Company Quick10K Filing
Timken
Price43.80 EPS4
Shares77 P/E11
MCap3,368 P/FCF9
Net Debt1,433 EBIT484
TEV4,802 TEV/EBIT10
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-15
10-Q 2018-09-30 Filed 2018-10-30
10-Q 2018-06-30 Filed 2018-07-31
10-Q 2018-05-01 Filed 2018-05-01
10-K 2017-12-31 Filed 2018-02-15
10-Q 2017-09-30 Filed 2017-10-25
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-21
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-27
10-K 2015-12-31 Filed 2016-02-24
10-Q 2015-09-30 Filed 2015-10-28
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-04-29
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-04
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-04-29
10-K 2012-12-31 Filed 2013-02-13
10-Q 2012-09-30 Filed 2012-10-29
10-Q 2012-06-30 Filed 2012-07-31
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-17
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-02
10-K 2010-12-31 Filed 2011-02-22
10-Q 2010-09-30 Filed 2010-11-04
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-02-25
8-K 2020-05-27
8-K 2020-05-08
8-K 2020-05-01
8-K 2020-04-18
8-K 2020-04-03
8-K 2020-03-20
8-K 2020-02-05
8-K 2020-01-30
8-K 2019-10-30
8-K 2019-07-31
8-K 2019-07-12
8-K 2019-06-25
8-K 2019-05-10
8-K 2019-05-01
8-K 2019-04-01
8-K 2019-02-07
8-K 2018-11-09
8-K 2018-10-29
8-K 2018-09-14
8-K 2018-09-06
8-K 2018-07-31
8-K 2018-07-27
8-K 2018-07-19
8-K 2018-05-08
8-K 2018-05-01
8-K 2018-03-19
8-K 2018-02-07
8-K 2018-01-31

TKR 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Significant Accounting Policies
Note 3 - Acquisitions
Note 4 - Revenue
Note 5 - Segment Information
Note 6 - Income Taxes
Note 7 - Earnings per Share
Note 8 - Inventories
Note 9 - Goodwill and Other Intangibles
Note 10 - Financing Arrangements
Note 11 - Contingencies
Note 12 - Equity
Note 13 - Impairment and Restructuring Charges
Note 14 - Retirement Benefit Plans
Note 15 - Other Postretirement Benefit Plans
Note 16 - Accumulated Other Comprehensive Income (Loss)
Note 17 - Fair Value
Note 18 - Derivative Instruments and Hedging Activities
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits
EX-10.1 tkr33120exhibit101.htm
EX-10.2 tkr33120exhibit102.htm
EX-31.1 tkr33120exhibit311.htm
EX-31.2 tkr33120exhibit312.htm
EX-32 tkr33120exhibit32.htm

Timken Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4.73.82.81.90.90.02012201420172020
Assets, Equity
1.20.90.60.40.1-0.22012201420172020
Rev, G Profit, Net Income
0.70.40.1-0.2-0.5-0.82012201420172020
Ops, Inv, Fin

Document
false--12-31Q1202000000983620.01750.01750.00270.003030000095600000018100000182000000.280.280020000000020000000098375135983751350.07760.06740.02150.02020.038752027-09-072028-12-152020-09-182023-09-112024-09-012028-05-01000050000024000008000001000001900000500000600000200000000000.3022000000.02770.02920.01130.02520.02110.01130.01100.02850.01000.027240000042000001000009000000200000000010000000100000001000000010000000001200000000.050.02770.02522283618023308986 0000098362 2020-01-01 2020-03-31 0000098362 us-gaap:PensionPlansDefinedBenefitMember 2020-01-01 2020-03-31 0000098362 2020-03-31 0000098362 2019-01-01 2019-03-31 0000098362 2019-12-31 0000098362 us-gaap:PreferredClassBMember 2020-03-31 0000098362 us-gaap:PreferredClassAMember 2019-12-31 0000098362 us-gaap:PreferredClassAMember 2020-03-31 0000098362 us-gaap:PreferredClassBMember 2019-12-31 0000098362 2018-12-31 0000098362 2019-03-31 0000098362 tkr:DiamondChainMember 2019-04-01 2019-04-01 0000098362 tkr:A2018AcquisitionsMember 2020-01-01 2020-03-31 0000098362 tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 tkr:BEKAMember 2019-11-01 2019-11-01 0000098362 tkr:A2019AcquisitionsMember 2020-03-31 0000098362 tkr:A2019AcquisitionsMember us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-03-31 0000098362 us-gaap:OtherNoncurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 tkr:A2019AcquisitionsMember 2019-12-31 0000098362 tkr:A2019AcquisitionsMember us-gaap:PensionPlansDefinedBenefitMember 2020-03-31 0000098362 us-gaap:AccruedLiabilitiesMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 us-gaap:OtherNoncurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 us-gaap:AccountsReceivableMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:AccruedLiabilitiesMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 tkr:IncomeTaxesPayableMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:PropertyPlantAndEquipmentMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherCurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 tkr:IncomeTaxesPayableMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 us-gaap:ShortTermDebtMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 tkr:IncomeTaxesPayableMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 tkr:A2019AcquisitionsMember us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-12-31 0000098362 us-gaap:OtherNoncurrentAssetsMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherCurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 us-gaap:OtherCurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:LeasesAcquiredInPlaceMember tkr:A2019AcquisitionsMember 2019-12-31 0000098362 us-gaap:NoncontrollingInterestMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherNoncurrentLiabilitiesMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:ShortTermDebtMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 us-gaap:ShortTermDebtMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:InventoriesMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 tkr:DeferredTaxLiabilityMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:AccountsPayableAndAccruedLiabilitiesMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherIntangibleAssetsMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:LongTermDebtMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 tkr:A2019AcquisitionsMember us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0000098362 us-gaap:OtherCurrentAssetsMember tkr:A2019AcquisitionsMember 2020-01-01 2020-03-31 0000098362 us-gaap:LeasesAcquiredInPlaceMember tkr:A2019AcquisitionsMember 2020-03-31 0000098362 tkr:ServiceRevenueMember 2020-01-01 2020-03-31 0000098362 tkr:ServiceRevenueMember 2019-01-01 2019-03-31 0000098362 tkr:U.S.GovernmentMember 2020-01-01 2020-03-31 0000098362 tkr:U.S.GovernmentMember 2019-01-01 2019-03-31 0000098362 us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 0000098362 us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0000098362 us-gaap:SalesChannelThroughIntermediaryMember 2019-01-01 2019-03-31 0000098362 us-gaap:SalesChannelDirectlyToConsumerMember 2019-01-01 2019-03-31 0000098362 us-gaap:SalesChannelDirectlyToConsumerMember 2020-01-01 2020-03-31 0000098362 us-gaap:SalesChannelThroughIntermediaryMember 2020-01-01 2020-03-31 0000098362 us-gaap:EMEAMember tkr:ProcessIndustriesMember 2020-01-01 2020-03-31 0000098362 country:US 2020-01-01 2020-03-31 0000098362 srt:AsiaPacificMember tkr:MobileIndustriesMember 2019-01-01 2019-03-31 0000098362 srt:AsiaPacificMember 2020-01-01 2020-03-31 0000098362 us-gaap:EMEAMember 2019-01-01 2019-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember tkr:ProcessIndustriesMember 2020-01-01 2020-03-31 0000098362 us-gaap:EMEAMember tkr:MobileIndustriesMember 2019-01-01 2019-03-31 0000098362 srt:AsiaPacificMember tkr:MobileIndustriesMember 2020-01-01 2020-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember 2019-01-01 2019-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember 2020-01-01 2020-03-31 0000098362 us-gaap:EMEAMember tkr:ProcessIndustriesMember 2019-01-01 2019-03-31 0000098362 country:US tkr:ProcessIndustriesMember 2019-01-01 2019-03-31 0000098362 srt:AsiaPacificMember tkr:ProcessIndustriesMember 2019-01-01 2019-03-31 0000098362 country:US tkr:MobileIndustriesMember 2019-01-01 2019-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember tkr:ProcessIndustriesMember 2019-01-01 2019-03-31 0000098362 tkr:MobileIndustriesMember 2020-01-01 2020-03-31 0000098362 srt:AsiaPacificMember 2019-01-01 2019-03-31 0000098362 us-gaap:EMEAMember 2020-01-01 2020-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember tkr:MobileIndustriesMember 2020-01-01 2020-03-31 0000098362 tkr:ProcessIndustriesMember 2019-01-01 2019-03-31 0000098362 country:US tkr:MobileIndustriesMember 2020-01-01 2020-03-31 0000098362 tkr:CanadaMexicoandSouthAmericaMember tkr:MobileIndustriesMember 2019-01-01 2019-03-31 0000098362 tkr:ProcessIndustriesMember 2020-01-01 2020-03-31 0000098362 tkr:MobileIndustriesMember 2019-01-01 2019-03-31 0000098362 country:US tkr:ProcessIndustriesMember 2020-01-01 2020-03-31 0000098362 country:US 2019-01-01 2019-03-31 0000098362 us-gaap:EMEAMember tkr:MobileIndustriesMember 2020-01-01 2020-03-31 0000098362 srt:AsiaPacificMember tkr:ProcessIndustriesMember 2020-01-01 2020-03-31 0000098362 tkr:ReportableSegmentsMember 2020-01-01 2020-03-31 0000098362 us-gaap:CorporateMember 2019-01-01 2019-03-31 0000098362 tkr:ReportableSegmentsMember 2019-01-01 2019-03-31 0000098362 us-gaap:CorporateMember 2020-01-01 2020-03-31 0000098362 2018-07-01 2018-09-30 0000098362 us-gaap:CustomerRelationshipsMember 2020-03-31 0000098362 us-gaap:TechnologyBasedIntangibleAssetsMember 2020-03-31 0000098362 us-gaap:UnclassifiedIndefinitelivedIntangibleAssetsMember 2020-03-31 0000098362 us-gaap:CustomerRelationshipsMember 2019-12-31 0000098362 us-gaap:ComputerSoftwareIntangibleAssetMember 2019-12-31 0000098362 us-gaap:TrademarksMember 2019-12-31 0000098362 us-gaap:TechnologyBasedIntangibleAssetsMember 2019-12-31 0000098362 us-gaap:UnclassifiedIndefinitelivedIntangibleAssetsMember 2019-12-31 0000098362 us-gaap:TrademarksMember 2020-03-31 0000098362 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-03-31 0000098362 tkr:ProcessIndustriesMember 2020-03-31 0000098362 tkr:MobileIndustriesMember 2019-12-31 0000098362 tkr:MobileIndustriesMember 2020-03-31 0000098362 tkr:ProcessIndustriesMember 2019-12-31 0000098362 tkr:LineOfCreditAccountsReceivableSecuritizationMember 2020-03-31 0000098362 tkr:ForeignSubsidiaryMember 2020-03-31 0000098362 tkr:LineOfCreditAccountsReceivableSecuritizationMember 2019-12-31 0000098362 tkr:ForeignSubsidiaryMember 2019-12-31 0000098362 tkr:FixedRateBankLoanBEKAMember 2020-01-01 2020-03-31 0000098362 tkr:SeniorUnsecuredNotes4.5Member 2018-09-06 2018-09-06 0000098362 tkr:EuroTermLoanVariableRateMember 2020-03-31 0000098362 tkr:EuroTermLoanVariableRateMember 2017-09-18 2017-09-18 0000098362 tkr:FixedRateBankLoanBEKAMember 2019-11-01 2019-11-01 0000098362 tkr:OutstandingBorrowingsMember 2020-03-31 0000098362 tkr:SeniorUnsecuredNotesVariableRateMember 2020-03-31 0000098362 tkr:SeniorUnsecuredNotesVariableRateMember 2019-06-25 2019-06-25 0000098362 tkr:SeniorUnsecuredNotes4.5Member 2020-03-31 0000098362 tkr:TermLoanVariableRateMember 2018-09-11 2018-09-11 0000098362 us-gaap:CreditFacilityDomain us-gaap:SubsequentEventMember 2020-04-03 2020-04-03 0000098362 tkr:FixedRateBankLoanBEKAMember 2020-03-31 0000098362 tkr:ConeDriveMember 2018-09-01 2018-09-01 0000098362 us-gaap:CreditFacilityDomain us-gaap:SubsequentEventMember 2020-04-03 0000098362 tkr:SeniorUnsecuredNotesVariableRateMember 2020-01-01 2020-03-31 0000098362 tkr:RollonGroupMember 2018-09-18 2018-09-18 0000098362 tkr:TermLoanVariableRateMember 2020-01-01 2020-03-31 0000098362 tkr:EuroTermLoanVariableRateMember 2020-01-01 2020-03-31 0000098362 tkr:LineOfCreditAccountsReceivableSecuritizationMember 2020-01-01 2020-03-31 0000098362 tkr:OtherLongTermDebtMember 2020-03-31 0000098362 tkr:SeniorUnsecuredNotes4.5Member 2019-12-31 0000098362 tkr:TermLoanVariableRateMember 2020-03-31 0000098362 tkr:SeniorUnsecuredNotesVariableRateMember 2019-12-31 0000098362 tkr:SeniorUnsecuredNotes3.875Member 2019-12-31 0000098362 tkr:TermLoanVariableRateMember 2019-12-31 0000098362 tkr:SeniorUnsecuredNotes3.875Member 2020-03-31 0000098362 tkr:SeriesMediumTermNoteMember 2020-03-31 0000098362 tkr:EuroSeniorUnsecuredNotes2.02Member 2020-03-31 0000098362 tkr:FixedRateBankLoanBEKAMember 2019-12-31 0000098362 tkr:SeriesMediumTermNoteMember 2019-12-31 0000098362 tkr:EuroSeniorUnsecuredNotes2.02Member 2019-12-31 0000098362 tkr:EuroTermLoanVariableRateMember 2019-12-31 0000098362 tkr:OtherLongTermDebtMember 2019-12-31 0000098362 currency:EUR tkr:SeniorUnsecuredNotesVariableRateMember 2020-03-31 0000098362 tkr:EuroTermLoanVariableRateMember 2020-03-31 0000098362 tkr:EuroSeniorUnsecuredNotes2.02Member 2020-03-31 0000098362 tkr:SeniorUnsecuredNotes3.875Member 2020-03-31 0000098362 currency:EUR tkr:SeniorUnsecuredNotesVariableRateMember 2019-12-31 0000098362 tkr:SeniorUnsecuredNotes4.5Member 2020-01-01 2020-03-31 0000098362 tkr:EuroTermLoanVariableRateMember 2019-12-31 0000098362 tkr:EuroSeniorUnsecuredNotes2.02Member 2020-01-01 2020-03-31 0000098362 tkr:SeriesMediumTermNoteMember 2020-01-01 2020-03-31 0000098362 srt:MinimumMember tkr:SeriesMediumTermNoteMember 2020-03-31 0000098362 srt:MaximumMember tkr:SeriesMediumTermNoteMember 2020-03-31 0000098362 tkr:SeniorUnsecuredNotes3.875Member 2020-01-01 2020-03-31 0000098362 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherAdditionalCapitalMember 2020-01-01 2020-03-31 0000098362 us-gaap:AccountingStandardsUpdate201613Member us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000098362 us-gaap:RetainedEarningsUnappropriatedMember 2020-01-01 2020-03-31 0000098362 us-gaap:NoncontrollingInterestMember 2020-03-31 0000098362 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0000098362 us-gaap:AccountingStandardsUpdate201613Member 2020-01-01 2020-03-31 0000098362 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0000098362 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0000098362 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0000098362 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000098362 us-gaap:OtherAdditionalCapitalMember 2019-01-01 2019-03-31 0000098362 us-gaap:RetainedEarningsUnappropriatedMember 2019-01-01 2019-03-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2020-01-01 2020-03-31 0000098362 srt:MaximumMember tkr:GaffneyMember us-gaap:RestructuringChargesMember 2020-01-01 2020-03-31 0000098362 tkr:DiamondChainMember 2020-01-01 2020-03-31 0000098362 srt:MaximumMember tkr:DiamondChainMember us-gaap:RestructuringChargesMember 2020-01-01 2020-03-31 0000098362 tkr:GaffneyMember 2020-01-01 2020-03-31 0000098362 srt:MinimumMember tkr:DiamondChainMember us-gaap:RestructuringChargesMember 2020-01-01 2020-03-31 0000098362 srt:MinimumMember tkr:GaffneyMember us-gaap:RestructuringChargesMember 2020-01-01 2020-03-31 0000098362 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2020-01-01 2020-03-31 0000098362 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-03-31 0000098362 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-03-31 0000098362 country:US us-gaap:PensionPlansDefinedBenefitMember 2020-01-01 2020-03-31 0000098362 us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-03-31 0000098362 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-01-01 2020-03-31 0000098362 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-03-31 0000098362 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-07-01 2018-09-30 0000098362 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-07-01 2019-09-30 0000098362 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-12-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2019-12-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2020-01-01 2020-03-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2020-03-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2019-12-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2020-01-01 2020-03-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2020-03-31 0000098362 tkr:UnrealizedgainlossonmarketablesecuritiesMember 2020-01-01 2020-03-31 0000098362 tkr:UnrealizedgainlossonmarketablesecuritiesMember 2020-03-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2019-12-31 0000098362 tkr:UnrealizedgainlossonmarketablesecuritiesMember 2019-12-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2020-03-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2019-01-01 2019-03-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2019-01-01 2019-03-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2019-01-01 2019-03-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2019-03-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2019-03-31 0000098362 tkr:PensionAndPostretirementLiabilityAdjustmentMember 2018-12-31 0000098362 tkr:DerivativeFinancialInstrumentsFairValueAdjustmentMember 2018-12-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2018-12-31 0000098362 tkr:ForeignCurrencyTranslationAdjustmentMember 2019-03-31 0000098362 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0000098362 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0000098362 us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0000098362 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0000098362 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000098362 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000098362 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000098362 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000098362 us-gaap:NondesignatedMember 2020-03-31 0000098362 us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0000098362 us-gaap:NondesignatedMember 2019-12-31 0000098362 us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 xbrli:pure xbrli:shares iso4217:EUR iso4217:USD xbrli:shares iso4217:USD
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
timkenlogoa44.jpg
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
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 March 31, 2020
 
 
Common Shares, without par value
 
75,066,149 shares
 



THE TIMKEN COMPANY
INDEX TO FORM 10-Q REPORT





PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
THE TIMKEN COMPANY AND SUBSIDIARIES

Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
(Dollars in millions, except per share data)
 
 
 
Net sales
$
923.4

 
$
979.7

Cost of products sold
644.5

 
677.1

Gross Profit
278.9

 
302.6

Selling, general and administrative expenses
153.6

 
152.7

Impairment and restructuring charges
3.6

 

Operating Income
121.7

 
149.9

Interest expense
(17.1
)
 
(18.0
)
Interest income
1.5

 
1.3

Non-service pension and other postretirement income
3.4

 
0.1

Other income, net
4.1

 
3.3

Income Before Income Taxes
113.6

 
136.6

Provision for income taxes
29.6

 
41.3

Net Income
84.0

 
95.3

Less: Net income attributable to noncontrolling interest
3.3

 
3.4

Net Income Attributable to The Timken Company
$
80.7

 
$
91.9

 
 
 
 
Net Income per Common Share Attributable to The Timken Company
  Common Shareholders
 
 
 
Basic earnings per share
$
1.07

 
$
1.21

 
 
 
 
Diluted earnings per share
$
1.06

 
$
1.19

See accompanying Notes to the Consolidated Financial Statements.


Consolidated Statements of Comprehensive Income
(Unaudited) 
 
Three Months Ended
March 31,
 
2020
 
2019
(Dollars in millions)
 
 
 
Net Income
$
84.0

 
$
95.3

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments
(78.8
)
 
(4.2
)
Pension and postretirement liability adjustments
(1.3
)
 
(0.1
)
Change in fair value of marketable securities
(0.4
)
 

Change in fair value of derivative financial instruments
4.2

 
(0.6
)
Other comprehensive loss, net of tax
(76.3
)
 
(4.9
)
Comprehensive Income, net of tax
7.7

 
90.4

Less: comprehensive (loss) income attributable to noncontrolling interest
(4.2
)
 
4.3

Comprehensive Income Attributable to The Timken Company
$
11.9

 
$
86.1

See accompanying Notes to the Consolidated Financial Statements.

1


Consolidated Balance Sheets
 
(Unaudited)
 
 
 
March 31,
2020
 
December 31,
2019
(Dollars in millions)
 
 
 
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
387.5

 
$
209.5

Restricted cash
6.5

 
6.7

Accounts receivable, less allowances (2020 – $18.2 million; 2019 – $18.1 million)
577.7

 
545.1

Unbilled receivables
137.4

 
129.2

Inventories, net
819.7

 
842.0

Deferred charges and prepaid expenses
35.7

 
36.7

Other current assets
127.7

 
105.4

Total Current Assets
2,092.2

 
1,874.6

Property, Plant and Equipment, net
961.6

 
989.2

Other Assets
 
 
 
Goodwill
987.9

 
993.7

Other intangible assets
735.3

 
758.5

Operating lease assets
112.8

 
114.1

Non-current pension assets
7.1

 
3.4

Non-current other postretirement benefit assets

 
36.6

Deferred income taxes
67.4

 
71.8

Other non-current assets
15.7

 
18.0

Total Other Assets
1,926.2

 
1,996.1

Total Assets
$
4,980.0

 
$
4,859.9

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term debt
$
109.0

 
$
17.3

Current portion of long-term debt
64.1

 
64.7

Short-term operating lease liabilities
28.6

 
28.3

Accounts payable, trade
296.0

 
301.7

Salaries, wages and benefits
88.3

 
134.5

Income taxes payable
15.8

 
17.8

Other current liabilities
168.0

 
172.3

Total Current Liabilities
769.8

 
736.6

Non-Current Liabilities
 
 
 
Long-term debt
1,785.8

 
1,648.1

Accrued pension benefits
164.5

 
165.1

Accrued postretirement benefits
44.8

 
31.8

Long-term operating lease liabilities
70.8

 
71.3

Deferred income taxes
158.7

 
168.2

Other non-current liabilities
85.3

 
84.0

Total Non-Current Liabilities
2,309.9

 
2,168.5

Shareholders’ Equity
 
 
 
Class I and II Serial Preferred Stock, without par value:
 
 
 
Authorized – 10,000,000 shares each class, none issued

 

Common shares, without par value:
 
 
 
Authorized – 200,000,000 shares
 
 
 
Issued (including shares in treasury) (2020 – 98,375,135 shares;
2019 – 98,375,135 shares)
 
 
 
Stated capital
53.1

 
53.1

Other paid-in capital
920.1

 
937.6

Earnings invested in the business
1,964.8

 
1,907.4

Accumulated other comprehensive loss
(118.9
)
 
(50.1
)
Treasury shares at cost (2020 – 23,308,986 shares; 2019 – 22,836,180 shares)
(1,001.7
)
 
(979.8
)
Total Shareholders’ Equity
1,817.4

 
1,868.2

Noncontrolling Interest
82.9

 
86.6

Total Equity
1,900.3

 
1,954.8

Total Liabilities and Equity
$
4,980.0

 
$
4,859.9

See accompanying Notes to the Consolidated Financial Statements.

2


Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
(Dollars in millions)
 
 
 
CASH PROVIDED (USED)
 
 
 
Operating Activities
 
 
 
Net income
$
84.0

 
$
95.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
42.3

 
39.5

Loss (gain) on sale of assets
1.2

 
(1.8
)
Deferred income tax (benefit) provision
(5.1
)
 
0.4

Stock-based compensation expense
5.6

 
7.8

Pension and other postretirement (income) expense
(0.3
)
 
2.9

Pension and other postretirement benefit contributions and payments
(5.5
)
 
(4.9
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(47.6
)
 
(65.0
)
Unbilled receivables
(8.3
)
 
(6.6
)
Inventories
0.3

 
(4.1
)
Accounts payable, trade

 
20.2

Other accrued expenses
(34.3
)
 
(58.0
)
Income taxes
12.5

 
24.7

Other, net
11.4

 
1.9

Net Cash Provided by Operating Activities
56.2

 
52.3

Investing Activities
 
 
 
Capital expenditures
(31.8
)
 
(16.2
)
Acquisitions, net of cash received

 
(2.9
)
Proceeds from disposal of property, plant and equipment

 
2.1

Investments in short-term marketable securities, net
0.2

 
(2.6
)
Net Cash Used in Investing Activities
(31.6
)
 
(19.6
)
Financing Activities
 
 
 
Cash dividends paid to shareholders
(22.9
)
 
(21.3
)
Purchase of treasury shares
(42.3
)
 
(8.3
)
Proceeds from exercise of stock options
7.5

 
1.0

Payments related to tax withholding for stock-based compensation
(10.2
)
 
(6.4
)
Accounts receivable facility borrowings
10.0

 
25.0

Accounts receivable facility payments
(10.0
)
 

Proceeds from long-term debt
200.0

 
207.0

Payments on long-term debt
(37.9
)
 
(116.8
)
Short-term debt activity, net
72.3

 
(6.8
)
Net Cash Provided by Financing Activities
166.5

 
73.4

Effect of exchange rate changes on cash
(13.3
)
 
0.9

Increase in Cash, Cash Equivalents and Restricted Cash
177.8

 
107.0

Cash, cash equivalents and restricted cash at beginning of year
216.2

 
133.1

Cash, Cash Equivalents and Restricted Cash at End of Period
$
394.0

 
$
240.1

See accompanying Notes to the Consolidated Financial Statements.

3


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions, except per share data)

Note 1 - Basis of Presentation
The accompanying Consolidated Financial Statements (unaudited) for The Timken Company (the "Company" or "Timken") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by the accounting principles generally accepted in the United States ("U.S. GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Note 2 - Significant Accounting Policies
The Company's significant accounting policies are detailed in "Note 1 - Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application requires significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2020, and the impact of adoption was not material to the Company's results of operations and financial condition. Refer to Note 12 - Equity for the cumulative effect of initially applying ASU 2016-13.




4


Note 3 - Acquisitions
During 2019, the Company completed two acquisitions. On November 1, 2019, the Company completed the acquisition of BEKA Lubrication ("BEKA"), a leading global supplier of automatic lubrication systems. BEKA serves a diverse range of industrial sectors, including wind, food and beverage, rail, on- and off-highway and other process industries. Headquartered in Pegnitz, Germany, BEKA has manufacturing and research and development based in Germany, and assembly facilities and sales offices around the world. On April 1, 2019, the Company completed the acquisition of The Diamond Chain Company ("Diamond Chain"), a leading supplier of high-performance roller chains for industrial markets. Diamond Chain serves a diverse range of market sectors, including industrial distribution, material handling, food and beverage, agriculture, construction and other process industries. Diamond Chain, located in Indianapolis, Indiana, operates primarily in the United States and China. These acquisitions will be collectively referred to hereafter as the "2019 Acquisitions."

The following table presents the purchase price allocation at fair value, net of cash acquired, for the 2019 Acquisitions as of March 31, 2020: 
 
Initial Purchase
Price Allocation
Adjustments
Purchase
Price Allocation
Assets:
 
 
 
Accounts receivable, net
$
26.3

$
(0.1
)
$
26.2

Inventories, net
62.9

0.2

63.1

Other current assets
4.9

1.0

5.9

Property, plant and equipment, net
57.4


57.4

Operating lease assets
4.7


4.7

Goodwill
44.2

6.7

50.9

Other intangible assets
84.4


84.4

Other non-current assets
0.7


0.7

   Total assets acquired
$
285.5

$
7.8

$
293.3

Liabilities:
 
 
 
Accounts payable, trade
$
10.8

$
(0.2
)
$
10.6

Salaries, wages and benefits
6.8


6.8

Income taxes payable
2.1


2.1

Other current liabilities
6.7

7.4

14.1

Short-term debt
0.8


0.8

Long-term debt
17.2


17.2

Accrued pension benefits
0.5


0.5

Accrued postretirement benefits
0.1


0.1

Long-term operating lease liabilities
4.1


4.1

Deferred income taxes
5.1

(0.2
)
4.9

Other non-current liabilities
1.1

0.8

1.9

   Total liabilities assumed
$
55.3

$
7.8

$
63.1

Noncontrolling interest acquired
1.8


1.8

   Net assets acquired
$
228.4

$

$
228.4


In March 2020, the Company accrued $6.6 million for a working capital adjustment to the purchase price for BEKA in accordance with the purchase agreement, which will be paid during the second quarter of 2020. This adjustment, as well as other measurement period adjustments recorded in 2020, resulted in a $6.7 million increase to goodwill.
 
In determining the fair value of the amounts above, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being valued. The estimation of fair value required significant judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors. Inputs were generally determined by taking into account independent appraisals and historical data, supplemented by current and anticipated market conditions.



5


Note 3 - Acquisitions (continued)
The above purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations is obtained. The purchase price allocation for BEKA is preliminary as a result of the continued evaluation of working capital accounts and contingent liabilities, as well as the finalization of the Company's review pertaining to a limited set of valuation calculations and inputs. The primary areas of the BEKA purchase price allocation that have not been finalized relate to the fair value of inventory, net property, plant, and equipment and other intangible assets, and the related impacts on deferred income taxes and goodwill. During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.

Note 4 - Revenue
The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three months ended March 31, 2020 and 2019, respectively:
 
Three Months Ended
Three Months Ended
 
March 31, 2020
March 31, 2019
 
Mobile
Process
Total
Mobile
Process
Total
United States
$
238.2

$
192.6

$
430.8

$
273.7

$
209.7

$
483.4

Americas excluding United States
48.8

35.0

83.8

48.5

43.6

92.1

Europe / Middle East / Africa
108.7

115.6

224.3

101.7

125.0

226.7

Asia-Pacific
71.0

113.5

184.5

76.1

101.4

177.5

Net sales
$
466.7

$
456.7

$
923.4

$
500.0

$
479.7

$
979.7

When reviewing revenue by sales channel, the Company separates net sales to original equipment manufacturers from sales to distributors and end users. The following table presents the percent of revenue by sales channel for the three months ended March 31, 2020 and 2019, respectively:
 
Three Months Ended
Three Months Ended
Revenue by sales channel
March 31, 2020
March 31, 2019
Original equipment manufacturers
59%
57%
Distribution/end users
41%
43%
In addition to disaggregating revenue by segment and geography and by sales channel as shown above, the Company believes information about the timing of transfer of goods or services, type of customer and distinguishing service revenue from product sales is also relevant. During the three months ended March 31, 2020 and March 31, 2019, approximately 12% and 10%, 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 5% of total net sales represented service revenue during the three months ended March 31, 2020 and March 31, 2019, respectively. Finally, the United States ("U.S.") government or its contractors represented approximately 8% and 7% of total net sales during the three months ended March 31, 2020 and March 31, 2019, 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 $175.4 million at March 31, 2020.

6



Note 4 - Revenue (continued)

Unbilled Receivables:
The following table contains a rollforward of unbilled receivables for the three months ended March 31, 2020:
 
March 31, 2020
Beginning balance, January 1
$
129.2

Additional unbilled revenue recognized
110.7

Less: amounts billed to customers
(102.5
)
Ending balance
$
137.4


There were no impairment losses recorded on unbilled receivables for the three months ended March 31, 2020.

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
March 31,
 
2020
 
2019
Net sales:
 
 
 
Mobile Industries
$
466.7

 
$
500.0

Process Industries
456.7

 
479.7

Net sales
$
923.4

 
$
979.7

Segment EBITDA:
 
 
 
Mobile Industries
$
75.1

 
$
79.3

Process Industries
107.5

 
127.6

Total EBITDA, for reportable segments
$
182.6

 
$
206.9

Corporate EBITDA
(11.1
)
 
(14.1
)
Depreciation and amortization
(42.3
)
 
(39.5
)
Interest expense
(17.1
)
 
(18.0
)
Interest income
1.5

 
1.3

Income before income taxes
$
113.6

 
$
136.6






7


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
March 31,
 
2020
 
2019
Provision for income taxes
$
29.6

 
$
41.3

Effective tax rate
26.1
%
 
30.2
%

Income tax expense for the three months ended March 31, 2020 was calculated using the forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the projected mix of earnings in international jurisdictions with relatively higher tax rates and unfavorable U.S. permanent differences.

The effective tax rate of 26.1% for the three months ended March 31, 2020 was lower than the three months ended March 31, 2019 primarily due to higher discrete tax expense in the previous year for uncertain tax positions related to the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). The expense was partially offset by a projected increase in the mix of earnings in international jurisdictions with relatively higher tax rates.

Subsequent to March 31, 2020, the European Court of Justice issued a ruling applicable to an unrelated taxpayer that concerns the scope of countries subject to exemption on withholding tax on dividends. This ruling could cause the Company to increase its accrual for uncertain tax positions for withholding taxes on certain prior year intercompany dividends made in Europe. The Company is currently evaluating the details of this case to assess its applicability to Timken and whether it will have a material impact on the provision for income taxes in the second quarter of 2020.

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 months ended March 31, 2020 and 2019, respectively:
 
Three Months Ended
March 31,
 
2020
 
2019
Numerator:
 
 
 
Net income attributable to The Timken Company
$
80.7

 
$
91.9

Less: undistributed earnings allocated to nonvested
stock

 

Net income available to common shareholders for basic
   and diluted earnings per share
$
80.7

 
$
91.9

Denominator:
 
 
 
Weighted average number of shares outstanding - basic
75,461,254

 
75,986,285

Effect of dilutive securities:
 
 
 
Stock options and awards - based on the treasury stock
method
847,302

 
1,026,288

Weighted average number of shares outstanding
assuming dilution of stock options and awards
76,308,556

 
77,012,573

Basic earnings per share
$
1.07

 
$
1.21

Diluted earnings per share
$
1.06

 
$
1.19


The exercise prices for certain stock options that the Company has awarded exceeded the average market price of the Company’s common shares during each period presented. Such stock options are antidilutive and were not included in the computation of diluted earnings per share. The antidilutive stock options outstanding during the three months ended March 31, 2020 and 2019 were 1,367,821 and 1,191,056, respectively.


8


Note 8 - Inventories
The components of inventories at March 31, 2020 and December 31, 2019 were as follows:
 
March 31,
2020
 
December 31,
2019
Manufacturing supplies
$
34.2

 
$
34.2

Raw materials
101.2

 
100.0

Work in process
316.9

 
308.9

Finished products
411.1

 
439.0

     Subtotal
863.4

 
882.1

Allowance for obsolete and surplus inventory
(43.7
)
 
(40.1
)
     Total Inventories, net
$
819.7

 
$
842.0


Inventories are valued at net realizable value, with approximately 59% valued on the first-in, first-out ("FIFO") method and the remaining 41% 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 March 31, 2020 and December 31, 2019 was $164.9 million and $164.6 million, respectively. An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation. The prior year balances have been revised to align to the current year classification of the LIFO reserve and the allowance for obsolete and surplus inventory.


9


Note 9 - Goodwill and Other Intangibles
The changes in the carrying amount of goodwill for the three months ended March 31, 2020 were as follows:
 
Mobile
Industries
Process
Industries
Total
Beginning balance
$
361.3

$
632.4

$
993.7

Acquisitions
4.5

2.2

6.7

Foreign currency translation adjustments and other changes
(6.3
)
(6.2
)
(12.5
)
Ending balance
$
359.5

$
628.4

$
987.9



The $6.7 million addition of goodwill from acquisitions represents measurement period adjustments recorded in 2020 for the 2019 Acquisitions.

The following table displays intangible assets as of March 31, 2020 and December 31, 2019:
 
Balance at March 31, 2020
Balance at December 31, 2019
 
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets
subject to amortization:
 
 
 
 
 
 
Customer relationships
$
504.0

$
(135.3
)
$
368.7

$
510.9

$
(128.8
)
$
382.1

Technology and know-how
261.9

(58.0
)
203.9

265.1

(54.7
)
210.4

Trade names
12.5

(6.2
)
6.3

12.7

(6.1
)
6.6

Capitalized software
271.1

(247.9
)
23.2

270.3

(245.8
)
24.5

Other
13.6

(9.2
)
4.4

13.8

(9.1
)
4.7

 
$
1,063.1

$
(456.6
)
$
606.5

$
1,072.8

$
(444.5
)
$
628.3

Intangible assets not subject to amortization:
 
 
 
 
 
 
Trade names
$
120.1

 
$
120.1

$
121.5

 
$
121.5

FAA air agency certificates
8.7

 
8.7

8.7

 
8.7

 
$
128.8



$
128.8

$
130.2



$
130.2

Total intangible assets
$
1,191.9

$
(456.6
)
$
735.3

$
1,203.0

$
(444.5
)
$
758.5



Amortization expense for intangible assets was $14.2 million and $14.5 million for the three months ended March 31, 2020 and 2019, respectively. Amortization expense for intangible assets is projected to be $54.3 million in 2020; $51.0 million in 2021; $46.1 million in 2022; $43.2 million in 2023; and $41.6 million in 2024.

10


Note 10 - Financing Arrangements
Short-term debt at March 31, 2020 and December 31, 2019 was as follows:
 
March 31,
2020
December 31,
2019
Variable-rate Accounts Receivable Facility with an interest rate of 2.52% at March 31, 2020 and 2.77% at December 31, 2019
$
21.9

$
1.8

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.30% to 1.75% at March 31, 2020 and 0.27% to 1.75% at December 31, 2019
87.1

15.5

Short-term debt
$
109.0

$
17.3


The Company has a $100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2021. Under the terms of the Accounts Receivable Facility, the Company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a wholly-owned consolidated subsidiary that, in turn, uses the trade receivables to secure borrowings that are funded through a vehicle that issues commercial paper in the short-term market. Borrowings under the Accounts Receivable Facility may be limited by certain borrowing base limitations; however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at March 31, 2020. As of March 31, 2020, there were outstanding borrowings of $100.0 million under the Accounts Receivable Facility, which reduced the availability under this facility to zero. $21.9 million of the outstanding borrowings under the Accounts Receivable Facility was classified as short-term and reflects the Company's expectations over the next 12 months relative to the minimum borrowing base. The cost of this facility, which is the prevailing commercial paper rate plus facility fees, is considered a financing cost and is included in "Interest expense" in the Consolidated Statements of Income.

The Company also maintains uncommitted lines of credit at certain foreign subsidiaries, which provide for short-term borrowings up to $263.5 million in the aggregate. At March 31, 2020, the Company’s foreign subsidiaries had borrowings outstanding of $87.1 million and bank guarantees of $1.1 million, which reduced the aggregate availability under these facilities to $175.3 million.

Long-term debt at March 31, 2020 and December 31, 2019 was as follows:
 
March 31,
2020
December 31,
2019
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 2.72% and Euro of 1.00% at March 31, 2020 and 2.85% and Euro of 1.00% at December 31, 2019
$
296.4

$
132.7

Variable-rate Euro Term Loan(1), maturing on September 18, 2020, with an interest rate of 1.13% at March 31, 2020 and December 31, 2019
53.5

54.4

Variable-rate Accounts Receivable Facility with an interest rate of 2.52% at March 31, 2020 and 2.77% at December 31, 2019
78.1

98.2

Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 2.11% at March 31, 2020 and 2.92% at December 31, 2019
336.3

338.5

Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%
348.6

348.5

Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%
165.0

167.7

Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%
396.2

396.1

Fixed-rate Medium-Term Notes, Series A(1), maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76%
154.6

154.6

Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%
17.7

18.0

Other
3.5

4.1

 
1,849.9

1,712.8

Less: Current maturities
64.1

64.7

Long-term debt
$
1,785.8

$
1,648.1


(1) Net of discounts and fees

11


Note 10 - Financing Arrangements (continued)

On June 25, 2019, the Company entered into a Fourth Amended and Restated Credit Agreement ("Senior Credit Facility"). The Senior Credit Facility is a $650.0 million unsecured revolving credit facility, which matures on June 25, 2024. At March 31, 2020, the Company had $296.4 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $353.6 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio.

On April 3, 2020, the Company borrowed an additional $350 million under the Senior Credit Facility, which is now almost fully drawn. The Company increased its borrowings under the Senior Credit Facility as a precautionary measure to increase its cash position and enhance its financial flexibility due to the uncertainty in the global markets resulting from the ongoing novel coronavirus (“COVID-19”) pandemic. The additional borrowings in April under the Senior Credit Facility are currently being held on the Company’s balance sheet and may be used for general corporate purposes.

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

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

On September 18, 2017, the Company entered into a 100 million variable-rate term loan that matures on September 18, 2020 (the "2020 Term Loan"). The Company has paid to-date a total of 51.5 million under the 2020 Term Loan, which reduced the principal balance to 48.5 million as of March 31, 2020. At March 31, 2020, the 2020 Term Loan was classified as current portion of long-term debt. The Company expects to service interest and repay the remaining principal balance with cash held or generated outside the U.S.
 
At March 31, 2020, 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 March 31, 2020, outstanding letters of credit totaled $39.0 million, primarily having expiration dates within 12 months.



12


Note 11 - Contingencies
The Company and certain of its subsidiaries have been identified as potentially responsible parties for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), known as the Superfund, or similar state laws with respect to certain sites. Claims for investigation and remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation.
 
On December 28, 2004, the United States Environmental Protection Agency (“USEPA”) sent Lovejoy, Inc. ("Lovejoy") a Special Notice Letter that identified Lovejoy as a potentially responsible party, together with at least 14 other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”). The Company acquired Lovejoy in 2016. Lovejoy’s Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and the Illinois Environmental Protection Agency (“IEPA”) allege there have been one or more releases or threatened releases of hazardous substances, allegedly including, but not limited to, a release or threatened release on or from Lovejoy's property, at the Site. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of response costs. Lovejoy’s allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against Lovejoy related to the Site have been settled or dismissed.

The Company had total environmental accruals of $5.2 million for various known environmental matters that are probable and reasonably estimable at March 31, 2020 and December 31, 2019, respectively, which includes the Lovejoy matter discussed above. These accruals were recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company’s liability in proportion to other responsible parties.

The Company is a defendant in a 2017 lawsuit filed in the U.S. by a former employee asserting workplace-related negligence by the Company's medical personnel. No specific amount of damages has been asserted by the plaintiff
at this time. While the Company’s defense is ongoing, management’s low end of the range of probable outcomes is immaterial to the Company.

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 $7.6 million and $7.5 million at March 31, 2020 and December 31, 2019, respectively.

13


Note 12 - Equity

The following tables present the changes in the components of equity for the three months ended March 31, 2020 and 2019, respectively:
 
 
The Timken Company Shareholders
 
 
Total
Stated
Capital
Other
Paid-In
Capital
Earnings
Invested
in the
Business
Accumulated
Other
Comprehensive
(Loss)
Treasury
Stock
Non
controlling
Interest
Balance at 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
84.0

 
 
80.7

 
 
3.3

Foreign currency translation adjustment
(78.8
)
 
 
 
(71.3
)
 
(7.5
)
Pension and other postretirement liability
adjustments (net of income tax benefit
of $0.5 million)
(1.3
)
 
 
 
(1.3
)
 
 
Unrealized loss on marketable securities
(0.4
)
 
 
 
(0.4
)
 
 
Change in fair value of derivative financial
instruments, net of reclassifications
4.2

 
 
 
4.2

 
 
Change in ownership of noncontrolling
   interest
0.5

 
 
 
 
 
0.5

Dividends – $0.28 per share
(22.9
)
 
 
(22.9
)
 
 
 
Stock-based compensation expense
5.6

 
5.6

 
 
 
 
Stock purchased at fair market value
(42.3
)
 

 
 
(42.3
)
 
Stock option exercise activity
7.5

 
(0.9
)
 
 
8.4

 
Restricted share activity

 
(22.2
)
 
 
22.2

 
Payments related to tax withholding for
stock-based compensation
(10.2
)
 

 
 
(10.2
)
 
Balance at March 31, 2020
$
1,900.3

$
53.1

$