UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, ~~2021~~2022


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

For the transition period from to

Commission file number: 1-1169

THE TIMKEN COMPANY

(Exact name of registrant as specified in its charter)


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

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

234.262.3000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, without par value

TKR

The New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

Yes ☐ No ☒

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

Class

Outstanding at June 30, ~~2021~~2022

Common Shares, without par value

~~76,258,559~~73,447,492 shares

Table of Contents

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	2526
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4445
	Item 4.	Controls and Procedures	4445
II.	PART II.
	Item 1.	Legal Proceedings	4546
	Item1A.	Risk Factors	4546
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4546
	Item 6.	Exhibits	4647

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TIMKEN COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
(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	$	1,062.9	$	803.5	$	2,088.3	$	1,726.9	Net sales	$	1,153.7	$	1,062.9	$	2,278.3	$	2,088.3
Cost of products sold	Cost of products sold	760.6		573.2		1,486.8		1,217.7		Cost of products sold	811.9		760.6		1,609.1		1,486.8
Gross Profit	Gross Profit	302.3		230.3		601.5		509.2		Gross Profit	341.8		302.3		669.2		601.5
Selling, general and administrative expenses	Selling, general and administrative expenses	149.0		111.8		293.5		265.4		Selling, general and administrative expenses	155.9		149.0		310.0		293.5

Impairment and restructuring charges	Impairment and restructuring charges	1.3		3.1		5.3		6.7		Impairment and restructuring charges	10.0		1.3		11.0		5.3

Operating Income	Operating Income	152.0		115.4		302.7		237.1		Operating Income	175.9		152.0		348.2		302.7
Interest expense	Interest expense	(15.3)		(18.9)		(30.2)		(36.0)		Interest expense	(18.3)		(15.3)		(32.6)		(30.2)
Interest income	Interest income	0.7		0.6		1.2		2.1		Interest income	1.0		0.7		1.6		1.2

Non-service pension and other postretirement income (expense)		1.4		(5.3)		5.4		(1.9)
Other (expense) income, net		(2.2)		(2.0)		(1.2)		2.1
Non-service pension and other postretirement (expense) income										Non-service pension and other postretirement (expense) income	(7.9)		1.4		(6.6)		5.4
Other expense, net										Other expense, net	(1.1)		(2.2)		(0.9)		(1.2)
Income Before Income Taxes	Income Before Income Taxes	136.6		89.8		277.9		203.4		Income Before Income Taxes	149.6		136.6		309.7		277.9
Provision for income taxes	Provision for income taxes	29.4		28.0		54.7		57.6		Provision for income taxes	44.0		29.4		82.2		54.7
Net Income	Net Income	107.2		61.8		223.2		145.8		Net Income	105.6		107.2		227.5		223.2
Less: Net income (loss) attributable to noncontrolling interest		2.4		(0.1)		5.1		3.2
Less: Net income attributable to noncontrolling interest										Less: Net income attributable to noncontrolling interest	0.6		2.4		4.3		5.1
Net Income Attributable to The Timken Company	Net Income Attributable to The Timken Company	$	104.8	$	61.9	$	218.1	$	142.6	Net Income Attributable to The Timken Company	$	105.0	$	104.8	$	223.2	$	218.1

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	$	1.38	$	0.82	$	2.87	$	1.89	Basic earnings per share	$	1.43	$	1.38	$	3.01	$	2.87

Diluted earnings per share	Diluted earnings per share	$	1.36	$	0.82	$	2.82	$	1.88	Diluted earnings per share	$	1.42	$	1.36	$	2.98	$	2.82

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
(Dollars in millions)
Net Income $ 107.2 $ 61.8 $ 223.2 $ 145.8
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 23.2 24.5 (21.2) (54.3)
Pension and postretirement liability adjustments (1.7) (1.5) (3.3) (2.8)
Change in fair value of marketable securities 0 0.5 0 0.1
Change in fair value of derivative financial instruments (0.2) (2.6) 2.0 1.6
Other comprehensive income (loss), net of tax 21.3 20.9 (22.5) (55.4)
Comprehensive Income, net of tax 128.5 82.7 200.7 90.4
Less: comprehensive income (loss) attributable to noncontrolling interest 1.8 1.1 4.1 (3.1)
Comprehensive Income Attributable to The Timken Company $ 126.7 $ 81.6 $ 196.6 $ 93.5


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
(Dollars in millions)
Net Income	$	105.6	$	107.2	$	227.5	$	223.2
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(113.1)		23.2		(135.7)		(21.2)
Pension and postretirement liability adjustments	(1.4)		(1.7)		(2.9)		(3.3)

Change in fair value of derivative financial instruments	2.2		(0.2)		4.2		2.0
Other comprehensive (loss) income, net of tax	(112.3)		21.3		(134.4)		(22.5)
Comprehensive (loss) income, net of tax	(6.7)		128.5		93.1		200.7
Less: comprehensive income attributable to noncontrolling interest	1.7		1.8		2.8		4.1
Comprehensive (loss) income attributable to The Timken Company	$	(8.4)	$	126.7	$	90.3	$	196.6

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

Consolidated Balance Sheets


		(Unaudited)					(Unaudited)
(Dollars in millions)	(Dollars in millions)	June 30, 2021		December 31, 2020		(Dollars in millions)	June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	305.5	$	320.3	Cash and cash equivalents	$	305.3	$	257.1
Restricted cash	Restricted cash	0.8		0.8		Restricted cash	0.7		0.8
Accounts receivable, less allowances (2021 – $16.9 million; 2020 – $16.5 million)		704.4		581.1
Accounts receivable, less allowances (2022 – $17.5 million; 2021 – $16.9 million)						Accounts receivable, less allowances (2022 – $17.5 million; 2021 – $16.9 million)	756.3		626.4
Unbilled receivables	Unbilled receivables	100.4		110.9		Unbilled receivables	107.3		104.5
Inventories, net	Inventories, net	919.5		841.3		Inventories, net	1,158.0		1,042.7
Deferred charges and prepaid expenses	Deferred charges and prepaid expenses	34.2		39.9		Deferred charges and prepaid expenses	40.5		32.2
Other current assets	Other current assets	130.2		106.0		Other current assets	112.3		149.8

Total Current Assets	Total Current Assets	2,195.0		2,000.3		Total Current Assets	2,480.4		2,213.5
Property, Plant and Equipment, net	Property, Plant and Equipment, net	1,025.1		1,035.6		Property, Plant and Equipment, net	1,096.1		1,055.3
Other Assets	Other Assets					Other Assets
Goodwill	Goodwill	1,034.8		1,047.6		Goodwill	1,015.1		1,022.7
Other intangible assets	Other intangible assets	704.2		741.4		Other intangible assets	648.1		668.8
Operating lease assets	Operating lease assets	115.3		118.2		Operating lease assets	109.1		118.9
Non-current pension assets		3.2		2.0

Deferred income taxes	Deferred income taxes	70.9		77.0		Deferred income taxes	64.1		67.6
Other non-current assets	Other non-current assets	17.7		19.5		Other non-current assets	29.6		23.9

Total Other Assets	Total Other Assets	1,946.1		2,005.7		Total Other Assets	1,866.0		1,901.9
Total Assets	Total Assets	$	5,166.2	$	5,041.6	Total Assets	$	5,442.5	$	5,170.7
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Short-term debt		$	76.0	$	119.8
Current portion of long-term debt		11.1		10.9
Short-term operating lease liabilities		27.0		27.2

Accounts payable, trade	Accounts payable, trade	385.1		351.4		Accounts payable, trade	397.2		430.0
Short-term debt, including current portion of long-term debt						Short-term debt, including current portion of long-term debt	81.6		53.8
Salaries, wages and benefits	Salaries, wages and benefits	131.9		135.7		Salaries, wages and benefits	135.4		136.0
Income taxes payable	Income taxes payable	24.8		16.1		Income taxes payable	36.4		26.2

Other current liabilities	Other current liabilities	201.4		186.9		Other current liabilities	269.9		250.6

Total Current Liabilities	Total Current Liabilities	857.3		848.0		Total Current Liabilities	920.5		896.6
Non-Current Liabilities	Non-Current Liabilities					Non-Current Liabilities
Long-term debt	Long-term debt	1,424.3		1,433.9		Long-term debt	1,734.3		1,411.1
Accrued pension benefits	Accrued pension benefits	160.6		163.0		Accrued pension benefits	164.0		155.6
Accrued postretirement benefits	Accrued postretirement benefits	51.4		41.3		Accrued postretirement benefits	44.7		45.8
Long-term operating lease liabilities	Long-term operating lease liabilities	72.5		75.5		Long-term operating lease liabilities	70.8		77.6
Deferred income taxes	Deferred income taxes	135.0		148.7		Deferred income taxes	120.5		121.4
Other non-current liabilities	Other non-current liabilities	97.8		106.0		Other non-current liabilities	98.5		84.9

Total Non-Current Liabilities	Total Non-Current Liabilities	1,941.6		1,968.4		Total Non-Current Liabilities	2,232.8		1,896.4
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	—		—
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) (2021 – 77,069,551 shares; 2020 – 75,834,668 shares)
Issued (including shares in treasury) (2022 – 77,532,871 shares; 2021 – 77,090,104 shares)						Issued (including shares in treasury) (2022 – 77,532,871 shares; 2021 – 77,090,104 shares)
Stated capital	Stated capital	40.7		40.7		Stated capital	40.7		40.7
Other paid-in capital	Other paid-in capital	778.6		740.7		Other paid-in capital	804.1		786.9��
Retained earnings	Retained earnings	1,510.9		1,339.5		Retained earnings	1,793.2		1,616.4
Accumulated other comprehensive income		19.8		41.3
Treasury shares at cost (2021 – 810,992 shares; 2020 – 158,836 shares)		(59.1)		(9.3)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(155.9)		(23.0)
Treasury shares at cost (2022 – 4,085,379 shares; 2021 – 1,715,282 shares)						Treasury shares at cost (2022 – 4,085,379 shares; 2021 – 1,715,282 shares)	(278.5)		(126.1)
Total Shareholders’ Equity	Total Shareholders’ Equity	2,290.9		2,152.9		Total Shareholders’ Equity	2,203.6		2,294.9
Noncontrolling Interest	Noncontrolling Interest	76.4		72.3		Noncontrolling Interest	85.6		82.8
Total Equity	Total Equity	2,367.3		2,225.2		Total Equity	2,289.2		2,377.7
Total Liabilities and Equity	Total Liabilities and Equity	$	5,166.2	$	5,041.6	Total Liabilities and Equity	$	5,442.5	$	5,170.7

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
(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	$	223.2	$	145.8	Net income	$	227.5	$	223.2
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	85.2		84.0		Depreciation and amortization	82.1		85.2
Impairment charges	Impairment charges	4.5		0.1		Impairment charges	8.8		4.5
Loss on sale of assets	Loss on sale of assets	0.7		1.6		Loss on sale of assets	0.8		0.7

Acquisition-related gain	Acquisition-related gain	(0.6)		0		Acquisition-related gain	—		(0.6)
Deferred income tax benefit		(5.8)		(7.1)
Deferred income tax provision (benefit)						Deferred income tax provision (benefit)	1.7		(5.8)
Stock-based compensation expense	Stock-based compensation expense	12.5		11.4		Stock-based compensation expense	15.6		12.5
Pension and other postretirement benefit expense		0.5		8.2
Pension and other postretirement expense						Pension and other postretirement expense	11.2		0.5
Pension and other postretirement benefit contributions and payments	Pension and other postretirement benefit contributions and payments	(15.0)		(8.6)		Pension and other postretirement benefit contributions and payments	(8.1)		(15.0)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(125.8)		(8.4)		Accounts receivable	(149.3)		(125.8)
Unbilled receivables	Unbilled receivables	10.4		3.0		Unbilled receivables	(2.9)		10.4
Inventories	Inventories	(81.4)		41.3		Inventories	(126.1)		(81.4)
Accounts payable, trade	Accounts payable, trade	41.2		(28.9)		Accounts payable, trade	(6.1)		41.2
Other accrued expenses	Other accrued expenses	30.8		5.3		Other accrued expenses	16.6		30.8
Income taxes	Income taxes	(1.6)		30.9		Income taxes	12.1		(1.6)
Other, net	Other, net	0		25.0		Other, net	(6.8)		—

Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	178.8		303.6		Net Cash Provided by Operating Activities	77.1		178.8
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(60.5)		(56.5)		Capital expenditures	(75.2)		(60.5)
Acquisitions, net of cash received		0.1		(6.7)

Acquisitions, net of cash acquired of $0.2 million						Acquisitions, net of cash acquired of $0.2 million	(152.3)		0.1
Proceeds from disposal of property, plant and equipment						Proceeds from disposal of property, plant and equipment	3.1		—

Investments in short-term marketable securities, net	Investments in short-term marketable securities, net	(13.8)		(1.6)		Investments in short-term marketable securities, net	23.4		(13.8)
Other		0.3		0.1
Other, net						Other, net	2.3		0.3

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(73.9)		(64.7)		Net Cash Used in Investing Activities	(198.7)		(73.9)
Financing Activities	Financing Activities					Financing Activities
Cash dividends paid to shareholders	Cash dividends paid to shareholders	(46.7)		(43.9)		Cash dividends paid to shareholders	(46.4)		(46.7)
Purchase of treasury shares	Purchase of treasury shares	(26.3)		(42.3)		Purchase of treasury shares	(144.3)		(26.3)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	25.4		7.5		Proceeds from exercise of stock options	1.6		25.4
Payments related to tax withholding for stock-based compensation	Payments related to tax withholding for stock-based compensation	(23.5)		(10.4)		Payments related to tax withholding for stock-based compensation	(8.1)		(23.5)
Accounts receivable facility borrowings		66.1		10.0
Accounts receivable facility payments		(124.1)		(110.0)
Borrowings on accounts receivable facility						Borrowings on accounts receivable facility	122.0		66.1
Payments on accounts receivable facility						Payments on accounts receivable facility	(122.0)		(124.1)
Proceeds from long-term debt	Proceeds from long-term debt	135.0		550.0		Proceeds from long-term debt	684.5		135.0
Payments on long-term debt	Payments on long-term debt	(141.4)		(417.1)		Payments on long-term debt	(344.8)		(141.4)
Deferred financing costs	Deferred financing costs	0		(1.6)		Deferred financing costs	(3.5)		—
Short-term debt activity, net	Short-term debt activity, net	16.6		26.5		Short-term debt activity, net	31.9		16.6

Other						Other	6.5		—

Net Cash Used in Financing Activities		(118.9)		(31.3)
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	177.4		(118.9)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(0.8)		(7.7)		Effect of exchange rate changes on cash	(7.7)		(0.8)
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(14.8)		199.9
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash						Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	48.1		(14.8)
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	321.1		216.2		Cash, cash equivalents and restricted cash at beginning of year	257.9		321.1
Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	306.3	$	416.1	Cash, Cash Equivalents and Restricted Cash at End of Period	$	306.0	$	306.3

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

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, ~~2020.~~2021.

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, ~~2020.~~2021.

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:

In ~~December 2019,~~October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2019-12, “Income Taxes (ASC 740) – Simplifying the~~ASU 2021-08, "Business Combinations (Topic 805), Accounting for ~~Income Taxes,” which is intended~~Contract Assets and Contract Liabilities from Contracts with Customers." ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to ~~reduce complexity~~be recognized in accordance with ASC Topic 606 as if the ~~accounting for income taxes while maintaining or improving~~acquirer had originated the ~~usefulness of information provided to financial statement users. The~~contracts. This new 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,~~2022, 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.~~permitted. The Company adopted ASU ~~2019-12~~2021-08 effective January 1, ~~2021,~~2022, and the impact of the adoption was not material to the Company's results of operations and financial condition.

New Accounting Guidance Issued and Not Yet Adopted:

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832)." ASU 2021-10 is intended to increase transparency of government assistance by requiring entities to disclose the types of government assistance, the entity's accounting for government assistance, and the effect of the government assistance on an entity's financial statements. This new guidance is effective for all entities for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact of the new guidance on its disclosures.

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~~ASU 2020-04 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.

Table of Contents

Note 3 - Acquisitions

~~The Company completed 1 acquisition in 2020.~~ On ~~November 30, 2020,~~May 31, 2022, the Company completed the acquisition of ~~the assets~~Spinea, s.r.o. ("Spinea"), a European technology leader and manufacturer of ~~Aurora Bearing Company ("Aurora"). With annual~~highly engineered cycloidal reduction gears and actuators, with estimated 2022 full year sales of approximately ~~$30 million, Aurora serves a diverse range of industrial sectors, including aerospace~~$40.0 million. Spinea’s solutions primarily serve high-precision automation and ~~defense, racing, off-highway equipment and packaging. Aurora~~robotics applications in the factory automation sector. Spinea is ~~headquartered~~located in ~~Montgomery, Illinois.~~Presov, Slovakia. The ~~total~~ purchase price for this acquisition was ~~$17.2~~$152.3 million, ~~including a post-closing~~ net ~~working capital adjustment.~~of cash acquired of $0.2 million, subject to customary post closing adjustments. Based on markets and customers served, results for ~~Aurora~~Spinea are reported in ~~both the Mobile Industries segment and~~ the Process Industries segment.

The following table presents the purchase price allocation at fair value, ~~net of cash acquired,~~ for the ~~Aurora~~Spinea acquisition as of June 30, ~~2021:~~ 2022.

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 0.1 0.2
Property, plant and equipment, net 10.9 0 10.9
   Total assets acquired $ 30.1 $ 0.1 $ 30.2
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 $ 0.5 $ 28.9


	Initial Purchase Price Allocation
Assets:

Accounts receivable	$	2.1
Inventories	20.9
Other current assets	2.9
Property, plant and equipment	82.6

Goodwill	39.0
Other intangible assets	31.7

Total assets acquired	$	179.2
Liabilities:
Accounts payable, trade	$	7.4
Salaries, wages and benefits	1.4

Other current liabilities	1.2
Short-term debt	0.1
Long-term debt	0.2


Deferred income taxes	1.0
Other non-current liabilities	15.6
Total liabilities assumed	$	26.9
Net assets acquired	$	152.3

~~As a result of applying~~The following table summarizes the ~~accounting rules on business combinations, the Company recognized a bargain purchase gain of $11.7 million on the acquisition of Aurora. The Company recognized $0.6 million of the bargain~~preliminary purchase price ~~gain during the first three months of 2021 primarily due to the net working capital adjustment. The Company believes it was able to negotiate a bargain purchase price~~allocation for ~~the business due to some historic operational performance challenges, as well as the seller's desire to exit the business~~identifiable intangible assets acquired in ~~an expedited manner in an exclusive process with the Company.~~2022:


	Preliminary Purchase Price Allocation
			Weighted - Average Life
Trade names	$	8.2	20 years
Technology and know-how	6.1		6 years
Customer relationships	17.2		17 years
Capitalized software	0.2		2 years
Total intangible assets	$	31.7

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~~judgement 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.

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Note 3 - Acquisitions (continued)

The amounts in the table above represent the preliminary purchase price allocation for Spinea. This 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 are obtained. As of June 30, 2022, no elements of the purchase price allocation have been finalized. During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments ~~had~~has been completed on the acquisition date.

On August 20, 2021, the Company completed the acquisition of the assets of Intelligent Machine Solutions ("iMS"), a manufacturer of industrial robotics and automation solutions, with annual sales of approximately $6.0 million. iMS is headquartered in Norton Shores, Michigan. The ~~above~~total purchase price for this acquisition was $7.7 million, including post-closing adjustments. In addition, the seller has the opportunity to earn $3.0 million of contingent performance-based consideration between January 1, 2022 and June 30, 2024. This additional component will be accounted for as compensation expense over that period. Based on markets and customers served, results for iMS are primarily reported in the Process Industries segment.

The following table presents the final purchase price allocation is subject to change as additional information concerning final asset and liability valuations is obtained. The primary area of the Aurora purchase price allocation that has not been finalized relates to theat fair value ~~of inventory. Any changes in fair value could affect~~for the ~~bargain purchase price gain recognized.~~iMS acquisition:


	Final Purchase Price Allocation
Total assets acquired	$	9.8
Total liabilities assumed	2.1
Net assets acquired	$	7.7

~~Table~~ ~~of Contents~~

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 six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively:


		Three Months Ended						Three Months Ended							Three Months Ended						Three Months Ended
		June 30, 2021						June 30, 2020							June 30, 2022						June 30, 2021
		Mobile		Process		Total		Mobile		Process		Total			Mobile		Process		Total		Mobile		Process		Total
United States	United States	$	237.4	$	201.6	$	439.0	$	186.6	$	173.7	$	360.3	United States	$	270.3	$	229.9	$	500.2	$	237.4	$	201.6	$	439.0
Americas, excluding the United States		52.3		49.1		101.4		26.8		29.3		56.1
Americas excluding the United States														Americas excluding the United States	63.7		64.6		128.3		52.3		49.1		101.4
Europe / Middle East / Africa	Europe / Middle East / Africa	124.3		137.2		261.5		78.8		112.9		191.7		Europe / Middle East / Africa	118.1		141.8		259.9		124.3		137.2		261.5
China	China	32.2		138.4		170.6		26.4		122.0		148.4		China	31.2		123.7		154.9		32.2		138.4		170.6
Asia-Pacific, excluding China		48.0		42.4		90.4		24.0		23.0		47.0
Asia-Pacific excluding China														Asia-Pacific excluding China	60.3		50.1		110.4		48.0		42.4		90.4
Net sales	Net sales	$	494.2	$	568.7	$	1,062.9	$	342.6	$	460.9	$	803.5	Net sales	$	543.6	$	610.1	$	1,153.7	$	494.2	$	568.7	$	1,062.9


		Six Months Ended						Six Months Ended							Six Months Ended						Six Months Ended
		June 30, 2021						June 30, 2020							June 30, 2022						June 30, 2021
		Mobile		Process		Total		Mobile		Process		Total			Mobile		Process		Total		Mobile		Process		Total
United States	United States	$	480.3	$	387.8	$	868.1	$	424.8	$	366.3	$	791.1	United States	$	532.5	$	456.5	$	989.0	$	480.3	$	387.8	$	868.1
Americas, excluding the United States		101.1		92.3		193.4		75.6		64.3		139.9
Americas excluding the United States														Americas excluding the United States	121.8		119.7		241.5		101.1		92.3		193.4
Europe / Middle East / Africa	Europe / Middle East / Africa	251.4		264.4		515.8		187.5		228.5		416.0		Europe / Middle East / Africa	247.5		277.4		524.9		251.4		264.4		515.8
China	China	66.6		262.7		329.3		48.2		203.0		251.2		China	61.9		244.4		306.3		66.6		262.7		329.3
Asia-Pacific, excluding China		99.3		82.4		181.7		73.2		55.5		128.7
Asia-Pacific excluding China														Asia-Pacific excluding China	120.3		96.3		216.6		99.3		82.4		181.7
Net sales	Net sales	$	998.7	$	1,089.6	$	2,088.3	$	809.3	$	917.6	$	1,726.9	Net sales	$	1,084.0	$	1,194.3	$	2,278.3	$	998.7	$	1,089.6	$	2,088.3

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Note 4 - Revenue(continued)

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 six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively:

Six Months Ended

Revenue by sales channel

June 30, 2021

June 30, 2020

Revenue by sales channel

June 30, 2022

June 30, 2021

Original equipment manufacturers

61%

59%

Original equipment manufacturers

60%

61%

Distribution/end users

39%

41%

Distribution/end users

40%

39%

In addition to disaggregating revenue by segment, 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 six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, approximately 9% ~~and 13%~~, 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~~total net sales represented service revenue during ~~each of~~ the six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively. Finally, business with the United States ("U.S.") government or its contractors represented approximately 6% and 7% ~~and 9%~~ of total net sales during the six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively.

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 ~~$456.9~~$245.5 million at June 30, ~~2021.~~

~~Table~~ ~~of Contents~~

~~Note 4 - Revenue(continued)~~2022.

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the six months ended June 30, ~~2021~~2022 and the twelve months ended December 31, ~~2020:~~2021:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Beginning balance, January 1	Beginning balance, January 1	$	110.9	$	129.2	Beginning balance, January 1	$	104.5	$	110.9
Additional unbilled revenue recognized	Additional unbilled revenue recognized	179.4		393.6		Additional unbilled revenue recognized	201.5		383.0
Less: amounts billed to customers	Less: amounts billed to customers	(189.9)		(411.9)		Less: amounts billed to customers	(198.7)		(389.4)

Ending balance	Ending balance	$	100.4	$	110.9	Ending balance	$	107.3	$	104.5

There were no impairment losses recorded on unbilled receivables for the six months ended June 30, ~~2021~~2022 and June 30, ~~2020, respectively.~~2021.

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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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales:	Net sales:									Net sales:
Mobile Industries	Mobile Industries	$	494.2	$	342.6	$	998.7	$	809.3	Mobile Industries	$	543.6	$	494.2	$	1,084.0	$	998.7
Process Industries	Process Industries	568.7		460.9		1,089.6		917.6		Process Industries	610.1		568.7		1,194.3		1,089.6
Net sales	Net sales	$	1,062.9	$	803.5	$	2,088.3	$	1,726.9	Net sales	$	1,153.7	$	1,062.9	$	2,278.3	$	2,088.3
Segment EBITDA:	Segment EBITDA:									Segment EBITDA:
Mobile Industries	Mobile Industries	$	67.3	$	38.8	$	146.9	$	113.9	Mobile Industries	$	69.1	$	67.3	$	144.2	$	146.9
Process Industries	Process Industries	141.2		126.3		272.2		233.8		Process Industries	163.5		141.2		319.1		272.2
Total EBITDA, for reportable segments	Total EBITDA, for reportable segments	$	208.5	$	165.1	$	419.1	$	347.7	Total EBITDA, for reportable segments	$	232.6	$	208.5	$	463.3	$	419.1
Unallocated corporate expense	Unallocated corporate expense	(11.6)		(6.5)		(23.2)		(17.6)		Unallocated corporate expense	(13.4)		(11.6)		(26.3)		(23.2)

Corporate pension and other postretirement benefit related expense (1)	Corporate pension and other postretirement benefit related expense (1)	(3.5)		(8.8)		(4.4)		(8.8)		Corporate pension and other postretirement benefit related expense (1)	(11.6)		(3.5)		(14.2)		(4.4)
Acquisition-related gain (2)	Acquisition-related gain (2)	0		0		0.6		0		Acquisition-related gain (2)	—		—		—		0.6
Depreciation and amortization	Depreciation and amortization	(42.2)		(41.7)		(85.2)		(84.0)		Depreciation and amortization	(40.7)		(42.2)		(82.1)		(85.2)
Interest expense	Interest expense	(15.3)		(18.9)		(30.2)		(36.0)		Interest expense	(18.3)		(15.3)		(32.6)		(30.2)
Interest income	Interest income	0.7		0.6		1.2		2.1		Interest income	1.0		0.7		1.6		1.2
Income before income taxes	Income before income taxes	$	136.6	$	89.8	$	277.9	$	203.4	Income before income taxes	$	149.6	$	136.6	$	309.7	$	277.9

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

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

~~Table~~ ~~of Contents~~

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 June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Provision for income taxes	Provision for income taxes	$	29.4		$	28.0		$	54.7		$	57.6		Provision for income taxes	$	44.0		$	29.4		$	82.2		$	54.7
Effective tax rate	Effective tax rate	21.5		%	31.2		%	19.7		%	28.3		%	Effective tax rate	29.4		%	21.5		%	26.5		%	19.7		%

Income tax expense for the three and six months ended June 30, ~~2021~~2022 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~~projected mix of ~~accruals~~earnings in international jurisdictions with relatively higher tax rates.

The effective tax rate of 29.4% for ~~uncertain~~the three months ended June 30, 2022 was higher than the rate for the three months ended June 30, 2021 primarily due to an unfavorable mix of earnings in higher tax ~~positions from~~rate jurisdictions, the net unfavorable impact of discrete tax items, and lower deductions for stock-based compensation.

The effective tax rate of 26.5% for the six months ended June 30, 2022 was higher than the rate for the six months ended June 30, 2021 primarily due to an unfavorable mix of earnings in higher tax rate jurisdictions, the net unfavorable impact of discrete tax items, including a discrete tax benefit in the prior year in connection with the settlement of the 2017 and 2018 U.S. federal tax years and other foreign jurisdictions, and favorable U.S. permanent book-tax differences. These items were partially offset by the unfavorable impact of earnings in foreign jurisdictions with higher tax rates.

The effective tax rate of 21.5% for the three months ended June 30, 2021 was lower than the rate for the three months ended June 30, 2020 primarily due to the release of accruals for uncertain tax positions, discrete benefits on tax rate changes in foreign jurisdictions and a more favorable mix of earnings in lower tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the new elective Global Intangible Low Tax Income ("GILTI") high tax exemption rules.

~~The effective tax rate of 19.7% for~~during the six months ended June 30, 2021, ~~was~~and lower ~~than the rate~~deductions for the six months ended June 30, 2020 primarily due to the release of accruals for uncertain tax positions, a more favorable mix of earnings in lower tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the tax impact from stock-based ~~compensation awards and the new elective GILTI high tax exemption rules.~~

compensation.

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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 six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net income attributable to The Timken Company	Net income attributable to The Timken Company	$	104.8	$	61.9	$	218.1	$	142.6	Net income attributable to The Timken Company	$	105.0	$	104.8	$	223.2	$	218.1
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	—		—		—		—
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	$	104.8	$	61.9	$	218.1	$	142.6	Net income available to common shareholders for basic and diluted earnings per share	$	105.0	$	104.8	$	223.2	$	218.1
Denominator:	Denominator:									Denominator:
Weighted average number of shares outstanding - basic	Weighted average number of shares outstanding - basic	76,122,257		75,078,207		75,969,569		75,298,356		Weighted average number of shares outstanding - basic	73,660,410		76,122,257		74,234,300		75,969,569
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	1,131,900		620,082		1,288,192		733,693		Stock options and awards - based on the treasury stock method	522,383		1,131,900		642,948		1,288,192
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	77,254,157		75,698,289		77,257,761		76,032,049		Weighted average number of shares outstanding assuming dilution of stock options and awards	74,182,793		77,254,157		74,877,248		77,257,761
Basic earnings per share	Basic earnings per share	$	1.38	$	0.82	$	2.87	$	1.89	Basic earnings per share	$	1.43	$	1.38	$	3.01	$	2.87
Diluted earnings per share	Diluted earnings per share	$	1.36	$	0.82	$	2.82	$	1.88	Diluted earnings per share	$	1.42	$	1.36	$	2.98	$	2.82

The ~~exercise prices for certain~~dilutive effect of stock options and awards includes all outstanding stock options and awards except stock options that are considered antidilutive. Stock options are antidilutive when the ~~Company has awarded exceeded~~exercise price exceeds the average market price of the Company’s common shares during ~~certain~~the periods presented. ~~Such stock options are antidilutive and~~There were ~~not included in the computation of diluted earnings per share. The~~no antidilutive stock options outstanding during the three ~~months ended June 30, 2021~~ and ~~2020 were 0~~ ~~and~~ ~~1,338,686, respectively. The antidilutive stock options outstanding during the~~ six months ended June 30, ~~2021~~2022 and ~~2020 were 0~~ ~~and~~ ~~1,353,254~~, ~~respectively.~~2021.

Note 8 - Inventories

The components of inventories at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Manufacturing supplies	Manufacturing supplies	$	36.2	$	34.8	Manufacturing supplies	$	39.6	$	38.0
Raw materials	Raw materials	122.0		99.5		Raw materials	121.9		121.8
Work in process	Work in process	352.6		320.3		Work in process	469.4		418.4
Finished products	Finished products	466.9		441.2		Finished products	594.9		527.8
Subtotal	Subtotal	977.7		895.8		Subtotal	1,225.8		1,106.0
Allowance for obsolete and surplus inventory	Allowance for obsolete and surplus inventory	(58.2)		(54.5)		Allowance for obsolete and surplus inventory	(67.8)		(63.3)
Total Inventories, net		$	919.5	$	841.3
Total inventories, net						Total inventories, net	$	1,158.0	$	1,042.7

Inventories are valued at net ~~realizable~~realizable value, with approximately ~~61%~~58% valued on the first-in, first-out ("FIFO") method and the remaining ~~39% valued~~42% 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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$185.1~~ $216.7 million and ~~$172.1~~$199.4 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~~are 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.

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Note 9 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, ~~2021~~2022 were as follows:


		Mobile Industries		Process Industries		Total			Mobile Industries		Process Industries		Total
Beginning balance	Beginning balance	$	384.6	$	663.0	$	1,047.6	Beginning balance	$	371.7	$	651.0	$	1,022.7

Acquisitions								Acquisitions	—		39.0		39.0

Foreign currency translation adjustments and other changes	Foreign currency translation adjustments and other changes	(5.9)		(6.9)		(12.8)		Foreign currency translation adjustments and other changes	(19.4)		(27.2)		(46.6)
Ending balance	Ending balance	$	378.7	$	656.1	$	1,034.8	Ending balance	$	352.3	$	662.8	$	1,015.1

The acquisition of Spinea added $39.0 million of goodwill. The goodwill is expected to be 100% tax deductible.

The following table displays intangible assets as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Balance at June 30, 2021						Balance at December 31, 2020							Balance at June 30, 2022						Balance at December 31, 2021
		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	$	526.4	$	(176.7)	$	349.7	$	532.2	$	(161.9)	$	370.3	Customer relationships	$	514.9	$	(197.7)	$	317.2	$	518.1	$	(189.3)	$	328.8
Technology and know-how	Technology and know-how	273.9		(79.7)		194.2		277.2		(72.0)		205.2		Technology and know-how	265.9		(92.0)		173.9		270.7		(86.6)		184.1
Trade names	Trade names	14.3		(9.2)		5.1		14.2		(8.8)		5.4		Trade names	20.6		(8.6)		12.0		14.3		(9.6)		4.7
Capitalized software	Capitalized software	277.5		(258.2)		19.3		276.4		(254.6)		21.8		Capitalized software	283.7		(264.1)		19.6		280.0		(261.3)		18.7
Other	Other	4.7		(3.9)		0.8		4.7		(3.7)		1.0		Other	3.2		(2.5)		0.7		4.7		(3.6)		1.1
		$	1,096.8	$	(527.7)	$	569.1	$	1,104.7	$	(501.0)	$	603.7		$	1,088.3	$	(564.9)	$	523.4	$	1,087.8	$	(550.4)	$	537.4
Intangible assets not subject to amortization:	Intangible assets not subject to amortization:													Intangible assets not subject to amortization:
Trade names	Trade names	$	126.4			$	126.4	$	129.0			$	129.0	Trade names	$	116.0			$	116.0	$	122.7			$	122.7
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
		$	135.1			$	135.1	$	137.7			$	137.7		$	124.7			$	124.7	$	131.4			$	131.4
Total intangible assets	Total intangible assets	$	1,231.9	$	(527.7)	$	704.2	$	1,242.4	$	(501.0)	$	741.4	Total intangible assets	$	1,213.0	$	(564.9)	$	648.1	$	1,219.2	$	(550.4)	$	668.8

Amortization expense for intangible assets was ~~$28.2~~$25.3 million and ~~$28.1~~$28.2 million for the six months ended June 30, 2022 and 2021, respectively. Amortization expense included $21.5 millionand ~~2020,~~$24.3 million related to intangible assets acquired as part of a business combination for the six months ended June 30, 2022 and 2021, respectively. Amortization expense for intangible assets is projected to be ~~$57.5 million in 2021; $49.4~~$55.3 million in 2022; ~~$46.3~~$46.6 million in 2023; ~~$44.3~~$44.7 million in 2024; ~~and $43.2~~$42.9 million in ~~2025.~~2025; and $41.4 million in 2026. Substantially all amortization expense for intangible assets is recorded in Cost of product sold on the Consolidated Statement of Income.

Table of Contents

Note 10 - Other Current Liabilities

The following table displays other current liabilities as of June 30, 2022 and December 31, 2021:


	June 30,		December 31,
(Dollars in millions)	2022		2021
Sales rebates	$	56.1	$	70.3
Freight and duties	25.5		25.5
Operating lease liabilities	24.2		26.2
Product warranty	17.2		11.7
Professional fees	12.6		10.8
Restructuring	5.5		7.0
Taxes other than income and payroll taxes	19.2		16.0
Interest	14.2		10.8
Other	95.4		72.3
Total other current liabilities	$	269.9	$	250.6

Table of Contents

Note 1011 - Financing Arrangements

Short-term debt at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was as follows:

June 30,
2021 December 31,
2020
Variable-rate Accounts Receivable Facility with an interest rate of 0.96% at December 31, 2020 $ 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 2.10% at June 30, 2021 and 0.24% to 1.75% at December 31, 2020
76.0 61.8
Short-term debt $ 76.0 $ 119.8


	June 30, 2022		December 31, 2021

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.50% to 2.10% at June 30, 2022 and 0.50% to 2.00% at December 31, 2021	$	70.3	$	42.6
Short-term debt	$	70.3	$	42.6

The lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $254.4 million in the aggregate. Most of these lines of credit are uncommitted. At June 30, 2022, the Company’s foreign subsidiaries had borrowings outstanding of $70.3 million and bank guarantees of $0.2 million, which reduced the aggregate availability under these facilities to $183.9 million.

Long-term debt at June 30, 2022 and December 31, 2021 was as follows:


	June 30, 2022		December 31, 2021
Variable-rate Senior Credit Facility with an average interest rate on Euro of 1.00% at June 30, 2022 and U.S. Dollar of 1.09% and Euro of 1.00% at December 31, 2021	$	8.3	$	9.0


Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 2.79% at June 30, 2022 and 1.23% at December 31, 2021	316.9		321.1
Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%	349.7		349.5
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%	157.0		170.3
Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%	397.0		396.9
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 Senior Unsecured Notes(1), maturing on April 1, 2032, with an interest rate of 4.125%	341.2		—
Fixed-rate Euro Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%	13.9		15.8

Other	6.9		5.0
Total debt	$	1,745.6	$	1,422.3
Less: Current maturities	11.3		11.2
Long-term debt	$	1,734.3	$	1,411.1

(1) Net of discounts and fees

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.~~2024. 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 to certain borrowing base limitations; however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at June 30, ~~2021.~~2022. As of June 30, ~~2021,~~2022, there were 0no outstanding borrowings under the Accounts Receivable ~~Facility.~~Facility, and the entire $100 million was available. The cost of this facility, which is the prevailing commercial paper rate plus facility fees, is considered a financing cost and is included in interest expense in the Consolidated Statements of Income.

The lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $286.1 million in the aggregate. Most of these lines of credit are uncommitted. At June 30, 2021, the Company’s foreign subsidiaries had borrowings outstanding of $76.0 million and bank guarantees of $0.5 million, which reduced the aggregate availability under these facilities to $209.6 million.

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

June 30,
2021 December 31,
2020
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 1.46% and Euro of 1.48% at June 30, 2021 and U.S. Dollar of 2.01% and Euro of 1.48% at December 31, 2020 $ 9.4 $ 9.7
Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 1.35% at June 30, 2021 and 1.63% at December 31, 2020
325.4 329.6
Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%
349.3 349.0
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%
177.6 182.9
Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%
396.7 396.5
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%
154.7 154.7
Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15% 17.5 18.8
Other 4.8 3.6
Total debt $ 1,435.4 $ 1,444.8
Less: Current maturities 11.1 10.9
Long-term debt $ 1,424.3 $ 1,433.9

~~(1)~~ ~~Net of discounts and fees~~

1112

Table of Contents

Note 1011 - Financing Arrangements (continued)

The Company entered into the 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 June 30, ~~2021,~~2022, the Co~~mpany~~Company had ~~$9.4~~$8.3 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to ~~$640.6~~$641.7 million. The Senior Credit Facility has ~~two~~2 financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio.

On ~~May 27, 2020,~~March 28, 2022, the ~~Senior Credit Facility was amended to, among other things, effectively increase~~Company issued fixed-rate unsecured senior notes ("2032 Notes") in the ~~limit~~aggregate principal amount of $350 million 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~~an interest rate of ~~$25 million, instead of total debt~~4.125%, maturing on April 1, 2032. ~~The change~~Proceeds from the notes were used to ~~the consolidated leverage ratio calculation was effective through June 30, 2021. In the third quarter~~for general corporate purposes, which included repayment of ~~2021, the calculation of the consolidated leverage ratio~~borrowings under the Senior Credit Facility ~~will revert back to a total debt construct.~~

and the Accounts Receivable Facility outstanding at the time of issuance.

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 and Rollon S.p.A., 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. The change to the consolidated leverage ratio calculation was effective through June 30, 2021. In the third quarter of 2021, the calculation of the consolidated leverage ratio under the 2023 Term Loan will revert back to a total debt construct.

At June 30, ~~2021,~~2022, 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 June 30, ~~2021,~~2022, outstanding letters of credit ~~totaled~~ ~~$41.9~~totaled $43.7 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $3.4 million of finance leases) subsequent to June 30, 2022 are as follows:


Year
2022	$	6.3
2023	318.3
2024	360.0
2025	1.7
2026	11.5
2027	183.2
Thereafter	864.6

Table of Contents

Note 1112 - 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, 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 ~~$5.2~~$5.5 million and ~~$5.3~~$6.0 million for various known environmental matters that are probable and reasonably estimable at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which includes the Lovejoy matter described 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 ~~$10.9~~$17.2 million and ~~$9.4~~$11.7 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The ~~increase in~~balances at the ~~liability since year~~ end ~~primarily relates to accruals that are based on~~of each respective period represent the best ~~estimate~~estimates of costs for future claims ~~based on~~for products ~~sold~~ that are still under warranty. The ~~estimate~~increase in the liability for the first six months of ~~these~~2022 primarily relates to additional accruals isfor product sold into the automotive and renewable energy sectors. Accrual estimates are based on ~~historical~~actual 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~~such change occurs.

The following is a rollforward of the consolidated product warranty accrual for the six months ended June 30, ~~2021~~2022 and twelve months ended December 31, ~~2020:~~2021:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Beginning balance, January 1	Beginning balance, January 1	$	9.4	$	7.5	Beginning balance, January 1	$	11.7	$	9.4
Expense	Expense	5.0		9.4		Expense	7.6		10.1
Payments	Payments	(3.5)		(7.5)		Payments	(2.1)		(7.8)
Ending balance	Ending balance	$	10.9	$	9.4	Ending balance	$	17.2	$	11.7

1314

Table of Contents

Note 1213 - Equity

The following tables present the changes in the components of equity for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively:


				The Timken Company Shareholders															The Timken Company Shareholders
		Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non controlling Interest			Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non controlling Interest
Balance at March 31, 2021		$	2,250.1	$	40.7	$	761.3	$	1,429.0	$	(2.1)	$	(53.4)	$	74.6
Balance at March 31, 2022																Balance at March 31, 2022	$	2,355.0	$	40.7	$	795.4	$	1,711.1	$	(42.5)	$	(233.6)	$	83.9
Net income	Net income	107.2						104.8						2.4		Net income	105.6						105.0						0.6
Foreign currency translation adjustment	Foreign currency translation adjustment	23.2								23.8				(0.6)		Foreign currency translation adjustment	(113.1)								(114.2)				1.1
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)	(1.7)								(1.7)						Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)	(1.4)								(1.4)

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	2.2								2.2
Dividends – $0.30 per share		(22.9)						(22.9)

Dividends – $0.31 per share																Dividends – $0.31 per share	(22.9)						(22.9)
Stock-based compensation expense	Stock-based compensation expense	6.0				6.0										Stock-based compensation expense	8.5				8.5

Stock purchased at fair market value																Stock purchased at fair market value	(44.3)										(44.3)
Stock option exercise activity	Stock option exercise activity	11.3				11.3										Stock option exercise activity	0.2				0.2

Payments related to tax withholding for stock-based compensation	Payments related to tax withholding for stock-based compensation	(5.7)										(5.7)				Payments related to tax withholding for stock-based compensation	(0.6)										(0.6)
Balance at June 30, 2021		$	2,367.3	$	40.7	$	778.6	$	1,510.9	$	19.8	$	(59.1)	$	76.4
Balance at June 30, 2022																Balance at June 30, 2022	$	2,289.2	$	40.7	$	804.1	$	1,793.2	$	(155.9)	$	(278.5)	$	85.6

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 223.2 218.1 5.1
Foreign currency translation adjustment (21.2) (20.2) (1.0)
Pension and other postretirement liability
   adjustments (net of income tax benefit
   of $1.1 million)
(3.3) (3.3)
Change in fair value of derivative financial
   instruments, net of reclassifications 2.0 2.0
Dividends – $0.59 per share (46.7) (46.7)
Stock-based compensation expense 12.5 12.5
Stock purchased at fair market value (26.3) (26.3)
Stock option exercise activity 25.4 25.4
Payments related to tax withholding for
   stock-based compensation (23.5) (23.5)
Balance at June 30, 2021 $ 2,367.3 $ 40.7 $ 778.6 $ 1,510.9 $ 19.8 $ (59.1) $ 76.4


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non controlling Interest
Balance at December 31, 2021	$	2,377.7	$	40.7	$	786.9	$	1,616.4	$	(23.0)	$	(126.1)	$	82.8
Net income	227.5						223.2						4.3
Foreign currency translation adjustment	(135.7)								(134.2)				(1.5)
Pension and other postretirement liability adjustments (net of income tax benefit of $1.0 million)	(2.9)								(2.9)
Change in fair value of derivative financial instruments, net of reclassifications	4.2								4.2
Dividends - $0.61 per share	(46.4)						(46.4)
Stock-based compensation expense	15.6				15.6

Stock purchased at fair market value	(144.3)										(144.3)
Stock option exercise activity	1.6				1.6

Payments related to tax withholding for stock-based compensation	(8.1)										(8.1)
Balance at June 30, 2022	$	2,289.2	$	40.7	$	804.1	$	1,793.2	$	(155.9)	$	(278.5)	$	85.6

1415

Table of Contents

Note 1213 - Equity (continued)


			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 March 31, 2021	$	2,250.1	$	40.7	$	761.3	$	1,429.0	$	(2.1)	$	(53.4)	$	74.6
Net income	107.2						104.8						2.4
Foreign currency translation adjustment	23.2								23.8				(0.6)
Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)	(1.7)								(1.7)
Change in fair value of derivative financial instruments, net of reclassifications	(0.2)								(0.2)

Dividends - $0.30 per share	(22.9)						(22.9)
Stock-based compensation expense	6.0				6.0

Stock option exercise activity	11.3				11.3

Payments related to tax withholding for stock-based compensation	(5.7)										(5.7)
Balance at June 30, 2021	$	2,367.3	$	40.7	$	778.6	$	1,510.9	$	19.8	$	(59.1)	$	76.4

The Timken Company Shareholders
Total Stated
Capital Other
Paid-In
Capital Retained Earnings Accumulated
Other
Comprehensive
(Loss) Treasury
Stock Non
controlling
Interest
Balance at March 31, 2020 $ 1,900.3 $ 53.1 $ 920.1 $ 1,964.8 $ (118.9) $ (1,001.7) $ 82.9
Net income (loss) 61.8 61.9 (0.1)
Foreign currency translation adjustment 24.5 23.3 1.2
Pension and other postretirement liability
   adjustments (net of income tax benefit
   of $0.5 million)
(1.5) (1.5)
Unrealized loss on marketable securities 0.5 0.5
Change in fair value of derivative financial
   instruments, net of reclassifications (2.6) (2.6)
Dividends – $0.28 per share (21.0) (21.0)
Stock-based compensation expense 5.8 5.8
Restricted share activity 0 (1.5) 1.5
Payments related to tax withholding for
   stock-based compensation (0.2) (0.2)
Balance at June 30, 2020 $ 1,967.6 $ 53.1 $ 924.4 $ 2,005.7 $ (99.2) $ (1,000.4) $ 84.0

The Timken Company Shareholders
Total Stated
Capital Other
Paid-In
Capital Retained Earnings Accumulated
Other
Comprehensive
(Loss) Treasury
Stock Non
controlling
Interest
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)
(0.4) (0.4)
Net income 145.8 142.6 3.2
Foreign currency translation adjustment (54.3) (48.0) (6.3)
Pension and other postretirement liability
   adjustments (net of income tax benefit
   of $1.0 million)
(2.8) (2.8)
Unrealized loss on marketable securities 0.1 0.1
Change in fair value of derivative financial
   instruments, net of reclassifications 1.6 1.6
Change in ownership of noncontrolling
   interest 0.5 0.5
Dividends – $0.56 per share (43.9) (43.9)
Stock-based compensation expense 11.4 11.4
Stock purchased at fair market value (42.3) (42.3)
Stock option exercise activity 7.5 (0.9) 8.4
Restricted share activity 0 (23.7) 23.7
Payments related to tax withholding for
   stock-based compensation (10.4) (10.4)
Balance at June 30, 2020 $ 1,967.6 $ 53.1 $ 924.4 $ 2,005.7 $ (99.2) $ (1,000.4) $ 84.0


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		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	223.2						218.1						5.1
Foreign currency translation adjustment	(21.2)								(20.2)				(1.0)
Pension and other postretirement liability adjustments (net of income tax benefit of $1.1 million)	(3.3)								(3.3)
Change in fair value of derivative financial instruments, net of reclassifications	2.0								2.0
Dividends - $0.59 per share	(46.7)						(46.7)
Stock-based compensation expense	12.5				12.5

Stock purchased at fair market value	(26.3)										(26.3)
Stock option exercise activity	25.4				25.4

Payments related to tax withholding for stock-based compensation	(23.5)										(23.5)
Balance at June 30, 2021	$	2,367.3	$	40.7	$	778.6	$	1,510.9	$	19.8	$	(59.1)	$	76.4

1516

Table of Contents

Note 1314 - Impairment and Restructuring Charges

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

For the three months ended June 30, 2022:


	Mobile Industries		Process Industries		Total
Impairment charges	$	8.8	$	—	$	8.8
Severance and related benefit costs	0.7		0.4		1.1
Exit costs	0.1		—		0.1
Total	$	9.6	$	0.4	$	10.0

For the six months ended June 30, 2022:


	Mobile Industries		Process Industries		Total
Impairment charges	$	8.8	$	—	$	8.8
Severance and related benefit costs	1.1		0.3		1.4
Exit costs	0.8		—		0.8
Total	$	10.7	$	0.3	$	11.0

For the three months ended June 30, 2021:


		Mobile Industries		Process Industries		Unallocated Corporate		Total			Mobile Industries		Process Industries		Total
Impairment charges	Impairment charges	$	1.0	$	0.1	$	0	$	1.1	Impairment charges	$	1.0	$	0.1	$	1.1
Severance and related benefit costs	Severance and related benefit costs	0		0.1		0		0.1		Severance and related benefit costs	—		0.1		0.1
Exit costs	Exit costs	0.1		0		0		0.1		Exit costs	0.1		—		0.1
Total	Total	$	1.1	$	0.2	$	0	$	1.3	Total	$	1.1	$	0.2	$	1.3

For the six months ended June 30, 2021:


		Mobile Industries		Process Industries		Unallocated Corporate		Total			Mobile Industries		Process Industries		Total
Impairment charges	Impairment charges	$	1.1	$	3.4	$	0	$	4.5	Impairment charges	$	1.1	$	3.4	$	4.5
Severance and related benefit costs	Severance and related benefit costs	0		0.6		0		0.6		Severance and related benefit costs	—		0.6		0.6
Exit costs	Exit costs	0.2		0		0		0.2		Exit costs	0.2		—		0.2
Total	Total	$	1.3	$	4.0	$	0	$	5.3	Total	$	1.3	$	4.0	$	5.3

~~For the three months ended June 30, 2020:~~

Mobile Industries Process Industries Unallocated Corporate Total
Severance and related benefit costs $ 1.5 $ 1.7 $ 0 $ 3.2
Exit costs (0.3) 0.2 0 (0.1)
Total $ 1.2 $ 1.9 $ 0 $ 3.1

~~For the six months ended June 30, 2020:~~

Mobile Industries Process Industries Unallocated Corporate Total
Impairment charges $ 0 $ 0.1 $ 0 $ 0.1
Severance and related benefit costs 1.6 4.2 0.1 5.9
Exit costs 0.3 0.4 0 0.7
Total $ 1.9 $ 4.7 $ 0.1 $ 6.7

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.

Mobile Industries:

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

During the three months ended June 30, ~~2020~~2022, the Company recorded impairment charges of $8.8 million related to certain assets of its joint venture in Russia. As a result of Russia's invasion of Ukraine (and associated sanctions), the Company ~~recorded $2.0 million~~suspended its operations in ~~severance~~Russia. Refer to Russia Operations in Management's Discussion and related benefit costs to eliminate approximately 20 salaried positions. Of the $2.0 million charge, $0.6 million related to the Mobile Industries segment and $1.4 million related to the Process Industries segment.Analysis for additional information.

~~Mobile Industries:~~

Table of Contents

Note 14 - Impairment and Restructuring Charges (continued)

On July 19, 2021, the Company announced the closure of its bearing manufacturing facility in Villa Carcina, Italy. The Company will be transferring the ~~manufacturing~~manufacturing of its single-row tapered roller bearing production to other bearing facilities in Europe, Asia and the United States. The ~~plant is expected~~Company expects to ~~close~~complete the closure of the facility by ~~the end~~October of ~~2021~~ 2022 and is expected to affect approximately 110 employees. The Company expects to incur approximately $7$9 million to ~~$10~~$11 million of expenses related to this closure. ~~Ahead of this announcement,~~During the three months ended June 30, 2022, the Company ~~reviewed assets for impairment. As a result,~~recorded severance and related benefits of $0.4 million and exit costs of $0.4 million associated with this closure. During the six months ended June 30, 2022, the Company recorded severance and related benefits of $0.8 million and exit costs of $1.0 million associated with this closure. During the three months ended June 30, 2021, the Company recorded impairment charges of $1.0 ~~million during the three months ended June 30, 2021.~~

~~Table~~million. T ~~of Contents~~

~~Note 13 - Impairment and Restructuring Charges (continued)~~

~~On October 16, 2019, the~~he Company announced the reorganization of its bearing manufacturing facility in Gaffney, South Carolina. The Company transferred its high-volume bearing production and roller production to other Timken manufacturing facilities in the United States. The transfer of these operations was substantially completed by the end of the third quarter of 2020 and 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 six months ended June 30, 2020, the Company recognized severance and related benefits of $0.3 million and exit costs of $0.3 million related to this reorganization. The Companyhas incurred cumulative pretax costs related to this ~~reorganization~~closure of ~~$7.8~~$8.3 million as of June 30, ~~2021,~~2022, including rationalization costs recorded in cost of products sold. On January 31, 2022, the Company entered into an agreement to sell this facility with the sale expected to close in the fourth quarter of 2022.

Process Industries:

On February 4, 2020, the Company announced the closure of its chain manufacturing facility in Indianapolis, Indiana. This facility 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~~cease operations by the end of the fourth quarter of ~~2021~~2022 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~~$11 million to ~~$12~~$14 million of expenses related to this closure. During the three months and six months ended June 30, 2021, ~~and June 30, 2020,~~ the Company recorded severance and related benefit costs of $0.3 million and ~~$0.3 million, respectively, related to this closure. During the six months ended June 30, 2021 and June 30, 2020, the Company recorded severance and related benefit costs of~~ $0.6 ~~million and $2.2~~ million, respectively, related to this closure. The Company has incurred cumulative pretax costs related to this closure of ~~$8.5~~$12.0 million as of June 30, ~~2021,~~2022, 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~~six months ended ~~March 31, 2021.~~June 30, 2021. Management concluded no further investment would be made in these assets and as a result, reduced the value to zero.

Consolidated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the six months ended June 30, ~~2021~~2022 and twelve months ended December 31, ~~2020:~~2021:

June 30,
2021 December 31,
2020
Beginning balance, January 1 $ 8.0 $ 2.7
Expense 0.8 20.8
Payments (2.5) (15.5)
Ending balance $ 6.3 $ 8.0


	June 30, 2022		December 31, 2021
Beginning balance, January 1	$	7.0	$	8.0
Expense	2.2		4.4
Payments	(3.7)		(5.4)
Ending balance	$	5.5	$	7.0

The restructuring accrual at June 30, 2022 and December 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

Table of Contents

Note 1415 - 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 six months ended June 30, ~~2021~~2022 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, ~~2021.~~2022.


		U.S. Plans				International Plans				Total					U.S. Plans				International Plans				Total
		Three Months Ended June 30,													Three Months Ended June 30,
		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021
Components of net periodic benefit cost (credit):	Components of net periodic benefit cost (credit):													Components of net periodic benefit cost (credit):
Service cost	Service cost	$	2.3	$	2.7	$	0.5	$	0.4	$	2.8	$	3.1	Service cost	$	1.8	$	2.3	$	0.4	$	0.5	$	2.2	$	2.8
Interest cost	Interest cost	4.5		5.3		1.1		1.3		5.6		6.6		Interest cost	4.1		4.5		1.4		1.1		5.5		5.6
Expected return on plan assets	Expected return on plan assets	(6.1)		(6.4)		(2.6)		(2.1)		(8.7)		(8.5)		Expected return on plan assets	(5.0)		(6.1)		(2.4)		(2.6)		(7.4)		(8.7)
Amortization of prior service cost	Amortization of prior service cost	0.3		0.4		0.1		0.1		0.4		0.5		Amortization of prior service cost	0.3		0.3		0.1		0.1		0.4		0.4
Recognition of net actuarial losses	Recognition of net actuarial losses	3.5		8.8		0		0		3.5		8.8		Recognition of net actuarial losses	11.6		3.5		—		—		11.6		3.5

Net periodic benefit cost (credit)	Net periodic benefit cost (credit)	$	4.5	$	10.8	$	(0.9)	$	(0.3)	$	3.6	$	10.5	Net periodic benefit cost (credit)	$	12.8	$	4.5	$	(0.5)	$	(0.9)	$	12.3	$	3.6


		U.S. Plans				International Plans				Total					U.S. Plans				International Plans				Total
		Six Months Ended June 30,													Six Months Ended June 30,
		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021
Components of net periodic benefit cost (credit):	Components of net periodic benefit cost (credit):													Components of net periodic benefit cost (credit):
Service cost	Service cost	$	4.8	$	5.4	$	1.0	$	0.8	$	5.8	$	6.2	Service cost	$	3.7	$	4.8	$	0.8	$	1.0	$	4.5	$	5.8
Interest cost	Interest cost	8.9		10.5		2.2		2.8		11.1		13.3		Interest cost	8.2		8.9		2.9		2.2		11.1		11.1
Expected return on plan assets	Expected return on plan assets	(12.2)		(12.7)		(5.1)		(4.3)		(17.3)		(17.0)		Expected return on plan assets	(10.2)		(12.2)		(4.9)		(5.1)		(15.1)		(17.3)
Amortization of prior service cost	Amortization of prior service cost	0.6		0.8		0.1		0.1		0.7		0.9		Amortization of prior service cost	0.6		0.6		0.1		0.1		0.7		0.7
Recognition of net actuarial losses	Recognition of net actuarial losses	4.4		8.8		0		0		4.4		8.8		Recognition of net actuarial losses	14.2		4.4		—		—		14.2		4.4

Net periodic benefit cost (credit)	Net periodic benefit cost (credit)	$	6.5	$	12.8	$	(1.8)	$	(0.6)	$	4.7	$	12.2	Net periodic benefit cost (credit)	$	16.5	$	6.5	$	(1.1)	$	(1.8)	$	15.4	$	4.7

The Company ~~currently~~ expects ~~to make contributions and~~full year 2022 lump sum payments related to ~~its global defined benefit pension plans totaling approximately $15 million in 2021. Approximately $9.6 million of this amount related~~new retirees to ~~the 2021 payout of deferred compensation in June 2021 to a former executive officer of the Company. The payment triggered a remeasurement of the pension obligation~~exceed annual interest and service costs for ~~one~~two of the Company's U.S. defined benefit pension plans ~~during~~in 2022. This expectation triggered a remeasurement of assets and obligations for both plans. During the ~~six~~three months ended ~~June 30, 2021. In addition,~~March 31, 2022, the Company ~~made~~only expected to make lump sum payments related to new retirees ~~in 2021~~ in excess of annual interest and service costs for ~~two~~one of its ~~other~~ U.S. defined benefit pension plans asresulting in only one plan being remeasured. As a result of these remeasurements, the Company recognized net actuarial losses ("mark-to-market charges") of $11.6 million and $14.2 million during the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 2021, the Company expected to make lump sum payments related to new retirees in excess of annual interest and service costs for three of the Company's U.S. defined benefit pension plans in 2021. ~~These payments~~This expectation, along with the payout of deferred compensation to a former executive officer of the Company in June 2021, triggered a remeasurement of assets and obligations for these ~~U.S. defined benefit pension plans during the~~ ~~six months ended~~ ~~June 30, 2021.~~plans. As a result of ~~these remeasurements,~~this remeasurement, the Company recognized net actuarial losses of $3.5 million and $4.4 million during the ~~three and six~~ ~~months ended June 30, 2021, respectively.~~

~~During the~~ three and six months ended June 30, ~~2020, the~~ Company recognized actuarial losses of $8.8 million. The remeasurement was a result of expected lump sum payments to new retirees exceeding service and interest costs for one of the Company's U.S. defined benefit pension plans.

2021, respectively.

1819

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Note 1516 - 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 six months ended June 30, ~~2021~~2022 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, ~~2021.~~2022.

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Components of net periodic benefit credit:
Service cost $ 0.1 $ 0.1 $ 0.1 $ 0.1
Interest cost 0.3 0.5 0.7 1.0
Expected return on plan assets 0 (0.1) 0 (0.2)
Amortization of prior service credit (2.5) (2.5) (5.0) (4.9)
Net periodic benefit credit $ (2.1) $ (2.0) $ (4.2) $ (4.0)

In January 2021, the Company transferred the remaining $11.1 million in an existing Voluntary Employee Beneficiary Association ("VEBA") trust for certain retiree medical benefits to a second VEBA trust for the payment of certain active employees’ medical benefits. The Company utilized all of the assets in the second trust during the ~~six~~ ~~months ended June 30, 2021.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net periodic benefit credit:
Service cost	$	0.1	$	0.1	$	0.1	$	0.1
Interest cost	0.3		0.3		0.7		0.7

Amortization of prior service credit	(2.5)		(2.5)		(5.0)		(5.0)



Net periodic benefit credit	$	(2.1)	$	(2.1)	$	(4.2)	$	(4.2)

1920

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Note 1617 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive (loss) income ~~(loss)~~ for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 March 31, 2021 $ (62.0) $ 61.8 $ 0 $ (1.9) $ (2.1)
Other comprehensive income (loss) before
   reclassifications and income taxes 23.2 (0.1) 0 (2.1) 21.0
Amounts reclassified from accumulated other
   comprehensive (loss) income before income
   taxes 0 (2.1) 0 1.7 (0.4)
Income tax benefit 0 0.5 0 0.2 0.7
Net current period other comprehensive
   income (loss), net of income taxes 23.2 (1.7) 0 (0.2) 21.3
Noncontrolling interest 0.6 0 0 0 0.6
Net current period comprehensive income (loss),
   net of income taxes and noncontrolling
   interest 23.8 (1.7) 0 (0.2) 21.9
Balance at June 30, 2021 $ (38.2) $ 60.1 $ 0 $ (2.1) $ 19.8


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Change in fair value of derivative financial instruments		Total
Balance at March 31, 2022	$	(100.3)	$	55.1	$	2.7	$	(42.5)
Other comprehensive (loss) income before reclassifications and income taxes	(113.1)		0.2		3.9		(109.0)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—		(2.1)		(0.7)		(2.8)
Income tax (expense) benefit	—		0.5		(1.0)		(0.5)
Net current period other comprehensive (loss) income, net of income taxes	(113.1)		(1.4)		2.2		(112.3)
Noncontrolling interest	(1.1)		—		—		(1.1)
Net current period other comprehensive (loss) income, net of income taxes and noncontrolling interest	(114.2)		(1.4)		2.2		(113.4)
Balance at June 30, 2022	$	(214.5)	$	53.7	$	4.9	$	(155.9)

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 (21.2) (0.1) 0 (0.7) (22.0)
Amounts reclassified from accumulated other
   comprehensive (loss) income before income
   taxes 0 (4.3) 0 3.4 (0.9)
Income tax benefit (expense) 0 1.1 0 (0.7) 0.4
Net current period other comprehensive
   (loss) income, net of income taxes (21.2) (3.3) 0 2.0 (22.5)
Noncontrolling interest 1.0 0 0 0 1.0
Net current period comprehensive (loss) income,
   net of income taxes and noncontrolling
   interest (20.2) (3.3) 0 2.0 (21.5)
Balance at June 30, 2021 $ (38.2) $ 60.1 $ 0 $ (2.1) $ 19.8


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2021	$	(80.3)	$	56.6	$	0.7	$	(23.0)
Other comprehensive (loss) income before reclassifications and income taxes	(135.7)		0.4		7.1		(128.2)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—		(4.3)		(1.6)		(5.9)
Income tax (expense) benefit	—		1.0		(1.3)		(0.3)
Net current period other comprehensive (loss) income, net of income taxes	(135.7)		(2.9)		4.2		(134.4)
Noncontrolling interest	1.5		—		—		1.5
Net current period other comprehensive (loss) income, net of income taxes and noncontrolling interest	(134.2)		(2.9)		4.2		(132.9)
Balance at June 30, 2022	$	(214.5)	$	53.7	$	4.9	$	(155.9)

2021

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Note 1617 - Accumulated Other Comprehensive Income (Loss) (continued)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Change in fair value of derivative financial instruments		Total
Balance at March 31, 2021	$	(62.0)	$	61.8	$	(1.9)	$	(2.1)
Other comprehensive income (loss) before reclassifications and income taxes	23.2		(0.1)		(2.1)		21.0
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—		(2.1)		1.7		(0.4)
Income tax benefit	—		0.5		0.2		0.7
Net current period other comprehensive income (loss), net of income taxes	23.2		(1.7)		(0.2)		21.3
Noncontrolling interest	0.6		—		—		0.6
Net current period comprehensive income (loss), net of income taxes and noncontrolling interest	23.8		(1.7)		(0.2)		21.9
Balance at June 30, 2021	$	(38.2)	$	60.1	$	(2.1)	$	19.8

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 March 31, 2020 $ (186.6) $ 65.6 $ (0.4) $ 2.5 $ (118.9)
Other comprehensive income (loss) before
   reclassifications and income taxes 24.5 0 0.7 (2.2) 23.0
Amounts reclassified from accumulated other
   comprehensive (loss) income before income
   taxes 0 (2.0) 0 (1.3) (3.3)
Income tax benefit (expense) 0 0.5 (0.2) 0.9 1.2
Net current period other comprehensive
   income (loss), net of income taxes 24.5 (1.5) 0.5 (2.6) 20.9
Noncontrolling interest (1.2) 0 0 0 (1.2)
Net current period comprehensive income (loss),
   net of income taxes and noncontrolling
   interest 23.3 (1.5) 0.5 (2.6) 19.7
Balance at June 30, 2020 $ (163.3) $ 64.1 $ 0.1 $ (0.1) $ (99.2)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2020	$	(18.0)	$	63.4	$	(4.1)	$	41.3
Other comprehensive (loss) income before reclassifications and income taxes	(21.2)		(0.1)		(0.7)		(22.0)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	—		(4.3)		3.4		(0.9)
Income tax benefit (expense)	—		1.1		(0.7)		0.4
Net current period other comprehensive (loss) income, net of income taxes	(21.2)		(3.3)		2.0		(22.5)
Noncontrolling interest	1.0		—		—		1.0
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(20.2)		(3.3)		2.0		(21.5)
Balance at June 30, 2021	$	(38.2)	$	60.1	$	(2.1)	$	19.8

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 (54.3) 0.2 0.2 4.2 (49.7)
Amounts reclassified from accumulated other
   comprehensive (loss) income before income
   taxes 0 (4.0) 0 (1.9) (5.9)
Income tax benefit (expense) 0 1.0 (0.1) (0.7) 0.2
Net current period other comprehensive
   (loss) income, net of income taxes (54.3) (2.8) 0.1 1.6 (55.4)
Noncontrolling interest 6.3 0 0 0 6.3
Net current period comprehensive (loss) income,
   net of income taxes and noncontrolling
   interest (48.0) (2.8) 0.1 1.6 (49.1)
Balance at June 30, 2020 $ (163.3) $ 64.1 $ 0.1 $ (0.1) $ (99.2)

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

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Note 1718 - 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 June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021									June 30, 2022
		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	$	305.5	$	303.5	$	2.0	$	0	Cash and cash equivalents	$	283.3	$	281.5	$	1.8	$	—

Cash and cash equivalents measured at net asset value										Cash and cash equivalents measured at net asset value	22.0		—		—		—
Restricted cash	Restricted cash	0.8		0.8		0		0		Restricted cash	0.7		0.7		—		—
Short-term investments	Short-term investments	52.0		0		52.0		0		Short-term investments	30.6		—		30.6		—

Interest rate swap contract										Interest rate swap contract	3.3		—		3.3		—
Foreign currency forward contracts	Foreign currency forward contracts	0.9		0		0.9		0		Foreign currency forward contracts	3.4		—		3.4		—
Total Assets		$	359.2	$	304.3	$	54.9	$	0
Total assets										Total assets	$	343.3	$	282.2	$	39.1	$	—
Liabilities:	Liabilities:									Liabilities:
Foreign currency forward contracts	Foreign currency forward contracts	$	3.4	$	0	$	3.4	$	0	Foreign currency forward contracts	$	2.5	$	—	$	2.5	$	—

Total Liabilities		$	3.4	$	0	$	3.4	$	0
Total liabilities										Total liabilities	$	2.5	$	—	$	2.5	$	—

December 31, 2020
Total Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 320.3 $ 318.6 $ 1.7 $ 0
Restricted cash 0.8 0.8 0 0
Short-term investments 37.6 0 37.6 0
Foreign currency forward contracts 1.1 0 1.1 0
Total Assets $ 359.8 $ 319.4 $ 40.4 $ 0
Liabilities:
Foreign currency forward contracts $ 8.1 $ 0 $ 8.1 $ 0
Total Liabilities $ 8.1 $ 0 $ 8.1 $ 0


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	257.1	$	244.8	$	12.3	$	—

Restricted cash	0.8		0.8		—		—
Short-term investments	56.9		—		56.9		—

Foreign currency forward contracts	5.6		—		5.6		—
Total assets	$	320.4	$	245.6	$	74.8	$	—
Liabilities:
Foreign currency forward contracts	$	1.0	$	—	$	1.0	$	—
Total liabilities	$	1.0	$	—	$	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 value. Short-term investments are investments with maturities between four months and one year, and generally are valued at amortized cost, which ~~approximates~~approximates fair value. A portion of the cash and cash equivalents and short-term investments are valued based on net asset value. The Company uses publicly available market interest rates to measure the fair value of its interest rate swap contracts. The Company uses publicly available foreign currency fo~~rward~~forward and spot rates to measure the fair value of its foreign currency forward contracts.

Table of Contents

Note 18 - 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~~

During the three months ended June 30, 2022, property, plant and equipment at the Company's joint venture in Russia, with a carrying value of $15.9 million, were written down to their fair value of $7.1 million, resulting in an impairment charge of $8.8 million. The fair value for ~~further discussion.~~these assets was determined based on the best price that would be received in a current transaction to sell the assets to a third party.

No other material assets ~~were~~were measured at fair value on a nonrecurring basis during the six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~Table~~ ~~of Contents~~

~~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 for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable ~~estimate~~estimate of its fair value. The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was ~~$1,204.0~~$1,386.6 million and ~~$1,220.7~~$1,171.1 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The carrying value of this debt was ~~$1,095.7~~$1,414.1 million and ~~$1,103.2~~$1,087.5 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The fair value of long-term fixed-rate debt waswas 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 1819 - 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 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 7, 2027 ~~(the~~(the "2027 Notes"), as a hedge against its net investment in one of its European ~~affiliates.~~subsidiaries. The objective of the hedge transaction is to protect the net investment in the foreign operations against changes in the exchange rate between the U.S. dollar and the Euro. The net impact for the three and six months ended June 30, ~~2021,~~2022, respectively, was a ~~loss~~gain of ~~$0.7~~$3.2 million and a gain of ~~$1.9~~$4.8 million to accumulated comprehensive ~~loss~~(loss) income with a corresponding offset to other ~~(expense) income,~~expense, which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The Company entered into $350 million of floating-to-fixed 10-year Treasury rate locks during the first quarter of 2022, prior to issuing the 2032 Notes. This fixed the 10-year Treasury yield and settled at pricing of the 2032 Notes, resulting in $6.5 million of cash proceeds received by the Company. This amount was recorded to accumulated comprehensive income and will be amortized as a reduction in interest expense over the 10-year tenor of the 2032 Notes.

The Company does not purchase or hold any ~~derivative~~derivative financial instruments for trading purposes. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$187.8~~$434.4 million a~~nd $173.2~~and $300.8 million, respectively, of outstanding foreign currency forward contracts at notional value. Refer to Note 1718 - Fair Value for the fair value disclosure of derivative financial instruments.

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Note 19 - 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.

~~Table~~ ~~of Contents~~

~~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. Co~~nversely,~~nversely, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$88.7~~$76.7 million and ~~$86.9~~$80.0 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 June 30, ~~2021~~2022 and December 31, ~~2020~~,2021, the ~~Company~~Company had ~~$99.1~~$357.7 million and ~~$86.3~~$220.8 million, r~~espectively,~~respectively, of outstanding foreign currency forward contracts at notional value that were not ~~designated~~designated as hedging instruments. The following table presents the impact of derivative instruments not designated as hedging instruments for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and the related location within the Consolidated Statements of Income:


			Amount of gain or (loss) recognized in income										Amount of gain or (loss) recognized in income
			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2021		2020		2021		2020		Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2022		2021		2022		2021

Foreign currency forward contracts	Foreign currency forward contracts	Other income (expense), net	$	(0.9)	$	(3.7)	$	(0.7)	$	1.8	Foreign currency forward contracts	Other expense, net	$	(6.0)	$	(0.9)	$	(7.0)	$	(0.7)

2425

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

(Dollars in millions, except per share data)

OVERVIEW

Introduction:

The Timken Company 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®, Groeneveld® and ~~Groeneveld®~~Spinea®. Timken employs more than ~~17,000~~18,000 people globally in 4243 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 long-term 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~~Operational 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.

~~Table~~ ~~of Contents~~

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 initiatives to drive profitable organic ~~growth initiatives;~~growth; (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.

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Overview:


		Three Months Ended June 30,									Three Months Ended June 30,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
Net sales	Net sales	$	1,062.9	$	803.5	$	259.4	32.3	%	Net sales	$	1,153.7	$	1,062.9	$	90.8	8.5	%
Net income	Net income	107.2		61.8		45.4		73.5	%	Net income	105.6		107.2		(1.6)		(1.5)	%

Net income (loss) attributable to noncontrolling interest		2.4		(0.1)		2.5		NM
Net income attributable to noncontrolling interest										Net income attributable to noncontrolling interest	0.6		2.4		(1.8)		(75.0)	%
Net income attributable to The Timken Company	Net income attributable to The Timken Company	$	104.8	$	61.9	$	42.9	69.3	%	Net income attributable to The Timken Company	$	105.0	$	104.8	$	0.2	0.2	%

Diluted earnings per share	Diluted earnings per share	$	1.36	$	0.82	$	0.54	65.9	%	Diluted earnings per share	$	1.42	$	1.36	$	0.06	4.4	%
Average number of shares – diluted	Average number of shares – diluted	77,254,157		75,698,289		—		2.1	%	Average number of shares – diluted	74,182,793		77,254,157		—		(4.0)	%


		Six Months Ended June 30,									Six Months Ended June 30,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
Net sales	Net sales	$	2,088.3	$	1,726.9	$	361.4	20.9	%	Net sales	$	2,278.3	$	2,088.3	$	190.0	9.1	%
Net income	Net income	223.2		145.8		77.4		53.1	%	Net income	227.5		223.2		4.3		1.9	%

Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	5.1		3.2		1.9		59.4	%	Net income attributable to noncontrolling interest	4.3		5.1		(0.8)		(15.7)	%
Net income attributable to The Timken Company	Net income attributable to The Timken Company	$	218.1	$	142.6	$	75.5	52.9	%	Net income attributable to The Timken Company	$	223.2	$	218.1	$	5.1	2.3	%

Diluted earnings per share	Diluted earnings per share	$	2.82	$	1.88	$	0.94	50.0	%	Diluted earnings per share	$	2.98	$	2.82	$	0.16	5.7	%
Average number of shares – diluted	Average number of shares – diluted	77,257,761		76,032,049		—		1.6	%	Average number of shares – diluted	74,877,248		77,257,761		—		(3.1)	%

The increase in net sales for the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020~~2021 was primarily driven by ~~higher~~strong organic ~~revenue across most market sectors, as well as~~growth (including positive pricing), partially offset by the ~~favorable~~unfavorable impact of foreign currency exchange rate ~~changes and the Aurora acquisition.~~changes. The increase in net income for the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020~~2021 was primarily due to favorable price/mix and the impact of higher volume, ~~favorable manufacturing performance and the favorable impact of foreign currency exchange rate changes,~~ partially offset by higher ~~selling, general~~material, logistics and ~~administrative ("SG&A") expenses,~~other operating costs, higher ~~material~~pension mark-to-market charges, higher impairment and ~~logistics costs and unfavorable mix. In addition, there was lower~~ restructuring ~~and pension remeasurement~~ charges and ~~the~~a higher tax ~~rate was favorable in 2021 compared to 2020.~~rate.

The increase in net sales for the six months ended June 30, 2022 compared with the six months ended June 30, 2021 ~~compared with the six months ended June 30, 2020~~ was primarily driven by ~~higher~~strong organic ~~revenue across most market sectors, as well as~~growth (including positive pricing), partially offset by the ~~favorable~~unfavorable impact of foreign currency exchange rate ~~changes and the Aurora acquisition.~~changes. The increase in net income for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020~~2021 was primarily due to favorable price/mix and the impact of higher volume, ~~and related manufacturing performance and the favorable impact of foreign currency exchange rate changes,~~ partially offset by higher material, logistics and ~~logistics~~other operating costs, ~~unfavorable mix, and~~ higher ~~SG&A expenses. In addition, there was lower restructuring and~~ pension ~~remeasurement~~mark-to-market charges and ~~the~~a higher tax ~~rate was favorable in 2021 compared to 2020.~~

rate.

~~Table~~ ~~of Contents~~

Outlook:

The world continues to be impacted by the COVID-19 pandemic. The Company 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. 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. The Company’s main priority continues to be the health of its employees and others in the communities where it does business.

The Company’s operations and financial results were adversely impacted during 2020 due to the COVID-19 pandemic. With vaccines now being administered around the world, conditions are improving. During the first half of 2021, the Company operated are near-normal levels. While Timken continued to experience some COVID-19 related supply chain disruptions and staffing issues, the Company was able to adequately serve customers and meet robust demand levels across most markets. The Company will continue to monitor, assess and seek to manage the uncertainty surrounding the COVID-19 pandemic. Timken’s outlook for 2021 assumes that COVID-19 conditions around the world will continue to improve as the year progresses.

The Company expects ~~2021~~2022 full-year revenue to be up approximately ~~19%~~7% compared to ~~2020,~~2021, primarily due to higher ~~organic revenue~~demand across ~~both~~most end markets, positive pricing and the ~~Mobile Industries and Process Industries segments, as well as the favorable impact~~continued execution of ~~foreign currency exchange rates, acquisitions and positive pricing.~~growth initiatives. The Company's earnings are expected to be up ~~significantly~~ in ~~2021~~2022 compared with ~~2020,~~2021, primarily due to the ~~impact of higher volume and related manufacturing performance, the~~ favorable impact of ~~foreign currency exchange rate changes~~price/mix and ~~lower restructuring expenses and a lower tax rate,~~higher volume, partially offset by higher material, logistics and ~~logistics~~other operating costs, as well as higher ~~SG&A expenses~~interest costs and ~~unfavorable mix.~~

a higher tax rate. In 2021, the Company experienced supply chain disruptions, inflationary cost pressures and staffing issues related to accelerating customer demand. Timken expects business conditions to remain challenging in 2022, due in part to the impact of Russia's invasion of Ukraine and the ongoing Coronavirus ("COVID-19") lockdowns in China.

The Company expects to generate cash from operating activities in ~~the range of $450 million to $475 million in~~2022 above 2021 ~~down from $577.6 million in 2020, as the impact of~~levels driven by 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).~~earnings. The Company expects capital expenditures ~~to be approximately $150 million (approximately~~between 4.0% and 4.5% of sales in 2022, compared with 3.6% of ~~sales)~~sales ($148 million) in ~~2021, compared with $122 million in 2020.~~2021.

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THE STATEMENT OF INCOME

Sales:

Three Months Ended
June 30,
2021 2020 $ Change % Change
Net Sales $ 1,062.9 $ 803.5 $ 259.4 32.3 %


	Three Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	1,153.7	$	1,062.9	$	90.8	8.5	%

Six Months Ended
June 30,
2021 2020 $ Change % Change
Net Sales $ 2,088.3 $ 1,726.9 $ 361.4 20.9 %


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	2,278.3	$	2,088.3	$	190.0	9.1	%

Net sales increased for the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020.~~2021. The increase was primarily due to ~~higher~~strong organic ~~revenue~~growth of ~~$213~~$122 million, partially offset by the ~~favorable~~unfavorable impact of foreign currency exchange rate changes of ~~$39 million and the benefit of the Aurora acquisition of $8~~$35 million. The higher organic revenue was driven by higher demand across ~~both~~most market sectors in the Mobile ~~Industries~~ and Process Industries segments ~~as most end markets were up year-over-year, with the distribution, off-highway~~ and ~~automotive sectors posting the largest increases.~~higher net pricing.

Net sales increased for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020.~~2021. The increase was primarily due to ~~higher~~strong organic ~~revenue~~growth of ~~$282~~$235 million, partially offset by the ~~favorable~~unfavorable impact of foreign currency exchange rate changes of ~~$64 million and the benefit of the Aurora acquisition of $16~~$50 million. The higher organic revenue was driven by higher demand across ~~both~~most market sectors in the Mobile ~~Industries~~ and Process Industries segments ~~as most end markets were up year-over-year, with the off-highway, distribution, automotive~~ and ~~renewable energy sectors posting the largest increases.~~higher net pricing.

Gross Profit:


		Three Months Ended June 30,											Three Months Ended June 30,
		2021			2020			$ Change		Change			2022			2021			$ Change		Change
Gross profit	Gross profit	$	302.3		$	230.3		$	72.0	31.3%		Gross profit	$	341.8		$	302.3		$	39.5	13.1%
Gross profit % to net sales	Gross profit % to net sales	28.4		%	28.7		%			(30)	bps	Gross profit % to net sales	29.6		%	28.4		%			120	bps


		Six Months Ended June 30,											Six Months Ended June 30,
		2021			2020			$ Change		Change			2022			2021			$ Change		Change
Gross profit	Gross profit	$	601.5		$	509.2		$	92.3	18.1%		Gross profit	$	669.2		$	601.5		$	67.7	11.3%
Gross profit % to net sales	Gross profit % to net sales	28.8		%	29.5		%			(70)	bps	Gross profit % to net sales	29.4		%	28.8		%			60	bps

Gross profit increased for the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020,~~2021, primarily due to favorable price/mix of $73 million and the impact of higher volume of ~~$87~~$25 million, partially offset by higher material and logistics costs of $44 million, unfavorable manufacturing performance of $7 million and the ~~favorable~~unfavorable impact of foreign currency exchange rate changes of ~~$11 million, favorable manufacturing performance of~~ $5 ~~million and the favorable impact of acquisitions of $3~~ million. ~~These increases were partially offset by higher materials and logistics costs of $27 million and unfavorable price/mix of $9 million.~~

Gross profit increased for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020,~~2021, primarily due to favorable price/mix of $118 million and the impact of higher volume of ~~$115~~$54 million, the favorable impact of foreign currency exchange rate changes of $17 million, favorable manufacturing performance of $15 million and the favorable impact of acquisitions of $5 million. These increases were partially offset by higher ~~materials~~material and logistics costs of ~~$39~~$89 million, ~~and~~ unfavorable ~~price/mix~~manufacturing performance of ~~$27 million.~~

~~Table~~ ~~of Contents~~

~~Selling, General~~$8 million and ~~Administrative Expenses:~~

Three Months Ended
June 30,
2021 2020 $ Change Change
Selling, general and administrative expenses $ 149.0 $ 111.8 $ 37.2 33.3 %
Selling, general and administrative expenses % to net sales 14.0 % 13.9 % 10 bps

Six Months Ended
June 30,
2021 2020 $ Change Change
Selling, general and administrative expenses $ 293.5 $ 265.4 $ 28.1 10.6 %
Selling, general and administrative expenses % to net sales 14.1 % 15.4 % (130) bps

SG&A expenses increased in the three and six months ended June 30, 2021 compared with the three and six months ended June 30, 2020. The increase was primarily due to the favorable impact of 2020 cost reduction initiatives, including temporary salary reductions and work furloughs, that the Company implemented in the three and six months ended June 30, 2020 to reduce costs to combat the impact of the COVID-19 pandemic, which did not repeat in the current year. The increase was also due to the unfavorable impact of foreign currency exchange rate changes of $5 million.

Table of Contents

Selling, General and Administrative ("SG&A") Expenses:


	Three Months Ended June 30,
	2022			2021			$ Change		Change
Selling, general and administrative expenses	$	155.9		$	149.0		$	6.9	4.6	%
Selling, general and administrative expenses % to net sales	13.5		%	14.0		%			(50)	bps


	Six Months Ended June 30,
	2022			2021			$ Change		Change
Selling, general and administrative expenses	$	310.0		$	293.5		$	16.5	5.6	%
Selling, general and administrative expenses % to net sales	13.6		%	14.1		%			(50)	bps

SG&A expenses increased for the three and six months ended June 30, 2022 compared with the three and six months ended June 30, 2021. The increase for the three and six months ended June 30, 2022, as compared to the year-ago periods, was primarily due to higher compensation costs and increased spending to support the higher sales levels.

Impairment and Restructuring:


	Three Months Ended June 30,
	2022		2021		$ Change		% Change
Impairment charges	$	8.8	$	1.1	$	7.7	NM
Severance and related benefit costs	1.1		0.1		1.0		NM
Exit costs	0.1		0.1		—		—	%
Total	$	10.0	$	1.3	$	8.7	NM


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
Impairment charges	$	8.8	$	4.5	$	4.3	95.6	%
Severance and related benefit costs	1.4		0.6		0.8		133.3	%
Exit costs	0.8		0.2		0.6		300.0	%
Total	$	11.0	$	5.3	$	5.7	107.5	%

Impairment and restructuring charges of $10.0 million and $11.0 million during the three and six months ended June 30, ~~2021.~~

2022 were comprised primarily of impairment charges related to property, plant and equipment at the Company's joint venture in Russia. In addition, the Company incurred severance and related benefits, and exit costs associated with the closure of the Company's Villa Carcina, Italy bearing plant during the three and six months ended June 30, 2022. This initiative was undertaken to reduce headcount and continue to right-size the Company's manufacturing footprint.

~~Impairment and Restructuring:~~

Three Months Ended
June 30,
2021 2020 $ Change % Change
Impairment charges $ 1.1 $ — $ 1.1 NM
Severance and related benefit costs 0.1 3.2 (3.1) (96.9) %
Exit costs 0.1 (0.1) 0.2 (200.0) %
Total $ 1.3 $ 3.1 $ (1.8) (58.1) %

Six Months Ended
June 30,
2021 2020 $ Change % Change
Impairment charges $ 4.5 $ 0.1 $ 4.4 NM
Severance and related benefit costs 0.6 5.9 (5.3) (89.8) %
Exit costs 0.2 0.7 (0.5) (71.4) %
Total $ 5.3 $ 6.7 $ (1.4) (20.9) %

Impairment and restructuring charges of $1.3 million and $5.3 million during the three and six months ended June 30, 2021 were comprised primarily of impairment charges related to the planned closure of the Company's Villa Carcina, Italy facility, as well as severance and related benefits associated with the planned closure of the Company's Indianapolis, Indiana chain plant. These initiatives reduced headcount and right-sized the Company's manufacturing footprint. In addition, impairment and restructuring during the six months ended June 30, 2021 included impairment charges related to certain engineering-related assets used in the ~~business,~~business. Management concluded no further investment would be made in the ~~engineered-related~~engineering-related assets and as a result, reduced the value to zero.

~~Impairment and restructuring charges of $3.1 million and $6.7 million during the three and six months ended June 30, 2020 were comprised primarily of~~ In addition, severance and related benefits were associated with initiatives to reduce headcount and right-size the Company's manufacturing footprint, including the planned ~~closures~~closure of the Company's Indianapolis, Indiana chain plant and the ~~reorganization~~planned closure of the Company's ~~Gaffney, South Carolina~~Villa Carcina, Italy bearing ~~facility.~~

plant.

Refer to Note 1314 - Impairment and Restructuring Charges in the Notes to the Consolidated Financial Statements for additional information.

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~~Other~~Interest Income ~~(Expense):~~and Expense:

Three Months Ended
June 30,
2021 2020 $ Change % Change
Non-service pension and other postretirement income
(expense) $ 1.4 $ (5.3) $ 6.7 (126.4) %
Other expense (2.2) (2.0) (0.2) 10.0 %
Total other expense $ (0.8) $ (7.3) $ 6.5 (89.0) %


	Three Months Ended June 30,
	2022		2021		$ Change		% Change
Interest expense	$	(18.3)	$	(15.3)	$	(3.0)	19.6	%
Interest income	1.0		0.7		$	0.3	42.9	%

Six Months Ended
June 30,
2021 2020 $ Change % Change
Non-service pension and other postretirement income
(expense) $ 5.4 $ (1.9) $ 7.3 (384.2) %
Other (expense) income, net (1.2) 2.1 (3.3) (157.1) %
Total other income $ 4.2 $ 0.2 $ 4.0 NM


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
Interest expense	$	(32.6)	$	(30.2)	$	(2.4)	7.9	%
Interest income	1.6		1.2		$	0.4	33.3	%

~~Non-service pension and other postretirement income (expense) increased~~The increase in interest expense for the three and six months ended June 30, ~~2021~~2022 compared with the three and six months ended June 30, ~~2020. The increase~~2021 was primarily due to ~~lower actuarial losses~~higher average debt outstanding due to ~~remeasurement~~the issuance of ~~pension plan assets and obligations~~the $350 million 2032 Notes in March 2022. A portion of the proceeds from these notes was used to fund the acquisition of Spinea in the second quarter of 2022.

Other Income (Expense):


	Three Months Ended June 30,
	2022		2021		$ Change		% Change

Non-service pension and other postretirement (expense) income	$	(7.9)	$	1.4	$	(9.3)	NM
Other expense, net	(1.1)		(2.2)		1.1		(50.0)	%
Total other expense	$	(9.0)	$	(0.8)	$	(8.2)	NM


	Six Months Ended June 30,
	2022		2021		$ Change		% Change

Non-service pension and other postretirement (expense) income	$	(6.6)	$	5.4	$	(12.0)	(222.2)	%
Other expense, net	(0.9)		(1.2)		0.3		(25.0)	%
Total other (expense) income	$	(7.5)	$	4.2	$	(11.7)	(278.6)	%

Non-service pension and other postretirement (expense) income decreased for the three and six months ended June 30, ~~2021.~~2022 compared with the three and six months ended June 30, 2021, primarily due to higher pension remeasurement losses in 2022. The ~~remeasurement was~~remeasurements were triggered by expected lump sum payments to new retirees exceeding annual service and interest costs for ~~three~~two of the Company's U.S. defined benefit pension plans. As a result of the remeasurements, the Company recognized net actuarial losses of $11.6 million and $3.5 million during the three months ended June 30, 2022 and June 30, 2021, respectively, and $14.2 million and $4.4 million during the ~~three and~~ six months endedJune 30, 2022 and June 30, 2021, respectively. ~~Actuarial losses of $8.8 million were realized in~~In addition, the second quarter of 2020 due to the remeasurement of pension plan assets and obligations for one of the Company's U.S. defined benefit pension plans. The remeasurement was required in the second quarter of 2020 as a result of lump sum payments to new retirees in 2020 that are expected to exceed annual service and interest costs. The remaining increasedecrease was due to a lower ~~interest costs for the Company's defined benefit pension plans.~~expected return on plan assets in 2022. Refer to Note 1415 - Retirement Benefit Plans and Note 1516 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information.

Table of Contents

~~Other (expense) income, net decreased~~Income Tax Expense:


	Three Months Ended June 30,
	2022			2021			$ Change		Change
Provision for income taxes	$	44.0		$	29.4		$	14.6	49.7	%
Effective tax rate	29.4		%	21.5		%			790	bps


	Six Months Ended June 30,
	2022			2021			$ Change		Change
Provision for income taxes	$	82.2		$	54.7		$	27.5	50.3	%
Effective tax rate	26.5		%	19.7		%			680	bps

Income tax expense increased $14.6 million for the three months ended June 30, 2022 compared with the three months ended June 30, 2021 primarily due to higher pre-tax earnings, an unfavorable mix of earnings in higher tax rate jurisdictions, the unfavorable impact of discrete tax items, and lower deductions for stock-based compensation.

Income tax expense increased $27.5 million for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020, primarily due to lower insurance recoveries. In addition, there were foreign currency exchange losses recognized in the six months ended June 30,~~ 2021 ~~compared to foreign currency exchange gains in the six months ended June 30, 2020.~~

~~Table~~ ~~of Contents~~

~~Income Tax Expense:~~

Three Months Ended
June 30,
2021 2020 $ Change % Change
Provision for income taxes $ 29.4 $ 28.0 $ 1.4 5.0 %
Effective tax rate 21.5 % 31.2 % (970) bps

Six Months Ended
June 30,
2021 2020 $ Change % Change
Provision for income taxes $ 54.7 $ 57.6 $ (2.9) (5.0) %
Effective tax rate 19.7 % 28.3 % (860) bps

~~Income tax expense increased $1.4 million for the three months ended June 30, 2021 compared with the three months ended June 30, 2020,~~ primarily due to higher ~~earnings. The impact was partially offset by discrete benefits on tax rate changes in foreign jurisdictions and a more favorable~~pre-tax earnings, an unfavorable mix of earnings in ~~lower~~higher tax rate jurisdictions, the unfavorable impact of discrete tax items, including ~~the United States. Income taxes~~a discrete tax benefit recorded in the ~~United States were favorably impacted by permanent book-tax differences, including the new elective GILTI high tax exemption rules.~~

~~Income tax expense~~ ~~decreased~~ ~~$2.9 million for the~~ ~~six~~ ~~months ended June 30, 2021 compared~~prior period in connection with ~~the~~ ~~six~~ ~~months ended June 30, 2020, 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 ~~a more favorable mix of earnings in~~ lower ~~tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the tax impact from~~deductions for stock-based ~~compensation awards and the new elective GILTI high tax exemption rules. This impact was partially offset by increased income taxes due to higher pre-tax earnings.~~

compensation.

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

Table of Contents

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. The primary measurement used by management to measure the financial performance of each segment 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 2022 and 2021~~and2020~~ 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 item ~~highlights~~represents the Company's ~~only acquisition~~acquisitions completed in ~~2020:~~2022 and 2021:

•The Company acquired ~~Aurora~~Spinea during the ~~fourth~~second quarter of ~~2020. Results~~2022. The majority of the results for ~~Aurora~~Spinea are reported in the Process Industries segment.

•The Company acquired iMS during the third quarter of 2021. The majority of the results for iMS are reported in the Process Industries segment.

Mobile Industries ~~and Process Industries segments based on customers and underlying market sectors served.~~Segment:


	Three Months Ended June 30,
	2022			2021			$ Change		Change
Net sales	$	543.6		$	494.2		$	49.4	10.0%
EBITDA	$	69.1		$	67.3		$	1.8	2.7%
EBITDA margin	12.7		%	13.6		%			(90)	bps


	Three Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	543.6	$	494.2	$	49.4	10.0	%


Less: Currency	(15.7)		—		(15.7)		NM
Net sales, excluding the impact of currency	$	559.3	$	494.2	$	65.1	13.2	%


	Six Months Ended June 30,
	2022			2021			$ Change		Change
Net sales	$	1,084.0		$	998.7		$	85.3	8.5%
EBITDA	$	144.2		$	146.9		$	(2.7)	(1.8%)
EBITDA margin	13.3		%	14.7		%			(90)	bps


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	1,084.0	$	998.7	$	85.3	8.5	%


Less: Currency	(24.9)		—		(24.9)		NM
Net sales, excluding the impact of currency	$	1,108.9	$	998.7	$	110.2	11.0	%

3132

Table of Contents

The Mobile Industries ~~Segment:~~

Three Months Ended
June 30,
2021 2020 $ Change Change
Net sales $ 494.2 $ 342.6 $ 151.6 44.2%
EBITDA $ 67.3 $ 38.8 $ 28.5 73.5%
EBITDA margin 13.6 % 11.3 % 230 bps

Three Months Ended
June 30,
2021 2020 $ Change % Change
Net sales $ 494.2 $ 342.6 $ 151.6 44.2 %
Less: Acquisitions 4.6 — 4.6 NM
Currency 12.5 — 12.5 NM
Net sales, excluding the impact of acquisitions and currency $ 477.1 $ 342.6 $ 134.5 39.3 %

Six Months Ended
June 30,
2021 2020 $ Change Change
Net sales $ 998.7 $ 809.3 $ 189.4 23.4%
EBITDA $ 146.9 $ 113.9 $ 33.0 29.0%
EBITDA margin 14.7 % 14.1 % $ — 60 bps

Six Months Ended
June 30,
2021 2020 $ Change % Change
Net sales $ 998.7 $ 809.3 $ 189.4 23.4 %
Less: Acquisitions 8.8 — 8.8 NM
Currency 21.8 — 21.8 NM
Net sales, excluding the impact of acquisitions and currency $ 968.1 $ 809.3 $ 158.8 19.6 %

segment's net sales, excluding the effects of foreign currency exchange rate changes, increased $65.1 million or 13.2% in the three months ended June 30, 2022 compared with the three months ended June 30, 2021, reflecting increased shipments in the off-highway, automotive, rail and heavy truck sectors, as well as higher net pricing, partially offset by lower shipments in the aerospace sector. EBITDA increased by $1.8 million or 2.7% for the three months ended June 30, 2022 compared with the three months ended June 30, 2021, primarily due to favorable price/mix and the impact of higher volume, partially offset by higher material, logistics and other operating costs, higher impairment and restructuring charges, and the unfavorable impact of foreign currency exchange rate changes.

The Mobile Industries segment's net sales, excluding the effects of ~~acquisitions and~~ foreign currency exchange rate changes, increased ~~$134.5~~$110.2 million or ~~39.3%~~11.0% in the ~~three~~six months ended June 30, 2022 compared with the six months ended June 30, 2021, ~~compared with the three months ended June 30, 2020,~~ reflecting ~~organic growth~~increased shipments in the off-highway, ~~automotive,~~rail and heavy truck ~~and rail sectors. These increases were~~sectors, as well as higher net pricing, partially offset by lower shipments in the aerospace sector. EBITDA ~~increased~~decreased by ~~$28.5~~$2.7 million or 73.5% in the three months ended June 30, 2021 compared with the three months ended June 30, 2020, primarily due to the impact of higher volume, favorable manufacturing performance and the favorable impact of foreign currency exchange rate changes, partially offset by higher material and logistics costs, higher SG&A expenses and unfavorable mix.

~~The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased $158.8 million or 19.6% in~~1.8% for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020, reflecting organic growth in the off-highway, automotive~~2021, primarily due to higher material, logistics and ~~heavy truck sectors. These increases were~~other operating costs, higher impairment and restructuring charges, partially offset by ~~lower shipments in the rail~~favorable price/mix and ~~aerospace sector. EBITDA increased by $33.0 million or 29.0% in the six months ended June 30, 2021 compared with the six months ended June 30, 2020, primarily due to~~ the impact of higher ~~volume, favorable manufacturing performance and the favorable impact of foreign currency exchange rate changes, partially offset by higher material and logistics costs and unfavorable mix.~~volume.

Process Industries Segment:


	Three Months Ended June 30,
	2022			2021			$ Change		Change
Net sales	$	610.1		$	568.7		$	41.4	7.3%
EBITDA	$	163.5		$	141.2		$	22.3	15.8%
EBITDA margin	26.8		%	24.8		%			200	bps


	Three Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	610.1	$	568.7	$	41.4	7.3	%
Less: Acquisitions	3.9		—		3.9		NM
Currency	(19.0)		—		(19.0)		NM
Net sales, excluding the impact of acquisitions and currency	$	625.2	$	568.7	$	56.5	9.9	%


	Six Months Ended June 30,
	2022			2021			$ Change		Change
Net sales	$	1,194.3		$	1,089.6		$	104.7	9.6%
EBITDA	$	319.1		$	272.2		$	46.9	17.2%
EBITDA margin	26.7		%	25.0		%			170	bps


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
Net sales	$	1,194.3	$	1,089.6	$	104.7	9.6	%
Less: Acquisitions	5.1		—		5.1		NM
Currency	(25.0)		—		(25.0)		NM
Net sales, excluding the impact of acquisitions and currency	$	1,214.2	$	1,089.6	$	124.6	11.4	%

3233

Table of Contents

~~Process Industries Segment:~~

Three Months Ended
June 30,
2021 2020 $ Change Change
Net sales $ 568.7 $ 460.9 $ 107.8 23.4%
EBITDA $ 141.2 $ 126.3 $ 14.9 11.8%
EBITDA margin 24.8 % 27.4 % (260) bps

Three Months Ended
June 30,
2021 2020 $ Change % Change
Net sales $ 568.7 $ 460.9 $ 107.8 23.4 %
Less: Acquisitions 3.5 — 3.5 NM
Currency 26.1 — 26.1 NM
Net sales, excluding the impact of acquisitions and currency $ 539.1 $ 460.9 $ 78.2 17.0 %

Six Months Ended
June 30,
2021 2020 $ Change Change
Net sales $ 1,089.6 $ 917.6 $ 172.0 18.7%
EBITDA $ 272.2 $ 233.8 $ 38.4 16.4%
EBITDA margin 25.0 % 25.5 % (50) bps

Six Months Ended
June 30,
2021 2020 $ Change % Change
Net sales $ 1,089.6 $ 917.6 $ 172.0 18.7 %
Less: Acquisitions 7.2 — 7.2 NM
Currency 42.0 — 42.0 NM
Net sales, excluding the impact of acquisitions and currency $ 1,040.4 $ 917.6 $ 122.8 13.4 %

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$78.2~~$56.5 million or ~~17.0%~~9.9% in the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020.~~2021. The increase was primarily driven by increased demand in the distribution, ~~renewable energy,~~ general industrial ~~marine~~ and heavy industries ~~sectors. These increases were~~sectors, as well as higher net pricing, partially offset by lower ~~services revenue.~~ revenue in the renewable energy sector. EBITDA increased ~~$14.9~~$22.3 million or ~~11.8% in~~15.8% for the three months ended June 30, ~~2021~~2022 compared with the three months ended June 30, ~~2020~~2021 primarily due to ~~higher volume~~favorable price/mix and the ~~favorable~~ impact of ~~foreign currency exchange rate changes,~~higher volume, partially offset by higher ~~SG&A expenses~~material, logistics and ~~higher material and logistics~~other operating costs.

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$122.8~~$124.6 million or ~~13.4%~~11.4% in the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020.~~2021. The increase was primarily driven by increased demand in the distribution, ~~renewable energy and~~ general industrial, heavy industries, marine and services sectors, as well as higher net pricing, partially offset by lower ~~marine and services revenue.~~ revenue in the renewable energy sector. EBITDA increased ~~$38.4~~$46.9 million or ~~16.4% in~~17.2% for the six months ended June 30, ~~2021~~2022 compared with the six months ended June 30, ~~2020~~2021 primarily due to ~~higher volume,~~favorable price/mix and the ~~favorable~~ impact of ~~foreign currency exchange rate changes and favorable manufacturing performance,~~higher volume, partially offset by higher material, logistics and ~~logistics costs, unfavorable mix and higher SG&A expenses.~~

other operating costs.

~~Table~~ ~~of Contents~~

Unallocated Corporate:


		Three Months Ended June 30,											Three Months Ended June 30,
		2021			2020			$ Change		Change			2022			2021			$ Change		Change
Unallocated corporate expense	Unallocated corporate expense	$	(11.6)		$	(6.5)		$	(5.1)	78.5	%	Unallocated corporate expense	$	(13.4)		$	(11.6)		$	(1.8)	15.5	%
Unallocated corporate expense % to net sales	Unallocated corporate expense % to net sales	(1.1)		%	(0.8)		%			(30)	bps	Unallocated corporate expense % to net sales	(1.2)		%	(1.1)		%			(10)	bps


		Six Months Ended June 30,											Six Months Ended June 30,
		2021			2020			$ Change		Change			2022			2021			$ Change		Change
Unallocated corporate expense	Unallocated corporate expense	$	(23.2)		$	(17.6)		$	(5.6)	31.8	%	Unallocated corporate expense	$	(26.3)		$	(23.2)		$	(3.1)	13.4	%
Unallocated corporate expense % to net sales	Unallocated corporate expense % to net sales	(1.1)		%	(1.0)		%			(10)	bps	Unallocated corporate expense % to net sales	(1.2)		%	(1.1)		%			(10)	bps

~~Unallocated~~The increase in unallocated corporate expense ~~increased in~~for the three and six months ended June 30, 2022 compared with the three and six months ended June 30, 2021 ~~compared with the three and~~ ~~six~~ ~~months ended June 30, 2020,~~ was primarily due to ~~the favorable impact of COVID-19 related temporary cost reduction initiatives in 2020, which did not repeat in 2021.~~higher compensation expense and other spending to support increased business activity levels.

Table of Contents

CASH FLOW

Six Months Ended
June 30,
2021 2020 $ Change
Net cash provided by operating activities $ 178.8 $ 303.6 $ (124.8)
Net cash used in investing activities (73.9) (64.7) (9.2)
Net cash used in financing activities (118.9) (31.3) (87.6)
Effect of exchange rate changes on cash (0.8) (7.7) 6.9
(Decrease) increase in cash, cash equivalents and restricted cash $ (14.8) $ 199.9 $ (214.7)


	Six Months Ended June 30,
	2022		2021		$ Change


Net cash provided by operating activities	$	77.1	$	178.8	$	(101.7)


Net cash used in investing activities	(198.7)		(73.9)		(124.8)


Net cash provided by (used in) financing activities	177.4		(118.9)		296.3
Effect of exchange rate changes on cash	(7.7)		(0.8)		(6.9)
Increase (Decrease) in cash and cash equivalents and restricted cash	$	48.1	$	(14.8)	$	62.9

Operating Activities:

The decrease in net cash provided by operating activities for the first six months of ~~2021~~2022 compared with the first six months of ~~2020~~2021 was primarily due to an increase in cash used for working capital items of ~~$137.1~~$143.0 million, ~~a reduction~~partially offset by an increase in the benefit of ~~income~~income taxes on cash of ~~$31.2~~$21.2 million, ~~an increase~~a decrease in pension and other postretirement benefit contributions and payments of ~~$6.4~~$6.9 million, higher net income of $4.3 million and a decrease in other items. ~~The decrease was partially offset by higher net income of $77.4 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 six months of 2022 and 2021, ~~and 2020,~~ respectively:


		Six Months Ended June 30,							Six Months Ended June 30,
		2021		2020		$ Change			2022		2021		$ Change
Cash (Used) Provided:
Cash (used in) provided by:								Cash (used in) provided by:
Accounts receivable	Accounts receivable	$	(125.8)	$	(8.4)	$	(117.4)	Accounts receivable	$	(149.3)	$	(125.8)	$	(23.5)
Unbilled receivables	Unbilled receivables	10.4		3.0		7.4		Unbilled receivables	(2.9)		10.4		(13.3)
Inventories	Inventories	(81.4)		41.3		(122.7)		Inventories	(126.1)		(81.4)		(44.7)
Trade accounts payable	Trade accounts payable	41.2		(28.9)		70.1		Trade accounts payable	(6.1)		41.2		(47.3)
Other accrued expenses	Other accrued expenses	30.8		5.3		25.5		Other accrued expenses	16.6		30.8		(14.2)
Cash (used in) provided by working capital items		$	(124.8)	$	12.3	$	(137.1)
Cash used in working capital items								Cash used in working capital items	$	(267.8)	$	(124.8)	$	(143.0)

The following table displays the impact of income taxes on cash during the six months of 2022 and 2021, ~~and 2020,~~ respectively:


		Six Months Ended June 30,							Six Months Ended June 30,
		2021		2020		$ Change			2022		2021		$ Change
Accrued income tax expense	Accrued income tax expense	$	54.7	$	57.6	$	(2.9)	Accrued income tax expense	$	82.2	$	54.7	$	27.5
Income tax payments	Income tax payments	(53.1)		(32.5)		(20.6)		Income tax payments	(68.3)		(53.1)		(15.2)
Other miscellaneous items		(9.0)		(1.3)		(7.7)
Cash (expense) benefit from income taxes		$	(7.4)	$	23.8	$	(31.2)
Other items								Other items	(0.1)		(9.0)		8.9
Change in income taxes								Change in income taxes	$	13.8	$	(7.4)	$	21.2

Investing Activities:

~~Investing Activities:~~

The increase in net cash used in investing activities for the first six months of ~~2021~~2022 compared with the first six months of ~~2020~~2021 was primarily due to an increase in cash used for ~~investments in short-term marketable securities~~acquisitions of ~~$12.2~~$152.4 million and an increase in capital expenditures of ~~$4.0~~$14.7 million, partially offset by a decrease in cash used for ~~acquisitions~~investments in short-term marketable securities of ~~$6.8~~$37.2 million.

Financing Activities:

The change in net cash used in financing activities ~~increased~~ for the first six months of ~~2021~~2022 compared with the first six months of ~~2020~~2021 was primarily due to ~~a decrease~~an increase in net borrowings of ~~$107.2 million. This change was~~$419.4 million, partially offset by ~~a decrease~~an increase in the ~~purchase~~purchases of treasury shares of ~~$16.0~~$118.0 million.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

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

Net Debt:

June 30,
2021 December 31,
2020
Short-term debt $ 76.0 $ 119.8
Current portion of long-term debt 11.1 10.9
Long-term debt 1,424.3 1,433.9
Total debt $ 1,511.4 $ 1,564.6
Less: Cash and cash equivalents 305.5 320.3
Net debt $ 1,205.9 $ 1,244.3


	June 30, 2022		December 31, 2021
Short-term debt, including current portion of long-term debt	$	81.6	$	53.8

Long-term debt	1,734.3		1,411.1
Total debt	$	1,815.9	$	1,464.9
Less: Cash and cash equivalents	305.3		257.1
Net debt	$	1,510.6	$	1,207.8

Ratio of Net Debt to Capital:


		June 30, 2021			December 31, 2020				June 30, 2022			December 31, 2021
Net debt	Net debt	$	1,205.9		$	1,244.3		Net debt	$	1,510.6		$	1,207.8
Total equity	Total equity	2,367.3			2,225.2			Total equity	2,289.2			2,377.7
Net debt plus total equity (capital)	Net debt plus total equity (capital)	$	3,573.2		$	3,469.5		Net debt plus total equity (capital)	$	3,799.8		$	3,585.5
Ratio of net debt to capital	Ratio of net debt to capital	33.7		%	35.9		%	Ratio of net debt to capital	39.8		%	33.7		%

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 June 30, ~~2021,~~2022, the Co~~mpany~~Company had strong liquidity with ~~$305.5~~$305.3 million of cash and cash equivalents on the Consolidated Balance ~~Sheet. $267.4~~Sheet, as well as $741.7 million of ~~its $305.5~~available resources from committed credit lines. Of the $305.3 million of cash and cash equivalents, $257.0 million resided in jurisdictions outside the United States. Repatriation of non-U.S. cash could be subject to taxes and some portion may be subject to governmental restrictions. As of June 30, 2022, Timken has $17.8 million of cash in Russia, which the Company is presently unable to repatriate. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the United States. 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 June 30, ~~2021,~~2022, the Senior Credit Facility had outstanding borrowings of ~~$9.4~~$8.3 million, which reduced the availability to ~~$640.6~~$641.7 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 June 30, ~~2021,~~2022, the Company's consolidated leverage ratio was ~~1.68~~2.36 to ~~1.0 (based on the net debt construct described further below).~~1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of June 30, ~~2021,~~2022, the Company's consolidated interest coverage ratio was ~~12.08~~12.64 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 was 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 was effective through June 30, 2021. In the third quarter of 2021, 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.

~~Table~~ ~~of Contents~~

The 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 1.46% and the average rate on outstanding~~ Euro borrowings was ~~1.48%~~1.00% as of June 30, ~~2021.~~2022. 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 ~~Facilit~~y.Facility. As of June 30, ~~2021,~~2022, the Company carried investment-grade credit ratings with both Moody's ~~(Baa3),~~(Baa2) and S&P Global (BBB-)~~, and Fitch (BBB-)~~.

The Company has a $100 million Accounts Receivable Facility, which matures on November 30, ~~2021.~~2024. 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 June 30, 2021.~~ As of June 30, ~~2021,~~2022, the Company had no outstanding borrowings under the Accounts Receivable ~~Facility.~~ ~~The Company currently intends to renew or replace~~Facility and no borrowing base limitations. Availability under the Accounts Receivable Facility ~~prior to its maturity.~~was $100 million as of June 30, 2022.

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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 ~~$286.1~~$254.4 million. At June 30, ~~2021,~~2022, the Company had borrowings outstanding of ~~$76.0~~$70.3 million and bank guarantees of ~~$0.5~~$0.2 million, which reduced the aggregate availability under these facilities to approximately ~~$209.6~~$183.9 million.

On March 28, 2022, the Company issued the 2032 Notes in the aggregate principal amount of $350 million with an interest rate of 4.125%, maturing on April 1, 2032. Proceeds from the notes were used for general corporate purposes, which included repayment of borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance. In addition, a portion of the proceeds from the notes was used to fund the Spinea acquisition, which closed in the second quarter of 2022.

At June 30, ~~2021,~~2022, 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.~~

debt.

2021.

Financing Obligations and Other Commitments:

During the first six months of ~~2021,~~2022, the Company made cash contributions and payments of ~~$13.1~~$6.2 million to its global defined benefit pension plans and ~~$1.9~~$1.9 million to its other postretirement benefit plans. The Company expects to make contributions to its global defined benefit plans of ~~approximately $15~~approximately $10 million in ~~2021.~~2022. The Company expects to make payments of approximately $6$5 million to its other postretirement benefit plans in ~~2021.~~2022. Excluding mark-to-market charges, the Company expects ~~lower~~higher pension and other ~~postretirement~~postretirement benefits expense in ~~2021.~~

2022 compared to 2021 primarily due to lower expected returns on pension plan assets and higher interest expense, partially offset by lower service costs.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's financial statements are prepared in accordance with ~~accounting principles generally accepted in the United States.~~U.S. GAAP. 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, ~~2020,~~2021, during the six months ended June 30, ~~2021.~~2022.

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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 six months ended June 30, ~~2021, th~~e2022, the Company recorded negative foreign currency translation adjustments of $134.2 million that decreased shareholders' equity, compared with negative foreign currency translation adjustments of $20.2 million that d~~ecreased~~decreased shareholders' ~~equity, compared with negative foreign currency translation adjustments of $48.0 million that decreased shareholders'~~ equity for the six months ended June 30, ~~2020.~~2021. The foreign currency translation adjustments for the six months ended June 30, ~~2021 were~~2022 were negatively impacted by the strengthening of the U.S. dollar relative to other foreign currencies, including th~~e Euro.~~the Euro, Chinese Yuan and Indian Rupee.

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 June 30, ~~2021~~2022 totaled $2.3 million of net gains, compared with $3.5 million of net losses ~~compared with $0.6 million of net gains during~~during the three months ended June 30, ~~2020.~~2021. Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the six months ended June 30, ~~2021~~2022 totaled $4.6 million of net gains, compared with $5.6 million of net losses ~~compared with $0.7~~during the six months ended June 30, 2021.

Russia Operations:

The Company has two subsidiaries in Russia, including a 51%-owned joint venture to serve the rail market in Russia. As a result of Russia's invasion of Ukraine (and associated sanctions), the Company suspended operations and recorded property, plant and equipment impairment charges of $8.8 million and inventory write-downs of ~~net gains~~$4.3 million during the six months ended June 30, ~~2020.~~2022. After giving effect to these impairments and write-downs, as of June 30, 2022, the Company has net assets (net of noncontrolling interest of $8.7 million), totaling $17.5 million on its Consolidated Balance Sheet related to its Russia operations. Net assets related to the Company's Russia operations include $17.8 million of cash and cash equivalents. The Company will continue to monitor the events in Russia and Ukraine and may record additional asset impairments or write-offs in the future.

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NON-GAAP MEASURES

Supplemental Non-GAAP ~~Measures~~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 EBITDA:

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 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.~~

business.

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.

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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 June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Net Sales	Net Sales	$	1,062.9		$	803.5		$	2,088.3		$	1,726.9		Net Sales	$	1,153.7		$	1,062.9		$	2,278.3		$	2,088.3
Net Income Attributable to The Timken Company	Net Income Attributable to The Timken Company	104.8			61.9			218.1			142.6			Net Income Attributable to The Timken Company	105.0			104.8			223.2			218.1
Impairment, restructuring and reorganization charges (1)	Impairment, restructuring and reorganization charges (1)	2.2			5.8			7.4			11.6			Impairment, restructuring and reorganization charges (1)	2.0			2.2			3.6			7.4
Corporate pension and other postretirement benefit related expense (2)	Corporate pension and other postretirement benefit related expense (2)	3.5			8.8			4.4			8.8			Corporate pension and other postretirement benefit related expense (2)	11.6			3.5			14.2			4.4
Acquisition-related charges (3)		1.4			0.9			1.2			4.2
Acquisition-related gain (3)		—			—			(0.6)			—
Property (recoveries) losses and related expenses (4)		—			0.1			—			(2.1)
Russia-related charges (3)														Russia-related charges (3)	8.4			—			13.0			—
Acquisition-related charges (4)														Acquisition-related charges (4)	1.6			1.4			2.7			0.6

Noncontrolling interest of above adjustments	Noncontrolling interest of above adjustments	—			—			0.2			—			Noncontrolling interest of above adjustments	(4.5)			—			(5.8)			0.2
Provision for income taxes (5)	Provision for income taxes (5)	(5.8)			(0.5)			(17.9)			(3.4)			Provision for income taxes (5)	(0.2)			(5.8)			(5.3)			(17.9)
Adjusted Net Income	Adjusted Net Income	$	106.1		$	77.0		$	212.8		$	161.7		Adjusted Net Income	$	123.9		$	106.1		$	245.6		$	212.8
Net income (loss) attributable to noncontrolling interest		2.4			(0.1)			5.1			3.2
Net income attributable to noncontrolling interest														Net income attributable to noncontrolling interest	0.6			2.4			4.3			5.1
Provision for income taxes (as reported)	Provision for income taxes (as reported)	29.4			28.0			54.7			57.6			Provision for income taxes (as reported)	44.0			29.4			82.2			54.7
Interest expense	Interest expense	15.3			18.9			30.2			36.0			Interest expense	18.3			15.3			32.6			30.2
Interest income	Interest income	(0.7)			(0.6)			(1.2)			(2.1)			Interest income	(1.0)			(0.7)			(1.6)			(1.2)
Depreciation and amortization expense (6)	Depreciation and amortization expense (6)	42.0			40.5			84.7			81.4			Depreciation and amortization expense (6)	40.7			42.0			82.1			84.7
Less: Noncontrolling interest	Less: Noncontrolling interest	—			—			0.2			—			Less: Noncontrolling interest	(4.5)			—			(5.8)			0.2
Less: Provision for income taxes (5)	Less: Provision for income taxes (5)	(5.8)			(0.5)			(17.9)			(3.4)			Less: Provision for income taxes (5)	(0.2)			(5.8)			(5.3)			(17.9)
Adjusted EBITDA	Adjusted EBITDA	$	200.3		$	164.2		$	404.0		$	341.2		Adjusted EBITDA	$	231.2		$	200.3		$	456.3		$	404.0
Adjusted EBITDA Margin (% of net sales)	Adjusted EBITDA Margin (% of net sales)	18.8		%	20.4		%	19.3		%	19.8		%	Adjusted EBITDA Margin (% of net sales)	20.0		%	18.8		%	20.0		%	19.3		%

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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Diluted earnings per share (EPS)	Diluted earnings per share (EPS)	$	1.36	$	0.82	$	2.82	$	1.88	Diluted earnings per share (EPS)	$	1.42	$	1.36	$	2.98	$	2.82
Adjusted EPS	Adjusted EPS	$	1.37	$	1.02	$	2.75	$	2.13	Adjusted EPS	$	1.67	$	1.37	$	3.28	$	2.75
Diluted Shares	Diluted Shares	77,254,157		75,698,289		77,257,761		76,032,049		Diluted Shares	74,182,793		77,254,157		74,877,248		77,257,761

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

Three Months Ended June 30, 2021
Mobile Process Unallocated Corporate Total
Net Sales $ 494.2 $ 568.7 $ — $ 1,062.9
EBITDA 67.3 141.2 (15.1) 193.4
  Impairment, restructuring and reorganization
     charges (1)
1.2 0.8 — 2.0
  Corporate pension and other postretirement benefit
     related expense (2)
— — 3.5 3.5
  Acquisition-related charges (3)
0.2 0.2 1.0 1.4
Adjusted EBITDA $ 68.7 $ 142.2 $ (10.6) $ 200.3
Adjusted EBITDA Margin (% of net sales) 13.9 % 25.0 % — % 18.8 %


	Three Months Ended June 30, 2022
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	543.6		$	610.1		$	—	$	1,153.7
EBITDA	69.1			163.5			(25.0)		207.6
Impairment, restructuring and reorganization charges (1)	1.0			1.0			—		2.0
Corporate pension and other postretirement benefit related expense (2)	—			—			11.6		11.6
Russia-related charges (3)	9.4			(1.0)			—		8.4
Acquisition-related charges (4)	—			1.0			0.6		1.6

Adjusted EBITDA	$	79.5		$	164.5		$	(12.8)	$	231.2
Adjusted EBITDA Margin (% of net sales)	14.6		%	27.0		%	NM		20.0		%

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		Six Months Ended June 30, 2021													Three Months Ended June 30, 2021
		Mobile			Process			Unallocated Corporate			Total				Mobile			Process			Unallocated Corporate		Total
Net Sales	Net Sales	$	998.7		$	1,089.6		$	—		$	2,088.3		Net Sales	$	494.2		$	568.7		$	—	$	1,062.9
EBITDA	EBITDA	146.9			272.2			(27.0)			392.1			EBITDA	67.3			141.2			(15.1)		193.4
Impairment, restructuring and reorganization charges (1)	Impairment, restructuring and reorganization charges (1)	1.5			5.4			—			6.9			Impairment, restructuring and reorganization charges (1)	1.2			0.8			—		2.0
Corporate pension and other postretirement benefit related expense (2)	Corporate pension and other postretirement benefit related expense (2)	—						4.4						Corporate pension and other postretirement benefit related expense (2)	—						3.5
Acquisition-related charges (3)	Acquisition-related charges (3)	0.4			0.3			0.5			1.2			Acquisition-related charges (3)	0.2						1.0		1.4
Acquisition-related gain (3)		—						(0.6)

Adjusted EBITDA	Adjusted EBITDA	$	148.8		$	277.9		$	(22.7)		$	404.0		Adjusted EBITDA	$	68.7		$	142.2		$	(10.6)	$	200.3
Adjusted EBITDA Margin (% of net sales)	Adjusted EBITDA Margin (% of net sales)	14.9		%	25.5		%	—		%	19.3		%	Adjusted EBITDA Margin (% of net sales)	13.9		%	25.0		%	NM		18.8		%


	Six Months Ended June 30, 2022
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	1,084.0		$	1,194.3		$	—	$	2,278.3
EBITDA	144.2			319.1			(40.5)		422.8
Impairment, restructuring and reorganization charges (1)	2.0			1.6			—		3.6
Corporate pension and other postretirement benefit related expense (2)	—			—			14.2		14.2
Russia-related charges (3)	12.5			0.5			—		13.0
Acquisition-related charges (4)	—			1.4			1.3		2.7
Adjusted EBITDA	$	158.7		$	322.6		$	(25.0)	$	456.3
Adjusted EBITDA Margin (% of net sales)	14.6		%	27.0		%	NM		20.0		%

Three Months Ended June 30, 2020
Mobile Process Unallocated Corporate Total
Net Sales $ 342.6 $ 460.9 $ — $ 803.5
EBITDA 38.8 126.3 (15.3) 149.8
Impairment, restructuring and reorganization
charges (1)
2.4 2.2 — 4.6
Corporate pension and other postretirement benefit
related expense (2)
— — 8.8 8.8
Acquisition-related charges (3)
0.7 0.3 (0.1) 0.9
Property (recoveries) losses and related expenses (4)
0.1 — — 0.1
Adjusted EBITDA $ 42.0 $ 128.8 $ (6.6) $ 164.2
Adjusted EBITDA Margin (% of net sales) 12.3 % 27.9 % NM 20.4 %


		Six Months Ended June 30, 2020												Six Months Ended June 30, 2021
		Mobile			Process			Unallocated Corporate		Total				Mobile			Process			Unallocated Corporate		Total
Net Sales	Net Sales	$	809.3		$	917.6		$	—	$	1,726.9		Net Sales	$	998.7		$	1,089.6		$	—	$	2,088.3
EBITDA	EBITDA	113.9			233.8			(26.4)		321.3			EBITDA	146.9			272.2			(27.0)		392.1
Impairment, restructuring and reorganization charges (1)	Impairment, restructuring and reorganization charges (1)	3.6			5.3			0.1		9.0			Impairment, restructuring and reorganization charges (1)	1.5			5.4			—		6.9
Corporate pension and other postretirement benefit related expense (2)	Corporate pension and other postretirement benefit related expense (2)	—						8.8					Corporate pension and other postretirement benefit related expense (2)	—						4.4
Acquisition-related charges (3)	Acquisition-related charges (3)	2.6			1.2			0.4		4.2			Acquisition-related charges (3)	0.4			0.3			(0.1)		0.6
Property (recoveries) losses and related expenses (4)		(2.1)			—					(2.1)
Adjusted EBITDA	Adjusted EBITDA	$	118.0		$	240.3		$	(17.1)	$	341.2		Adjusted EBITDA	$	148.8		$	277.9		$	(22.7)	$	404.0
Adjusted EBITDA Margin (% of net sales)	Adjusted EBITDA Margin (% of net sales)	14.6		%	26.2		%	NM		19.8		%	Adjusted EBITDA Margin (% of net sales)	14.9		%	25.5		%	NM		19.3		%

(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 represents actuarial losses (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)~~losses and ~~losses~~(gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement. Refer to Note 1415 - Retirement Benefit Plans and Note 1516 - Other Postretirement Benefit Plans for additional discussion.

(3) Russia-related charges include impairments and allowances recorded against certain property, plant and equipment, inventory and trade receivables to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations. Refer to Russia Operations on page 38 above for additional information.

(4) Acquisition-related charges represent the contingent consideration related to the acquisition of iMS that closed on August 20, 2021, and deal-related expenses associated with completed and certain unsuccessful transactions, as well as any resulting inventory step-up impact. In addition, the 2021 acquisition-related charges includes measurement period adjustments to the bargain purchase gain on the acquisition of the assets of Aurora that closed on November 30, ~~2020 and deal-related expenses associated with completed and potential transactions, as well as any resulting inventory step-up impac~~t.

~~Table~~ ~~of Contents~~

~~(4)~~ Represents property loss and related expenses during the periods presented (net of insurance recoveries received in 2020) 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.2020.

(5) 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.

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

Free Cash Flow:

Free cash flow represents net cash provided by (used in) 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
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Net cash provided by operating activities $ 147.1 $ 247.4 $ 178.8 $ 303.6
Capital expenditures (31.1) (24.7) (60.5) (56.5)
Free cash flow $ 116.0 $ 222.7 $ 118.3 $ 247.1


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net cash provided by operating activities	$	78.3	$	147.1	$	77.1	$	178.8
Capital expenditures	(40.9)		(31.1)		(75.2)		(60.5)
Free cash flow	$	37.4	$	116.0	$	1.9	$	118.3

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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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$369.8~~$385.8 million and ~~$292.4~~$381.5 million, respectively. Net debt to adjusted EBITDA for the trailing twelve months was ~~1.7~~2.0 at June 30, ~~2021,~~2022, compared with ~~1.9~~1.7 at December 31, ~~2020.~~2021.

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

Twelve Months Ended
June 30,
2021 December 31,
2020
Net income $ 369.8 $ 292.4
Provision for income taxes 101.0 103.9
Interest expense 61.8 67.6
Interest income (2.8) (3.7)
Depreciation and amortization 168.3 167.1
Consolidated EBITDA 698.1 627.3
Adjustments:
Impairment, restructuring and reorganization charges (1)
$ 23.8 $ 25.9
Corporate pension and other postretirement benefit related expense (2)
14.1 18.5
Acquisition-related charges (3)
0.7 3.7
Acquisition-related gain (4)
(11.7) (11.1)
Gain on sale of real estate (0.4) (0.4)
Property losses (recoveries) and related expenses (5)
(3.4) (5.5)
Tax indemnification and related items 0.5 0.5
Total Adjustments 23.6 31.6
Adjusted EBITDA $ 721.7 $ 658.9
Net Debt $ 1,205.9 $ 1,244.3
Ratio of Net Debt to Adjusted EBITDA 1.7 1.9


	Twelve Months Ended
	June 30, 2022		December 31, 2021
Net income	$	385.8	$	381.5
Provision for income taxes	122.6		95.1
Interest expense	61.2		58.8
Interest income	(2.7)		(2.3)
Depreciation and amortization	164.7		167.8
Consolidated EBITDA	731.6		700.9
Adjustments:
Impairment, restructuring and reorganization charges (1)	$	11.0	$	14.3
Corporate pension and other postretirement benefit related expense (2)	10.1		0.3
Acquisition-related charges (3)	4.4		2.3



Russia-related charges (4)	13.0		—
Tax indemnification and related items	0.2		0.2
Total adjustments	38.7		17.1
Adjusted EBITDA	$	770.3	$	718.0
Net Debt	$	1,510.6	$	1,207.8
Ratio of Net Debt to Adjusted EBITDA	2.0		1.7

(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 represents actuarial ~~(gains)~~losses and ~~losses~~(gains) that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience. The Company recognizes actuarial ~~(gains)~~losses and ~~losses~~(gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.

(3) Acquisition-related charges represent contingent consideration related to the acquisition of iMS that closed on August 20, 2021, and deal-related expenses associated with completed and ~~potential~~certain unsuccessful transactions, as well as any resulting inventory step-up impact.

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

(4)
~~(5)~~ ~~Represents property loss~~Russia-related charges include allowances and ~~related expenses during~~impairments recorded against certain trade receivables, inventory and other assets to reflect the ~~periods presented (net~~current impact of ~~insurance recoveries received in 2020) resulting from property loss that occurred during the first quarter~~Russia's invasion of ~~2019 at one of~~Ukraine (and associated sanctions) on the Company's ~~warehouses~~operations. Refer to Russia Operations on page 38 in ~~Knoxville, Tennessee~~Management Discussion and ~~during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.~~

Analysis for additional information.

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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, ~~2020~~2021 that are not historical in nature (including the Company's forecasts, beliefs and expectations) are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management's Discussion and Analysis contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. The Company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the Company due to a variety of factors, such as:

•deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown, recession, 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, disruptions to the Company's supply chain, logistical issues associated with port closures or congestion, delays or increased costs, 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, competition for skilled labor 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; disruptions to the Company's supply chain and logistical issues associated with port closures or congestion, delays or increased costs; 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 and commercial requirements meant to address climate change; and changes in the cost of labor and benefits;

•the impact of inflation on employee expenses, shipping costs, raw material costs, energy and fuel costs and other production costs;

•the success of the Company’s operating plans, announced programs, initiatives and capital investments; the ability to integrate acquired 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, realization of synergies and expected cash flow generation;

•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, government procurement regulations, 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

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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;

~~Table~~ ~~of Contents~~

•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

•those items identified under Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 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, ~~2020.~~2021. 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 fiscal quarter ended June 30, ~~2021,~~2022, 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 May 31, 2022, the Company completed the acquisition of Spinea. The results of this acquisition are included in the Company's consolidated financial statements for the first six months of 2022. The total and net assets of Spinea represent 3% of the Company's total assets and 6% of the Company's net assets as of June 30, 2022. The net sales and net income of Spinea represented less than 1% of the Company's consolidated net sales and consolidated net income for the first six months of 2022. The scope of the Company's assessment of the effectiveness of internal control over financial reporting will not include this acquisition. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from the Company's scope in the year of acquisition.

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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~~U.S. Securities and Exchange Commission ("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 athe maximum permitted 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.~~required. 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 Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, 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.~~2021. Investors should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

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 June 30, ~~2021.~~2022.

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)
4/1/2021 - 4/30/2021 2,552 $ 85.36 — 9,950,000
5/1/2021 - 5/31/2021 61,126 88.09 — 9,950,000
6/1/2021 - 6/30/2021 638 86.35 — 9,950,000
Total 64,316 $ 87.96 —


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)
4/1/2022 - 4/30/2022	500,150	$	58.81	500,000	7,050,000
5/1/2022 - 5/31/2022	247,044	59.59		245,000	6,805,000
6/1/2022 - 6/30/2022	11,516	60.62		5,000	6,800,000
Total	758,710	$	59.09	750,000	—

(1)Of the shares purchased in April, May and June, ~~2,552, 61,126,~~150, 2,044 and ~~638,~~ 6,516, 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 12, 2021, the 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 purchase plan expires on February 28, 2026. Under this plan, the Company may purchase shares from time to time in open market purchases or privately negotiated 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.~~

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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 June 30, ~~2021~~2022 filed on ~~August 2, 2021,~~July 28, 2022, 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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SIGNATURES

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


						THE TIMKEN COMPANY
Date: ~~August 2, 2021~~July 28, 2022						By: /s/ Richard G. Kyle
						Richard G. Kyle President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 2, 2021~~July 28, 2022						By: /s/ Philip D. Fracassa
						Philip D. Fracassa Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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	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		0.1		0.2
Property, plant and equipment, net	10.9		0		10.9




Total assets acquired	$	30.1	$	0.1	$	30.2
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	$	0.5	$	28.9


	June 30, 2021		December 31, 2020
Variable-rate Accounts Receivable Facility with an interest rate of 0.96% at December 31, 2020	$	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 2.10% at June 30, 2021 and 0.24% to 1.75% at December 31, 2020	76.0		61.8
Short-term debt	$	76.0	$	119.8


	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 March 31, 2021	$	(62.0)	$	61.8	$	0	$	(1.9)	$	(2.1)
Other comprehensive income (loss) before reclassifications and income taxes	23.2		(0.1)		0		(2.1)		21.0
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(2.1)		0		1.7		(0.4)
Income tax benefit	0		0.5		0		0.2		0.7
Net current period other comprehensive income (loss), net of income taxes	23.2		(1.7)		0		(0.2)		21.3
Noncontrolling interest	0.6		0		0		0		0.6
Net current period comprehensive income (loss), net of income taxes and noncontrolling interest	23.8		(1.7)		0		(0.2)		21.9
Balance at June 30, 2021	$	(38.2)	$	60.1	$	0	$	(2.1)	$	19.8


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	320.3	$	318.6	$	1.7	$	0

Restricted cash	0.8		0.8		0		0
Short-term investments	37.6		0		37.6		0

Foreign currency forward contracts	1.1		0		1.1		0
Total Assets	$	359.8	$	319.4	$	40.4	$	0
Liabilities:
Foreign currency forward contracts	$	8.1	$	0	$	8.1	$	0
Total Liabilities	$	8.1	$	0	$	8.1	$	0


	Three Months Ended June 30, 2020
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	342.6		$	460.9		$	—	$	803.5
EBITDA	38.8			126.3			(15.3)		149.8
Impairment, restructuring and reorganization charges (1)	2.4			2.2			—		4.6
Corporate pension and other postretirement benefit related expense (2)	—			—			8.8		8.8
Acquisition-related charges (3)	0.7			0.3			(0.1)		0.9
Property (recoveries) losses and related expenses (4)	0.1			—			—		0.1
Adjusted EBITDA	$	42.0		$	128.8		$	(6.6)	$	164.2
Adjusted EBITDA Margin (% of net sales)	12.3		%	27.9		%	NM		20.4		%