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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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Ohio
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34-0577130
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|
(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
|
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|
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4500 Mount Pleasant Street NW
|
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North Canton
|
Ohio
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44720-5450
|
(Address of principal executive offices)
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(Zip Code)
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Title of each class
|
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Trading Symbol
|
|
Name of each exchange on which registered
|
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Common Shares, without par value
|
|
TKR
|
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The New York Stock Exchange
|
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Large accelerated filer
|
|
☒
|
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Accelerated filer
|
☐
|
|
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|
|
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Non-accelerated filer
|
|
☐
|
|
Smaller reporting company
|
☐
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Emerging growth company
|
☐
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Class
|
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Outstanding at March 31, 2020
|
|
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Common Shares, without par value
|
|
75,066,149 shares
|
|
|
|
|
PAGE
|
I.
|
|
|
|
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Item 1.
|
||
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Item 2.
|
||
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Item 3.
|
||
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Item 4.
|
||
II.
|
|
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Item 1.
|
||
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Item1A.
|
||
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Item 2.
|
||
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Item 6.
|
|
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
|
|
|
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
|
|
|
(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
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
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%
|
|
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
|
|
|
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
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Provision for income taxes
|
$
|
29.6
|
|
|
$
|
41.3
|
|
Effective tax rate
|
26.1
|
%
|
|
30.2
|
%
|
|
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
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
|
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
|
|
$
|
920.1
|
|
$
|
1,964.8
|
|
$
|
(118.9
|
)
|
$
|
(1,001.7
|
)
|
$
|
82.9
|
|
|
|
The Timken Company Shareholders
|
|
||||||||||||||||||
|
Total
|
Stated
Capital
|
Other
Paid-In
Capital
|
Earnings
Invested
in the
Business
|
Accumulated
Other
Comprehensive
(Loss)
|
Treasury
Stock
|
Non
controlling
Interest
|
||||||||||||||
Balance at December 31, 2018
|
$
|
1,642.7
|
|
$
|
53.1
|
|
$
|
951.9
|
|
$
|
1,630.2
|
|
$
|
(95.3
|
)
|
$
|
(960.3
|
)
|
$
|
63.1
|
|
Net income
|
95.3
|
|
|
|
91.9
|
|
|
|
3.4
|
|
|||||||||||
Foreign currency translation adjustment
|
(4.2
|
)
|
|
|
|
(5.1
|
)
|
|
0.9
|
|
|||||||||||
Pension and postretirement liability
adjustments |
(0.1
|
)
|
|
|
|
(0.1
|
)
|
|
|
||||||||||||
Change in fair value of derivative financial
instruments, net of reclassifications |
(0.6
|
)
|
|
|
|
(0.6
|
)
|
|
|
||||||||||||
Dividends – $0.28 per share
|
(21.3
|
)
|
|
|
(21.3
|
)
|
|
|
|
||||||||||||
Stock-based compensation
|
7.8
|
|
|
7.8
|
|
|
|
|
|
||||||||||||
Stock purchased at fair market value
|
(8.3
|
)
|
|
|
|
|
(8.3
|
)
|
|
||||||||||||
Stock option exercise activity
|
1.0
|
|
|
(0.6
|
)
|
|
|
1.6
|
|
|
|||||||||||
Restricted share activity
|
—
|
|
|
(20.9
|
)
|
|
|
20.9
|
|
|
|||||||||||
Payments related to tax withholding for
stock-based compensation |
(6.4
|
)
|
|
|
|
|
|
(6.4
|
)
|
|
|||||||||||
Balance at March 31, 2019
|
$
|
1,705.9
|
|
$
|
53.1
|
|
$
|
938.2
|
|
$
|
1,700.8
|
|
$
|
(101.1
|
)
|
$
|
(952.5
|
)
|
$
|
67.4
|
|
|
Mobile Industries
|
Process Industries
|
Corporate
|
Total
|
||||||||
Impairment charges
|
$
|
—
|
|
$
|
0.1
|
|
$
|
—
|
|
$
|
0.1
|
|
Severance and related benefit costs
|
0.1
|
|
2.5
|
|
0.1
|
|
2.7
|
|
||||
Exit costs
|
0.6
|
|
0.2
|
|
—
|
|
0.8
|
|
||||
Total
|
$
|
0.7
|
|
$
|
2.8
|
|
$
|
0.1
|
|
$
|
3.6
|
|
|
March 31,
2020 |
||
Beginning balance, January 1
|
$
|
2.7
|
|
Expense
|
3.5
|
|
|
Payments
|
(1.7
|
)
|
|
Ending balance
|
$
|
4.5
|
|
|
U.S. Plans
|
International Plans
|
Total
|
|||||||||||||||
|
Three Months Ended
March 31, |
Three Months Ended
March 31, |
Three Months Ended
March 31, |
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Components of net periodic
benefit cost:
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
2.7
|
|
$
|
2.6
|
|
$
|
0.4
|
|
$
|
0.4
|
|
$
|
3.1
|
|
$
|
3.0
|
|
Interest cost
|
5.2
|
|
6.0
|
|
1.5
|
|
1.9
|
|
6.7
|
|
7.9
|
|
||||||
Expected return on plan assets
|
(6.3
|
)
|
(6.4
|
)
|
(2.2
|
)
|
(2.6
|
)
|
(8.5
|
)
|
(9.0
|
)
|
||||||
Amortization of prior service cost
|
0.4
|
|
0.4
|
|
—
|
|
—
|
|
0.4
|
|
0.4
|
|
||||||
Net periodic benefit cost (credit)
|
$
|
2.0
|
|
$
|
2.6
|
|
$
|
(0.3
|
)
|
$
|
(0.3
|
)
|
$
|
1.7
|
|
$
|
2.3
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Components of net periodic benefit (credit) cost:
|
|
|
|
||||
Interest cost
|
$
|
0.5
|
|
|
$
|
1.9
|
|
Expected return on plan assets
|
(0.1
|
)
|
|
(0.8
|
)
|
||
Amortization of prior service credit
|
(2.4
|
)
|
|
(0.5
|
)
|
||
Net periodic benefit (credit) cost
|
$
|
(2.0
|
)
|
|
$
|
0.6
|
|
|
Foreign currency translation adjustments
|
Pension and other postretirement liability adjustments
|
Unrealized loss on marketable securities
|
Change in fair value of derivative financial instruments
|
Total
|
||||||||||
Balance at December 31, 2019
|
$
|
(115.3
|
)
|
$
|
66.9
|
|
$
|
—
|
|
$
|
(1.7
|
)
|
$
|
(50.1
|
)
|
Other comprehensive (loss) income before
reclassifications and income taxes |
(78.8
|
)
|
0.2
|
|
(0.5
|
)
|
6.4
|
|
(72.7
|
)
|
|||||
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes
|
—
|
|
(2.0
|
)
|
—
|
|
(0.6
|
)
|
(2.6
|
)
|
|||||
Income tax (expense) benefit
|
—
|
|
0.5
|
|
0.1
|
|
(1.6
|
)
|
(1.0
|
)
|
|||||
Net current period other comprehensive
income (loss), net of income taxes
|
(78.8
|
)
|
(1.3
|
)
|
(0.4
|
)
|
4.2
|
|
(76.3
|
)
|
|||||
Noncontrolling interest
|
7.5
|
|
—
|
|
|
—
|
|
7.5
|
|
||||||
Net current period comprehensive (loss)
income, net of income taxes and
noncontrolling interest
|
(71.3
|
)
|
(1.3
|
)
|
(0.4
|
)
|
4.2
|
|
(68.8
|
)
|
|||||
Balance at March 31, 2020
|
$
|
(186.6
|
)
|
$
|
65.6
|
|
$
|
(0.4
|
)
|
$
|
2.5
|
|
$
|
(118.9
|
)
|
|
Foreign currency translation adjustments
|
Pension and other postretirement liability adjustments
|
Unrealized loss on marketable securities
|
Change in fair value of derivative financial instruments
|
Total
|
||||||||||
Balance at December 31, 2018
|
$
|
(95.6
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
0.3
|
|
$
|
(95.3
|
)
|
Other comprehensive (loss) income before
reclassifications and income taxes |
(4.2
|
)
|
(0.1
|
)
|
—
|
|
0.4
|
|
(3.9
|
)
|
|||||
Amounts reclassified from accumulated other
comprehensive (loss) income before income
taxes
|
—
|
|
—
|
|
—
|
|
(1.2
|
)
|
(1.2
|
)
|
|||||
Income tax benefit
|
—
|
|
—
|
|
—
|
|
0.2
|
|
0.2
|
|
|||||
Net current period other comprehensive
loss, net of income taxes |
(4.2
|
)
|
(0.1
|
)
|
—
|
|
(0.6
|
)
|
(4.9
|
)
|
|||||
Noncontrolling interest
|
(0.9
|
)
|
—
|
|
—
|
|
—
|
|
(0.9
|
)
|
|||||
Net current period comprehensive loss,
net of income taxes and noncontrolling
interest
|
(5.1
|
)
|
(0.1
|
)
|
—
|
|
(0.6
|
)
|
(5.8
|
)
|
|||||
Balance at March 31, 2019
|
$
|
(100.7
|
)
|
$
|
(0.1
|
)
|
$
|
—
|
|
$
|
(0.3
|
)
|
$
|
(101.1
|
)
|
|
March 31, 2020
|
|||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
385.0
|
|
$
|
382.6
|
|
$
|
2.4
|
|
$
|
—
|
|
Cash and cash equivalents measured at net asset value
|
2.5
|
|
|
|
|
|
|
|
||||
Restricted cash
|
6.5
|
|
6.5
|
|
—
|
|
—
|
|
||||
Short-term investments
|
61.1
|
|
36.0
|
|
25.1
|
|
—
|
|
||||
Foreign currency hedges
|
9.1
|
|
—
|
|
9.1
|
|
—
|
|
||||
Total Assets
|
$
|
464.2
|
|
$
|
425.1
|
|
$
|
36.6
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
||||||||
Foreign currency hedges
|
$
|
0.3
|
|
$
|
—
|
|
$
|
0.3
|
|
$
|
—
|
|
Total Liabilities
|
$
|
0.3
|
|
$
|
—
|
|
$
|
0.3
|
|
$
|
—
|
|
|
December 31, 2019
|
|||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
160.7
|
|
$
|
158.2
|
|
$
|
2.5
|
|
$
|
—
|
|
Cash and cash equivalents measured at net asset value
|
48.8
|
|
|
|
|
|||||||
Restricted cash
|
6.7
|
|
6.7
|
|
—
|
|
—
|
|
||||
Short-term investments
|
25.7
|
|
—
|
|
25.7
|
|
—
|
|
||||
Short-term investments measured at net asset value
|
0.1
|
|
|
|
|
|||||||
Foreign currency hedges
|
7.6
|
|
—
|
|
7.6
|
|
—
|
|
||||
Total Assets
|
$
|
249.6
|
|
$
|
164.9
|
|
$
|
35.8
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
||||||||
Foreign currency hedges
|
$
|
1.4
|
|
$
|
—
|
|
$
|
1.4
|
|
$
|
—
|
|
Total Liabilities
|
$
|
1.4
|
|
$
|
—
|
|
$
|
1.4
|
|
$
|
—
|
|
|
|
Amount of gain or (loss) recognized in income
|
||||||
|
|
Three Months Ended
March 31, |
||||||
Derivatives not designated as hedging instruments:
|
Location of gain or (loss) recognized in income
|
2020
|
|
2019
|
||||
Foreign currency forward contracts
|
Other income (expense), net
|
$
|
5.5
|
|
|
$
|
3.0
|
|
•
|
Mobile Industries serves OEM customers that manufacture off-highway equipment for the agricultural, mining and construction markets; on-highway vehicles including passenger cars, light trucks, and medium- and heavy-duty trucks; rail cars and locomotives; outdoor power equipment; rotorcraft and fixed-wing aircraft; and other mobile equipment. Beyond service parts sold to OEMs, aftermarket sales and services to individual end users, equipment owners, operators and maintenance shops are handled directly or through the Company's extensive network of authorized automotive and heavy-truck distributors.
|
•
|
Process Industries serves OEM and end-user customers in industries that place heavy demands on the fixed operating equipment they make or use in heavy and other general industrial sectors. This includes metals, cement and aggregate production; power generation and renewable energy sources; oil and gas extraction and refining; pulp and paper and food processing; automation and robotics; and health and critical motion control equipment. Other applications include marine equipment, gear drives, cranes, hoists and conveyors. This segment also supports aftermarket sales and service needs through its global network of authorized industrial distributors and through the provision of services directly to end users.
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Net sales
|
$
|
923.4
|
|
$
|
979.7
|
|
$
|
(56.3
|
)
|
(5.7
|
)%
|
Net income
|
84.0
|
|
95.3
|
|
(11.3
|
)
|
(11.9
|
)%
|
|||
Net income attributable to noncontrolling interest
|
3.3
|
|
3.4
|
|
(0.1
|
)
|
(2.9
|
)%
|
|||
Net income attributable to The Timken Company
|
$
|
80.7
|
|
$
|
91.9
|
|
$
|
(11.2
|
)
|
(12.2
|
)%
|
Diluted earnings per share
|
$
|
1.06
|
|
$
|
1.19
|
|
$
|
(0.13
|
)
|
(10.9
|
)%
|
Average number of shares – diluted
|
76,308,556
|
|
77,012,573
|
|
—
|
|
(0.9
|
)%
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Net Sales
|
$
|
923.4
|
|
$
|
979.7
|
|
$
|
(56.3
|
)
|
(5.7
|
)%
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
Change
|
|||||||
Gross profit
|
$
|
278.9
|
|
$
|
302.6
|
|
$
|
(23.7
|
)
|
(7.8
|
%)
|
Gross profit % to net sales
|
30.2
|
%
|
30.9
|
%
|
|
|
(70
|
) bps
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
Change
|
|||||||
Selling, general and administrative expenses
|
$
|
153.6
|
|
$
|
152.7
|
|
$
|
0.9
|
|
0.6
|
%
|
Selling, general and administrative expenses % to net sales
|
16.6
|
%
|
15.6
|
%
|
|
100
|
bps
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2020
|
2019
|
$ Change
|
% Change
|
||||||
Impairment charges
|
$
|
0.1
|
|
$
|
—
|
|
$
|
0.1
|
|
NM
|
Severance and related benefit costs
|
2.7
|
|
—
|
|
2.7
|
|
NM
|
|||
Exit costs
|
0.8
|
|
—
|
|
0.8
|
|
NM
|
|||
Total
|
$
|
3.6
|
|
$
|
—
|
|
$
|
3.6
|
|
NM
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Interest expense
|
$
|
(17.1
|
)
|
$
|
(18.0
|
)
|
$
|
0.9
|
|
(5.0
|
%)
|
Interest income
|
$
|
1.5
|
|
$
|
1.3
|
|
$
|
0.2
|
|
15.4
|
%
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Non-service pension and other postretirement
income
|
$
|
3.4
|
|
$
|
0.1
|
|
$
|
3.3
|
|
NM
|
|
Other income, net
|
4.1
|
|
3.3
|
|
0.8
|
|
24.2
|
%
|
|||
Total other income, net
|
$
|
7.5
|
|
$
|
3.4
|
|
$
|
4.1
|
|
120.6
|
%
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Provision for income taxes
|
$
|
29.6
|
|
$
|
41.3
|
|
$
|
(11.7
|
)
|
(28.3
|
)%
|
Effective tax rate
|
26.1
|
%
|
30.2
|
%
|
|
(410) bps
|
•
|
The Company acquired BEKA during the fourth quarter of 2019. The majority of the results for BEKA are reported in the Mobile Industries segment.
|
•
|
The Company acquired Diamond Chain during the second quarter of 2019. The majority of the results for Diamond Chain are reported in the Process Industries segment.
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
Change
|
|||||||
Net sales
|
$
|
466.7
|
|
$
|
500.0
|
|
$
|
(33.3
|
)
|
(6.7
|
%)
|
EBITDA
|
$
|
75.1
|
|
$
|
79.3
|
|
$
|
(4.2
|
)
|
(5.3
|
%)
|
EBITDA margin
|
16.1
|
%
|
15.9
|
%
|
|
20
|
bps
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Net sales
|
$
|
466.7
|
|
$
|
500.0
|
|
$
|
(33.3
|
)
|
(6.7
|
%)
|
Less: Acquisitions
|
26.4
|
|
—
|
|
26.4
|
|
NM
|
|
|||
Currency
|
(7.5
|
)
|
—
|
|
(7.5
|
)
|
NM
|
|
|||
Net sales, excluding the impact of acquisitions and currency
|
$
|
447.8
|
|
$
|
500.0
|
|
$
|
(52.2
|
)
|
(10.4
|
%)
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
Change
|
|||||||
Net sales
|
$
|
456.7
|
|
$
|
479.7
|
|
$
|
(23.0
|
)
|
(4.8
|
%)
|
EBITDA
|
$
|
107.5
|
|
$
|
127.6
|
|
$
|
(20.1
|
)
|
(15.8
|
%)
|
EBITDA margin
|
23.5
|
%
|
26.6
|
%
|
|
(310) bps
|
|
Three Months Ended
March 31, |
|
|
||||||||
|
2020
|
2019
|
$ Change
|
% Change
|
|||||||
Net sales
|
$
|
456.7
|
|
$
|
479.7
|
|
$
|
(23.0
|
)
|
(4.8
|
%)
|
Less: Acquisitions
|
21.3
|
|
—
|
|
21.3
|
|
NM
|
|
|||
Currency
|
(8.5
|
)
|
—
|
|
(8.5
|
)
|
NM
|
|
|||
Net sales, excluding the impact of acquisitions and currency
|
$
|
443.9
|
|
$
|
479.7
|
|
$
|
(35.8
|
)
|
(7.5
|
)%
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2020
|
2019
|
$ Change
|
Change
|
||||||
Corporate EBITDA
|
$
|
(11.1
|
)
|
$
|
(14.1
|
)
|
$
|
3.0
|
|
(21.3%)
|
Corporate EBTIDA % to net sales
|
(1.2
|
)%
|
(1.4
|
)%
|
|
20 bps
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Cash and cash equivalents
|
$
|
387.5
|
|
$
|
209.5
|
|
$
|
178.0
|
|
85.0
|
%
|
Restricted cash
|
6.5
|
|
6.7
|
|
(0.2
|
)
|
(3.0
|
)%
|
|||
Accounts receivable, net
|
577.7
|
|
545.1
|
|
32.6
|
|
6.0
|
%
|
|||
Unbilled receivables
|
137.4
|
|
129.2
|
|
8.2
|
|
6.3
|
%
|
|||
Inventories, net
|
819.7
|
|
842.0
|
|
(22.3
|
)
|
(2.6
|
)%
|
|||
Deferred charges and prepaid expenses
|
35.7
|
|
36.7
|
|
(1.0
|
)
|
(2.7
|
)%
|
|||
Other current assets
|
127.7
|
|
105.4
|
|
22.3
|
|
21.2
|
%
|
|||
Total current assets
|
$
|
2,092.2
|
|
$
|
1,874.6
|
|
$
|
217.6
|
|
11.6
|
%
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Property, plant and equipment, net
|
$
|
961.6
|
|
$
|
989.2
|
|
$
|
(27.6
|
)
|
(2.8
|
)%
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Goodwill
|
$
|
987.9
|
|
$
|
993.7
|
|
$
|
(5.8
|
)
|
(0.6
|
)%
|
Other intangible assets
|
735.3
|
|
758.5
|
|
(23.2
|
)
|
(3.1
|
)%
|
|||
Operating lease assets
|
112.8
|
|
114.1
|
|
(1.3
|
)
|
(1.1
|
)%
|
|||
Non-current pension assets
|
7.1
|
|
3.4
|
|
3.7
|
|
108.8
|
%
|
|||
Non-current other postretirement benefit assets
|
—
|
|
36.6
|
|
(36.6
|
)
|
(100.0
|
)%
|
|||
Deferred income taxes
|
67.4
|
|
71.8
|
|
(4.4
|
)
|
(6.1
|
)%
|
|||
Other non-current assets
|
15.7
|
|
18.0
|
|
(2.3
|
)
|
(12.8
|
)%
|
|||
Total other assets
|
$
|
1,926.2
|
|
$
|
1,996.1
|
|
$
|
(69.9
|
)
|
(3.5
|
)%
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Short-term debt
|
$
|
109.0
|
|
$
|
17.3
|
|
$
|
91.7
|
|
530.1
|
%
|
Current portion of long-term debt
|
64.1
|
|
64.7
|
|
(0.6
|
)
|
(0.9
|
)%
|
|||
Short-term operating lease liabilities
|
28.6
|
|
28.3
|
|
0.3
|
|
1.1
|
%
|
|||
Accounts payable
|
296.0
|
|
301.7
|
|
(5.7
|
)
|
(1.9
|
)%
|
|||
Salaries, wages and benefits
|
88.3
|
|
134.5
|
|
(46.2
|
)
|
(34.3
|
)%
|
|||
Income taxes payable
|
15.8
|
|
17.8
|
|
(2.0
|
)
|
(11.2
|
)%
|
|||
Other current liabilities
|
168.0
|
|
172.3
|
|
(4.3
|
)
|
(2.5
|
)%
|
|||
Total current liabilities
|
$
|
769.8
|
|
$
|
736.6
|
|
$
|
33.2
|
|
4.5
|
%
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Long-term debt
|
$
|
1,785.8
|
|
$
|
1,648.1
|
|
$
|
137.7
|
|
8.4
|
%
|
Accrued pension benefits
|
164.5
|
|
165.1
|
|
(0.6
|
)
|
(0.4
|
)%
|
|||
Accrued postretirement benefits
|
44.8
|
|
31.8
|
|
13.0
|
|
40.9
|
%
|
|||
Long-term operating lease liabilities
|
70.8
|
|
71.3
|
|
(0.5
|
)
|
(0.7
|
)%
|
|||
Deferred income taxes
|
158.7
|
|
168.2
|
|
(9.5
|
)
|
(5.6
|
)%
|
|||
Other non-current liabilities
|
85.3
|
|
84.0
|
|
1.3
|
|
1.5
|
%
|
|||
Total non-current liabilities
|
$
|
2,309.9
|
|
$
|
2,168.5
|
|
$
|
141.4
|
|
6.5
|
%
|
|
March 31,
2020 |
December 31,
2019 |
$ Change
|
% Change
|
|||||||
Common shares
|
$
|
973.2
|
|
$
|
990.7
|
|
$
|
(17.5
|
)
|
(1.8
|
)%
|
Earnings invested in the business
|
1,964.8
|
|
1,907.4
|
|
57.4
|
|
3.0
|
%
|
|||
Accumulated other comprehensive loss
|
(118.9
|
)
|
(50.1
|
)
|
(68.8
|
)
|
137.3
|
%
|
|||
Treasury shares
|
(1,001.7
|
)
|
(979.8
|
)
|
(21.9
|
)
|
2.2
|
%
|
|||
Noncontrolling interest
|
82.9
|
|
86.6
|
|
(3.7
|
)
|
(4.3
|
)%
|
|||
Total shareholders’ equity
|
$
|
1,900.3
|
|
$
|
1,954.8
|
|
$
|
(54.5
|
)
|
(2.8
|
)%
|
|
Three Months Ended
March 31, |
|
|||||||
|
2020
|
2019
|
$ Change
|
||||||
Net cash provided by operating activities
|
$
|
56.2
|
|
$
|
52.3
|
|
$
|
3.9
|
|
Net cash used in investing activities
|
(31.6
|
)
|
(19.6
|
)
|
(12.0
|
)
|
|||
Net cash provided by financing activities
|
166.5
|
|
73.4
|
|
93.1
|
|
|||
Effect of exchange rate changes on cash
|
(13.3
|
)
|
0.9
|
|
(14.2
|
)
|
|||
Increase in cash, cash equivalents and restricted cash
|
$
|
177.8
|
|
$
|
107.0
|
|
$
|
70.8
|
|
|
Three Months Ended
March 31, |
|
|||||||
|
2020
|
2019
|
$ Change
|
||||||
Cash (Used) Provided:
|
|
|
|
||||||
Accounts receivable
|
$
|
(47.6
|
)
|
$
|
(65.0
|
)
|
$
|
17.4
|
|
Unbilled receivables
|
(8.3
|
)
|
(6.6
|
)
|
(1.7
|
)
|
|||
Inventories
|
0.3
|
|
(4.1
|
)
|
4.4
|
|
|||
Trade accounts payable
|
—
|
|
20.2
|
|
(20.2
|
)
|
|||
Other accrued expenses
|
(34.3
|
)
|
(58.0
|
)
|
23.7
|
|
|||
Cash used in working capital items
|
$
|
(89.9
|
)
|
$
|
(113.5
|
)
|
$
|
23.6
|
|
|
Three Months Ended
March 31, |
|
|||||||
|
2020
|
2019
|
$ Change
|
||||||
Accrued income tax expense
|
$
|
29.6
|
|
$
|
41.3
|
|
$
|
(11.7
|
)
|
Income tax payments
|
(20.8
|
)
|
(13.6
|
)
|
(7.2
|
)
|
|||
Other miscellaneous items
|
(1.4
|
)
|
(2.6
|
)
|
1.2
|
|
|||
Change in income taxes
|
$
|
7.4
|
|
$
|
25.1
|
|
$
|
(17.7
|
)
|
|
March 31,
2020 |
December 31,
2019 |
||||
Short-term debt
|
$
|
109.0
|
|
$
|
17.3
|
|
Current portion of long-term debt
|
64.1
|
|
64.7
|
|
||
Long-term debt
|
1,785.8
|
|
1,648.1
|
|
||
Total debt
|
$
|
1,958.9
|
|
$
|
1,730.1
|
|
Less: Cash and cash equivalents
|
387.5
|
|
209.5
|
|
||
Net debt
|
$
|
1,571.4
|
|
$
|
1,520.6
|
|
|
March 31,
2020 |
December 31,
2019 |
||||
Net debt
|
$
|
1,571.4
|
|
$
|
1,520.6
|
|
Total equity
|
1,900.3
|
|
1,954.8
|
|
||
Net debt plus total equity (capital)
|
$
|
3,471.7
|
|
$
|
3,475.4
|
|
Ratio of net debt to capital
|
45.3
|
%
|
43.8
|
%
|
•
|
deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown, terrorism, or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which the Company or its customers or suppliers conduct business, changes in currency valuations and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;
|
•
|
negative impacts to the Company's business, results of operations, financial position or liquidity, disruption to the Company's supply chains, negative impacts to customer demand or operations, and availability and health of employees, as a result of COVID-19 or other pandemics and associated governmental measures such as restrictions on travel and manufacturing operations;
|
•
|
the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which the Company operates. This includes: the ability of the Company to respond to rapid changes in customer demand, the effects of customer or supplier bankruptcies or liquidations, the impact of changes in industrial business cycles, the effects of distributor inventory corrections reflecting de-stocking of the supply chain and whether conditions of fair trade continue in the Company's markets;
|
•
|
competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products or services by existing and new competitors, and new technology that may impact the way the Company’s products are produced, sold or distributed;
|
•
|
changes in operating costs. This includes: the effect of changes in the Company’s manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability and cost of raw materials and energy; changes in the expected costs associated with product warranty claims; changes resulting from inventory management and cost reduction initiatives; the effects of unplanned plant shutdowns; and changes in the cost of labor and benefits;
|
•
|
the success of the Company’s operating plans, announced programs, initiatives and capital investments; the ability to integrate acquired companies; and the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings;
|
•
|
the Company’s ability to maintain appropriate relations with unions or works councils that represent Company associates in certain locations in order to avoid disruptions of business and to maintain the continued service of our management and other key employees;
|
•
|
unanticipated litigation, claims, investigations or assessments. This includes: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export and trade laws, competition and anti-bribery laws, environmental or health and safety issues, data privacy and taxes;
|
•
|
changes in worldwide financial and capital markets, including availability of financing and interest rates on satisfactory terms, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;
|
•
|
the Company's ability to satisfy its obligations and comply with covenants under its debt agreements, maintain favorable credit ratings and its ability to renew or refinance borrowings on favorable terms;
|
•
|
the impact on the Company's pension obligations and assets due to changes in interest rates, investment performance and other tactics designed to reduce risk; and
|
•
|
those items identified under Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
|
(a)
|
Disclosure Controls and Procedures
|
(b)
|
Changes in Internal Control Over Financial Reporting
|
Period
|
Total number
of shares
purchased (1)
|
|
Average
price paid
per share (2)
|
|
Total number
of shares
purchased as
part of publicly
announced
plans or
programs
|
|
Maximum
number of
shares that
may yet
be purchased
under the plans
or programs (3)
|
|
|
1/1/20 - 1/31/20
|
707
|
|
$
|
56.42
|
|
—
|
|
5,357,042
|
|
2/1/20 - 2/29/20
|
573,003
|
|
53.46
|
|
390,000
|
|
4,967,042
|
|
|
3/1/20 - 3/31/20
|
610,000
|
|
35.85
|
|
610,000
|
|
4,357,042
|
|
|
Total
|
1,183,710
|
|
$
|
44.39
|
|
1,000,000
|
|
|
|
(1)
|
Of the shares purchased in January and February, 707 and 183,003, respectively, represent common shares of the Company that were owned and tendered by employees to exercise stock options and to satisfy withholding obligations in connection with the exercise of stock options or vesting of restricted shares.
|
(2)
|
For shares tendered in connection with the vesting of restricted shares, the average price paid per share is an average calculated using the daily high and low of the Company's common shares as quoted on the New York Stock Exchange at the time of vesting. For shares tendered in connection with the exercise of stock options, the price paid is the real-time trading stock price at the time the options are exercised.
|
(3)
|
On February 6, 2017, the Company announced that its Board of Directors approved a share purchase plan pursuant to which the Company may purchase up to ten million of its common shares in the aggregate. This share repurchase plan expires on February 28, 2021. The Company may purchase shares from time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans.
|
|
|
THE TIMKEN COMPANY
|
Date: May 1, 2020
|
|
By: /s/ Richard G. Kyle
|
|
|
Richard G. Kyle
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
Date: May 1, 2020
|
|
By: /s/ Philip D. Fracassa
|
|
|
Philip D. Fracassa
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
(a)
|
“Associates” has the meaning assigned to it in Section 2.1 below.
|
(b)
|
“Award” means any award granted pursuant to a STIP.
|
(c)
|
“Award Year” means the calendar year following the Performance Year.
|
(d)
|
“Cause” means (i) an intentional act of fraud, embezzlement or theft in connection with an Associate’s duties with a Sponsor; (ii) intentional wrongful disclosure of secret processes or confidential information of a Sponsor; (iii) intentional wrongful engagement in any competitive activity that would constitute a material breach of an Associate’s duty of loyalty to the Sponsor; (iv) willful misconduct in the performance of duties; or (v) gross negligence in the performance of duties.
|
(e)
|
“Compensation Committee” means the Compensation Committee of the Board of Directors of the Company.
|
(f)
|
“Earnings” means the Associate’s earnings from Sponsors used to determine his or her Award as provided under the applicable STIP and as required by applicable local law governing the STIP. With respect to Associates whose primary work location is in the United States, Earnings shall (i) include the following amounts from Sponsors paid during the applicable Performance Year: (A) pay for regular hours worked, (B) pay for overtime hours worked, (C) pay for premium hours worked, (D) Sunday premiums, (E) fire fighter pay, (F) short-term disability payments, and (G) any other items specified by the Compensation Committee to be included, and (ii) exclude the following amounts paid during the applicable Performance Year: (A) shift differential, (B) vacation not taken, (C) long-term disability, (D) new hire/sign-on payments, (E) relocation payments, (F) international assignment payments, (G) military pay, and (H) any other items specified by the Compensation Committee to be excluded.
|
(g)
|
“Payment Date” means the date on which an Award is paid pursuant to Section 3.2.
|
(h)
|
“Performance Year” means the calendar year with respect to which an Award relates.
|
(i)
|
“Retire” or “Retirement” means an Associate’s voluntary termination of employment with the Sponsors at or after the Associate reaches age 62. Notwithstanding the foregoing, if applicable local law requires an applicable STIP to treat an Associate’s termination of employment as a retirement, such Associate will be deemed to have Retired at such termination of employment.
|
(j)
|
“Termination without Cause” means a Sponsor’s termination of an Associate’s employment for any reason other than death, disability, failure to return from a leave of absence or for Cause.
|
(a)
|
Each (i) full-time salaried employee of the Sponsors and (ii) each other employee of the Sponsors whose employment agreement or MySuccess record indicates STIP eligibility or who is required to be eligible for a STIP under applicable local law governing that STIP (together, “Associates”) will be eligible to receive an Award if the Associate satisfies the requirements in clause (1), (2), (3) or (4):
|
(1)
|
the Associate is actively employed on the Payment Date for the Award;
|
(2)
|
the Associate Retires before the Payment Date for the Award and was an Associate immediately prior to such Retirement;
|
(3)
|
subject to Section 2.1(b), the Associate experiences a Termination without Cause before the Payment Date for the Award and was an Associate immediately prior to such termination; or
|
(4)
|
the Associate dies before the Payment Date for the Award and was an Associate immediately prior to death.
|
(b)
|
Notwithstanding any provision of this Global Plan or any STIP to the contrary, an Associate who experiences a Termination without Cause and who is otherwise eligible to receive an Award pursuant to Section 2.1(a)(3) shall not be eligible to receive an Award unless, to the extent permitted by applicable local law, such Associate executes and tenders to the Company, and does not revoke, a general release of claims in a form provided by the Company which release must be signed, and any applicable revocation period shall have expired within 30 or 60 days (as specified by the Company at the time such release is provided) of the Associate’s termination of employment.
|
(c)
|
Any Associate whose employment with the Sponsors terminates under circumstances not described in Section 2.1(a)(2), (3), or (4) before the Payment Date for the Award will not be eligible for an Award. Notwithstanding the foregoing, the Chief Executive Officer or the Executive Vice President, Human Resources of the Company (or with respect to an executive officer of the Company, the Compensation Committee) may each, individually, in his, her or its sole discretion and at his, her or its election, determine that an Associate remains eligible for an Award following a termination of employment not described in Section 2.1(a)(2),(3), or (4), and in such event, an Award will be paid to the Associate in accordance with such determination. For the avoidance of doubt, bargaining unit employees and employees who are classified by a Sponsor as a temporary employee, intern, co-op or career training student will not be eligible for an Award under any STIP unless as required by applicable local law.
|
(a)
|
The amount of an Award will be determined under the applicable STIP and will be based on the Associate’s Earnings. Any Sponsor may choose not to pay an Award under the applicable STIP if the Sponsor determines, in its sole discretion, that performance does not warrant the payment of an Award for the applicable Performance Year.
|
(b)
|
An Associate who is eligible for an Award under Section 2.1 but who Retires, dies or experiences a Termination without Cause prior to December 31 of the applicable Performance Year will receive a pro-rated Award based on the Associate’s Earnings for that Performance Year prior to the Associate’s Retirement, death or Termination without Cause, as applicable.
|
(c)
|
An Associate who takes leave covered under the U.S. Family Medical Leave Act at any time in the Performance Year but who is otherwise eligible for an Award under Section 2.1 for that Performance Year will receive a pro-rated Award based on Earnings actually earned by the Associate during the Performance Year.
|
(d)
|
An Associate who spent part of an applicable Performance Year in an employment category that is not eligible for an Award will be eligible for a pro-rated Award if the Associate satisfies the eligibility requirements of Section 2.1, provided that only those Earnings accrued as an Associate will be considered in the Award calculation.
|
1.
|
Vesting of Awards.
|
(a)
|
Normal Vesting: Subject to the terms and conditions of Sections 2 and 3 hereof, Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall become nonforfeitable on December 31, 2021 if Grantee has been in the continuous employ of the Company or a Subsidiary from the Date of Grant until December 31, 2021.
|
2.
|
Alternative Vesting of Awards.
|
(a)
|
Death or Disability: Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto shall immediately become nonforfeitable if Grantee should die or become permanently disabled while in the employ of the Company or any Subsidiary.
|
(b)
|
Change in Control:
|
(i)
|
Upon a Change in Control occurring after the Date of Grant and before December 31, 2021 while Grantee is an employee of the Company or a Subsidiary, to the extent the Common Shares covered by this Agreement and any Deferred Cash
|
(ii)
|
For purposes of this Agreement, a “Replacement Award” shall mean an award (A) of deferred shares, (B) that has a value at least equal to the value of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or its successor following the Change in Control) (the “Successor”), (D) the tax consequences of which, under the Code, if Grantee is subject to U.S. federal income tax under the Code, are not less favorable to Grantee than the tax consequences of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto, (E) that becomes nonforfeitable in full upon a termination of Grantee’s employment with the Company or its Successor in the Change in Control (or another entity that is affiliated with the Company or the Successor for Good Reason by Grantee or without Cause by the Company or the Successor within a period of two years after the Change in Control, and (F) the other terms and conditions of which are not less favorable to Grantee than the terms and conditions of the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it conforms to the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) or otherwise does not result in the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto, or the Replacement Award, failing to comply with Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 2(b)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
|
(iii)
|
For purposes of Section 2(b)(ii), “Good Reason” will be defined to mean a material reduction in the nature or scope of the responsibilities, authorities or duties of Grantee attached to Grantee’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of Grantee’s principal office immediately prior to the Change in Control, or a material reduction in Grantee’s remuneration upon or after the Change in Control; provided, that no later than 90 days following an event constituting Good Reason Grantee gives notice to the Successor of the occurrence of such event and the Successor fails to cure the event within 30 days following the receipt of such notice.
|
(iv)
|
For purposes of Section 2(b)(ii), “Cause” will be defined to mean: (i) an intentional act of fraud, embezzlement or theft in connection with Grantee’s duties with the Company or a Subsidiary (or the Successor, if applicable); (ii) an intentional wrongful disclosure of secret processes or confidential information of the Company or a Subsidiary (or the Successor, if applicable); (iii) an intentional, wrongful engagement in any competitive activity that would constitute a material breach of
|
(v)
|
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding Common Shares covered by this Agreement and any Deferred Cash Dividends then accumulated with respect thereto which at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be nonforfeitable at the time of such Change in Control.
|
3.
|
Forfeiture of Awards. Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited automatically and without further notice on the date that Grantee ceases to be an employee of the Company or a Subsidiary prior to December 31, 2021 for any reason other than as described in Sections 1 or 2 hereof. In the event that Grantee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a Subsidiary, Grantee’s right to receive the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited at the time of that determination notwithstanding any other provision of this Agreement to the contrary.
|
4.
|
Crediting of Deferred Cash Dividends. With respect to each of the Common Shares covered by this Agreement, Grantee shall be credited on the records of the Company with Deferred Cash Dividends in an amount equal to the amount per share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending on the date on which Grantee receives payment of the Common Shares covered by this Agreement pursuant to Section 5 hereof or at the time when the Common Shares covered by this Agreement are forfeited in accordance with Section 3 of this Agreement. The Deferred Cash Dividends shall accumulate without interest.
|
5.
|
Payment of Awards.
|
(a)
|
General: Subject to Section 3 and Section 5(b), payment for the Common Shares covered by this Agreement that are nonforfeitable will be paid in Common Shares, and any such Common Shares and any Deferred Cash Dividends accumulated with respect thereto will be made within 60 days following December 31, 2021.
|
(b)
|
Other Payment Events: Notwithstanding Section 5(a), to the extent that the Common Shares covered by this Agreement are nonforfeitable on the dates set forth below, payment with respect to the Common Shares covered by this Agreement that have become nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto will be made as follows:
|
(i)
|
Change in Control. Within 10 days of a Change in Control, Grantee is entitled to receive payment for the Common Shares covered by this Agreement that are nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto on the date of the Change in Control; provided, however, that if such Change in Control would not qualify as a permissible date of distribution under Section
|
(ii)
|
Death or Disability. Within 10 days of the date of Grantee’s death or the date Grantee becomes permanently disabled, Grantee is entitled to receive payment for the Common Shares covered by this Agreement that are nonforfeitable and any Deferred Cash Dividends accumulated with respect thereto on such date.
|
(c)
|
Release Requirement: Notwithstanding any provision of this Agreement to the contrary, the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto will not become nonforfeitable or payable pursuant to Section 2(b)(ii)(E) of this Agreement as a result of a termination of employment for Good Reason by Grantee or without Cause by the Company or the Successor unless, to the extent permitted by applicable law, Grantee signs, does not revoke, and agrees to be bound by a general release of claims in a form provided by the Company or the Successor, which release must be signed, and any applicable revocation period shall have expired within 30 or 60 days (as specified by the Company or the Successor at the time such release is provided) of Grantee’s termination of employment (such 30 day or 60 day period, as applicable, the “Review Period”). In the event such Review Period begins in one taxable year of Grantee, and ends in a second taxable year of Grantee, then to the extent necessary to avoid any penalties or additional taxes under Section 409A of the Code, no payment shall be made before the second taxable year.
|
6.
|
Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement or pay any Deferred Cash Dividends accumulated with respect thereto if the issuance or payment thereof would result in violation of any such law. To the extent that the Ohio Securities Act shall be applicable to this Agreement, the Company shall not be obligated to issue any of the Common Shares or other securities covered by this Agreement or pay any Deferred Cash Dividends accumulated with respect thereto unless such Common Shares and Deferred Cash Dividends are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder.
|
7.
|
Transferability. Neither Grantee’s right to receive the Common Shares covered by this Agreement nor Grantee’s right to receive any Deferred Cash Dividends shall be transferable by Grantee except by will or the laws of descent and distribution. Any purported transfer in violation of this Section 7 shall be null and void, and the purported transferee shall obtain no rights with respect to such Shares.
|
8.
|
Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent.
|
9.
|
Adjustments. Subject to Section 12 of the Plan, the Committee shall make any adjustments in the number or kind of shares of stock or other securities covered by this Agreement, and other terms and provisions, that the Committee shall determine is equitably required to prevent any dilution or expansion of Grantee’s rights under this Agreement that otherwise would result from any (a) extraordinary cash dividend, stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization, partial or complete liquidation or other distribution of assets involving the Company or (c) other transaction or event having an effect similar to any of those referred to in
|
10.
|
Withholding Taxes. To the extent that the Company or a Subsidiary is required to withhold federal, state, local or foreign taxes or other amounts in connection with any delivery of Common Shares to Grantee, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such delivery of Common Shares or any other benefit provided for under this Agreement that Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld. To the extent permitted by applicable law, Grantee may elect that all or any part of such withholding requirement be satisfied by retention by the Company of a portion of the Common Shares delivered to Grantee. Any Common Shares so withheld shall be credited against such withholding requirements at the fair market value of such shares on the date of such withholding. Grantee may also satisfy such tax obligation by paying the Company cash via personal check or having such amounts deducted from payroll, to the extent permitted by applicable law.
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11.
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Detrimental Activity and Recapture.
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(a)
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In the event that, as determined by the Committee, Grantee shall engage in Detrimental Activity during employment or other service with the Company or a Subsidiary, the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto will be forfeited automatically and without further notice at the time of that determination notwithstanding any other provision of this Agreement. Notwithstanding anything in this Agreement to the contrary, including Section 12 of this Agreement, nothing in this Agreement prevents Grantee from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
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(b)
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For purposes of this Agreement, “Detrimental Activity” means: (i) engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which Grantee has had any direct responsibility during the last two years of Grantee’s employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity; (ii) soliciting any employee of the Company or a Subsidiary to terminate Grantee’s employment with the Company or a Subsidiary; (iii) the disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries, acquired by Grantee during Grantee’s employment with the Company or its Subsidiaries or while acting as a director of or consultant for the Company or its Subsidiaries thereafter; (iv) the failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by Grantee during employment by the Company and any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries; (v) activity that results in Clawback Termination, which for purposes of
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(c)
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If a Restatement occurs and the Committee determines that Grantee is personally responsible for causing the Restatement as a result of Grantee’s personal misconduct or any fraudulent activity on the part of Grantee, then the Committee has discretion to, based on applicable facts and circumstances and subject to applicable law, cause the Company to recover all or any portion (but no more than 100%) of the Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto earned or payable to Grantee for some or all of the years covered by the Restatement. The amount of any earned or payable Common Shares covered by this Agreement and any Deferred Cash Dividends accumulated with respect thereto recovered by the Company shall be limited to the amount by which such earned or payable Common Shares and Deferred Cash Dividends exceeded the amount that would have been earned by or paid to Grantee had the Company’s financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Committee. The Committee shall also determine whether the Company shall effect any recovery under this Section 11(c) by: (i) seeking repayment from Grantee; (ii) reducing, except with respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that would otherwise be payable to Grantee under any compensatory plan, program or arrangement maintained by the Company (subject to applicable law and the terms and conditions of such plan, program or arrangement); (iii) by withholding, except with respect to any non-qualified deferred compensation under Section 409A of the Code, payment of future increases in compensation (including the payment of any discretionary bonus amount) that would otherwise have been made to Grantee in accordance with the Company’s compensation practices; or (iv) by any combination of these alternatives. For purposes of this Agreement, “Restatement” means a restatement of any part of the Company’s financial statements for any fiscal year or years beginning with the year in which the Date of Grant occurs due to material noncompliance with any financial reporting requirement under the U.S. securities laws applicable to such fiscal year or years.
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12.
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Clawback. Notwithstanding anything to the contrary, if Grantee breaches any of Grantee’s obligations under any non-competition or other restrictive covenant agreement that it has entered into with the Company or a Subsidiary including the Nondisclosure and Assignment Agreement attached hereto as Exhibit A (the “Non-Competition Agreement”), to the extent permissible by local law, Grantee shall forfeit any Common Shares and any Deferred Cash Dividends. In addition, in the event that Grantee breaches the Non-Competition Agreement, if the Company shall so determine, Grantee shall, promptly upon notice of such determination, (a) return to the Company, all the Common Shares that Grantee has received but not disposed of that became nonforfeitable pursuant to this Agreement, (b) with respect to any Common Shares so issued pursuant to this Agreement that Grantee has disposed of, pay to the Company in cash the aggregate Market Value per Share of those Common Shares on the date on which the Common Shares were issued under this Agreement, and (c) return to the Company any cash amount paid with respect to the Deferred Cash Dividends, in each case as reasonably determined by the Company. To the extent that such amounts are not promptly paid to the Company, the Company may set off the
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13.
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No Right to Future Awards or Employment. This award is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute a commitment to make any future awards. This award and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. No provision of this Agreement shall limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate Grantee’s employment at any time.
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14.
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Relation to Other Benefits. Any economic or other benefit to Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which Grantee may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.
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15.
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Processing of Information. Information about Grantee and Grantee’s award of Common Shares and Deferred Cash Dividends may be collected, recorded and held, used and disclosed for any purpose related to the administration of the award. Grantee understands that such processing of this information may need to be carried out by the Company and its Subsidiaries and by third party administrators whether such persons are located within Grantee’s country or elsewhere, including the United States of America. Grantee consents to the processing of information relating to Grantee and Grantee’s receipt of the Common Shares and Deferred Cash Dividends in any one or more of the ways referred to above.
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16.
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Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that subject to the terms of the Plan and the provisions of Section 8 hereof, no amendment shall materially impair the rights of Grantee with respect to either the Common Shares or other securities covered by this Agreement or the Deferred Cash Dividends without Grantee’s consent.
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17.
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Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision in any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.
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18.
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Choice of Law. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio. Grantee agrees that the state and federal courts located in the State of Ohio shall have jurisdiction in any action, suit or proceeding against Grantee based on or arising out of this Agreement and Grantee hereby: (a) submits to the personal jurisdiction of such courts; (b) consents to service of process in connection with any action, suit or proceeding against Grantee; and (c) waives any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of process.
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1.
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Nondisclosure and Non-Use of Confidential Information.
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2.
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Return of Materials.
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3.
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Obligations Regarding Developments.
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4.
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No Restrictions.
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5.
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Restriction on Unfair Competition.
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6.
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Non-Solicitation of Employees.
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7.
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Injunctive Relief.
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8.
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Not an Employment Agreement.
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9.
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Authorized Disclosure of Trade Secrets and Confidential Information.
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10.
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Binding Effect.
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11.
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Entire Agreement; Modifications; Waiver.
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12.
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Invalidity of any Provision.
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13.
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Applicable Law and Venue.
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14.
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Interpretation.
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15.
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Definitions.
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By: /s/ Richard G. Kyle
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Richard G. Kyle
President and Chief Executive Officer
(Principal Executive Officer)
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By: /s/ Philip D. Fracassa
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Philip D. Fracassa
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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By: /s/ Richard G. Kyle
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Richard G. Kyle
President and Chief Executive Officer
(Principal Executive Officer)
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By: /s/ Philip D. Fracassa
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Philip D. Fracassa
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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