Acquisitions and Dispositions

2018 Acquisitions

ATCO

On July 2, 2018, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding capital stock of ATCO Rubber Products, Inc. (ATCO) for approximately $156.7 million, net of the estimated working capital adjustment. The total purchase price consisted of $151.4 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $12.0 million based on EBITDA growth of the acquired business. ATCO is an industry leader in the manufacturing and distribution of insulated HVAC flexible duct systems and will support the Company’s strategy to grow its Climate Products businesses to become a more valuable resource to its HVAC customers. The acquired business is reported in the Company’s Climate segment.

For the year ended December 29, 2018, the Company’s total net sales included $90.0 million of revenue recognized by ATCO from the date of acquisition. ATCO had revenues of approximately $166.0 million in its fiscal year ending December 31, 2017 (unaudited).

The following table presents condensed pro forma consolidated results of operations as if the ATCO acquisition has occurred at the beginning of 2017. The pro forma information does not purport to be indicative of the results that would have been obtained if the operations had actually been combined during the periods presented, and is not necessarily indicative of operating results to be expected in future periods. The most significant pro forma adjustments to the historical results of operations relate to the application of purchase accounting and the financing structure.



	For the Year Ended
(In thousands, except per share data)	2018		2017

Net sales	$	2,595,454	$	2,431,972
Net income	111,482		90,270

Basic earnings per share	$	1.96	$	1.59
Diluted earnings per share	1.95		1.57

Die-Mold

On March 31, 2018, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Die-Mold Tool Limited (Die-Mold) for approximately $13.6 million, net of working capital adjustments. The total purchase price consisted of $12.4 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $2.3 million based on EBITDA growth of the acquired business. Die-Mold, based out of Ontario, Canada, is a manufacturer of plastic PEX and other plumbing-related fittings and an integrated designer and manufacturer of plastic injection tooling. The business complements the Company’s existing businesses within the Piping Systems segment.

2017 Acquisition

Heatlink Group

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 $17.2 million, net of working capital adjustments. The total purchase price consisted of $16.3 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owners up to $2.2 million based on EBITDA growth of the acquired business. 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

Jungwoo-Mueller

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.

Purchase Price Allocations

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 were financed by available cash balances, as well as the assets acquired and liabilities assumed at the respective acquisition dates. The purchase price allocation for ATCO is provisional as of December 29, 2018 and subject to change upon completion of the final valuation of the long-lived assets, contingent consideration, and final working capital adjustment during the measurement period. During 2018, the valuation of the Heatlink Group acquisition was finalized. Changes to the purchase price allocation from the amounts presented in the Company’s 2017 Annual Report on Form 10-K included the valuation of the contingent consideration of $0.9 million and the recognition of a deferred tax liability of $1.9 million that resulted from a basis difference in the long-lived assets acquired. These changes resulted in an increase to goodwill.



(in thousands)	ATCO			Die-Mold		Heatlink Group		Jungwoo-Mueller

Total consideration	$	156,704		$	13,629	$	17,164	$	20,533

Allocated to:
Accounts receivable	21,829			1,684		2,809		5,551
Inventories	31,666			1,833		4,648		17,616
Other current assets	1,051			267		508		1,437
Property, plant, and equipment	83,080			3,278		2,024		24,191
Goodwill	17,770		⁽¹⁾	2,241		6,879		223
Intangible assets	21,430			5,209		6,413		756
Other assets	224			—		—		277
Total assets acquired	177,050			14,512		23,281		50,051

Accounts payable	8,093			710		3,633		7,252
Other current liabilities	10,187			173		593		577
Long-term debt	2,066			—		—		8,659
Pension and other postretirement liabilities	—			—		—		799
Other noncurrent liabilities	—			—		1,891		582
Total liabilities assumed	20,346			883		6,117		17,869

Noncontrolling interest	—			—		—		11,649

Net assets acquired	$	156,704		$	13,629	$	17,164	$	20,533

⁽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	ATCO		Die-Mold		Heatlink Group		Jungwoo-Mueller

Intangible asset type:
Customer relationships	20 years	$	6,200	$	3,077	$	4,265	$	—
Non-compete agreements	3-5 years	—		70		74		—
Patents and technology	10-15 years	8,950		1,512		1,466		756
Trade names, licenses, and other	5-10 years	3,960		550		608		—
Supply contracts	5 years	2,320		—		—		—

Total intangible assets		$	21,430	$	5,209	$	6,413	$	756

2017 Disposition

Mueller-Xingrong

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. 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 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.