TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES
The third quarter of 1997 was the best quarter in Mueller's history.
Operating income, net earnings, and pounds of product manufactured and
shipped all reached record levels. Net earnings for the third quarter of
1997 were $18.1 million, or 92 cents per share, compared to $16.2 million,
or 83 cents per share, for the third quarter of 1996.
This earnings record was achieved even though our recently acquired
European copper tube businesses incurred operating losses of approximately
$2 million. We acquired these businesses for a modest investment, with the
objective of improving their cost structure and productivity. We see great
opportunity to build substantial values in Europe.
Net sales for the third quarter of 1997 totaled $229.1 million, an
increase of 30 percent over sales of $176.0 million for the same quarter of
1996. Pounds shipped increased by 24 percent.
Volume in the U.S. copper tube business continues to be strong; spreads
have improved from the second quarter of 1997, though they remain
significantly below levels achieved in the third quarter of 1996. Earnings
at our copper fittings operations were the best ever. Brass rod also
operated with solid volume and earnings.
Our DWV plastics business continues to grow. We recently purchased a
factory building, which is contiguous to our existing plant in Kalamazoo,
Michigan. Nineteen additional injection molding presses were installed in
this expansion, and in other facilities.
Our copper refinery project in Fulton, Mississippi is on
schedule. This $25 million investment, when completed in 1999, will allow
our Fulton tube mill to use a lower cost mix of scrap and cathode.
Financing was established for this project through a Mississippi Industrial
Revenue Bond, which will generate ongoing tax benefits.
U.S. economic conditions remain favorable for our business. Fixed 30-
year mortgage rates are near 7.5 percent. Unemployment is close to its
lowest level in more than 25 years. Inflation is modest. Consumer
confidence is high. Although new housing starts declined slightly during the
third quarter, the housing market remains solid. Consequently, we are
optimistic that Mueller's business will be sound through the end of the
year, and into 1998.
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
October 14, 1997
Corporate News
Plastics Business Continues
Consistent Improvement
Profits at Mueller's DWV plastic fittings business have improved
dramatically since 1996. The plastic fittings unit earned the prestigious
Harvey L. Karp EBIT ("Everyone Benefits In Teamwork") Award in five
consecutive quarters commencing with the second quarter of 1996. This
deserves special recognition because we have never had back-to-back winners
before.
This internal award recognizes the business which demonstrates the best
earnings improvement over the preceding quarter. The award was established
in 1993, and has encouraged a healthy rivalry among the Company's operating
units.
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
September 27, September 28,
1997 1996
Net sales $ 229,133 $ 175,991
Costs of goods sold 181,376 133,204
Depreciation and amortization 5,593 4,697
Selling, general, and administrative expense 15,120 12,809
----------- -----------
Operating income 27,044 25,281
Interest expense (1,818) (1,400)
Environmental reserves (1,100) (1,945)
Other income, net 1,661 1,424
----------- -----------
Income before taxes 25,787 23,360
Income tax expense (7,736) (7,178)
----------- -----------
Net income $ 18,051 $ 16,182
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,641 19,520
Net income $ 0.92 $ 0.83
=========== ===========
Fully diluted:
Average shares outstanding 19,648 19,550
Net income $ 0.92 $ 0.83
=========== ===========
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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 27, September 28,
1997 1996
Net sales $ 645,936 $ 546,063
Costs of goods sold 509,845 426,272
Depreciation and amortization 15,409 13,718
Selling, general, and administrative expense 45,850 41,632
----------- -----------
Operating income 74,832 64,441
Interest expense (4,114) (4,113)
Environmental reserves (3,100) (1,945)
Other income, net 4,857 4,364
----------- -----------
Income before taxes 72,475 62,747
Income tax expense (22,327) (19,376)
----------- -----------
Net income $ 50,148 $ 43,371
=========== ===========
Net income per share:
Primary:
Average shares outstanding 19,604 19,477
Net income $ 2.56 $ 2.23
=========== ===========
Fully diluted:
Average shares outstanding 19,641 19,534
Net income $ 2.55 $ 2.22
=========== ===========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
September 27, 1997 December 28, 1996
ASSETS
Cash and cash equivalents $ 44,333 $ 96,956
Accounts receivable, net 139,254 88,905
Inventories 113,162 76,647
Other current assets 13,383 12,204
--------- ---------
Total current assets 310,132 274,712
Property, plant and equipment, net 256,391 219,855
Other assets 43,120 14,790
--------- ---------
$ 609,643 $ 509,357
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 19,083 $ 14,844
Accounts payable 36,805 18,305
Other current liabilities 53,494 45,807
--------- ---------
Total current liabilities 109,382 78,956
Long-term debt 61,094 44,806
Other noncurrent liabilities 41,340 37,116
--------- ---------
Total liabilities 211,816 160,878
Minority interest in subsidiaries 641 397
Stockholders' equity 397,186 348,082
--------- ---------
$ 609,643 $ 509,357
========= =========
Book value per share $ 22.69 $ 19.96
========= =========
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