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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