TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES
We are pleased to report that Mueller's earnings rose 22 percent for the
first quarter of 1998 compared with the same quarter of 1997. Net sales,
pounds shipped, and operating income all posted double digit gains,
resulting in the best first quarter in Mueller's history. Net earnings
were $19.3 million, or 97 cents per diluted share, compared to $15.8
million, or 80 cents per diluted share, for the first quarter of 1997.
Net sales for the first quarter were $226.7 million, an increase of 13
percent over sales of $201.4 million during the same quarter of 1997.
Pounds shipped totaled 156.1 million, an increase of 25 percent. Of this
increase, 83 percent was attributable to acquired businesses. Pounds
shipped grew by a larger percent than sales dollars because the price of
copper was lower in the first quarter of 1998 than in the same period of
1997.
Improvement in margins in our U.S. copper tube business was of particular
importance in achieving record first quarter earnings. Earnings at our
copper fittings operations also rose; however volume was down slightly.
Brass rod turned in a star performance in both sales and profit. Our DWV
plastics business also generated good earnings on excellent volume.
We are making investments to improve our European copper tube operations.
Progress was made during the first quarter, and we are optimistic that,
over time, these operations will become a significant contributor to
Mueller's earnings.
In 1997, Mueller spent $36.9 million on capital improvement programs. In
1998, we expect to spend or commit in excess of $50 million for capital
projects. We believe these projects will enable Mueller to further reduce
costs and better serve our customers.
U.S. economic conditions continue to be excellent for our business. Housing
starts are running at an annualized rate of more than 1.6 million units for
the first time in 10 years. Likewise, permits for new construction are the
highest they have been since 1986. The supply of unsold new homes on the
market is less than four months, the smallest inventory in two decades.
Conventional 30-year mortgage rates are low, just above 7 percent.
Inflation and unemployment are modest. Consumer confidence is high.
Overall, the outlook for the balance of 1998 is promising.
On April 14, 1998 Mueller's Board of Directors declared a two-for-one stock
split to be effected in the form of a 100 percent stock dividend.
Stockholders of record on May 12, 1998 will receive one additional share of
common stock for each share of the Company's common stock held on that
date.
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Our Annual Shareholders' Meeting will be held in Memphis, Tennessee on May
7, 1998. You should have already received the notice of the meeting, as
well as proxy material and the 1997 Annual Report. We hope you can attend,
but if you cannot, we urge you to sign and return your proxy card.
Sincerely,
Harvey L. Karp
Chairman of the Board
William D. O'Hagan
President and Chief Executive Officer
April 16, 1998
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Historical Analysis (1994-1998) of Quarterly
Earnings Before Tax and Earnings Per Share
Mueller's earnings have grown substantially over the past four years. In
the first quarter of 1998, our Company earned $28.5 million before tax,
compared with $6.7 million for the same quarter of 1994, an increase of 325
percent. Diluted earnings per share have risen 385 percent, from $0.20 to
$0.97.
[GRAPH]
First Quarter Diluted Earnings Per Share
1994 $0.20
1995 0.53
1996 0.69
1997 0.80
1998 0.97
A similar progression is evident in each of the quarters from 1994 to the
present:
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
Diluted Earnings Per Share
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
1994 $ 0.20 $ 0.28 $ 0.45 $ 0.50 $ 1.41
1995 0.53 0.56 0.60 0.65 2.34
1996 0.69 0.71 0.83 0.91 3.14
1997 0.80 0.83 0.92 1.00 3.56
1998 0.97
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
March 28,1998 March 29,1997
Net sales $ 226,652 $ 201,366
Cost of goods sold 175,457 155,784
Depreciation and amortization 5,584 4,832
Selling, general, and
administrative expense 17,842 15,496
---------- ----------
Operating income 27,769 25,254
Interest expense (1,352) (1,178)
Environmental reserves (600) (2,000)
Other income, net 2,723 1,030
---------- ----------
Income before taxes 28,540 23,106
Income tax expense (9,275) (7,348)
---------- ----------
Net income $ 19,265 $ 15,758
========== ==========
Earnings per share:
Basic:
Weighted average shares outstanding 17,550 17,473
========== ==========
Basic earnings per share $ 1.10 $ 0.90
========== ==========
Diluted:
Weighted average shares outstanding 19,773 19,592
========== ==========
Diluted earnings per share $ 0.97 $ 0.80
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 28,1998 Dec. 27, 1997
ASSETS
Cash and cash equivalents $ 76,082 $ 69,978
Accounts receivable, net 143,648 128,902
Inventories 93,624 98,181
Other current assets 13,758 11,990
---------- ----------
Total current assets 327,112 309,051
Property, plant and equipment, net 269,186 260,364
Other assets 40,065 41,361
---------- ----------
$ 636,363 $ 610,776
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 18,234 $ 18,980
Accounts payable 32,732 30,530
Other current liabilities 57,900 51,047
---------- ----------
Total current liabilities 108,866 100,557
Long-term debt 49,508 53,113
Other noncurrent liabilities 39,637 38,375
---------- ----------
Total liabilities 198,011 192,045
Minority interest in subsidiaries 946 691
Stockholders' equity 437,406 418,040
---------- ----------
$ 636,363 $ 610,776
========== ==========
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