Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Note 3 - Acquisitions and Divestitures

Acquisitions:

During 2023, Timken completed six acquisitions, which enhanced the Company's capabilities and product portfolio. On December 20, 2023, the Company completed the acquisition of 100% of the capital stock of Lagersmit Holding B.V. ("Lagersmit"), a Netherlands-based manufacturer of highly engineered sealing solutions for marine, dredging, water, tidal energy and other industrial applications. On November 1, 2023, the Company acquired Engineered Solutions Group ("iMECH"). The Company acquired 100% of the capital stock in the United States and substantially all of the assets in Canada. iMECH manufactures thrust bearings, radial bearings, specialty coatings and other components primarily used in the energy industry. iMECH has facilities in Houston, Texas and Alberta, Canada. On September 29, 2023, the Company acquired 100% of the capital stock of Rosa Sistemi S.p.A. ("Rosa"), a European designer and manufacturer of roller guideways, linear bearings, customized linear systems and actuators, commercialized ball guideways and precision ball screws. Rosa has its headquarters, R&D and high-precision manufacturing facility in Milan, Italy. On September 1, 2023, the Company acquired 100% of the capital stock of D-C Filtration Holdings Corp. ("Des-Case"), a Tennessee-based manufacturer of specialty filtration products for industrial lubricants. Des-Case has manufacturing facilities in Tennessee and the Netherlands. On April 4, 2023, the Company acquired 100% of the capital stock of Leonardo Top S.a.r.l. ("Nadella"), a leading European manufacturer of linear guides, telescopic rails, actuators and systems and other specialized industrial motion solutions. Based in Italy, Nadella operates manufacturing facilities in Europe and China. On January 31, 2023, the Company acquired substantially all of the assets of American Roller Bearing Company ("ARB"), a North Carolina-based manufacturer of industrial bearings. ARB, which boasts a large U.S. installed base and strong aftermarket business, operates manufacturing facilities in Hiddenite and Morganton, North Carolina. The total purchase price for these six acquisitions was $641.4 million (including working capital adjustments paid in 2024), net of cash acquired of $30.8 million. Results for Lagersmit, Rosa, Des-Case and Nadella are reported in the Industrial Motion segment, and results for iMECH and ARB are reported in the Engineered Bearings segment. The Company incurred acquisition-related costs of $6.7 million in total to complete these six acquisitions in 2023.

Note 3 - Acquisitions and Divestitures (continued)

The following table presents the updated purchase price allocation at fair value, net of cash acquired, for the 2023 acquisitions, as of December 31, 2023 and June 30, 2024:


	Purchase Price Allocation at December 31, 2023		2024 Adjustments		Updated Purchase Price Allocation at June 30, 2024
Assets:

Accounts receivable	$	44.7	$	(0.9)	$	43.8
Inventories	111.8		1.7		113.5
Other current assets	5.0		—		5.0
Property, plant and equipment	47.7		0.2		47.9
Operating lease assets	7.3		—		7.3
Goodwill	285.6		5.0		290.6
Other intangible assets	306.7		(6.2)		300.5
Other assets	6.7		(1.6)		5.1
Total assets acquired	$	815.5	$	(1.8)	$	813.7
Liabilities:
Accounts payable, trade	$	24.0	$	0.2	$	24.2
Salaries, wages and benefits	16.9		(2.0)		14.9
Income taxes payable	5.5		—		5.5
Other current liabilities	10.7		0.5		11.2
Short-term debt	4.7		—		4.7
Long-term debt	6.0		—		6.0
Accrued pension benefits	3.6		—		3.6
Long-term operating lease liabilities	7.0		(0.8)		6.2
Deferred income taxes	83.3		(1.1)		82.2
Other non-current liabilities	7.6		—		7.6
Total liabilities assumed	$	169.3	$	(3.2)	$	166.1
Noncontrolling interest acquired	5.2		1.0		6.2
Net assets acquired	$	641.0	$	0.4	$	641.4

The following table summarizes the preliminary purchase price allocation at fair value for identifiable intangible assets acquired in 2023:


	2023
			Weighted- Average Life

Trade names	$	25.6	17 years
Technology and know-how	70.5		15 years
Customer relationships	202.8		14 years
Non-compete agreements	1.0		3 years
Capitalized software	0.6		2 years
Total intangible assets	$	300.5

Note 3 - Acquisitions and Divestitures (continued)

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 judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors. As a result, the Company utilized third-party valuation specialists to assist in determining the fair value of certain assets. 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 purchase price allocation for the 2023 acquisitions as of the dates noted above. This purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information in most cases and is subject to change as additional information concerning final asset and liability valuations are obtained and management completes its reassessment of the measurement period procedures based on the results of the preliminary valuation. The purchase price allocations for Lagersmit, iMECH, Rosa and Des-Case are preliminary. The purchase price allocations for Nadella and ARB are complete. 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.

Divestitures:

On February 28, 2023, the Company completed the sale of all of its membership interests in S.E. Setco Services Company, LLC ("SE Setco"), a 50% owned joint venture. The Company had accounted for SE Setco as an equity method investment prior to the sale. The Company received $5.7 million in cash proceeds for SE Setco and recognized a pretax gain of $4.8 million on the sale. The gain was reflected in other income, net in the Consolidated Statement of Income.