Acquisitions and Dispositions

12 Months Ended

Dec. 28, 2013

Acquisitions and Dispositions [Abstract]

Acquisitions and Dispositions

Note 14 – Acquisitions and Dispositions

On October 18, 2013, the Company entered into a definitive agreement with KME Yorkshire Limited (Yorkshire) to acquire certain assets and assume certain liabilities of Yorkshire for purposes of acquiring its copper tube business.  This transaction received regulatory approval in the United Kingdom on February 11, 2014.  Yorkshire produces European standard copper distribution tubes.  The purchase price will be approximately $29.7 million.  In 2012, Yorkshire had annual revenue of approximately $196.1 million.

On October 17, 2013, the Company entered into a Stock Purchase Agreement with Commercial Metals Company and Howell Metal Company (Howell) providing for the purchase of all of the outstanding capital stock of Howell for approximately $55.3 million in cash, net of working capital adjustments.  Howell manufactures copper tube and line sets for U.S. distribution.  The acquisition of Howell complements the Company’s copper tube and line sets businesses, both components of the Plumbing and Refrigeration segment.   For the twelve months ended August 31, 2013, Howell’s net sales for copper tube and line sets were $156.3 million.  The total estimated fair value of the assets acquired totaled $64.4 million, consisting primarily of receivables of $14.6 million, inventories of $27.6 million, property, plant, and equipment of $21.6 million, and other current assets of $0.6 million.  The total estimated fair value of the liabilities assumed totaled $11.4 million, consisting primarily of accounts payable and accrued expenses of $9.9 million and other current liabilities of $1.5 million.  Of the remaining purchase price, $2.0 million was allocated to other intangible assets and $0.3 million to tax-deductible goodwill.  The allocation of the purchase price to long-lived assets is provisional as of December 28, 2013 and subject to change upon completion of the final valuation of these assets.  The results of operations for Howell have been included in the accompanying Consolidated Financial Statements from the acquisition date.

On August 16, 2012, the Company acquired 100 percent of the outstanding stock of Westermeyer Industries, Inc. (Westermeyer) for approximately $11.6 million in cash.  Westermeyer, located in Bluffs, Illinois, designs, manufactures, and distributes high-pressure components and accessories for the air-conditioning and refrigeration markets.  The acquisition of Westermeyer complements the Company’s existing refrigeration business, a component of the OEM segment.  The fair values of the assets acquired totaled $7.5 million, consisting of receivables of $2.0 million, inventories of $1.9 million, and property, plant, and equipment of $3.6 million.  These assets were partially offset by current liabilities of approximately $1.0 million.  Of the remaining purchase price, $2.3 million was allocated to tax-deductible goodwill and $2.7 million to other intangible assets.

On December 28, 2010, the Company purchased certain assets of Tube Forming, L.P. (TFI).  TFI primarily serves the HVAC market in North America.  The acquired assets include inventories, production equipment as well as factory leaseholds.  TFI had operations in Carrollton, Texas, and Guadalupe, Mexico, where it produced precision copper return bends and crossovers, and custom-made tube components and brazed assemblies, including manifolds and headers.  TFI’s estimated net sales for 2010 were approximately $35.0 million.  The Company paid approximately $6.9 million for the assets subject to certain adjustments, which was funded with existing cash on hand.  The acquisition of TFI extends the Company’s product offering within the OEM segment.

These acquisitions were accounted for using the acquisition method of accounting.  Therefore, the results of operations of the acquired businesses were included in the Company’s Consolidated Financial Statements from their respective acquisition dates.  The purchase price for these acquisitions, which was financed by available cash balances, has been allocated to the assets and liabilities of the acquired businesses based on their respective fair market values.

On August 9, 2013, the Company sold certain of its plastic fittings manufacturing assets located in Portage, Michigan and Ft. Pierce, Florida.  Simultaneously, the Company entered into a lease agreement with the purchaser of the assets to continue to manufacture and distribute Schedule 40 plastic fittings utilizing the Ft. Pierce assets for a period of approximately eight to 14 months (Transition Period).  The total sales price was $66.2 million, of which $61.2 million was received on August 9, 2013; the remaining $5.0 million will be received at the end of the Transition Period.  This transaction resulted in a pre-tax gain of $39.8 million in the third quarter of 2013, or 81 cents per diluted share after tax.

The net book value of assets disposed was $15.9 million.  For goodwill testing purposes, these assets were part of the SPD reporting unit which is a component of the Company’s Plumbing & Refrigeration operating segment.  Because these assets met the definition of a business in accordance with ASC 805 Business Combinations, $10.5 million of the SPD reporting unit’s goodwill balance was allocated to the disposal group.  The amount of goodwill allocated was based on the relative fair values of the asset group which was disposed and the portion of the SPD reporting unit which was retained.

The Company will continue to manufacture and supply plastic drain, waste, and vent (DWV) fittings.  The Company extended its third party supply agreement to complement its product offering with purchased products the Company does not competitively manufacture with its remaining assets.  This supply agreement was originally entered into after the majority of the Company’s plastic manufacturing assets were destroyed in the 2011 fire at its Wynne, Arkansas facility.  The extended supply agreement has an initial five-year term.

With the decision to cease the Company’s manufacturing operations in Portage, there was an evaluation of the remaining long-lived assets for impairment, and it was determined that the carrying value of the land and building were no longer recoverable.  An impairment charge of $3.2 million was recognized during the third quarter of 2013 to adjust the carrying value of the land and building to their estimated fair value.  The fair value estimate was determined by obtaining and evaluating recent sales data for similar assets (Level 2 hierarchy as defined by ASC 820).