TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
Mueller's earnings in the third quarter of 2000 declined due to increased
raw material costs, which we were unable to recover in the selling prices
of our products. Net income for the third quarter was $19.3 million, or
50 cents per diluted share, compared with $26.3 million, or 66 cents per
diluted share, for the same quarter of 1999.
Net sales for the third quarter totaled $296.0 million, an increase of 2.8
percent over net sales of $287.9 million for the comparable 1999 period.
For the nine months year-to-date, net income was $75.6 million compared
with $73.5 million during the same period in 1999. On a pre-tax basis,
year-to-date earnings increased more than 12 percent to $119.9 million,
but higher effective tax rates (36.9 percent versus 31.2 percent) offset
pre-tax earnings improvement. Earnings per diluted share for the first
nine months of 2000 were $1.97, an increase of 6.5 percent over the $1.85
reported a year ago. Year-to-date, net sales were $926.9 million, an
increase of 6.7 percent over net sales of $869.1 million in the 1999
period.
Mueller ended the quarter in excellent financial shape with $135 million
in cash on hand and a very comfortable 17.6 percent debt-to-total-
capitalization ratio.
During the third quarter, our manufacturing operations performed well.
Also, our capital investment programs are on schedule and on budget. In
Wynne, Arkansas, we have installed the equipment and systems specified in
our tube mill modernization project. The transition to this new equipment
should produce benefits in the fourth quarter and beyond. Our European
copper tube mill modernization program is scheduled for completion by the
end of 2001, and by early 2001, a horizontal continuous caster should be
operational at our brass rod mill in Port Huron, Michigan.
Demand for our products, which is largely tied to housing and construction
markets, continues to be good despite reports that new home starts may
decline by 6 to 8 percent from the torrid pace of 1999. On the other
hand, 30-year mortgage rates have recently declined from a high of 8.64
percent in May to 7.83 percent currently . We welcome lower rates, as
past experience shows a strong correlation between mortgage rates and the
vibrancy of Mueller's business.
Through early October 2000, Mueller acquired 2.1 million shares of its
common stock under a four-million-share repurchase authorization. Our
Board of Directors has expanded and extended this authorization to
repurchase a total of ten million shares through October 2001.
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Over the past month, the stock market has been particularly volatile, and
Mueller's stock price has declined along with many others. However, the
vagaries of the stock market have not altered our Company's business
philosophy or objectives. We are committed to being a world-class
manufacturing company which provides our customers with outstanding
service. We relentlessly focus on enhancing intrinsic value which we are
confident will benefit our customers, stockholders, and employees.
Sincerely,
/S/HARVEY L. KARP /S/WILLIAM D. O'HAGAN
Harvey L. Karp William D. O'Hagan
Chairman of the Board President and Chief Executive Officer
October 10, 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 third quarter of 2000, our Company earned $30.6 million before tax,
compared with $12.0 million for the same quarter of 1994, an increase of 155
percent. Diluted earnings per share have risen 127 percent, from 22 cents
to 50 cents.
[GRAPH]
THIRD QUARTER DILUTED EARNINGS PER SHARE
1994 $0.22
1995 0.30
1996 0.41
1997 0.46
1998 0.47
1999 0.66
2000 0.50
EARNINGS BEFORE TAX (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 47.2 30.6
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 0.78 0.50
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
September 23, 2000 September 25, 1999
Net sales $ 295,979 $ 287,880
Cost of goods sold 234,063 216,341
Depreciation and amortization 9,238 9,268
Selling, general, and
administrative expense 22,437 23,162
---------- ----------
Operating income 30,241 39,109
Interest expense (2,207) (3,078)
Other income, net 2,554 2,143
---------- ----------
Income before income taxes 30,588 38,174
Income tax expense (11,281) (11,834)
---------- ----------
Net income $ 19,307 $ 26,340
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 34,439 35,683
========== ==========
Basic earnings per share $ 0.56 $ 0.74
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 38,275 39,814
========== ==========
Diluted earnings per share $ 0.50 $ 0.66
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Nine Months Ended
September 23, 2000 September 25, 1999
Net sales $ 926,912 $ 869,062
Cost of goods sold 708,370 658,421
Depreciation and amortization 27,519 27,606
Selling, general, and
administrative expense 71,547 74,229
---------- ----------
Operating income 119,476 108,806
Interest expense (7,130) (9,086)
Other income, net 7,509 7,093
---------- ----------
Income before income taxes 119,855 106,813
Income tax expense (44,220) (33,345)
---------- ----------
Net income $ 75,635 $ 73,468
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 34,582 35,772
========== ==========
Basic earnings per share $ 2.19 $ 2.05
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 38,449 39,751
========== ==========
Diluted earnings per share $ 1.97 $ 1.85
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 23,2000 December 25, 1999
ASSETS
Cash and cash equivalents $ 135,144 $ 149,454
Accounts receivable, net 184,110 167,858
Inventories 125,083 119,644
Other current assets 11,740 3,790
---------- ----------
Total current assets 456,077 440,746
Property, plant, and equipment, net 361,059 347,846
Other assets 122,474 115,488
---------- ----------
$ 939,610 $ 904,080
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 23,994 $ 31,012
Accounts payable 50,067 49,958
Other current liabilities 72,536 72,091
---------- ----------
Total current liabilities 146,597 153,061
Long-term debt 107,401 118,858
Other noncurrent liabilities 68,251 62,377
---------- ----------
Total liabilities 322,249 334,296
Minority interest in subsidiaries 297 354
Stockholders' equity 617,064 569,430
---------- ----------
$ 939,610 $ 904,080
========== ==========
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