10-Q 1 tkr-20220331.htm 10-Q tkr-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
tkr-20220331_g1.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, 2022
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)
 
Ohio34-0577130
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4500 Mount Pleasant Street NW
North CantonOhio 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 classTrading SymbolName of each exchange on which registered
Common Shares, without par valueTKRThe 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 filerAccelerated 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, 2022
Common Shares, without par value74,130,549 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,
 20222021
(Dollars in millions, except per share data)
Net sales$1,124.6 $1,025.4 
Cost of products sold797.2 726.2 
Gross Profit327.4 299.2 
Selling, general and administrative expenses154.1 144.5 
Impairment and restructuring charges1.0 4.0 
Operating Income172.3 150.7 
Interest expense(14.3)(14.9)
Interest income0.6 0.5 
Non-service pension and other postretirement income 1.3 4.0 
Other income, net0.2 1.0 
Income Before Income Taxes160.1 141.3 
Provision for income taxes38.2 25.3 
Net Income121.9 116.0 
Less: Net income attributable to noncontrolling interest3.7 2.7 
Net Income Attributable to The Timken Company$118.2 $113.3 
Net Income per Common Share Attributable to The Timken Company
  Common Shareholders
Basic earnings per share$1.58 $1.49 
Diluted earnings per share$1.56 $1.47 
See accompanying Notes to the Consolidated Financial Statements.


Consolidated Statements of Comprehensive Income
(Unaudited) 
 Three Months Ended
March 31,
 20222021
(Dollars in millions)
Net Income$121.9 $116.0 
Other comprehensive loss, net of tax:
Foreign currency translation adjustments(22.6)(44.4)
Pension and postretirement liability adjustments(1.5)(1.6)
Change in fair value of derivative financial instruments2.0 2.2 
Other comprehensive loss, net of tax(22.1)(43.8)
Comprehensive Income, net of tax99.8 72.2 
Less: comprehensive income attributable to noncontrolling interest1.1 2.3 
Comprehensive Income Attributable to The Timken Company$98.7 $69.9 
See accompanying Notes to the Consolidated Financial Statements.
1

Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)March 31,
2022
December 31,
2021
ASSETS
Current Assets
Cash and cash equivalents$424.5 $257.1 
Restricted cash0.7 0.8 
Accounts receivable, less allowances (2022 – $17.5 million; 2021 – $16.9 million)
743.9 626.4 
Unbilled receivables88.5 104.5 
Inventories, net1,112.6 1,042.7 
Deferred charges and prepaid expenses41.0 32.2 
Other current assets137.1 149.8 
Total Current Assets2,548.3 2,213.5 
Property, Plant and Equipment, net1,039.9 1,055.3 
Other Assets
Goodwill1,010.4 1,022.7 
Other intangible assets648.6 668.8 
Operating lease assets116.7 118.9 
Deferred income taxes65.2 67.6 
Other non-current assets29.4 23.9 
Total Other Assets1,870.3 1,901.9 
Total Assets$5,458.5 $5,170.7 
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable, trade416.1 430.0 
Short-term debt, including current portion of long-term debt41.0 53.8 
Salaries, wages and benefits118.3 136.0 
Income taxes payable30.0 26.2 
Other current liabilities260.8 250.6 
Total Current Liabilities866.2 896.6 
Non-Current Liabilities
Long-term debt1,747.2 1,411.1 
Accrued pension benefits156.5 155.6 
Accrued postretirement benefits45.3 45.8 
Long-term operating lease liabilities76.5 77.6 
Deferred income taxes121.9 121.4 
Other non-current liabilities89.9 84.9 
Total Non-Current Liabilities2,237.3 1,896.4 
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) (2022 – 77,457,218 shares;
     2021 – 77,090,104 shares)
Stated capital40.7 40.7 
Other paid-in capital795.4 786.9 
Retained earnings1,711.1 1,616.4 
Accumulated other comprehensive loss(42.5)(23.0)
Treasury shares at cost (2022 – 3,326,669 shares; 2021 – 1,715,282 shares)
(233.6)(126.1)
Total Shareholders’ Equity2,271.1 2,294.9 
Noncontrolling Interest83.9 82.8 
Total Equity2,355.0 2,377.7 
Total Liabilities and Equity$5,458.5 $5,170.7 
See accompanying Notes to the Consolidated Financial Statements.
2

Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
March 31,
 20222021
(Dollars in millions)
CASH PROVIDED (USED)
Operating Activities
Net income$121.9 $116.0 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization41.4 43.0 
Impairment charges 3.4 
Loss on sale of assets0.6 0.3 
Acquisition-related gain (0.6)
Deferred income tax provision (benefit)1.8 (2.0)
Stock-based compensation expense7.1 6.5 
Pension and other postretirement benefit expense (income)1.0 (1.0)
Pension and other postretirement benefit contributions and payments(5.2)(2.5)
Changes in operating assets and liabilities:
Accounts receivable(118.2)(138.9)
Unbilled receivables16.1 (2.5)
Inventories(70.2)(33.3)
Accounts payable, trade7.7 19.9 
Other accrued expenses(19.5)17.0 
Income taxes6.3 3.6 
Other, net8.0 2.8 
Net Cash (Used in) Provided by Operating Activities(1.2)31.7 
Investing Activities
Capital expenditures(34.3)(29.4)
Investments in short-term marketable securities, net(0.8)(9.9)
Other, net0.1 (0.1)
Net Cash Used in Investing Activities(35.0)(39.4)
Financing Activities
Cash dividends paid to shareholders(23.5)(23.8)
Purchase of treasury shares(100.0)(26.3)
Proceeds from exercise of stock options1.4 14.1 
Payments related to tax withholding for stock-based compensation(7.5)(17.8)
Borrowings on accounts receivable facility100.0 66.1 
Payments on accounts receivable facility(100.0)(24.1)
Proceeds from long-term debt524.3 70.0 
Payments on long-term debt(182.7)(73.4)
Deferred financing costs(2.6) 
Short-term debt activity, net(11.1)8.8 
Other6.4  
Net Cash Provided By (Used in) Financing Activities204.7 (6.4)
Effect of exchange rate changes on cash(1.2)(3.9)
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash167.3 (18.0)
Cash, cash equivalents and restricted cash at beginning of year257.9 321.1 
Cash, Cash Equivalents and Restricted Cash at End of Period$425.2 $303.1 
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, 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, 2021.

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts. This new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2021-08 effective January 1, 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." 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.
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Note 3 - 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, 2022 and 2021, respectively:
Three Months EndedThree Months Ended
March 31, 2022March 31, 2021
MobileProcessTotalMobileProcessTotal
United States$262.2 $226.6 $488.8 $242.9 $186.2 $429.1 
Americas excluding the United States58.1 55.1 113.2 48.8 43.2 92.0 
Europe / Middle East / Africa129.4 135.6 265.0 127.1 127.2 254.3 
China30.7 120.7 151.4 34.4 124.3 158.7 
Asia-Pacific excluding China60.0 46.2 106.2 51.3 40.0 91.3 
Net sales$540.4 $584.2 $1,124.6 $504.5 $520.9 $1,025.4 
When reviewing revenue by sales channel, the Company separates net sales to original equipment manufacturers ("OEMs") from sales to distributors and end users. The following table presents the percent of revenue by sales channel for the three months ended March 31, 2022 and 2021, respectively:
Three Months EndedThree Months Ended
Revenue by sales channelMarch 31, 2022March 31, 2021
Original equipment manufacturers60%61%
Distribution/end users40%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 three months ended March 31, 2022 and March 31, 2021, approximately 9% 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% and 4% of total net sales represented service revenue during each of the three months ended March 31, 2022 and March 31, 2021, respectively. Finally, business with the United States ("U.S.") government or its contractors represented approximately 7% of total net sales during the three months ended March 31, 2022 and March 31, 2021.

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 $213.1 million at March 31, 2022.

Unbilled Receivables:
The following table contains a rollforward of unbilled receivables for the three months ended March 31, 2022:
March 31,
2022
Beginning balance, January 1$104.5 
Additional unbilled revenue recognized105.5 
Less: amounts billed to customers(121.5)
Ending balance$88.5 
There were no impairment losses recorded on unbilled receivables for the three months ended March 31, 2022.
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Note 4 - 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,
 20222021
Net sales:
Mobile Industries$540.4 $504.5 
Process Industries584.2 520.9 
Net sales$1,124.6 $1,025.4 
Segment EBITDA:
Mobile Industries$75.1 $79.6 
Process Industries155.6 131.0 
Total EBITDA, for reportable segments$230.7 $210.6 
Unallocated corporate expense(12.9)(11.6)
Corporate pension and other postretirement benefit related expense (1)
(2.6)(0.9)
Acquisition-related gain (2)
 0.6 
Depreciation and amortization(41.4)(43.0)
Interest expense(14.3)(14.9)
Interest income0.6 0.5 
Income before income taxes$160.1 $141.3 
(1) Corporate pension and other postretirement benefit related expense represents actuarial (losses) and 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.
Note 5 - 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,
 20222021
Provision for income taxes$38.2 $25.3 
Effective tax rate23.9 %17.9 %
Income tax expense for the three months ended March 31, 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 projected mix of earnings in international jurisdictions with relatively higher tax rates.
The effective tax rate of 23.9% for the three months ended March 31, 2022 was higher than the rate for the three months ended March 31, 2021 primarily due to higher pre-tax earnings and a higher discrete tax benefit in the prior year due to the release of accruals for uncertain tax positions from the settlement of the 2017 and 2018 U.S. federal tax years during the three months ended March 31, 2021.
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Note 6 - 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, 2022 and 2021, respectively:
Three Months Ended
March 31,
20222021
Numerator:
Net income attributable to The Timken Company$118.2 $113.3 
Less: undistributed earnings allocated to nonvested stock  
Net income available to common shareholders for basic
   and diluted earnings per share
$118.2 $113.3 
Denominator:
Weighted average number of shares outstanding - basic74,782,153 75,820,157 
Effect of dilutive securities:
Stock options and awards - based on the treasury
   stock method
763,512 1,444,484 
Weighted average number of shares outstanding assuming
   dilution of stock options and awards
75,545,665 77,264,641 
Basic earnings per share$1.58 $1.49 
Diluted earnings per share $1.56 $1.47 
The 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 exercise price exceeds the average market price of the Company’s common shares during the periods presented. There were no antidilutive stock options outstanding during the three months ended March 31, 2022 and 2021.
Note 7 - Inventories
The components of inventories at March 31, 2022 and December 31, 2021 were as follows:
March 31,
2022
December 31,
2021
Manufacturing supplies$39.3 $38.0 
Raw materials132.6 121.8 
Work in process466.6 418.4 
Finished products533.3 527.8 
     Subtotal1,171.8 1,106.0 
Allowance for obsolete and surplus inventory(59.2)(63.3)
     Total inventories, net$1,112.6 $1,042.7 
Inventories are valued at net realizable value, with approximately 58% valued on the first-in, first-out ("FIFO") method and the remaining 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 March 31, 2022 and December 31, 2021 was $211.7 million and $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 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 8 - Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:
Mobile
Industries
Process
Industries
Total
Beginning balance$371.7 $651.0 $1,022.7 
Foreign currency translation adjustments and other changes(5.6)(6.7)(12.3)
Ending balance$366.1 $644.3 $1,010.4 
The following table displays intangible assets as of March 31, 2022 and December 31, 2021:
 Balance at March 31, 2022Balance at December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets
subject to amortization:
Customer relationships$512.3 $(194.5)$317.8 $518.1 $(189.3)$328.8 
Technology and know-how267.5 (90.0)177.5 270.7 (86.6)184.1 
Trade names12.9 (8.4)4.5 14.3 (9.6)4.7 
Capitalized software281.7 (262.8)18.9 280.0 (261.3)18.7 
Other3.8 (3.0)0.8 4.7 (3.6)1.1 
$1,078.2 $(558.7)$519.5 $1,087.8 $(550.4)$537.4 
Intangible assets not subject to amortization:
Trade names$120.4 $120.4 $122.7 $122.7 
FAA air agency certificates8.7 8.7 8.7 8.7 
$129.1 $129.1 $131.4 $131.4 
Total intangible assets$1,207.3 $(558.7)$648.6 $1,219.2 $(550.4)$668.8 
Amortization expense for intangible assets was $12.7 million and $14.1 million for the three months ended March 31, 2022 and 2021, respectively. Amortization expense included $10.9 million and $12.1 million related to intangible assets acquired as part of a business combination for the three months ended March 31, 2022 and 2021, respectively. Amortization expense for intangible assets is projected to be $50.9 million in 2022; $45.5 million in 2023; $43.5 million in 2024; $42.1 million in 2025; and $40.8 million in 2026. Substantially all amortization expense for intangible assets is recorded in Cost of product sold on the Consolidated Statement of Income.
Note 9 - Other Current Liabilities
The following table displays other current liabilities as of March 31, 2022 and December 31, 2021:
March 31,December 31,
(Dollars in millions)20222021
Sales rebates$54.7 $70.3 
Product warranty13.0 11.7 
Operating lease liabilities25.7 26.2 
Professional fees11.2 10.8 
Restructuring7.0 7.0 
Taxes other than income and payroll taxes21.5 16.0 
Interest8.3 10.8 
Other119.4 97.8 
Total other current liabilities$260.8 $250.6 
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Note 10 - Financing Arrangements
Short-term debt at March 31, 2022 and December 31, 2021 was as follows:
March 31,
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 March 31, 2022 and 0.50% to 2.00% at December 31, 2021
$29.9 $42.6 
Short-term debt$29.9 $42.6 
The lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $268.4 million in the aggregate. Most of these lines of credit are uncommitted. At March 31, 2022, the Company’s foreign subsidiaries had borrowings outstanding of $29.9 million and bank guarantees of $0.3 million, which reduced the aggregate availability under these facilities to $238.2 million.

Long-term debt at March 31, 2022 and December 31, 2021 was as follows:
March 31,
2022
December 31,
2021
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 1.17% and Euro of 1.00% at March 31, 2022 and U.S. Dollar of 1.09% and Euro of 1.00% at December 31, 2021
$8.8 $9.0 
Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 1.58% at March 31, 2022 and 1.23% at December 31, 2021
319.0 321.1 
Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%
349.6 349.5 
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%
165.8 170.3 
Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%
396.9 396.9 
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%
341.7  
Fixed-rate Euro Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%
15.4 15.8 
Other6.4 5.0 
Total debt$1,758.3 $1,422.3 
Less: Current maturities11.1 11.2 
Long-term debt$1,747.2 $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, 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 March 31, 2022. As of March 31, 2022, there were no outstanding borrowings under the Accounts Receivable Facility. 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.

9

Note 10 - 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 March 31, 2022, the Company had $8.8 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $641.2 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio.
On March 28, 2022, the Company issued fixed-rate unsecured senior notes ("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 to repay borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance, and for general corporate purposes.
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.
At March 31, 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 March 31, 2022, outstanding letters of credit totaled $42.8 million, most with expiration dates within 12 months.
The maturities of long-term debt (including $3.8 million of finance leases) subsequent to March 31, 2022 are as follows:
Year
2022$8.8 
2023317.6 
2024360.5 
20251.7 
202611.5 
2027192.2 
Thereafter866.0 
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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, 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 $6.4 million and $6.0 million for various known environmental matters that are probable and reasonably estimable at March 31, 2022 and December 31, 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 $13.0 million and $11.7 million at March 31, 2022 and December 31, 2021, respectively. The increase in the liability primarily relates to accruals that are based on the best estimate of costs for future claims based on products sold that are still under warranty. The estimate of these accruals is based on historical claims and expected trends that continue to mature. Any significant change to these assumptions may be material to the results of operations in any particular period in which that change occurs.

The following is a rollforward of the consolidated product warranty accrual for the three months ended March 31, 2022 and twelve months ended December 31, 2021:
March 31,
2022
December 31,
2021
Beginning balance, January 1$11.7 $9.4 
Expense2.2 10.1 
Payments(0.9)(7.8)
Ending balance$13.0 $11.7 
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Note 12 - Equity
The following tables present the changes in the components of equity for the three months ended March 31, 2022 and 2021, respectively:

  The Timken Company Shareholders 
 TotalStated
Capital
Other
Paid-In
Capital
Retained EarningsAccumulated
Other
Comprehensive
Income (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 income121.9 118.2 3.7 
Foreign currency translation adjustment(22.6)(20.0)(2.6)
Pension and other postretirement liability
   adjustments (net of income tax benefit
   of $0.5 million)
(1.5)(1.5)
Change in fair value of derivative financial
   instruments, net of reclassifications
2.0 2.0 
Dividends – $0.30 per share
(23.5)(23.5)
Stock-based compensation expense7.1 7.1 
Stock purchased at fair market value(100.0)(100.0)
Stock option exercise activity1.4 1.4 
Payments related to tax withholding for
   stock-based compensation
(7.5)(7.5)
Balance at March 31, 2022$2,355.0 $40.7 $795.4 $1,711.1 $(42.5)$(233.6)$83.9 

  The Timken Company Shareholders 
 TotalStated
Capital
Other
Paid-In
Capital
Retained EarningsAccumulated
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 income116.0 113.3 2.7 
Foreign currency translation adjustment(44.4)(44.0)(0.4)
Pension and other postretirement liability
   adjustments (net of income tax benefit
   of $0.6 million)
(1.6)(1.6)
Change in fair value of derivative financial
   instruments, net of reclassifications
2.2 2.2 
Dividends – $0.29 per share
(23.8)(23.8)
Stock-based compensation expense6.5 6.5 
Stock purchased at fair market value(26.3)(26.3)
Stock option exercise activity14.1 14.1 
Payments related to tax withholding for
   stock-based compensation
(17.8)(17.8)
Balance at March 31, 2021$2,250.1 $40.7 $761.3 $1,429.0 $(2.1)$(53.4)$74.6 
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Note 13 - Impairment and Restructuring Charges
Impairment and restructuring charges by segment are comprised of the following:
For the three months ended March 31, 2022:
Mobile IndustriesProcess IndustriesTotal
Severance and related benefit costs$0.4 $(0.1)$0.3 
Exit costs0.7  0.7 
Total$1.1 $(0.1)$1.0 
For the three months ended March 31, 2021:
Mobile IndustriesProcess IndustriesTotal
Impairment charges$0.1 $3.3 $3.4 
Severance and related benefit costs 0.5 0.5 
Exit costs0.1  0.1 
Total$0.2 $3.8 $4.0 
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:
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 of its single-row tapered roller bearing production to other bearing facilities in Europe, Asia and the United States. The Company expects to complete the closure by June of 2022 and is expected to affect approximately 110 employees. The Company expects to incur approximately $9 million to $11 million of expenses related to this closure. During the three months ended March 31, 2022, the Company recorded severance and related benefits of $0.4 million and exit costs of $0.6 million related to this closure. The Company has incurred cumulative pretax costs related to this closure of $7.5 million as of March 31, 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 cease operations by the end of the fourth quarter of 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 $11 million to $14 million of expenses related to this closure. During the three months ended March 31, 2021, the Company recorded severance and related benefit costs of $0.3 million, respectively, related to this closure. The Company has incurred cumulative pretax costs related to this closure of $11.1 million as of March 31, 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 months ended March 31, 2021. Management concluded no further investment would be made in these assets and as a result, reduced the value to zero.

13

Note 13 - Impairment and Restructuring Charges (continued)
Consolidated Restructuring Accrual:
The following is a rollforward of the consolidated restructuring accrual for the three months ended March 31, 2022 and twelve months ended December 31, 2021:
March 31,
2022
December 31,
2021
Beginning balance, January 1$7.0 $8.0 
Expense1.0 4.4 
Payments(1.0)(5.4)
Ending balance$7.0 $7.0 
The restructuring accrual at March 31, 2022 and December 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.
14

Note 14 - Retirement Benefit Plans
The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans. The amounts for the three months ended March 31, 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, 2022.
U.S. PlansInternational PlansTotal
 Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
 202220212022202120222021
Components of net periodic benefit
   cost (credit):
Service cost$1.9 $2.5 $0.4 $0.5 $2.3 $3.0 
Interest cost4.1 4.4 1.5 1.1 5.6 5.5 
Expected return on plan assets(5.2)(6.1)(2.5)(2.5)(7.7)(8.6)
Amortization of prior service cost0.3 0.3   0.3 0.3 
Recognition of net actuarial losses 2.6 0.9   2.6 0.9 
   Net periodic benefit cost (credit)$3.7 $2.0 $(0.6)$(0.9)$3.1 $1.1 
The Company expects full year 2022 lump sum payments for one of its U.S. defined benefit pension plans to exceed annual interest and service costs. This expectation triggered a remeasurement of assets and obligations for the plan. As a result of this remeasurement, the Company recognized net actuarial losses ("Mark-to-Market Charges") of $2.6 million during the three months ended March 31, 2022.
For the three months ended March 31, 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. This expectation triggered a remeasurement of assets and obligations for these plans. As a result of this remeasurement, the Company recognized net actuarial losses of $0.9 million during the three months ended March 31, 2021.
Note 15 - Other Postretirement Benefit Plans
The following table sets forth the net periodic benefit cost for the Company’s other postretirement benefit plans. The amounts for the three months ended March 31, 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, 2022.
 Three Months Ended
March 31,
 20222021
Components of net periodic benefit credit:
Interest cost$0.4 $0.4 
Amortization of prior service credit(2.5)(2.5)