Mueller Industries, Inc. Reports Third Quarter Results

23 Oct, 2012, 07:00 ET from Mueller Industries, Inc.

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. 

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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.