Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Divestitures

Note 3 - Acquisitions and Divestitures

Acquisitions:

On May 31, 2022, the Company completed the acquisition of Spinea, s.r.o. ("Spinea"), a European technology leader and manufacturer of highly engineered cycloidal reduction gears and actuators, with estimated 2022 full year sales of approximately $40.0 million. Spinea’s solutions primarily serve high-precision automation and robotics applications in the factory automation sector. Spinea is located in Presov, Slovakia. The purchase price for this acquisition was $152.4 million, net of cash acquired of $0.2 million, subject to customary post-closing adjustments. Based on markets and customers served, results for Spinea are reported in the Process Industries segment.

The following table presents the purchase price allocation at fair value, for the Spinea acquisition as of September 30, 2022.

	Initial Purchase Price Allocation
Assets:
Accounts receivable	$	2.1
Inventories	20.9
Other current assets	2.9
Property, plant and equipment	82.0
Goodwill	39.2
Other intangible assets	32.1
Total assets acquired	$	179.2
Liabilities:
Accounts payable, trade	$	7.4
Salaries, wages and benefits	1.5
Other current liabilities	1.2
Long-term debt	0.2
Deferred income taxes	1.0
Other non-current liabilities	15.5
Total liabilities assumed	$	26.8
Net assets acquired	$	152.4

Note 3 - Acquisitions and Divestitures (continued)

The following table summarizes the preliminary purchase price allocation for identifiable intangible assets acquired in 2022:

	Preliminary Purchase Price Allocation
			Weighted - Average Life
Trade names	$	8.2	20 years
Technology and know-how	6.1		6 years
Customer relationships	17.2		17 years
Capitalized software	0.6		2 years
Total intangible assets	$	32.1

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 judgement 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 amounts in the table above represent the preliminary purchase price allocation for Spinea. This purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations are obtained. As of September 30, 2022, no elements of the purchase price allocation have been finalized. During the applicable measurement period, the Company 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 has been completed on the acquisition date.

On August 20, 2021, the Company completed the acquisition of the assets of Intelligent Machine Solutions ("iMS"), a manufacturer of industrial robotics and automation solutions, with annual sales of approximately $6.0 million. iMS is headquartered in Norton Shores, Michigan. The total purchase price for this acquisition was $7.7 million, including post-closing adjustments. In addition, the seller has the opportunity to earn $3.0 million of contingent performance-based consideration between January 1, 2022 and June 30, 2024. This additional component will be accounted for as compensation expense over that period. Based on markets and customers served, results for iMS are primarily reported in the Process Industries segment.

The following table presents the final purchase price allocation at fair value for the iMS acquisition:

	Final Purchase Price Allocation
Total assets acquired	$	9.8
Total liabilities assumed	2.1
Net assets acquired	$	7.7

On September 6, 2022, the Company entered into an agreement to acquire GGB Bearing Technology ("GGB Bearings"), a division of Enpro, Industries and a global technology and market leader of premium engineered metal-polymer plain bearings for $305 million subject to customary post-closing adjustments. GGB Bearings revenue is estimated to be $200 million for the full year 2022. GGB Bearings' products are used mainly in industrial applications, and the acquisition has manufacturing facilities across the United States, Europe and China. The transaction, which is subject to customary closing conditions, is expected to close in the fourth quarter of 2022 and will be funded with cash on hand and borrowings from existing credit facilities.

Note 3 - Acquisitions and Divestitures (continued)

Divestitures:

On September 1, 2022, the Company completed the divestiture of Timken-Rus Service Company ooo ("Timken Russia"), one of its two subsidiaries in Russia. Timken Russia had net sales of $4.8 million and $19.6 million in 2022 and 2021, respectively. The results of operations of Timken Russia were reported in the Mobile Industries and Process Industries segments based on customers and underlying market sectors served. The Company recorded proceeds of $1.0 million, net of cash divested of $5.3 million, and recognized a loss of $2.1 million on the sale of the business. The loss was reflected in other income, net in the Consolidated Statement of Income.

The Company made the decision to sell its Timken Aerospace Drive Systems, LLC ("ADS") business, located in Manchester, Connecticut. On October 7, 2022, the Company entered into a definitive agreement to sell the ADS business. During the third quarter of 2022, the business met the held for sale criteria, and the Company reclassified its assets and liabilities accordingly. Assets held for sale of $40.1 million are included in other current assets, and liabilities held for sale of $7.3 million are included in other current liabilities on the Consolidated Balance Sheet. As a result of the carrying value of the business exceeding the estimated sales price less costs to sell, the Company recorded an impairment charge of $29.3 million. The impairment charge is included in the impairment and restructuring line on the Consolidated Statement of Income. The Company expects to complete the sale during the fourth quarter of 2022, subject to customary closing conditions. Operating results of the ADS business are included the Mobile Industries segment.

The following table provides the major captions of assets and liabilities held for sale at September 30, 2022:

Assets:
Accounts receivable, net	$	6.0
Unbilled receivables	25.4
Inventories, net	13.4
Property, plant and equipment, net	4.4
Operating lease assets	3.7
Intangible assets, net	16.2
Other assets	0.3
Total assets	69.4
Less: impairment charge	(29.3)
Assets held for sale	$	40.1
Liabilities:
Accounts payable, trade	$	2.1
Salaries, wages and benefits	1.1
Other current liabilities	1.0
Long-term operating lease liabilities	3.1
Liabilities held for sale	$	7.3