TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
We are gratified to report that Mueller's pretax earnings in the third
quarter of 2001 increased from the same quarter the year before. Although
the increase was small, it was significant, since the nation's economy
clearly slowed during the quarter. Despite the horrific September 11th
terrorist attacks on our country, our Company and its employees carried on.
We recognize that Mueller manufactures basic infrastructure products needed
for rebuilding and construction, and you can be assured Mueller will be there
when needed.
Net earnings were $19.0 million, or 51 cents per diluted share, in the
third quarter of 2001 compared with $19.3 million, or 50 cents per diluted
share, for the same quarter last year. The effective tax rate for the
quarter was 37.9 percent versus 36.9 percent for the third quarter of 2000.
Also, average diluted shares outstanding were 37.3 million versus 38.3
million for the third quarter last year.
Net sales for the third quarter were $253.4 million compared with net
sales of $304.0 million for the third quarter of 2000. Our net sales were
affected by the decline in the price of copper which averaged 67 cents per
pound in the quarter versus 87 cents per pound in the same quarter last year.
Also affecting sales was the total pounds of product shipped, which declined
by 10 percent from the year before.
The sales decline led to a contraction in margins in the Industrial
Products Division; however, margins in the Standard Products Division
improved, largely due to production efficiencies and reduced raw material
costs.
Year-to-date, net income was $55.2 million on net sales of $816.0
million compared with net income of $75.6 million on net sales of $950.8
million for the first three quarters of 2000. Earnings per diluted share for
the first nine months of 2001 were $1.48 compared with $1.97 reported a year
ago.
Our European copper tube mill project is nearing completion, both on
time and under budget. The objective of this investment was to reduce costs
while improving productivity. We believe we will commence reaping these
benefits in the fourth quarter of 2001.
With the completion of our European modernization, we are confident that
all of our manufacturing plants are highly competitive and world class. This
means that over the next several years, our capital investment programs will
focus on maintenance and refinements.
The housing and construction industry over the past year has been solid
and resilient. Housing starts are currently at a seasonally adjusted annual
rate of 1.53 million units. And, mortgage rates are very attractive, having
declined along with the nine interest rate cuts by the Federal Reserve Bank.
Currently, 30-year mortgage rates are 6.19 percent, compared with 7.56
percent one year ago. Moreover, inventories of new homes available for sale
are low, so there is very little overhang of unsold homes.
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These factors are clearly positive for our business. The countervailing
factors are the erosion in consumer confidence and the uncertain state of the
economy.
Obviously, reading the economic tea leaves is a dubious undertaking, but
one thing is clear - Americans have found that investing in their home is both
personally satisfying and financially rewarding. We believe this will
continue to be true, and that Mueller will benefit from this long-term trend.
Mueller is financially strong, with no net debt and excellent cash flow.
We are in a position to take advantage of opportunities for growth in the
years ahead.
Sincerely,
/S/HARVEY L. KARP /S/WILLAIM D. O'HAGAN
Harvey L. Karp William D. O'Hagan
Chairman of the Board President and Chief Executive Officer
October 16, 2001
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
September 29, 2001 September 23, 2000
Net sales $ 253,438 $ 304,017
Cost of goods sold 190,809 242,101
Depreciation and amortization 10,683 9,238
Selling, general, and
administrative expense 21,073 22,437
---------- ----------
Operating income 30,873 30,241
Interest expense (660) (2,207)
Environmental reserves (1,349) -
Other income, net 1,755 2,554
---------- ----------
Income before income taxes 30,619 30,588
Income tax expense (11,618) (11,281)
---------- ----------
Net income $ 19,001 $ 19,307
========== ==========
Earnings per share
Basic:
Weighted average shares outstanding 33,424 34,439
========== ==========
Basic earnings per share $ 0.57 $ 0.56
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 37,298 38,275
========== ==========
Diluted earnings per share $ 0.51 $ 0.50
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENCED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Nine Months Ended
September 29, 2001 September 23, 2000
Net sales $ 816,037 $ 950,847
Cost of goods sold 628,015 732,305
Depreciation and amortization 31,715 27,519
Selling, general, and
administrative expense 66,390 71,547
---------- ----------
Operating income 89,917 119,476
Interest expense (2,764) (7,130)
Environmental reserves (2,966) -
Other income, net 4,890 7,509
---------- ----------
Income before income taxes 89,077 119,855
Income tax expense (33,832) (44,220)
---------- ----------
Net income $ 55,245 $ 75,635
========== ==========
Earnings per share
Basic:
Weighted average shares outstanding 33,396 34,582
========== ==========
Basic earnings per share $ 1.65 $ 2.19
========== ==========
Diluted:
Weighted average shares outstanding
plus assumed conversions 37,237 38,449
========== ==========
Diluted earnings per share $ 1.48 $ 1.97
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENCED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 29, 2001 December 30, 2000
ASSETS
Cash and cash equivalents $ 133,520 $ 100,268
Accounts receivable, net 156,393 152,157
Inventories 128,155 142,325
Other current assets 13,695 10,421
---------- ----------
Total current assets 431,763 405,171
Property, plant and equipment, net 381,428 379,885
Other assets 126,164 125,220
---------- ----------
$ 939,355 $ 910,276
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 4,120 $ 5,909
Accounts payable 42,436 43,733
Other current liabilities 90,540 68,207
---------- ----------
Total current liabilities 137,096 117,849
Long-term debt 47,884 100,975
Other noncurrent liabilities 86,508 77,050
---------- ----------
Total liabilities 271,488 295,874
---------- ----------
Minority interest in subsidiaries 297 297
Stockholders' equity 667,570 614,105
---------- ----------
$ 939,355 $ 910,276
========== ==========
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MUELLER INDUSTRIES, INC. IS NAMED SUPPLIER
OF THE YEAR BY AFFILIATED DISTRIBUTORS
At its annual meeting of North American affiliates and preferred
suppliers, Affiliated Distributors (A-D) named Mueller Industries, Inc. its
2001 Plumbing Supplier of the Year. A-D is one of North America's largest
distribution networks. Its plumbing division, which represents a
cooperative of leading independent distributors of plumbing, heating, air-
conditioning, and industrial piping products, consists of over 50
distributors and 700 locations in the United States.
A-D's affiliates selected Mueller for its overall excellent performance
from a field of over 80 preferred suppliers. Selection criteria included
excellence in sales representation, customer service, product quality,
marketing support, and service levels. This award demonstrates Mueller's
continuing success in fulfilling one of our prime objectives: to provide our
customers with superior service.
[PHOTO]
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