To our Stockholders, Customers and Employees
Mueller's earnings continued to grow at a rapid pace in the second
quarter of 2000. Net earnings rose 17.3 percent to $29.8 million, or 78
cents per diluted share, compared with $25.4 million or 64 cents per
diluted share for the same quarter of 1999.
On a pretax basis, Mueller's earnings growth was even more impressive
at 26.0 percent. The effective tax rate in the second quarter was 36.9
percent, contrasted with 32.0 percent for the same quarter last year.
Net sales for the second quarter totaled $328.6 million, an increase
of 12.0 percent over sales of $293.3 million for the second quarter of
1999. We shipped 216 million pounds of product versus 211 million pounds
in the same quarter last year.
We are pleased to note that the American Metals Market, a metals
industry journal, in its annual review of the major companies in the
industry, ranked Mueller as the top company in 1999 in terms of return on
total assets. At 10.98 percent, Mueller's performance was more than
double the average return of the 25 companies listed in the review.
During the quarter, Mueller acquired Micro Gauge, Inc. and a related
business, Microgauge Machining Inc., for approximately $9.1 million.
These acquisitions bring to our Industrial Products Division specialized
machining capabilities, which were previously outsourced to Micro Gauge.
Subsequent to the end of the fiscal quarter, the Company also acquired
Propipe Technologies, Inc., a fabricator of gas train manifold systems,
for approximately $6.0 million. These acquired businesses have annualized
sales of approximately $30 million, a portion of which were to Mueller.
The outlook for the housing industry continues to appear promising
with housing starts currently at a seasonally adjusted annual rate of 1.6
million units. Despite six interest rate increases imposed by the Federal
Reserve over the past year, mortgage rates remain attractive. In fact,
30-year fixed-rate mortgages have dropped from a high for the year of 8.82
percent (on May 19) to a rate of 8.16 percent (on July 7). Also,
approximately 30 percent of homebuyers are using adjustable rate mortgages
to finance their purchases at rates often 100 basis points lower than
fixed-rate mortgages.
On June 30, 2000, Robert J. Pasquarelli was appointed Mueller's Vice
President and General Manager, European Operations. He will be
responsible for implementation of the Company's capital improvement
program in Europe, as well as day-to-day operations. Mr. Pasquarelli,
coincident with his appointment, resigned as a director, and was succeeded
by Gary S. Gladstein. Mr. Gladstein, age 55, is a CPA and holds an MBA
degree. He formerly served as a Mueller director from 1990 to 1994.
We are also pleased to report that John P. Fonzo has been appointed
Vice President, General Counsel and Secretary, succeeding William H.
Hensley who will be returning to Kansas.
-1-
<PAGE>
Our Annual Stockholders' Meeting was held at Mueller's corporate
headquarters in Memphis on May 12, 2000. The Stockholders reelected
Messrs. Hodes, Karp, Manolovici, O'Hagan, and Pasquarelli as directors and
approved the appointment of Ernst & Young LLP as 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 12, 2000
-2-
<PAGE>
HISTORICAL ANALYSIS (1994-2000) OF QUARTERLY
EARNINGS BEFORE TAX AND EARNINGS PER SHARE
Mueller's earnings have grown substantially over the past six years. In
the second quarter of 2000, our Company earned $47.2 million before tax,
compared with $9.1 million for the same quarter of 1994, an increase of 419
percent. Diluted earnings per share have risen 457 percent, from 14 cents
to 78 cents.
[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
2000 0.78
<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 38.9 145.7
2000 42.1 47.2
</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 0.66 2.51
2000 0.69 0.78
</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 24,2000 June 26,1999
<S> <C> <C>
Net sales $ 328,583 $ 293,342
Cost of goods sold 247,793 220,340
Depreciation and amortization 9,239 9,348
Selling, general, and
administrative expense 24,820 25,888
---------- ----------
Operating income 46,731 37,766
Interest expense (2,296) (3,147)
Other income, net 2,731 2,821
---------- ----------
Income before income taxes 47,166 37,440
Income tax expense (17,404) (11,995)
---------- ----------
Net income $ 29,762 $ 25,445
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 34,464 35,799
========== ==========
Basic earnings per share $ 0.86 $ 0.71
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 38,319 39,824
========== ==========
Diluted earnings per share $ 0.78 $ 0.64
========== ==========
</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 24,2000 June 26,1999
<S> <C> <C>
Net sales $ 630,933 $ 581,182
Cost of goods sold 474,307 442,080
Depreciation and amortization 18,281 18,338
Selling, general, and
administrative expense 49,110 51,067
---------- ----------
Operating income 89,235 69,697
Interest expense (4,923) (6,008)
Other income, net 4,955 4,950
---------- ----------
Income before income taxes 89,267 68,639
Income tax expense (32,939) (21,511)
---------- ----------
Net income $ 56,328 $ 47,128
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 34,654 35,816
========== ==========
Basic earnings per share $ 1.63 $ 1.32
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 38,536 39,719
========== ==========
Diluted earnings per share $ 1.46 $ 1.19
========== ==========
</TABLE>
-5-
<PAGE>
<TABLE>
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
June 24,2000 December 25, 1999
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 136,985 $ 149,454
Accounts receivable, net 198,375 167,858
Inventories 130,224 119,644
Other current assets 10,714 3,790
---------- ----------
Total current assets 476,298 440,746
Property, plant and equipment, net 350,435 347,846
Other assets 119,334 115,488
---------- ----------
$ 946,067 $ 904,080
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 25,302 $ 31,012
Accounts payable 49,343 49,958
Other current liabilities 86,941 72,091
---------- ----------
Total current liabilities 161,586 153,061
Long-term debt 112,220 118,858
Other noncurrent liabilities 68,410 62,377
---------- ----------
Total liabilities 342,216 334,296
Minority interest in subsidiaries 297 354
Stockholders' equity 603,554 569,430
---------- ----------
$ 946,067 $ 904,080
========== ==========
-6-
</TABLE>
