TKR Timken Co

Conference Call: 

Wednesday, July 31, 2019

11:00 a.m. Eastern Time

Live Dial-In: 800-239-9838

or 323-794-2551

(Call in 10 minutes prior to be included.)

Conference ID: Timken's 2Q Earnings Call

Conference Call Replay:  

Replay Dial-In available through

August 14, 2019:

888-203-1112 or 719-457-0820

Replay Passcode: 7993365

Live Webcast: 

http://investors.timken.com

The Timken Company

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in millions, except per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net sales

$

1,000.0

$

906.3

$

1,979.7

$

1,789.4

Cost of products sold

694.3

638.9

1,371.4

1,257.1

Gross Profit

305.7

267.4

608.3

532.3

Selling, general & administrative expenses

158.7

141.8

311.4

290.4

Impairment and restructuring charges

1.9

0.3

1.9

0.5

145.1

125.3

295.0

241.4

Non-service pension and other postretirement income

0.2

4.1

0.3

5.7

Other income, net

1.4

2.9

4.7

3.6

Earnings Before Interest and Taxes (EBIT) ⁽¹⁾

146.7

132.3

300.0

250.7

Interest expense, net

(18.2)

(10.2)

(34.9)

(19.8)

Income Before Income Taxes

128.5

122.1

265.1

230.9

Provision for income taxes

33.6

30.2

74.9

58.5

Net Income

94.9

91.9

190.2

172.4

Less: Net income attributable to noncontrolling interest

2.4

0.9

5.8

1.2

Net Income Attributable to The Timken Company

$

92.5

$

91.0

$

184.4

$

171.2

Net Income per Common Share Attributable to The Timken
Company Common Shareholders

    Basic Earnings per share

$

1.22

$

1.18

$

2.43

$

2.21

    Diluted Earnings per share

$

1.20

$

1.16

$

2.39

$

2.17

Average Shares Outstanding

76,085,358

77,360,159

76,024,301

77,544,365

Average Shares Outstanding - assuming dilution

77,208,432

78,496,298

77,098,982

78,751,951

⁽¹⁾ EBIT is a non-GAAP measure defined as operating income plus other income (expense). EBIT is an important financial measure used in
the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management
believes that reporting EBIT is useful to investors as this measure is representative of the Company's core operations.

BUSINESS SEGMENTS

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in millions)

2019

2018

2019

2018

Mobile Industries

Net sales

$

493.7

$

489.1

$

993.7

$

977.6

Earnings before interest and taxes (EBIT) ⁽¹⁾

$

59.1

$

54.5

$

120.5

$

105.6

EBIT Margin ⁽¹⁾

12.0

%

11.1

%

12.1

%

10.8

%

Process Industries

Net sales

$

506.3

$

417.2

$

986.0

$

811.8

Earnings before interest and taxes (EBIT) ⁽¹⁾

$

103.0

$

90.6

$

209.2

$

172.2

EBIT Margin ⁽¹⁾

20.3

%

21.7

%

21.2

%

21.2

%

Corporate expense

$

(15.4)

$

(15.2)

$

(29.7)

$

(29.3)

Corporate pension-related charges ⁽²⁾

—

2.4

—

2.2

Consolidated

Net sales

$

1,000.0

$

906.3

$

1,979.7

$

1,789.4

Earnings before interest and taxes (EBIT) ⁽¹⁾

$

146.7

$

132.3

$

300.0

$

250.7

EBIT Margin ⁽¹⁾

14.7

%

14.6

%

15.2

%

14.0

%

⁽¹⁾ EBIT is a non-GAAP measure defined as operating income plus other income (expense). EBIT Margin is a non-GAAP measure defined as
EBIT as a percentage of net sales. EBIT and EBIT Margin are important financial measures used in the management of the business,
including decisions concerning the allocation of resources and assessment of performance.  Management believes that reporting EBIT and
EBIT Margin is useful to investors as these measures are representative of the core operations of the segments and Company, respectively.

(2) Corporate pension-related charges represent professional fees associated with international pension de-risking and actuarial (losses) and gains that resulted from the remeasurement of pension plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial (losses) and gains through earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

June 30,
2019

December 31,
2018

ASSETS

Cash, cash equivalents and restricted cash

$

167.4

$

133.1

Accounts receivable, net

589.9

546.6

Unbilled receivables

153.3

116.6

Inventories, net

843.8

835.7

Other current assets

112.3

105.2

Total Current Assets

1,866.7

1,737.2

Property, plant and equipment, net

912.0

912.1

Operating lease assets ⁽¹⁾

117.3

—

Goodwill and other intangible assets

1,700.9

1,693.7

Non-current pension assets

10.9

6.2

Other assets

66.4

96.0

Total Assets

$

4,674.2

$

4,445.2

LIABILITIES

Accounts payable

$

291.6

$

273.2

Short-term debt, including current portion of long-term debt

46.3

43.0

Short-term operating lease liabilities ⁽¹⁾

29.5

—

Income taxes

26.4

23.5

Accrued expenses

302.5

345.9

Total Current Liabilities

696.3

685.6

Long-term debt

1,642.6

1,638.6

Accrued pension cost

162.6

161.3

Accrued postretirement benefits cost

109.3

108.7

Long-term operating lease liabilities ⁽¹⁾

73.0

—

Other non-current liabilities

206.8

208.3

Total Liabilities

2,890.6

2,802.5

EQUITY

The Timken Company shareholders' equity

1,711.3

1,579.6

Noncontrolling Interest

72.3

63.1

Total Equity

1,783.6

1,642.7

Total Liabilities and Equity

$

4,674.2

$

4,445.2

⁽¹⁾ Due to the adoption of the new leasing standard, the Company recognized operating lease assets and corresponding operating lease
liabilities on the Consolidated Balance Sheet. In conjunction with the adoption of the new leasing standard, the Company reclassified $15.3
million of lease assets related to purchase accounting adjustments from the ABC Bearings Limited ("ABC Bearings") acquisition from Other
assets to Operating lease assets. These assets do not have material corresponding lease liabilities.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in millions)

2019

2018

2019

2018

Cash Provided by (Used in)

OPERATING ACTIVITIES

Net Income

$

94.9

$

91.9

$

190.2

$

172.4

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation and amortization

41.7

35.0

81.2

70.8

Stock-based compensation expense

7.1

7.5

14.9

17.8

Pension and other postretirement expense

2.9

(0.4)

5.8

1.6

Pension and other postretirement benefit contributions

(4.0)

(2.7)

(8.9)

(8.8)

Changes in operating assets and liabilities:

Accounts receivable

29.1

(14.3)

(35.9)

(86.4)

Unbilled receivables

(30.0)

(16.3)

(36.6)

(27.8)

Inventories

20.7

(26.1)

16.6

(79.9)

Accounts payable

(6.8)

(6.1)

13.4

(8.4)

Accrued expenses

12.9

36.3

(45.1)

(2.4)

Income taxes

(22.7)

(17.1)

2.4

(3.7)

11.8

14.4

11.9

12.6

Net Cash Provided by Operating Activities

$

157.6

$

102.1

$

209.9

$

57.8

INVESTING ACTIVITIES

Capital expenditures

$

(23.0)

$

(21.8)

$

(39.2)

$

(39.6)

Acquisitions, net of cash received

(80.1)

—

(83.0)

—

Other, net

2.9

(0.2)

2.4

3.6

Net Cash Used in Investing Activities

$

(100.2)

$

(22.0)

$

(119.8)

$

(36.0)

FINANCING ACTIVITIES

Cash dividends paid to shareholders

$

(21.3)

$

(21.6)

$

(42.6)

$

(42.7)

Purchase of treasury shares

(15.3)

(26.9)

(23.6)

(49.6)

Proceeds from exercise of stock options

7.9

2.2

8.9

10.6

Payments related to tax withholding for stock-based compensation

(1.7)

(0.6)

(8.1)

(5.0)

Net (payments on) proceeds from credit facilities

(76.4)

(7.8)

39.8

(8.2)

Net (payments on) proceeds from long-term debt

(21.6)

10.2

(29.4)

103.8

Other, net

(1.9)

0.1

(1.9)

(1.0)

Net Cash (Used in) Provided by Financing Activities

$

(130.3)

$

(44.4)

$

(56.9)

$

7.9

Effect of exchange rate changes on cash

0.2

(9.4)

1.1

(8.5)

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

$

(72.7)

$

26.3

$

34.3

$

21.2

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

240.1

120.3

133.1

125.4

Cash, Cash Equivalents and Restricted Cash at End of Period

$

167.4

$

146.6

$

167.4

$

146.6

Reconciliations of Adjusted Net Income to GAAP Net Income and Adjusted Earnings Per Share to GAAP Earnings
Per Share:

(Unaudited)

The following reconciliation is provided as additional relevant information about the Company's performance deemed useful to investors. 
Management believes that the non-GAAP measures of adjusted net income and adjusted diluted earnings per share are important financial
measures used in the management of the business, including decisions concerning the allocation of resources and assessment of
performance. Management believes that reporting adjusted net income and adjusted diluted earnings per share is useful to investors as these
measures are representative of the Company's core operations.

(Dollars in millions, except share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

EPS

2018

EPS

2019

2018

EPS

Net Income Attributable to The Timken Company

$

92.5

$

1.20

$

91.0

$

1.16

$

184.4

$

2.39

$

171.2

$

2.17

Adjustments: ⁽¹⁾

  Impairment, restructuring and reorganization charges ⁽²⁾

$

2.2

$

0.7

$

2.2

$

1.4

  Property loss and related expenses from flood damage ⁽³⁾

(0.2)

—

5.8

—

  Acquisition-related charges ⁽⁴⁾

3.1

0.2

7.9

0.2

  Brazil legal matter ⁽⁵⁾

3.3

—

3.3

—

  Gain on sale of real estate ⁽⁶⁾

—

—

(1.7)

—

  Corporate pension-related charges

—

(2.4)

—

(2.2)

  Tax indemnification and related items

—

—

0.5

0.3

  Noncontrolling interest ⁽⁷⁾

(0.3)

—

(0.2)

—

  Provision for income taxes ⁽⁸⁾

(2.7)

(2.3)

(0.1)

(3.7)

      Total Adjustments:

5.4

0.07

(3.8)

(0.05)

17.7

0.23

(4.0)

(0.05)

Adjusted Net Income Attributable to The Timken
Company

$

97.9

$

1.27

$

87.2

$

1.11

$

202.1

$

2.62

$

167.2

$

2.12

⁽¹⁾ Adjustments are pre-tax, with the net tax provision listed separately.

⁽²⁾ Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants and (iii) severance related to cost reduction initiatives. The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges.  However, management believes these actions are not representative of the Company's core operations.

⁽³⁾ Represents property loss and related expenses during the first half of the year (net of insurance proceeds) resulting from flood damage caused by heavy rainstorms that occurred during the first quarter of 2019 in Knoxville, Tennessee, that impacted one of the Company's warehouses.

⁽⁴⁾ Acquisition-related charges in 2019 primarily related to the Rollon S.p.A. ("Rollon") and The Diamond Chain Company ("Diamond Chain") acquisitions, including transaction costs and inventory step-up impact.

⁽⁵⁾ The Brazil legal matter represents expense recorded to establish a liability associated with an investigation into alleged antitrust violations in the bearing industry that was initiated in October 2014. Refer to the Contingencies footnote within the second quarter 2019 Form 10-Q for additional discussion.

⁽⁶⁾ The gain on sale of real estate related to the sale of a manufacturing facility in Pulaski, Tennessee during the first quarter of 2019. This amount was recorded in other income.

⁽⁷⁾ Represents the noncontrolling interest impact of the adjustments listed above.

⁽⁸⁾ Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of discrete tax items recorded during the respective periods, as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income in interim periods.

Reconciliation of EBIT to GAAP Net Income, and EBIT and EBITDA Margin, After Adjustments, to Net Income as a
Percentage of Sales, and EBIT and EBITDA, After Adjustments, to Net Income:

(Unaudited)

The following reconciliation is provided as additional relevant information about the Company's performance deemed useful to investors.  Management believes consolidated earnings before interest and taxes(EBIT) is a non-GAAP measure that is useful to investors as it is representative of the Company's performance and that it is appropriate to compare GAAP net income to consolidated EBIT. Management also believes that non-GAAP measures of adjusted EBIT, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBIT margin and adjusted EBITDA margin are useful to investors as they are representative of the Company's core operations and are used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

(Dollars in millions)

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

Percentage to
Net Sales

2018

Percentage to

Net Sales

2019

Percentage to
Net Sales

2018

Percentage to
Net Sales

Net Income

$

94.9

9.5

%

$

91.9

10.1

%

$

190.2

9.6

%

$

172.4

9.6

%

Provision for income taxes

33.6

3.4

%

30.2

3.3

%

74.9

3.8

%

58.5

3.3

%

Interest expense

19.3

1.9

%

10.7

1.2

%

37.3

1.9

%

20.7

1.2

%

Interest income

(1.1)

(0.1)

%

(0.5)

—

%

(2.4)

(0.1)

%

(0.9)

(0.1)

%

Consolidated EBIT

$

146.7

14.7

%

$

132.3

14.6

%

$

300.0

15.2

%

$

250.7

14.0

%

Adjustments:

  Impairment, restructuring and reorganization charges ⁽¹⁾

$

2.2

0.2

%

$

0.7

0.1

%

$

2.2

0.1

%

$

1.4

0.1

%

  Property loss and related expenses from flood damage ⁽²⁾

(0.2)

—

%

—

—

%

5.8

0.3

%

—

—

%

  Acquisition-related charges ⁽³⁾

3.1

0.3

%

0.2

—

%

7.9

0.4

%

0.2

—

%

 Brazil legal matter ⁽⁴⁾

3.3

0.3

%

—

—

%

3.3

0.2

%

—

—

%

 Gain on sale of real estate ⁽⁵⁾

—

—

%

—

—

%

(1.7)

(0.1)

%

—

—

%

Corporate pension-related charges

—

—

%

(2.4)

(0.3)

%

—

—

%

(2.2)

(0.1)

%

Tax indemnification and related
items

—

—

%

—

—

%

0.5

—

%

0.3

—

%

     Total Adjustments

8.4

0.8

%

(1.5)

(0.2)

%

18.0

0.9

%

(0.3)

—

%

Adjusted EBIT

$

155.1

15.5

%

$

130.8

14.4

%

$

318.0

16.1

%

$

250.4

14.0

%

Depreciation and amortization

41.7

4.2

%

35.0

3.9

%

81.2

4.1

%

70.8

4.0

%

Adjusted EBITDA

$

196.8

19.7

%

$

165.8

18.3

%

$

399.2

20.2

%

$

321.2

18.0

%

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

⁽²⁾ Represents property loss and related expenses during the first half of the year (net of insurance proceeds) resulting from flood damage caused by heavy rainstorms that occurred during the first quarter of 2019 in Knoxville, Tennessee, that impacted one of the Company's warehouses.

⁽³⁾ Acquisition-related charges in 2019 primarily related to the Rollon and Diamond Chain acquisitions, including transaction costs and inventory step-up impact.

⁽⁴⁾ The Brazil legal matter represents expense recorded to establish a liability associated with an investigation into alleged antitrust violations in the bearing industry that was initiated in October 2014. Refer to the Contingencies footnote within the second quarter 2019 Form 10-Q for additional discussion.

⁽⁵⁾ The gain on sale of real estate related to the sale of a manufacturing facility in Pulaski, Tennessee during the first quarter of 2019. This amount was recorded in other income.

Reconciliation of segment EBIT Margin, After Adjustments, to segment EBIT as a Percentage of Sales and segment
EBIT, After Adjustments, to segment EBIT:

(Unaudited)

The following reconciliation is provided as additional relevant information about the Company's Mobile Industries and Process Industries
segment performance deemed useful to investors. Management believes that non-GAAP measures of adjusted EBIT and adjusted EBIT
margin for the segments are useful to investors as they are representative of each segment's core operations and are used in the
management of the business, including decisions concerning the allocation of resources and assessment of performance.

Mobile Industries

(Dollars in millions)

Three Months
Ended
June 30, 2019

Percentage
to Net Sales

Three Months
Ended
June 30, 2018

Percentage
to Net Sales

Six Months
Ended
June 30, 2019

Percentage
to Net Sales

Six Months
Ended
June 30, 2018

Percentage
to Net Sales

Earnings before interest and
taxes (EBIT)

$

59.1

12.0

%

$

54.5

11.1

%

$

120.5

12.1

%

$

105.6

10.8

%

  Impairment, restructuring and
reorganization charges ⁽¹⁾

0.7

0.1

%

0.4

0.1

%

1.0

0.1

%

1.1

0.1

%

  Gain on sale of real estate ⁽²⁾

—

—

%

—

—

%

(1.7)

(0.2)

%

—

—

%

  Property loss and related expenses from

     flood damage ⁽³⁾

(0.2)

—

%

—

—

%

5.8

0.6

%

—

—

%

  Acquisition-related charges ⁽⁴⁾

0.1

—

%

—

—

%

0.1

—

%

—

—

%

Adjusted EBIT

$

59.7

12.1

%

$

54.9

11.2

%

$

125.7

12.6

%

$

106.7

10.9

%

Process Industries

(Dollars in millions)

Three Months
Ended
June 30, 2019

Percentage
to Net Sales

Three Months
Ended
June 30, 2018

Percentage
to Net Sales

Six Months
Ended
June 30, 2019

Percentage
to Net Sales

Six Months
Ended
June 30, 2018

Percentage
to Net Sales

Earnings before interest and taxes (EBIT)

$

103.0

20.3

%

$

90.6

21.7

%

$

209.2

21.2

%

$

172.2

21.2

%

  Impairment, restructuring and
reorganization charges ⁽¹⁾

1.5

0.3

%

0.2

0.1

%

1.2

0.1

%

0.2

—

%

  Acquisition-related charges ⁽⁴⁾

2.5

0.5

%

—

—

%

6.4

0.7

%

—

—

%

Adjusted EBIT

$

107.0

21.1

%

$

90.8

21.8

%

$

216.8

22.0

%

$

172.4

21.2

%

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

⁽²⁾ The gain on sale of real estate related to the sale of a manufacturing facility in Pulaski, Tennessee during the first quarter of 2019. This amount was recorded in other income.

⁽³⁾ Represents property loss and related expenses during the first half of the year (net of insurance proceeds) resulting from flood damage caused by heavy rainstorms that occurred during the first quarter of 2019 in Knoxville, Tennessee, that impacted one of the Company's warehouses.

⁽⁴⁾ Acquisition-related charges in 2019 primarily related to the Rollon and Diamond Chain acquisitions, including transaction costs and inventory step-up impact.

Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital to the Ratio of Total Debt to Capital:

(Unaudited)

These reconciliations are provided as additional relevant information about the Company's financial position deemed useful to investors.
Capital, used for the ratio of total debt to capital, is a non-GAAP measure defined as total debt plus total shareholders' equity. Capital, used
for the ratio of net debt to capital, is a non-GAAP measure defined as total debt less cash, cash equivalents and restricted cash plus total
shareholders' equity. Management believes Net Debt and the Ratio of Net Debt to Capital are important measures of the Company's financial
position, due to the amount of cash and cash equivalents on hand.

(Dollars in millions)

June 30,
2019

December 31,
2018

Short-term debt, including current portion of long-term debt

$

46.3

$

43.0

Long-term debt

1,642.6

1,638.6

  Total Debt

$

1,688.9

$

1,681.6

Less: Cash, cash equivalents and restricted cash

(167.4)

(133.1)

Net Debt

$

1,521.5

$

1,548.5

Total Equity

$

1,783.6

$

1,642.7

Ratio of Net Debt to Capital

46.0

%

48.5

%

Reconciliation of Free Cash Flow to GAAP Net Cash Provided by Operating Activities:

(Unaudited)

Management believes that free cash flow is a non-GAAP measure that is useful to investors because it is a meaningful indicator of cash
generated from operating activities available for the execution of its business strategy.

(Dollars in millions)

Three Months
Ended
June 30,

Six Months
Ended
June 30,

2019

2018

2019

2018

Net cash provided by operating activities

$

157.6

$

102.1

$

209.9

$

57.8

Less: capital expenditures

(23.0)

(21.8)

(39.2)

(39.6)

Free cash flow

$

134.6

$

80.3

$

170.7

$

18.2

Reconciliation of EBIT, EBIT, After Adjustments, and EBITDA, After Adjustments, to GAAP Net Income:

(Unaudited)

The following reconciliation is provided as additional relevant information about the Company's performance deemed useful to investors.
Management believes consolidated earnings before interest and taxes (EBIT) is a non-GAAP measure that is useful to investors as it is
representative of the Company's performance and that it is appropriate to compare GAAP net income to consolidated EBIT. Management
also believes that non-GAAP measures of adjusted EBIT and adjusted EBITDA are useful to investors as they are representative of the
Company's core operations and are used in the management of the business, including decisions concerning the allocation of resources and
assessment of performance.

(Dollars in millions)

Twelve Months Ended
June 30, 2019

Twelve Months Ended
December 31, 2018

Net Income

$

323.3

$

305.5

Provision for income taxes

119.0

102.6

Interest expense

68.3

51.7

Interest income

(3.6)

(2.1)

Consolidated EBIT

$

507.0

$

457.7

Adjustments:

  Impairment, restructuring and reorganization charges ⁽¹⁾

$

7.9

$

7.1

  Acquisition-related charges ⁽²⁾

28.3

20.6

  Brazil legal matter ⁽³⁾

3.3

—

  Gain on sale of real estate ⁽⁴⁾

(1.7)

—

  Loss on divestiture ⁽⁵⁾

0.8

0.8

  Corporate pension-related charges ⁽⁶⁾

15.0

12.8

  Flood property damage and expenses ⁽⁷⁾

5.8

—

  Tax indemnification and related items

1.7

1.5

     Total Adjustments

61.1

42.8

Adjusted EBIT

$

568.1

$

500.5

Depreciation and amortization

146.0

Adjusted EBITDA ⁽⁸⁾

$

724.5

$

646.5

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

⁽²⁾ Acquisition-related charges in 2019 related to the ABC Bearings, Apiary Investment Holdings Limited ("Cone Drive"), Rollon and Diamond
Chain acquisitions, including transaction costs and inventory step-up impact. In 2018, acquisition charges related to ABC Bearings, Cone
Drive and Rollon acquisitions.

⁽³⁾ The Brazil legal matter represents expense recorded to establish a liability associated with an investigation into alleged antitrust violations in
the bearing industry that was initiated in October 2014. Refer to the Contingencies footnote within the second quarter 2019 Form 10-Q for
additional discussion.

⁽⁴⁾ The gain on sale of real estate related to the sale of a manufacturing facility in Pulaski, Tennessee during the first quarter of 2019. This
amount was recorded in other income.

⁽⁵⁾ Loss on divestiture relates to the sale of Groeneveld Information Technology Holding B.V. located in Gorinchem, Netherlands.

⁽⁶⁾ Corporate pension-related charges represent curtailments and actuarial (gains) and losses that resulted from the remeasurement of
pension plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial (gains) and losses through
earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.

⁽⁷⁾ Represents property loss and related expenses during the first half of the year (net of insurance proceeds) resulting from flood damage
caused by heavy rainstorms that occurred during the first quarter of 2019 in Knoxville, Tennessee, that impacted one of the Company's
warehouses.

⁽⁸⁾ Twelve months trailing adjusted EBITDA reflects results from acquired companies from the acquisition date through June 30, 2019 and
December 31, 2018, respectively.

Reconciliation of Adjusted Earnings per Share to GAAP Earnings per Share for Full Year 2019 Outlook:

(Unaudited)

The following reconciliation is provided as additional relevant information about the Company's outlook deemed useful to investors. 
Forecasted full year adjusted diluted earnings per share is an important financial measure that management believes is useful to

investors as it is representative of the Company's expectation for the performance of its core business operations.

Low End
Earnings
Per Share

High End
Earnings
Per Share

Forecasted full year GAAP diluted earnings per share

$

4.55

$

4.75