Mueller Industries, Inc. Reports Forty-Four Percent Increase in Second Quarter 2011 Earnings

News provided by

Mueller Industries, Inc.

Jul 26, 2011, 07:00 ET

MEMPHIS, Tenn., July 26, 2011 /PRNewswire/ -- Harvey L. Karp, Chairman of Mueller Industries, Inc. (NYSE: MLI), announced today that Mueller's net income in the second quarter of 2011 was $22.3 million, or 59 cents per diluted share.  This compares with net income of $15.6 million, or 41 cents per diluted share, for the same period of 2010.  Net sales for the second quarter of 2011 were $652.9 million compared with $540.4 million in the second quarter of 2010.  

For the first half of 2011, net income was $62.9 million, or $1.65 per diluted share, on net sales of $1.34 billion.  This compares with net income of $49.5 million, or $1.31 per diluted share, on net sales of $1.03 billion for the first half of 2010.  The year-to-date results of both 2011 and 2010 include unusual items in net income.  For the 2011 period, income of 18 cents per diluted share was included, resulting from the favorable settlement of a legal action.  And, in 2010, income of 58 cents per diluted share was included in net income, resulting from an insurance claim.  Excluding these unusual items, Mueller's net income for the first half of 2011 was $56.1 million, or $1.47 per diluted share, compared with $27.6 million, or 73 cents per diluted share, for the first half of 2010.

Financial and Operating Highlights

Regarding the second quarter of 2011, Mr. Karp said:

  • "Our Plumbing & Refrigeration segment posted operating earnings of $24.8 million on net sales of $347.1 million which compares with prior year earnings of $19.7 million on net sales of $285.7 million.  Improved results were due to better spreads.
  •  "Our OEM segment posted operating earnings of $18.8 million during the second quarter of 2011 on net sales of $314.1 million, which compares with operating earnings of $16.9 million on net sales of $257.8 million for the same period in 2010.
  • "Our financial condition remains strong.  We ended the quarter with $345.0 million in cash equal to $9.11 per share.  In preparation for a major maintenance program at our Fulton, Mississippi, copper tube mill, we increased inventory by more than 15 million pounds to ensure uninterrupted supply for our customers; accordingly, we used in excess of $60 million cash to fund this temporary bulge in inventory quantities.
  • "Total stockholders' equity was $854.3 million.
  • "Our current ratio was 4.4 to 1, and our financial leverage is conservative with a debt to total capitalization ratio of 19 percent.
  • "The Comex average price of copper was $4.16 per pound in the second quarter of 2011, which compares with $3.19 in the second quarter of 2010.  Higher selling prices due to rising material values accounted for approximately $90 million of the increase in net sales primarily in the Plumbing & Refrigeration segment."

Business Outlook

Regarding the outlook, Mr. Karp said, "The construction industry continues to struggle in the face of high unemployment, foreclosures, and a weak economic recovery.  Nonetheless, we believe we are at or near the cyclical lows.  We are well prepared to ramp-up production when the recovery gains momentum.  Mueller's performance in the first half was gratifying."

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 that includes office buildings, factories, hotels, hospitals, etc.

**********************

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 Six Months Ended

July 2,

June 26,

July 2,

June 26,

2011

2010

2011

2010

(Unaudited)

(Unaudited)








Net sales

$   652,923

$   540,388

$   1,340,604

$   1,025,656








Cost of goods sold

573,877

466,645

1,163,751

879,693

Depreciation and amortization

9,166

10,090

18,865

20,438

Selling, general, and administrative expense

33,330

33,468

68,699

70,791

Litigation settlement

-

-

(10,500)

-

Insurance settlement

-

1,210

-

(21,296)








Operating income

36,550

28,975

99,789

76,030








Interest expense

(2,834)

(2,964)

(6,182)

(5,496)

Other income (expense), net

264

(2,518)

1,323

(2,378)








Income before income taxes

33,980

23,493

94,930

68,156








Income tax expense

(11,249)

(7,456)

(31,657)

(17,320)








Consolidated net income

22,731

16,037

63,273

50,836








Net income attributable to noncontrolling interest

(400)

(479)

(355)

(1,320)








Net income attributable to Mueller Industries, Inc.

$   22,331

$   15,558

$      62,918

$      49,516








Weighted average shares






for basic earnings per share

37,737

37,674

37,730

37,631

Effect of dilutive stock-based awards

356

43

309

69








Adjusted weighted average shares






for diluted earnings per share

38,093

37,717

38,039

37,700








Basic earnings per share

$       0.59

$       0.41

$          1.67

$          1.32








Diluted earnings per share

$       0.59

$       0.41

$          1.65

$          1.31








Dividends per share

$       0.10

$       0.10

$          0.20

$          0.20








Summary Segment Data:






Net sales:






Plumbing & Refrigeration Segment

$    347,069

$    285,717

$    727,658

$    542,379

OEM Segment

314,086

257,780

633,422

489,984

Elimination of intersegment sales

(8,232)

(3,109)

(20,476)

(6,707)








Net sales

$     652,923

$     540,388

$   1,340,604

$   1,025,656








Operating income:






Plumbing & Refrigeration Segment

$    24,790

$    19,740

$    54,473

$    60,199

OEM Segment

18,816

16,932

48,462

33,063

Unallocated expenses

(7,056)

(7,697)

(3,146)

(17,232)








Operating income

$    36,550

$    28,975

$    99,789

$    76,030

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)













July 2,

December 25,

2011

2010

(Unaudited)

ASSETS


Cash and cash equivalents

$    345,039

$    394,139

Accounts receivable, net

327,381

269,258

Inventories

296,999

209,892

Other current assets

47,144

39,025




   Total current assets

1,016,563

912,314




Property, plant, and equipment, net

223,234

229,498

Other assets

118,747

117,184





$   1,358,544

$   1,258,996












LIABILITIES AND STOCKHOLDERS' EQUITY


Current portion of debt

$    50,582

$      32,020

Accounts payable

86,574

67,849

Other current liabilities

94,496

95,258




   Total current liabilities

231,652

195,127




Long-term debt

156,976

158,226

Pension and postretirement liabilities

40,558

40,939

Environmental reserves

23,232

23,902

Deferred income taxes

21,813

24,081

Other noncurrent liabilities

1,877

824




   Total liabilities

476,108

443,099




Total Mueller Industries, Inc. stockholders' equity

854,305

788,736

Noncontrolling interest

28,131

27,161




   Total equity

882,436

815,897





$    1,358,544

$    1,258,996

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)









For the Six Months Ended



July 2,

June 26,



2011

2010



(Unaudited)

Operating activities:


Consolidated net income

$    63,273

$    50,836

Reconciliation of net income to net cash (used in)



provided by operating activities:




Depreciation and amortization

18,999

20,554


Stock-based compensation expense

1,712

1,435


(Gain) loss on disposal of properties

(275)

164


Insurance settlement

-

(21,296)


Insurance proceeds - noncapital related

-

5,561


Deferred income taxes

(2,549)

(4,370)


Income tax benefit from exercise of stock options

(90)

(88)


Changes in assets and liabilities, net of business acquired:




Receivables

(55,010)

(60,819)


Inventories

(78,966)

4,796


Other assets

(4,398)

6,979


Current liabilities

17,199

26,129


Other liabilities

768

2,870


Other, net

433

(363)






Net cash (used in) provided by operating activities

(38,904)

32,388






Investing activities:


Capital expenditures

(8,743)

(9,286)

Acquisition of business

(6,882)

-

Insurance proceeds

-

17,703

Proceeds from sales of properties

151

23

Net (deposits into) withdrawals from restricted cash balances

(3,877)

11






Net cash (used in) provided by investing activities

(19,351)

8,451






Financing activities:


Dividends paid

(7,546)

(7,529)

Debt issuance costs

(1,942)

-

Issuance of shares under stock-based incentive plans



from treasury

1,335

2,465

Income tax benefit from exercise of stock options

90

88

Acquisition of treasury stock

(743)

(75)

Repayments of long-term debt

(250)

-

Issuance of debt by joint venture, net

16,498

16,431






Net cash provided by financing activities

7,442

11,380






Effect of exchange rate changes on cash

1,713

(1,065)






(Decrease) increase in cash and cash equivalents

(49,100)

51,154






Cash and cash equivalents at the beginning of the period

394,139

346,001






Cash and cash equivalents at the end of the period

$   345,039

$   397,155

MUELLER INDUSTRIES, INC.

RECONCILIATION OF NET INCOME AS REPORTED

TO NET INCOME BEFORE LITIGATION SETTLEMENT AND INSURANCE SETTLEMENT

(In thousands, except per share data)






Earnings without the litigation settlement in 2011 and without the insurance settlement in 2010 is a measurement not derived in accordance with generally accepted accounting principles (GAAP).  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 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 earnings without the litigation settlement and insurance settlement to net income as reported are as follows:

For the Six Months Ended July 2, 2011





Pro forma



Impact of


Without

As

Litigation

Litigation

Reported

Settlement

Settlement

(Unaudited)






Operating income

$    99,789

$    (10,500)

$    89,289






Interest expense

(6,182)

-

(6,182)

Other income, net

1,323

-

1,323






Income before income taxes

94,930

(10,500)

84,430

Income tax expense

(31,657)

3,675

(27,982)






Consolidated net income

63,273

(6,825)

56,448






Net income attributable to noncontrolling interest

(355)

-

(355)






Net income attributable to Mueller Industries, Inc.

$    62,918

$    (6,825)

$    56,093












Diluted earnings per share

$       1.65

$      (0.18)

$       1.47













For the Six Months Ended June 26, 2010





Pro forma



Impact of


Without

As

Insurance

Insurance

Reported

Settlement

Settlement

(Unaudited)






Operating income

$    76,030

$    (21,296)

$    54,734






Interest expense

(5,496)

-

(5,496)

Other expense, net

(2,378)

-

(2,378)






Income before income taxes

68,156

(21,296)

46,860

Income tax expense (Note A)

(17,320)

(618)

(17,938)






Consolidated net income

50,836

(21,914)

28,922






Net income attributable to noncontrolling interest

(1,320)

-

(1,320)






Net income attributable to Mueller Industries, Inc.

$   49,516

$    (21,914)

$    27,602












Diluted earnings per share

$       1.31

$       (0.58)

$        0.73












(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.

SOURCE Mueller Industries, Inc.

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