<PAGE>
1999
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 25, 1999 Commission 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.)
8285 TOURNAMENT DRIVE, SUITE 150
MEMPHIS, TENNESSEE 38125
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 753-3200
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 29, 1999, was 34,971,226.
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<PAGE>
MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Period Ended September 25, 1999
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Consolidated Statements of Income
for the quarters and nine months ended September 25,
1999 and September 26, 1998 3
b.) Consolidated Balance Sheets
as of September 25, 1999 and December 26, 1998 5
c.) Consolidated Statements of Cash Flows
for the nine months ended September 25, 1999
and September 26, 1998 7
d.) Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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<PAGE>
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 25, 1999 September 26, 1998
<S> <C> <C>
Net sales $ 287,880 $ 212,746
Cost of goods sold 216,341 163,952
---------- ----------
Gross profit 71,539 48,794
Depreciation and amortization 9,268 5,650
Selling, general, and
administrative expense 23,162 17,692
---------- ----------
Operating income 39,109 25,452
Interest expense (3,078) (1,158)
Environmental reserves - -
Other income, net 2,143 1,809
---------- ----------
Income before income taxes 38,174 26,103
Current income tax expense (602) (9,666)
Deferred income tax benefit (expense) (11,232) 2,328
---------- ----------
Total income tax expense (11,834) (7,338)
---------- ----------
Net income $ 26,340 $ 18,765
========== ==========
Weighted average shares
for basic earnings per share 35,683 35,689
Effect of dilutive stock options 4,131 4,111
---------- ----------
Adjusted weighted average shares
for diluted earnings per share 39,814 39,800
---------- ----------
Basic earnings per share $ 0.74 $ 0.53
========== ==========
Diluted earnings per share $ 0.66 $ 0.47
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Nine Months Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Net sales $ 869,062 $ 665,265
Cost of goods sold 658,421 512,927
---------- ----------
Gross profit 210,641 152,338
Depreciation and amortization 27,606 16,923
Selling, general, and
administrative expense 74,229 53,946
---------- ----------
Operating income 108,806 81,469
Interest expense (9,086) (3,701)
Environmental reserves - (600)
Other income, net 7,093 6,513
---------- ----------
Income before income taxes 106,813 83,681
Current income tax expense (15,187) (25,908)
Deferred income tax expense (18,158) (33)
---------- ----------
Total income tax expense (33,345) (25,941)
---------- ----------
Net income $ 73,468 $ 57,740
========== ==========
Weighted average shares
for basic earnings per share 35,772 35,338
Effect of dilutive stock options 3,979 4,348
---------- ----------
Adjusted weighted average shares
for diluted earnings per share 39,751 39,686
---------- ----------
Basic earnings per share $ 2.05 $ 1.63
========== ==========
Diluted earnings per share $ 1.85 $ 1.45
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
September 25, 1999 December 26, 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 156,619 $ 80,568
Accounts receivable, less allowance
for doubtful accounts of $5,323 in
1999 and $4,929 in 1998 170,464 155,601
Inventories:
Raw material and supplies 29,205 26,544
Work-in-process 14,050 18,196
Finished goods 68,552 89,672
Gold - 320
---------- ----------
Total inventories 111,807 134,732
Current deferred income taxes - 5,140
Other current assets 4,385 6,283
---------- ----------
Total current assets 443,275 382,324
Property, plant and equipment, net 375,939 379,082
Goodwill, net 74,361 75,988
Other assets 31,247 37,300
---------- ----------
$ 924,822 $ 874,694
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<CAPTION>
September 25, 1999 December 26, 1998
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 28,705 $ 19,980
Accounts payable 51,795 46,641
Accrued wages and other employee costs 31,324 26,636
Current deferred income taxes 3,089 -
Other current liabilities 58,889 49,317
---------- ----------
Total current liabilities 173,802 142,574
Long-term debt, less current portion 131,427 174,569
Pension and postretirement liabilities 11,523 12,584
Environmental reserves 14,043 16,321
Deferred income taxes 22,184 10,490
Other noncurrent liabilities 13,458 15,680
---------- ----------
Total liabilities 366,437 372,218
---------- ----------
Minority interest in subsidiaries 354 354
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 100,000,000; issued
40,091,502; outstanding 35,334,294
in 1999 and 35,807,596 in 1998 401 401
Additional paid-in capital, common 258,516 258,171
Retained earnings (Since
January 1, 1991) 346,666 273,198
Cumulative translation adjustment (5,773) (3,317)
Treasury common stock, at cost (41,779) (26,331)
---------- ----------
Total stockholders' equity 558,031 502,122
Commitments and contingencies (Note 2) - -
---------- ----------
$ 924,822 $ 874,694
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
For the Nine Months Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Cash flows from operating activities
Net income $ 73,468 $ 57,740
Reconciliation of net income to net
cash provided by operating activities:
Depreciation and amortization 27,606 16,923
Minority interest in subsidiaries - (301)
Deferred income taxes 18,158 33
Gain on disposal of properties (1,574) (1,676)
Changes in assets and liabilities:
Receivables (16,746) 623
Inventories 21,975 (5,096)
Other assets 1,304 (3,984)
Current liabilities 20,244 4,638
Other liabilities (3,061) (1,938)
Other, net (343) (117)
---------- ----------
Net cash provided by operating activities 141,031 66,845
---------- ----------
Cash flows from investing activities
Businesses acquired - (39,859)
Capital expenditures (26,742) (36,227)
Proceeds from sales of properties 4,887 1,816
Escrowed IRB proceeds 6,022 9,549
Note receivable - (4,484)
---------- ----------
Net cash used in investing activities (15,833) (69,205)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 5,000 -
Repayments of long-term debt (19,560) (12,037)
Repayments on line of credit, net (19,840) -
Acquisition of treasury stock (15,915) -
Proceeds from stock options exercised
including related tax benefits 812 6,803
---------- ----------
Net cash used in financing activities (49,503) (5,234)
---------- ----------
Effect of exchange rate changes on cash 356 (263)
---------- ----------
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(In thousands)
<CAPTION>
For the Nine Months Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Increase (decrease) in cash
and cash equivalents 76,051 (7,857)
Cash and cash equivalents at the
beginning of the period 80,568 69,978
---------- ----------
Cash and cash equivalents at the
end of the period $ 156,619 $ 62,121
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
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
Basic per share amounts have been computed based on the average number
of common shares outstanding. Diluted per share amounts reflect the
increase in average common shares outstanding that would result from the
assumed exercise of outstanding stock options, computed using the treasury
stock method.
Note 2 - Commitments and Contingencies
The Company is subject to normal environmental standards imposed by
federal, state, local, and foreign environmental laws and regulations.
Based upon information currently available, management believes that the
outcome of pending environmental matters will not materially affect the
overall financial position and results of operations 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.
Note 3 - Comprehensive Income
Comprehensive income for the Company consists of net income and
foreign currency translation adjustments. Total comprehensive income was
$27,477,000 and $20,922,000 for the quarters ending September 25, 1999, and
September 26, 1998, respectively and was $71,012,000 and $58,540,000 for
the nine-month periods ending September 25, 1999, and September 26, 1998,
respectively.
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<PAGE>
Note 4 - Industry Segments
Summarized segment information is as follows:
(In thousands)
<TABLE>
<CAPTION>
For the Quarter Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Net sales:
Standard Products Division $ 213,163 $ 145,606
Industrial Products Division 68,895 61,468
Other Businesses 6,455 6,091
Elimination of intersegment sales (633) (419)
---------- ----------
$ 287,880 $ 212,746
========== ==========
Operating income:
Standard Products Division $ 33,575 $ 18,732
Industrial Products Division 6,765 7,580
Other Businesses 1,956 567
Unallocated expenses (3,187) (1,427)
---------- ----------
$ 39,109 $ 25,452
========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Net sales:
Standard Products Division $ 634,094 $ 440,434
Industrial Products Division 219,683 207,737
Other Businesses 17,018 17,688
Elimination of intersegment sales (1,733) (594)
---------- ----------
$ 869,062 $ 665,265
========== ==========
Operating income:
Standard Products Division $ 94,400 $ 64,248
Industrial Products Division 23,740 21,297
Other Businesses 3,441 2,676
Unallocated expenses (12,775) (6,752)
---------- ----------
$ 108,806 $ 81,469
========== ==========
</TABLE>
Certain amounts in the 1998 segment disclosures have been reclassified
to conform with the 1999 presentation.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Overview
Mueller Industries, Inc. is a leading manufacturer of copper tube and
fittings; brass and copper alloy rod, bar and shapes; aluminum and brass
forgings; aluminum and copper impact extrusions; plastic fittings and
valves; refrigeration valves and fittings; and fabricated tubular products.
Mueller's plants are located throughout the United States and in Canada,
France, and Great Britain. The Company also owns a short line railroad in
Utah and natural resource properties in the Western U.S.
The Company's businesses are managed and organized into three
segments: (i) Standard Products Division (SPD); (ii) Industrial Products
Division (IPD); and (iii) Other Businesses. SPD manufactures and sells
copper tube, and copper and plastic fittings and valves. Outside of the
United States, SPD manufactures copper tube in Europe and copper fittings
in Canada. SPD sells these products to wholesalers in the HVAC (heating,
ventilation and air-conditioning), plumbing and refrigeration markets, and
to distributors to the manufactured housing and recreational vehicle
industries. IPD manufactures and sells brass and copper alloy rod, bar and
shapes; aluminum and brass forgings; aluminum and copper impact extrusions;
refrigeration valves and fittings; fabricated tubular products; and gas
valves and assemblies. IPD sells its products primarily to original
equipment manufacturers (OEMs), many of which are in the HVAC, plumbing,
and refrigeration markets. Other Businesses include Utah Railway Company
and other natural resource properties and interests. SPD and IPD account
for more than 97 percent of consolidated net sales and more than 86 percent
of consolidated total assets.
During 1998, the Company completed three acquisitions: (i) Mueller
Copper Tube Products, Inc. (formerly known as Halstead Industries, Inc.)
operates a copper tube mill in Wynne, Arkansas and a line sets factory in
Clinton, Tennessee; (ii) B&K Industries, Inc., based in Elk Grove Village,
Illinois, is a significant import distributor of residential and commercial
plumbing products in the United States that sells through all major
distribution channels including hardware co-ops, home centers, plumbing
wholesalers, hardware wholesalers, OEMs and manufactured housing
wholesalers; and (iii) Lincoln Brass Works, Inc. produces custom valve
assemblies, custom metal assemblies, gas delivery systems and tubular
products, primarily for the gas appliance market, at two manufacturing
facilities in Tennessee.
New housing starts and commercial construction are important
determinants of the Company's sales to the HVAC, 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 and commercial buildings.
Profitability of certain of the Company's product lines depends upon
the "spreads" between the cost of raw material and the selling prices of
its completed products. The open market prices for copper cathode and
scrap, for example, influence the selling price of copper tubing, a
principal product manufactured by the Company. The Company attempts to
minimize the effects of fluctuations in material costs by passing through
these costs to its customers. "Spreads" fluctuate based upon competitive
market conditions.
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<PAGE>
Results of Operations
Net income was $26.3 million, or 66 cents per diluted share, for the
third quarter of 1999, which compares with net income of $18.8 million, or
47 cents per diluted share, for the same period of 1998. Year-to-date, net
income was $73.5 million, or $1.85 per diluted share, which compares to net
income of $57.7 million, or $1.45 per diluted share, for 1998.
During the third quarter of 1999, the Company's net sales were $287.9
million, which compares to net sales of $212.7 million, or a 35 percent
increase over the same period of 1998. Net sales were $869.1 million in
the first nine months of 1999 compared to $665.3 million in 1998. During
the third quarter of 1999, the Company's manufacturing businesses shipped
196.0 million pounds of product compared to 150.7 million pounds in the
same quarter of 1998. The Company's manufacturing businesses shipped 615.0
million pounds of product in the first nine months of 1999, or 32.0 percent
more than the same period of 1998. This increase in net sales and
shipments includes volume from businesses acquired in the second half of
1998. Third quarter and year-to-date operating income increased primarily
due to: (i) higher sales volumes particularly at copper tube and line sets;
(ii) spread improvements at copper tube; and (iii) earnings at our acquired
businesses. Increased operating income was partially offset by losses at
our European operations. Selling, general, and administrative expense as
well as depreciation and amortization increased primarily due to acquired
businesses.
Interest expense for the third quarter of 1999 totaled $3.1 million
compared to $1.2 million in the same quarter of 1998. For the first nine
months of 1999, interest expense was $9.1 million compared to $3.7 million
for the same period of 1998. Interest expense increased due to the
increase in long-term debt following the issuance of the $125 million term
note, partially offset by scheduled repayments of long-term debt.
The Company continues to achieve its long-term objective of divesting
certain natural resource properties and businesses. During April 1999, the
Company sold 100 percent of its interest in Alaska Gold Company.
As a consequence of this sale transaction, the Company believes it has
realized for federal tax purposes an ordinary loss of approximately $70
million which will reduce taxable income in 1999. Recognition of this tax
attribute, previously recognized as a deferred tax asset less an
appropriate valuation allowance, reduced the Company's effective tax rate
to approximately 31.2 percent in 1999. The Company computed its income tax
provision for the first three quarters of 1999 using this effective income
tax rate. This effective rate also reflects the benefit of a lower federal
provision relating to the recognition of net operating loss carryforwards,
and a lower state provision associated with incentive IRB financings.
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<PAGE>
Liquidity and Capital Resources
Cash provided by operating activities during the first nine months of
1999 totaled $141.0 million which is primarily attributable to net income,
depreciation and amortization, and deferred income taxes. During the first
nine months of 1999, the Company used $15.8 million in investing
activities, consisting primarily of $26.7 million in capital expenditures
offset by $6.0 million of proceeds from escrowed IRB funds and $4.9 million
of proceeds from sales of properties. Cash used in investing activities was
funded with existing cash balances, cash from operations, plus escrowed IRB
proceeds.
During the first nine months of 1999, the Company used $49.5 million
in financing activities primarily for scheduled payments on long-term debt
and repayment of a line-of-credit. In addition, the Company purchased
500,000 shares of its common stock from a former director in August, and
60,000 shares of its common stock from its Chief Executive Officer in
April.
The Company has a $100.0 million unsecured line-of-credit agreement
(the Credit Facility) which expires in May 2001, but which may be extended
for successive one-year periods by agreement of the parties. Borrowings
under the Credit Facility bear interest, at the Company's option, at (i)
prime rate less .50 percent, (ii) LIBOR plus .27 percent subject to
adjustment, or (iii) Federal Funds Rate plus .65 percent. There are no
outstanding borrowings under the Credit Facility. At September 25, 1999,
funds available under the Credit Facility was reduced by $5.0 million for
outstanding letters of credit. At September 25, 1999, the Company's total
debt was $160.1 million or 22.3 percent of its total capitalization.
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.
The Company has planned for approximately $50 million of capital
additions and improvements in 1999. The largest ongoing project is the
modernization of our recently acquired copper tube mill in Wynne, Arkansas.
This project, which involves expenditure of approximately $24 million over
a two-year period, will improve yield, productivity, and throughput when
completed. The Company is also planning a new $10 million investment at
our Port Huron, Michigan brass rod mill. This investment, which is
expected to be complete near the end of 2000, will increase our casting
capacity, improve yield, and reduce conversion costs.
The Company's $33.4 million copper casting facility in Fulton,
Mississippi became operational during the first nine months of 1999. This
facility allows the use of a lower-cost mix of copper scrap and cathode
when market conditions warrant. Mueller also has programs under way to make
near-term improvements at its European operations. Further, the Company is
also considering various long-term capital investments for these businesses
which will further improve their cost structure and productivity.
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<PAGE>
On October 18, 1999, the Company's Board of Directors authorized the
repurchase of up to four million shares of the Company's common stock from
time to time over the next year through open market transactions or through
privately negotiated transactions. The Company will have no obligation to
purchase any shares and may cancel, suspend or extend the time period for
the purchase of shares at any time. The purchases will be funded primarily
through existing cash and cash from operations. The Company may hold such
shares in treasury or use a portion of the repurchased shares for employee
benefit plans, as well as for other corporate purposes.
Management believes that cash provided by operations and currently
available cash of $156.6 million will be adequate to meet the Company's
normal future capital expenditure and operational needs. The Company's
current ratio remains strong at 2.6 to 1.
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
26, 1998.
Environmental Matters
Mueller Copper Tube Products, Inc. (MCTP) (formerly known as Halstead
Industries, Inc.), a wholly-owned subsidiary, has commenced a cleanup and
remediation of soil and groundwater at its Wynne, Arkansas plant. MCTP
will remove trichloroethene (TCE), a cleaning solvent used by MCTP, left in
the soil as a result of its historical operations. MCTP will also expand
its prior investigation to points offsite to determine the extent, if any,
that TCE has migrated beyond MCTP's property. Actions taken by MCTP are
being reviewed and approved by the Arkansas Department of Environmental
Quality. The Company anticipates that MCTP will spend up to an estimated
$5 million over the next several years on these activities and established
a reserve for this project in connection with the acquisition of MCTP.
Other Businesses
Operations of one of the Company's subsidiaries, Utah Railway Company,
continue to be unfavorably affected by a 1998 fire at one of the coal mines
it serves. Limited production has resumed at the mine. Mueller has filed
a business interruption insurance claim for the loss of earnings due to the
fire. At this time, the amount to be recovered from our insurer cannot be
determined.
Subsequent to quarter end, Utah Railway Company purchased the stock of
the Salt Lake City Southern Railroad Company, Inc. (SLCS) from RailTex,
Inc. for $675 thousand. SLCS operates pursuant to an easement on
approximately 25 miles of track, owned by the Utah Transit Authority, from
downtown Salt Lake City to near Draper, Utah.
-14-
<PAGE>
Year 2000 Program
The Company established a Year 2000 program to evaluate, confirm
compliance and identify any necessary changes to its information technology
(IT) and operating (non-IT) systems to address Year 2000 requirements. The
Company retained a consulting firm specializing in this area to assist in
the program. Their final project was completed at the end of the second
quarter. To date, the Company has expensed approximately $850 thousand
related to this outside consultant.
Mueller has completed its assessment and inventory of its IT systems.
Based on this assessment, the Company has replaced certain hardware and
modified its developed software code at a cost which is immaterial.
Certain business systems of the Company's European businesses are not Year
2000 compliant, but this is being resolved within the context of an overall
upgrade to these information systems that began in the third quarter of
1999.
The Company has completed its assessment and inventory of non-IT
systems for all of its North American manufacturing facilities. A small
number of non-IT systems were not Year 2000 compliant. The Company has
replaced and/or corrected and certified these systems as compliant during
the third quarter at a cost that is not material. To the extent that
Mueller does not identify all non-IT systems that are not Year 2000
compliant, production on individual pieces of equipment might be curtailed
for a period of time. However, management believes that the risk that it
would be unable to maintain customer services due to Year 2000 equipment
failures is low.
The Company is in the process of determining its critical product and
service supplier Year 2000 readiness. All critical North American
suppliers have been surveyed with a current response rate of about 90
percent. Mueller's European operations are continuing this process, and
are on plan to be completed in the fourth quarter. The Company will
continue to follow up with non-responses and all inquiries to ensure, to
the best of its ability, that these suppliers will be Year 2000 compliant.
Nonetheless, there can be no assurance that the systems used by these
suppliers will be remediated in a timely manner, which, if not remediated,
may have an adverse effect on Mueller.
Mueller is currently working on the development of Year 2000
contingency plans. As Year 2000 efforts have progressed, areas of potential
operational risk have been identified for contingency plan development.
These contingency efforts focus on both pro-active and reactive tasks
including manual procedures, reports and documentation, critical materials
inventories and priority planning.
-15-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Mueller Industries, Inc.'s Quarterly Report to
Stockholders for the quarter ended September 25, 1999.
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.
(b) During the quarter ended September 25, 1999, the Registrant
filed no Current Reports on Form 8-K.
Items 1, 2, 3, and 4 are not applicable and have been omitted.
-16-
<PAGE>
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 November 3, 1999.
MUELLER INDUSTRIES, INC.
/s/ Kent A. McKee
Kent A. McKee
Vice President and Chief Financial Officer
/s/ Richard W. Corman
Richard W. Corman
Corporate Controller
-17-
<PAGE>
EXHIBIT INDEX
Exhibits Description Page
19.1 Mueller Industries, Inc.'s Quarterly Report to
Stockholders for the quarter ended September 25, 1999.
Such report is being furnished for the
information of the Securities and Exchange
Commission only and is not to be deemed filed as a
part of this Quarterly Report on Form 10-Q.
27.1 Financial Data Schedule (EDGAR filing only)
-18-
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES
We are pleased to report that Mueller had an outstanding third quarter.
The Company's earnings increased by 40 percent, compared with the same
quarter of 1998.
Net earnings were $26.3 million, or 66 cents per diluted share, in the
third quarter of 1999, compared to $18.8 million, or 47 cents per diluted
share, in the same quarter of 1998.
Mueller shipped 196.0 million pounds of product in the third quarter,
generating $287.9 million in net sales. This compares to 150.7 million
pounds shipped and $212.7 million in net sales in the comparable period of
1998.
Mueller's manufacturing operations performed well during the quarter.
Copper tube enjoyed excellent results on favorable pricing and good volume.
Copper and plastic fittings continue to deliver solid sales and
profitability. Brass rod posted good volume and a modest rise in earnings
versus the same period last year.
Despite achieving significant cost reductions, our Europe operations
continued to incur losses in the third quarter due to competitive pricing.
However, we are optimistic that pricing conditions will improve in the near
term.
The Company has initiated a $10 million capital investment at our Port
Huron, Michigan brass rod mill. This investment, which is expected to be
completed near the end of 2000, will increase our casting capacity, improve
yield and reduce conversion costs.
In addition, major capital improvements are under way at our Wynne,
Arkansas copper tube mill. Our casting facility in Fulton, Mississippi is
complete, enabling substantial savings in material costs under the right
market conditions.
On August 30, 1999 Mueller repurchased 500,000 of its common
shares. The shares were bought for $29.15 each, slightly below the closing
price on the New York Stock Exchange on that date.
Economic indicators continue to be positive for the U.S. economy and
housing industry. This bodes well for our business for the balance of 1999,
and into the year 2000.
Sincerely,
/S/HARVEY L. KARP /S/WILLIAM D. O'HAGAN
Harvey L. Karp William D. O'Hagan
Chairman of the Board President and Chief Executive Officer
October 12, 1999
-1-
<PAGE>
Historical Analysis (1994-1999) of Quarterly
Earnings Before Tax and Earnings Per Share
Mueller's earnings continue to grow. In the third quarter of 1999, our
Company earned $38.2 million before tax, compared with $12.0 million for the
same quarter of 1994, an increase of 218 percent. Diluted earnings per share
have risen 200 percent, from $0.22 per share to $0.66 per share.
[GRAPH]
Third Quarter Diluted Earnings Per Share
1994 $0.22
1995 0.30
1996 0.41
1997 0.46
1998 0.47
1999 0.66
<TABLE>
Earnings Before Tax (millions)
<CAPTION>
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
1994 $ 6.7 $ 9.1 $ 12.0 $ 13.0 $ 40.8
1995 14.7 15.6 17.0 17.2 64.5
1996 19.3 20.1 23.4 25.6 88.4
1997 23.1 23.6 25.8 28.3 100.8
1998 28.5 29.0 26.1 25.7 109.3
1999 31.2 37.4 38.2
</TABLE>
<TABLE>
Diluted Earnings Per Share
<CAPTION>
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
1994 $ 0.10 $ 0.14 $ 0.22 $ 0.25 $ 0.71
1995 0.27 0.28 0.30 0.32 1.17
1996 0.34 0.36 0.41 0.46 1.57
1997 0.40 0.42 0.46 0.50 1.78
1998 0.49 0.50 0.47 0.45 1.90
1999 0.55 0.64 0.66
</TABLE>
-2-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Quarter Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Net sales $ 287,880 $ 212,746
Cost of goods sold 216,341 163,952
Depreciation and amortization 9,268 5,650
Selling, general, and
administrative expense 23,162 17,692
---------- ----------
Operating income 39,109 25,452
Interest expense (3,078) (1,158)
Environmental reserves - -
Other income, net 2,143 1,809
---------- ----------
Income before taxes 38,174 26,103
Income tax expense (11,834) (7,338)
---------- ----------
Net income $ 26,340 $ 18,765
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 35,683 35,689
========== ==========
Basic earnings per share $ 0.74 $ 0.53
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 39,814 39,800
========== ==========
Diluted earnings per share $ 0.66 $ 0.47
========== ==========
</TABLE>
-3-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Nine Months Ended
September 25, 1999 September 26, 1998
<S> <C> <C>
Net sales $ 869,062 $ 665,265
Cost of goods sold 658,421 512,927
Depreciation and amortization 27,606 16,923
Selling, general, and
administrative expense 74,229 53,946
---------- ----------
Operating income 108,806 81,469
Interest expense (9,086) (3,701)
Environmental reserves - (600)
Other income, net 7,093 6,513
---------- ----------
Income before taxes 106,813 83,681
Income tax expense (33,345) (25,941)
---------- ----------
Net income $ 73,468 $ 57,740
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 35,772 35,338
========== ==========
Basic earnings per share $ 2.05 $ 1.63
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 39,751 39,686
========== ==========
Diluted earnings per share $ 1.85 $ 1.45
========== ==========
</TABLE>
-4-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
September 25, 1999 December 26, 1998
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 156,619 $ 80,568
Accounts receivable, net 170,464 155,601
Inventories 111,807 134,732
Other current assets 4,385 11,423
---------- ----------
Total current assets 443,275 382,324
Property, plant and equipment, net 375,939 379,082
Other assets 105,608 113,288
---------- ----------
$ 924,822 $ 874,694
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 28,705 $ 19,980
Accounts payable 51,795 46,641
Other current liabilities 93,302 75,953
---------- ----------
Total current liabilities 173,802 142,574
Long-term debt 131,427 174,569
Other noncurrent liabilities 61,208 55,075
---------- ----------
Total liabilities 366,437 372,218
Minority interest in subsidiaries 354 354
Stockholders' equity 558,031 502,122
---------- ----------
$ 924,822 $ 874,694
========== ==========
-5-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 25, 1999 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-25-1999
<PERIOD-END> SEP-25-1999
<CASH> 156,619
<SECURITIES> 0
<RECEIVABLES> 175,787
<ALLOWANCES> 5,323
<INVENTORY> 111,807
<CURRENT-ASSETS> 443,275
<PP&E> 518,779
<DEPRECIATION> 142,840
<TOTAL-ASSETS> 924,822
<CURRENT-LIABILITIES> 173,802
<BONDS> 131,427
0
0
<COMMON> 401
<OTHER-SE> 557,630
<TOTAL-LIABILITY-AND-EQUITY> 924,822
<SALES> 869,062
<TOTAL-REVENUES> 869,062
<CGS> 658,421
<TOTAL-COSTS> 658,421
<OTHER-EXPENSES> 101,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,086
<INCOME-PRETAX> 106,813
<INCOME-TAX> 33,345
<INCOME-CONTINUING> 73,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,468
<EPS-BASIC> 2.05
<EPS-DILUTED> 1.85
