Mueller Industries (MLI) 8-K Mueller Industries, Inc. Reports Third Quarter 2015 Earnings

Mueller Industries, Inc. Reports Third Quarter 2015 Earnings

MEMPHIS, Tenn., October 20, 2015 -- Mueller Industries, Inc. (NYSE: MLI) announced today net income of $17.8 million, or 31 cents per diluted share, for the third quarter of 2015.  This compares to net income of $23.8 million, or 42 cents per diluted share, during the third quarter of 2014.  Net sales for the third quarter of 2015 were $535.2 million compared with $602.8 million for the same quarter of the prior year.

Both revenues and earnings in the third quarter of 2015 were impacted by lower copper prices and lower unit volume in the OEM Segment.  The average price of copper was $2.40 per pound in the third quarter of 2015 compared to $3.16 per pound in the third quarter of 2014.  During the third quarter of 2015, copper declined $0.37 per pound, or 49 percent of the year-over-year decline.

The sharp decline of copper in the quarter put pressure on margins of our FIFO accounting businesses.  OEM volumes in the US continued to be impacted by soft demand in the industrial segment and increased import competition due to the stronger dollar.  OEM volumes in China were impacted by slowing demand due to general domestic economic conditions.

Financial and Operating Highlights for the third quarter of 2015:

- The impact of the copper decline represented $63.3 million of the $67.6 million reduction in net sales and $13.5 million in lower gross margins.

- The effective tax rate for the quarter reflects a benefit of $4.2 million related to a reduction to the Company's deferred tax liabilities.

- The rationalization of the UK copper tube business acquired in 2014 was completed during the quarter.  All associated impairments and redundancy expenses are now complete.

- During the quarter we completed the acquisition of Great Lakes Copper and invested in a joint venture that acquired Tecumseh Products Company for a total cash investment of $137.4 million.

- The Company recognized $2.2 million in expenses related to transaction costs linked to the investment in Tecumseh Products Company in the final week of the quarter.

- Cash provided from operations in the quarter was $78.3 million with the quarter end cash totaling $220.7 million, or $3.86 per share.

- Debt to total capitalization was 20.5 percent and the current ratio was 3.6 to 1.

Regarding the outlook, Greg Christopher, Mueller's CEO, said "Construction remains positive in both residential and non-residential segments and we expect this trend to continue.  However, uncertainty in the industrial sectors looks to continue into the next few quarters."  He adds, "We have completed the rationalizations of our Yorkshire and Howell acquisitions and we are pleased with their continuing improvement.  Our balance sheet remains solid and cash remains strong after investing $173.3 million in acquisitions and $22.5 million in capital improvements year-to-date 2015."

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Mueller Industries, Inc. is a an industrial manufacturer that specializes in copper and copper alloy manufacturing while also producing goods made from aluminum, steel, and plastics.  It is headquartered in Memphis, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, and China.  Its products include tubing, fittings, valves, vessels, and related items for plumbing and HVACR related piping systems, as well as rod, forgings, extrusions, and various components for OEM applications.  Products are distributed into sectors such as building construction, appliance, defense, energy, and automotive.

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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.

CONTACTJeffrey A. Martin(901)753-3226

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MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the Quarter Ended						For the Nine Months Ended
(In thousands, except per share data)	September 26, 2015			September 27, 2014			September 26, 2015			September 27, 2014
Net sales	$	535,184		$	602,820		$	1,628,019		$	1,826,885
Cost of goods sold		467,167			521,278			1,398,366			1,574,830
Depreciation and amortization		8,749			8,952			24,790			25,651
Selling, general, and administrative expense		32,241			34,004			98,492			100,512
Gain on sale of assets		—			—			(15,376	)		(1,417	)
Severance		—			860			3,442			3,072
Operating income		27,027			37,726			118,305			124,237
Interest expense		(1,682	)		(1,430	)		(5,977	)		(3,913	)
Other income, net		164			225			534			440
Income before income taxes		25,509			36,521			112,862			120,764
Income tax expense		(5,223	)		(12,199	)		(36,374	)		(36,279	)
Income/(loss) from unconsolidated subsidiary, net of tax		(2,191	)		—			(2,191	)		—
Consolidated net income		18,095			24,322			74,297			84,485
Net income attributable to noncontrolling interest		(295	)		(499	)		(868	)		(911	)
Net income attributable to Mueller Industries, Inc.	$	17,800		$	23,823		$	73,429		$	83,574
Weighted average shares for basic earnings per share		56,375			56,107			56,272			55,999
Effect of dilutive stock-based awards		598			637			690			746
Adjusted weighted average shares for diluted earnings per share		56,973			56,744			56,962			56,745
Basic earnings per share	$	0.32		$	0.42		$	1.30		$	1.49
Diluted earnings per share	$	0.31		$	0.42		$	1.29		$	1.47
Dividends per share	$	0.075		$	0.075		$	0.225		$	0.225
Summary Segment Data:
Net sales:
Plumbing & Refrigeration Segment	$	325,022		$	357,843		$	957,375		$	1,093,060
OEM Segment		212,596			247,883			678,293			743,322
Elimination of intersegment sales		(2,434	)		(2,906	)		(7,649	)		(9,497	)
Net sales	$	535,184		$	602,820		$	1,628,019		$	1,826,885
Operating income:
Plumbing & Refrigeration Segment	$	19,559		$	20,156		$	75,033		$	76,371
OEM Segment		13,278			23,977			62,627			68,479
Unallocated expenses		(5,810	)		(6,407	)		(19,355	)		(20,613	)
Operating income	$	27,027		$	37,726		$	118,305		$	124,237

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MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)	September 26, 2015			December 27, 2014
ASSETS
Cash and cash equivalents		$	220,745		$	352,134
Accounts receivable, net			299,417			275,065
Inventories			250,799			256,585
Other current assets			54,538			57,429
Total current assets			825,499			941,213
Property, plant, and equipment, net			270,655			245,910
Other assets			277,372			140,973
		$	1,373,526		$	1,328,096
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of debt		$	13,756		$	36,194
Accounts payable			113,597			100,735
Other current liabilities			102,188			101,140
Total current liabilities			229,541			238,069
Long-term debt			204,500			205,250
Pension and postretirement liabilities			44,024			41,556
Environmental reserves			21,566			21,842
Deferred income taxes			22,142			24,556
Other noncurrent liabilities			3,570			1,389
Total liabilities			525,343			532,662
Total Mueller Industries, Inc. stockholders' equity			815,433			762,150
Noncontrolling interest			32,750			33,284
Total equity			848,183			795,434
		$	1,373,526		$	1,328,096

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MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended
(In thousands)	September 26, 2015			September 27, 2014
Cash flows from operating activities
Consolidated net income	$	74,297		$	84,485
Reconciliation of consolidated net income to net cash    provided by operating activities:
Depreciation and amortization		25,132			25,888
Stock-based compensation expense		4,611			4,957
Equity in losses of unconsolidated subsidiary		2,191			—
Gain on disposal of assets		(14,875	)		(1,146	)
Impairment charges		570			—
Deferred income taxes		(8,262	)		(6,908	)
Income tax benefit from exercise of stock options		(953	)		(829	)
Changes in assets and liabilities, net of businesses acquired:
Receivables		5,249			(62,854	)
Inventories		29,901			(14,868	)
Other assets		4,302			(15,272	)
Current liabilities		(27,580	)		(8,675	)
Other liabilities		740			(797	)
Other, net		145			223
Net cash provided by operating activities		95,468			4,204
Cash flows from investing activities
Capital expenditures		(22,502	)		(28,406	)
Businesses acquired, net of cash acquired		(107,405	)		(30,137	)
Net withdrawals from restricted cash balances		1,822			2,507
Investment in unconsolidated subsidiary		(65,900	)		—
Proceeds from the sales of assets		5,521			4,920
Net cash used in investing activities		(188,464	)		(51,116	)
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.		(12,669	)		(12,606	)
Issuance of debt by Mueller Europe, Limited, net		—			12,008
Repayment of debt by joint venture, net		(21,597	)		(3,170	)
Net cash used to settle stock-based awards		(718	)		(887	)
Repurchase of common stock		—			(58	)
Repayments of long-term debt		(750	)		(800	)
Income tax benefit from exercise of stock options		953			829
Net cash used in financing activities		(34,781	)		(4,684	)
Effect of exchange rate changes on cash		(3,612	)		(346	)
Decrease in cash and cash equivalents		(131,389	)		(51,942	)
Cash and cash equivalents at the beginning of the period		352,134			311,800
Cash and cash equivalents at the end of the period	$	220,745		$	259,858

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