4.	Acquisitions

In September 2016, we acquired ROHL, a California-based luxury plumbing company. In a related transaction, we also acquired TCL Manufacturing Ltd, which gave us 100% ownership of Perrin & Rowe, a UK manufacturer and designer of luxury kitchen and bathroom plumbing products. The total combined purchase price was approximately $166 million (including $3 million of liabilities assumed), subject to certain post-closing adjustments. We financed the transaction using cash on hand and borrowings under our existing credit facilities. Net sales and operating income in the three months ended September 30, 2016 were not material to the Company. The results of operations are included in the Plumbing segment.

In May 2016, we acquired Riobel, a Canadian plumbing company specializing in premium showroom bath and shower fittings, for a total purchase price of $88.4 million in cash, subject to certain post-closing adjustments. We financed the transaction using cash on hand and borrowings under our existing credit facilities. Net sales and operating income in the nine and three months ended September 30, 2016 were not material to the Company. The results of operations are included in the Plumbing segment.

In May 2015, we completed our tender offer to purchase all of the outstanding shares of common stock of Norcraft, a leading publicly-owned manufacturer of kitchen and bathroom cabinetry, for a total purchase price of $648.6 million in cash. We financed the transaction using cash on hand and borrowings under our existing credit facilities. This transaction is expected to strengthen our overall product offering, round out our regional market penetration and enhance our frameless cabinetry capabilities. The results of operations of Norcraft are included in the Cabinets segment. We incurred $15.1 million of Norcraft acquisition-related transaction costs during the year ended December 31, 2015. The goodwill deductible for income tax purposes is $66.2 million.

During the third quarter of 2016 and following the completion of the Norcraft purchase accounting measurement period, the Company identified certain immaterial prior period balance sheet misstatements relating to calculation of deferred tax liabilities as disclosed in the purchase price allocation related to the Norcraft acquisition. The correction of the cumulative misstatement during the third quarter of 2016 resulted in a $24.3 million and $15.4 million reduction in Norcraft’s deferred tax liabilities and the carrying value of goodwill, respectively, and an offsetting increase of $8.9 million in the uncertain tax positions accrual. The Company assessed the materiality of these misstatements on previously issued financial statements and concluded that the misstatements were not material to the Consolidated Financial Statements for any interim or annual periods taken as a whole.

The following table summarizes the final allocation of the purchase price to the fair values of assets acquired and liabilities assumed as of the date of the Norcraft acquisition.


(In millions)
Accounts receivable	$	30.8
Inventories		28.6
Property, plant and equipment		45.3
Goodwill		290.6
Identifiable intangible assets		360.0
Other assets		9.4

Total assets		764.7
Deferred tax liabilities		75.6
Other liabilities and accruals		40.5

Net assets acquired^(a)	$	648.6

^(a)

Net assets exclude $15.5 million of cash transferred to the Company as the result of the Norcraft acquisition.

Goodwill includes expected sales and cost synergies. Identifiable intangible assets consist of an indefinite-lived tradename of $150 million and customer relationships of $210 million. The useful life of the customer relationships identifiable intangible asset was estimated to be 20 years.

The following unaudited pro forma summary presents consolidated financial information as if Norcraft had been acquired on January 1, 2014. The unaudited pro forma financial information is based on historical results of operations and financial position of the Company and Norcraft. The pro forma results include:

•

estimated amortization of a definite-lived customer relationship intangible asset (amortized using the straight-line method),

•

the estimated cost of the inventory adjustment to fair value,

•

interest expense associated with debt that would have been incurred in connection with the acquisition,

•

the reclassification of Norcraft transaction costs from 2015 to the first quarter of 2014, and

•

adjustments to conform accounting policies.

The unaudited pro forma financial information does not necessarily represent the results that would have occurred had the Norcraft acquisition occurred on January 1, 2014. In addition, the unaudited pro forma information should not be deemed to be indicative of future results.


(In millions, except per share amounts)	Nine Months Ended September 30, 2015		Three Months Ended September 30, 2015
Net sales	$	3,497.0	$	1,238.7
Income from continuing operations		235.0		100.1

Basic earnings per common share	$	1.47	$	0.62
Diluted earnings per common share	$	1.44	$	0.61

In March 2015, we acquired a Cabinets component company for approximately $6 million in cash. This acquisition did not have a material impact on our financial statements.