TKR_CBA 11-K 12.31.14

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 11-K
 
 
ý
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 1-1169
 
THE TIMKEN COMPANY SAVINGS PLAN FOR CERTAIN BARGAINING ASSOCIATES
(Full title of the Plan)

 
 

THE TIMKEN COMPANY, 4500 Mt. Pleasant St., NW,
North Canton, OH 44720-5450
(Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office)
 



Table of Contents
The Timken Company Savings Plan
for Certain Bargaining Associates

Financial Statements and Supplemental Schedules
December 31, 2014 and 2013, and Year Ended December 31, 2014





Table of Contents

Financial Statements
 
Supplemental Schedules
 
 
 
Exhibit 23 - Consent of Independent Registered Public Accounting Firm
 






Report of Independent Registered Public Accounting Firm

The Timken Company, Administrator of
The Timken Company Savings Plan for
Certain Bargaining Associates

We have audited the accompanying statements of net assets available for benefits of The Timken Company Savings Plan for Certain Bargaining Associates as of December 31, 2014 and 2013, and the related statement of changes in net assets available for benefits for the year ended December 31, 2014. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of The Timken Company Savings Plan for Certain Bargaining Associates at December 31, 2014 and 2013, and the changes in its net assets available for benefits for the year ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2014, and delinquent participant contributions for the year then ended, have been subjected to audit procedures performed in conjunction with the audit of The Timken Company Savings Plan for Certain Bargaining Associates' financial statements. The information in the supplemental schedules is the responsibility of the Plan's management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.


/s/ Ernst & Young LLP
Akron, Ohio
Date: June 29, 2015


1

The Timken Company Savings Plan
for Certain Bargaining Associates


Statements of Net Assets Available for Benefits


 
December 31,
Assets
2014
 
2013
Investments, at fair value:
 
 
 
Interest in The Master Trust Agreement for The Timken Company Defined Contribution Plans
$
6,430,876

 
$
5,900,330

Receivables:
 
 
 
Contribution receivable from participants
2,910

 
5,063

Contributions receivable from The Timken Company
543

 
2,383

Participant notes receivable
205,316

 
293,673

 
208,769

 
301,119

 
 
 
 
Total assets reflecting investments at fair value
6,639,645

 
6,201,449

 
 
 
 
Adjustment from fair value to contract value for interest in The Master Trust Agreement for The Timken Company Defined Contribution Plans relating to fully benefit-responsive investment contracts
(13,353
)
 
(245
)
Net assets available for benefits
$
6,626,292

 
$
6,201,204

 
 
 
 
See accompanying notes.
 
 
 


2

The Timken Company Savings Plan
for Certain Bargaining Associates

Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2014


Additions
 
Investment income:
 
Net appreciation from The Master Trust Agreement for The Timken Company Defined Contribution Plans
$
361,263

Interest income from participant notes
11,604

Contributions:
 
Participants
253,771

The Timken Company
95,332

 
349,103

Total Additions
721,970

 
 
Deductions
 
Benefits paid directly to participants
285,800

Administrative expenses
272

Total deductions
286,072

 
 
Net increase prior to transfers
435,898

Transfer to TimkenSteel Corporation
(10,810
)
Net increase
425,088

 
 
Net assets available for benefits:
 
Beginning of year
6,201,204

End of year
$
6,626,292

 
 
See accompanying notes.
 


3

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements
December 31, 2014 and 2013, and Year Ended December 31, 2014


1. Description of the Plan
The following description of The Timken Company Savings Plan for Certain Bargaining Associates (the Plan) provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions. The Plan was established on February 16, 2003. On February 16, 2003, The Timken Company (Timken) acquired Ingersoll-Rand Company Limited’s Engineered Solutions business, which was comprised of certain operating assets and subsidiaries including The Torrington Company. On July 1, 2013, Timken merged the Timken Gears & Services Savings Plan into the Plan and renamed the Plan as The Timken Company Savings Plan for Certain Bargaining Associates. Effective January 1, 2014 the Company amended and restated the Plan in its entirety to allow certain employees of TSB Metal Recycling LLC to participate in the Plan and to make certain other changes to the Plan.
On June 30, 2014, the Company completed the separation of its steel business from its bearings and power transmission business through a spinoff, creating a new independent publicly traded company, TimkenSteel Corporation (TimkenSteel). The Company's board of directors declared a distribution of all outstanding common shares of TimkenSteel through a dividend. At the close of business on June 30, 2014, the Company's shareholders received one common share of TimkenSteel for every two common shares of the Company they held as of the close of business on June 23, 2014. A dividend of $176,715 in TimkenSteel was distributed to participants in the Plan, creating the TimkenSteel Common Stock Fund. In addition, as a result of the spinoff, $10,810 in plan assets were transferred to The TimkenSteel Corporation Savings Plan for Certain Bargaining Associates for TimkenSteel employees and retirees.
General
During 2006, The Timken Company closed its Standard Plant, the full-time hourly employees of which were represented by the United Auto Workers Local 1645. As a result of this transaction, all participants in the Plan terminated their employment with The Timken Company and the Plan will no longer have any new participants or contributions from Local 1645. The Plan is a defined contribution plan which covered full-time hourly employees of Timken who are represented by the United Auto Workers (UAW) Local 864 and the International Association of Machinists (IAM) Local 311. Employees of Timken represented by UAW Local 864 and IAM Local 311 become eligible to participate in the Plan following the earlier of (i) being credited with one year of service or (ii) completion of 60 consecutive days of employment. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Under the provisions of the Plan, UAW Local 864 and IAM Local 311 participants are able to elect to contribute up to 18% of their eligible earnings and Workers United Local 10 participants are able to elect up to 75% of their eligible earnings on a pretax basis directly to the Plan subject to Internal Revenue Service (IRS) limitations. Participants are also able to contribute amounts representing distributions from other qualified defined benefit or 401(k) defined contribution plans. For employees represented by UAW Local 864 and Workers United Local 10, Timken matches participant contributions, “Company Matching Contributions” at an amount equal to 100% on the first 3% of the participant’s eligible earnings. The plan also provides a 3% non-elective contribution (Company Non-elective Contribution) for all employees represented by UAW 864. The compensation used to determine the Company Matching Contribution and the Company Non-elective Contribution for UAW Local 864 participants is equal to 100% of the employee's base hourly rate for the first forty hours per week plus 50% of overtime earnings. All employer contributions are invested in The Timken Company Common Stock Fund.

Upon enrollment, a participant is required to direct his or her contribution in 1% increments to any of the Plan’s investment options. Participants have access to their account information and the ability to make changes on a daily basis, subject to the next available payroll for contribution change election, through an automated telecommunications system. Account information and certain changes may also be made through the Internet.
Delinquent Participant Contributions
During 2014, the Company failed to transmit certain participant contributions to the Plan in the amount of $160 within the time period prescribed by ERISA. Late transmissions of participant contributions constitute a prohibited transaction under ERISA section 406, regardless of materiality. The Company transmitted the delinquent participant contributions to the Plan by December 31, 2014. Related excise taxes were paid by the Company.

4

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of (a) Timken’s contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. Plan earnings are allocated based on the participant’s share of net earnings or losses of their respective elected investment options. Allocations of administrative expenses are based on the participant’s account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants were immediately vested in their contributions and rollover contributions plus actual earnings thereon. Vesting in the Company Matching Contribution portion of their account plus actual earnings thereon is also immediate.
Participant Notes Receivable
Participants may borrow from their account related to their participant contributions and rollover contributions with a minimum of $1,000 up to a maximum equal to the lesser of (1) $50,000 minus the excess of the highest outstanding loan balance during the past 12 months or (2) 50% of their account balance related to participant contributions and rollover contributions. Loan terms generally cannot exceed five years for general purpose loans and thirty years for residential loans.

The loans are secured by the balance in the participant’s vested account and bear interest at an interest rate of 1% in excess of the prime rate, as published in the Wall Street Journal on the first business day of the month in which the loan is granted. Principal and interest are paid ratably through payroll deductions. Loans that are unpaid are treated as distributions.
Payment of Benefits
Benefits are recorded when paid. Upon termination of service with The Timken Company due to the closure of the Standard Plant, participants having a vested account balance greater than $1,000 were given the option of (i) transferring their account balance to another plan, (ii) receiving a lump-sum amount equal to the vested balance of their account, (iii) receiving installment payments of their vested assets over a period of time not to exceed their life expectancy, or (iv) leaving their vested account balance in the Plan. Participants having a vested account balance less than $1,000 received a lump-sum amount equal to their vested account balance. Participants electing to leave their vested assets in the Plan may do so until age 70-1/ 2 after which time the lump-sum or installment distribution options would apply.
Hardship withdrawals are allowed for participants incurring an immediate and severe financial need, as defined by the Plan. Hardship withdrawals are strictly regulated by the IRS and a participant must exhaust all available loan options and distributions prior to requesting a hardship withdrawal.
Administrative Expenses
The plan's administrative expenses are paid by either the Plan or the Company, as provided by the Plan's provisions. Administrative expenses paid by the Plan include recordkeeping and trustee fees. Expenses relating to purchases, sales or transfers of the Plan's investments are charged to the particular investment fund to which the expenses relate. All other administrative expenses of the Plan are paid by the Company. Expenses that are paid by the Company are excluded from these financial statements.
Plan Termination
Although it has not expressed any interest to do so, Timken has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the Plan's trustee, JP Morgan (Trustee), shall distribute to each participant the vested balance in their separate account.


5

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


2. Accounting Policies

Basis of Accounting
The financial statements have been prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value and are invested in The Master Trust Agreement for the Timken Defined Contribution Plans (Master Trust), which was established for the investment of assets of the Plan and the two other defined contribution plans sponsored by The Timken Company.
The Plan’s trustee maintains a collective investment trust of Timken common shares in which the Company’s defined contribution plans participate on a unit basis. Timken common shares are traded on a national securities exchange and participation units in The Timken Company Common Stock Fund are valued at the last reported sales price on the last business day of the plan year.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.
Participant Notes Receivable
Participant notes receivable represents participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2014 or 2013. If a participant ceases to make loan repayments and the Plan Administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncements
In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent), (ASU 2015-07). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy investments for which fair values are estimated using the net asset value practical expedient provided by Accounting Standards Codification 820, Fair Value Measurement. Disclosures about investments in certain entities that calculate net asset value per share are limited under ASU 2015-07 to those investments for which the entity has elected to estimate the fair value using the net asset value practical expedient. ASU 2015-07 is effective for entities (other than public business entities) for fiscal years beginning after December 15, 2016, with retrospective application to all periods presented. Early application is permitted. The Company is currently evaluating the impact of adopting ASU 2015-07.


3. Investments
The Plan’s assets are held in the Master Trust, commingled with assets of other Company-sponsored benefit plans.

Each participating plan’s interest in the investment funds (i.e., separate accounts) of the Master Trust is based on account balances of the participants and their elected investment funds. The Master Trust assets are allocated among the participating plans by assigning to each plan those transactions (primarily contributions, benefit payments, and plan-specific expenses) that can be specifically identified and by allocating among all plans, in proportion to the fair value of the assets assigned to each plan, income and expenses resulting from the collective investment of the assets of the Master Trust. The Plan’s ownership percentage in the Master Trust as of December 31, 2014 and 2013 was 0.61% and 0.41%, respectively.

6

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


The following tables present the fair values of investments in the Master Trust and the Plan's ownership percentage in each investment fund of the Master Trust:
 
December 31, 2014
 
Cash and Cash Equivalents
 
Company Stock
 
Registered Investment Companies
 
Common Collective
 
Total Assets
 
Plan's Ownership Percentage
Investment, at Fair Value:
 
 
 
 
 
 
 
 
 
 
 
The Timken Company Common Stock Fund
$
657,641

 
$
169,394,951

 
$

 
$

 
170,052,592

 
0.21
%
TimkenSteel Common Stock Fund
11,108

 
63,360,126

 

 

 
63,371,234

 
0.24
%
Morgan Stanley Small Company Growth

 

 
14,813,430

 

 
14,813,430

 
0.11
%
American Funds EuroPacific Growth

 

 
86,365,892

 

 
86,365,892

 
0.09
%
American Funds Washington Mutual Investors

 

 
29,056,130

 

 
29,056,130

 
0.09
%
American Beacon Small Cap Value

 

 
19,829,041

 

 
19,829,041

 
0.22
%
Vanguard Target Retirement Income

 

 
18,682,387

 

 
18,682,387

 
9.06
%
Vanguard Target Retirement 2015

 

 
53,853,742

 

 
53,853,742

 
2.27
%
Vanguard Target Retirement 2025

 

 
42,876,841

 

 
42,876,841

 
0.53
%
Vanguard Target Retirement 2035

 

 
35,591,237

 

 
35,591,237

 
0.99
%
Vanguard Target Retirement 2045

 

 
14,860,688

 

 
14,860,688

 
0.38
%
Vanguard Target Retirement 2020

 

 
14,653,078

 

 
14,653,078

 
2.91
%
Vanguard Target Retirement 2030

 

 
10,230,594

 

 
10,230,594

 
4.54
%
Vanguard Target Retirement 2040

 

 
3,273,703

 

 
3,273,703

 
2.74
%
Vanguard Target Retirement 2050

 

 
2,702,181

 

 
2,702,181

 
1.14
%
JPMorgan S&P 500 Index

 

 

 
8,519,545

 
8,519,545

 
0.61
%
The Timken Company - JPMCB Core Bond Fund

 

 

 
88,400,086

 
88,400,086

 
0.07
%
JPMorgan Equity Index

 

 

 
149,370,583

 
149,370,583

 
0.00
%
Nuveen Winslow Large-Cap Growth

 

 

 
56,696,153

 
56,696,153

 
0.12
%
SSgA Russell 2000-A Index

 

 

 
47,039,238

 
47,039,238

 
0.09
%
 
$
668,749

 
$
232,755,077

 
$
346,788,944

 
$
350,025,605

 
$
930,238,375

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wells Fargo Stable Value Fund:
 
 
 
 
 
 
 
 
 
 
 
Wells Fargo Stable Return Fund

 

 

 
3,264,205

 
3,264,205

 
 
Wells Fargo Stable Value Fund

 

 

 
128,802,600

 
128,802,600

 
 
Adjustment from fair value to contract value

 

 

 
(1,823,408
)
 
(1,823,408
)
 
 
 
$

 
$

 
$

 
$
130,243,397

 
$
130,243,397

 
0.73
%
 
 
 
 
 
 
 
 
 
 
 
 
Net Assets of Master Trust
$
668,749

 
$
232,755,077

 
$
346,788,944

 
$
480,269,002

 
$
1,060,481,772

 
0.61
%

7

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


 
December 31, 2013
 
Cash and Cash Equivalents
 
Company Stock
 
Registered Investment Companies
 
Common Collective
 
Government and Agency Securities
 
Mortgage and Asset Backed Securities
 
Corporate Bonds
 
Wrap Contracts
 
Total Assets
 
Plan's Ownership Percentage
Investment, at Fair Value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Timken Company Common Stock Fund
$
2,272,411

 
$
311,718,611

 
$

 
$

 
$

 
$

 
$

 
$

 
$
313,991,022

 
0.15
%
Morgan Stanley Small Company Growth

 

 
26,341,600

 

 

 

 

 

 
26,341,600

 
0.05
%
American Funds EuroPacific Growth

 

 
122,203,443

 

 

 

 

 

 
122,203,443

 
0.07
%
American Funds Washington Mutual Investors

 

 
37,090,782

 

 

 

 

 

 
37,090,782

 
0.06
%
American Beacon Small Cap Value

 

 
32,171,620

 

 

 

 

 

 
32,171,620

 
0.12
%
Vanguard Target Retirement Income

 

 
25,366,044

 

 

 

 

 

 
25,366,044

 
6.35
%
Vanguard Target Retirement 2015

 

 
74,178,696

 

 

 

 

 

 
74,178,696

 
1.56
%
Vanguard Target Retirement 2025

 

 
49,463,045

 

 

 

 

 

 
49,463,045

 
0.29
%
Vanguard Target Retirement 2035

 

 
42,757,483

 

 

 

 

 

 
42,757,483

 
0.83
%
Vanguard Target Retirement 2045

 

 
20,055,670

 

 

 

 

 

 
20,055,670

 
0.34
%
Vanguard Target Retirement 2020

 

 
14,424,622

 

 

 

 

 

 
14,424,622

 
2.67
%
Vanguard Target Retirement 2030

 

 
6,253,997

 

 

 

 

 

 
6,253,997

 
5.62
%
Vanguard Target Retirement 2040

 

 
2,596,672

 

 

 

 

 

 
2,596,672

 
1.99
%
Vanguard Target Retirement 2050

 

 
2,152,852

 

 

 

 

 

 
2,152,852

 
0.89
%
JPMorgan S&P 500 Index

 

 

 
40,380,646

 

 

 

 

 
40,380,646

 
0.11
%
The Timken Company - JPM Bond Fund

 

 

 
7,415,239

 
24,596,335

 
66,456,847

 
18,282,643

 

 
116,751,064

 
0.05
%
JPMorgan Equity Index

 

 

 
180,551,056

 

 

 

 

 
180,551,056

 
0.00
%
Nuveen Winslow Large-Cap Growth

 

 

 
80,486,000

 

 

 

 

 
80,486,000

 
0.08
%
SSgA Russell 200-A Index

 

 

 
69,365,489

 

 

 

 

 
69,365,489

 
0.05
%
 
$
2,272,411

 
$
311,718,611

 
$
455,056,526

 
$
378,198,430

 
$
24,596,335

 
$
66,456,847

 
$
18,282,643

 
$

 
$
1,256,581,803

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JPMorgan Stable Value Fund:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JPMorgan Liquidity Fund

 

 

 
5,763,603

 

 

 

 

 
5,763,603

 
 
JPMorgan Intermediate Bond Fund

 

 

 
184,514,113

 

 

 

 

 
184,514,113

 
 
Wrapper Value

 

 

 

 

 

 

 
45,074

 
45,074

 
 
Adjustment from fair value to contract value

 

 

 
(51,241
)
 

 

 

 

 
(51,241
)
 
 
 
$

 
$

 
$

 
$
190,226,475

 
$

 
$

 
$

 
$
45,074

 
$
190,271,549

 
0.48
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Assets of Master Trust
$
2,272,411

 
$
311,718,611

 
$
455,056,526

 
$
568,424,905

 
$
24,596,335

 
$
66,456,847

 
$
18,282,643

 
$
45,074

 
$
1,446,853,352

 
0.41
%

8

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)



Changes in net assets for the Master Trust are as follows:
 
Year Ended
December 31, 2014
 
 
Net Transfers (contributions, transfers and benefit payments for the participating plans)
$
(549,368,057
)
Net appreciation in fair value of instruments:
 
   Company Stock
16,572,021

   Registered Investment Companies
6,303,835

   Common Collective Funds
34,646,492

   Government and Agency Securities
1,885,282

   Mortgage and Asset Backed Securities
1,441,975

   Corporate Bonds
1,848,486

       Investment Contracts
1,957,632

 
(484,712,334
)
 
 
Interest
1,382

Dividends
99,370,299

 
99,371,681

 
 
Total investment income (net of transfers)
(385,340,653
)
Administrative expenses
(1,030,927
)
Net decrease
(386,371,580
)
Net assets:
 
   Beginning of the year
1,446,853,352

   End of the year
$
1,060,481,772




9

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


4. Fair Value

The fair value framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2 - Inputs to the valuation methodology include:
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical or similar assets or liabilities in inactive markets;
inputs other than quoted prices that are observable for the asset or liability;
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.


10

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)



The following tables present the fair value hierarchy for those investment of the Master Trust measured at fair value on a recurring basis as of December 31, 2014 and 2013:
 
Assets at Fair Value as of
 
December 31, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Cash and Cash Equivalents:
 
 
 
 
 
 
 
JPMorgan US Government Money Market
$
668,749

 
$

 
$
668,749

 
$

Company Stock:
 
 
 
 
 
 
 
The Timken Company Common Stock
169,394,951

 
169,394,951

 

 

TimkenSteel Common Stock
63,360,126

 
63,360,126

 

 

Registered Investment Companies:
 
 
 
 
 
 
 
Morgan Stanley Small Company Growth
14,813,430

 
14,813,430

 

 

American Funds EuroPacific Growth
86,365,892

 
86,365,892

 

 

American Funds Washington Mutual Investors
29,056,130

 
29,056,130

 

 

American Beacon Small Cap Value
19,829,041

 
19,829,041

 

 

Vanguard Target Retirement Income
18,682,387

 
18,682,387

 

 

Vanguard Target Retirement 2015
53,853,742

 
53,853,742

 

 

Vanguard Target Retirement 2020
14,653,078

 
14,653,078

 

 

Vanguard Target Retirement 2025
42,876,841

 
42,876,841

 

 

Vanguard Target Retirement 2030
10,230,594

 
10,230,594

 

 

Vanguard Target Retirement 2035
35,591,237

 
35,591,237

 

 

Vanguard Target Retirement 2040
3,273,703

 
3,273,703

 

 

Vanguard Target Retirement 2045
14,860,688

 
14,860,688

 

 

Vanguard Target Retirement 2050
2,702,181

 
2,702,181

 

 

Common Collective Funds:
 
 
 
 
 
 
 
JPMorgan S&P 500 Index
8,519,545

 

 
8,519,545

 

SSgA Russell 2000-A Index
47,039,238

 

 
47,039,238

 

JPMorgan Equity Index
149,370,583

 

 
149,370,583

 

Nuveen Winslow Large-Cap Growth
56,696,153

 

 
56,696,153

 

The Timken Company-JPM Bond Fund:
 
 
 
 
 
 
 
Common Collective Fund:
 
 
 
 
 
 
 
JPMCB Core Bond Fund
88,400,086

 

 
88,400,086

 

Wells Fargo Stable Value Fund:
 
 
 
 
 
 
 
Common Collective Funds:
 
 
 
 
 
 
 
Wells Fargo Stable Return Fund
3,264,205

 

 
3,264,205

 

Wells Fargo Stable Value Fund
128,802,600

 

 
128,802,600

 

Total assets
$
1,062,305,180

 
$
579,544,021

 
$
482,761,159

 
$



11

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


 
Assets at Fair Value as of
 
December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Cash and Cash Equivalents:
 
 
 
 
 
 
 
JPMorgan US Government Money Market
$
2,272,411

 
$

 
$
2,272,411

 
$

Company Stock:
 
 
 
 
 
 
 
The Timken Company Common Stock
311,718,611

 
311,718,611

 

 

Registered Investment Companies:
 
 
 
 
 
 
 
Morgan Stanley Small Company Growth
26,341,600

 
26,341,600

 

 

American Funds EuroPacific Growth
122,203,443

 
122,203,443

 

 

American Funds Washington Mutual Investors
37,090,782

 
37,090,782

 

 

American Beacon Small Cap Value
32,171,620

 
32,171,620

 

 

Vanguard Target Retirement Income
25,366,044

 
25,366,044

 

 

Vanguard Target Retirement 2015
74,178,696

 
74,178,696

 

 

Vanguard Target Retirement 2020
14,424,622

 
14,424,622

 

 

Vanguard Target Retirement 2025
49,463,045

 
49,463,045

 

 

Vanguard Target Retirement 2030
6,253,997

 
6,253,997

 

 

Vanguard Target Retirement 2035
42,757,483

 
42,757,483

 

 

Vanguard Target Retirement 2040
2,596,672

 
2,596,672

 

 

Vanguard Target Retirement 2045
20,055,670

 
20,055,670

 

 

Vanguard Target Retirement 2050
2,152,852

 
2,152,852

 

 

Common Collective Funds:
 
 
 
 
 
 
 
JPMorgan S&P 500 Index
40,380,646

 

 
40,380,646

 

SSgA Russel 2000-A Index
69,365,489

 

 
69,365,489

 

JPMorgan Equity Index
180,551,056

 

 
180,551,056

 

Nuveen Winslow Large-Cap Growth
80,486,000

 

 
80,486,000

 

The Timken Company-JPM Bond Fund:
 
 
 
 
 
 
 
Common Collective Fund:
 
 
 
 
 
 
 
JPMorgan Liquidity Fund
7,415,239

 

 
7,415,239

 

Government and Agency Securities
24,596,335

 

 
24,596,335

 

Mortgage and Asset Backed Securities
66,456,847

 

 
66,456,847

 

Corporate Bonds
18,282,643

 

 
18,282,643

 

JPMorgan Stable Value Fund:
 
 
 
 
 
 
 
Common Collective Funds:
 
 
 
 
 
 
 
JPMorgan Liquidity Fund
5,763,603

 

 
5,763,603

 

JPMorgan Intermediate Bond Fund
184,514,113

 

 
184,514,113

 

Wrapper Value
45,074

 

 

 
45,074

Total assets
$
1,446,904,593

 
$
766,775,137

 
$
680,084,382

 
$
45,074



12

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


The investment strategy for American Funds Washington Mutual Investors is to invest in common stocks of established companies that are listed on, or meet the financial listing requirements of, the New York Stock Exchange and have a strong record of earnings and dividends.
The Timken Company and TimkenSteel Common Stock Funds participate in units and are valued based on the closing price of each company's common shares traded on a national securities exchange. Registered investment companies are valued based on quoted market prices reported on the active market on which the individual securities are traded.
The JPMorgan S&P 500 Index Fund and the JPMorgan Equity Index Fund include investments that provide exposure to a broad equity market and are designed to mirror the aggregate price and dividend performance of the S&P 500 Index. The fair values of the investments in this category have been determined using the net asset value per share.
At December 31, 2013, the Plan was invested in the Timken Company JPM Bond Fund. The JPM Bond Fund included investments that seek to maximize total return by investing primarily in a diversified portfolio of intermediate and long term debt securities. The JP Morgan Liquidity Fund was valued using the net asset value per share. The Government and Agency Securities were valued at the closing prices on the date of the last transaction. Mortgage and Asset Backed Securities were valued based on quoted prices for similar assets in active markets. Corporate Bonds were valued at the closing price on the date of the last transaction. During 2014, the Company replaced the JPM Bond Fund with the JPMCB Core Bond Fund. The JPMCB Core Bond Fund invests primarily in a diversified portfolio of intermediate and long-term debt securities and is valued using the net asset value per share.
The SSgA Russell 2000-A Index Fund includes investments seeking an investment return that approximates as closely as practicable, before expenses, the performance of the Russell 2000 Index over the long term. The fund includes exposure to stocks of small U.S. companies. The fair value of the investments in this category has been determined using the net asset value per share.
The Nuveen Winslow Large-Cap Growth Fund is a portfolio that invests at least 80% of its net assets in equity securities of U.S. companies with market capitalization in excess of $4 billion at the time of purchase. The fair value of the investments in this category has been determined using the net asset value per share on the active market on which the individual securities are traded.

At December 31, 2013, the Company was invested in the JP Morgan Stable Value Fund. The Stable Value Fund was invested in the JPMorgan Liquidity and JPMorgan Intermediate Bond funds. The fair value of the investment in these funds was estimated using the net asset value per share. The JPMorgan Liquidity Fund invested in a diversified portfolio of fixed and floating rate short-term money market instruments and U.S. Treasury securities. The JPMorgan Mortgage Private Placement invested primarily in privately placed fixed rate and floating rate mortgages and leasebacks secured by apartment complexes and single family homes, as well as commercial properties, such as office buildings, shopping centers, retail stores and warehouses. The JPMorgan Intermediate Bond Fund was designed as a fixed income portfolio strategy for stable value funds and other conservative fixed income investors. During 2014, the Company replaced the JP Morgan Stable Value Fund with the Wells Fargo Stable Value Fund. The Wells Fargo Stable Value Fund primarily invests in security backed investment contracts and is measured using the net asset value per share. As a result of the transition to the Wells Fargo Stable Value Fund, there are no Level 3 assets at December 31, 2014.

The following tables present a summary of changes in the fair value of the Master Trust’s Level 3 assets as of December 31, 2014 and December 31, 2013, respectively:

 
 
Wrapper Value
 
Total
Balance,
January 1, 2014
$
45,074

 
$
45,074

Realized gains
(45,074
)
 
(45,074
)
Balance,
December 31, 2014
$

 
$

 
 
 
 
 
 
 
Wrapper Value
 
Total
Balance,
January 1, 2013
$
48,420

 
$
48,420

Unrealized losses
(3,346
)
 
(3,346
)
Balance,
December 31, 2013
$
45,074

 
$
45,074


13

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


The following table represents the Plan's level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, and the significant unobservable inputs and the ranges of values for those inputs as of December 31, 2013:

December 31, 2013
Instrument
Fair Value
Principal Valuation Technique
Unobservable Inputs
Range of Significant Input Values
Weighted Average
Synthetic guaranteed investment contract wrapper
$
45,074

Replacement Cost
Swap Yield Rate
0.81
%
0.81
%
 
 
 
Duration
3.05

 
 
 
 
Payout Date
N/A

 
 
 
 
Payout Percentage
N/A

 


The following tables summarize investments measured at fair value based on net asset value (NAVs) per share as of December 31, 2014 and 2013, respectively:
December 31, 2014
 
Fair Value
 
Redemption Unfunded Commitments
 
Redemption Frequency
 
Redemption Notice Period
JPMorgan S&P 500 Index
 
$
8,519,545

 
Not applicable
 
Daily
 
Trade Day
The Timken Company - JPM Core Bond Fund
 
$
88,400,086

 
Not applicable
 
Daily
 
Trade Day
SSgA Russell 2000-A Index
 
$
47,039,238

 
Not applicable
 
Daily
 
Trade Day
JPMorgan Equity Index
 
$
149,370,583

 
Not applicable
 
Daily
 
Trade Day + 1 day
Nuveen Winslow Large Cap Growth
 
$
56,696,153

 
Not applicable
 
Daily
 
Trade Day
Wells Fargo Stable Return Fund
 
$
3,264,205

 
Not applicable
 
Daily
 
Trade Day
Wells Fargo Stable Value Fund
 
$
128,802,600

 
Not applicable
 
Daily
 
Trade Day
December 31, 2013
 
Fair Value
 
Redemption Unfunded Commitments
 
Redemption Frequency
 
Redemption Notice Period
JPMorgan S&P 500 Index
 
$
40,380,646

 
Not applicable
 
Daily
 
Trade Day
The Timken Company - JPM Bond Fund
 
$
116,751,064

 
Not applicable
 
Daily
 
Trade Day
SSgA Russell 2000-A Index
 
$
69,365,489

 
Not applicable
 
Daily
 
Trade Day
JPMorgan Equity Index
 
$
180,551,056

 
Not applicable
 
Daily
 
Trade Day + 1 day
Nuveen Winslow Large Cap Growth
 
$
80,486,000

 
Not applicable
 
Daily
 
Trade Day
JPMorgan Liquidity
 
$
5,763,603

 
Not applicable
 
Daily
 
Trade Day
JPMorgan Intermediate Bond
 
$
184,514,113

 
Not applicable
 
Daily
 
Trade Day



14

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)




5. Non-Participant-Directed Investments
Non-participant-directed investments are investments in The Timken Company Stock Fund as a result of the Company matching contributions. Information about the net assets and the significant components of changes in net assets related to non-participant-directed investments was as follows:
 
December 31,
 
2014
 
2013
Investments, at fair value:
 
 
 
Interest in Master Trust related to The Timken Company Common Stock Fund
$
504,839

 
$
479,832

Receivables:
 
 
 
Contributions receivable from the Timken Company
25

 
36

 
$
504,864

 
$
479,868

 
Year Ended
 
December 31, 2014
Change in net assets:
 
Net depreciation in fair value of investments
$
(123,685
)
Dividends
9,592

Contributions
5,912

Benefits paid directly to participants
(43,332
)
Expenses
(10
)
Transfers from participant-directed accounts (net)
176,519

 
$
24,996


6. Investment Contracts
During 2013, the Master Trust invested in synthetic guaranteed investment contracts (SGICs), or a Stable Value Fund, that credit a stated interest rate for a specified period of time. The Stable Value Fund provided principal preservation plus accrued interest through fully benefit-responsive wrap contracts issued by a third party which back the underlying assets owned by the Master Trust. The account was credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The investment contract issuer was contractually obligated to repay the principal at a specified interest rate that was guaranteed to the Plan.
Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the fully benefit-responsive investment contracts. Contract value represents contributions made under the contracts, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
The Plan’s wrapper contracts permit all allowable participant-initiated transactions to occur at contract value. There are no events known to the Plan that are probable of occurring and which would limit its ability to transact at contract value with the issuer of the wrapper contract, which also limit the ability of the Plan to transact at contract value with participants. The wrapper contracts cannot be terminated by its issuer at a value other than contract value or prior to the scheduled maturity date, except under a limited number of very specific circumstances including termination of the Plan or failure to qualify, material misrepresentations by the Plan sponsor or investment manager, failure by these same parties to meet material obligations under the contract, or other similar types of events.


15

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rates for the wrap contracts are calculated on a quarterly basis (or more frequently if necessary) using contract value, market value of the underlying fixed income portfolio, the yield of the portfolio, and the duration of the index, but cannot be less than zero. The crediting rate is most affected by the change in the annual effective yield to maturity of the underlying securities, but is also affected by the difference between the contract value and the market value of the covered investments.

During 2014, the Company transitioned to Wells Fargo Stable Value Fund. The Wells Fargo Stable Value Fund is a common collective fund, thus the wraps are held at the common collective fund level.


 
 
December 31,
Average Yields for SGICs
 
2014
 
2013
Based on actual earnings
 
N/A
 
1.0
%
Base on interest rate credited to participants
 
N/A
 
2.0
%


7. Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
 
December 31, 2014

 
December 31, 2013

Net assets available for Benefits per the financial statements
$
6,626,292

 
$
6,201,204

Adjustments from contract value to fair value for fully benefit-responsive investment contracts
13,353

 
245

Net assets available for benefits per the Form 5500
$
6,639,645

 
$
6,201,449

The fully benefit-responsive investment contracts have been adjusted from fair value to contract value for purposes of the financial statements. For purposes of the Form 5500, the investment contracts will be stated at fair value.

The following is a reconciliation of total additions per the financial statements to total income per the Form 5500 for the year ended December 31, 2014:
 
December 31, 2014
Total additions per the financial statements
$
721,970

Less: Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2013
(245
)
Add: Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2014
13,353

Total income per the Form 5500
$
735,078


8. Risks and Uncertainties
The Master Trust invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market volatility, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.


16

The Timken Company Savings Plan
for Certain Bargaining Associates
Notes to Financial Statements (continued)


9. Income Tax Status
The Plan has received a determination letter from the IRS dated August 21, 2012, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code), and therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes that the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax-exempt. The Plan Administrator will take steps to ensure that the Plan's operations remain in compliance with the Code, including taking appropriate action, when necessary, to bring the Plan's operations into compliance.

Accounting principles generally accepted in the United States require plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2011.

10. Related-Party Transactions
Related-party transactions included the investments in the common stock of the Company and the investment funds of the Trustee. Such transactions are exempt from being prohibited transactions.
The following is a summary of transactions in Timken common shares with the Master Trust for the year ended December 31, 2014:
 
Dollars
Purchased
$
25,304,727

Issued to participants for payment of benefits
$
10,876,925

Purchases and benefits paid to participants include Timken common shares valued at quoted market prices at the date of purchase or distribution.
Certain legal and accounting fees and certain administrative expenses relating to the maintenance of participant records are paid by the Company. Fees paid during the year for services rendered by parties in interest were based on customary and reasonable rates for such services.

During 2014, a total dividend of $81,911,612 in TimkenSteel was distributed to participants in the Master Trust as a result of the spinoff, creating the TimkenSteel Common Stock Fund. Additionally, there were benefits paid of $1,573,658 to participants in TimkenSteel common shares during 2014.


17

Table of Contents



Supplemental Schedules

18

The Timken Company Savings Plan
For Certain Bargaining Associates

EIN #34-0577130      Plan #022

Schedule H, Line 4a - Schedule of Delinquent Participant Contributions

Year Ended December 31, 2014
Participant Contributions Transferred Late to Plan
 
Total that Constitutes Nonexempt Prohibited Transactions
 
Check here if Late Participant Loan Repayments are Included: ý
 
Contributions Not Corrected
 
Contributions Corrected Outside VFCP
 
Contributions Pending Correction in VFCP
 
Total Fully Corrected Under VFCP and PTE 2002-51
 
$
160.40

 
$

 
$

 
$

 
$
160.40

(1)
$
926.81

 
$

 
$

 
$
926.81

(2)
$

 

(1)
Represents delinquent participant contributions and lost earnings for the pay periods of February 20, 2014 and July 7, 2014.
(2)
Represents delinquent loan repayments for various pay periods in 2014.


19

The Timken Company Savings Plan
For Certain Bargaining Associates

EIN #34-0577130      Plan #022
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year)
Year Ended December 31, 2014
 
Identity of Issuer, Borrower, Lessor, or Similar Party
 
Description of Investment, Including Maturity Date, Rate of
 Interest, Collateral, Par, or Maturity Value
  
Current Value
Participant notes receivable*
 
Interest rates ranging from 4.25% to 5.25% with various maturity dates
  
$
205,316


* Indicates party in interest to the Plan


20



SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other person who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
THE TIMKEN COMPANY SAVINGS PLAN FOR CERTAIN BARGAINING ASSOCIATES
 
 
 
Date: June 29, 2015
By:
/s/ J. Ted Mihaila
 
 
J. Ted Mihaila
 
 
Senior Vice President and Controller


21