Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2006 Earnings
MEMPHIS, Tenn., Feb. 6 /PRNewswire-FirstCall/ -- Harvey L. Karp, Chairman of Mueller Industries, Inc. (NYSE: MLI), announced today that Mueller's income from continuing operations for fiscal 2006 was $148.9 million, or $4.00 per diluted share, which compares with $89.2 million, or $2.40 per diluted share, for 2005. Net sales for 2006 were $2.51 billion compared with $1.73 billion in 2005. The increase in net sales is primarily due to the increased cost of copper, the Company's principal raw material, which is generally passed through to customers by changes in selling prices.
For the fourth quarter of 2006, the Company's net income was $5.2 million, or 14 cents per diluted share, on net sales of $544.2 million. This compares with net income of $35.8 million, or 97 cents per diluted share, on net sales of $483.6 million for the quarter ended December 31, 2005. The fourth quarter of 2006 includes a pre-tax charge of approximately $14.2 million (or 26 cents per diluted share after tax) to write-down inventories to the lower-of-cost- or-market that resulted from falling copper prices. Additionally, the fourth quarter results were adversely impacted by lower unit volumes due to the much anticipated "correction" in the residential construction market.
Financial and Operating Highlights
Mr. Karp said:
* "The COMEX average price of copper was $3.19 per pound in the fourth
quarter of 2006 and closed the year at $2.85 per pound. During 2006,
copper had reached the price of $4.08 per pound, which is a historic
high.
* "Our current ratio remains strong at 3.0 to 1 and our working capital is
$520.7 million, of which $200.5 million is cash on hand.
* "Cash provided by operating activities was $64.5 million in 2006
compared with $106.1 million during 2005. Additional investments in
accounts receivable and inventories were required because of higher raw
material costs.
* "For the full year, our Plumbing & Refrigeration segment posted
operating earnings of $197.4 million on net sales of $1.72 billion which
compares with operating earnings of $125.5 million on net sales of $1.28
billion in 2005. During the fourth quarter of 2006, market conditions
for our core product lines remained challenging; unit volumes,
particularly copper tube, were down substantially compared with the
fourth quarter of 2005. Operating margins were curtailed during the
fourth quarter due to weakness in demand, price reductions, and higher
unit costs on lower production volume.
* "Our OEM segment posted operating earnings of $44.8 million during the
year on net sales of $835.3 million, which compares with operating
earnings of $27.0 million on net sales of $460.3 million for 2005.
Included in the OEM segment is our Chinese joint venture which reported
total operating income of $6.4 million for 2006.
* "Of the $14.2 million inventory write-down, $11.2 million occurred in
Europe where FIFO inventory accounting is employed. In the U.S., LIFO
inventory accounting is primarily used for the cost of the copper
component in inventory, which moderates swings in inventory valuations.
* "Capital expenditures during 2006 totaled $41.2 million of which $17.9
million relates to our Chinese joint venture."
Business Outlook for 2007
Regarding the outlook for 2007, Mr. Karp said, "After more than five years of vigorous growth, the housing industry is experiencing the widely predicted 'correction.' The 'correction' is underway but may have already bottomed-out.
"We note that the inventory of unsold new homes is declining, while building permits, the key indicator of future business, increased at the end of 2006. Also, mortgage rates are near historical lows and demographic factors are positive for the housing market.
"We expect the commercial and retail sectors of Mueller's business will perform well during the year."
Mueller Industries, Inc. is a leading manufacturer of copper tube and fittings; brass and copper alloy rod, bar and shapes; aluminum and brass forgings; aluminum and copper impact extrusions; plastic fittings and valves; refrigeration valves and fittings; and fabricated tubular products. Mueller's operations are located throughout the United States and in Canada, Mexico, Great Britain, and China. Mueller's business is importantly linked to: (1) the construction of new homes; (2) the improvement and reconditioning of existing homes and structures; and (3) the commercial construction market which includes, office buildings, factories, hotels, hospitals, etc.
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 "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 Year Ended
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited)
Net sales $544,212 $483,624 $2,510,912 $1,729,923
Cost of goods sold 486,383 389,874 2,109,436 1,430,075
Gross profit 57,829 93,750 401,476 299,848
Depreciation and amortization 10,586 10,125 41,619 40,696
Selling, general, and
administrative expense 31,537 34,606 140,972 127,394
Operating income 15,706 49,019 218,885 131,758
Interest expense (5,316) (4,820) (20,477) (19,550)
Other income, net 1,773 1,809 5,171 11,997
Income from continuing
operations before
income taxes 12,163 46,008 203,579 124,205
Income tax expense (6,988) (10,197) (54,710) (34,987)
Income from continuing
operations 5,175 35,811 148,869 89,218
Gain from discontinued operations,
net of income taxes - - - 3,324
Net income $5,175 $35,811 $148,869 $92,542
Earnings per share:
Basic earnings per share:
Weighted average shares
outstanding 37,016 36,634 36,893 36,590
From continuing
operations $0.14 $0.98 $4.04 $2.44
From discontinued
operations - - - 0.09
Basic earnings per share $0.14 $0.98 $4.04 $2.53
Diluted earnings per
share:
Weighted average shares
outstanding plus
assumed conversions 37,236 37,080 37,246 37,103
From continuing
operations $0.14 $0.97 $4.00 $2.40
From discontinued
operations - - - 0.09
Diluted earnings per
share $0.14 $0.97 $4.00 $2.49
Summary Segment Data:
Net sales:
Plumbing & Refrigeration
segment $352,253 $362,849 $1,716,613 $1,281,688
OEM segment 206,867 123,693 835,339 460,301
Elimination of intersegment
sales (14,908) (2,918) (41,040) (12,066)
Net sales $544,212 $483,624 $2,510,912 $1,729,923
Operating income:
Plumbing & Refrigeration
segment $18,018 $46,770 $197,402 $125,502
OEM segment 2,438 7,445 44,764 26,985
Unallocated expenses (4,750) (5,196) (23,281) (20,729)
Operating income $15,706 $49,019 $218,885 $131,758
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 30, December 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents $200,471 $129,685
Accounts receivable, net 281,679 260,685
Inventories 258,647 196,987
Other current assets 35,397 36,919
Total current assets 776,194 624,276
Property, plant, and equipment, net 315,064 307,046
Other assets 177,649 185,606
$1,268,907 $1,116,928
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $35,998 $4,120
Accounts payable 96,095 124,216
Other current liabilities 123,426 135,346
Total current liabilities 255,519 263,682
Long-term debt 308,154 312,070
Pension and postretirement
liabilities 36,599 35,236
Environmental reserves 8,907 9,073
Deferred income taxes 46,408 63,944
Other noncurrent liabilities 2,206 3,078
Total liabilities 657,793 687,083
Minority interest in subsidiaries 22,300 6,937
Stockholders' equity 588,814 422,908
$1,268,907 $1,116,928
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended
December 30, December 31,
2006 2005
(Unaudited)
Operating activities:
Net income from continuing operations $148,869 $89,218
Reconciliation of net income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 41,855 40,858
Deferred income taxes (19,339) (9,556)
Share-based compensation expense 2,789 -
Loss (gain) on disposal of properties 2,620 (3,665)
Minority interest in subsidiaries 2,610 9
Gain on sale of equity investment (1,876) -
Provision for doubtful accounts 1,109 1,911
Income tax benefit from exercise
of stock options (1,065) 991
Equity in income of
unconsolidated subsidiary (964) (4,480)
Gain on early retirement of debt (97) -
Changes in assets and liabilities,
net of business acquired:
Receivables (15,459) (64,905)
Inventories (56,786) (5,979)
Other assets 1,449 1,764
Current liabilities (41,357) 66,435
Other liabilities (2,578) (5,894)
Other, net 2,759 (590)
Net cash provided by operating activities 64,539 106,117
Investing activities:
Capital expenditures (41,206) (18,449)
Proceeds from sales of properties and
equity investment 23,528 10,112
Business acquired, net of cash received 3,632 (6,937)
Net cash used in investing activities (14,046) (15,274)
Financing activities:
Issuance of long-term debt 28,759 -
Dividends paid (14,775) (14,647)
Proceeds from stock options exercised 7,701 4,819
Repayments of long-term debt (2,059) (1,090)
Acquisition of treasury stock (1,092) (551)
Income tax benefit from exercise of
stock options 1,065 -
Net cash provided by (used in)
financing activities 19,599 (11,469)
Effect of exchange rate changes on cash 694 (462)
Net cash provided by operating activities
of discontinued operations - 3,324
Increase in cash and cash equivalents 70,786 82,236
Cash and cash equivalents at the
beginning of the period 129,685 47,449
Cash and cash equivalents at the end
of the period $200,471 $129,685
SOURCE Mueller Industries, Inc.
Released February 6, 2007