Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2008 Earnings
MEMPHIS, Tenn., Feb. 5 /PRNewswire-FirstCall/ -- Harvey L. Karp, Chairman of Mueller Industries, Inc. (NYSE: MLI), announced today that Mueller's net income for the fiscal year ended December 27, 2008 was $80.8 million, or $2.17 per diluted share, which compares with $115.5 million, or $3.10 per diluted share, for 2007. Net sales for 2008 were $2.56 billion compared with $2.70 billion in 2007.
For the fourth quarter of 2008, the Company's net income was $7.8 million, or 21 cents per diluted share, on net sales of $435.4 million. This compares with net income of $28.8 million, or 78 cents per diluted share, on net sales of $621.7 million for the fourth quarter of 2007. During the fourth quarter of 2008, the Company recognized several special items that, in aggregate, decreased net income by $2.0 million, or 5 cents per diluted share. The special items are described below.
Financial and Operating Highlights
Mr. Karp said:
-- "The reduction in net sales was primarily due to lower unit shipments as well as the lower average cost of copper, the Company's principal raw material, which is generally passed through to customers by changes in selling prices. The price of copper was volatile during 2008 and declined substantially during the fourth quarter; the Comex average price of copper during the fourth quarter was $1.75 per pound in 2008 versus $3.25 in 2007.
-- "Cash provided by operating activities was $180.9 million in 2008 compared with $185.8 million during 2007.
-- "For the full year, our Plumbing & Refrigeration segment posted operating earnings of $106.8 million on net sales of $1.40 billion which compares with operating earnings of $178.4 million on net sales of $1.57 billion in 2007. Operating earnings decreased primarily due to lower shipment volumes and higher per unit conversion costs on lower production volumes.
-- "Our OEM segment posted operating earnings of $45.3 million during the year on net sales of $1.18 billion, which compares with operating earnings of $38.2 million on net sales of $1.14 billion for 2007. Weak demand in the later part of the year reduced shipments.
-- "Our current ratio remains strong at 3.7 to 1 and our working capital is $553.2 million, of which over $275 million is cash on hand.
-- "As of year end, our financial leverage was modest with a debt to total capitalization ratio of 20.7 percent. During 2008, we purchased approximately $149.0 million of our outstanding 6% Subordinated Debentures at discounts off of face value. Gains attributable to these repurchases totaled $19.1 million in the fourth quarter and $21.6 million for the year.
-- "The special items referred to above are: (i) an impairment charge totaling $18.0 million to reduce the carrying value of goodwill, (ii) additional environmental provisions of $15.0 million pertaining to estimated environmental settlements and obligations, (iii) a nontaxable gain of $19.1 million related to the repurchase of debentures, (iv) LIFO income of $14.9 million due to reduction of the quantities of LIFO inventory, and (v) a charge of $4.9 million to write-down certain inventories to the lower-of-cost-or- market that resulted from falling copper and other metal prices. The goodwill impairment is an estimate that will be adjusted after valuation procedures, including third party valuations, are completed as required by generally accepted accounting principles.
-- "Our return on average equity was 11.5 percent for 2008 which compares with 17.8 percent for 2007.
-- "Total stockholders' equity was $700.7 million which equates to a book value per share of $18.86 of which $7.51 per share is in cash. Stockholders' equity was reduced by the impact of foreign currency translations of our operations based in Mexico and the United Kingdom as their respective currencies declined in value relative to the U.S. dollar during the quarter.
-- "Capital expenditures during 2008 totaled $22.3 million and capital expenditures in 2009 are expected to be between $20 million and $25 million.
-- "Late in the year, our European copper tube operation was damaged by fire. Production was curtailed for approximately four weeks to make the necessary temporary repairs. Certain production equipment and portions of the building structures were extensively damaged requiring further assessment which is underway; rehabilitation alternatives are also being evaluated. The total value of the loss, including business interruption, cannot be determined at this time but is expected to be covered by our property insurance."
Business Outlook for 2009
Regarding the outlook for 2009, Mr. Karp said, "Mueller's operating results for 2008 were gratifying, considering the state of the U.S. economy and the decline in global markets. We are now in the second year of a recession which appears likely to be the longest downturn since World War II.
"Mueller's strategy for 2009 is to promptly readjust our operations to the on-going flow of business. We see many opportunities to improve our operations and reduce costs. It is our objective to emerge from the current economic malaise a stronger, more efficient and lower-cost competitor.
"Our strong balance sheet will enable us to fund our capital improvement programs from internal sources. We are also investigating acquisition opportunities which are directly related to our core business capabilities. We have always been cautious in evaluating acquisition candidates, and we will continue to do so."
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
December 27, December 29, December 27, December 29,
2008 2007 2008 2007
(Unaudited) (Unaudited)
Net sales $435,373 $621,734 $2,558,448 $2,697,845
Cost of goods sold 371,648 523,381 2,233,123 2,324,924
Depreciation and
amortization 10,828 10,299 44,345 44,153
Selling, general, and
administrative expense 28,301 33,140 136,884 143,284
Copper litigation
settlement - (28) - (8,893)
Impairment charge 18,000 2,756 18,000 2,756
Operating income 6,596 52,186 126,096 191,621
Interest expense (3,295) (5,504) (19,050) (22,071)
Other income, net 4,813 2,793 12,100 13,731
Income before income
taxes 8,114 49,475 119,146 183,281
Income tax expense (340) (20,635) (38,332) (67,806)
Net income $7,774 $28,840 $80,814 $115,475
Weighted average shares
for basic earnings per
share 37,142 37,079 37,123 37,060
Effect of dilutive stock
options 28 95 186 163
Adjusted weighted average
shares for diluted
earnings per share 37,170 37,174 37,309 37,223
Basic earnings per share $0.21 $0.78 $2.18 $3.12
Diluted earnings per
share $0.21 $0.78 $2.17 $3.10
Summary Segment Data:
Net sales:
Plumbing &
Refrigeration
segment $241,069 $349,228 $1,400,682 $1,572,565
OEM segment 197,227 276,249 1,176,892 1,144,302
Elimination of
intersegment
sales (2,923) (3,743) (19,126) (19,022)
Net sales $435,373 $621,734 $2,558,448 $2,697,845
Operating income(loss):
Plumbing &
Refrigeration
segment $20,882 $47,507 $106,785 $178,367
OEM segment (9,902) 9,113 45,278 38,215
Unallocated expenses (4,384) (4,434) (25,967) (24,961)
Operating income $6,596 $52,186 $126,096 $191,621
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 27, December 29,
2008 2007
(Unaudited)
ASSETS
Cash and cash equivalents $278,860 $308,618
Accounts receivable, net 219,035 323,003
Inventories 210,609 269,032
Other current assets 46,322 39,694
Total current assets 754,826 940,347
Property, plant, and equipment, net 276,927 308,383
Other assets 151,160 200,474
$1,182,913 $1,449,204
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current portion of long-term debt $24,184 $72,743
Accounts payable 63,732 140,497
Other current liabilities 113,668 121,813
Total current liabilities 201,584 335,053
Long-term debt 158,726 281,738
Pension and postretirement liabilities 38,452 36,071
Environmental reserves 23,248 8,897
Deferred income taxes 33,940 52,156
Other noncurrent liabilities 1,698 2,029
Total liabilities 457,648 715,944
Minority interest in subsidiary 24,582 22,765
Stockholders' equity 700,683 710,495
$1,182,913 $1,449,204
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended
December 27, December 29,
2008 2007
(Unaudited)
Operating activities:
Net income $80,814 $115,475
Reconciliation of net income to net
cash provided by operating activities:
Depreciation and amortization 44,884 44,477
Gain on early retirement of debt (21,575) -
Deferred income taxes (4,465) 3,094
Stock-based compensation expense 2,915 2,737
Loss (gain) on disposal of properties 598 (2,468)
Minority interest in subsidiary, net of
dividends received 1,796 (781)
Income tax benefit from exercise of stock
options (92) (73)
Impairment charge 18,000 2,756
Changes in assets and liabilities, net of
business acquired:
Receivables 91,705 (8,114)
Inventories 44,591 20,411
Other assets (7,855) (4,120)
Current liabilities (84,584) 12,704
Other liabilities 12,741 1,809
Other, net 1,459 (2,063)
Net cash provided by operating activities 180,932 185,844
Investing activities:
Capital expenditures (22,261) (29,870)
Proceeds from sales of properties 81 3,809
Business acquired, net of cash received - (32,243)
Net deposits into restricted cash balances (6,117) (4,194)
Net cash used in investing activities (28,297) (62,498)
Financing activities:
Repayments of long-term debt (126,877) (18,765)
Dividends paid (14,847) (14,825)
Issuance of shares under incentive stock
option plans from treasury 1,167 1,124
(Repayment) issuance of debt by joint
venture, net (25,564) 16,635
Acquisition of treasury stock (32) (54)
Income tax benefit from exercise of
stock options 92 73
Net cash used in financing activities (166,061) (15,812)
Effect of exchange rate changes on cash (16,332) 613
(Decrease) increase in cash and cash
equivalents (29,758) 108,147
Cash and cash equivalents at the beginning
of the year 308,618 200,471
Cash and cash equivalents at the end of the
year $278,860 $308,618
SOURCE Mueller Industries, Inc.
Released February 5, 2009