Acquisitions (Notes)

6 Months Ended

Jun. 30, 2019

Business Combination Disclosure [Text Block]

Note 3 - Acquisitions

On April 1, 2019, the Company completed the acquisition of The Diamond Chain Company ("Diamond Chain"), a leading supplier of high-performance roller chains for industrial markets. Diamond Chain serves a diverse range of market sectors, including industrial distribution, material handling, food and beverage, agriculture, construction and other process industries. Diamond Chain, located in Indianapolis, Indiana, operates primarily in the United States and China and had sales of approximately $60 million for the twelve months ended March 31, 2019. The purchase price for this acquisition was $84.9 million, excluding $1.8 million for cash acquired. During the six months ended June 30, 2019, the Company incurred acquisition-related costs of $1.3 million to complete this acquisition. Based on markets and customers served, the results for Diamond Chain are reported in the Process Industries segment. The following table presents the purchase price allocation at fair value, net of cash acquired, for the Diamond Chain acquisition:



	Initial Purchase Price Allocation
Assets:
Accounts receivable, net	$	6.7
Inventories, net	24.1
Other current assets	2.4
Property, plant and equipment, net	19.4
Operating lease assets	2.1
Goodwill	17.7
Other intangible assets	26.7
Other non-current assets	0.5
Total assets acquired	$	99.6
Liabilities:
Accounts payable, trade	$	5.6
Other current liabilities	4.1
Long-term operating lease liabilities	2.1
Other non-current liabilities	1.1
Total liabilities assumed	$	12.9
Noncontrolling interest acquired	1.8
Net assets and noncontrolling interest acquired	$	84.9

The following table summarizes the preliminary purchase price allocation for identifiable intangible assets acquired in 2019:



	Preliminary Purchase Price Allocation
			Weighted - Average Life
Trade names (indefinite life)	$	12.3	Indefinite
Technology and know-how	5.2		14 years
Customer relationships	9.2		16 years
Total intangible assets	$	26.7

During 2018, the Company completed three acquisitions. On September 18, 2018, the Company completed the acquisition of Rollon S.p.A. ("Rollon"), a leader in engineered linear motion products, specializing in the design and manufacture of linear guides, telescopic rails and linear actuators used in a wide range of industries such as passenger rail, aerospace, packaging and logistics, medical and automation. On September 1, 2018, the Company completed the acquisition of Apiary Investments Holdings Limited ("Cone Drive"), a leader in precision drives used in diverse markets including solar, automation, aerial platforms, and food and beverage. On August 30, 2018, the Company's majority-owned subsidiary, Timken India Limited ("Timken India"), completed the acquisition of ABC Bearings. Timken India issued its shares as consideration for the acquisition of ABC Bearings. ABC Bearings is a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings in India. Hereafter, the ABC Bearings, Cone Drive, and Rollon acquisitions will be referred to collectively as the "2018 Acquisitions".

In January 2019, the Company paid a working capital adjustment of $2.9 million in connection with the Cone Drive acquisition, which was accrued and reflected in the purchase price in 2018. In May 2019, the Company received a $4.8 million payment from escrow related to an indemnification settlement for the Cone Drive acquisition, which is reflected as a purchase price adjustment. This adjustment, as well as other measurement period adjustments recorded in 2019, resulted in a $5.0 million decrease to goodwill. The following table presents the purchase price allocation at fair value, net of cash acquired, for the 2018 Acquisitions:



	Initial Purchase Price Allocation		Adjustments			Preliminary Purchase Price Allocation
Assets:
Accounts receivable, net	$	42.5				$	42.5
Inventories, net	61.6		(0.1		)	61.5
Other current assets	8.5		1.0			9.5
Property, plant and equipment, net	71.7		(6.3		)	65.4
Goodwill	468.2		(5.0		)	463.2
Other intangible assets	372.6		2.7			375.3
Other non-current assets	20.2		(3.7		)	16.5
Total assets acquired	$	1,045.3	$	(11.4	)	$	1,033.9
Liabilities:
Accounts payable, trade	$	35.2				$	35.2
Salaries, wages and benefits	9.1					9.1
Income taxes payable	2.5		0.4			2.9
Other current liabilities	8.2		0.2			8.4
Short-term debt	2.5		(0.6		)	1.9
Long-term debt	3.0		(2.9		)	0.1
Accrued pension cost	5.7					5.7
Accrued postretirement benefits cost	11.7					11.7
Deferred income taxes	116.2		(3.7		)	112.5
Other non-current liabilities	16.9					16.9
Total liabilities assumed	$	211.0	$	(6.6	)	$	204.4
Net assets acquired	$	834.3	$	(4.8	)	$	829.5

In determining the fair value of the amounts above, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being valued. The estimation of fair value required significant judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors. Inputs were generally determined by taking into account independent appraisals and historical data, supplemented by current and anticipated market conditions.

The above purchase price allocations for Diamond Chain and the 2018 Acquisitions, including the residual amount allocated to goodwill, are based on preliminary information and is subject to change as additional information concerning final asset and liability valuations is obtained. The Diamond Chain purchase price allocation is preliminary as a result of the proximity of the acquisition date to June 30, 2019. The primary areas of the preliminary purchase price allocation for the 2018 Acquisitions that have not been finalized relate to the fair value of net property, plant, and equipment and other intangible assets, and the related impacts on deferred income taxes and goodwill. During the applicable measurement periods, we will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.