $ (9.0) (0.9) %

~~The decrease in net property, plant and equipment for the nine months of 2020 was primarily due to depreciation of~~ ~~$83 million~~ ~~in 2020~~ ~~and the designation of certain assets totaling $4 million as held for sale, partially offset by capital expenditures of $82 million.~~

~~Other Assets:~~

September 30,
2020 December 31,
2019 $ Change % Change
Goodwill $ 1,021.1 $ 993.7 $ 27.4 2.8 %
Other intangible assets 737.2 758.5 (21.3) (2.8) %
Operating lease assets 105.4 114.1 (8.7) (7.6) %
Non-current pension assets 9.0 3.4 5.6 164.7 %
Non-current other postretirement benefit assets — 36.6 (36.6) (100.0) %
Deferred income taxes 72.9 71.8 1.1 1.5 %
Other non-current assets 18.8 18.0 0.8 4.4 %
Total other assets $ 1,964.4 $ 1,996.1 $ (31.7) (1.6) %

~~The increase in goodwill was primarily due to foreign currency exchange rate changes of $21 million.~~ ~~The decrease in other intangible assets was primarily due to current-year amortization of $42 million, partially offset by the~~unfavorable impact of foreign currency exchange rate ~~changes of $16 million.~~changes.

At December 31, 2019, as a result of a plan amendment, one of the Company's postretirement benefit plans was overfunded. The decrease in non-current other postretirement benefit assets was due to the creation of a new VEBA trust in January 2020. The Company transferred $50 million from an existing VEBA trust under the overfunded plan to fund the new VEBA trust to pay certain active employees' medical benefits, which caused the postretirement plan to become underfunded. The remaining balance of this plan, after the transfer of the $50 million, was reclassified to accrued postretirement benefits on the Consolidated Balance sheet as of September 30, 2020. Refer to ~~Note 15 - Other Postretirement Benefit Plans~~ in~~the Notes to the Consolidated Financial Statements for additional information.~~

~~Current Liabilities:~~

September 30,
2020 December 31,
2019 $ Change % Change
Short-term debt $ 64.8 $ 17.3 $ 47.5 274.6 %
Current portion of long-term debt 10.8 64.7 (53.9) (83.3) %
Short-term operating lease liabilities 26.6 28.3 (1.7) (6.0) %
Accounts payable 306.7 301.7 5.0 1.7 %
Salaries, wages and benefits 116.7 134.5 (17.8) (13.2) %
Income taxes payable 23.3 17.8 5.5 30.9 %
Other current liabilities 191.5 172.3 19.2 11.1 %
Total current liabilities $ 740.4 $ 736.6 $ 3.8 0.5 %

~~The increase in short-term debt was~~ primarily due to the increase in borrowings under variable-rate lines of credit for the Company's foreign subsidiaries. The decrease in the current portion of long-term debt was primarily due to the payment of $47 million on the Company's 2020 Term Loan that matured in September 2020.

T~~he decrease in accrued salaries, wages and benefits was primarily due~~ ~~to the 2019 performance-based compensation accruals exceeding similar accruals for 2020.~~

The increase in other current liabilities was primarily due to an increase in accrued taxes of $8 million, mostly related to higher value-added tax corresponding to higher net sales in August and September 2020 as compared to net sales in November and December 2019. In addition, accrued restructuring increased $5 million as compared to the prior year end. Refer to ~~Note 13 - Impairment and Restructuring Charges~~ ~~in the Notes to the Consolidated Financial Statements for additional information.~~

3627

~~Non-Current Liabilities:~~CASH FLOW

September 30,
2020 December 31,
2019 $ Change % Change
Long-term debt $ 1,533.0 $ 1,648.1 $ (115.1) (7.0) %
Accrued pension benefits 161.5 165.1 (3.6) (2.2) %
Accrued postretirement benefits 44.8 31.8 13.0 40.9 %
Long-term operating lease liabilities 66.0 71.3 (5.3) (7.4) %
Deferred income taxes 162.3 168.2 (5.9) (3.5) %
Other non-current liabilities 102.1 84.0 18.1 21.5 %
Total non-current liabilities $ 2,069.7 $ 2,168.5 $ (98.8) (4.6) %

The decrease in long-term debt was due to the reduction in borrowings under the Accounts Receivable facility as the Company fully paid the outstanding balance of $98.2 million that was classified as long-term at December 31, 2019 while also reducing its borrowing under the Senior Credit Facility.


	Three Months Ended March 31,
	2021		2020		$ Change


Net cash provided by operating activities	$	31.7	$	56.2	$	(24.5)


Net cash used in investing activities	(39.4)		(31.6)		(7.8)


Net cash (used in) provided by financing activities	(6.4)		166.5		(172.9)
Effect of exchange rate changes on cash	(3.9)		(13.3)		9.4
(Decrease) increase in cash, cash equivalents and restricted cash	$	(18.0)	$	177.8	$	(195.8)

The increase in accrued postretirement benefits was primarily due to the creation of the new VEBA trust. In January 2020, the Company transferred $50 million from an existing VEBA trust under the Company's postretirement benefit plans to fund the new VEBA trust to pay certain active employees' medical benefits. The creation of the new VEBA trust shifted the balance from overfunded as of December 31, 2019 to a liability position as of September 30, 2020. Refer to Op~~Note 15 - Other Postretirement Benefit Plans~~ in~~the Notes to the Consolidated Financial Statements for additional information.~~

erating Activities:

The increase in other non-current liabilities was primarily due to $10.5 million of payroll taxes that are deferred for more than 12 months under the CARES Act, as well as an increase in uncertain tax positions of approximately $4 million.

~~Shareholders’ Equity:~~

September 30,
2020 December 31,
2019 $ Change % Change
Common shares $ 983.7 $ 990.7 $ (7.0) (0.7) %
Earnings invested in the business 2,073.4 1,907.4 166.0 8.7 %
Accumulated other comprehensive loss (39.3) (50.1) 10.8 (21.6) %
Treasury shares (989.7) (979.8) (9.9) 1.0 %
Noncontrolling interest 70.9 86.6 (15.7) (18.1) %
Total shareholders’ equity $ 2,099.0 $ 1,954.8 $ 144.2 7.4 %

Earnings invested in the business in the nine months of 2020 increased by net income attributable to the Company of $231.4 million, partially offset by dividends declared of $65.0 million. The increase in accumulated other comprehensive loss was primarily due to foreign currency translation adjustments of $15.0 million. See ~~Other 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 one million of its common shares for $42.3 million in the first quarter of 2020, partially offset by $32.5 million of new shares issued, net of shares surrendered, for stock compensation plans in 2020. The decrease ~~in noncontrolling interest was due to a dividend declared by Timken India Limited that resulted in payment to the noncontrolling interest parties in the third quarter of 2020.~~

~~Cash Flows~~

Nine Months Ended
September 30,
2020 2019 $ Change
Net cash provided by operating activities $ 457.2 $ 354.8 $ 102.4
Net cash used in investing activities (101.4) (162.2) 60.8
Net cash used in financing activities (257.7) (137.4) (120.3)
Effect of exchange rate changes on cash (0.3) (6.4) 6.1
Increase in cash, cash equivalents and restricted cash $ 97.8 $ 48.8 $ 49.0

~~Operating Activities:~~

~~The increase~~ in net cash provided by operating activities for the first ~~nine~~three months of ~~2020~~2021 compared with the first ~~nine~~three months of ~~2019~~2020 was primarily due to ~~a reduction~~an increase in cash used for working capital items of ~~$100.3~~$47.9 million ~~which includes~~and a reduction in the benefit of income taxes on cash ~~spent on active medical claims due to the use~~ of ~~VEBA funds discussed previously.~~$5.8 million, partially offset by higher net income of $32.0 million. Refer to the 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 ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively:


		Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		$ Change			2021		2020		$ Change
Cash Provided (Used):	Cash Provided (Used):							Cash Provided (Used):
Accounts receivable	Accounts receivable	$	(27.6)	$	(6.4)	$	(21.2)	Accounts receivable	$	(138.9)	$	(47.6)	$	(91.3)
Unbilled receivables	Unbilled receivables	(11.9)		(35.0)		23.1		Unbilled receivables	(2.5)		(8.3)		5.8
Inventories	Inventories	47.9		37.8		10.1		Inventories	(33.3)		0.3		(33.6)
Trade accounts payable	Trade accounts payable	2.8		(7.4)		10.2		Trade accounts payable	19.9		—		19.9
Other accrued expenses	Other accrued expenses	49.4		(28.7)		78.1		Other accrued expenses	17.0		(34.3)		51.3
Cash provided by (used in) working capital items		$	60.6	$	(39.7)	$	100.3
Cash used in working capital items								Cash used in working capital items	$	(137.8)	$	(89.9)	$	(47.9)

The following table displays the impact of income taxes on cash during the ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively:


		Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		$ Change			2021		2020		$ Change
Accrued income tax expense	Accrued income tax expense	$	84.2	$	110.4	$	(26.2)	Accrued income tax expense	$	25.3	$	29.6	$	(4.3)
Income tax payments	Income tax payments	(78.6)		(97.5)		18.9		Income tax payments	(16.5)		(20.8)		4.3
Other miscellaneous items	Other miscellaneous items	0.1		(2.2)		2.3		Other miscellaneous items	(7.2)		(1.4)		(5.8)
Change in income taxes		$	5.7	$	10.7	$	(5.0)
Cash benefit from income taxes								Cash benefit from income taxes	$	1.6	$	7.4	$	(5.8)

Investing Activities:

The ~~decrease~~increase in net cash used in investing activities for the ~~nine~~first three months of ~~2020~~2021 compared with the ~~nine~~first three months of ~~2019~~2020 was primarily due to ~~a decrease in cash used for acquisitions of $76.0 million, partially offset by a $10.5 million~~an increase in cash used for investments in short-term marketable ~~securities.~~securities of $10.1 million, partially offset by a decrease in capital expenditures of $2.4 million.

Financing Activities:

The ~~increase~~change in net cash ~~used in~~(used in) provided by financing activities for the ~~nine~~first three months of ~~2020~~2021 compared with the ~~nine~~first three months of ~~2019~~2020 was primarily due to a decrease in net borrowings of ~~$123.3 million due to an increase~~$187.0 million. This change was partially offset by a decrease in the purchase of ~~debt payments in 2020.~~treasury shares of $16 million.

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~~Liquidity and Capital Resources:~~LIQUIDITY AND CAPITAL RESOURCES

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

Net Debt:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Short-term debt	Short-term debt	$	64.8	$	17.3	Short-term debt	$	167.5	$	119.8
Current portion of long-term debt	Current portion of long-term debt	10.8		64.7		Current portion of long-term debt	10.8		10.9
Long-term debt	Long-term debt	1,533.0		1,648.1		Long-term debt	1,423.7		1,433.9
Total debt	Total debt	$	1,608.6	$	1,730.1	Total debt	$	1,602.0	$	1,564.6
Less: Cash and cash equivalents	Less: Cash and cash equivalents	313.1		209.5		Less: Cash and cash equivalents	302.3		320.3
Net debt	Net debt	$	1,295.5	$	1,520.6	Net debt	$	1,299.7	$	1,244.3

Ratio of Net Debt to Capital:


		September 30, 2020			December 31, 2019				March 31, 2021			December 31, 2020
Net debt	Net debt	$	1,295.5		$	1,520.6		Net debt	$	1,299.7		$	1,244.3
Total equity	Total equity	2,099.0			1,954.8			Total equity	2,250.1			2,225.2
Net debt plus total equity (capital)	Net debt plus total equity (capital)	$	3,394.5		$	3,475.4		Net debt plus total equity (capital)	$	3,549.8		$	3,469.5
Ratio of net debt to capital	Ratio of net debt to capital	38.2		%	43.8		%	Ratio of net debt to capital	36.6		%	35.9		%

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 ~~September 30, 2020,~~March 31, 2021, the ~~Company~~Company had strong liquidity with ~~$313.1~~$302.3 million of cash and cash equivalents on the Consolidated Balance Sheet. ~~$260.7~~$262.6 million of its ~~$313.1~~$302.3 million of cash and cash equivalents resided in jurisdictions outside the U.S. 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.

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, 2020,~~March 31, 2021, the Senior Credit Facility had outstanding borrowings of ~~$114.3~~$9.3 million, which reduced the availability to ~~$535.7~~$640.7 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. As of ~~September 30, 2020,~~March 31, 2021, the Company's consolidated leverage ratio was ~~2.03~~ 1.91 to 1.0 (based on the new net debt construct discussed further below). The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of ~~September 30, 2020,~~March 31, 2021, the Company's consolidated interest coverage ratio was ~~9.74 t~~o10.79 to 1.0.

On May 27, 2020, both the Senior Credit Facility and the 2023 Term Loan were amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio. As amended, the consolidated leverage ratio under both the Senior Credit Facility and the 2023 Term Loan is calculated using a net debt construct, netting unrestricted cash in excess of $25 million, instead of total debt. This change to the consolidated leverage ratio calculation will be effective through June 30, 2021, after which the calculation of the consolidated leverage ratio under the Senior Credit Facility and the 2023 Term Loan will revert back to a total debt construct.

3929

The ~~interest~~interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating. The average rate on outstanding U.S. dollar borrowings was ~~2.29%~~1.43% and the average rate on outstanding Euro borrowings was ~~1.10%~~1.48% as of ~~September 30, 2020.~~March 31, 2021. In addition, the ~~Company~~Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit ~~Facility.~~Facility. The Company currently carries investment-grade credit ratings with Standard and Poor's (BBB-), Moody's (Baa3) and Fitch (BBB-).

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 trade accounts receivable of the Company. Borrowings under the Accounts Receivable Facility were not reduced by any such borrowing base limitations at March 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, the Company had no$100 million of outstanding borrowings under the Accounts Receivable Facility, ~~and~~which reduced the availability under this facility to 0. The Company currently intends to renew or replace the Accounts Receivable Facility ~~was at $100.0 million at September 30, 2020.~~prior to its maturity.

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which provide for borrowings of up to approximately ~~$278.3~~$270.6 million. At ~~September 30, 2020,~~March 31, 2021, the Company had borrowings outstanding of ~~$64.8~~$67.5 million and bank guarantees of ~~$0.7~~$0.5 million, which reduced the aggregate availability under these facilities to approximately ~~$212.8~~$202.6 million.

At ~~September 30, 2020,~~March 31, 2021, the Company was in full compliance with all applicable covenants on its outstanding debt, and expects to remain in full compliance with its debt covenants.

The Company ~~believes that it~~expects to generate cash from operating activities in the range of $475 million to $500 million in 2021, down from $577.6 million in 2020, as the impact of higher earnings is expected to be more than offset by the changes in working capital (i.e. a ~~strong financial position with over $300 million~~use of cash ~~and~~in 2021 versus a source of cash equivalents on the balance sheet as of September 30, 2020. Additionally, as of September 30, 2020 the Company had total availability under its Senior Credit Facility and Accounts Receivable Facility of over $600 million that may be used for general corporate purposes.in 2020). The Company expects capital expenditures to ~~continue to generate positive cash flow from operating activities over the remainder~~be approximately $150 million (approximately 3.6% of 2020 and has no significant long-term debt maturities before September 2023. These sources of cash are expected to provide sufficient liquidity to allow the Company to meet its future cash requirements.sales) in 2021, compared with $122 million in 2020.

Financing Obligations and Other Commitments:

During the first ~~nine~~three months of ~~2020,~~2021, the Company made cash contributions and payments of ~~$11.1~~$1.8 million to its global defined benefit pension plans and ~~$1.7~~$0.7 million to its other postretirement benefit plans. The Company expects to make contributions to its global defined benefit ~~plan~~splans of approximately $15 million in ~~2020.~~2021. The Company expects to make ~~additional~~ payments of approximately $3$6 million to its other postretirement benefit plans in ~~2020.~~ 2021. Excluding mark-to-market charges, the Company expects lower pension and other postretirement benefits expense in ~~2020.~~2021.

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

~~Critical Accounting Policies and Estimates:~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the U.S. 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, ~~2019,~~2020, during the ~~nine~~three months ended ~~September 30, 2020.~~

The Company tests goodwill and indefinite-lived intangible assets for impairment at least annually, performing its annual impairment test as of October 1. In each interim period, the Company assesses whether or not an indicator of impairment is present that would necessitate a goodwill and indefinite-lived intangible assets impairment analysis be performed in an interim period other than during the fourth quarter. While the Company currently expects the COVID-19 pandemic will have a near-term negative impact on the financial results of the Company, as evidenced by the customer demand in 2020, the duration and magnitude of the impact is currently not determinable. While the Company took a number of actions to align to the overall global short-term decrease in demand, those actions in the second quarter of 2020 were mainly short term in nature. The Company has also initiated other longer term cost reduction initiatives primarily in the third quarter of 2020, but there have been no current adjustments or expectations of adjusting any significant long term strategic plans or forecasts at this time. The Company is in the process of finalizing long term forecasts beyond 2020, including our internal review procedures with senior leadership and our board of directors. The Company notes that reporting units with goodwill and indefinite-lived intangibles primarily driven by recent acquisitions are likely to have fair values that are closer to the current carrying value of the reporting unit, primarily due to the shorter period of time for fair value from the recent acquisition to have changed. Generally, goodwill and indefinite-lived intangibles recorded in business combinations are more susceptible to risk of impairment soon after the acquisition primarily because the business combination is recorded at fair value based on operating plans and economic conditions present at the time of the acquisition.March 31, 2021.

~~Other Matters~~

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~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company recorded ~~positive~~negative foreign currency translation adjustments of~~$15.0~~ $44.0 million that ~~increased~~decreased shareholders' equity, compared with negative foreign currency translation adjustments of ~~$61.9~~$71.3 million that decreased shareholders' equity for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The foreign currency translation adjustments for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were ~~favorably~~negatively impacted by ~~the weakening~~the strengthening of the U.S. dollar relative to other foreign currencies,, including the Euro and Chinese ~~Yuan Renminbi.~~Yuan.

Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the three months ended ~~September 30, 2020~~March 31, 2021 totaled ~~$4.6~~$2.1 million of net losses, compared with ~~$2.2~~$0.1 million of net gains ~~during~~during the three months ended ~~September 30, 2019. Foreign currency exchange~~March 31, 2020.

Supplemental Non-GAAP Measures

In addition to results reported in accordance with U.S. GAAP, the Company provides information on non-GAAP financial measures. These non-GAAP financial measures include adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margins, segment adjusted EBITDA and segment adjusted EBITDA margins, ratio of net debt to adjusted EBITDA (for the trailing 12 months), net debt, ratio of net debt to capital and free cash flow. This information is intended to supplement GAAP financial measures and is not intended to replace GAAP financial measures. Net debt and the ratio of net debt to capital is disclosed in the "Liquidity and Capital Resources" section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Adjusted net income and adjusted earnings per share represent net income attributable to The Timken Company and diluted earnings per share, respectively, adjusted for impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries; actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, gains and losses on the sale of real estate, gains and losses on divestitures, the income tax impact of these adjustments, as well as other income tax discrete items, and other items from time to time that are not part of the Company's core operations. Management believes adjusted net income and adjusted earnings per share are useful to investors as they are representative of ~~hedging activity,~~the Company's core operations and are used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, adjusted for items that are not part of the Company's core operations. These items include impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries; actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, gains and losses on the sale of real estate, gains and losses on divestitures, and other items from time to time that are not part of the Company's core operations. Management believes adjusted EBITDA is useful to investors as it is representative of the Company's core operations and is used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

Reconciliation of net income to net income attributable to The Timken Company to adjusted net income, adjusted EBITDA and adjusted EBITDA Margin:


	Three Months Ended March 31,
	2021			2020
Net Sales	$	1,025.4		$	923.4
Net Income Attributable to The Timken Company	113.3			80.7
Impairment, restructuring and reorganization charges (1)	5.2			5.8
Corporate pension and other postretirement benefit related expense (2)	0.9			—
Acquisition-related charges (3)	(0.2)			3.3
Acquisition-related gain (4)	(0.6)			—
Property (recoveries) losses and related expenses (5)	—			(2.2)
Noncontrolling interest of above adjustments	0.2			—
Provision for income taxes (6)	(12.1)			(2.9)
Adjusted Net Income	$	106.7		$	84.7
Net income attributable to noncontrolling interest	2.7			3.3
Provision for income taxes (as reported)	25.3			29.6
Interest expense	14.9			17.1
Interest income	(0.5)			(1.5)
Depreciation and amortization expense (7)	42.7			40.9
Less: Noncontrolling interest	0.2			—
Less: Provision for income taxes (6)	(12.1)			(2.9)
Adjusted EBITDA	$	203.7		$	177.0
Adjusted EBITDA Margin (% of net sales)	19.9		%	19.2		%

Diluted earnings and adjusted earnings per share in the table below are based on net income attributable to The Timken Company and adjusted net income, respectively, in the table above.


	Three Months Ended March 31,
	2021		2020
Diluted earnings per share (EPS)	$	1.47	$	1.06
Adjusted EPS	$	1.38	$	1.11
Diluted Shares	77,264,641		76,308,556

Reconciliation of segment EBITDA to segment adjusted EBITDA and segment adjusted EBITDA margin:


	Three Months Ended March 31, 2021
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	504.5		$	520.9		$	—	$	1,025.4
EBITDA	79.6			131.0			(11.9)		198.7
Impairment, restructuring and reorganization charges (1)	0.3			4.6			—		4.9
Corporate pension and other postretirement benefit related expense (2)	—			—			0.9		0.9
Acquisition-related charges (3)	0.2			0.1			(1.1)		(0.8)

Adjusted EBITDA	$	80.1		$	135.7		$	(12.1)	$	203.7
Adjusted EBITDA Margin (% of net sales)	15.9		%	26.0		%	NM		19.9		%


	Three Months Ended March 31, 2020
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	466.7		$	456.7		$	—	$	923.4
EBITDA	75.1			107.5			(11.1)		171.5
Impairment, restructuring and reorganization charges (1)	1.2			3.1			0.1		4.4
Acquisition-related charges (3)	1.9			0.9			0.5		3.3
Property (recoveries) losses and related expenses (5)	(2.2)			—			—		(2.2)
Adjusted EBITDA	$	76.0		$	111.5		$	(10.5)	$	177.0
Adjusted EBITDA Margin (% of net sales)	16.3		%	24.4		%	NM		19.2		%

(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives and (iv) related depreciation and amortization. The Company re-assesses its operating footprint and cost structure periodically and makes adjustments as needed that result in restructuring charges. However, management believes these actions are not representative of the Company’s core operations.

(2) Corporate pension and other postretirement benefit related expense represents actuarial losses and (gains) that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience. The Company recognizes actuarial losses and (gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement. Refer to Note 14 - Retirement Benefit Plans and Note 15 - Other Postretirement Benefit Plans for additional discussion.

(3) The acquisition-related charges represent transaction costs and the inventory step-up impact.

(4) The acquisition-related gain represents measurement period adjustments to the bargain purchase price gain on the acquisition of the assets of Aurora that closed on November 30, 2020.

(5) Represents property loss and related expenses during the period presented (net of insurance recoveries received in 2020) resulting from ~~transactions included~~property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.

(6) Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of discrete tax items recorded during the respective periods as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income in interim periods.

(7) Depreciation and amortization shown excludes depreciation recognized in reorganization charges, if any.

Free Cash Flow:

Free cash flow represents net cash provided by operating activities less capital expenditures. Management believes free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.

Reconciliation of net cash provided by operating activities to free cash flow:


	Three Months Ended March 31,
	2021		2020
Net cash provided by operating activities	$	31.7	$	56.2
Capital expenditures	(29.4)		(31.8)
Free cash flow	$	2.3	$	24.4

Ratio of Net Debt to Adjusted EBITDA:

The ratio of net debt to adjusted EBITDA for the trailing twelve months represents total debt less cash and cash equivalents divided by adjusted EBITDA for the trailing twelve months. The Company presents net debt to adjusted EBITDA because it believes it is more representative of the Company's financial position as it is reflective of the Company's ability to cover its net debt obligations with results from its core operations. Net income for the trailing twelve months ended March 31, 2021 and December 31, 2020 was $324.4 million and $292.4 million, respectively. Net debt to adjusted EBITDA for the trailing twelve months was flat at 1.9 at March 31, 2021, compared with 1.9 at December 31, 2020.

Reconciliation of Net income to Adjusted EBITDA for the trailing twelve months:


	Twelve Months Ended
	March 31, 2021		December 31, 2020
Net income	$	324.4	$	292.4
Provision for income taxes	99.6		103.9
Interest expense	65.4		67.6
Interest income	(2.7)		(3.7)
Depreciation and amortization	167.8		167.1
Consolidated EBITDA	654.5		627.3
Adjustments:
Impairment, restructuring and reorganization charges (1)	$	26.4	$	25.9
Corporate pension and other postretirement benefit related expense (2)	19.4		18.5
Acquisition-related charges (3)	0.2		3.7
Acquisition-related gain (4)	(11.7)		(11.1)
Property (recoveries) losses and related expenses (5)	(0.4)		(0.4)
Gain on real estate	(3.3)		(5.5)
Tax indemnification and related items	0.5		0.5
Total Adjustments	31.1		31.6
Adjusted EBITDA	$	685.6	$	658.9
Net Debt	$	1,299.7	$	1,244.3
Ratio of Net Debt to Adjusted EBITDA	1.9		1.9

(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; and (iii) severance related to cost reduction initiatives. The Company re-assesses its operating footprint and cost structure periodically and makes adjustments as needed that result in restructuring charges. However, management believes these actions are not representative of the Company’s core operations.

(2) Corporate pension and other postretirement benefit related expense (income) represents actuarial (gains) and losses that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience. The Company recognizes actuarial (gains) and losses in connection with the annual remeasurement in the ~~Company's operating results for~~fourth quarter, or if specific events trigger a remeasurement.

(3) The acquisition-related charges represent transaction costs and the ~~nine months ended September~~inventory step-up impact.

(4) The acquisition-related gain represents a bargain purchase gain on the acquisition of the assets of Aurora that closed on November 30, ~~2020 totaled~~2020.

~~$3.9 million of net~~
(5) Property losses ~~compared with $5.3 million~~ ~~of net gains~~(recoveries) represent property losses and related expenses during the ~~nine months ended September 30, 2019.~~periods presented (net of insurance proceeds received) resulting from property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.

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~~Forward-Looking Statements~~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, ~~2019~~2020 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. Statements regarding expectations for full-year performance are based on the assumption that the second quarter of 2020 is the low point for the Company's sales revenue and markets gradually improve the balance of the year. 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;

•negative impacts to the Company's business, results of operations, financial position or liquidity, disruption to the Company's supply chains, negative impacts to customer demand or operations, and availability and health of employees, as a result of COVID-19 or other pandemics and associated governmental measures such as restrictions on travel and manufacturing operations;

•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, the effects of distributor inventory corrections reflecting de-stocking of the supply chain 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 or services by existing and new competitors, and new technology that may impact the way the Company’s products are produced, 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; the effects of government-imposed restrictions meant to address climate change; 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;~~companies and to address material issues not uncovered during the Company's due diligence review; 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 and to maintain the continued service of our management and other key employees;

•unanticipated litigation, claims, investigations or assessments. This includes: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export and trade laws, competition and anti-bribery laws, environmental or health and safety issues, data privacy 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 and comply with covenants under its debt agreements, maintain favorable credit ratings and 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; and

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•those items identified under Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 or this Form 10-Q.

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, ~~2019.~~2020. 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.

On November 1, 2019, the Company completed the acquisition of BEKA. The results of this acquisition are included in the Company’s consolidated financial statements for the first nine months of 2020. The total and net assets of BEKA represent ~~4% and 8%~~ ~~of the~~ ~~Company’s total and net assets, respectively, as of September 30, 2020. The net sales and net income of BEKA represented 4% of the Company’s consolidated net sales and less than 1% o~~f the Company’s consolidated net income for the first nine months of 2020. The Company is currently integrating this acquisition into its internal control framework and processes, and as prescribed by U.S Securities and Exchange Commission rules and regulations, the Company will include BEKA in the internal control over financial reporting assessment as of December 31, 2020.

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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. SEC regulations require us to disclose certain information about environmental proceedings when a governmental authority is a party to the proceedings if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to such regulations, the Company uses a threshold of $1 million or more for purposes of determining whether disclosure of any such proceedings is required as we believe matters under this threshold are not material to the Company. 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

The information set forth in this Form 10-Q, including, without limitation, the risk factors presented below, updates and should be read in conjunction with, the risk factors disclosed in Part 1, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020, 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, 2020.

~~Work stoppages or similar difficulties could significantly disrupt our operations, reduce our revenues and materially affect our earnings.~~

A work stoppage at one or more of our facilities, whether caused by fire, flooding, epidemics, pandemic, including the COVID-19 outbreak, other natural disaster or otherwise, could have a material adverse effect on our business, financial condition and results of operations. In addition, some of our employees are represented by labor unions or works councils under collective bargaining agreements with varying durations and terms. We have experienced work stoppages recently at certain of our facilities as a result of measures meant to combat the spread of COVID-19. While these stoppages have been short-term in nature, no assurances can be made that we will not experience additional work stoppages due to government directives, employee health concerns, or conflicts with labor unions, works councils, and other similar groups in the future.

A work stoppage at one of our suppliers, whether caused by COVID-19 or otherwise, could also materially and adversely affect our operations if an alternative source of supply is not readily available. In addition, if one or more of our customers were to experience a work stoppage, whether due to COVID-19 or otherwise, that customer could halt or limit purchases of our products, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the credit and default risk or bankruptcy of customers or suppliers as a result of work stoppages could also materially and adversely affect our operations and results.

~~If government imposed restrictions continue, are reimposed, or are expanded or the COVID-19 pandemic worsens, our business could be further adversely impacted in a material way.~~

The global outbreak of COVID-19 continues to create uncertainty with respect to economic demand and operations. We have global operations and customers and suppliers, in countries most impacted by COVID-19. The COVID-19 outbreak has resulted in significant governmental measures being implemented to control the spread of COVID-19, including, among others, restrictions on travel and manufacturing operations in many regions of the world that are changing frequently as the pandemic evolves. In addition, we have implemented risk mitigation plans across the enterprise (including work-from-home policies, "social distancing," and use of personal protective equipment) to reduce the risk of spreading the virus in many of our global locations. To the extent that governments implement more restrictive mandates to combat the spread of COVID-19, or reimpose restrictions that have now lapsed, or to the extent that the COVID-19 outbreak intensifies, we could experience additional material impacts on our short-term and long-term operations and related results of operations, including revenue, gross margins, operating margins and cash flows.

The full magnitude of the COVID-19 pandemic, including the extent of the total impact on the Company’s business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time due to the fluidity of the situation. The full impact of the COVID-19 pandemic will be determined by its duration, its geographic spread, the rate and intensity of individual spread, the extent and length of business disruptions due to government mandates and health authority guidance and the overall impact on the global economy, among other factors.

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, 2020.~~March 31, 2021.

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)
7/1/2020 - 7/31/2020 63 $ 47.93 — 4,357,042
8/1/2020 - 8/31/2020 26,472 54.84 — 4,357,042
9/1/2020 - 9/30/2020 2,104 55.53 — 4,357,042
Total 28,639 $ 54.88 —


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)
1/1/2021 - 1/31/2021	5,235	$	80.48	—	4,257,042
2/1/2021 - 2/28/2021	505,441	74.34		300,000	—
3/1/2021 - 3/31/2021	79,002	79.28		50,000	9,950,000
Total	589,678	$	75.06	350,000

(1)Of the shares purchased in ~~July, August~~January, February and ~~September, 63, 26,472~~March, 5,235, 205,441 and ~~2,104,~~29,002, 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,~~12, 2021, the ~~Company announced that its~~Company's Board of Directors approved a new share purchase plan, effective March 1, 2021, pursuant to which the Company may purchase up to ten million of its common shares, in the aggregate. This share ~~repurchase~~purchase plan expires on February 28, ~~2021. The~~2026. Under this plan, the Company may purchase shares from time to time in open market purchases or privately negotiated ~~transactions. The Company~~transactions, and it may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans. The previous share purchase plan expired on February 28, 2021.

Item 6. Exhibits










































































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 and principal accounting 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 and principal accounting 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, 2020~~March 31, 2021 filed on ~~October 29, 2020,~~April 28, 2021, 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)

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