Acquisitions and Dispositions

12 Months Ended

Dec. 30, 2017

Acquisitions and Dispositions [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

2017 Acquisition

On May 31, 2017, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Pexcor Manufacturing Company Inc. and Heatlink Group Inc. (collectively, Heatlink Group) for approximately $16.3 million in cash, net of working capital adjustments. Heatlink Group, based out of Calgary, Alberta, Canada, produces and sells a complete line of products for PEX plumbing and radiant systems. The business complements the Company’s existing businesses within the Piping Systems segment.

2016 Acquisition

On April 26, 2016, the Company entered into an agreement providing for the purchase of a 60 percent equity interest in Jungwoo-Mueller for approximately $20.5 million in cash.  Jungwoo-Mueller, which manufactures copper-based pipe joining products, is headquartered in Seoul, South Korea and serves markets worldwide.  This business complements the Company’s existing copper fittings businesses in the Piping Systems segment and is reported in the Company’s Consolidated Financial Statements one month in arrears.

2015 Acquisitions

Great Lakes Copper

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 $70.0 million in cash, including a $1.5 million post-closing working capital adjustment.  Great Lakes manufactures copper tube products in Canada.  This acquisition complements the Company’s existing copper tube businesses in the Piping Systems segment.  

Sherwood Valve Products

On June 18, 2015, the Company entered into a Membership Interest Purchase Agreement with Sherwood Valve Products Inc. providing for the purchase of all of the outstanding equity interests of Sherwood Valve LLC (Sherwood) for $21.8 million in cash, net of a post-closing working capital adjustment.  Sherwood manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets.  The acquisition of Sherwood complements our existing compressed gas business in the Industrial Metals segment.  

Turbotec Products, Inc.

On March 30, 2015, the Company entered into a Stock Purchase Agreement with Turbotec Products PLC providing for the purchase of all of the outstanding capital stock of Turbotec Products, Inc. (Turbotec) for approximately $14.1 million in cash, net of a post-closing working capital adjustment. 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 Climate segment.

These acquisitions were accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The following table summarizes the allocation of the purchase price to acquire these businesses, which was financed by available cash balances, as well as the assets acquired and liabilities assumed at the respective acquisition dates.  The purchase price allocation for Heatlink Group is provisional as of December 30, 2017 and subject to change upon completion of the final valuation of the long-lived assets during the measurement period.  During 2017, the valuation of the Jungwoo-Mueller acquisition was finalized and changes to the purchase price allocation from the amounts presented in the Company’s 2016 Consolidated Financial Statements were immaterial.

(in thousands)	Heatlink Group		Jungwoo-Mueller		Great Lakes			Sherwood			Turbotec
Total consideration	$	16,317	$	20,533	$	70,011		$	21,795		$	14,138
Allocated to:
Accounts receivable	2,809		5,551		26,079			6,490			1,936
Inventories	4,648		17,616		15,233			11,892			3,247
Other current assets	508		1,437		22			260			72
Property, plant, and equipment	2,024		24,191		22,771			10,327			9,080
Goodwill	4,071		223		23,208		(1)	—			2,088
Intangible assets	6,413		756		27,468			(38		)	880
Other assets	—		277		1,413			—			59
Total assets acquired	20,473		50,051		116,194			28,931			17,362
Accounts payable	3,633		7,252		36,026			6,022			1,603
Accrued wages & other employee costs	—		—		—			471			356
Other current liabilities	523		577		381			487			51
Long-term debt	—		8,659		—			—			—
Pension and other postretirement liabilities	—		799		5,655			—			—
Other noncurrent liabilities	—		582		4,121			156			1,214
Total liabilities assumed	4,156		17,869		46,183			7,136			3,224
Noncontrolling interest	—		11,649		—			—			—
Net assets acquired	$	16,317	$	20,533	$	70,011		$	21,795		$	14,138

⁽¹⁾ Tax-deductible goodwill

The fair value of the noncontrolling interest at Jungwoo-Mueller was determined based on the proportionate share of consideration transferred and adjusted for lack of control and marketability based on the average of the classic put option model and the Finnerty Formula.

The following details the total intangible assets identified in the allocation of the purchase price at the respective acquisition dates:

(in thousands)	Estimated Useful Life	Heatlink Group		Jungwoo-Mueller		Great Lakes		Turbotec
Intangible asset type:
Customer relationships	20 years	$	4,265	$	—	$	20,273	$	350
Non-compete agreements	3-5 years	74		—		2,269		90
Patents and technology	10-15 years	1,466		756		3,104		220
Trade names, licenses, and other	5-10 years	608		—		1,822		220
Total intangible assets		$	6,413	$	756	$	27,468	$	880

2017 Disposition

On June 21, 2017, the Company entered into a definitive equity transfer agreement with Jiangsu Xingrong Hi-Tech Co. Ltd. and Jiangsu Baiyang Industries Co. Ltd. (Baiyang), together, the minority partners in Mueller-Xingrong (the Company’s Chinese joint venture), pursuant to which the Company sold its 50.5 percent equity interest in Mueller-Xingrong to Baiyang for approximately $18.3 million. Mueller-Xingrong manufactured engineered copper tube primarily for air-conditioning applications in China and was included in the Piping Systems segment. Mueller-Xingrong reported net sales of $67.3 million and net losses of $9 thousand in 2017, compared to net sales of $121.5 million and net income of $62 thousand in 2016, and net sales of $155.9 million and net income of $555 thousand in 2015. The carrying value of the assets disposed totaled $56.8 million, consisting primarily of accounts receivable, inventories, and long-lived assets. The carrying value of the liabilities disposed (consisting primarily of current debt and accounts payable), noncontrolling interest, and amounts recognized in accumulated other comprehensive income (AOCI) totaled $36.2 million. Since the disposal constituted a complete liquidation of the Company’s investment in a foreign entity, the Company removed from AOCI and recognized a cumulative translation gain of $3.8 million. As a result of the disposal, the Company recognized a net gain on the sale of this business of $1.5 million in the Consolidated Financial Statements.

2015 Disposition

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, $5.0 million was received on December 30, 2016, and $10.2 million was received on August 28, 2017.  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 Piping Systems segment.

The net book value of the assets disposed was $2.3 million.  For goodwill testing purposes, these assets were part of the Domestic Piping Systems (DPS) reporting unit, which is a component of the Company’s Piping Systems segment.  Because these assets met the definition of a business, $2.4 million of the DPS reporting unit’s goodwill balance was allocated to the disposal group based on the relative fair values of the asset group that was disposed and the portion of the DPS reporting unit that was retained.