TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES
The first quarter of 2000 was another record-setting quarter for Mueller.
Net earnings rose 23 percent to $26.6 million, or 69 cents per diluted
share, compared with 55 cents per diluted share for the same quarter last
year.
Net sales for the first quarter were $302.4 million, an increase of five
percent over sales of $287.8 million for the first quarter of 1999. We
shipped 194 million pounds of product, versus 208 million pounds in the
first quarter of 1999. This decline in volume was due primarily to
production interruptions at our copper tube and fittings operations. We
appreciate the efforts of our employees, which minimized the downtime and
its impact on our customer service.
It is significant that Mueller's earnings increase was achieved despite a
marked rise in the effective tax rate applicable to our earnings. In the
first quarter of 1999, our tax rate was 30.5 percent contrasted with 36.9
percent for the first quarter of 2000. The tax rate increase was due to
our having recognized the majority of various historical tax benefits in
prior years. Income before taxes for the first quarter was $42.1 million;
a 35 percent increase compared with the same quarter of 1999.
Over the years, Mueller's policy of investing in capital programs has
yielded excellent results. In 1999, our capital investments totaled $40.1
million; however, in 2000, we plan on committing $90 million (the most
ever) for capital projects, which should allow us to further reduce costs,
improve yields and increase efficiencies. During 2000, our Wynne,
Arkansas, tube mill modernization project will be completed, and by year-
end, our $40 million project to sharply reduce conversion costs at our
European tube mills should be well advanced.
In October 1999, Mueller initiated a program to repurchase up to four
million shares of its outstanding common stock. Since then, we have
acquired 1,156,000 shares at an average cost of $31.22 per share. We may
repurchase additional shares from time to time subject to market
conditions and management discretion regarding the alternative uses of
funds.
The U.S. housing industry continues to show strength with housing starts
currently at a seasonally adjusted annual rate of 1.78 million units.
There appears to be little evidence of any pullback in demand so far,
despite the five interest rate increases imposed by the Federal Reserve
Bank since last June. Pricing in the housing market remains strong, as
both existing and new homes are in short supply. Moreover, the U.S.
economy continues to grow rapidly, with stunning productivity increases
and low inflation. We believe these factors signal a positive environment
for our business.
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Our Annual Stockholders' Meeting will be held at Mueller's headquarters in
Memphis, Tennessee, on May 12, 2000. You should have already received the
notice of meeting, as well as proxy material and the 1999 Annual Report.
We hope you can attend, but if you cannot, we urge you to sign and return
your proxy card.
Sincerely,
/S/HARVEY L. KARP
Harvey L. Karp
Chairman of the Board
/S/WILLIAM D. O'HAGAN
William D. O'Hagan
President and Chief Executive Officer
April 13, 2000
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Historical Analysis (1994-2000) of Quarterly
Earnings Before Tax and Earnings Per Share
Mueller's earnings have grown substantially over the past six years. In
the first quarter of 2000, our Company earned $42.1 million before tax,
compared with $6.7 million for the same quarter of 1994, an increase of 528
percent. Diluted earnings per share have risen 590 percent, from $0.10 to
$0.69.
[GRAPH]
First Quarter Diluted Earnings Per Share
1994 $0.10
1995 0.27
1996 0.34
1997 0.40
1998 0.49
1999 0.55
2000 0.69
Earnings Before Tax (in millions)
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
1994 $ 6.7 $ 9.1 $ 12.0 $ 13.0 $ 40.8
1995 14.7 15.6 17.0 17.2 64.5
1996 19.3 20.1 23.4 25.6 88.4
1997 23.1 23.6 25.8 28.3 100.8
1998 28.5 29.0 26.1 25.7 109.3
1999 31.2 37.4 38.2 38.9 145.7
2000 42.1
Diluted Earnings Per Share
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
1994 $ 0.10 $ 0.14 $ 0.22 $ 0.25 $ 0.71
1995 0.27 0.28 0.30 0.32 1.17
1996 0.34 0.36 0.41 0.46 1.57
1997 0.40 0.42 0.46 0.50 1.78
1998 0.49 0.50 0.47 0.45 1.90
1999 0.55 0.64 0.66 0.66 2.51
2000 0.69
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
March 25,2000 March 27,1999
Net sales $ 302,350 $ 287,840
Cost of goods sold 226,514 221,740
Depreciation and amortization 9,042 8,990
Selling, general, and
administrative expense 24,290 25,179
---------- ----------
Operating income 42,504 31,931
Interest expense (2,627) (2,861)
Other income, net 2,224 2,129
---------- ----------
Income before taxes 42,101 31,199
Income tax expense (15,535) (9,516)
---------- ----------
Net income $ 26,566 $ 21,683
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 34,844 35,833
========== ==========
Basic earnings per share $ 0.76 $ 0.61
========== ==========
Diluted:
Weighted average shares outstanding 38,753 39,615
========== ==========
Diluted earnings per share $ 0.69 $ 0.55
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 25, 2000 Dec. 25, 1999
ASSETS
Cash and cash equivalents $ 125,575 $ 149,454
Accounts receivable, net 199,087 167,858
Inventories 121,634 119,644
Other current assets 10,047 3,790
---------- ----------
Total current assets 456,343 440,746
Property, plant, and equipment, net 345,230 347,846
Other assets 113,595 115,488
---------- ----------
$ 915,168 $ 904,080
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 25,979 $ 31,012
Accounts payable 51,414 49,958
Other current liabilities 81,286 72,091
---------- ----------
Total current liabilities 158,679 153,061
Long-term debt 117,215 118,858
Other noncurrent liabilities 63,479 62,377
---------- ----------
Total liabilities 339,373 334,296
Minority interest in subsidiaries 297 354
Stockholders' equity 575,498 569,430
---------- ----------
$ 915,168 $ 904,080
========== ==========
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