Mueller Industries, Inc. Reports Third Quarter Results

MEMPHIS, Tenn., Oct. 23, 2012 /PRNewswire/ --

Quarterly and Year-to-Date Earnings

Mueller Industries, Inc. (NYSE: MLI), announced today that net income in the third quarter was $15.5 million, or 41 cents per diluted share, on net sales of $514.2 million.  This compares with net income of $10.5 million, or 27 cents per diluted share, on net sales of $585.8 million in the third quarter of 2011.

Year-to-date, the Company earned $66.0 million, or $1.72 per diluted share.  For the same period of 2011, net income was $73.4 million, or $1.92 per diluted share, which includes a favorable litigation settlement gain of 18 cents per diluted share.  Net sales for the first nine months of 2012 were $1.69 billion compared with net sales of $1.93 billion for the same period a year ago.   

In the third quarter, the Company repurchased 10,422,859 shares of its outstanding common stock for an aggregate purchase price of $427.4 million, or $41.00 per share.  As of the end of the third quarter, the total common stock outstanding was 27,970,180 shares (excluding dilutive equity awards).  The privately negotiated transaction significantly reduced the outstanding shares which should result in significant accretion to earnings per share in future periods.  On a pro forma basis (assuming the repurchase occurred at the beginning of the period), net income for the third quarter of 2012 would have been 51 cents per diluted share.

Financial and Operating Highlights

  • The net sales decrease of $71.6 million was primarily due to lower selling prices. The average price of copper, the principal raw material of the Company, was $3.53 per pound in the third quarter of 2012, which compares with $4.07 per pound in the third quarter of 2011.
  • The Plumbing & Refrigeration segment posted operating earnings of $17.6 million on net sales of $297.9 million compared with operating earnings of $13.9 million on net sales of $325.8 million in the third quarter of 2011.  The decrease in net sales was primarily due to lower selling prices.   
  • The OEM segment posted operating earnings of $14.4 million during the third quarter of 2012 on net sales of $221.5 million, which compared with operating earnings of $12.2 million on net sales of $266.6 million for the same period in 2011.  The decrease in net sales was attributable to lower selling prices on 6.9 percent lower unit volumes.    
  • The Company's total equity and cash balance decreased due to the share repurchase transaction noted above.  At the end of the third quarter, cash was $165.8 million and total stockholders' equity was $495.0 million.
  • The ratio of debt to total capitalization was 29.5 percent at the end of the third quarter of 2012.  The increased leverage was due primarily to the borrowings under the Company's credit facility related to the share repurchase transaction.
  • As of the end of the third quarter, the current ratio was 3.3 to 1.

Business Outlook

Regarding the outlook, Greg Christopher, CEO said, "We agree with the many economists who believe the construction industry is in the process of recovery.  Most predict that 2013 will be a much better year for housing and thereafter commercial construction.

"Absent disruptions to the market from potential changes in federal tax and spending policies, we should see improved demand levels for our products, especially as we move into the seasonally stronger spring months."

Mueller Industries, Inc. is a leading manufacturer of copper tube and fittings, brass rod and forgings, and a broad array of flow control products in these metals as well as aluminum and plastics.  Mueller's operations are located throughout the United States and in Canada, Mexico, Great Britain, and China.  Mueller's business is importantly linked to the construction and improvement of homes and nonresidential structures, including office buildings, hotels, schools, hospitals, and manufacturing buildings. 

************************

Statements in this release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties.  These include economic and currency conditions, continued availability of raw materials and energy, market demand, pricing, competitive and technological factors, and the availability of financing, among others, as set forth in the Company's SEC filings.  The words "pro forma," "outlook," "estimate," "project," "intend," "expect," "believe," "target," and similar expressions are intended to identify forward-looking statements.  The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report.  The Company has no obligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.

 

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)





















For the Quarter Ended


For the Nine Months Ended



September 29,


October 1,


September 29,


October 1,



2012


2011


2012


2011



(Unaudited)


(Unaudited)










Net sales


$    514,165


$    585,809


$  1,685,932


$  1,926,413










Cost of goods sold


449,718


523,984


1,465,744


1,687,735

Depreciation and amortization


7,870


8,716


23,318


27,581

Selling, general, and administrative expense


32,120


34,245


97,209


102,944

Litigation settlement


-


-


-


(10,500)

Insurance settlement


-


-


(1,500)


-










Operating income


24,457


18,864


101,161


118,653










Interest expense


(353)


(2,822)


(5,711)


(9,004)

Other income, net


219


102


963


1,425










Income before income taxes


24,323


16,144


96,413


111,074










Income tax expense


(8,753)


(5,403)


(29,486)


(37,060)










Consolidated net income


15,570


10,741


66,927


74,014










Net income attributable to noncontrolling interest


(59)


(266)


(900)


(621)










Net income attributable to Mueller Industries, Inc.


$      15,511


$      10,475


$      66,027


$      73,393










Weighted average shares









for basic earnings per share


37,505


37,878


37,849


37,779

Effect of dilutive stock-based awards


452


483


444


367










Adjusted weighted average shares









for diluted earnings per share


37,957


38,361


38,293


38,146










Basic earnings per share


$         0.41


$         0.28


$         1.74


$         1.94










Diluted earnings per share


$         0.41


$         0.27


$         1.72


$         1.92










Dividends per share


$         0.10


$         0.10


$         0.30


$         0.30










Summary Segment Data:









Net sales:









Plumbing & Refrigeration Segment


$    297,913


$    325,776


$    944,955


$  1,053,434

OEM Segment


221,468


266,560


760,995


899,982

Elimination of intersegment sales


(5,216)


(6,527)


(20,018)


(27,003)










Net sales


$    514,165


$    585,809


$  1,685,932


$  1,926,413










Operating income:









Plumbing & Refrigeration Segment


$      17,593


$      13,884


$      68,456


$      68,357

OEM Segment


14,421


12,172


54,203


60,634

Unallocated expenses


(7,557)


(7,192)


(21,498)


(10,338)










Operating income


$      24,457


$      18,864


$    101,161


$    118,653










 

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


















September 29,


December 31,



2012


2011



(Unaudited)

ASSETS





Cash and cash equivalents


$       165,755


$       514,162

Accounts receivable, net


261,015


250,027

Inventories


224,358


219,193

Other current assets


38,381


43,317






    Total current assets


689,509


1,026,699






Property, plant, and equipment, net


228,860


203,744

Other assets


121,047


117,161








$    1,039,416


$    1,347,604
















LIABILITIES AND STOCKHOLDERS' EQUITY




Current portion of debt


$         12,570


$         41,265

Accounts payable


65,513


65,545

Other current liabilities


133,027


106,434






    Total current liabilities


211,110


213,244






Long-term debt


207,550


156,476

Pension and postretirement liabilities


53,246


54,244

Environmental reserves


22,811


22,892

Deferred income taxes


18,604


14,856

Other noncurrent liabilities


985


1,130






    Total liabilities


514,306


462,842






Total Mueller Industries, Inc. stockholders' equity


495,047


855,688

Noncontrolling interest


30,063


29,074






    Total equity


525,110


884,762








$    1,039,416


$    1,347,604








MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)












For the Nine Months Ended





September 29,


October 1,





2012


2011





(Unaudited)

Operating activities:





Consolidated net income


$         66,927


$         74,014

Reconciliation of consolidated net income to net cash provided by






operating activities:







Depreciation and amortization


23,713


27,844



Stock-based compensation expense


3,042


2,583



Loss (gain) on disposal of properties


175


(99)



Insurance settlement


(1,500)


-



Insurance proceeds - noncapital related


14,250


10,000



Deferred income taxes


2,319


(2,785)



Income tax benefit from exercise of stock options


(517)


(867)



Changes in assets and liabilities, net of businesses acquired:







Receivables


(15,779)


(38,480)



Inventories


585


(10,432)



Other assets


(8,434)


(9,263)



Current liabilities


(21,120)


13,703



Other liabilities


7,834


1,907



Other, net


1,271


759








Net cash provided by operating activities


72,766


68,884








Investing activities:





Capital expenditures


(43,841)


(13,128)

Acquisition of businesses


(11,503)


(6,882)

Insurance proceeds for property and equipment


42,250


-

Proceeds from sales of properties


502


1,745

Net withdrawals from (deposits into) restricted cash balances


6,908


(5,120)








Net cash used in investing activities


(5,684)


(23,385)








Financing activities:





Dividends paid


(11,415)


(11,345)

Debt issuance costs


-


(1,942)

Net cash (used) received to settle stock-based awards


(740)


3,674

Repurchase of common stock


(427,448)


-

Income tax benefit from exercise of stock options


517


867

Repayments of long-term debt


(148,926)


(1,902)

Issuance of long-term debt


200,000


-

(Repayments) issuance of debt by joint venture, net


(28,955)


19,316








Net cash (used in) provided by financing activities


(416,967)


8,668








Effect of exchange rate changes on cash


1,478


547








(Decrease) increase in cash and cash equivalents


(348,407)


54,714








Cash and cash equivalents at the beginning of the period


514,162


394,139








Cash and cash equivalents at the end of the period


$       165,755


$       448,853








     














MUELLER INDUSTRIES, INC.


PRO FORMA CONDENSED STATEMENTS OF INCOME


QUARTER ENDED SEPTEMBER 29, 2012


(In thousands, except per share data)















The following table illustrates the effects of the stock repurchase transaction (10,422,859 shares at $41.00 per share) on reported earnings as if it had occurred on the first day of the third quarter of 2012.  Earnings including the effects of the stock repurchase transaction is a measurement not derived in accordance with generally accepted accounting principles.  Including the effects of the stock repurchase transaction is useful as it measures the effects of increased borrowings and decreased available cash on hand to the operating results, and measures the impact of the decreased share count in the weighted average shares computation.  These adjustments are helpful in illustrating the impact of these transactions on the reported earnings and diluted earnings per share.  The reconciliation of pro forma earnings including the effects of the stock repurchase transaction to net income as reported is as follows:


















For the Three Months Ended September 29, 2012
























Effect of











As


Stock











Reported


Repurchase


Pro Forma









(Unaudited)




















Operating income


$  24,457


$                 -


$        24,457




















Interest expense


(353)


(1,731)

(a)

(2,084)







Other income, net


219


(121)

(b)

98




















Income before income taxes


24,323


(1,852)


22,471







Income tax expense


(8,753)


648


(8,105)




















Consolidated net income


15,570


(1,204)


14,366




















Net income attributable to noncontrolling interest


(59)


-


(59)




















Net income attributable to Mueller Industries, Inc.


$  15,511


$         (1,204)


$        14,307




















Weighted average shares













for basic earnings per share


37,505




27,655







Effect of dilutive stock-based awards


452




452




















Adjusted weighted average shares













for diluted earnings per share


37,957




28,107

































Diluted earnings per share


$      0.41




$            0.51




















(a) Represents the estimated increase in interest expense for the quarter, assuming an all-in borrowing rate of 3.75% applied to the amount borrowed to fund the stock repurchase transaction.
















(b) Represents the estimated decrease in interest income for the quarter, assuming a weighted average return of 0.21% on the amount of the cash portion of the repurchase transaction.





























SOURCE Mueller Industries, Inc.




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