Mueller Industries, Inc. Reports Third Quarter Results
MEMPHIS, Tennessee, October 25, 2011 /PRNewswire/ --
- Quarterly and Year-to-Date Earnings
Harvey L. Karp, Chairman of Mueller Industries, Inc. (NYSE: MLI), announced today that Mueller's net income in the third quarter was $10.5 million, or 27 cents per diluted share, on net sales of $585.8 million. This compares with net income of $18.9 million, or 50 cents per diluted share, on net sales of $507.2 million in the third quarter of 2010. The third quarter 2011 results were affected by the precipitous decline in copper prices, resulting in a pretax charge of $6.8 million (or approximately 12 cents per diluted share after tax). Without these charges, earnings would have been 39 cents per diluted share.
Year-to-date, the Company earned $73.4 million, or $1.92 per diluted share, which includes a gain of 18 cents per diluted share related to a favorable litigation settlement. For the same period of 2010, net income was $68.4 million, or $1.81 per diluted share, which includes an insurance settlement gain of 59 cents per diluted share.
Net sales for the first nine months of 2011 were $1.93 billion compared with net sales of $1.53 billion for the same period a year ago.
Financial and Operating Highlights
Regarding the third quarter of 2011, Mr. Karp said:
- "The average price of copper was $4.07 per pound in the third quarter of 2011, which compares with $3.30 per pound in the third quarter of 2010. Copper prices reached a high of $4.47 per pound early in the third quarter 2011, and at the end of the quarter stood at $3.15 per pound.
- "Our Plumbing & Refrigeration segment posted operating earnings of $13.9 million on net sales of $325.8 million compared with operating earnings of $11.5 million on net sales of $282.7 million in the third quarter of 2010. The increase in net sales was due to higher selling prices on 5.1 percent lower unit volume.
- "Our OEM segment posted operating earnings of $12.2 million during the third quarter of 2011 on net sales of $266.6 million, which compared with operating earnings of $23.0 million on net sales of $229.0 million for the same period in 2010. The increase in net sales was attributable to higher selling prices on 8.1 percent lower unit volumes.
- "In September, a portion of our Wynne, Arkansas, manufacturing operations was damaged by fire. Fortunately, no one was injured. Our efforts in providing our customers with the full range of products required have been successful.
- "Mueller ended the quarter with $448.9 million in cash, or $11.74 per share.
- "Total stockholders' equity was $856.2 million which equates to a book value per share of $22.40.
- "Mueller's current ratio remains excellent at 4 to 1 and our working capital is $800.4 million. Leverage is conservative with a ratio of debt to total capitalization at 19.1 percent."
Business Outlook
Regarding the outlook, Mr. Karp said, "The near-term outlook for the housing sector continues to be subdued; however, the construction of multi-family housing is improving. Commercial construction is also showing glimmers of better times ahead.
"We believe that the employment picture must brighten as a prerequisite for improvement in the housing market."
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 operations are located throughout the United States and in Canada, Mexico, Great Britain, and China. Mueller's business is importantly linked to (1) the construction of new homes; (2) the improvement and reconditioning of existing homes and structures; and (3) the commercial construction market which includes office buildings, factories, hotels, hospitals, etc.
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Statements in this release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties. These include economic and currency conditions, continued availability of raw materials and energy, market demand, pricing, competitive and technological factors, and the availability of financing, among others, as set forth in the Company's SEC filings. The words "outlook," "estimate," "project," "intend," "expect," "believe," "target," and similar expressions are intended to identify forward-looking statements. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. The Company has no obligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For the Quarter Ended For the Nine Months Ended
October 1, September 25, October 1, September 25,
2011 2010 2011 2010
(Unaudited) (Unaudited)
Net sales $ 585,809 $ 507,240 $ 1,926,413 $ 1,532,896
Cost of goods
sold 523,984 437,597 1,687,735 1,317,290
Depreciation
and
amortization 8,716 9,934 27,581 30,372
Selling,
general, and
administrative
expense 34,245 28,810 102,944 99,601
Litigation
settlement - - (10,500) -
Insurance
settlement - 12 - (21,284)
Operating
income 18,864 30,887 118,653 106,917
Interest
expense (2,822) (3,072) (9,004) (8,568)
Other income
(expense), net 102 30 1,425 (2,348)
Income before
income taxes 16,144 27,845 111,074 96,001
Income tax
expense (5,403) (9,098) (37,060) (26,418)
Consolidated
net income 10,741 18,747 74,014 69,583
Net (income)
loss
attributable to
noncontrolling
interest (266) 162 (621) (1,158)
Net income
attributable to
Mueller
Industries,
Inc. $ 10,475 $ 18,909 $ 73,393 $ 68,425
Weighted
average shares
for basic
earnings per
share 37,878 37,710 37,779 37,657
Effect of
dilutive
stock-based
awards 483 92 367 77
Adjusted
weighted
average shares
for diluted
earnings per
share 38,361 37,802 38,146 37,734
Basic earnings
per share $ 0.28 $ 0.50 $ 1.94 $ 1.82
Diluted
earnings per
share $ 0.27 $ 0.50 $ 1.92 $ 1.81
Dividends per
share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Summary Segment
Data:
Net sales:
Plumbing &
Refrigeration
Segment $ 325,776 $ 282,735 $ 1,053,434 $ 825,114
OEM Segment 266,560 228,981 899,982 718,965
Elimination of
intersegment
sales (6,527) (4,476) (27,003) (11,183)
Net sales $ 585,809 $ 507,240 $ 1,926,413 $ 1,532,896
Operating
income:
Plumbing &
Refrigeration
Segment $ 13,884 $ 11,511 $ 68,357 $ 71,710
OEM Segment 12,172 22,994 60,634 56,057
Unallocated
expenses (7,192) (3,618) (10,338) (20,850)
Operating
income $ 18,864 $ 30,887 $ 118,653 $ 106,917
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
October 1, December 25,
2011 2010
(Unaudited)
ASSETS
Cash and cash equivalents $ 448,853 $ 394,139
Accounts receivable, net 315,709 269,258
Inventories 214,868 209,892
Other current assets 53,366 39,025
Total current assets 1,032,796 912,314
Property, plant, and equipment, net 207,761 229,498
Other assets 118,353 117,184
$ 1,358,910 $ 1,258,996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of debt $ 52,827 $ 32,020
Accounts payable 65,743 67,849
Other current liabilities 113,823 95,258
Total current liabilities 232,393 195,127
Long-term debt 156,726 158,226
Pension and postretirement liabilities 39,649 40,939
Environmental reserves 23,111 23,902
Deferred income taxes 19,788 24,081
Other noncurrent liabilities 2,187 824
Total liabilities 473,854 443,099
Total Mueller Industries, Inc.
stockholders' equity 856,189 788,736
Noncontrolling interest 28,867 27,161
Total equity 885,056 815,897
$ 1,358,910 $ 1,258,996
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine Months
Ended
October 1, September 25,
2011 2010
(Unaudited)
Operating activities:
Consolidated net income $ 74,014 $ 69,583
Reconciliation of net income to net cash
provided by
operating activities:
Depreciation and
amortization 27,844 30,550
Stock-based
compensation expense 2,583 2,185
(Gain) loss on
disposal of properties (99) 252
Insurance settlement - (21,284)
Insurance proceeds -
noncapital related 10,000 5,561
Deferred income taxes (2,785) (8,386)
Income tax benefit
from exercise of stock
options (867) (89)
Changes in assets and
liabilities, net of
business acquired:
Receivables (38,480) (50,810)
Inventories (10,432) 2,800
Other assets (9,263) 6,158
Current liabilities 13,703 21,562
Other liabilities 1,907 2,839
Other, net 759 (225)
Net cash provided by operating activities 68,884 60,696
Investing activities:
Capital expenditures (13,128) (14,210)
Acquisition of business (6,882) (2,021)
Insurance proceeds - 17,703
Proceeds from sales of properties 1,745 26
Net (deposits into) withdrawals from
restricted cash balances (5,120) 1,649
Net cash (used in) provided by investing
activities (23,385) 3,147
Financing activities:
Dividends paid (11,345) (11,300)
Debt issuance costs (1,942) -
Issuance of shares under stock-based
incentive plans
from treasury 11,885 2,463
Income tax benefit from exercise of stock
options 867 89
Acquisition of treasury stock (8,211) (85)
Repayments of long-term debt (1,902) -
Issuance (repayment) of debt by joint
venture, net 19,316 (1,097)
Net cash provided by (used in) financing
activities 8,668 (9,930)
Effect of exchange rate changes on cash 547 202
Increase in cash and cash equivalents 54,714 54,115
Cash and cash equivalents at the
beginning of the period 394,139 346,001
Cash and cash equivalents at the end of
the period $ 448,853 $ 400,116
MUELLER INDUSTRIES, INC.
RECONCILIATION OF NET INCOME AS REPORTED
TO NET INCOME BEFORE LOWER-OF-COST-OR-MARKET RESERVE
(In thousands, except per share data)
Earnings without the lower-of-cost-or-market (LCM) reserve in the
third quarter of 2011 is a measurement not derived in accordance
with generally accepted accounting principles (GAAP). Excluding
the LCM reserve is useful as it assists in comparing our results
to competitors. The LCM reserve resulted from the decrease in
copper prices experienced near the end of the quarter, causing the
Company to write-down approximately $6.8 million of certain
inventories valued using the first-in, first-out (FIFO) and
average cost methods to the lower-of-cost-or-market.
Reconciliation of net income as reported to earnings without the
LCM reserve is as follows:
For the Three Months Ended October 1, 2011
Pro forma
Impact of Without
As LCM LCM
Reported Reserve Reserve
(Unaudited)
Operating income $ 18,864 $ 6,796 $ 25,660
Interest expense (2,822) - (2,822)
Other income, net 102 - 102
Income before
income taxes 16,144 6,796 22,940
Income tax expense (5,403) (2,379) (7,782)
Consolidated net
income 10,741 4,417 15,158
Net income
attributable to
noncontrolling
interest (266) - (266)
Net income
attributable to
Mueller
Industries, Inc. $ 10,475 $ 4,417 $ 14,892
Diluted earnings
per share $ 0.27 $ 0.12 $ 0.39
MUELLER INDUSTRIES, INC.
RECONCILIATION OF NET INCOME AS REPORTED
TO NET INCOME BEFORE LITIGATION SETTLEMENT,
LOWER-OF-COST-OR-MARKET RESERVE,
AND INSURANCE SETTLEMENT
(In thousands, except per share data)
Earnings without the litigation settlement and lower-of-cost-or-market
(LCM) reserve in 2011 and without the insurance settlement in 2010 is a
measurement not derived in accordance with generally accepted accounting
principles (GAAP). Excluding the LCM reserve is useful as it assists in
comparing our results to competitors. Excluding the litigation settlement
and insurance settlement is useful as it measures the operating results
that are the outcome of daily operating decisions made in the normal
course of business. The LCM reserve resulted from the decrease in copper
prices experienced near the end of the quarter, causing the Company to
write-down approximately $6.8 million of certain inventories valued using
the first-in, first-out (FIFO) and average cost methods to the
lower-of-cost-or-market. The litigation settlement resulted from the
collection of proceeds from the lawsuit against Peter Berkman, Jeffrey
Berkman, and Homewerks Worldwide LLC. The insurance settlement resulted
from the final settlement for losses claimed as a result of a fire at our
U.K. subsidiary in November 2008, the results of which are not impacted
by daily operations and are not expected to recur in future periods.
Reconciliations of net income as reported to earnings without the
litigation settlement, LCM reserve, and insurance settlement are
as follows:
For the Nine Months Ended October 1, 2011
Pro forma
Without
Impact of Impact of Litigation
As Litigation LCM Settlement
Reported Settlement Reserve & LCM
(Unaudited)
Operating
income $ 118,653 $ (10,500) $ 6,796 $ 114,949
Interest
expense (9,004) - - (9,004)
Other income,
net 1,425 - - 1,425
Income before
income taxes 111,074 (10,500) 6,796 107,370
Income tax
expense (37,060) 3,675 (2,379) (35,764)
Consolidated
net income 74,014 (6,825) 4,417 71,606
Net income
attributable
to
noncontrolling
interest (621) - - (621)
Net income
attributable
to Mueller
Industries,
Inc. $ 73,393 $ (6,825) $ 4,417 $ 70,985
Diluted
earnings per
share $ 1.92 $ (0.18) $ 0.12 $ 1.86
For the Nine Months Ended September 25, 2010
Pro forma
Impact of Without
As Insurance Insurance
Reported Settlement Settlement
(Unaudited)
Operating
income $ 106,917 $ (21,284) $ 85,633
Interest
expense (8,568) - (8,568)
Other expense,
net (2,348) - (2,348)
Income before
income taxes 96,001 (21,284) 74,717
Income tax
expense (Note
A) (26,418) (1,090) (27,508)
Consolidated
net income 69,583 (22,374) 47,209
Net income
attributable
to
noncontrolling
interest (1,158) - (1,158)
Net income
attributable
to Mueller
Industries,
Inc. $ 68,425 $ (22,374) $ 46,051
Diluted
earnings per
share $ 1.81 $ (0.59) $ 1.22
(A) Realization of this insurance settlement resulted in a tax
benefit primarily from the utilization of U.K. net operating
losses that were previously reserved.
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