TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
Mueller's business continued to improve in the second quarter of 2002,
although at a somewhat slower pace than we had anticipated. On a sequential
basis, earnings per diluted share increased from 31 cents in the fourth
quarter of 2001, to 48 cents in the first quarter of 2002, to 50 cents for
the current quarter.
Net income was $18.5 million, or 50 cents per diluted share, compared
with $20.8 million, or 56 cents per diluted share for the same quarter last
year. Net sales for the second quarter of 2002, were $277 million compared
with $286 million for the same quarter 2001. We shipped 198 million pounds
of product (an increase of two percent over the first quarter of this year)
versus 186 million pounds in the second quarter of 2001.
Profit margins were at sub-par levels in the second quarter of 2002.
Ordinarily, businesses expect margins to decline during an economic
slowdown; and that is what occurred in the year 2001. However, as the
economy improved in 2002, we anticipated an improvement in margins, but it
has been slow in coming. Nonetheless, we are optimistic that margins will
rise to more acceptable levels in the near term.
Our financial condition is strong. Year-to-date, Mueller has generated
$56 million in cash from operations, and we ended the quarter with $129
million in cash on hand. Our debt-to-total capitalization is a very low 2.5
percent, and net of cash, we have no debt.
The outlook for our business remains positive. The housing and
construction industry continues to show vigor. Housing starts are currently
at a seasonally adjusted annual rate of 1.7 million units. Thirty-year
mortgage rates have stayed below seven percent and building permits, an
important indicator of future business, remain robust. In addition, the
inventory of new homes available for sale is near its historic low, and this
means there is little reason for builders to curtail their activity. And
importantly, the overall national economy grew significantly in the first
quarter of 2002, and the index of leading economic indicators forecasts
continued economic improvement.
Our Annual Stockholders' Meeting was held at Mueller's headquarters in
Memphis, Tennessee on May 9, 2002. The stockholders elected Messrs. Fulvio,
Gladstein, Hodes, Karp, and O'Hagan as directors, approved the appointment
of Ernst & Young LLP as our independent auditors, and approved the Company's
new stock option program.
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
July 16, 2002
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
June 29, 2002 June 30, 2001
Net sales $ 277,241 $ 286,021
Cost of goods sold 216,318 219,090
Depreciation and amortization 9,839 10,505
Selling, general, and
administrative expense 23,086 22,761
---------- ----------
Operating income 27,998 33,665
Interest expense (343) (680)
Environmental reserves (230) (856)
Other income, net 1,426 1,369
---------- ----------
Income before income taxes 28,851 33,498
Income tax expense (10,386) (12,723)
---------- ----------
Net income $ 18,465 $ 20,775
========== ==========
Earnings per share:
Basic $ 0.54 $ 0.62
========== ==========
Diluted $ 0.50 $ 0.56
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Six Months Ended
June 29, 2002 June 30, 2001
Net sales $ 545,265 $ 562,599
Cost of goods sold 424,808 437,206
Depreciation and amortization 19,598 21,032
Selling, general, and
administrative expense 45,803 45,317
---------- ----------
Operating income 55,056 59,044
Interest expense (836) (2,104)
Environmental reserves (405) (1,617)
Other income, net 3,062 3,135
---------- ----------
Income before income taxes 56,877 58,458
Income tax expense (20,476) (22,214)
---------- ----------
Net income $ 36,401 $ 36,244
========== ==========
Earnings per share:
Basic $ 1.08 $ 1.09
========== ==========
Diluted $ 0.98 $ 0.97
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 29, 2002 December 29, 2001
ASSETS
Cash and cash equivalents $ 129,178 $ 121,862
Accounts receivable, net 183,711 148,808
Inventories 132,410 126,629
Other current assets 4,559 6,614
---------- ----------
Total current assets 449,858 403,913
Property, plant, and equipment, net 385,006 387,533
Other assets 123,096 124,619
---------- ----------
$ 957,960 $ 916,065
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 3,860 $ 3,996
Accounts payable 54,947 34,209
Other current liabilities 65,026 63,283
---------- ----------
Total current liabilities 123,833 101,488
Long-term debt 15,047 46,977
Other noncurrent liabilities 95,801 94,396
---------- ----------
Total liabilities 234,681 242,861
Minority interest in subsidiaries 337 271
Stockholders' equity 722,942 672,933
---------- ----------
$ 957,960 $ 916,065
========== ==========
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