TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES Mueller's sales and earnings in the second quarter of 2001 declined from the record quarter of a year ago. However, it appears that the effect of the overall economic slowdown lessened in the second quarter of this year as operating margins increased over the previous quarter. Net earnings were $20.8 million, or 56 cents per diluted share, compared with 78 cents per diluted share for the same quarter last year. Also, net sales for the second quarter were $286.0 million compared with net sales of $337.5 million for the second quarter of 2000. We shipped 186 million pounds of product (an increase of six percent over the first quarter of this year) versus 216 million pounds in the second quarter of 2000. Year-to-date, net income was $36.2 million on net sales of $562.6 million compared with net income of $56.3 million on net sales of $646.8 million for the first half of 2000. Earnings per diluted share for the first six months of 2001 were 97 cents compared with $1.46 reported a year ago. Mueller ended the quarter with a strong balance sheet and with excellent cash flow. Year-to-date, Mueller has generated $73 million in cash from operations and ended the quarter with $140 million in cash on hand. Our debt-to-total capitalization is a low 13.3 percent and net of cash, our debt is zero. We are pleased to note that for the second consecutive year the "American Metal Market", a metals industry daily newspaper, ranked Mueller first in terms of return on total assets in its tenth annual ranking of North American metals companies. At 10.18 percent, Mueller's performance was almost 2 percentage points better than the company ranked second, and 2.5 percentage points better than the company ranked third. Through the first half of 2001, Mueller invested $23 million in capital projects, primarily related to our copper tube and brass rod mill operations, which should allow us to further reduce costs and improve yields. Our European modernization project is on schedule and most major components of equipment are on site. We anticipate commissioning the new equipment and transitioning production during the second half of 2001. We are cautiously optimistic that the improvement in our business during the second quarter will continue during the second half of the year. Housing starts are currently at a seasonally adjusted annual rate of 1.62 million units. Mortgage rates remain attractive and demand for housing continues to be strong while inventories of homes available for sale are low. Although persistent job market concerns may soften demand, the influence of low mortgage rates may offset such concerns. In addition, many analysts predict overall economic growth to pick up in the second half of the year spurred by the cumulative effect of the Federal Reserve's interest rate cuts and the tax rebate that will be flowing to consumers by the third quarter. -1- Our Annual Stockholders' Meeting was held at Mueller's headquarters in Memphis, Tennessee on May 10, 2001. The stockholders reelected Messrs. Gladstein, Hodes, Karp, Manolovici, and O'Hagan as directors and approved the appointment of Ernst & Young LLP as our independent auditors. 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 July 17, 2001 -2- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Quarter Ended June 30, 2001 June 24, 2000 Net sales $ 286,021 $ 337,494 Cost of goods sold 219,090 256,704 Depreciation and amortization 10,505 9,239 Selling, general, and administrative expense 22,761 24,820 ---------- ---------- Operating income 33,665 46,731 Interest expense (680) (2,296) Environmental reserves (856) - Other income, net 1,369 2,731 ---------- ---------- Income before income taxes 33,498 47,166 Income tax expense (12,723) (17,404) ---------- ---------- Net income $ 20,775 $ 29,762 ========== ========== Earnings per share Basic: Weighted average shares outstanding 33,399 34,464 ========== ========== Basic earnings per share $ 0.62 $ 0.86 ========== ========== Diluted: Weighted average shares outstanding plus assumed conversions 37,281 38,319 ========== ========== Diluted earnings per share $ 0.56 $ 0.78 ========== ==========
-3- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Six Months Ended June 30, 2001 June 24, 2000 Net sales $ 562,599 $ 646,830 Cost of goods sold 437,206 490,204 Depreciation and amortization 21,032 18,281 Selling, general, and administrative expense 45,317 49,110 ---------- ---------- Operating income 59,044 89,235 Interest expense (2,104) (4,923) Environmental reserves (1,617) - Other income, net 3,135 4,955 ---------- ---------- Income before income taxes 58,458 89,267 Income tax expense (22,214) (32,939) ---------- ---------- Net income $ 36,244 $ 56,328 ========== ========== Earnings per share Basic: Weighted average shares outstanding 33,383 34,654 ========== ========== Basic earnings per share $ 1.09 $ 1.63 ========== ========== Diluted: Weighted average shares outstanding plus assumed conversions 37,207 38,536 ========== ========== Diluted earnings per share $ 0.97 $ 1.46 ========== ==========
-4- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
June 30, 2001 December 30, 2000 ASSETS Cash and cash equivalents $ 139,729 $ 100,268 Accounts receivable, net 173,957 152,157 Inventories 118,641 142,325 Other current assets 15,355 10,421 ---------- ---------- Total current assets 447,682 405,171 Property, plant, and equipment, net 378,865 379,885 Other assets 128,794 125,220 ---------- ---------- $ 955,341 $ 910,276 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $ 4,620 $ 5,909 Accounts payable 45,724 43,733 Other current liabilities 86,423 68,207 ---------- ---------- Total current liabilities 136,767 117,849 Long-term debt 93,916 100,975 Other noncurrent liabilities 80,455 77,050 ---------- ---------- Total liabilities 311,138 295,874 Minority interest in subsidiaries 297 297 Stockholders' equity 643,906 614,105 ---------- ---------- $ 955,341 $ 910,276 ========== ==========
-5- NORTH AMERICAN METAL COMPANIES RANKED BY RETURN ON TOTAL ASSETS
Return 2000 2000 2000 on Assets Company Net Profit Total Return Rank Name (Loss) Assets on Assets 1 Mueller Industries Inc. 92,690,000 910,276,000 10.18 2 Nucor Corp. 310,907,988 3,721,787,719 8.35 3 Falconbridge Ltd. 247,958,211 3,238,569,634 7.66 4 Olin Corp. 81,000,000 1,123,000,000 7.21 5 Barrick Gold Corp. 301,000,000 4,535,000,000 6.64 6 Reliance Steel & Aluminum Co. 62,319,000 997,243,000 6.25 7 California Steel Industries Inc. 34,845,000 602,158,432 5.79 8 Cominco Ltd. 114,461,000 1,995,661,200 5.74 9 Worthington Industries Inc. 94,151,000 1,673,873,000 5.62 10 Quanex Corp. 35,400,000 645,859,000 5.48 11 Dofasco Inc. 127,051,710 2,372,439,880 5.36 12 Engelhard Corp. 168,296,000 3,166,832,000 5.31 13 Earle M. Jorgensen Co. 24,000,000 464,000,000 5.17 14 Steel Dynamics Inc. 53,795,000 1,067,074,000 5.04 15 Allegheny Technologies Inc. 132,500,000 2,776,200,000 4.77 16 Alcoa Inc. 1,484,000,000 31,691,000,000 4.68 17 Grupo Mexico SA de CV 309,158,000 6,892,480,000 4.49 18 Intermet Corp. 40,900,000 919,000,000 4.45 19 Inco Ltd. 400,000,000 9,676,000,000 4.13 20 Commercial Metals Co. 46,255,000 1,172,862,000 3.94 21 Ipsco Inc. 57,700,000 1,622,700,000 3.56 22 Russel Metals Inc. 16,091,870 467,577,898 3.44 23 Alcan Inc. 618,000,000 18,407,000,000 3.36 24 Carpenter Technology Corp. 53,300,000 1,745,900,000 3.05 25 Co-Steel Inc. 25,936,189 939,009,765 2.76 Reproduced with permission from "American Metal Market". Copyright 2001 American Metal Market LLC, a division of Metal Bulletin PLC. All rights reserved.
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