TIMKEN CO

Previous wording

The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and related services. With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward. The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, GGB®, Philadelphia Gear®, Cone Drive®, Rollon®, Nadella®, Diamond®, Drives®, Groeneveld®, BEKA®, Des-Case®, Lovejoy® and Lagersmit®. Timken employs more than 19,000 people globally in 45 countries. The Company operates under two reportable segments: (1) Engineered Bearings and (2) Industrial Motion. The following further describes these business segments:

Current wording

The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and related services. With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward. The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, GGB®, Philadelphia Gear®, Cone Drive®, Rollon®, Nadella®, Diamond®, Drives®, Groeneveld®, BEKA®, Des-Case®, Lovejoy®, Lagersmit® and CGI. Timken employs more than 19,000 people globally in 45 countries. The Company operates under two reportable segments: (1) Engineered Bearings and (2) Industrial Motion. The following further describes these business segments:

Previous wording

•Timken’s Industrial Motion segment includes a diverse and growing portfolio of engineered products, including industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, couplings, filtration systems and industrial clutches and brakes that keep systems running efficiently. Industrial Motion also includes industrial drivetrain services, which return equipment to like-new condition. The Industrial Motion portfolio features many strong brands, including Philadelphia Gear®, Cone Drive®, Spinea®, Rollon®, Nadella®, Groeneveld®, BEKA®, Des-Case®, Diamond®, Drives®, Timken® Belts, Lovejoy®, PT Tech® and Lagersmit®. Industrial Motion products are used across a broad range of industries, including solar energy, automation, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical and more.

Current wording

•Timken’s Industrial Motion segment includes a diverse and growing portfolio of engineered products, including industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, couplings, filtration systems and industrial clutches and brakes that keep systems running efficiently. Industrial Motion also includes industrial drivetrain services, which return equipment to like-new condition. The Industrial Motion portfolio features many strong brands, including Philadelphia Gear®, Cone Drive®, Spinea®, Rollon®, Nadella®, Groeneveld®, BEKA®, Des-Case®, Diamond®, Drives®, Timken® Belts, Lovejoy®, PT Tech®, Lagersmit® and CGI. Industrial Motion products are used across a broad range of industries, including solar energy, automation, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical and more.

Previous wording

The decrease in net sales for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023 was driven by lower organic sales and the unfavorable impact of foreign currency exchange rate changes, partially offset by the benefit of acquisitions (net of divestitures).

Current wording

Net sales decreased for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023. The decrease was primarily driven by lower organic demand in China and Europe, and the unfavorable impact of foreign currency exchange rate changes, partially offset by the benefit of acquisitions (net of divestitures) and favorable pricing.

Previous wording

The decrease in net income for the three months ended June 30, 2024 compared with the three months ended June 30, 2023 was primarily due to the impact of lower volume, higher interest expense, and the unfavorable impact of foreign currency exchange rate changes, partially offset by favorable price/mix, lower operating costs, and the benefit of acquisitions (net of divestitures). The decrease in net income for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 was primarily due to the impact of lower volume, higher interest expense, and the unfavorable impact of foreign currency exchange rate changes, partially offset by lower operating costs, favorable price/mix, lower impairment charges, and the benefit of acquisitions (net of divestitures).

Current wording

Net income decreased for the three months ended September 30, 2024 compared with the three months ended September 30, 2023 primarily due to the impact of lower volume, higher logistics costs, the unfavorable impact of foreign currency exchange rate changes, and higher selling, general, and administrative (SG&A) costs, partially offset by the gain on the sale of a former bearing manufacturing plant, favorable price/mix, lower impairment and restructuring charges and the benefit of acquisitions (net of divestitures). Net income decreased for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 primarily due to the impact of lower volume, the unfavorable impact of foreign currency exchange rate changes, and higher interest expense, partially offset by favorable price/mix, lower impairment charges, the benefit of acquisitions (net of divestitures), the gain on the sale of a former bearing manufacturing plant, and lower manufacturing and SG&A costs.

Previous wording

The Company expects 2024 full-year revenue to be down 3% to 4% compared to 2023, driven by lower demand and unfavorable currency impact, partially offset by the favorable impact from acquisitions (net of divestitures) and favorable pricing. The Company's net earnings are expected to be down in 2024 compared with 2023, primarily due to the impact of lower sales volume, higher operating costs, and a higher income tax rate, partially offset by lower impairment and pension remeasurement charges, favorable price/mix, and the benefit of acquisitions (net of divestitures).

Current wording

The Company expects 2024 full-year revenue to be down approximately 4% compared to 2023, driven by lower demand and unfavorable currency impact, partially offset by the favorable impact from acquisitions (net of divestitures) and favorable pricing. The Company's net earnings are expected to be down in 2024 compared with 2023, primarily due to the impact of lower sales volume, higher operating costs, higher interest expense and a higher income tax rate, partially offset by favorable price/mix, lower impairment and pension remeasurement charges, and the benefit of acquisitions (net of divestitures).

Previous wording

The Company expects to generate a comparable amount of cash from operating activities in 2024 compared to 2023. The Company expects capital expenditures to remain flat in 2024 compared to 2023, and relatively in line with 2023 spending as a percentage of sales (4.0%).

Current wording

The Company expects to generate a lower amount of cash from operating activities in 2024 compared to 2023 primarily due to lower expected net income. The Company expects capital expenditures to remain flat in 2024 compared to 2023, and relatively in line with 2023 spending as a percentage of sales (4.0%).

Previous wording

Net sales decreased for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023. The decrease was driven by lower organic sales of $98 and $214 million, respectively (lower volume partially offset by favorable pricing), including a significant decline in the renewable energy market sector, and the unfavorable impact of foreign currency exchange rate changes of $14 and $20 million, respectively, partially offset by the favorable impact of acquisitions (net of divestitures) of $22 and $72 million, respectively.

Current wording

Net sales decreased for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023. The decrease was driven by lower organic revenue of $33 million and $247 million, respectively (lower volume partially offset by favorable pricing) and the unfavorable impact of foreign currency exchange rate changes of $3 million and $23 million, respectively, partially offset by the favorable impact of acquisitions (net of divestitures) of $21 million and $92 million, respectively. The lower demand in the three and nine months ended September 30, 2024 was experienced across both the Engineered Bearings and Industrial Motion segments.

Previous wording

Operating income decreased for the three months ended June 30, 2024 compared with the three months ended June 30, 2023, due to the unfavorable impact of lower sales net of cost of products sold, increased amortization expense, and higher impairment charges, offset partially by lower SG&A expenses. Operating income decreased for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, due to the unfavorable impact of lower sales net of cost of products sold, higher SG&A expenses, and increased amortization expense, partially offset by lower impairment and restructuring charges.

Current wording

Operating income decreased for the three months ended September 30, 2024 compared with the three months ended September 30, 2023, due to the unfavorable impact of lower sales net of cost of products sold, higher SG&A expenses, and increased amortization expense, offset partially by the gain on the sale of a former bearing manufacturing plant and lower impairment and restructuring charges. Operating income decreased for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, due to the unfavorable impact of lower sales net of cost of products sold, higher SG&A expenses, and increased amortization expense, partially offset by lower impairment and restructuring charges and the gain on the sale of a former bearing manufacturing plant.

Previous wording

•Cost of products sold decreased for the three months ended June 30, 2024 compared with the three months ended June 30, 2023, due to the impact of lower volume of $54 million and the impact of foreign currency exchange rate changes of $8 million, partially offset by the incremental cost of goods sold from acquisitions (net of divestitures) of $8 million. Cost of products sold decreased for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, due to the impact of lower volume of $126 million, the impact of foreign currency exchange rate changes of $13 million, and favorable net material and logistics costs of $6 million, partially offset by the incremental cost of goods sold from acquisitions (net of divestitures) of $34 million.

Current wording

•Cost of products sold decreased for the three months ended September 30, 2024 compared with the three months ended September 30, 2023, due to the impact of lower volume of $20 million, partially offset by higher net material and logistics costs of $8 million and the incremental cost of goods sold from acquisitions (net of divestitures) of $6 million. Cost of products sold decreased for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, due to the impact of lower volume of $138 million, the impact of foreign currency exchange rate changes of $16 million, partially offset by the incremental cost of goods sold from acquisitions (net of divestitures) of $40 million and unfavorable net material and logistics costs of $4 million.

Previous wording

•SG&A expenses decreased for the three months ended June 30, 2024 compared with the three months ended June 30, 2023, primarily due to favorable impact from currency and reduced discretionary spending to align with the lower demand levels, partially offset by the impact of acquisitions and higher compensation expense. SG&A expenses increased for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, primarily due to the impact of acquisitions, partially offset by favorable impact from currency, lower compensation expense, and reduced discretionary spending to align with the lower demand levels.

Current wording

•SG&A expenses increased for the three months ended September 30, 2024 compared with the three months ended September 30, 2023, primarily due to the impact of acquisitions and bad debt expense. SG&A expenses increased for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, primarily due to the impact of acquisitions and bad debt expense, partially offset by the reduced discretionary spending to align with the lower demand levels, and reduced compensation expense.

Previous wording

•Amortization of intangible assets increased for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023, primarily due to the addition of intangible assets from the six acquisitions that were completed during 2023. Refer to Note 3 - Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements for additional information.

Current wording

•Amortization of intangible assets increased for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023, primarily due to the addition of intangible assets from the six acquisitions that were completed during 2023, as well as the CGI acquisition, which was completed in the third quarter of 2024. Refer to Note 3 - Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements for additional information.

Previous wording

•Impairment and restructuring charges were higher for the three months ended June 30, 2024 compared with the three months ended June 30, 2023, primarily due to the impairment of certain engineering-related assets used in the Engineered Bearing Segment. Impairment and restructuring charges were lower for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, primarily due to impairment charges of $28.3 million related to the goodwill impairment recorded in the Industrial Motion segment during the first three months of 2023.

Current wording

•Impairment and restructuring charges were lower for the three months ended September 30, 2024 compared with the three months ended September 30, 2023, primarily due to impairment charges for the closure of the plant in Gaffney, South Carolina, during the three months ended September 30, 2023. Impairment and restructuring charges were lower for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, primarily due to impairment charges of $28.3 million related to the goodwill impairment recorded in the Industrial Motion segment during the first quarter of 2023, partially offset by the impairment of certain engineering-related assets used in the Engineered Bearing Segment during the second quarter of 2024.

Previous wording

The increase in net interest expense for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023 was due to increased debt levels and higher average interest rates.

Current wording

The increase in interest income for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 was due to increased cash levels and higher average interest rates.

Previous wording

The change in non-service pension and other postretirement expense (income) for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023 was due to pension remeasurement gains recognized during 2023. Refer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information.

Current wording

The increase in non-service pension and other postretirement expense for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 was due to pension remeasurement gains recognized during 2023. Refer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information.

Previous wording

The change in other income, net, for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 was primarily due to a gain of $4.8 million on the divestiture of SE Setco, a 50% owned joint venture, during the six months ended June 30, 2023.

Current wording

The change in other (expense) income for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 was primarily driven by net foreign currency losses in the current year periods of $5.4 million and $11.0 million, respectively. In addition, a gain of $4.8 million on the divestiture of SE Setco, a 50% owned joint venture, was recognized during the nine months ended September 30, 2023.

Previous wording

Income tax expense decreased $11.0 million for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 due to lower pre-tax earnings. This was partially offset by the net unfavorable impact of discrete items in comparison to the year ago period.

Current wording

Income tax expense decreased $8.7 million and $19.7 million for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023, respectively, due to lower pre-tax earnings and the net favorable impact of discrete items in comparison to the year ago period.

Previous wording

The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S. GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2023 and foreign currency exchange rate changes. The effects of acquisitions, divestitures and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.

Current wording

The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S. GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2024 and 2023 and foreign currency exchange rate changes. The effects of acquisitions, divestitures and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.

Previous wording

The following item represents the Company's acquisitions and divestitures completed in 2023:

Current wording

The following item represents the Company's acquisitions and divestitures completed in 2024 and 2023:

Previous wording

•The Company completed the sale of Jiangsu TWB Bearings Co., Ltd. ("TWB") during the fourth quarter of 2023. Results for TWB were reported in the Engineered Bearings segment.

Current wording

•The Company completed the sale of TWB during the fourth quarter of 2023. Results for TWB were reported in the Engineered Bearings segment.

Previous wording

The Engineered Bearings segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, decreased $152.7 million or 8.7% in the six months ended June 30, 2024 compared with the six months ended June 30, 2023. The decrease was driven by a significant volume decline in the renewable energy sector, and lower volume in the off-highway and general industrial sectors, partially offset by higher volume in the rail sector, and higher pricing. EBITDA decreased by $48.5 million or 12.4% for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, primarily due to the impact of lower volume and the unfavorable impact of foreign currency exchange rate changes, partially offset by favorable price/mix and improved operating cost performance.

Current wording

The Engineered Bearings segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, decreased $180.8 million or 7.1% in the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The decrease was driven by a significant volume decline in the renewable energy sector, and lower volume in the off-highway and general & heavy industrial market sectors, partially offset by higher volume in the rail, aerospace and industrial distribution sectors, and higher pricing. EBITDA decreased by $46.7 million or 8.7% for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, primarily due to the impact of lower volume and the unfavorable impact of foreign currency exchange rate changes, partially offset by favorable price/mix, improved operating cost performance, the gain on the sale of a former bearing manufacturing facility, lower impairment charges, and the benefit of acquisitions.

Previous wording

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $38.0 million or 9.2% in the three months ended June 30, 2024 compared with the three months ended June 30, 2023. The decrease reflects lower volume across most platforms, with drive systems and linear motion experiencing the largest declines, partially offset by higher pricing. EBITDA decreased $5.3 million or 6.6% for the three months ended June 30, 2024 compared with the three months ended June 30, 2023 primarily due to the impact of lower volume, partially offset by the benefit of acquisitions and lower SG&A costs.

Current wording

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $5.0 million or 1.4% in the three months ended September 30, 2024 compared with the three months ended September 30, 2023. The decrease reflects lower demand across most platforms, with lubrication systems experiencing the largest decline, partially offset by growth in the drive systems platform, and favorable pricing. EBITDA increased $0.6 million or 0.9% for the three months ended September 30, 2024 compared with the three months ended September 30, 2023 primarily due to the benefit of acquisitions, partially offset by the impact of lower volume and higher operating costs.

Previous wording

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $61.5 million or 7.9% in the six months ended June 30, 2024 compared with the six months ended June 30, 2023. The decrease reflects lower volume across most platforms, with drive systems, linear motion and belts and chain experiencing the largest decline, partially offset by higher services revenue and higher pricing. EBITDA increased $23.8 million or 18.4% for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 primarily due to lower impairment charges, the benefit of acquisitions, and favorable price/mix, partially offset by the impact of lower volume. The lower impairment charges were primarily due to a goodwill impairment recorded in the quarter ended March 31, 2023.

Current wording

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $66.6 million or 5.8% in the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The decrease reflects lower volume across most platforms, with linear motion, lubrication systems, belts and chain, and drive systems experiencing the largest decline, partially offset by higher industrial services revenue and favorable pricing. EBITDA increased $24.4 million or 12.2% for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 primarily due to lower impairment charges, the benefit of acquisitions, and favorable price/mix, partially offset by the impact of lower volume. The lower impairment charges were primarily due to a goodwill impairment recorded in the quarter ended March 31, 2023.

Previous wording

Unallocated corporate expense increased for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023 primarily due to the unfavorable impact of foreign currency exchange rate changes.

Current wording

Unallocated corporate expense increased for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 primarily due to unfavorable foreign currency losses in the current year periods of $5.4 million and $11.0 million, respectively.

Previous wording

The decrease in net cash provided by operating activities for the first six months of 2024 compared with the first six months of 2023 was primarily due to a decrease in net income of $42.6 million, lower non-cash impairment charges of $26.4 million, the unfavorable impact of working capital items of $28.5 million and higher pension and postretirement payments of $8.9 million, partially offset by the favorable impact of income taxes on cash of $56.0 million due to lower tax payments. Refer to the tables below for additional detail of the impact of each line item on net cash provided by operating activities.

Current wording

The decrease in net cash provided by operating activities for the first nine months of 2024 compared with the first nine months of 2023 was due to the unfavorable impact of working capital items of $80.0 million, a decrease in net income of $45.9 million, lower non-cash impairment charges of $31.2 million, and higher gains from sales of assets of $14.6 million, partially offset by the favorable impact of income taxes on cash of $34.2 million and higher depreciation and amortization of $16.6 million. Refer to the tables below for additional detail of the impact of each line item on net cash provided by operating activities.

Previous wording

The following table displays the impact of working capital items on cash during the first six months of 2024 and 2023, respectively:

Current wording

The following table displays the impact of working capital items on cash during the first nine months of 2024 and 2023, respectively:

Previous wording

The following table displays the impact of income taxes on cash during the firstsix months of 2024 and 2023, respectively:

Current wording

The following table displays the impact of income taxes on cash during the first nine months of 2024 and 2023, respectively:

Previous wording

The decrease in net cash used in investing activities for the first six months of 2024 compared with the first six months of 2023 was primarily due to a decrease in cash used for acquisitions of $324.2 million, an increase in cash from the net liquidation of short-term marketable securities of $21.6 million and lower capital expenditures of $9.9 million, partially offset by lower proceeds from divestitures of $4.2 million.

Current wording

The decrease in net cash used in investing activities for the first nine months of 2024 compared with the first nine months of 2023 was due to a decrease in cash used for acquisitions of $297.0 million, an increase in cash from the net liquidation of short-term marketable securities of $22.1 million, lower capital expenditures of $18.5 million, and higher proceeds from disposals of fixed assets of $15.8 million, offset partially by lower proceeds from divestitures of $4.2 million.

Previous wording

The decrease in net cash used in financing activities for the first six months of 2024 compared with the first six months of 2023 was primarily due to a decrease in net borrowings of $318.9 million, a decrease in the proceeds from the sale of shares of TIL of $52.5 million and a decrease in proceeds from the exercise of stock options of $11.8 million, partially offset by a decrease in the purchase of treasury shares of $124.8 million.

Current wording

The change in net cash used in/provided by financing activities for the first nine months of 2024 compared with the first nine months of 2023 was due to a decrease in net borrowings of $406.8 million and lower proceeds from the sale of shares of TIL during the 2024 period compared to the 2023 period in the amount of $52.5 million, and the impact of other items (net), partially offset by a decrease in the purchase of treasury shares of $187.0 million.

Previous wording

At June 30, 2024, the Company had strong liquidity with $469.9 million of cash and cash equivalents on the Consolidated Balance Sheet, as well as $809.3 million available under committed credit lines. Of the $469.9 million of cash and cash equivalents, $446.0 million resided in jurisdictions outside the United States. Repatriation of non-U.S. cash could be subject to taxes and some portion may be subject to governmental restrictions. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the United States. This strategy includes making investments in facilities, equipment and potential new acquisitions. The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.

Current wording

At September 30, 2024, the Company had strong liquidity with $412.7 million of cash and cash equivalents on the Consolidated Balance Sheet, as well as $778.0 million available under committed credit lines. Of the $412.7 million of cash and cash equivalents, $381.2 million resided in jurisdictions outside the United States. Repatriation of non-U.S. cash could be subject to taxes and some portion may be subject to governmental restrictions. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the United States. This strategy includes making investments in facilities, equipment and potential new acquisitions. The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.

Previous wording

On December 5, 2022, the Company entered into the Credit Agreement, which is comprised of a $750.0 million Senior Credit Facility and a $400.0 million 2027 Term Loan that each mature on December 5, 2027. The interest rates under the Credit Agreement are based on SOFR. At June 30, 2024, the Company had $40.7 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $709.3 million. The Credit Agreement has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0. As of June 30, 2024, the Company's consolidated leverage ratio was 1.98 to 1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of June 30, 2024, the Company's consolidated interest coverage ratio was 7.72 to 1.0.

Current wording

On December 5, 2022, the Company entered into the Credit Agreement, which is comprised of a $750.0 million Senior Credit Facility and a $400.0 million 2027 Term Loan that each mature on December 5, 2027. The interest rates under the Credit Agreement are based on SOFR. At September 30, 2024, the Company had no outstanding borrowings under the Senior Credit Facility. The Credit Agreement has two financial covenants: a consolidated net leverage ratio and a consolidated interest coverage ratio. The maximum consolidated net leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0. As of September 30, 2024, the Company's consolidated net leverage ratio was 2.14 to 1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of September 30, 2024, the Company's consolidated interest coverage ratio was 7.48 to 1.0.

Previous wording

The interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating. The average rate on outstanding U.S. dollar borrowings was 6.42% and the average rate on outstanding Euro borrowings was 4.80% as of June 30, 2024. In addition, the Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility. As of June 30, 2024, the Company carried investment-grade credit ratings with both Moody's (Baa2) and S&P Global (BBB-).

Current wording

The interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating. The average rate on outstanding U.S. dollar borrowings was 6.24% and the average rate on outstanding Euro borrowings was 4.63% as of September 30, 2024. In addition, the Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility. As of September 30, 2024, the Company carried investment-grade credit ratings with both Moody's (Baa2) and S&P Global (BBB-).

Previous wording

The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2026. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company. As of June 30, 2024, the Company had no outstanding borrowings under the Accounts Receivable Facility and no borrowing base limitations.

Current wording

The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2026. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company. The Accounts Receivable Facility had no borrowing base limitations at September 30, 2024. As of September 30, 2024, the Company had $72 million of outstanding borrowings under the Accounts Receivable Facility, which reduced the availability to $28 million.

Previous wording

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $223.9 million. At June 30, 2024, the Company had borrowings outstanding of $27.7 million and bank guarantees of $2.1 million, which reduced the aggregate availability under these facilities to $194.1 million.

Current wording

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $231.5 million. At September 30, 2024, the Company had borrowings outstanding of $25.9 million and bank guarantees of $2.4 million, which reduced the aggregate availability under these facilities to $203.2 million.

Previous wording

The Company expects to generate a comparable amount of cash from operating activities in 2024 compared to 2023. The Company expects capital expenditures to remain relatively flat in 2024 compared to 2023 and in line with 2023 spending as a percentage of sales (4.0%).

Current wording

The Company expects to generate a lower amount of cash from operating activities in 2024 compared to 2023 primarily due to lower expected net income. The Company expects capital expenditures to remain relatively flat in 2024 compared to 2023 and in line with 2023 spending as a percentage of sales (4.0%).

Previous wording

During the first six months of 2024, the Company made cash contributions and payments of $15.5 million to its global defined benefit pension plans and $0.7 million to its other postretirement benefit plans. The Company expects to make contributions to its global defined benefit plans of approximately $25 million in 2024. The Company expects to make payments of approximately $4 million to its other postretirement benefit plans in 2024. Excluding mark-to-market charges, the Company expects higher pension and other postretirement benefits expense in 2024 compared to 2023 primarily due to lower expected returns on pension plan assets and higher interest expense.

Current wording

During the first nine months of 2024, the Company made cash contributions and payments of $21.7 million to its global defined benefit pension plans and $1.2 million to its other postretirement benefit plans. The Company expects to make contributions to its global defined benefit plans of approximately $25 million in 2024. The Company expects to make payments of approximately $4 million to its other postretirement benefit plans in 2024. Excluding mark-to-market charges, the Company expects higher pension and other postretirement benefits expense in 2024 compared to 2023 primarily due to lower expected returns on pension plan assets and higher interest expense.

Previous wording

The Company's financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company reviews its critical accounting policies throughout the year. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates, as described in its Annual Report on Form 10-K for the year ended December 31, 2023, during the six months ended June 30, 2024.

Current wording

The Company's financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company reviews its critical accounting policies throughout the year. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates, as described in its Annual Report on Form 10-K for the year ended December 31, 2023, during the nine months ended September 30, 2024.

Previous wording

For the six months ended June 30, 2024, the Company recorded negative foreign currency translation adjustments of $79.5 million that decreased shareholders' equity, compared with negative foreign currency translation adjustments of $0.2 million that decreased shareholders' equity for the six months ended June 30, 2023. The foreign currency translation adjustments for the six months ended June 30, 2024 was negatively impacted by the strengthening of the U.S. dollar relative to other foreign currencies, including the Euro, the Chinese Renminbi and Mexican Peso.

Current wording

For the nine months ended September 30, 2024, the Company recorded negative foreign currency translation adjustments of $0.2 million that decreased shareholders' equity, compared with negative foreign currency translation adjustments of $63.5 million that decreased shareholders' equity for the nine months ended September 30, 2023. The foreign currency translation adjustments for the nine months ended September 30, 2024 was negatively impacted by the strengthening of the U.S. dollar relative to other foreign currencies, including the Mexican Peso.

Previous wording

Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the three months ended June 30, 2024 totaled $0.4 million of net losses, compared with $1.7 million of net gains during the three months ended June 30, 2023. Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the six months ended June 30, 2024 totaled $3.6 million of net losses, compared with $1.3 million of net losses during the six months ended June 30, 2023.

Current wording

Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the three months ended September 30, 2024 totaled $6.3 million of net losses, compared with $5.2 million of net losses during the three months ended September 30, 2023. Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the nine months ended September 30, 2024 totaled $9.9 million of net losses, compared with $6.5 million of net losses during the nine months ended September 30, 2023.

Previous wording

On March 26, 2024, the Company announced that it had reached an agreement with Tarak Mehta to become Timken’s next President and Chief Executive Officer. Mr. Mehta is an accomplished industry veteran who most recently served as President of the Motion business and a member of the Group Executive Committee at ABB Ltd. He will succeed Richard G. Kyle, who has served as Timken’s President and Chief Executive Officer since 2014. Mr. Mehta is expected to start his employment with the Company on September 5, 2024, at which time Mr. Kyle will move into an advisory role to assist with the leadership transition. Mr. Kyle is expected to retire as an employee of Timken on February 15, 2025, but will remain on the Company’s Board of Directors. Mr. Mehta will also be appointed to the Board of Directors.

Current wording

On September 5, 2024, the Board of Directors (the "Board") of the Company appointed Tarak Mehta President and Chief Executive Officer ("CEO") of the Company and appointed Richard G. Kyle Advisor to the CEO. Mr. Mehta is an accomplished industry veteran who most recently served as President of the Motion business and a member of the Group Executive Committee at ABB Ltd. He succeeds Richard G. Kyle, who has served as Timken’s President and CEO since 2014. Mr. Kyle will continue to act as the Company’s principal executive officer through this filing of the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024, after which Mr. Mehta will assume such role. Mr. Kyle will serve as Advisor to the CEO until his scheduled retirement as an employee of the Company on February 15, 2025.

Previous wording

(1)Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives; and (iv) impairment of assets. On March 26, 2024, the Company announced that Richard G. Kyle, President and CEO of the Company would be retiring from his position as CEO and that Tarak Mehta would be appointed CEO on September 5, 2024. Impairment, restructuring and reorganization charges for 2024 include the acceleration of certain stock compensation awards for Mr. Kyle and other one-time costs associated with the transition. Impairment, restructuring and reorganization charges for 2023 included $28.3 million related to the impairment of goodwill. The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges. However, management believes these actions are not representative of the Company’s core operations.

Current wording

(1)Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives; and (iv) impairment of assets. Impairment, restructuring and reorganization charges for 2023 included $28.3 million related to the impairment of goodwill. The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges. However, management believes these actions are not representative of the Company’s core operations.