MUELLER INDUSTRIES, INC.
2001 ANNUAL REPORT
Mueller Industries, Inc. (NYSE:MLI) is the leading U.S. 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 was recently recognized by "Forbes" magazine, appearing
on its "Platinum List : Best Big Companies." The Company's operations are
located throughout the United States, and in the United Kingdom, Canada,
France and Mexico.
In The Year 2001:
Mueller's debt-to-capital ratio improved more than 50%, dropping from 14.8% in
2000 to 7%.
Nearly $60 million was paid down on long-term debt, leaving the company with
no net debt.
Stockholder's equity increased by 9.6%, from $614.1 million to $672.9 million.
For additional information, see the Ten-Year Review on page 6.
CONTENTS
Financial Highlights 2
Letter to Stockholders, Customers, and Employees 3
Ten-Year Review 6
Standard Products Division 9
Industrial Products Division 10
Company Overview 11
Financial Review 13
Corporate Information 54
-1-
MUELLER INDUSTRIES, INC.
Financial Highlights
(Dollars in thousands, except per share data)
2001 2000 1999 1998 1997
Summary of Operations
Net sales $ 1,044,787 $ 1,238,441 $ 1,197,270 $ 948,948 $ 903,925
Product shipments
(in millions of pounds) 701.3 785.9 815.2 644.6 545.3
Net income $ 66,955 $ 92,690 $ 99,279 $ 75,445 $ 69,770
Diluted earnings per share $ 1.80 $ 2.43 $ 2.51 $ 1.90 $ 1.78
Significant Year-End Data
Cash and cash equivalents $ 121,862 $ 100,268 $ 149,454 $ 80,568 $ 69,978
Ratio of current assets to current liabilities 4.0 to 1 3.4 to 1 2.9 to 1 2.7 to 1 3.1 to 1
Long-term debt (including current portion) $ 50,973 $ 106,884 $ 149,870 $ 194,549 $ 72,093
Debt as a percent of total capitalization 7.0% 14.8% 20.8% 27.9% 14.7%
Stockholders' equity $ 672,933 $ 614,105 $ 569,430 $ 502,122 $ 418,040
Book value per share $ 20.11 $ 18.41 $ 16.31 $ 14.02 $ 11.94
Capital expenditures $ 49,081 $ 63,458 $ 40,115 $ 55,440 $ 36,865
-2-
LETTER TO STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
Mueller's business in the year 2001 was clearly affected by the economic
recession. Earnings, sales, and volume of products shipped declined from the
prior year.
Net sales in 2001 totaled $1.04 billion compared with $1.24 billion in
2000. Net income was $67.0 million in 2001, 28 percent less than in the prior
year. Earnings per share for 2001 were $1.80 compared with $2.43 for the year
before. And pounds of product shipped also declined to 701.3 million pounds
from 785.9 million pounds in 2000.
The economic slowdown did not come as a surprise to Mueller. In last
year's annual report, we noted that there was ample evidence that a slowdown
was imminent. As a result, we took prompt steps to reduce our costs and fine-
tune our operations, including a wage freeze and streamlining our sales and
manufacturing activities. These preemptive actions served the Company well
during the year 2001. Also, we are pleased to report that Mueller's financial
condition is excellent, and our cash flow remains strong. We are well
positioned to benefit from an improvement in the economy.
The housing and commercial construction industry, the most important
market for our products, held up very well during 2001. Housing starts were
approximately 1.6 million units, which was about the same as in the year 2000.
This should have been a positive factor for our business. However, as the
year progressed, it became clear that many of our customers had elected to
substantially reduce inventories by curtailing their purchases. This normally
occurs during a business slowdown, as prudent businessmen seek to limit their
exposure to risk. With the contraction in volume, which principally occurred
in copper tube and brass rod, we experienced the predictable erosion in
margins in those products. The positive side of this scenario is that when
the business climate improves, we can expect our customers to restock
inventories to more normal levels, and that could lead to a surge of new
business and, hopefully, improved pricing.
Domestic Copper Tube Operations
During 2001, we faced the challenge of reducing our operating costs even
as volume declined. This is a particularly difficult task for a capital-
intensive business. Nonetheless, we were able to reduce costs by eliminating
overtime and working short weeks while deriving the benefits from our recent
capital investments. This allowed us to keep in place our skilled employment
base, which will be of critical importance when market conditions improve.
Also, we continued our commitment to reinvesting in our key businesses.
During the year, we installed an additional extrusion press at our Fulton,
Mississippi, copper tube mill. This will provide us with added flexibility to
meet our customers' requirements.
Additionally, during 2001, we implemented a plan to relocate our line sets
operation (formerly at Clinton, Tennessee) to our Wynne, Arkansas, copper tube
mill. By doing so, we eliminated the double handling of the copper tube used
in the fabrication of line sets as well as the overhead associated with the
Clinton site. We will also be able to increase inventory turns by reducing
work-in-process. We expect the benefits of the move to Wynne to be realized
by early 2002.
-3-
Fittings Operations
During the year, we upgraded our manufacturing technology in the copper
and plastic fittings business. We believe this investment will ensure our
position as a low cost manufacturer. Moreover, we plan to expand the sales of
our plastic products in the Canadian market.
Late in 2001, Mueller exited the metric copper fittings business. We
were at a disadvantage in this market as metric copper fittings manufactured
in our Canadian factory incurred duty and freight expenses that our European-
based competitors avoid. We elected to close our Canadian plant and have
moved the remaining production to our U.S. facility. We are currently
considering our options, including a European fittings facility or joint
venture.
European Operations
Late in the year, we completed the modernization of our copper tube
operations in the United Kingdom. The focus of this project was to utilize
state-of-the-art manufacturing processes. We experienced the typical start-up
challenges which are now principally behind us. In fact, we are now realizing
the expected production volumes, and employment has been reduced to desired
levels. We believe we will also achieve targeted conversion cost levels in
the first half of 2002. We are now positioned to be the low-cost copper tube
mill in Europe. We expect European operations will contribute to our earnings
improvement in 2002.
Industrial Products Businesses
We encountered arduous business conditions in our Industrial Products
Division during 2001. Domestic shipments of brass rod declined approximately
20 percent, while margins were squeezed even more. Of course, we took steps
to reduce our costs wherever possible. In addition, we completed the
installation of a horizontal continuous caster and state-of-the-art finishing
lines, which we are confident will maintain our position as one of the low
cost manufacturers.
In addition, strategic business unit managers in each of our business
units are dedicated to improving performance and focus.
Mueller's Financial Position is Excellent
A major shareholder recently commented that Mueller had "a gold-plated
balance sheet." We agree, and moreover believe that a strong balance sheet
is essential to the health and growth of our Company.
Mueller ended the year 2001 with $121.9 million in cash, and an enviable
debt-to-total capitalization ratio of seven percent. Cash flow from
operations during the year was $125.8 million, which allowed us to pay down
long-term debt by $55.9 million. In fact, currently we have no net debt as
cash on hand exceeds total debt.
Our current ratio is an excellent 4.0 to 1. And stockholders' equity is
now $672.9 million. We have available a $200 million line-of-credit and are
utilizing only 15 percent of same. The terms of the credit facility are
comparable to a single A credit rating which reflects the underlying strength
of our financial condition.
-4-
Recently, we were recognized by "Forbes" magazine by appearing on their
"Platinum List: Best Big Companies." This is the fourth consecutive year we
have ranked among America's best companies. Additionally, as we previously
reported, Mueller in the year 2000 ranked first in return on assets among
companies in the North American metals industry as determined by the
"American Metal Market."
Business Outlook for 2002
We are optimistic that the national economy will improve as the year 2002
progresses. The pace of the recovery may be uncertain, but overall, the
economic signals are positive. Particularly important for the construction
industry is the level of mortgage rates. Currently, thirty-year mortgage
rates are below seven percent, which is very attractive by historical
standards. This should provide a strong stimulus for the housing market
during 2002. In addition to low rates, there is widespread availability of
mortgage funds. Also, we have observed that the volatility of the financial
markets has persuaded many people that an investment in a home is both
financially wise and personally desirable. In fact, permits for new housing,
an important indicator of future business, are currently running at an
annualized rate of more than 1.5 million units.
In our opinion, the combination of a solid housing market along with the
likelihood that our customers will restock their inventories, holds the
promise that 2002 will be a good business year for Mueller.
In Closing
It has been ten years since the undersigned assumed direction of the
Company's businesses. In that time, our sales have more than doubled, our
product line has expanded, our manufacturing facilities are now world-class,
we have established a significant presence in the European market and, most
importantly, Mueller has a solid record of profitable growth. We believe our
Company serves its customers well and endeavors to be a good citizen in the
communities where we work.
We are pleased with these accomplishments, and we are especially proud of
our talented and dedicated employees.
Sincerely,
/S/HARVEY L. KARP
Harvey L. Karp
Chairman of the Board
/S/WILLIAM D. O'HAGAN
WILLIAM D.O'HAGAN
President and Chief Executive Officer
March 14, 2002
-5-
MUELLER INDUSTRIES, INC.
Ten-Year Review
Selected Financial Data
(Dollars in thousands, except per share data)
2001 2000 1999 1998 1997
INCOME STATEMENT DATA
Net sales $ 1,044,787 $ 1,238,441 $ 1,197,270 $ 948,948 $ 903,925
Cost of goods sold 805,961 957,584 915,057 739,850 719,729
---------- ---------- ---------- -------- --------
Gross profit 238,826 280,857 282,213 209,098 184,196
Depreciation and amortization 42,083 37,457 36,986 24,899 20,998
Selling, general, and administrative expense 87,678 94,754 97,301 75,390 63,489
---------- ---------- ---------- -------- --------
Operating income 109,065 148,646 147,926 108,809 99,709
Interest expense (3,417) (9,287) (11,681) (5,839) (4,968)
Environmental expense (3,600) (2,049) - (2,133) (3,100)
Other income, net 5,944 9,603 9,464 8,503 9,180
---------- ---------- ---------- -------- --------
Income before income taxes 107,992 146,913 145,709 109,340 100,821
Income tax expense (41,037) (54,223) (46,430) (33,895) (31,051)
---------- ---------- ---------- -------- --------
Net income $ 66,955 $ 92,690 $ 99,279 $ 75,445 $ 69,770
========== ========== ========== ======== ========
Adjusted weighted average shares (000) 37,245 38,096 39,605 39,644 39,250
Diluted earnings per share $ 1.80 $ 2.43 $ 2.51 $ 1.90 $ 1.78
========== ========== ========== ======== ========
BALANCE SHEET DATA
Cash and cash equivalents $ 121,862 $ 100,268 $ 149,454 $ 80,568 $ 69,978
Current assets 403,913 405,171 440,746 382,324 309,051
Working capital 302,425 287,322 287,685 239,750 208,494
Total assets 916,065 910,276 904,080 874,694 610,776
Current liabilities 101,488 117,849 153,061 142,574 100,557
Debt 50,973 106,884 149,870 194,549 72,093
Stockholders' equity 672,933 614,105 569,430 502,122 418,040
SELECTED OPERATING DATA
Cash provided by operations $ 125,766 $ 118,474 $ 164,755 $ 102,681 $ 52,930
Capital expenditures $ 49,081 $ 63,458 $ 40,115 $ 55,440 $ 36,865
Number of employees 3,731 4,291 4,356 4,788 3,378
Current ratio 4.0 to 1 3.4 to 1 2.9 to 1 2.7 to 1 3.1 to 1
Return on average equity 10.4% 15.7% 18.5% 16.4% 18.2%
Debt to total capitalization 7.0% 14.8% 20.8% 27.9% 14.7%
Outstanding shares (000) 33,467 33,358 34,919 35,808 35,017
Book value per share $ 20.11 $ 18.41 $ 16.31 $ 14.02 $ 11.94
========== ========== ========== ======== ========
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MUELLER INDUSTRIES, INC.
Ten-Year Review (continued)
Selected Financial Data
(Dollars in thousands, except per share data)
1996 1995 1994 1993 1992
INCOME STATEMENT DATA
Net sales $ 729,889 $ 688,830 $ 561,075 $ 512,727 $ 528,006
Cost of goods sold 566,147 559,876 459,539 414,617 440,374
-------- -------- -------- -------- --------
Gross profit 163,742 128,954 101,536 98,110 87,632
Depreciation and amortization 18,472 15,452 12,689 14,160 12,505
Selling, general, and administrative expense 54,808 49,491 44,895 45,923 45,809
-------- -------- -------- -------- --------
Operating income 90,462 64,011 43,952 38,027 29,318
Interest expense (5,346) (4,168) (6,718) (5,759) (5,694)
Environmental expense (2,045) (1,421) (2,914) (1,060) -
Other income, net 5,341 6,127 6,504 2,235 675
-------- -------- -------- -------- --------
Income before income taxes 88,412 64,549 40,824 33,443 24,299
Income tax expense (27,239) (19,726) (12,898) (12,307) (7,633)
-------- -------- -------- -------- --------
Net income $ 61,173 $ 44,823 $ 27,926 $ 21,136 $ 16,666
======== ======== ======== ======== ========
Adjusted weighted average shares (000) 38,993 38,298 39,560 41,772 40,220
Diluted earnings per share $ 1.57 $ 1.17 $ 0.71 $ 0.51 $ 0.41
======== ======== ======== ======== ========
BALANCE SHEET DATA
Cash and cash equivalents $ 96,956 $ 48,357 $ 34,492 $ 77,336 $ 44,459
Current assets 274,712 211,038 183,551 194,411 182,381
Working capital 195,756 143,154 116,330 146,981 120,855
Total assets 509,357 450,835 430,755 369,743 372,547
Current liabilities 78,956 67,884 67,221 47,430 61,526
Debt 59,650 75,902 94,736 62,711 69,477
Stockholders' equity 348,082 285,875 241,948 222,114 204,421
SELECTED OPERATING DATA
Cash provided by operations $ 78,700 $ 54,968 $ 21,963 $ 50,987 $ 38,714
Capital expenditures $ 18,868 $ 40,980 $ 48,152 $ 11,083 $ 10,952
Number of employees 2,339 2,274 2,256 2,010 2,055
Current ratio 3.5 to 1 3.1 to 1 2.7 to 1 4.1 to 1 3.0 to 1
Return on average equity 19.3% 17.0% 12.0% 9.9% 9.3%
Debt to total capitalization 14.6% 21.0% 28.1% 22.0% 25.4%
Outstanding shares (000) 34,870 34,699 34,796 38,333 40,000
Book value per share $ 9.98 $ 8.24 $ 6.95 $ 5.79 $ 5.11
======== ======== ======== ======== ========
-7-
[GRAPH]
Net Sales
($ millions)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Net Sales $528 $513 $561 $689 $730 $904 $949 $1,197 $1,238 $1,045
[GRAPH]
Net Income
($ millions)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Net Income $17 $21 $28 $45 $61 $70 $75 $99 $93 $67
[GRAPH]
Total Assets
($ millions)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Total Assets $373 $370 $431 $451 $509 $611 $875 $904 $910 $916
[GRAPH]
Stockholders' Equity
($ millions)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Stockholders'
Equity $204 $222 $242 $286 $348 $418 $502 $569 $614 $673
[GRAPH]
Debt-to-Total Capitalization
(percent)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Debt-to-Total
Capitalization 25.4% 22.0% 28.1% 21.0% 14.6% 14.7% 27.9% 20.8% 14.8% 7.0%
-8-
STANDARD PRODUCTS DIVISION
The Standard Products Division began and completed several initiatives to
maintain its position as a low-cost manufacturer. These included major
capital improvements as well as plant rationalizations that will streamline
our operations.
Copper Tube Operations
Late in 2001, Mueller completed a major modernization project at our
copper tube mill in Bilston, England. We installed state-of-the-art casting,
extrusion, and drawing equipment, with the objective of substantially reducing
conversion costs. The project was completed on time and under budget. We are
currently achieving the expected production volumes with significantly lower
labor costs and improved yield. We are confident that the Bilston plant will
be one of the most efficient and low cost copper tube mills in Europe and the
world. Furthermore, the Bilston mill now has the capacity to supply billets
to our operation in Longueville, France, thereby eliminating our reliance on
third parties and gaining the benefit of incremental throughput.
At our Fulton, Mississippi copper tube mill, we completed the
installation of an additional extrusion press. This has enhanced our
production scheduling flexibility and responsiveness while reducing overtime
labor costs for production and scheduled maintenance on our original extrusion
press. Establishing back-up systems into this critical manufacturing process
ensures our ability to provide our customers with unsurpassed reliability of
delivery.
During 2001, we were able to reduce our conversion cost in our domestic
copper tube mills despite declining volumes. We reduced work weeks and
eliminated overtime except in a few critical operations. We also rigorously
contained other costs.
Other Operations
During 2001, we ceased manufacturing metric copper fittings at our
facility in Strathroy, Ontario, Canada. We were at a disadvantage due to
duties and freight costs that European-based manufacturers avoided. We are
exploring alternatives to re-enter the metric fittings market in Europe.
Also during 2001, we implemented a plan to relocate the fabrication of
line sets from Clinton, Tennessee to our copper tube mill in Wynne, Arkansas.
In doing so, we are eliminating handling and freight costs as the Wynne mill
supplies the copper tube required in this operation. We have vacated the
Clinton facility, and are currently producing line sets at Wynne.
-9-
INDUSTRIAL PRODUCTS DIVISION
Brass Rod Mill
In the brass rod business, we completed installation of a horizontal
continuous casting line. Casting performance and operating efficiency have
met our initial expectations. Processing costs were also reduced by the
installation of more efficient material handling equipment. This project
equipped Mueller with state-of-the-art brass billet casting and melting
technology that has improved our yield.
Installation of two new finishing lines was substantially completed in
the fourth quarter of 2001. Production and runoff will be completed in the
first quarter of 2002. These lines will also increase our efficiency and
yield.
These two projects largely complete the renewal of the brass rod
manufacturing process that began in the mid-1990's. Our manufacturing
processes are now state-of-the-art and world-class.
Engineered Products
The consolidation of our Microgauge business into one building was
completed during 2001. Two new machining centers were installed, which
resulted in increased throughput and reduced costs. Forging has also added a
high-speed coring press. This technology allows us to supply near net shape
forging products to our customers that are more efficient and value-added.
With these capabilities now in place, we should be positioned to grow both the
forging and impact extrusion businesses by meeting more of our customers
needs.
We have recently reorganized our Forgings, Impacts, and Microgauge
operations into one business unit. By operating as a unit, we will be able to
take advantage of complementary processes and product applications.
-10-
COMPANY OVERVIEW
Standard Products Division
U.S. Copper Tube
PLANTS:
Fulton, Mississippi
Wynne, Arkansas
PRODUCTS AND APPLICATIONS
Water tube, in straight lengths and coils, for plumbing and
construction
Dehydrated coils and nitrogen-charged straight lengths for
refrigeration and air-conditioning
Industrial tube, in straight lengths and level-wound coils, for
fittings, redraw, etc.
Line sets for controlling the flow of refrigerant gases
CUSTOMERS
Plumbing wholesalers, home centers, and hardware wholesalers
and co-ops
Air-conditioning and refrigeration wholesalers and OEMs
Mueller's copper fitting plants and OEMs
Wholesalers and OEMs
Copper Fittings
PLANTS
Fulton, Mississippi
Covington, Tennessee
Port Huron, Michigan
PRODUCTS AND APPLICATIONS
Over 1,500 wrot copper elbows, tees and adapters, and assorted cast
copper fittings for plumbing, heating, air-conditioning, and
refrigeration
CUSTOMERS
Plumbing and air-conditioning wholesalers, home centers, hardware
wholesalers and co-ops, and OEMs
Plastic Fittings
PLANTS
Kalamazoo, Michigan
Cerritos, California
Upper Sandusky, Ohio
PRODUCTS AND APPLICATIONS
A broad line of over 1,000 PVC and ABS plastic fittings and valves
for drainage, waste and ventilation, in housing and commercial
construction, recreational vehicles, and manufactured housing
CUSTOMERS
Plumbing wholesalers, home centers, hardware wholesalers and co-ops,
and distributors to the manufactured housing and recreational
vehicle industry
European Copper Tube
PLANTS
Bilston, Great Britain
Longueville, France
PRODUCTS AND APPLICATIONS
Copper tube in various lengths, diameters, and hardnesses for
plumbing, refrigeration, and heating
Industrial tube for redraw, copper fittings, etc.
-11-
CUSTOMERS
Builders' merchants, plumbing, refrigeration, and heating wholesalers
OEMs
Industrial Products Division
Brass Rod
PLANTS
Port Huron, Michigan
PRODUCTS AND APPLICATIONS
A broad range of rounds, squares, hexagons, and special shapes in
free machining, thread rolling, and forging alloys for numerous end
products, including plumbing brass, valves and fittings, and
industrial machinery and equipment
CUSTOMERS
OEMs, contract machining companies and distributors
Engineered Products
PLANTS
Port Huron, Michigan
Marysville, Michigan
Brighton, Michigan
Hartsville, Tennessee
Jacksboro, Tennessee
Waynesboro, Tennessee
Middletown, Ohio
North Wales, Pennsylvania
Salisbury, Maryland
PRODUCTS AND APPLICATIONS
Brass and aluminum hot metal forgings in assorted alloys for
plumbing brass, valves and fittings, and industrial machinery and
equipment
Cold-formed aluminum and copper products for automotive, industrial,
and recreational components
High volume machining of aluminum, steel, brass and cast iron,
forging, impacts, and castings for automotive applications
Valves and custom OEM products for refrigeration and air-
conditioning applications
Custom valve and other metal assemblies for the gas appliance and
barbecue grill markets
Shaped and formed tube, produced to tight tolerances, for baseboard
heating, appliances, medical instruments, etc.;
coaxial cables
CUSTOMERS
OEMs
Other Businesses
Utah Railway Company, established in 1912, hauls coal to connections
with national carriers, power plants, and to other destinations. Utah
Railway Company also provides train switching services in Utah's
central corridor.
-12-
Financial Review
Overview
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
plants are located throughout the United States and in Canada, France, and
Great Britain. The Company also owns a short line railroad in Utah.
The Company's businesses are managed and organized into three segments:
(i) Standard Products Division (SPD); (ii) Industrial Products Division (IPD);
and (iii) Other Businesses. SPD manufactures and sells copper tube, and copper
and plastic fittings and valves. Outside of the United States, SPD
manufactures copper tube in Europe. SPD sells these products to wholesalers
in the HVAC (heating, ventilation, and air-conditioning), plumbing and
refrigeration markets, to distributors to the manufactured housing and
recreational vehicle industries, and to building material retailers. IPD
manufactures and sells brass and copper alloy rod, bar, and shapes; aluminum
and brass forgings; aluminum and copper impact extrusions; refrigeration
valves and fittings; fabricated tubular products; and gas valves and
assemblies. IPD sells its products primarily to original equipment
manufacturers (OEMs), many of which are in the HVAC, plumbing and
refrigeration markets. Other Businesses is composed primarily of Utah Railway
Company. SPD and IPD account for more than 98 percent of consolidated net
sales and more than 83 percent of consolidated total assets.
New housing starts and commercial construction are important determinants
of the Company's sales to the HVAC, refrigeration and plumbing markets because
the principal end use of a significant portion of the Company's products is in
the construction of single and multi-family housing and commercial buildings.
Profitability of certain of the Company's product lines depends upon the
"spreads" between the cost of raw material and the selling prices of its
completed products. The open market prices for copper cathode and scrap, for
example, influence the selling price of copper tubing, a principal product
manufactured by the Company. The Company attempts to minimize the effects of
fluctuations in material costs by passing through these costs to its
customers. Spreads fluctuate based upon market conditions.
Results of Operations
2001 Performance Compared with 2000
Consolidated net sales in 2001 were $1.04 billion, 16 percent less than
net sales of $1.24 billion in 2000. Pounds of product sold totaled 701.3
million in 2001 or 11 percent less than the 785.9 million pounds sold in 2000.
This decrease in pounds sold was a result of the economic slowdown experienced
during 2001. Net selling prices generally fluctuate with changes in raw
material prices; therefore, pounds sold is an additional measurement of the
Company's performance. The COMEX average copper price in 2001 was
approximately 14 percent less than the 2000 average. This change impacted the
Company's net sales and cost of goods sold.
-13-
Cost of goods sold decreased $151.6 million, to $806.0 million in 2001.
This decrease was attributable to lower raw material costs, mostly copper, and
reduced volumes. Gross profit was $238.8 million or 22.9 percent of net sales
in 2001 compared with $280.9 million or 22.7 percent of net sales in 2000.
The decline in gross profit was due to lower volumes and reduced spreads in
certain product lines, partially offset by reductions in manufacturing
conversion costs.
Depreciation and amortization increased to $42.1 million in 2001 compared
with $37.5 million in 2000. This increase was due to capital expenditures in
recent years. Selling, general, and administrative expense decreased to $87.7
million in 2001 reflecting lower volume and results of cost containment
measures.
Interest expense decreased to $3.4 million in 2001 from $9.3 million in
2000. This decrease was due to debt reductions combined with lower borrowing
rates. The Company capitalized interest of $1.4 million for major capital
improvement projects in 2001 compared with $1.2 million in 2000. The
provision for environmental reserves totaled $3.6 million in 2001 compared
with $2.0 million in 2000. Other income decreased to $5.9 million in 2001
from $9.6 million in 2000, primarily due to less interest income.
The Company provided $41.0 million for income taxes in 2001, of which
$15.8 million was deferred. Current income tax expense of $25.2 million
decreased from 2000 primarily due to decreased earnings. The 2001 effective
tax rate of 38.0 percent compares with the 2000 rate of 36.9 percent.
The Company's employment was approximately 3,750 at the end of 2001.
This compares with approximately 4,300 at the 2000 year-end.
Standard Products Division
Net sales by SPD were $773.8 million in 2001 compared with $910.0 million
in 2000 for a 15 percent decrease. Operating income was $102.8 million in
2001 compared with $128.5 million in 2000. During 2001, the Company began
moving its line set operations from Clinton, Tennessee, to its Wynne,
Arkansas, copper tube mill. Benefits from this move including reduced in-
process inventories and reduced material handling will commence in 2002. The
Company also discontinued manufacturing metric copper fittings at its
Strathroy, Ontario, Canada facility. Sales of metric fittings exported into
the European market totaled less than $7 million in 2001. Approximately $1.2
million was charged to operations in 2001 for the rationalization of these two
businesses.
Industrial Products Division
IPD's net sales were $251.7 million in 2001 compared with $307.2 million
in 2000. Operating income was $17.5 million in 2001 compared with $30.6
million in 2000. Volume declines as well as reduced spreads were responsible
for the shortfall in current year earnings.
-14-
Other Businesses
Utah Railway Company hauled 5.5 million tons of coal in 2001, 8 percent
less than in 2000. The decrease in volume was attributable to the loss of
shipments from one of the mines served by the railroad, which suspended
operations in August 2000. Segment revenue totaled $23.4 million in 2001
compared with $24.7 million in 2000. Operating income was $1.7 million in
2001 compared with $3.4 million in 2000.
2000 Performance Compared with 1999
Consolidated net sales in 2000 were $1.24 billion or 3.4 percent higher
than $1.20 billion in 1999. Pounds of product sold totaled 785.9 million in
2000 or 3.6 percent less than the 815.2 million pounds sold in 1999. The
decrease in pounds sold was a result of production interruptions in the first
quarter and the slower economic environment in the second half of the year.
The COMEX average copper price in 2000 was approximately 16.4 percent higher
than the 1999 average.
Cost of goods sold increased $42.5 million, to $957.6 million in 2000.
This increase was primarily attributable to higher raw material costs, mostly
copper. Gross profit was 22.7 percent of net sales in 2000 compared with 23.6
percent of net sales in 1999. The decline in gross profit was due to lower
volumes and increases in raw material and energy costs in the second half of
2000.
Depreciation and amortization increased to $37.5 million in 2000 compared
with $37.0 million in 1999. This increase was due to acquisitions in 2000 and
capital expenditures in recent years. Selling, general, and administrative
expense decreased to $94.8 million in 2000 reflecting lower volume.
Interest expense decreased to $9.3 million in 2000 from $11.7 million in
1999. The Company capitalized interest of $1.2 million for major capital
improvement projects in 2000 compared with $0.4 million in 1999. The
provision for environmental reserves totaled $2.0 million in 2000 whereas none
was required in 1999. Other income increased to $9.6 million in 2000 from
$9.5 million in 1999.
The Company provided $54.2 million for income taxes in 2000, of which
$8.9 million was deferred. Current income tax expense of $45.3 million
increased from 1999 primarily due to the 1999 realization of an ordinary loss
as a consequence of the sale of natural resource property. The 36.9 percent
effective tax rate for 2000, compared with the 1999 rate of 31.9 percent,
reflects the Company having recognized the majority of historical tax benefits
in prior years.
The Company's employment was approximately 4,300 at the end of 2000.
This compares to approximately 4,350 at the 1999 year-end.
Standard Products Division
Net sales by SPD were $910.0 million in 2000 compared with $882.5 million
in 1999 for a 3.1 percent increase. Operating income was $128.5 million in
2000 compared with $129.1 million in 1999. Higher raw material and energy
costs were factors in reducing margins and operating income. During 2000,
operating income was reduced by a $2.1 million charge for expected severance
and termination costs associated with our European modernization program.
-15-
Industrial Products Division
IPD's net sales were $307.2 million in 2000 compared with $294.8 million
in 1999. During 2000, the Company completed two acquisitions: (i) Micro
Gauge, Inc. and a related business, Micro Gauge Machining, Inc., a specialized
machining operation and (ii) Propipe Technologies, Inc., a fabricator of gas
train manifold systems. Operating income was $30.6 million in 2000 compared
with $29.9 million in 1999. Increased volume and lower manufacturing costs
accounted for the profit improvement.
Other Businesses
Utah Railway Company hauled 6.0 million tons of coal in 2000, 12.6
percent more than in 1999. During 2000, a fire occurred at one of the coal
mines served by Utah Railway. Shipments from the mine were suspended during
the latter half of the year. Segment revenue totaled $24.7 million in 2000
compared with $22.3 million in 1999. Operating income was $3.4 million in
2000 compared with $3.3 million in 1999.
Liquidity and Capital Resources
The Company's cash and cash equivalents balance increased to $121.9
million at year-end. Major components of the 2001 change included $125.8
million of cash provided by operating activities, $48.9 million of cash used
in investing activities and $54.2 million of cash used in financing
activities.
Net income of $67.0 million in 2001 was the primary component of cash
provided by operating activities. Depreciation and amortization of $42.1
million and deferred income taxes of $15.8 million were the primary non-cash
adjustments. Major changes in working capital included a $15.0 million
decrease in inventories and a $16.4 million decrease in current and other
liabilities.
The major component of net cash used in investing activities during 2001
was $49.1 million for capital expenditures. Capital expenditures were
primarily related to improvements in manufacturing processes.
Net cash used in financing activities totaled $54.2 million. During
2001, the Company used $65.9 million for debt repayments offset by $10.0
million of proceeds from the issuance of long-term debt.
The Company has a $200 million unsecured line-of-credit (Credit Facility)
which expires in November 2003. At year-end, the Company had borrowings of
$30.0 million against the Credit Facility. Additionally, approximately $6.4
million in letters of credit were backed by the Credit Facility at the end of
2001. At December 29, 2001, the Company's total debt was $51.0 million or
seven percent of its total capitalization.
Covenants contained in the Company's financing obligations require, among
other things, the maintenance of minimum levels of working capital, tangible
net worth, and debt service coverage ratios. The Company is in compliance
with all of its debt covenants.
-16-
The Company's major capital projects were substantially complete in 2001,
including casting facilities at the Company's brass rod mill, modernization of
the European copper tube mill, and installation of an additional extrusion
press at the Company's Fulton, Mississippi, copper tube mill. The Company
expects to invest between $35 and $40 million for capital projects during
2002.
Contractual cash obligations of the Company at December 29, 2001 included
the following:
(In millions)
Payments Due by Year
2003- 2005-
Total 2002 2004 2006 Thereafter
Long-term debt,
including capital
lease obligations $ 51.0 $ 4.0 $ 36.4 $ 0.2 $ 10.4
Operating leases 27.8 5.7 10.3 6.9 4.9
----- ----- ----- ----- -----
Total
contractual
cash obligations $ 78.8 $ 9.7 $ 46.7 $ 7.1 $ 15.3
===== ===== ===== ===== =====
Fluctuations in the cost of copper and other raw materials affect the
Company's liquidity. Changes in material costs directly impact components of
working capital, primarily inventories and accounts receivable.
Management believes that cash provided by operations and currently
available cash of $121.9 million will be adequate to meet the Company's normal
future capital expenditure and operational needs. The Company's current ratio
was 4 to 1 at December 29, 2001.
On October 18, 1999, the Company's Board of Directors authorized the
repurchase of up to four million shares of the Company's common stock from
time-to-time over the next year through open market transactions or through
privately negotiated transactions. During 2000, this authorization was
expanded and extended to repurchase up to a total of ten million shares.
During 2001, the authorization was extended through October, 2002. The
Company has no obligation to purchase any shares and may cancel, suspend, or
extend the time period for the purchase of shares at any time. The purchases
will be funded primarily through existing cash and cash from operations. The
Company may hold such shares in treasury or use a portion of the repurchased
shares for employee benefit plans, as well as for other corporate purposes.
Through December 29, 2001, the Company has repurchased approximately 2.3
million shares under this authorization.
-17-
Environmental Matters
The Company ended 2001 with total environmental reserves of approximately
$9.2 million. Based upon information currently available, management believes
that the outcome of pending environmental matters will not materially affect
the overall financial position and results of operations of the Company.
Market Risk
The Company is exposed to market risk from changes in interest rates,
foreign exchange, raw material costs, and energy costs. To reduce such risks,
the Company may periodically use financial instruments. All hedging
transactions are authorized and executed pursuant to policies and procedures.
Further, the Company does not buy or sell financial instruments for trading
purposes. A discussion of the Company's accounting for derivative instruments
and hedging activities is included in the Summary of Significant Accounting
Policies in the Notes to the Consolidated Financial Statements.
Interest Rates
At December 29, 2001 and December 30, 2000, the fair value of the
Company's debt was estimated at $51.9 million, and $107.1 million,
respectively, using yields obtained for similar types of borrowing
arrangements and taking into consideration the underlying terms of the debt.
Such fair value exceeded the carrying value of debt at December 29, 2001 by
$0.9 million and at December 30, 2000 by $0.2 million. Market risk is
estimated as the potential change in fair value resulting from a hypothetical
10 percent decrease in interest rates and amounted to $0.5 million at December
29, 2001 and $0.2 million at December 30, 2000.
The Company had $30.3 million of variable-rate debt outstanding at
December 29, 2001 and $90.5 million at December 30, 2000. At these borrowing
levels, a hypothetical 10 percent increase in interest rates would have had an
unfavorable impact on the Company's pretax earnings and cash flows of $0.1
million in 2001 and $0.6 million in 2000. The primary interest rate exposure
on floating-rate debt is based on LIBOR.
Foreign Currency Exchange Rates
Foreign currency exposures arising from transactions include firm
commitments and anticipated transactions denominated in a currency other than
an entity's functional currency. The Company and its subsidiaries generally
enter into transactions denominated in their respective functional currencies.
Foreign currency exposures arising from transactions denominated in currencies
other than the functional currency are not material; however, the Company may
utilize certain forward fixed-rate contracts to hedge such transactional
exposures. Gains and losses with respect to these positions are deferred in
stockholders' equity as a component of comprehensive income and reflected in
earnings upon collection of receivables. At year-end, the Company held open
forward contracts to exchange approximately $1.4 million for various foreign
currencies over the next six months.
-18-
The Company's primary foreign currency exposure arises from foreign-
denominated revenues and profits and their translation into U.S. dollars. The
primary currencies to which the Company is exposed include the Canadian
dollar, the British pound sterling, the Euro, and the Mexican peso. The
Company generally views as long-term its investments in foreign subsidiaries
with a functional currency other than the U.S. dollar. As a result, the
Company generally does not hedge these net investments. The net investment in
foreign subsidiaries translated into U.S dollars using the year-end exchange
rates was $115 million at December 29, 2001 and $101 million at December 30,
2000. The potential loss in value of the Company's net investment in foreign
subsidiaries resulting from a hypothetical 10 percent adverse change in quoted
foreign currency exchange rates at December 29, 2001, and December 30, 2000
amounted to $11.5 million and $10.1 million, respectively. This change would
be reflected in the equity section of the Company's Consolidated Balance
Sheet.
Cost of Raw Materials and Energy
Copper and brass represent the largest component of the Company's
variable costs of production. The cost of these materials is subject to
global market fluctuations caused by factors beyond the Company's control.
Significant increases in the cost of metal, to the extent not reflected in
prices for the Company's finished products, could materially and adversely
affect the Company's business, results of operations and financial condition.
The Company occasionally enters into forward fixed-price arrangements
with certain customers. The Company may utilize forward contracts to hedge
risks associated with forward fixed-price arrangements. The Company may also
utilize forward contracts to manage price risk associated with inventory.
Gains or losses with respect to these positions are deferred in stockholders'
equity as a component of comprehensive income and reflected in earnings upon
the sale of inventory. Periodic value fluctuations of the contracts generally
offset the value fluctuations of the underlying fixed-price transactions or
inventory. At year-end, the Company held open forward contracts to purchase
approximately $1.6 million of copper over the next 12 months.
Future contracts may also be used to manage price risk associated with
natural gas purchases. Gains and losses with respect to these positions are
deferred in stockholders' equity as a component of comprehensive income and
reflected in earnings upon consumption of natural gas. Periodic value
fluctuations of the contracts generally offset the value fluctuations of the
underlying natural gas prices. At year-end, the Company held open hedge
forward contracts to purchase approximately $4.4 million of natural gas over
the next 15 months.
Critical Accounting Policies
The Company's Consolidated Financial Statements are prepared in
accordance with accounting principles generally accepted in the United States.
Application of these principles requires the Company to make estimates and
judgments that affect the amounts as reported in the Consolidated Financial
Statements. The accounting policies that are most critical to aid in
understanding and evaluating the results of operations and financial position
of the Company include the following:
-19-
Inventory Valuation
Inventories are valued at the lower of cost or market. The most
significant component of the Company's inventories is copper. Open market
prices and the mix of cathode and scrap purchases determine the cost of copper
for the Company. Open market prices are subject to volatility. During
periods when open market prices decline, the Company may need to provide an
allowance to reduce the carrying value of the inventory. In addition, certain
items in inventory may be considered obsolete, and as such, the Company may
establish an allowance to reduce the carrying value of these items to their
net realizable value. The amounts, if any, to provide in these inventory
allowances are determined by the Company based on certain estimates,
assumptions, and judgments made from the information available at that time.
Deferred Taxes
Deferred tax assets and liabilities are recognized on the differences
between the financial statement and the tax law treatment of certain items.
Realization of certain components of deferred tax assets is dependent upon the
occurrence of future events. The Company records a valuation allowance to
reduce its deferred tax asset to the amount it believes is more likely than
not to be realized. The likelihood of realization is determined based on the
Company's judgment, estimates, and assumptions regarding its future operations
and the likelihood of adverse application of tax laws in the jurisdictions in
which the Company operates.
Environmental Reserves
The Company recognizes an environmental liability when it is probable the
liability exists and the amount is reasonably estimable. The Company
estimates its remediation obligations based upon reports of outside
consultants, internal analyses of clean-up costs and ongoing monitoring,
communications with regulatory agencies, and changes in environmental law.
The Company adjusts its environmental reserves when further information
develops or circumstances change.
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations" (SFAS No. 141), and No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142), effective for fiscal years beginning after December
15, 2001. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with SFAS No. 142. Other intangible assets will continue to be
amortized over their useful lives.
-20-
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of SFAS No. 142 in 2002 is expected to increase
operating income $4.6 million and net income $4.0 million, or 11 cents per
diluted share. During 2002, the Company will perform the first of the
required impairment tests of goodwill and indefinite-lived intangible assets
as of the beginning of its fiscal year. Any impairment charge resulting from
these tests will be reflected as the cumulative effect of a change in
accounting principle as of the beginning of 2002. The Company believes the
results of the impairment tests will not have a significant effect on its
earnings or its financial position.
The FASB issued Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS No. 143) in June 2001.
SFAS No. 143 applies to legal obligations associated with the retirement of
certain tangible long-lived assets. This statement is effective for fiscal
years beginning after June 15, 2002. The adoption of SFAS No. 143 will not
have a significant effect on earnings or the financial position of the
Company.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS No. 144). SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. This
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. It supersedes Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The adoption of SFAS
No. 144 will not have a significant effect on earnings or the financial
position of the Company.
Cautionary Statement Regarding Forward-Looking Information
This Annual Report contains various forward-looking statements and
includes assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to risk and uncertainties. In connection with the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
Mueller provides the following cautionary statement identifying important
economic, political, and technological factors, among others, the absence of
which could cause actual results or events to differ materially from those set
forth in or implied by the forward-looking statements and related assumptions.
Such factors include: (i) the current and projected future business
environment, including interest rates and capital and consumer spending; (ii)
continuation of the strong domestic housing and commercial construction
industry environment; (iii) fluctuations in commodity prices (including prices
of copper and other raw materials); (iv) competitive factors and competitor
responses to Mueller initiatives; (v) successful implementation and completion
of major capital projects; (vi) stability of government laws and regulations,
including taxes; and (vii) continuation of the environment to make
acquisitions, domestic and foreign, including regulatory requirements and
market values of candidates.
-21-
Mueller Industries, Inc.
Consolidated Statements of Income
Years Ended December 29, 2001, December 30, 2000, and December 25, 1999
(In thousands, except per share data)
2001 2000 1999
Net sales $1,044,787 $1,238,441 $1,197,270
Cost of goods sold 805,961 957,584 915,057
--------- --------- ---------
Gross profit 238,826 280,857 282,213
Depreciation and amortization 42,083 37,457 36,986
Selling, general, and
administrative expense 87,678 94,754 97,301
--------- --------- ---------
Operating income 109,065 148,646 147,926
Interest expense (3,417) (9,287) (11,681)
Environmental expense (3,600) (2,049) -
Other income, net 5,944 9,603 9,464
--------- --------- ---------
Income before income taxes 107,992 146,913 145,709
Income tax expense (41,037) (54,223) (46,430)
--------- --------- ---------
NET INCOME $ 66,955 $ 92,690 $ 99,279
========= ========= =========
Weighted average shares for basic
earnings per share 33,409 34,305 35,594
Effect of dilutive stock options 3,836 3,791 4,011
--------- --------- ---------
Adjusted weighted average shares for
diluted earnings per share 37,245 38,096 39,605
========= ========= =========
BASIC EARNINGS PER SHARE $ 2.00 $ 2.70 $ 2.79
========= ========= =========
DILUTED EARNINGS PER SHARE $ 1.80 $ 2.43 $ 2.51
========= ========= =========
See accompanying notes to consolidated financial statements.
-22-
Mueller Industries, Inc.
Consolidated Balance Sheets
As of December 29, 2001 and December 30, 2000
(In thousands)
2001 2000
ASSETS
Current assets
Cash and cash equivalents $ 121,862 $ 100,268
Accounts receivable, less allowance for
doubtful accounts of $6,573 in 2001
and $5,612 in 2000 148,808 152,157
Inventories 126,629 142,325
Current deferred income taxes 2,654 4,101
Other current assets 3,960 6,320
-------- --------
Total current assets 403,913 405,171
Property, plant, and equipment, net 387,533 379,885
Goodwill, net 98,749 102,673
Other assets 25,870 22,547
-------- --------
TOTAL ASSETS $ 916,065 $ 910,276
======== ========
See accompanying notes to consolidated financial statements.
-23-
Mueller Industries, Inc.
Consolidated Balance Sheets (continued)
As of December 29, 2001 and December 30, 2000
(In thousands, except share data)
2001 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 3,996 $ 5,909
Accounts payable 34,209 43,733
Accrued wages and other employee costs 21,349 26,994
Other current liabilities 41,934 41,213
-------- --------
Total current liabilities 101,488 117,849
Long-term debt, less current portion 46,977 100,975
Pension liabilities 9,564 5,688
Postretirement benefits other than pensions 13,182 13,632
Environmental reserves 9,203 9,862
Deferred income taxes 51,768 39,362
Other noncurrent liabilities 10,679 8,506
-------- --------
Total liabilities 242,861 295,874
-------- --------
Minority interest in subsidiaries 271 297
Stockholders' equity
Preferred stock - shares authorized 4,985,000;
none outstanding - -
Series A junior participating preferred stock -
$1.00 par value; shares authorized 15,000;
none outstanding - -
Common stock - $.01 par value; shares authorized
100,000,000; issued 40,091,502; outstanding
33,466,512 in 2001 and 33,358,061 in 2000 401 401
Additional paid-in capital, common 261,647 260,979
Retained earnings 532,122 465,167
Accumulated other comprehensive loss (22,038) (11,826)
Treasury common stock, at cost (99,199) (100,616)
-------- --------
Total stockholders' equity 672,933 614,105
-------- --------
Commitments and contingencies - -
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 916,065 $ 910,276
======== ========
See accompanying notes to consolidated financial statements.
-24-
Mueller Industries, Inc.
Consolidated Statements of Cash Flows
Years Ended December 29, 2001, December 30, 2000, and December 25, 1999
(In thousands)
2001 2000 1999
OPERATING ACTIVITIES:
Net income $ 66,955 $ 92,690 $ 99,279
Reconciliation of net income to net
cash provided by operating
activities:
Depreciation 37,008 32,601 31,130
Amortization 5,075 4,856 5,856
Provision for doubtful
accounts receivable 1,704 663 1,503
Minority interest in subsidiaries,
net of dividend paid (26) (57) -
Deferred income taxes 15,801 8,912 31,257
Income tax benefit from exercise
of stock options 356 1,402 -
Gain on disposal of properties (249) (413) (1,847)
Changes in assets and liabilities,
net of businesses acquired:
Receivables 270 15,862 (15,339)
Inventories 14,983 (22,835) 12,992
Other assets 1,621 621 14,973
Current liabilities (15,543) (11,597) 622
Other liabilities (871) (43) (14,657)
Other, net (1,318) (4,188) (1,014)
--------- --------- ---------
Net cash provided by
operating activities 125,766 118,474 164,755
--------- --------- ---------
INVESTING ACTIVITIES:
Acquisition of businesses - (15,245) (675)
Capital expenditures (49,081) (63,458) (40,115)
Proceeds from sales of properties 2,715 683 7,137
Escrowed IRB proceeds (2,515) - 6,022
Note receivable - - 4,484
--------- --------- ---------
Net cash used in investing activities (48,881) (78,020) (23,147)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 10,000 90,000 125,000
Repayments of long-term debt (65,911) (132,986) (29,819)
Proceeds from the sale of treasury stock 1,729 2,708 1,093
Acquisition of treasury stock - (48,411) (29,669)
Net repayments on lines of credit - - (139,840)
--------- --------- ---------
Net cash used in financing activities (54,182) (88,689) (73,235)
--------- --------- ---------
See accompanying notes to consolidated financial statements.
-25-
Mueller Industries, Inc.
Consolidated Statements of Cash Flows (continued)
Years Ended December 29, 2001, December 30, 2000, and December 25, 1999
(In thousands)
2001 2000 1999
Effect of exchange rate changes on cash $ (1,109) $ (951) $ 513
--------- --------- ---------
Increase (decrease) in cash and
cash equivalents 21,594 (49,186) 68,886
Cash and cash equivalents at the
beginning of the year 100,268 149,454 80,568
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $ 121,862 $ 100,268 $ 149,454
========= ========= =========
For supplemental disclosures of cash flow information, see
Notes 1, 4, 6, and 12.
See accompanying notes to consolidated financial statements.
-26-
Mueller Industries, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 29, 2001, December 30, 2000, and December 25, 1999
(In thousands)
Accumulated
Common Stock Additional Other Treasury Stock
Number Paid-In Retained Comprehensive Number
of Shares Amount Capital Earnings Income (Loss) of Shares Cost Total
BALANCE, DECEMBER 26, 1998 40,092 $ 401 $ 258,171 $ 273,198 $ (3,317) 4,284 $ (26,331) $ 502,122
Comprehensive income:
Net income - - - 99,279 - - - 99,279
Other comprehensive loss:
Foreign currency translation - - - - (4,795) - - (4,795)
--------
Comprehensive income 94,484
Issuance of shares
under incentive
stock option plan - - 406 - - (115) 687 1,093
Repurchase of common stock - - - - - 1,004 (29,669) (29,669)
Proceeds from payment
on note receivable
from officer - - 1,400 - - - - 1,400
------- ---- -------- -------- -------- ------ -------- --------
BALANCE, DECEMBER 25, 1999 40,092 401 259,977 372,477 (8,112) 5,173 (55,313) 569,430
Comprehensive income:
Net income - - - 92,690 - - - 92,690
Other comprehensive loss:
Foreign currency translation - - - - (3,714) - - (3,714)
--------
Comprehensive income 88,976
Issuance of shares
under incentive
stock option plan - - (400) - - (295) 3,108 2,708
Repurchase of common stock - - - - - 1,856 (48,411) (48,411)
Tax benefit related to
employee stock options - - 1,402 - - - - 1,402
------- ---- -------- -------- -------- ------ -------- --------
BALANCE, DECEMBER 30, 2000 40,092 $ 401 $ 260,979 $ 465,167 $ (11,826) 6,734 $(100,616) $ 614,105
======= ==== ======== ======== ======== ====== ======== ========
See accompanying notes to consolidated financial statements.
-27-
Mueller Industries, Inc.
Consolidated Statements of Stockholders' Equity (continued)
Years Ended December 29, 2001, December 30, 2000, and December 25, 1999
(In thousands)
Accumulated
Common Stock Additional Other Treasury Stock
Number Paid-In Retained Comprehensive Number
of Shares Amount Capital Earnings Income (Loss) of Shares Cost Total
BALANCE, DECEMBER 30, 2000 40,092 $ 401 $ 260,979 $ 465,167 $ (11,826) 6,734 $(100,616) $ 614,105
Comprehensive income:
Net income - - - 66,955 - - - 66,955
Other comprehensive
income (loss):
Foreign currency translation - - - - (4,564) - - (4,564)
Minimum pension liability
adjustment, net of
applicable income tax
benefit of $1,165 - - - - (4,370) - - (4,370)
Cumulative effect of change
in accounting for
derivative financial
instruments, net of
applicable income taxes
of $75 - - - - 122 - - 122
Change in fair value of
derivatives, net of
applicable income tax
benefit of $1,414 - - - - (2,306) - - (2,306)
Losses reclassified into
earnings from other
comprehensive income, net
of applicable income tax
benefit of $556 - - - - 906 - - 906
--------
Comprehensive income 56,743
Issuance of shares
under incentive
stock option plan - - 312 - - (109) 1,417 1,729
Tax benefit related to
employee stock options - - 356 - - - - 356
------- ---- -------- -------- -------- ------ -------- --------
BALANCE, DECEMBER 29, 2001 40,092 $ 401 $ 261,647 $ 532,122 $ (22,038) 6,625 $ (99,199) $ 672,933
======= ==== ======== ======== ======== ====== ======== ========
See accompanying notes to consolidated financial statements.
-28-
Notes To Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The principal business of Mueller Industries, Inc. is the manufacture and
sale 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; fabricated tubular
products; and gas valves and assemblies. The Company markets its products to
the HVAC, plumbing, refrigeration, hardware, and other industries. During
2001, the Company operated 22 factories in eight states, Canada, Great
Britain, and France and had distribution facilities nationwide and sales
representation worldwide. The Company also operates a short line railroad
through its subsidiary, Utah Railway Company.
Principles of Consolidation
The consolidated financial statements include the accounts of Mueller
Industries, Inc. and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The minority interest
represents separate private ownership of 25 percent of Ruby Hill Mining
Company and 19 percent of Richmond-Eureka Mining Company.
Inventories
The Company's inventories are valued at the lower of cost or market. The
material component of its U.S. copper tube and copper fittings inventories is
valued on a last-in, first-out (LIFO) basis. Other inventories, including the
non-material components of U.S. copper tube and copper fittings, are valued on
a first-in, first-out (FIFO) basis. Inventory costs include material, labor
costs, and manufacturing overhead.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is
provided on the straight-line method over the estimated useful lives ranging
from 20 to 40 years for buildings and five to 20 years for machinery and
equipment.
Intangible Assets
The excess of the cost over the fair value of net assets of businesses
acquired is recorded as goodwill and is amortized on a straight-line basis
over 20 to 25 years. The cost of other acquired intangibles is amortized on a
straight-line basis over their estimated useful lives. Accumulated
amortization as of December 29, 2001 and December 30, 2000 was $17.7 and $12.6
million, respectively. The Company continually evaluates the carrying value
of long-lived assets. Any impairments would be recognized when the expected
future undiscounted cash flows derived from such long-lived assets are less
than their carrying value.
-29-
Revenue Recognition
Revenue is recognized when products are shipped or services are
performed. The Company classifies the cost of shipping its product to
customers as a component of cost of goods sold in accordance with Emerging
Issues Task Force Issue No. 00-10, "Accounting for Shipping and Handling Fees
and Costs."
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB No. 25) and related
Interpretations as permitted by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
Earnings Per Share
Basic earnings per share is computed based on the average number of
common shares outstanding. Diluted earnings per share reflects the increase
in average common shares outstanding that would result from the assumed
exercise of outstanding stock options calculated using the treasury stock
method.
Income Taxes
The Company accounts for income taxes using the liability method required
by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
Cash Equivalents
Temporary investments with maturities of three months or less are
considered to be cash equivalents. These investments are stated at cost. At
December 29, 2001 and December 30, 2000, temporary investments consisted of
certificates of deposit, commercial paper, bank repurchase agreements, and
U.S. and foreign government securities totaling $122.1 million and $105.3
million, respectively.
Concentrations of Credit and Market Risk
Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of customers comprising the Company's customer
base, and their dispersion across different industries, including HVAC,
plumbing, refrigeration, hardware, automotive, OEMs, and others.
The Company minimizes its exposure to base metal price fluctuations
through various strategies. Generally, it prices an equivalent amount of
copper raw material, under flexible pricing arrangements it maintains with its
suppliers, at the time it determines the selling price of finished products to
its customers.
-30-
At December 29, 2001, the Company held open forward commitments to
purchase approximately $1.6 million of copper in the next 12 months,
approximately $4.4 million of natural gas in the next 15 months, and to
exchange approximately $1.4 million for various foreign currencies in the next
six months.
Derivative Instruments and Hedging Activities
Effective at the beginning of fiscal 2001, the Company adopted Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), as amended by Statement
of Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities" (SFAS No. 138), which requires
that all derivative instruments be reported on the balance sheet at fair value
and establishes criteria for designation and effectiveness of hedging
relationships. The cumulative effect of adopting SFAS No. 133 and SFAS No.
138 as of the beginning of fiscal 2001 was not material to the Company's
consolidated financial statements. The amounts of gains and losses reported
in accumulated other comprehensive loss upon adoption of SFAS No. 133 and SFAS
No. 138 that were reclassified into earnings during the 12 months following
the adoption were also not material to the Company's consolidated financial
statements.
The Company has utilized forward contracts to manage the volatility
related to purchases of copper and natural gas, and sales denominated in
foreign currencies. In addition, the Company has reduced its exposure to
increases in interest rates by entering into an interest rate swap contract.
These contracts have been designated as cash flow hedges. In accordance with
SFAS No. 133, the Company has recorded the fair value of these contracts in
the Consolidated Balance Sheet. The related gains and losses on the contracts
are deferred in stockholders' equity as a component of comprehensive income.
With respect to the copper and natural gas contracts, deferred gains and
losses are recognized in cost of goods sold in the period in which the related
sales of the commodities or consumption are recognized. Deferred gains and
losses on foreign currency contracts are recognized in selling, general, and
administrative expense in the period in which the foreign sales are collected.
Deferred gain or loss on the interest rate swap contract is recognized in
interest expense in the period in which the related interest payment being
hedged has been expensed. As of December 29, 2001, the Company expects to
reclassify $1.0 million of net losses on derivative instruments from
accumulated other comprehensive loss into earnings during the next 12 months.
To the extent that the changes in the fair value of the contracts do not
perfectly offset the changes in the present value of the hedged transactions,
that ineffective portion is immediately recognized in earnings. Gains and
losses recognized by the Company in 2001 related to the ineffective portion of
its hedging instruments as well as gains and losses related to the portion of
the hedging instruments excluded from the assessment of hedge effectiveness
were not material to the Company's financial statements. Should these
contracts no longer meet hedge criteria in accordance with SFAS No. 133,
either through lack of effectiveness or because the hedged transaction is not
probable of occurring, all deferred gains and losses related to the hedge will
be immediately reclassified from accumulated other comprehensive loss into
earnings.
-31-
Prior to the adoption of SFAS No. 133, the Company also used copper,
natural gas, and foreign currency forward contracts for hedging purposes.
Unrealized gains and losses on these contracts were not recognized in income.
Realized gains and losses were recognized when the related operating revenue
or expense was recognized.
Fair Value of Financial Instruments
The carrying amounts for cash and cash equivalents, accounts receivable,
and accounts payable approximate fair value due to the short-term maturity of
these instruments. Using a discounted cash flow analysis, the fair value of
the Company's long-term debt instruments exceeded their carrying value by $0.9
million and $0.2 million at December 29, 2001 and December 30, 2000,
respectively, based on the estimated current incremental borrowing rates for
similar types of borrowing arrangements. The fair value of the Company's
interest rate swap contract was approximately $(0.3) million at December 29,
2001. This value represents the estimated amount the Company would need to
pay if such contract is terminated before maturity, principally resulting from
market interest rate decreases. The contracted rates on committed forward
contracts exceeded the market rates for similar term contracts by
approximately $1.9 million at December 29, 2001. The Company estimates the
fair value of contracts by obtaining quoted market prices.
Fair value estimates are made at a specific point in time based on
relevant market information about the financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Foreign Currency Translation
For foreign subsidiaries, the functional currency is the local currency.
Balance sheet accounts are translated at exchange rates in effect at the end
of the year and income statement accounts are translated at average exchange
rates for the year. Translation gains and losses are included in
stockholders' equity as a component of comprehensive income. Transaction
gains and losses included in the Consolidated Statements of Income were not
significant.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
-32-
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations", (SFAS No. 141) and No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142), effective for fiscal years beginning after December
15, 2001. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with SFAS No. 142. Other intangible assets will continue to be
amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002. Application
of the non-amortization provisions of SFAS No. 142 in 2002 is expected to
increase operating income by $4.6 million and net income by $4.0 million, or
11 cents per diluted share. During 2002, the Company will perform the first
of the required impairment tests of goodwill and indefinite lived intangible
assets as of the beginning of its fiscal year. Any impairment charge
resulting from these tests will be reflected as the cumulative effect of a
change in accounting principle as of the beginning of 2002. The Company
believes the results of the impairment tests will not have a significant
effect on its earnings or its financial position.
The FASB issued Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS No.143) in June
2001. SFAS No. 143 applies to legal obligations associated with the
retirement of certain tangible long-lived assets. This statement is
effective for fiscal years beginning after June 15, 2002. The adoption of
SFAS No. 143 will not have a significant effect on earnings or the financial
position of the Company.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS No. 144). SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. This
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. It supersedes Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS No. 144 will not have a significant effect on earnings or the financial
position of the Company.
Reclassifications
Certain amounts in the 2000 and 1999 consolidated financial statements
have been reclassified to conform to the 2001 presentation.
-33-
Note 2 - Inventories
(In thousands)
2001 2000
Raw material and supplies $ 28,185 $ 25,111
Work-in-process 16,346 19,941
Finished goods 82,098 97,273
-------- --------
Inventories $ 126,629 $ 142,325
======== ========
Inventories valued using the LIFO method totaled $33.7 million at
December 29, 2001 and $37.3 million at December 30, 2000. At December 29,
2001 and December 30, 2000, the FIFO cost of such inventories approximates the
LIFO values.
Note 3 - Property, Plant, and Equipment, Net
(In thousands)
2001 2000
Land and land improvements $ 9,266 $ 9,162
Buildings 83,125 73,268
Machinery and equipment 458,898 419,290
Construction in progress 26,748 47,552
-------- --------
578,037 549,272
Less accumulated depreciation (190,504) (169,387)
-------- --------
Property, plant, and equipment, net $ 387,533 $ 379,885
======== ========
-34-
Note 4 - Long-Term Debt
(In thousands)
2001 2000
Line-of-credit at floating rate,
matures November 2003 $ 30,000 $ 90,000
2001 Series IRBs with interest at
6.63%, due 2021 10,000 -
1997 Series IRBs with interest at
7.39%, due through 2014 10,125 13,625
1997 Series IRBs with interest at
7.31%, due through 2009 545 1,005
1994 Series IRBs with interest at
8.825%, due through 2001 - 1,286
Other, including capitalized
lease obligations 303 968
-------- --------
50,973 106,884
Less current portion of long-term debt (3,996) (5,909)
-------- --------
Long-term debt $ 46,977 $ 100,975
======== ========
On November 30, 2000, the Company executed a Credit Agreement (the
Agreement) with a syndicate of six banks establishing an unsecured $200
million revolving credit facility (the Credit Facility) which matures in
November 2003. Borrowings under the Credit Facility bear interest, at the
Company's option, at (i) LIBOR plus a variable premium or (ii) the larger of
Prime, or the Federal Funds rate plus .50 percent. LIBOR advances may be
based upon the one, two, three, or six-month LIBOR. The variable premium over
LIBOR is based on certain financial ratios, and can range from 25 to 40 basis
points. At December 29, 2001, the premium was 25 basis points. Additionally,
a facility fee is payable quarterly on the total commitment and varies from
12.5 to 22.5 basis points based upon the Company's capitalization ratio. When
funded debt is 50 percent or more of the commitment, a utilization fee is
payable quarterly on the average loan balance outstanding and varies from 0 to
20 basis points based upon the capitalization ratio. Proceeds from the
initial draw on the Credit Facility were used to pay off existing notes.
Availability of funds under the Credit Facility is reduced by the amount of
certain outstanding letters of credit, which totaled approximately $6.4
million at December 29, 2001.
Borrowings under the above Agreement require the Company, among other
things, to maintain certain minimum levels of net worth and meet certain
minimum financial ratios. The Company is in compliance with all debt
covenants.
-35-
On February 13, 2001, the Company, through a wholly owned subsidiary,
issued $10 million of 2001 Series IRBs. The Company entered into an interest
rate swap agreement, which fixes the interest rate at 6.63 percent for seven
years. Subsequent to the seven-year period, the rate will convert to LIBOR
plus .90 percent. The IRBs call for quarterly interest payments through March
1, 2011 and for quarterly principal payments of $250 thousand plus interest
from June 1, 2011 to March 1, 2021.
Aggregate annual maturities of the Company's debt are $4.0 million, $33.7
million, $2.7 million, $0.1 million, and $0.1 million for the years 2002
through 2006 respectively, and $10.4 million thereafter. Interest paid in
2001, 2000, and 1999 was $5.5 million, $10.6 million, and $12.4 million,
respectively. During 2001, 2000, and 1999, the Company capitalized interest
of $1.4 million, $1.2 million, and $0.4 million, respectively, related to its
major capital improvement programs.
Note 5 - Stockholders' Equity
On November 10, 1994, the Company declared a dividend distribution of one
Right for each outstanding share of the Company's common stock. Each Right
entitles the holder to purchase one unit consisting of one-thousandth of a
share of Series A Junior Participating Preferred Stock at a purchase price of
$160 per unit, subject to adjustment. The Rights will not be exercisable, or
transferable apart from the Company's common stock, until 10 days following an
announcement that a person or affiliated group has acquired, or obtained the
right to acquire, beneficial ownership of 15 percent or more of its common
stock other than pursuant to certain offers for all shares of the Company's
common stock that have been determined to be fair to, and in the best interest
of, the Company's stockholders. The Rights, which do not have voting rights,
will be exercisable by all holders (except for a holder or affiliated group
beneficially owning 15 percent or more of the Company's common stock, whose
Rights will be void) so that each holder of a Right shall have the right to
receive, upon the exercise thereof, at the then current exercise price, the
number of shares of the Company's common stock having a market value of two
times the exercise price of the Rights. All Rights expire on November 10,
2004, and may be redeemed by the Company at a price of $.01 at any time prior
to either their expiration or such time that the Rights become exercisable.
In the event that the Company is acquired in a merger or other business
combination, or certain other events occur, provision shall be made so that
each holder of a Right (except Rights previously voided) shall have the right
to receive, upon exercise thereof at the then current exercise price, the
number of shares of common stock of the surviving company which at the time of
such transaction would have a market value of two times the exercise price of
the Right.
-36-
On October 18, 1999, the Company's Board of Directors authorized the
repurchase of up to four million shares of the Company's common stock from
time-to-time over the next year through open market transactions or through
privately negotiated transactions. During 2000, this authorization was
expanded to purchase up to 10 million shares. During 2001, this authorization
was extended through October 2002. The Company will have no obligation to
purchase any shares and may cancel, suspend, or extend the time period for the
purchase of shares at any time. The purchases will be funded primarily
through existing cash and cash from operations. The Company may hold such
shares in treasury or use a portion of the repurchased shares for employee
benefit plans, as well as for other corporate purposes. Through December 29,
2001, the Company has repurchased approximately 2.3 million shares under this
authorization.
Note 6 - Income Taxes
The components of income before income taxes were taxed under the
following jurisdictions:
(In thousands)
2001 2000 1999
Domestic $ 120,486 $ 156,150 $ 154,765
Foreign (12,494) (9,237) (9,056)
--------- --------- ---------
Income before income taxes $ 107,992 $ 146,913 $ 145,709
========= ========= =========
Income tax expense consists of the following:
(In thousands)
2001 2000 1999
Current tax expense:
Federal $ 23,266 $ 42,479 $ 12,052
Foreign 595 816 1,692
State and local 1,375 2,016 1,429
--------- --------- ---------
Current tax expense 25,236 45,311 15,173
--------- --------- ---------
Deferred tax expense:
Federal 15,096 8,412 30,570
Foreign (54) - -
State and local 759 500 687
--------- --------- ---------
Deferred tax expense 15,801 8,912 31,257
--------- --------- ---------
Income tax expense $ 41,037 $ 54,223 $ 46,430
========= ========= =========
-37-
U.S. income and foreign withholding taxes are provided on the earnings of
foreign subsidiaries that are expected to be remitted to the extent that taxes
on the distribution of such earnings would not be offset by foreign tax
credits.
The difference between the reported income tax expense and a tax
determined by applying the applicable U.S. federal statutory income tax rate
to income before income taxes is reconciled as follows:
(In thousands)
2001 2000 1999
Expected income tax expense $ 37,797 $ 51,420 $ 50,998
State and local income tax,
net of federal benefit 1,653 1,810 1,616
Foreign income taxes 4,327 3,493 4,371
Valuation allowance (284) (3,923) (8,220)
Other, net (2,456) 1,423 (2,335)
--------- --------- ---------
Income tax expense $ 41,037 $ 54,223 $ 46,430
========= ========= =========
-38-
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
(In thousands)
2001 2000
Deferred tax assets:
Accounts receivable $ 1,880 $ 1,961
Inventories 1,628 1,140
Pension, OPEB, and accrued items 11,078 9,649
Other reserves 7,365 10,392
Net operating loss carryforwards 31,775 33,313
Capital loss carryforwards 17,500 760
Foreign tax credits 95 359
Alternative minimum tax
credit carryforwards 4,243 4,026
Other 3,207 -
-------- --------
Total deferred tax assets 78,771 61,600
Less valuation allowance (58,535) (34,286)
-------- --------
Deferred tax assets, net of
valuation allowance 20,236 27,314
-------- --------
Deferred tax liabilities:
Property, plant, and equipment 67,396 60,566
Other 1,954 2,009
-------- --------
Total deferred tax liabilities 69,350 62,575
-------- --------
Net deferred tax liability $ (49,114) $ (35,261)
======== ========
During 2001, the Company's valuation allowance increased $24.0 million
primarily as a result of fully providing for the capital loss carryforward
described below as well as foreign net operating loss carryforwards generated
during the year.
As of December 29, 2001, the Company had recognized domestic net
operating loss carryforwards (NOLs) of $32.7 million, of which $25.9 million
expire in 2005 and $6.8 million expire in 2006. Annual limitations on these
NOLs are approximately $17.2 million in 2002, and approximately $14.4 million
thereafter. During 2000 and 1999, the Company recognized $3.8 million and
$2.3 million, respectively, of NOL tax attributes, reducing the deferred
income tax provision in each year. In addition, the Company has alternative
minimum tax credit carryforwards of approximately $4.2 million which are
available to reduce future federal regular income taxes, if any, over an
indefinite period.
-39-
As of December 29, 2001, the Company had foreign net operating loss
carryforwards (foreign NOLs) available to offset $61.5 million of foreign
subsidiary income. These foreign NOLs have not been recognized and expire as
follows: $2.1 million in 2002, $1.5 million in 2003, $7.7 million in 2004,
$2.8 million in 2005, and $1.9 million in 2006. The remaining $45.5 million
of foreign NOLs are available to offset foreign subsidiary income over an
indefinite period.
The 1999 sale of a subsidiary resulted in the realization of an ordinary
federal tax loss of approximately $70 million of which $45 million has been
recognized. The Internal Revenue Service agreed to allow this loss as part of
the comprehensive closing agreement which concluded the audit of the years
1993 through 1995. For financial reporting purposes, additional recognition
may occur in future periods.
Based upon a recent Federal Circuit Court decision, the Company has filed
an amended return claiming $49 million of capital loss carryforward from 1999.
The Company cannot predict the likelihood of the claim's success at this time.
This unrecognized capital loss may be available to offset capital gains of the
Company, if any, through December 25, 2004.
Income taxes paid were approximately $28.3 million in 2001, $43.6 million
in 2000, and $13.5 million in 1999.
Note 7 - Other Current Liabilities
Included in other current liabilities were accrued discounts and
allowances of $22.5 million at December 29, 2001, and $20.0 million at
December 30, 2000.
Note 8 - Employee Benefits
The Company sponsors several qualified and nonqualified pension plans and
other postretirement benefit plans for certain of its employees. The
following tables provide a reconciliation of the changes in the plans' benefit
obligations and the fair value of the plans' assets over the two-year period
ending December 29, 2001, and a statement of the plans' funded status as of
December 29, 2001 and December 30, 2000:
-40-
(In thousands)
Pension Benefits Other Benefits
2001 2000 2001 2000
Change in benefit
obligation:
Obligation at
beginning of year $ 103,417 $ 104,676 $ 7,996 $ 8,223
Service cost 1,802 2,620 13 16
Interest cost 7,222 7,193 702 621
Participant contributions 408 400 - -
Plan amendments - 562 - -
Actuarial (gain) loss (617) (3,970) 1,659 (359)
Business acquisitions - 185 - -
Benefit payments (7,324) (5,316) (1,365) (505)
Curtailments (2,429) - (891) -
Settlement (122) (55) - -
Foreign currency
translation adjustment (888) (2,878) - -
-------- -------- -------- --------
Obligation at end of year $ 101,469 $ 103,417 $ 8,114 $ 7,996
======== ======== ======== ========
Change in fair value
of plan assets:
Fair value of plan
assets at beginning
of year $ 126,683 $ 123,979 $ - $ -
Actual return on
plan assets (7,523) 8,970 - -
Employer contributions 1,331 1,702 1,365 505
Participant contributions 408 400 - -
Benefit payments (7,324) (5,316) (1,365) (505)
Settlement (122) (55) - -
Foreign currency
translation adjustment (890) (2,997) - -
-------- -------- -------- --------
Fair value of plan assets
at end of year $ 112,563 $ 126,683 $ - $ -
======== ======== ======== ========
Funded status:
Funded (underfunded)
status at end of year $ 11,094 $ 23,266 $ (8,114) $ (7,996)
Unrecognized prior
service cost 4,005 4,909 (96) (104)
Unrecognized (gain) loss (11,870) (28,604) 386 (705)
-------- -------- -------- --------
Net amount recognized $ 3,229 $ (429) $ (7,824) $ (8,805)
======== ======== ======== ========
-41-
The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plans with benefit obligations in
excess of plan assets were $43.6 million, $42.1 million, and $38.4 million,
respectively, as of December 29, 2001, and $1.8 million, $1.8 million, and
$1.4 million, respectively, as of December 30, 2000.
The following table provides the amounts recognized in the Consolidated
Balance Sheets as of December 29, 2001 and December 30, 2000:
(In thousands)
Pension Benefits Other Benefits
2001 2000 2001 2000
Prepaid benefit cost $ 6,956 $ 4,809 $ - $ -
Accrued benefit liability (9,262) (5,238) (7,824) (8,805)
Accumulated other
comprehensive income 5,535 - - -
-------- -------- -------- --------
Net amount recognized $ 3,229 $ (429) $ (7,824) $ (8,805)
======== ======== ======== ========
The components of net periodic benefit cost (income) are as follows:
(In thousands)
2001 2000 1999
Pension benefits:
Service cost $ 1,802 $ 2,620 $ 3,180
Interest cost 7,222 7,193 6,834
Expected return on
plan assets (9,794) (9,614) (8,146)
Amortization of prior
service cost 904 875 869
Amortization of net gain (1,749) (1,701) (933)
--------- --------- ---------
Net periodic benefit
cost (income) $ (1,615) $ (627) $ 1,804
========= ========= =========
Other benefits:
Service cost $ 13 $ 16 $ 19
Interest cost 702 621 647
Amortization of prior
service cost (8) (8) (8)
Amortization of net gain - (25) (23)
Curtailment gain (323) - -
--------- --------- ---------
Net periodic benefit cost $ 384 $ 604 $ 635
========= ========= =========
-42-
In 2001, the Company significantly reduced the number of participants in
one of its defined benefit pension plans. In accordance with Statement of
Financial Accounting Standards No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits", the Company did not recognize a curtailment gain as the reduction
of the benefit obligation resulting from the curtailment was less than the
previously unrecognized net loss on that plan.
Prior service costs are amortized on a straight-line basis over the
average remaining service period of active participants. Gains and losses in
excess of 10 percent of the greater of the benefit obligation and the market-
related value of assets are amortized over the average remaining service
period of active participants.
The assumptions used in the measurement of the Company's benefit
obligations are as follows:
(In thousands)
Pension Benefits Other Benefits
2001 2000 2001 1999
Weighted average
assumptions:
Discount rate 7.25% 7.17% 8.34% 8.21%
Expected return
on plan assets 8.10% 7.96% N/A N/A
Rate of compensation
increases 4.25% 3.25% N/A N/A
Only one pension plan uses the rate of compensation increase in its
benefit formula. All other pension plans are based on length of service.
The annual assumed rate of increase in the per capita cost of covered
benefits (i.e., health care cost trend rate) is assumed to range from 8.0 to
11.5 percent for 2002, gradually decrease to 6.0 percent for 2011, and remain
at that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point would increase
the accumulated postretirement benefit obligation by $646 thousand and the
service and interest cost components of net periodic postretirement benefit
costs by $54 thousand for 2001. Decreasing the assumed health care cost trend
rates by one percentage point in each year would decrease the accumulated
postretirement benefit obligation and the service and interest cost components
of net periodic postretirement benefit costs for 2001 by $590 thousand and $50
thousand, respectively.
The Company sponsors voluntary employee savings plans that qualify under
Section 401(k). Compensation expense for the Company's matching contribution
to the 401(k) plans was $2.1 million in 2001, $2.0 million in 2000, and $1.5
million in 1999. The Company's match is a cash contribution.
-43-
Participants direct the investment of their account balances by
allocating among a range of asset classes including mutual funds (equity,
fixed income, and balanced funds), and money market funds. The plans do not
offer direct investment in securities issued by the Company.
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992
(the Act) was enacted. The Act mandates a method of providing for
postretirement benefits to UMWA current and retired employees, including some
retirees who were never employed by the Company. In October 1993,
beneficiaries were assigned to the Company and the Company began its mandated
contributions to the UMWA Combined Benefit Fund, a multiemployer trust.
Beginning in 1994, the Company was required to make contributions for assigned
beneficiaries under an additional multiemployer trust created by the Act, the
UMWA 1992 Benefit Plan. The ultimate amount of the Company's liability under
the Act will vary due to factors which include, among other things, the
validity, interpretation, and regulation of the Act, its joint and several
obligation, the number of valid beneficiaries assigned, and the extent to
which funding for this obligation will be satisfied by transfers of excess
assets from the 1950 UMWA pension plan and transfers from the Abandoned Mine
Reclamation Fund. Nonetheless, the Company believes it has an adequate
reserve for this liability.
The Company maintains a nonqualified, deferred compensation plan, which
permits certain management employees to annually elect to defer, on a pretax
basis, a portion of their compensation. The deferred benefit to be provided
is based on the amount of compensation deferred, Company match, and earnings
on the deferrals. During 2001, the Company match was discontinued. Other
expenses associated with the plan in 2001 were insignificant. Expenses
associated with the deferred compensation plan were $0.2 million, and $0.5
million in 2000 and 1999, respectively. The Company has invested in certain
assets to assist in funding this plan. The fair value of these assets,
included in other assets, was $5.5 million and $5.1 million at December 29,
2001 and December 30, 2000, respectively.
The Company makes contributions to certain multiemployer defined benefit
pension plan trusts that cover union employees based on collective bargaining
agreements. Contributions by employees are not required nor are they
permitted. Pension expense under the multiemployer defined benefit pension
plans was $0.3 million for 2001, 2000, and 1999.
Note 9 - Commitments and Contingencies
The Company is subject to environmental standards imposed by federal,
state, local, and foreign environmental laws and regulations. It has provided
and charged to income $3.6 million in 2001 and $2.0 million in 2000, for
pending environmental matters. The basis for the provision is updated
information and results of ongoing remediation and monitoring programs.
Management believes that the outcome of pending environmental matters will not
materially affect the financial condition or results of operations of the
Company.
-44-
The Company is involved in certain litigation as a result of claims that
arise in the ordinary course of business, which management believes will not
have a material adverse effect on the Company's financial condition or results
of operations.
The Company leases certain facilities and equipment under operating
leases expiring on various dates through 2011. The lease payments under these
agreements aggregate to approximately $5.7 million in 2002, $5.2 million in
2003, $5.1 million in 2004, $4.0 million in 2005, $2.9 million in 2006, and
$4.9 million thereafter. Total lease expense amounted to $8.8 million in
2001, $9.0 million in 2000 and $10.9 million in 1999.
Note 10 - Other Income, Net
(In thousands)
2001 2000 1999
Rent and royalties $ 692 $ 799 $ 1,026
Interest income 4,977 8,391 6,591
Gain on disposal of properties, net 249 413 1,847
Minority interest in income
of subsidiaries 26 - -
--------- --------- ---------
Other income, net $ 5,944 $ 9,603 $ 9,464
========= ========= =========
Note 11 - Stock Options
The Company follows APB No. 25 in accounting for its employee stock
options. Under APB No.25, no compensation expense is recognized because the
exercise price of the Company's incentive employee stock options equals the
market price of the underlying stock on the date of grant.
Under existing plans, the Company may grant options to purchase shares of
common stock at prices not less than the fair market value of the stock on the
date of the grant. Generally, the options vest annually in 20 percent
increments over a five-year period beginning one year from the date of the
grant. Any unexercised options expire after not more than ten years. No
options may be granted after ten years from the date of plan adoption.
Additionally, the Company has granted stock options to key executives as
retention incentives and inducements to enter into employment agreements with
the Company. Generally, these special grants have terms and conditions
similar to those granted under the Company's other stock option plans.
The income tax benefit associated with the exercise of stock options
reduced income taxes payable, classified as other current liabilities, by $0.4
million in 2001 and $1.4 million in 2000. Such benefits are reflected as
additions directly to additional paid-in capital.
-45-
A summary of the Company's stock option activity and related information
follows:
(Shares in thousands)
Weighted Average
Options Exercise Price
Outstanding at December 26, 1998 5,172 $ 6.22
Granted 158 34.25
Exercised (121) 10.60
Expired, cancelled, or surrendered (10) 19.65
--------
Outstanding at December 25, 1999 5,199 6.94
Granted 150 24.42
Exercised (311) 10.07
Expired, cancelled, or surrendered (16) 24.70
--------
Outstanding at December 30, 2000 5,022 7.22
Granted 76 29.43
Exercised (120) 17.55
Expired, cancelled, or surrendered (42) 26.03
--------
Outstanding at December 29, 2001 4,936 $ 7.15
========
Options exercisable at:
December 25, 1999 4,410 $ 4.17
December 30, 2000 4,377 4.75
December 29, 2001 4,462 5.24
Exercise prices for stock options outstanding at December 29, 2001,
ranged from $2.06 to $37.04. Of the 4.9 million stock options that are
outstanding at year-end, 3.6 million are owned by Mr. Harvey L. Karp and
expire one year after Mr. Karp's separation from employment with the Company.
Mr. Karp's options have an exercise price of $2.06 per share. The weighted
average remaining life of the remaining 1.3 million shares is 6.19 years, and
the weighted average exercise price of these shares is $20.85. The weighted
average fair value per option granted was $13.58 in 2001, $12.60 in 2000, and
$17.71 in 1999.
As of December 29, 2001, the Company had reserved 3.7 million shares of
its common stock for issuance pursuant to certain stock option plans.
Additionally, the Company had reserved 15 thousand shares of preferred stock
for issuance pursuant to the shareholder rights plan.
-46-
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The
fair value for these options at the date of grant was estimated using the
following weighted average assumptions for the years 2001, 2000, and 1999:
weighted average expected life of the options of six years; and no dividend
payments. The weighted average risk free interest rate used in the model was
4.67 percent for 2001, 5.00 percent for 2000, and 6.84 percent for 1999. The
volatility factor of the expected market value of the Company's common stock
was 0.418 in 2001, 0.479 in 2000, and 0.433 in 1999.
The pro forma information is determined using the Black-Scholes option
valuation model. Option valuation models require highly subjective
assumptions including the expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows:
(In thousands, except per share data)
2001 2000 1999
Net income $ 66,955 $ 92,690 $ 99,279
SFAS No. 123 pro forma
compensation expense (1,991) (2,257) (1,879)
--------- --------- ---------
SFAS No. 123 pro forma
net income $ 64,964 $ 90,433 $ 97,400
========= ========= =========
Pro forma earnings per share:
Basic $ 1.94 $ 2.64 $ 2.74
Diluted $ 1.75 $ 2.39 $ 2.47
========= ========= =========
Note 12 - Acquisitions
On April 20, 2000, Mueller acquired Micro Gauge, Inc. and a related
business, Microgauge Machining Inc., (collectively Micro Gauge) for
approximately $9.1 million. These acquisitions bring to our Industrial
Products Division specialized machining capabilities, which were previously
outsourced to Micro Gauge. In addition, on June 28, 2000, the Company
acquired Propipe Technologies, Inc., a fabricator of gas train manifold
systems, for approximately $6.1 million.
-47-
On September 30, 1999, the Company's subsidiary, Utah Railway Company,
purchased the stock of the Salt Lake City Southern Railroad Company, Inc.
(SLCS) for $675 thousand. SLCS operates pursuant to an easement on
approximately 25 miles of track, owned by the Utah Transit Authority, from
downtown Salt Lake City to near Draper, Utah.
Each of the acquisitions was accounted for using the purchase method of
accounting. Therefore, the results of operations of the acquired businesses
were included in the consolidated financial statements of the Company from
their respective acquisition dates. The purchase price for these
acquisitions, which was financed by available cash balances and credit
facilities, has been allocated to the assets of the acquired businesses based
on their respective fair market values.
The total fair value of assets acquired in 2000 was $19.1 million.
Liabilities assumed in these acquisitions were $3.9 million. The excess of
the purchase price over the net assets acquired in 2000 was $7.4 million,
which is being amortized over 25 years.
Note 13 - Industry Segments
The Company's three reportable segments include its Standard Products
Division (SPD), its Industrial Products Division (IPD), and Other Businesses.
These segments are classified primarily by the markets for their products.
Performance of segments is generally evaluated by their operating income.
SPD manufactures copper tube and fittings, plastic fittings, and line
sets. These products are manufactured in the U.S. and Europe and are sold
primarily to wholesalers.
IPD manufactures brass rod, impact extrusions, and forgings as well as a
variety of end-products including plumbing brass; automotive components;
valves and fittings; and specialty copper, copper-alloy, and aluminum tubing.
These products are sold primarily to OEM customers.
-48-
SEGMENT INFORMATION:
(In thousands)
2001 2000 1999
Net sales:
Standard Products Division $ 773,802 $ 909,963 $ 882,515
Industrial Products Division 251,747 307,240 294,806
Other Businesses 23,399 24,667 22,263
Elimination of intersegment sales (4,161) (3,429) (2,314)
--------- --------- ---------
$1,044,787 $1,238,441 $1,197,270
========= ========= =========
Depreciation and amortization:
Standard Products Division $ 29,549 $ 26,246 $ 26,495
Industrial Products Division 10,098 8,791 7,936
Other Businesses 743 783 787
General corporate 1,693 1,637 1,768
--------- --------- ---------
$ 42,083 $ 37,457 $ 36,986
========= ========= =========
Operating income:
Standard Products Division $ 102,787 $ 128,466 $ 129,141
Industrial Products Division 17,469 30,604 29,935
Other Businesses 1,682 3,377 3,297
Unallocated expenses (12,873) (13,801) (14,447)
--------- --------- ---------
$ 109,065 $ 148,646 $ 147,926
========= ========= =========
Expenditures for long-lived assets:
Standard Products Division $ 33,902 $ 43,581 $ 31,089
Industrial Products Division 10,379 34,380 5,063
Other Businesses 299 74 960
--------- --------- ---------
$ 44,580 $ 78,035 $ 37,112
========= ========= =========
Segment assets:
Standard Products Division $ 604,099 $ 621,370 $ 599,596
Industrial Products Division 158,659 164,210 136,586
Other Businesses 30,348 30,014 40,088
General corporate 122,959 94,682 127,810
--------- --------- ---------
$ 916,065 $ 910,276 $ 904,080
========= ========= =========
-49-
GEOGRAPHIC INFORMATION:
(In thousands)
2001 2000 1999
Net sales:
United States $ 904,756 $1,081,799 $1,040,384
Foreign 140,031 156,642 156,886
--------- --------- ---------
$1,044,787 $1,238,441 $1,197,270
========= ========= =========
Long-lived assets:
United States $ 451,231 $ 455,356 $ 425,214
Foreign 60,921 49,749 38,120
--------- --------- ---------
$ 512,152 $ 505,105 $ 463,334
========= ========= =========
Note 14 - Quarterly Financial Information (Unaudited)
(In thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
2001
Net sales $ 276,578 $ 286,021 $ 253,438 $ 228,750
Gross profit (1) 58,462 66,931 62,629 50,804
Net income 15,469 20,775 19,001 11,710
Basic earnings per share 0.46 0.62 0.57 0.35
Diluted earnings per share 0.42 0.56 0.51 0.31
2000
Net sales $ 309,336 $ 337,494 $ 304,017 $ 287,594
Gross profit (1) 75,836 80,790 61,916 62,315
Net income 26,566 29,762 19,307 17,055
Basic earnings per share 0.76 0.86 0.56 0.51
Diluted earnings per share 0.69 0.78 0.50 0.46
(1) Gross profit is net sales less cost of goods sold, which excludes
depreciation and amortization.
-50-
Report Of Independent Auditors
The Stockholders of Mueller Industries, Inc.
We have audited the accompanying consolidated balance sheets of Mueller
Industries, Inc. as of December 29, 2001 and December 30, 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 29, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Mueller Industries, Inc. at December 29, 2001 and December 30, 2000, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 29, 2001, in conformity with
accounting principles generally accepted in the United States.
/s/Ernst & Young LLP
Memphis, Tennessee
February 5, 2002
-51-
Capital Stock Information
The high, low, and closing prices of Mueller's common stock on the New
York Stock Exchange for each fiscal quarter of 2001 and 2000 were as follows:
High Low Close
2001
Fourth quarter $ 33.73 $ 27.94 $ 33.53
Third quarter 35.15 26.50 28.70
Second quarter 34.87 28.38 32.91
First quarter 32.11 25.05 30.04
2000
Fourth quarter $ 26.94 $ 20.06 $ 26.81
Third quarter 32.25 22.06 22.56
Second quarter 34.25 26.00 26.50
First quarter 36.62 26.19 28.31
As of March 1, 2002, the number of holders of record of Mueller's common stock
was approximately 2,700. On March 1, 2002, the closing price for Mueller's
common stock on the New York Stock Exchange was $32.65.
The Company has paid no cash dividends on its common stock and presently does
not anticipate paying cash dividends in the near future.
-52-
Selected Financial Data
(In thousands, except per share data)
2001 (1) 2000 (1) 1999 (1) 1998 (1) 1997
For the fiscal year:
Net sales $1,044,787 $1,238,441 $1,197,270 $ 948,948 $ 903,925
Operating income 109,065 148,646 147,926 108,809 99,709
Net income 66,955 92,690 99,279 75,445 69,770
Diluted earnings
per share (2) 1.80 2.43 2.51 1.90 1.78
At year-end:
Total assets 916,065 910,276 904,080 874,694 610,776
Long-term debt 46,977 100,975 118,858 174,569 53,113
(1) Includes the effects of Halstead Industries, Inc. and B&K Industries, Inc. acquisitions.
(2) In 1998, the Company declared a two-for-one stock split effected in the form of a 100 percent stock dividend.
Diluted earnings per share has been restated to reflect the split for all periods presented.
-53-
Corporate Information
BOARD OF DIRECTORS
Harvey L. Karp Chairman of the Board,
Mueller Industries, Inc.
Gary S. Gladstein(1)(2) Senior Consultant,
Soros Fund Management LLC
Robert B. Hodes(1)(3) Counsel, Willkie Farr & Gallagher
G. E. Manolovici(1)(2)(3) Private Investor
William D. O'Hagan President and Chief Executive Officer,
Mueller Industries, Inc.
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
EXECUTIVE OFFICERS
Harvey L. Karp Chairman of the Board
William D. O'Hagan President and Chief Executive Officer
Lee R. Nyman Senior Vice President
Manufacturing/Engineering
Kent A. McKee Vice President and
Chief Financial Officer
Roy C. Harris Vice President and
Chief Information Officer
John P. Fonzo Vice President,
General Counsel and Secretary
OTHER OFFICERS AND MANAGEMENT
Robert L. Fleeman Vice President, International Sales
Richard W. Corman Corporate Controller
James E. Browne Assistant Secretary
-54-
Standard Products Division
Larry D. Birch Vice President, Sales - Corporate Accounts
Gregory L. Christopher Vice President,
Sales and Supply Chain Management
Bruce R. Clements Vice President, Manufacturing -
Copper Tube
Daniel R. Corbin Vice President, Manufacturing - Plastics
John B. Hansen Vice President, Marketing
Tommy L. Jamison Vice President, Manufacturing -
Copper Fittings
Andrew A. Sippel Division Controller
Peter D. Berkman President - B&K Industries
Robert J. Pasquarelli Vice President and General Manager -
European Operations
Industrial Products Division
James H. Rourke Group Vice President and
General Manager - Rod
Lance K. Alton General Manager - Forgings,
Impacts, Microgauge
John R. Brower General Manager - Precision Tube
Mark T. Lang General Manager - Gas Products
Douglas J. Murdock General Manager - Refrigeration Products
David G. Rice Division Controller
Other Businesses
Gary L. Barker President, Utah Railway Company
-55-
STOCKHOLDER INFORMATION
Annual Meeting
The annual meeting of stockholders will be held at the Company's
headquarters at 8285 Tournament Drive, Suite 150, Memphis, TN 38125, 10:00
a.m. local time, May 9, 2002.
Common Stock
Mueller common stock is traded on the NYSE - Symbol MLI.
Form 10-K
The Company's Annual Report on Form 10-K is available on the Company's
website at www.muellerindustries.com or upon written request:
c/o Mueller Industries, Inc.
8285 Tournament Drive, Suite 150
Memphis, TN 38125
Attention: Investor Relations
Independent Auditors
Ernst & Young LLP
Memphis, Tennessee
Transfer Agent and Registrar
Continental Stock Transfer & Trust Co.
17 Battery Place
New York, NY 10004
Stockholder Inquiries
To notify the Company of address changes or lost certificates, stockholders
can call Continental Stock Transfer & Trust Co. at (212) 509-4000.
-56-