<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 June 26, 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
July 22, 1999, was 35,832,476.
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<PAGE>
MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Period Ended June 26, 1999
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Consolidated Statements of Income
for the quarters and six months ended June 26, 1999
and June 27, 1998 3
b.) Consolidated Balance Sheets
as of June 26, 1999 and December 26, 1998 5
c.) Consolidated Statements of Cash Flows
for the six months ended June 26, 1999
and June 27, 1998 7
d.) Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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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
June 26, 1999 June 27, 1998
<S> <C> <C>
Net sales $ 293,342 $ 225,867
Cost of goods sold 220,340 173,518
---------- ----------
Gross profit 73,002 52,349
Depreciation and amortization 9,348 5,689
Selling, general, and
administrative expense 25,888 18,412
---------- ----------
Operating income 37,766 28,248
Interest expense (3,147) (1,191)
Environmental reserves - -
Other income, net 2,821 1,981
---------- ----------
Income before income taxes 37,440 29,038
Current income tax expense (9,562) (7,709)
Deferred income tax expense (2,433) (1,619)
---------- ----------
Total income tax expense (11,995) (9,328)
---------- ----------
Net income $ 25,445 $ 19,710
========== ==========
Weighted average shares
for basic earnings per share 35,799 35,225
Effect of dilutive stock options 4,025 4,487
---------- ----------
Adjusted weighted average shares
for diluted earnings per share 39,824 39,712
---------- ----------
Basic earnings per share $ 0.71 $ 0.56
========== ==========
Diluted earnings per share $ 0.64 $ 0.50
========== ==========
<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 Six Months Ended
June 26, 1999 June 27, 1998
<S> <C> <C>
Net sales $ 581,182 $ 452,519
Cost of goods sold 442,080 348,975
---------- ----------
Gross profit 139,102 103,544
Depreciation and amortization 18,338 11,273
Selling, general, and
administrative expense 51,067 36,254
---------- ----------
Operating income 69,697 56,017
Interest expense (6,008) (2,543)
Environmental reserves - (600)
Other income, net 4,950 4,704
---------- ----------
Income before income taxes 68,639 57,578
Current income tax expense (14,585) (16,242)
Deferred income tax expense (6,926) (2,361)
---------- ----------
Total income tax expense (21,511) (18,603)
---------- ----------
Net income $ 47,128 $ 38,975
========== ==========
Weighted average shares
for basic earnings per share 35,816 35,163
Effect of dilutive stock options 3,903 4,466
---------- ----------
Adjusted weighted average shares
for diluted earnings per share 39,719 39,629
---------- ----------
Basic earnings per share $ 1.32 $ 1.11
========== ==========
Diluted earnings per share $ 1.19 $ 0.98
========== ==========
<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>
June 26, 1999 December 26, 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 131,716 $ 80,568
Accounts receivable, less allowance
for doubtful accounts of $5,009 in
1999 and $4,929 in 1998 172,902 155,601
Inventories:
Raw material and supplies 23,862 26,544
Work-in-process 15,003 18,196
Finished goods 78,348 89,672
Gold - 320
---------- ----------
Total inventories 117,213 134,732
Current deferred income taxes 6,480 5,140
Other current assets 4,713 6,283
---------- ----------
Total current assets 433,024 382,324
Property, plant and equipment, net 378,144 379,082
Goodwill, net 74,465 75,988
Other assets 31,705 37,300
---------- ----------
$ 917,338 $ 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>
June 26, 1999 December 26, 1998
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 30,521 $ 19,980
Accounts payable 52,052 46,641
Accrued wages and other employee costs 27,978 26,636
Other current liabilities 54,559 49,317
---------- ----------
Total current liabilities 165,110 142,574
Long-term debt 146,374 174,569
Pension and postretirement liabilities 11,846 12,584
Environmental reserves 14,656 16,321
Deferred income taxes 20,099 10,490
Other noncurrent liabilities 13,978 15,680
---------- ----------
Total liabilities 372,063 372,218
---------- ----------
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 35,806,796
in 1999 and 35,807,596 in 1998 401 401
Additional paid-in capital, common 258,423 258,171
Retained earnings (Since
January 1, 1991) 320,326 273,198
Cumulative translation adjustment (6,910) (3,317)
Treasury common stock, at cost (27,319) (26,331)
---------- ----------
Total stockholders' equity 544,921 502,122
Commitments and contingencies (Note 2) - -
---------- ----------
$ 917,338 $ 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 Six Months Ended
June 26, 1999 June 27, 1998
<S> <C> <C>
Cash flows from operating activities
Net income $ 47,128 $ 38,975
Reconciliation of net income to net
cash provided by operating activities:
Depreciation and amortization 18,338 11,273
Minority interest in subsidiaries - (301)
Deferred income taxes 6,926 2,361
Gain on disposal of properties (1,535) (1,517)
Changes in assets and liabilities:
Receivables (19,688) (7,772)
Inventories 16,374 (650)
Other assets 623 (4,463)
Current liabilities 13,321 3,115
Other liabilities (1,895) 310
Other, net 179 (75)
---------- ----------
Net cash provided by operating activities 79,771 41,256
---------- ----------
Cash flows from investing activities
Capital expenditures (20,647) (23,812)
Proceeds from sales of properties 3,934 1,619
Escrowed IRB proceeds 6,024 6,082
Note receivable - (4,484)
---------- ----------
Net cash used in investing activities (10,689) (20,595)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 5,000 -
Repayments of long-term debt (11,618) (8,894)
Repayments on line of credit, net (10,975) -
Acquisition of treasury stock (1,339) -
Proceeds from stock options exercised
including related tax benefits 603 6,357
---------- ----------
Net cash used in financing activities (18,329) (2,537)
---------- ----------
Effect of exchange rate changes on cash 395 (188)
---------- ----------
Increase in cash
and cash equivalents 51,148 17,936
Cash and cash equivalents at the
beginning of the period 80,568 69,978
---------- ----------
Cash and cash equivalents at the
end of the period $ 131,716 $ 87,914
========== ==========
<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
$24,362,000 and $18,963,000 for the quarters ending June 26, 1999, and June
27, 1998, respectively and was $43,535,000 and $37,618,000 for the six-
month periods ending June 26, 1999, and June 27, 1998, respectively.
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<PAGE>
Note 4 - Industry Segments
Summarized segment information is as follows:
(In thousands)
[CAPTION]
For the Quarter Ended
June 26, 1999 June 27, 1998
[S] [C] [C]
Net sales:
Standard Products Division $ 214,373 $ 149,980
Industrial Products Division 74,921 70,600
Other Businesses 5,125 5,375
Elimination of intersegment sales (1,077) (88)
---------- ----------
$ 293,342 $ 225,867
========== ==========
Operating income:
Standard Products Division $ 32,072 $ 24,244
Industrial Products Division 6,659 8,405
Other Businesses 921 252
Unallocated expenses (1,886) (4,653)
---------- ----------
$ 37,766 $ 28,248
========== ==========
[CAPTION]
For the Six Months Ended
June 26, 1999 June 27, 1998
[S] [C] [C]
Net sales:
Standard Products Division $ 420,931 $ 294,828
Industrial Products Division 150,788 146,269
Other Businesses 10,563 11,597
Elimination of intersegment sales (1,100) (175)
---------- ----------
$ 581,182 $ 452,519
========== ==========
Operating income:
Standard Products Division $ 59,758 $ 47,402
Industrial Products Division 15,895 16,460
Other Businesses 1,485 2,109
Unallocated expenses (7,441) (9,954)
---------- ----------
$ 69,697 $ 56,017
========== ==========
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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 98 percent of consolidated net sales and more than 86 percent
of consolidated total assets.
During 1998, the Company completed three acquisitions: (i) Halstead
Industries, Inc. (now called Mueller Copper Tube Products, 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 $25.4 million, or 64 cents per diluted share, for the
second quarter of 1999, which compares with net income of $19.7 million, or
50 cents per diluted share, for the same period of 1998. Year-to-date, net
income was $47.1 million, or $1.19 per diluted share, which compares to net
income of $39.0 million, or 98 cents per diluted share, for 1998.
During the second quarter of 1999, the Company's net sales were $293.3
million, which compares to net sales of $225.9 million, or a 30 percent
increase over the same period of 1998. Net sales were $581.2 million in
the first half of 1999 compared to $452.5 million in 1998. During the
second quarter of 1999, the Company's manufacturing businesses shipped
211.1 million pounds of product compared to 159.2 million pounds in the
same quarter of 1998. The Company's manufacturing businesses shipped 419.0
million pounds of product in the first half of 1999, or 32.9 percent more
than the same period of 1998. Pounds shipped grew by a larger percent than
net sales because the average price of copper was lower in 1999 than in
1998. This increase in net sales and shipments includes volume from
businesses acquired in the second half of 1998. Second quarter and first
half 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 second quarter of 1999 totaled $3.1 million
compared to $1.2 million in the same quarter of 1998. For the first six
months of 1999, interest expense was $6.0 million compared to $2.5 million
for the same period of 1998. The Company capitalized $0.4 million of
interest related to capital improvement programs in the first half of 1999
compared to $0.3 million in the first half of 1998. Total interest in the
first half of 1999 increased due to the increase in long-term debt
following the issuance of the $125 million term note, partially offset by
scheduled repayments in other 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 interests 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 31.3 percent in 1999. The Company computed its income tax
provision for the first half 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 half of 1999
totaled $79.8 million which is primarily attributable to net income.
During the first half of 1999, the Company used $10.7 million in investing
activities, consisting primarily of $20.6 million in capital expenditures
offset by $6.0 million proceeds from escrowed IRB funds and $3.9 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 half of 1999, the Company used $18.3 million in
financing activities primarily for scheduled payments on long-term debt and
repayment on a line-of-credit. In addition, in April, the Company
purchased 60,000 shares of its common stock from its Chief Executive
Officer. Proceeds from this transaction were used by the CEO to pay taxes
related to a 1998 exercise of non-qualified options on Company shares.
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 June 26, 1999, funds
available under the Credit Facility was reduced by $4.9 million for
outstanding letters of credit. At June 26, 1999, the Company's total debt
was $176.9 million or 24.5 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 proposed project is the
modernization of our recently acquired copper tube mill in Wynne, Arkansas.
This project, which would require expenditure of approximately $24 million
over a two-year period, will improve yield, productivity, and throughput
when completed.
The Company's $33.4 million copper casting facility in Fulton,
Mississippi became operational during the first half 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 underway 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.
Management believes that cash provided by operations and currently
available cash of $131.7 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.
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<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On May 6, 1999, the Company held its Annual Meeting of Stockholders at
which two proposals were voted upon: (i) election of directors; and (ii)
the approval of the appointment of auditors. The following persons were
duly elected to serve, subject to the Company's Bylaws, as Directors of the
Company until the next Annual Meeting, or until election and qualification
of their successors:
Votes in Favor Votes Withheld
Robert B. Hodes 27,332,405 1,020,849
Harvey L. Karp 27,914,999 438,255
G. E. Manolovici 27,975,455 377,799
William D. O'Hagan 28,029,597 323,657
Robert J. Pasquarelli 28,070,613 282,641
The proposal to approve the appointment of Ernst & Young LLP as the
Company's auditors was ratified by 28,225,753 votes in favor, 97,514 votes
against, and 29,987 votes abstaining.
There were no broker non-votes pertaining to these proposals.
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.
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; however,
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.
Labor Relations
On June 28, 1999, the Company renewed the union contract that covers
employees at its Wynne, Arkansas, facility for a five-year period.
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.
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<PAGE>
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 during 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, or
plans to replace and/or correct and certify 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 80 percent.
Mueller's European operations are just beginning this process, but we 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 triage planning.
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 June 26, 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 June 26, 1999, the Registrant filed
no Current Reports on Form 8-K.
Items 1, 2, and 3 are not applicable and have been omitted.
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<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 August 9, 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
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<PAGE>
EXHIBIT INDEX
Exhibits Description Page
19.1 Mueller Industries, Inc.'s Quarterly Report to
Stockholders for the quarter ended June 26, 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)
-16-
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES
The second quarter of 1999 was, by far, the best quarter in Mueller's
history. Product shipments, sales, net income and earnings per share all
increased by more than 25 percent versus the same quarter of 1998. Net
income was $25.4 million, or 64 cents per share, compared to $19.7 million
or 50 cents per share in the same quarter last year.
Sales for the second quarter were $293.3 million, a 30 percent increase
over sales of $225.9 million for the same quarter of 1998. Product
shipments of 211.1 million pounds (including volume from businesses
acquired in 1998) grew 33 percent over the like period last year.
Net income for the first half of 1999 was $47.1 million, an increase of 21
percent over the first half of 1998. Product shipments in the first half
of 1999 grew to 419.0 million pounds, compared to 315.3 million pounds in
the first half of 1998. Net sales and operating income showed similar
improvements.
These outstanding results are the consequence of an excellent economic
environment, the major operational improvements that Mueller has
implemented in its product lines, and of the Company's recent strategic
acquisitions.
Housing starts for the first five months of 1999 were 9.3 percent ahead of
1998's pace, even though 30-year mortgage rates are currently more than
100 basis points higher than last year's low. Measures of housing
affordability remain strong. Consumer confidence is at a high level.
Inflation and unemployment are modest, and the index of leading indicators
remains near its high for the decade. Demographics also favor continuing
strength in the U.S. housing market due to increasingly affluent baby
boomers, rising homeownership rates, and strong household formations.
Overall, these are positive factors for the housing industry and for our
business.
Mueller is continuing to invest in major capital improvements. In May, our
Board of Directors approved a $24 million dollar program to upgrade our
recently-acquired copper tube mill in Wynne, Arkansas. This investment has
the objective of transforming Wynne into a world-class facility,
substantially reducing its production costs. Major new extruding and
drawing equipment will be installed over the next 18 months. We are also
continuing to invest in our copper and plastic fittings plants, and in the
brass rod mill. These investments should continue to improve manufacturing
flexibility and ratchet down costs.
We are continuing to make operational improvements in our European tube
businesses, with the goal of reducing manufacturing and distribution
costs. Despite these operational improvements, our European businesses
incurred losses in the second quarter due to competitive pricing,
particularly in the United Kingdom. Nonetheless, we believe the
opportunities in Europe will become increasingly attractive due to the
likelihood of consolidation in the copper fabrication industry.
-1-
<PAGE>
The Company continues to achieve its long-term plan of divesting certain
natural resource properties and businesses. On April 26, 1999, the Company
sold its interests in Alaska Gold Company, realizing a modest gain in the
second quarter. Moreover, the Company will realize an ordinary federal
income tax deduction reducing our current tax obligation by approximately
$25 million.
Our Annual Stockholders' meeting was held at Mueller's new corporate
headquarters in Memphis on May 6, 1999. The stockholders reelected all
Board members and approved the reappointment of our independent auditors.
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
July 13, 1999
-2-
<PAGE>
Historical Analysis (1994-1999) of Quarterly
Earnings Before Tax and Earnings Per Share
Mueller's earnings have grown substantially over the past five years. In
the second quarter of 1999, our Company earned $37.4 million before tax,
compared with $9.1 million for the same quarter of 1994, an increase of 311
percent. Diluted earnings per share have risen 357 percent, from $0.14 to
$0.64.
[GRAPH]
Second Quarter Diluted Earnings Per Share
1994 $0.14
1995 0.28
1996 0.36
1997 0.42
1998 0.50
1999 0.64
<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
</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
</TABLE>
-3-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Quarter Ended
June 26,1999 June 27,1998
<S> <C> <C>
Net sales $ 293,342 $ 225,867
Cost of goods sold 220,340 173,518
Depreciation and amortization 9,348 5,689
Selling, general, and
administrative expense 25,888 18,412
---------- ----------
Operating income 37,766 28,248
Interest expense (3,147) (1,191)
Environmental reserves - -
Other income, net 2,821 1,981
---------- ----------
Income before taxes 37,440 29,038
Income tax expense (11,995) (9,328)
---------- ----------
Net income $ 25,445 $ 19,710
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 35,799 35,225
========== ==========
Basic earnings per share $ 0.71 $ 0.56
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 39,824 39,712
========== ==========
Diluted earnings per share $ 0.64 $ 0.50
========== ==========
</TABLE>
-4-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Six Months Ended
June 26,1999 June 27,1998
<S> <C> <C>
Net sales $ 581,182 $ 452,519
Cost of goods sold 442,080 348,975
Depreciation and amortization 18,338 11,273
Selling, general, and
administrative expense 51,067 36,254
---------- ----------
Operating income 69,697 56,017
Interest expense (6,008) (2,543)
Environmental reserves - (600)
Other income, net 4,950 4,704
---------- ----------
Income before taxes 68,639 57,578
Income tax expense (21,511) (18,603)
---------- ----------
Net income $ 47,128 $ 38,975
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 35,816 35,163
========== ==========
Basic earnings per share $ 1.32 $ 1.11
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 39,719 39,629
========== ==========
Diluted earnings per share $ 1.19 $ 0.98
========== ==========
</TABLE>
-5-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
June 26,1999 December 26, 1998
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 131,716 $ 80,568
Accounts receivable, net 172,902 155,601
Inventories 117,213 134,732
Other current assets 11,193 11,423
---------- ----------
Total current assets 433,024 382,324
Property, plant and equipment, net 378,144 379,082
Other assets 106,170 113,288
---------- ----------
$ 917,338 $ 874,694
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 30,521 $ 19,980
Accounts payable 52,052 46,641
Other current liabilities 82,537 75,953
---------- ----------
Total current liabilities 165,110 142,574
Long-term debt 146,374 174,569
Other noncurrent liabilities 60,579 55,075
---------- ----------
Total liabilities 372,063 372,218
Minority interest in subsidiaries 354 354
Stockholders' equity 544,921 502,122
---------- ----------
$ 917,338 $ 874,694
========== ==========
-6-
</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 JUNE 26, 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> 6-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> JUN-26-1999
<CASH> 131,716
<SECURITIES> 0
<RECEIVABLES> 177,911
<ALLOWANCES> 5,009
<INVENTORY> 117,213
<CURRENT-ASSETS> 433,024
<PP&E> 512,984
<DEPRECIATION> 134,840
<TOTAL-ASSETS> 917,338
<CURRENT-LIABILITIES> 165,110
<BONDS> 146,374
0
0
<COMMON> 401
<OTHER-SE> 544,520
<TOTAL-LIABILITY-AND-EQUITY> 917,338
<SALES> 581,182
<TOTAL-REVENUES> 581,182
<CGS> 442,080
<TOTAL-COSTS> 442,080
<OTHER-EXPENSES> 69,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,008
<INCOME-PRETAX> 68,639
<INCOME-TAX> 21,511
<INCOME-CONTINUING> 47,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,128
<EPS-BASIC> 1.32
<EPS-DILUTED> 1.19
