1
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended April 1, 1995 Commissions file number 1-569
MUELLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-0790410
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2959 N. ROCK ROAD
WICHITA, KANSAS 67226-1191
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 636-6300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $ 0.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of the Registrant's common stock outstanding as of April
14, 1995 was 8,644,232.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /X/ No / /
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MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Period Ended April 1, 1995
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Consolidated Statements of Income
for the quarters ended April 1, 1995
and March 26, 1994...................................3
b.) Consolidated Balance Sheets
as of April 1, 1995 and December 31, 1994............4
c.) Consolidated Statements of Cash Flows
for the quarters ended April 1, 1995 and
March 26, 1994.......................................6
d.) Notes to Consolidated Financial Statements...........7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................8
Part II. Other Information
Item 5. Other Information........................................10
Item 6. Exhibits and Reports on Form 8-K.........................10
Signatures...........................................................11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
April 1, 1995 March 26, 1994
Net sales $ 171,770 $ 120,812
Cost of goods sold 140,560 99,785
------- -------
Gross profit 31,210 21,027
Depreciation, depletion, and
amortization 3,646 2,700
Selling, general, and
administrative expense 12,967 10,688
------- -------
Operating income 14,597 7,639
Interest expense (1,377) (1,694)
Environmental reserves - (412)
Unusual items - (265)
Other income, net 1,473 1,379
------- -------
Income before income taxes 14,693 6,647
Current income tax expense (4,268) (589)
Deferred income tax expense (375) (1,876)
------- -------
Total income tax expense (4,643) (2,465)
------- -------
Net income $ 10,050 $ 4,182
======= =======
Net income per share:
Primary:
Average shares outstanding 9,449 10,437
Net income $ 1.06 $ 0.40
======= =======
Fully diluted:
Average shares outstanding 9,478 10,437
Net income $ 1.06 $ 0.40
======= =======
<FN>
See accompanying notes to consolidated financial statements.
4
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
April 1, 1995 December 31, 1994
Assets
Current assets:
Cash and cash equivalents $ 23,885 $ 34,492
Accounts receivable, less allowance
for doubtful accounts of $3,307 in
1995 and $3,336 in 1994 88,388 66,925
Inventories:
Raw materials and supplies 18,705 20,043
Work-in-process 17,411 18,251
Finished goods 40,775 36,074
------- -------
Total inventories 76,891 74,368
Current deferred income taxes 4,455 4,491
Other current assets 5,028 3,275
------- -------
Total current assets 198,647 183,551
Property, plant and equipment, net 201,405 196,772
Deferred income taxes 23,384 23,797
Other assets 22,248 26,635
------- -------
$ 445,684 $ 430,755
======= =======
<FN>
See accompanying notes to consolidated financial statements.
5
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
April 1, 1995 December 31, 1994
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 18,475 $ 18,611
Accounts payable 31,228 21,607
Accrued wages and other employee costs 15,010 13,105
Current deferred income taxes 344 366
Other current liabilities 13,387 13,532
------- -------
Total current liabilities 78,444 67,221
Long-term debt 72,398 76,125
Pension and post retirement liabilities 18,549 18,445
Environmental reserves 10,456 11,178
Deferred income taxes 2,964 3,016
Other noncurrent liabilities 12,814 12,822
------- -------
Total liabilities 195,625 188,807
------- -------
Stockholders' equity:
Preferred stock-shares authorized
4,985,000; none outstanding - -
Series A junior participating preferred
stock-$1.00 par value; shares
authorized 15,000; none outstanding - -
Common stock - $.01 par value; shares
authorized 20,000,000; issued
10,000,000; outstanding 8,644,232
in 1995 and 8,698,977 in 1994 100 100
Paid-in capital, common 254,044 254,251
Retained earnings (Since
January 1, 1991) 32,037 21,987
Cumulative translation adjustment (2,814) (2,832)
Treasury common stock, at cost (33,308) (31,558)
------- -------
Total stockholders' equity 250,059 241,948
Commitments and contingencies (Note 2) - -
------- -------
$ 445,684 $ 430,755
======= =======
<FN>
See accompanying notes to consolidated financial statements.
6
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Quarter Ended
April 1, 1995 March 26, 1994
Cash flows from operating activities
Net income $ 10,050 $ 4,182
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Provision for unusual items - 265
Depreciation, depletion and
amortization of intangibles 3,646 2,700
Deferred income taxes 375 1,876
Gain on disposal of properties (310) (753)
Changes in assets and liabilities:
Receivables (21,463) (3,207)
Inventories (2,523) 1,054
Other assets (1,846) (826)
Current liabilities 11,481 497
Other liabilities (626) (1,167)
Other, net 26 (262)
------- -------
Net cash provided (used)
by operating activities (1,190) 4,359
------- -------
Cash flows from investing activities
Capital expenditures (8,707) (5,730)
Proceeds from sales of properties 530 1,596
Escrowed IRB financing 4,580 (16,609)
------- -------
Net cash used by investing activities (3,597) (20,743)
------- -------
Cash flows from financing activities
Repayments of long-term debt (3,863) (1,705)
Proceeds from sale of treasury stock 98 113
Acquisition of treasury stock (2,055) -
Issuance of long-term debt - 20,000
------- -------
Net cash provided (used) by
financing activities (5,820) 18,408
------- -------
Increase (decrease) in cash
and cash equivalents (10,607) 2,024
Cash and cash equivalents at the
beginning of the period 34,492 77,336
------- -------
Cash and cash equivalents at the
end of the period $ 23,885 $ 79,360
======= =======
<FN>
See accompanying notes to consolidated financial statements.
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MUELLER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
General
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Results of operations for the
interim periods presented are not necessarily indicative of results which may
be expected for any other interim period or for the year as a whole. This
quarterly report on Form 10-Q should be read in conjunction with the Company's
Annual Report on Form 10-K, including the annual financial statements
incorporated therein by reference.
The accompanying unaudited interim financial statements include all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
Note 1 - Earnings Per Common Share
Primary earnings per common share are based upon the weighted average
number of common and common equivalent shares outstanding during the period.
Fully diluted earnings per share are based upon the weighted average number of
common shares outstanding plus the dilutive effects of all outstanding stock
options.
Note 2 - Commitments and Contingencies
The Company is subject to normal environmental standards imposed by
federal, state and local environmental laws and regulations. Management
believes that the outcome of pending environmental matters will not materially
affect the overall financial position of the Company.
In addition, the Company is involved in certain litigation as either
plaintiff or defendant as a result of claims that arise in the ordinary course
of business which management believes will not have a material effect on the
Company's financial condition.
Purchase Commitments
The Company has committed to capital expenditures for the following
projects: (i) approximately $20.0 million to modernize the copper tube mill
in Fulton, Mississippi; (ii) approximately $15.0 million to modernize the
brass rod mill in Port Huron, Michigan; and (iii) approximately $22.0 million
to construct a new high-volume copper fitting facility adjacent to the
Company's copper tube mill in Fulton, Mississippi. As of April 1, 1995, $32.6
million has been incurred of which $27.5 million was funded with proceeds of
the 1993 and 1994 Series IRBs. At April 1, 1995, $11.5 million of the IRB
proceeds remain escrowed, until required for funding the projects, and are
classified as other assets. These approved major projects should become fully
operational in 1995. No other material purchase commitments for capital
expenditures exist.
8
Forward Contracts
During the first quarter of 1995, the Company entered into a forward
contract to deliver approximately 15,000 ounces of gold on July 6, 1995 at a
price of $381 per ounce. At April 1, 1995, there were no other open hedge
transactions.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Overview
The Company's principal business is the manufacture and sale of copper
tube, brass rod, fittings and other products made of copper, brass, bronze,
plastic and aluminum. These core manufacturing businesses have been in
operation for over 75 years. New housing starts and commercial construction
are important determinants of the Company's sales to the air-conditioning,
refrigeration and plumbing markets because the principal end use of a
significant portion of the Company's products is in the construction of single
and multi-family housing units and commercial buildings.
Profitability of certain of the Company's product lines is dependent upon
the "spreads" between the cost of metal and the gross selling prices of its
completed products. The open market price for copper cathode, for example,
directly influences the selling price of copper tubing, a principal product
manufactured by the Company. The Company attempts to minimize the effects of
changes in copper prices by passing base metal costs through to its customers.
In 1994, the Company adopted the LIFO method of accounting for the copper
component of its copper tube and fittings inventories. Management believes
the LIFO method results in a better matching of current costs with current
revenues. The market price of copper does, however, indirectly effect the
carrying value (FIFO basis) of the Company's brass inventories. The Company's
copper and brass inventories customarily total between 30 to 35 million
pounds. "Spreads" fluctuate based upon competitive market conditions.
The Company also owns various natural resource properties in the Western
United States and Canada. It operates a short line railroad in Utah and a
placer gold mining operation in Alaska. Additionally, certain other natural
resource properties produce royalty income.
Results of Operations
Net income was $10.1 million, or $1.06 per common share, for the first
quarter of 1995, which compares with net income of $4.2 million, or 40 cents
per common share, for the same period of 1994.
During the first quarter of 1995 the Company's net sales were $171.8
million, which compares to net sales of $120.8 million, or a 42 percent
increase over the same period of 1994. The increase in net sales was
primarily attributable to the core manufacturing businesses, which shipped
12.4 percent more pounds of product. The September, 1994 acquisition of two
plastic manufacturing facilities contributed to this increase. The increase
is also reflective of price increases which pass through higher metal costs.
The Company's core manufacturing businesses shipped 103.4 million pounds of
product in the first quarter of 1995 which compares to 92.0 million pounds in
the same quarter of 1994. First quarter operating income increased primarily
9
due to: (i) productivity improvements at its manufacturing plants; (ii)
higher sales volumes; (iii) selective price increases in the fittings and
brass rod markets; and (iv) cost containment in selling, general, and
administrative expenses.
Interest expense for 1995 decreased approximately $.3 million due to
capitalized interest of $.5 million related to capital improvement programs at
the copper tube mill, the brass rod mill, and the high-volume copper fittings
factory. The effective tax rate of 31.6 percent in the first quarter of 1995
reflects the benefits of a lower federal provision relating to the recognition
of net operating loss carryforwards and a lower state provision associated
with incentive IRB financings.
Compared to first quarter 1994, first quarter 1995 earnings per share
were favorably effected by the June, 1994 purchase of treasury stock
aggregating 924,875 shares, or 9.6 percent of shares then outstanding.
Liquidity and Capital Resources
Cash used by operating activities in the first quarter of 1995 totalled
$1.2 million which is primarily attributable to the increase in accounts
receivable. The increase in accounts receivable reflects the favorable
increase in sales activity.
During the first quarter of 1995, the Company's capital expenditures
totalled $8.7 million which was provided for by cash from operations, except
that portion related to two major capital improvement projects which were
funded by IRBs.
The Company has a $30 million unsecured line-of-credit agreement (the
Credit Facility) which expires on June 30, 1996, but may be extended for
successive one year periods by agreement of the parties. At the Company's
option, borrowings bear interest at prime less 1/2 of one percent. There are
no outstanding borrowings under the Credit Facility. At April 1, 1995, the
Company's total debt was $90.9 million or 26.7 percent of its capitalization.
The Company's financing obligations contain various covenants which
require, among other things, the maintenance of minimum levels of working
capital, tangible net worth, and debt service coverage ratios. The Company is
in compliance with all debt covenants.
Management believes that cash provided by operations and currently
available cash of $23.9 million will be adequate to meet the Company's normal
future capital expenditure and operational needs. The Company's current ratio
remains strong at 2.5 to 1.
The Company has ongoing three major capital expenditure projects: (i) a
modernization project at its Fulton, Mississippi copper tube mill; (ii) a
modernization project at its Port Huron, Michigan brass rod mill; and (iii) a
new high-volume copper fittings plant in Fulton, Mississippi. These projects
will require capital of approximately $57.0 million. The two Fulton,
Mississippi projects have been financed by IRBs. The primary objective of
these projects is to improve efficiency, yield and productivity as well as add
some capacity.
Additionally, the Company has identified and is evaluating various other
capital improvement projects that could further enhance productivity and/or
add capacity. Various funding alternatives for such projects are also being
considered.
10
Update on Major Capital Improvement Programs
Mueller is upgrading its brass rod mill manufacturing processes with an
expansion that includes the installation of an indirect extrusion press, new
billet heating furnaces, and material handling systems. The indirect
extrusion press is scheduled to arrive at the Port Huron facility in May,
1995. The Company expects to transition production to the new equipment
during the fourth quarter of 1995.
The building containing Mueller's new high-volume fittings plant in
Fulton, Mississippi, is nearly completed and some fittings manufacturing
equipment has arrived. While the Company anticipates limited production of
certain fittings commencing in the second quarter, the plant will not become
fully operational until later in 1995.
Mueller's capital improvement project at its Fulton copper tube mill to
upgrade technology and install state-of-the-art tube drawing equipment remains
on schedule. All major items of equipment have been delivered to the Fulton
facility, where they are in the process of being installed. The Company
anticipates that the new equipment will be operational during the third
quarter of 1995.
Part II. OTHER INFORMATION
Item 5. Other Information
The following discussion updates the disclosure in Item 1, Business, in
the Company's Annual Report on Form 10-K, for the year ended December 31,
1994.
Environmental Matters
Mining Remedial Recovery Company (MRRC)
1. Cleveland Mill Site
During the first quarter, the government executed a consent decree
relating to the site, which has now been lodged with the federal district
court.
2. Hanover Site
During the first quarter, MRRC commenced its voluntary plan to regrade
and cap the tailings at the Hanover site located in Grant County, New
Mexico. MRRC anticipates that its share of the costs associated with
this remediation plan will approximate $375,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Mueller Industries, Inc.'s Quarterly Report to
Stockholders for the quarter ended April 1, 1995. Such
report is being furnished for the information of the
Securities and Exchange Commission only and is not to
be deemed filed as part of this Quarterly Report on
Form 10-Q.
11
99.1 Press Release issued by Mueller Industries, Inc. on
April 20, 1995.
(b) During the quarter ended April 1, 1995, the Registrant
filed no Current Reports on Form 8-K.
Items 1, 2, 3 and 4 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on April 24, 1995.
MUELLER INDUSTRIES, INC.
/S/ EARL W. BUNKERS
Earl W. Bunkers, Executive Vice
President and Chief Financial Officer
/S/ KENT A. MCKEE
Kent A. McKee
Treasurer and Assistant Secretary
/S/ RICHARD W. CORMAN
Richard W. Corman
Director of Corporate Accounting