<PAGE> 1
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 30, 1995
Commissions file number 1-6770
MUELLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-0790410
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2959 N. ROCK ROAD
WICHITA, KANSAS 67226-1191
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 636-6300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $ 0.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of the Registrant's common stock outstanding as of
October 18, 1995 was 17,334,998.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /X/ No / /
<PAGE> 2
MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Period Ended September 30, 1995
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Consolidated Statements of Income
for the nine-months and quarters ended
September 30, 1995 and September 24, 1994 3
b.) Consolidated Balance Sheets
as of September 30, 1995 and December 31, 1994 5
c.) Consolidated Statements of Cash Flows
for the nine-months ended September 30, 1995
and September 24, 1994 7
d.) Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 5. Other information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Quarter Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 171,549 $ 137,975
Cost of goods sold 137,410 113,253
----------- -----------
Gross profit 34,139 24,722
Depreciation, depletion, and amortization 4,098 3,227
Selling, general, and administrative expense 13,011 10,497
----------- -----------
Operating income 17,030 10,998
Interest expense (820) (1,988)
Environmental reserves (955) -
Unusual items - -
Other income, net 1,736 3,023
----------- -----------
Income before income taxes 16,991 12,033
Current income tax expense (4,202) (3,221)
Deferred income tax expense (1,184) (294)
----------- -----------
Total income tax expense (5,386) (3,515)
----------- -----------
Net income $ 11,605 $ 8,518
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,263,000 18,997,000
Net income $ 0.60 $ 0.45
=========== ===========
Fully diluted:
Average shares outstanding 19,263,000 19,029,000
Net income $ 0.60 $ 0.45
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Nine-Months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 524,699 $ 395,363
Cost of goods sold 427,557 325,483
----------- -----------
Gross profit 97,142 69,880
Depreciation, depletion, and amortization 11,507 9,102
Selling, general, and administrative expense 38,387 32,411
----------- -----------
Operating income 47,248 28,367
Interest expense (3,331) (5,300)
Environmental reserves (955) (412)
Unusual items - (1,406)
Other income, net 4,311 6,566
----------- -----------
Income before income taxes 47,273 27,815
Current income tax expense (12,889) (5,342)
Deferred income tax expense (2,066) (3,995)
----------- -----------
Total income tax expense (14,955) (9,337)
----------- -----------
Net income $ 32,318 $ 18,478
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,115,000 20,071,000
Net income $ 1.69 $ 0.92
=========== ===========
Fully diluted:
Average shares outstanding 19,256,000 20,077,000
Net income $ 1.68 $ 0.92
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 31,176 $ 34,492
Accounts receivable, less allowance
for doubtful accounts of $3,182 in
1995 and $3,336 in 1994 96,229 66,925
Inventories:
Raw materials and supplies 18,243 20,043
Work-in-process 14,255 18,251
Finished goods 37,236 36,074
----------- -----------
Total inventories 69,734 74,368
Current deferred income taxes 5,724 4,491
Other current assets 3,469 3,275
----------- -----------
Total current assets 206,332 183,551
Property, plant and equipment, net 220,315 196,772
Deferred income taxes 20,097 23,797
Other assets 13,275 26,635
----------- -----------
$ 460,019 $ 430,755
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 17,721 $ 18,611
Accounts payable 23,446 21,607
Accrued wages and other employee costs 14,529 13,105
Current deferred income taxes 194 366
Other current liabilities 25,324 13,532
----------- -----------
Total current liabilities 81,214 67,221
Long-term debt 62,727 76,125
Pension and postretirement liabilities 16,721 18,445
Environmental reserves 10,144 11,178
Deferred income taxes 2,787 3,016
Other noncurrent liabilities 12,924 12,822
----------- -----------
Total liabilities 186,517 188,807
----------- -----------
Stockholders' equity:
Preferred stock-shares authorized
4,985,000; none outstanding - -
Series A junior participating preferred
stock-$1.00 par value; shares authorized
15,000; none outstanding - -
Common stock-$.01 par value; shares
authorized 20,000,000; issued 20,000,000;
outstanding 17,334,998 in 1995 and
17,397,954 in 1994 200 100
Additional paid-in capital, common 254,056 254,251
Retained earnings (since January 1, 1991) 54,305 21,987
Cumulative translation adjustments (2,322) (2,832)
Treasury common stock, at cost (32,737) (31,558)
----------- -----------
Total stockholders' equity 273,502 241,948
Commitments and contingencies (Note 2) - -
----------- -----------
$ 460,019 $ 430,755
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 7
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
For the Nine-Months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Cash flows from operating activities
Net income $ 32,318 $ 18,478
Adjustments to reconcile net income to net
cash provided by operating activities:
Provisions for unusual items - 1,406
Depreciation, depletion, and
amortization of intangibles 11,507 8,509
Amortization of deferred preparation costs - 593
Provision for doubtful accounts receivable - 146
Deferred income taxes 2,066 3,995
Gain on disposal of properties (1,081) (2,804)
Changes in assets and liabilities:
Receivables (29,304) (10,252)
Inventories 4,634 (11,538)
Other assets (309) (1,344)
Current liabilities 15,155 10,107
Other liabilities (2,656) (2,662)
Other, net 631 291
----------- -----------
Net cash provided by operating activities 32,961 14,925
----------- -----------
Cash flows from investing activities
Capital expenditures (34,555) (30,161)
Acquisition of business - (12,964)
Proceeds from sales of properties 1,137 4,759
Escrowed IRB proceeds 12,703 (27,695)
----------- -----------
Net cash used by investing activities (20,715) (66,061)
----------- -----------
Cash flows from financing activities
Repayments of long-term debt (14,288) (6,581)
Proceeds from the sale of treasury stock 781 766
Acquisition of treasury stock (2,055) (25,897)
Proceeds from issuance of long-term debt - 45,344
----------- -----------
Net cash provided (used) by financing activities (15,562) 13,632
----------- -----------
Decrease in cash and cash equivalents (3,316) (37,504)
Cash and cash equivalents at the
beginning of the period 34,492 77,336
----------- -----------
Cash and cash equivalents at the
end of the period $ 31,176 $ 39,832
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 8
MUELLER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
General
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Results of operations for the
interim periods presented are not necessarily indicative of results which may
be expected for any other interim period or for the year as a whole. This
quarterly report on Form 10-Q should be read in conjunction with the Company's
Annual Report on Form 10-K, including the annual financial statements
incorporated therein by reference.
The accompanying unaudited interim financial statements include all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
Note 1 - Earnings Per Common Share
Primary earnings per common share are based upon the weighted average number
of common and common equivalent shares outstanding during the period. Fully
diluted earnings per share are based upon the weighted average number of
common shares outstanding plus the dilutive effects of all outstanding stock
options.
Note 2 - Commitments and Contingencies
The Company is subject to normal environmental standards imposed by
federal, state and local environmental laws and regulations. Management
believes that the outcome of pending environmental matters will not materially
effect the overall financial position of the Company.
In addition, the Company is involved in certain litigation as either
plaintiff or defendant as a result of claims that arise in the ordinary course
of business which management believes will not have a material effect on the
Company's financial condition.
Purchase Commitments
The Company has committed to capital expenditures for the following
projects: (i) approximately $20.0 million to modernize the copper tube mill
in Fulton, Mississippi; (ii) approximately $16.0 million to modernize the
brass rod mill in Port Huron, Michigan; and (iii) approximately $22.0 million
to construct a new high-volume copper fitting facility adjacent to the
Company's copper tube mill in Fulton, Mississippi. As of September 30, 1995,
expenditures of $50.5 million have been incurred of which $35.9 million was
funded with proceeds of the 1993 and 1994 Series IRBs. At September 30, 1995,
$3.4 million of the IRB proceeds remain escrowed, until required for funding
the projects, and are classified as other assets. These approved major
projects should be substantially complete by the end of 1995. No other
material purchase commitments for capital expenditures exist.
<PAGE> 9
Forward Contracts
During the first quarter of 1995, the Company entered into a forward
contract to deliver approximately 15,000 ounces of gold on July 6, 1995 at a
price of $381 per ounce. At September 30, 1995, there were no open hedge
transactions.
Note 3 - Stockholders' Equity
During the third quarter of 1995, the Company's Board of Directors
declared a two-for-one stock split to be effected in the form of a 100 percent
stock dividend. The record date was September 6, 1995. All presentations of
share data herein, including earnings per share, have been adjusted to reflect
the split for all periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Overview
The Company's principal business is the manufacture and sale of copper
tube, brass rod, fittings and other products made of copper, brass, bronze,
plastic and aluminum. These core manufacturing businesses have been in
operation for over 75 years. New housing starts and commercial construction
are important determinants of the Company's sales to the air-conditioning,
refrigeration and plumbing markets because the principal end use of a
significant portion of the Company's products is in the construction of single
and multi-family housing units and commercial buildings.
Profitability of certain of the Company's product lines is dependent upon
the "spreads" between the cost of metal and the gross selling prices of its
completed products. The open market price for copper cathode, for example,
directly influences the selling price of copper tubing, a principal product
manufactured by the Company. The Company attempts to minimize the effects of
changes in copper prices by passing base metal costs through to its customers.
In 1994, the Company adopted the LIFO method of accounting for the copper
metal component of its copper tube and fittings inventories. Management
believes the LIFO method results in a better matching of current costs with
current revenues. The market price of copper does, however, indirectly effect
the carrying value (FIFO basis) of the Company's brass inventories. The
Company's copper and brass inventories customarily total between 30 to 40
million pounds. "Spreads" fluctuate based upon competitive market conditions.
The Company also owns various natural resource properties in the Western
United States and Canada. It operates a short line railroad in Utah and a
placer gold mining operation in Alaska. Additionally, certain other natural
resource properties produce royalty and other income.
Results of Operations
Net income was $11.6 million, or 60 cents per common share, for the third
quarter of 1995, which compares with net income of $8.5 million, or 45 cents
per common share, for the same period of 1994. Year-to-date, net income was
$32.3 million, or $1.69 per common share, which compares to net income of
$18.5 million or 92 cents per common share, for 1994.
<PAGE> 10
During the third quarter of 1995, the Company's net sales were $171.5
million, which compares to net sales of $138.0 million, or a 24 percent
increase over the same period of 1994. Net sales were $524.7 million in the
first three quarters of 1995 versus $395.4 million in 1994. The third quarter
increase in net sales was primarily attributable to (i) higher sales prices in
the core manufacturing businesses, partially attributable to the pass through
of higher metal costs, and (ii) higher sales activity in the natural resources
segment that pertains to gold sales. The year-to-date increase in net sales
is primarily attributable to the manufacturing businesses which achieved
higher volume (approximately 6.9 percent more pounds in 1995), and higher
sales prices. The September, 1994 acquisition of two plastic manufacturing
facilities contributed to the volume increase. The Company's core
manufacturing businesses shipped 90.9 million pounds of product in the third
quarter of 1995 which compares to 92.3 million pounds in the same quarter of
1994. The slight third quarter decline in pounds shipped was due to minor
production interruptions. Third quarter operating income increased primarily
due to: (i) productivity improvements at its manufacturing plants; and (ii)
selective price increases in the fittings and brass rod markets.
Interest expense for the third quarter of 1995 decreased approximately
$1.2 million due to capitalized interest of $.9 million related to capital
improvement programs at the copper tube mill, the brass rod mill, and the
high-volume copper fittings factory. A charge of $955 thousand for
environmental reserves was recorded; the amount results from cost overruns and
updated estimates for costs associated with various sites. The effective tax
rate of 31.7 percent in the third quarter of 1995 reflects the benefits of a
lower federal provision relating to the recognition of net operating loss
carryforwards and a lower state provision associated with incentive IRB
financings.
Compared to the same periods of 1994, third quarter and year-to-date 1995
earnings per share were favorably effected by the June, 1994 purchase of
treasury stock aggregating 9.6 percent of shares then outstanding.
Liquidity and Capital Resources
Cash provided by operating activities in the first three quarters of 1995
totaled $33.0 million which is primarily attributable to net income, increases
in current liabilities, and depreciation, depletion, and amortization offset
by an increase in accounts receivable. The increase in accounts receivable
reflects the favorable increase in sales activity.
During the first three quarters of 1995, the Company's capital
expenditures totaled $34.6 million which was provided for by cash from
operations, except that portion related to two major capital improvement
projects which were funded by IRBs.
During the second quarter of 1995, the Company increased to $50.0 million
its unsecured line-of-credit agreement (the Credit Facility) which expires on
June 30, 1997, but may be extended for successive one year periods by
agreement of the parties. At the Company's option, borrowings bear interest
at prime less 1/2 of one percent. There are no outstanding borrowings under
the Credit Facility. At September 30, 1995, the Company's total debt was
$80.4 million or 22.7 percent of its capitalization.
<PAGE> 11
The Company's financing obligations contain various covenants which
require, among other things, the maintenance of minimum levels of working
capital, tangible net worth, and debt service coverage ratios. The Company is
in compliance with all debt covenants.
Management believes that cash provided by operations and currently
available cash of $31.2 million will be adequate to meet the Company's normal
future capital expenditure and operational needs. The Company's current ratio
remains strong at 2.5 to 1.
The Company has ongoing three major capital expenditure projects: (i) a
modernization project at its Fulton, Mississippi copper tube mill; (ii) a
modernization project at its Port Huron, Michigan brass rod mill to install an
indirect extrusion press; and (iii) a new high-volume copper fittings plant in
Fulton, Mississippi. These projects will require capital of approximately
$58.0 million. The two Fulton, Mississippi projects have been financed
primarily by IRBs. The objective of these projects is to improve efficiency,
yield and productivity as well as add some capacity.
Additionally, the Company's modernization of its copper fittings plant in
Covington, Tennessee will require approximately $6.0 to $7.0 million. This
project will be funded with cash generated by operations.
Update on Capital Improvement Programs
Mueller is upgrading its brass rod mill manufacturing processes with an
expansion that includes the installation of an indirect extrusion press, new
billet heating furnaces, and material handling systems. The indirect
extrusion press and much of the related equipment has arrived at the Port
Huron facility. The Company expects to transition production to the new
equipment by early 1996.
The building containing Mueller's new high-volume fittings plant in
Fulton, Mississippi, is completed and most fittings manufacturing equipment
has arrived. Limited production of certain fittings commenced in the second
quarter, however, most lines in the plant will become fully operational later
in 1995.
Mueller's capital improvement project at its Fulton copper tube mill to
upgrade technology and install state-of-the-art tube drawing equipment remains
on schedule. All major items of equipment have been delivered and installed
at the Fulton facility. At the beginning of October, 1995, the Company began
permanently operating the new equipment.
Another important ongoing program is the modernization of the copper
fittings plant in Covington, Tennessee. Modernization of this facility, which
produces a broad range of low-volume items, is estimated to require
approximately $6.0 to $7.0 million in capital improvements.
<PAGE> 12
Update on Other Matters
Gold Mining
Last winter, Alaska Gold Company ("Alaska Gold") commenced full scale
open pit gold mining operations in Nome, Alaska. During the winter and spring
of 1995, Alaska Gold removed overburden and stockpiled pay gravel for
processing in the summer. The stockpiled pay gravel thaws naturally and is
then run through a wash plant in the summer, with the raw gold being sent to a
third party to be refined into pure gold, which can then be sold. During the
second and third quarters, Alaska Gold processed approximately 300,000 cubic
yards of pay gravel which yielded approximately 18,000 ounces of gold.
Coal Properties
In 1994, United States Fuel Company ("U.S. Fuel") entered into an
agreement to sell the majority of its assets. This sale has not yet been
consummated, but U.S. Fuel has granted extensions of the closing date to give
the potential purchaser additional time to finalize financing. If this sale
is not completed, U.S. Fuel intends to offer the property to other potential
buyers while resuming full scale remediation at the site.
Part II. OTHER INFORMATION
Item 5. Other Information
The following discussion updates the disclosure in Item 1, Business, in
the Company's Annual Report on Form 10-K, for the year ended December 31,
1994.
Environmental Matters
Mining Remedial Recovery Company (MRRC)
1. Cleveland Mill Site
During the third quarter, MRRC and Bayard Mining Corp. ("Bayard"),
both wholly-owned subsidiaries of Arava Natural Resources Company,
Inc., collectively paid $384,000 to governmental entities, which
represented Bayard's and MRRC's share of past response costs and
natural resource damage claims. The remainder of the past response
costs and natural resource damage claims were paid by a third party.
Bids to process the Cleveland Mill tailings have been solicited from
potential processors, with bid responses due later this year.
2. Hanover
During the third quarter, MRRC substantially completed its voluntary
plan to regrade and cap tailings at the Hanover site located in Grant
County, New Mexico. During excavation, MRRC discovered that the
actual volume of tailings on the site was significantly greater than
had been estimated, which resulted in MRRC's costs exceeding budget by
approximately $300,000.
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment to Employment Agreement, effective as of August
10, 1995, by and between Mueller Industries, Inc. and
William D. O'Hagan.
19.1 Mueller Industries, Inc.'s Quarterly Report to
Stockholders for the quarter ended September 30, 1995.
Such report is being furnished for the information of the
Securities and Exchange Commission only and is not to be
deemed filed as part of this Quarterly Report on
Form 10-Q.
99.1 Press Release issued by Mueller Industries, Inc. on
October 18, 1995.
(b) During the quarter ended September 30, 1995, the Registrant filed no
Current Reports on Form 8-K.
Items 1, 2, 3, and 4 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
October 20, 1995.
MUELLER INDUSTRIES, INC.
/S/ EARL W. BUNKERS
Earl W. Bunkers, Executive Vice President
and Chief Financial Officer
/S/ KENT A. MCKEE
Kent A. McKee
Treasurer and Assistant Secretary
/S/ RICHARD W. CORMAN
Richard W. Corman
Director of Corporate Accounting
AMENDMENT
AMENDMENT, effective as of August 10, 1995, to EMPLOYMENT AGREEMENT by
and between MUELLER INDUSTRIES, INC., a Delaware corporation having its
principle address at 2959 North Rock Road, Wichita, Kansas 67226 ( the
"Employer") and WILLIAM D. O'HAGAN, an individual residing at 1104 North
Linden Circle, Wichita, Kansas 67206 (the "Executive").
WITNESSETH:
WHEREAS, the parties desire to amend the Employment Agreement, dated as
of January 1, 1994, between Employer and Executive (the "Employment
Agreement"); the Employment Agreement, as amended effective as of August 10,
1995, being hereinafter called the "Agreement").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto covenant and agree as follows:
1. In section 1 of the Agreement the phrase "ending on December 31,
1996" is amended to read as follows: "ending on December 31, 1999".
2. Section 3 a (i) of the Agreement shall be revised to read as
follows: " a base salary for the first calendar year at a rate of $375,000.00
per annum to be paid in equal installments in accordance with normal payroll
practices of the Employer but not less frequently than monthly, provided that
in each subsequent calendar year or part thereof during which the Executive is
employed commencing in 1996, Executive's base salary shall be adjusted upward
annually from Executive's 1995 base salary in relation to increases granted to
other key executives (the "Base Salary");".
3. Section 3 a of the Agreement shall be amended by adding the
following clause iv to the end of Section 3a:
"iv. an option (the "Second Option") to acquire a total of fifty-five
thousand (55,000) shares of common stock of the Employer, of which eleven
thousand five hundred (11,500) shares has been granted pursuant to the 1991
Incentive Stock Option Plan, and forty-three thousand five hundred (43,500)
shares has been granted pursuant to the 1994 Stock Option Plan by the
Compensation Committee, such option to be in the form and subject to the terms
and conditions expressed in Exhibit A-1 attached hereto.
4. Section 4 c (i) of the Agreement shall be amended by changing the
word "1996" in the third and fifth line to "1999".
5. Section 4 d of the Agreement shall be amended by changing the word
"1996" in the second line to "1999".
6. Section 4 of the Agreement shall be amended by adding the
following subsections f and g to the end of Section 4:
<PAGE> 2
"f. If concurrent with, or at any time within six months after a
"Change in Control" either the Employer terminates the Executive's employment
or the Executive voluntarily terminates his employment, then:
(i) the Employer shall pay the Executive as severance pay in a lump
sum within thirty (30) days following the termination, the following amounts,
which shall not be discounted to take into account present value:
(1) the Executive's full Base salary through the date of
termination at the rate in effect immediately prior to the
termination date;
(2) in lieu of any further Base salary payments to Executive for
any period subsequent to the date of termination, an amount equal to
the period of (x) Executive's annual Base salary rate in effect
immediately prior to the date of termination, multiplied by (y) the
number of years (including partial years) then remaining in the
Term; and
(3) in lieu of any further bonus payments to Executive for any
period subsequently to the date of termination, an amount equal to
the product of (x) Executive's bonus for the immediately preceding
year, multiplied by (y) the number of years (treating any remaining
partial year as a full year) then remaining in the Term;
(ii) Employer shall, at Employer's expense, allow Executive to
continue to participate, for the number of years (including partial years)
then remaining in the Term, in all the Employer's employee benefits plans, to
the same extent and upon the same terms and conditions as the Executive
participated immediately prior to the termination, provided that Employee's
continued participation is permissible or otherwise practicable under the
general terms and provisions of such benefit plans; and
(iii) on the later of (x) the day the Executive notifies the
Employer he is terminating as a result of a Change in Control, and (y) ten
(10) days prior to the date the Executive's employment is terminated, all
remaining unvested options previously granted Executive shall become
exercisable on that date.
"Change in Control", as used in clause 4 f of the Agreement, is defined
to mean the occurrence of any of the following three events:
(i) a change in control of a nature that would be required to
be reported in response to any form or report to the Securities and
Exchange Commission or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in
control of the Employer;
(ii) when a "person", as such term is used in Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is or becomes the "beneficial owner", as defined in
Rule 13d-3 under the Exchange Act, directly or indirectly, of 20%
or more of the voting power of the Employer's then outstanding
securities, other than (x) any person who is a beneficial owner of
more than 5% of Employer's Common Stock on August 10, 1995, (y)
"Exempted Persons" as defined in Section 1(a) of Employer's Rights
Agreement, dated as of November 10, 1994, or (z) mutual funds,
banks, investment advisors registered under the Investment Adviser
Act of 1940, as amended, and other institutional investors, which
<PAGE> 3
either (i)became 20% beneficial owners as a result of an acquisition
of Common Stock by the Employer which, by reducing the number of
such shares then outstanding, increases the proportionate number of
shares beneficially owned by such person to 20% or more of the
outstanding Common Stock, except that if such person, after such
share purchases by the Employer, becomes the beneficial owner of any
additional shares of Common Stock, then this exception shall not
apply and a Change in Control shall be deemed to occur on the date
such person becomes the beneficial owner of such additional shares,
or (ii) were exempted from the operation of this provision with the
prior approval of eighty percent of the Board of Directors of the
Employer; or
(iii) when the individual who, on August 10, 1995, constitute
the Board of Directors of Employer cease for any reason to
constitute at least a majority thereof, provided, however, that a
director who was not a director on August 10, 1995 shall be deemed
to have been a director at that date if such director was elected
by, or on the recommendation of or with the approval of, at least
sixty percent of the directors on August 10, 1995 (either directly
or by prior operation of this provision);
provided, however, that a Change in Control shall not be deemed to
occur until, as to clause (i), a change in control form or report is
actually filed, and as to clause (ii), a beneficial owner discloses
in a public filing that it has crossed the 20% threshold.
g. In no event may the Employer terminate the Executive's employment
hereunder upon less than thirty (30) days prior written notice."
7. Except as expressly amended by this Agreement, the remaining terms
and provisions of the Employment Agreement shall remain unchanged and continue
in full force and effect.
8. This Agreement may be executed in counterparts, each of which
shall be deemed an original but which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Amendment as of the date first above written.
MUELLER INDUSTRIES, INC.
By:/ s / Harvey L. Karp / s / William D. O'Hagan
Name: Harvey L. Karp William D. O'Hagan
Title: Chairman
<PAGE> 4
EXHIBIT A-1
1. Except as provided in Section 3 of this Exhibit A-1, the 11,500 shares
granted pursuant to the 1991 Incentive Stock Option Plan, would vest as
follows:
11,000 shares August 10, 1996
500 shares August 10, 1997
2. Except as provided in Section 3 of this Exhibit A-1, the 43,500 shares
granted pursuant to the 1994 Stock Option Plan, would vest as follows:
10,500 shares August 10, 1997
11,000 shares August 10, 1998
11,000 shares August 10, 1999
11,000 shares June 15, 2000
3. If Employer and Executive do not enter into a new employment agreement
prior to September 30, 1999, all remaining unvested options shall
become immediately exercisable on that date. The options shall also
vest earlier, if and to the extent provided for in Section 4 (f) of the
Employment Agreement.
4. Executive may exercise his options referenced in Section 1 of this
Exhibit A-1 by paying (i) cash or, at Executive's option, (ii)
executing a promissory note in favor of the Employer, in the form
attached as Exhibit 1 to the Agreement, and containing the following
terms: (i) the note would be secured by the stock, which could not
otherwise be sold, assigned, pledged, encumbered, transferred or
otherwise hypothecated by Executive as long as the note was
outstanding, provided, however, that Executive would be free to sell
any or all such shares so long as the Executive paid down the note in
an amount equal to the option price times the number of shares sold;
(ii) the note would be down in three years from the date of exercise of
the option; (iii) interest would be payable quarterly; (iv) the
interest rate would be fixed at the three year treasury rate in effect
when the options were exercised; and (v) the note would be prepayable,
at any time, in whole or in part without penalty.
5. If Executive elects to pay cash for his option referenced in Section 1
of this Exhibit A-1, the shares so acquired may immediately be sold,
assigned, pledged, encumbered, transferred or otherwise hypothecated by
Executive.
6. Options for the first 50,000 shares which vest shall be priced using
fair market value on the date of grant as determined under the 1991
Incentive Stock Option Plan and the 1994 Stock Option Plan, which grant
date was July 27, 1995.
7. Options for the last 5,000 shares, which vest on June 15, 2000, shall
be based using the fair market value on the date of grant as determined
under the 1994 Stock Option Plan, which grant date was August 10, 1995.
TO OUR STOCKHOLDERS:
Mueller's earnings rose 36 percent for the third quarter of 1995 compared
with the same quarter of 1994. This is the fifth record quarter in a row and
the 15th consecutive quarter of strong earnings performance.
Earnings for the third quarter of 1995 were $11.6 million, or 60 cents per
share, compared to earnings of $8.5 million or 45 cents per share for the same
quarter of 1994. Net sales for the third quarter of 1995 totaled $171.5
million compared with sales of $138.0 million for the same quarter of 1994.
Mueller's sales and earnings for the first three quarters of 1995 were the
best ever in our Company's history. However, this reflects only part of the
important developments taking place at our Company. Over the past 18 months,
we have not only acquired plastic fittings manufacturing operations located in
California and Michigan, but we have made significant progress toward
implementation of three major internal capital improvement programs. Most
companies our size would probably have undertaken only one, or perhaps two
such programs at a time. We decided to tackle all of these simultaneously, in
order to reduce our costs, accelerate our growth, and provide our customers
with the best possible product, availability, and service. We are pleased to
report that our copper tube modernization project and our new high-volume
copper fittings plant, both in Fulton, Mississippi, should be substantially
completed by the end of 1995. The Port Huron, Michigan indirect extrusion
press project should be completed shortly thereafter. In addition, the
ongoing modernization program at our copper fittings plant in Covington,
Tennessee, is on schedule and we should see increasing benefits from this
program by mid-1996. Needless to say, we expect to harvest substantial
benefits from these capital programs in the years ahead.
Last month, Mueller declared a two-for-one stock split of our common stock.
The stock commenced trading on a post-split basis on October 2, 1995.
Accordingly, all per share amounts in this report have been adjusted to
reflect the results of this split.
Also, we recently announced to our employees that our corporate
headquarters will be relocated from Wichita, Kansas to Memphis, Tennessee by
next spring. This move will place our corporate offices in closer proximity
to our manufacturing facilities in Tennessee and Northern Mississippi. To
achieve our desired results, our corporate management and staff must be
positioned and structured to provide the fullest level of leadership and
support to our operating businesses.
<PAGE> 2
We continue to be optimistic regarding the outlook for future business
conditions in the housing industry. Long-term mortgage rates are low by
historical standards and this generally translates into increased demand for
housing.
Sincerely,
/s/ Harvey L. Karp
Harvey L. Karp
Chairman of the Board
/s/ William D. O'Hagan
William D. O'Hagan
President and Chief Executive Officer
October 18, 1995
<PAGE> 3
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share data)
<CAPTION>
For the Quarter Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 171,549 $ 137,975
Costs and expenses 154,519 126,977
----------- -----------
Operating income 17,030 10,998
Non operating income (expense), net (39) 1,035
----------- -----------
Income before taxes 16,991 12,033
Income tax expense 5,386 3,515
----------- -----------
Net income $ 11,605 $ 8,518
=========== ===========
Earnings per common
and common equivalent share:
Primary $ 0.60 $ 0.45
=========== ===========
Fully diluted $ 0.60 $ 0.45
=========== ===========
<CAPTION>
For the Nine-Months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 524,699 $ 395,363
Costs and expenses 477,451 366,996
----------- -----------
Operating income 47,248 28,367
Non operating income (expense), net 25 (552)
----------- -----------
Income before taxes 47,273 27,815
Income tax expense 14,955 9,337
----------- -----------
Net income $ 32,318 $ 18,478
=========== ===========
Earnings per common
and common equivalent share:
Primary $ 1.69 $ 0.92
=========== ===========
Fully diluted $ 1.68 $ 0.92
=========== ===========
</TABLE>
<PAGE> 4
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Current assets $ 206,332 $ 183,551
Property, plant and equipment, net 220,315 196,772
Other assets 33,372 50,432
----------- -----------
$ 460,019 $ 430,755
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities $ 81,214 $ 67,221
Long-term debt 62,727 76,125
Other noncurrent liabilities 42,576 45,461
----------- -----------
Total liabilities 186,517 188,807
----------- -----------
Stockholders' equity:
Common stock 200 100
Paid-in capital, common 254,056 254,251
Retained earnings since January, 1991 54,305 21,987
Cumulative translation adjustments (2,322) (2,832)
Treasury common stock at cost (32,737) (31,558)
----------- -----------
Total stockholders' equity 273,502 241,948
----------- -----------
$ 460,019 $ 430,755
=========== ===========
Book value per share $ 15.78 $ 13.91
=========== ===========
</TABLE>
<PAGE> 5
DIRECTORS AND OFFICERS
DIRECTORS
Harvey L. Karp Chairman of the Board
Mueller Industries, Inc.
Robert B. Hodes (1) (3) Partner
Willkie Farr & Gallagher
Allan Mactier (1) (2) (3) Private Investor
William D. O'Hagan President and Chief Executive Officer
Mueller Industries, Inc.
Robert J. Pasquarelli (1) (2) Chief Executive Officer of
New Jersey Steel Corporation
OFFICERS
Harvey L. Karp Chairman of the Board
William D. O'Hagan President and Chief Executive Officer
Earl W. Bunkers Executive Vice President and
Chief Financial Officer
Harvey W. Clements Vice President and General Manager -
Tube Division
John B. Hansen Vice President and General Manager-
Fittings Division
William H. Hensley Vice President, General Counsel
and Secretary
Richard G. Miller Vice President and
Chief Information Officer
Lee R. Nyman Vice President - Manufacturing/
Management Engineering
James H. Rourke Vice President and General Manager -
Industrial Division
Roy C. Harris Corporate Controller
Kent A. McKee Treasurer and Assistant Secretary
Mueller Industries, Inc./2959 N. Rock Road/Wichita, KS 67226/(316)636-6300
[FN]
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000089439
<NAME> MUELLER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 31,176
<SECURITIES> 0
<RECEIVABLES> 99,411
<ALLOWANCES> 3,182
<INVENTORY> 69,734
<CURRENT-ASSETS> 206,332
<PP&E> 271,163
<DEPRECIATION> 50,848
<TOTAL-ASSETS> 460,019
<CURRENT-LIABILITIES> 81,214
<BONDS> 62,727
<COMMON> 200
0
0
<OTHER-SE> 273,302
<TOTAL-LIABILITY-AND-EQUITY> 460,019
<SALES> 524,699
<TOTAL-REVENUES> 524,699
<CGS> 427,557
<TOTAL-COSTS> 427,557
<OTHER-EXPENSES> 49,894
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,331
<INCOME-PRETAX> 47,273
<INCOME-TAX> 14,955
<INCOME-CONTINUING> 32,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,318
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.68
FOR IMMEDIATE RELEASE Contact: Kent A. McKee
October 18, 1995 (316) 636-6300
MUELLER INDUSTRIES, INC. ANNOUNCES
36 PERCENT INCREASE IN THIRD QUARTER EARNINGS
Wichita, KS - Mueller Industries, Inc. (NYSE: MLI) today reported net income
for the quarter ended September 30, 1995 of $11.6 million or 60 cents per
share, on 19,263,000 weighted average shares outstanding. This compared with
net income for the third quarter of 1994 of $8.5 million, or 45 cents per
share on 18,997,000 weighted average shares outstanding. Net sales for the
third quarter of 1995 were $171.5 million compared with net sales of $138.0
million for the same quarter of 1994. Earnings per share and weighted average
shares outstanding have been adjusted in all periods presented for the
Company's two-for-one stock split that was effected in September, 1995.
For the first nine months of 1995, net income was $32.3 million, or $1.69 per
share, on net sales of $524.7 million, which compares with net income of $18.5
million, or 92 cents per share on net sales of $395.4 million for the same
period of 1994.
Harvey L. Karp, Chairman, stated, "We are pleased to report that the copper
tube modernization project and our new high-volume copper fittings plant
should be substantially completed by year-end. Additionally, the indirect
extrusion press project at our Port Huron rod mill should be completed by
early 1996. We expect to achieve substantial benefits from these capital
programs in the years ahead."
Mueller Industries, Inc. is a leading and diversified fabricator whose
products include copper tube and fittings; brass and copper alloy rods, bars
and shapes; brass and bronze forgings; aluminum and copper impact extrusions;
plastic fittings and valves; and refrigeration valves, driers and flare
fittings. The Company also owns a short line railroad in Utah, a placer gold
mining operation in Alaska, and other natural resource properties.
<PAGE> 2
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Quarter Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 171,549 $ 137,975
Cost of goods sold 137,410 113,253
Depreciation and amortization 4,098 3,227
Selling, general, and administrative expense 13,011 10,497
----------- -----------
Operating income 17,030 10,998
Interest expense (820) (1,988)
Environmental reserves (955) -
Unusual items - -
Other income, net 1,736 3,023
----------- -----------
Income before taxes 16,991 12,033
Income tax expense (5,386) (3,515)
----------- -----------
Net income $ 11,605 $ 8,518
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,263,000 18,997,000
Net income $ 0.60 $ 0.45
=========== ===========
Fully diluted:
Average shares outstanding 19,263,000 19,029,000
Net income $ 0.60 $ 0.45
=========== ===========
</TABLE>
<PAGE> 3
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Nine-Months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 524,699 $ 395,363
Cost of goods sold 427,557 325,483
Depreciation and amortization 11,507 9,102
Selling, general, and administrative expense 38,387 32,411
----------- -----------
Operating income 47,248 28,367
Interest expense (3,331) (5,300)
Environmental reserves (955) (412)
Unusual items - (1,406)
Other income, net 4,311 6,566
----------- -----------
Income before taxes 47,273 27,815
Income tax expense (14,955) (9,337)
----------- -----------
Net income $ 32,318 $ 18,478
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,115,000 20,071,000
Net income $ 1.69 $ 0.92
=========== ===========
Fully diluted:
Average shares outstanding 19,256,000 20,077,000
Net income $ 1.68 $ 0.92
=========== ===========
</TABLE>
<PAGE> 4
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 31,176 $ 34,492
Accounts receivable, net 96,229 66,925
Inventories 69,734 74,368
Other current assets 9,193 7,766
----------- -----------
Total current assets 206,332 183,551
Property, plant and equipment, net 220,315 196,772
Other assets 33,372 50,432
----------- -----------
$ 460,019 $ 430,755
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 17,721 $ 18,611
Accounts payable 23,446 21,607
Other current liabilities 40,047 27,003
----------- -----------
Total current liabilities 81,214 67,221
Long-term debt 62,727 76,125
Other noncurrent liabilities 42,576 45,461
----------- -----------
Total liabilities 186,517 188,807
Stockholders' equity 273,502 241,948
----------- -----------
$ 460,019 $ 430,755
=========== ===========
Book value per share $ 15.78 $ 13.91
=========== ===========
</TABLE>
