Mueller Industries (MLI) 8-K Mueller Industries, Inc. Reports

FOR IMMEDIATE RELEASE	Contact: Kent A. McKee
Memphis, TN—July 20, 2010	(901) 753-3208

MUELLER INDUSTRIES, INC. REPORTS

SECOND QUARTER 2010 EARNINGS

Harvey L. Karp, Chairman of Mueller Industries, Inc. (NYSE: MLI), announced today that Mueller’s net income in the second quarter of 2010 was $15.6 million, or 41 cents per diluted share.  This compares with net income of $6.0 million, or 16 cents per diluted share, for the same period of 2009.  Net sales for the second quarter of 2010 were $540.4 million compared with $367.8 million in 2009.  For the first half of 2010, net income was $49.5 million, or $1.31 per diluted share, on net sales of $1.03 billion.  This compares with net income of $3.5 million, or 9 cents per diluted share, on net sales of $694.4 million for the first half of 2009.

Net sales of the Company’s core product lines increased substantially due to the higher market values of copper and brass, the Company’s principal raw materials, which are largely passed through to customers.  In the second quarter of 2010, the Comex average price of copper was 48 percent higher than in the second quarter of 2009.

Financial and Operating Highlights

Regarding the second quarter of 2010, Mr. Karp said:

● “Our Plumbing & Refrigeration segment posted operating earnings of $19.7 million on net sales of $285.7 million which compares with prior year earnings of $11.9 million on net sales of $229.8 million.  Improved results were due to better spreads partially offset by lower unit shipments.

 ●   “Our OEM segment posted operating earnings of $16.9 million during the second quarter of 2010 on net sales of $257.8 million, which compares with operating earnings of $8.1 million on net sales of $139.9 million for the same period in 2009.  Much of the improvement was due to higher unit shipments.

●  “Our financial condition remains strong.  We ended the quarter with $397.2 million in cash equal to $10.53 per share.

● “Total stockholders’ equity was $755.4 million which equates to a book value of $20.03 per share.

● Our current ratio remains solid at 4.0 to 1, and our financial leverage is conservative with a debt to total capitalization ratio of 20.3 percent.

●  “The Comex average price of copper was $3.19 per pound in the second quarter of 2010, which compares with $2.15 in the second quarter of 2009.  Higher selling prices due to rising material values accounted for approximately $111 million of the increase in net sales primarily in the Plumbing & Refrigeration segment.  Approximately $50 million of the increase in net sales was attributable to increased unit volume primarily in the OEM segment.

●  “We recognized a charge of $2.5 million for environmental matters related to Eureka Mills, a non-operating site. “

Business Outlook

Regarding the outlook, Mr. Karp said, “Uncertainty seems to be the underlying theme.  Looming foreclosures, weak jobs reports, an environment of higher taxes, and rising federal deficits are causing widespread anxiety.  However, we believe Mueller’s financial strength and industry leadership positions us to pursue opportunities as they arise.”

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.

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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 o bligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
	For the Quarter Ended						For the Six Months Ended
	June 26,			June 27,			June 26,			June 27,
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Net sales	$	540,388		$	367,800		$	1,025,656		$	694,358
Cost of goods sold		466,645			313,353			879,693			600,736
Depreciation and amortization		10,090			10,355			20,438			20,835
Selling, general, and administrative expense		33,468			30,316			70,791			61,474
Insurance settlement		1,210			—			(21,296	)		—
Operating income		28,975			13,776			76,030			11,313
Interest expense		(2,964	)		(2,482	)		(5,496	)		(5,118	)
Other (expense) income, net		(2,518	)		385			(2,378	)		1,012
Income before income taxes		23,493			11,679			68,156			7,207
Income tax expense		(7,456	)		(5,512	)		(17,320	)		(3,550	)
Consolidated net income		16,037			6,167			50,836			3,657
Less: net income attributable to noncontrolling interest		(479	)		(139	)		(1,320	)		(121	)
Net income attributable to Mueller Industries, Inc.	$	15,558		$	6,028		$	49,516		$	3,536
Weighted average shares for basic earnings per share		37,674			37,143			37,631			37,143
Effect of dilutive stock-based awards		43			120			69			97
Adjusted weighted average shares for diluted earnings per share		37,717			37,263			37,700			37,240
Basic earnings per share	$	0.41		$	0.16		$	1.32		$	0.10
Diluted earnings per share	$	0.41		$	0.16		$	1.31		$	0.09
Dividends per share	$	0.10		$	0.10		$	0.20		$	0.20
Summary Segment Data:
Net sales:
Plumbing & Refrigeration Segment	$	285,717		$	229,763		$	542,379		$	420,156
OEM Segment		257,780			139,885			489,984			278,277
Elimination of intersegment sales		(3,109	)		(1,848	)		(6,707	)		(4,075	)
Net sales	$	540,388		$	367,800		$	1,025,656		$	694,358
Operating income:
Plumbing & Refrigeration Segment	$	19,740		$	11,882		$	60,199		$	22,213
OEM Segment		16,932			8,052			33,063			1,786
Unallocated expenses		(7,697	)		(6,158	)		(17,232	)		(12,686	)
Operating income	$	28,975		$	13,776		$	76,030		$	11,313

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
	June 26,		December 26,
	2010		2009
	(Unaudited)
ASSETS
Cash and cash equivalents	$	397,155	$	346,001
Accounts receivable, net		286,578		228,739
Inventories		185,054		191,262
Other current assets		35,181		42,841
Total current assets		903,968		808,843
Property, plant, and equipment, net		237,743		250,395
Other assets		122,491		120,903
	$	1,264,202	$	1,180,141
LIABILITIES AND EQUITY
Current portion of debt	$	40,765	$	24,325
Accounts payable		98,336		73,837
Other current liabilities		86,453		85,208
Total current liabilities		225,554		183,370
Long-term debt, less current portion		158,226		158,226
Pension and postretirement liabilities		43,082		44,320
Environmental reserves		25,630		23,268
Deferred income taxes		28,364		31,128
Other noncurrent liabilities		860		887
Total liabilities		481,716		441,199
Total Mueller Industries, Inc. stockholders' equity		755,436		713,167
Noncontrolling interest		27,050		25,775
Total equity		782,486		738,942
	$	1,264,202	$	1,180,141

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	For the Six Months Ended
	June 26,			June 27,
	2010			2009
	(Unaudited)
Operating activities:
Consolidated net income	$	50,836		$	3,657
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization		20,554			20,946
Stock-based compensation expense		1,435			1,220
Insurance settlement		(21,296	)		—
Insurance proceeds - noncapital related		5,561			—
Loss on disposal of properties		164			260
Deferred income taxes		(4,370	)		(136	)
Income tax benefit from exercise of stock options		(88	)		—
Gain on early retirement of debt		—			(128	)
Changes in assets and liabilities:
Receivables		(60,819	)		16,831
Inventories		4,796			45,209
Other assets		6,979			1,059
Current liabilities		26,129			(21,741	)
Other liabilities		2,870			(546	)
Other, net		(363	)		(101	)
Net cash provided by operating activities		32,388			66,530
Investing activities:
Capital expenditures		(9,286	)		(8,725	)
Insurance proceeds for property and equipment		17,703			—
Net withdrawals from restricted cash balances		11			13,039
Proceeds from sales of properties		23			606
Net cash provided by investing activities		8,451			4,920
Financing activities:
Dividends paid		(7,529	)		(7,428	)
Issuance (repayment) of debt by joint venture, net		16,431			(14,567	)
Repayments of long-term debt		—			(370	)
Dividends paid to noncontrolling interest		—			(1,449	)
Acquisition of treasury stock		(75	)		—
Issuance of shares under incentive stock option plans from treasury		2,465			—
Income tax benefit from exercise of stock options		88			—
Net cash provided by (used in) financing activities		11,380			(23,814	)
Effect of exchange rate changes on cash		(1,065	)		7,463
Increase in cash and cash equivalents		51,154			55,099
Cash and cash equivalents at the beginning of the period		346,001			278,860
Cash and cash equivalents at the end of the period	$	397,155		$	333,959

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MUELLER INDUSTRIES, INC.

RECONCILIATION OF NET INCOME AS REPORTED

TO NET INCOME BEFORE INSURANCE SETTLEMENT

(In thousands, except per share data)

Earnings without insurance settlement is a measurement not derived in accordance with generally accepted accounting principles (GAAP).  Excluding the 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 insurance settlement resulted from reimbursement 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.  Reconciliation of earnings without insurance settlement to net income as reported is as follows:

	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 income, 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
Less 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.

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