TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES Mueller's earnings in the third quarter of 2000 declined due to increased raw material costs, which we were unable to recover in the selling prices of our products. Net income for the third quarter was $19.3 million, or 50 cents per diluted share, compared with $26.3 million, or 66 cents per diluted share, for the same quarter of 1999. Net sales for the third quarter totaled $296.0 million, an increase of 2.8 percent over net sales of $287.9 million for the comparable 1999 period. For the nine months year-to-date, net income was $75.6 million compared with $73.5 million during the same period in 1999. On a pre-tax basis, year-to-date earnings increased more than 12 percent to $119.9 million, but higher effective tax rates (36.9 percent versus 31.2 percent) offset pre-tax earnings improvement. Earnings per diluted share for the first nine months of 2000 were $1.97, an increase of 6.5 percent over the $1.85 reported a year ago. Year-to-date, net sales were $926.9 million, an increase of 6.7 percent over net sales of $869.1 million in the 1999 period. Mueller ended the quarter in excellent financial shape with $135 million in cash on hand and a very comfortable 17.6 percent debt-to-total- capitalization ratio. During the third quarter, our manufacturing operations performed well. Also, our capital investment programs are on schedule and on budget. In Wynne, Arkansas, we have installed the equipment and systems specified in our tube mill modernization project. The transition to this new equipment should produce benefits in the fourth quarter and beyond. Our European copper tube mill modernization program is scheduled for completion by the end of 2001, and by early 2001, a horizontal continuous caster should be operational at our brass rod mill in Port Huron, Michigan. Demand for our products, which is largely tied to housing and construction markets, continues to be good despite reports that new home starts may decline by 6 to 8 percent from the torrid pace of 1999. On the other hand, 30-year mortgage rates have recently declined from a high of 8.64 percent in May to 7.83 percent currently . We welcome lower rates, as past experience shows a strong correlation between mortgage rates and the vibrancy of Mueller's business. Through early October 2000, Mueller acquired 2.1 million shares of its common stock under a four-million-share repurchase authorization. Our Board of Directors has expanded and extended this authorization to repurchase a total of ten million shares through October 2001. -1- Over the past month, the stock market has been particularly volatile, and Mueller's stock price has declined along with many others. However, the vagaries of the stock market have not altered our Company's business philosophy or objectives. We are committed to being a world-class manufacturing company which provides our customers with outstanding service. We relentlessly focus on enhancing intrinsic value which we are confident will benefit our customers, stockholders, and employees. Sincerely, /S/HARVEY L. KARP /S/WILLIAM D. O'HAGAN Harvey L. Karp William D. O'Hagan Chairman of the Board President and Chief Executive Officer October 10, 2000 -2- HISTORICAL ANALYSIS (1994-2000) OF QUARTERLY EARNINGS BEFORE TAX AND EARNINGS PER SHARE Mueller's earnings have grown substantially over the past six years. In the third quarter of 2000, our Company earned $30.6 million before tax, compared with $12.0 million for the same quarter of 1994, an increase of 155 percent. Diluted earnings per share have risen 127 percent, from 22 cents to 50 cents. [GRAPH] THIRD QUARTER DILUTED EARNINGS PER SHARE 1994 $0.22 1995 0.30 1996 0.41 1997 0.46 1998 0.47 1999 0.66 2000 0.50