Acquisitions and Dispositions

9 Months Ended

Sep. 26, 2015

Acquisitions and Dispositions [Abstract]

Acquisitions and Dispositions

Note 9 – Acquisitions and Dispositions

Acquisitions

On October 18, 2013, the Company entered into a definitive agreement with KME Yorkshire Limited to acquire certain assets and assume certain liabilities of its copper tube business.  Yorkshire Copper Tube (Yorkshire) produces European standard copper distribution tubes.  This transaction received regulatory approval in the United Kingdom on February 11, 2014 and closed on February 28, 2014.  The purchase price was approximately $30.1 million, paid in cash.  The acquisition of Yorkshire complements the Company's existing copper tube businesses in the Plumbing & Refrigeration segment.  In 2012, Yorkshire had annual revenue of approximately $196.1 million.  During the third quarter of 2014, the purchase price allocation, including all fair value measurements, was finalized.  The fair value of the assets acquired totaled $20.7 million, consisting primarily of inventories of $17.6 million, property, plant, and equipment of $2.1 million, and other current assets of $1.0 million.  The fair value of the liabilities assumed totaled $15.6 million, consisting primarily of accounts payable and accrued expenses of $15.2 million and other current liabilities of $0.4 million.  Of the remaining purchase price, $8.1 million was allocated to tax-deductible goodwill and $16.9 million was allocated to other intangible assets.

The Company recognized approximately $3.4 million of severance costs related to the reorganization of Yorkshire during the first nine months of 2015, compared to $3.1 million in the first nine months of 2014. The Company does not expect to incur further severance costs for the rationalization of the business.

On March 30, 2015, the Company entered into a Stock Purchase Agreement with Turbotec Products, Inc. (Turbotec) providing for the purchase of all of the outstanding capital stock of Turbotec for approximately $14.2 million in cash, net of working capital adjustments. Turbotec manufactures coaxial heat exchangers and twisted tubes for the heating, ventilation, and air-conditioning (HVAC), geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets. The acquisition of Turbotec complements the Company's existing refrigeration business, a component of the OEM segment. For the twelve months ended March 31, 2015, Turbotec's net sales were approximately $21.8 million. The fair value of the assets acquired totaled $14.4 million, consisting primarily of property, plant, and equipment of $9.1 million, inventories of $3.2 million, accounts receivable of $1.9 million, other current assets of $0.1 million, and other assets of $0.1 million. The fair value of the liabilities assumed totaled $2.0 million, consisting primarily of accounts payable of $1.6 million and accrued expenses of $0.4 million. Of the remaining purchase price, $2.1 million was allocated to non-tax-deductible goodwill, $0.9 million was allocated to other intangible assets, and $1.2 million was allocated to deferred tax liabilities. The allocation of the purchase price to long-lived assets is provisional as of September 26, 2015 and subject to change upon completion of the final valuation of the assets. The results of operations for Turbotec have been included in the accompanying Condensed Consolidated Financial Statements from the acquisition date.

On June 18, 2015, the Company entered into a Membership Interest Purchase Agreement with Sherwood Valve Products, LLC (Sherwood) providing for the purchase of all of the outstanding equity interests of Sherwood for $21.8 million in cash, net of working capital adjustments.  Sherwood manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets.  The acquisition of Sherwood complements the Company's existing refrigeration business, a component of the OEM segment.  In 2014, Sherwood had net sales of approximately $49.1 million.  The fair value of the assets acquired totaled $28.9 million, consisting primarily of inventories of $11.9 million, property, plant, and equipment of $10.3 million, accounts receivable of $6.5 million, and other current assets of $0.2 million.  The fair value of the liabilities assumed totaled $7.1 million, consisting primarily of accounts payable of $6.0 million, accrued wages of $0.5 million, other current liabilities of $0.5 million, and other noncurrent liabilities of $0.1 million.  The allocation of the purchase price to long-lived assets is provisional as of September 26, 2015 and subject to change upon completion of the final valuation of the assets.  The results of operations for Sherwood have been included in the accompanying Condensed Consolidated Financial Statements from the acquisition date.

On July 31, 2015, the Company entered into a Share Purchase Agreement with Great Lakes Copper, Inc. providing for the purchase of all of the outstanding shares of Great Lakes Copper Ltd. (Great Lakes) for $71.5 million in cash, subject to post closing working capital adjustments.  The acquisition of Great Lakes complements the Company's existing copper tube businesses in the Plumbing & Refrigeration segment.  For the twelve months ended June 30, 2015, Great Lakes' net sales were approximately $260.5 million.  The fair value of the assets acquired totaled $49.9 million, consisting primarily of accounts receivable of $26.0 million, inventories of $14.3 million, property, plant, and equipment of $9.5 million, and other current assets of $0.1 million.  The fair value of the liabilities assumed totaled $40.3 million, consisting primarily of accounts payable of $34.4 million, other postretirement benefits of $5.7 million, and other current liabilities of $0.2 million.  Of the remaining purchase price, $61.9 million was allocated to tax-deductible and non-tax-deductible goodwill.  The allocation of the purchase price to long-lived assets and review of working capital is provisional as of September 26, 2015 and subject to change upon completion of the final valuation of the assets.  The results of operations for Great Lakes have been included in the accompanying Condensed Consolidated Financial Statements from the acquisition date.

Dispositions

On June 1, 2015, the Company sold certain assets.  Simultaneously, the Company entered into a lease agreement with the purchaser of the assets for their continued use for a period of approximately 22 months (Lease Period).

The total sales price was $20.2 million, of which $5.0 million was received on June 1, 2015; the Company will receive $5.0 million on December 30, 2016 and the remaining $10.2 million will be received at the end of the Lease Period.  This transaction resulted in a pre-tax gain of $15.4 million in the second quarter of 2015, or 17 cents per diluted share after tax.  This gain was recognized in the Plumbing & Refrigeration segment.

The net book value of the assets disposed was $2.3 million.  For goodwill testing purposes, these assets were part of the SPD reporting unit which is a component of the Company's Plumbing & Refrigeration segment.  Because these assets met the definition of a business in accordance with ASC 805, Business Combinations, $2.4 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.