TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
Mueller's net income was $46.6 million, or $1.27 per diluted share, in
the third quarter of 2002 compared with $19.0 million, or 51 cents per
diluted share, for the same quarter last year. Earnings for the current
quarter included a gain of $21.1 million, or 57 cents per diluted share,
from the sale of the Utah Railway. In addition, the Company utilized a
capital loss carryforward to offset a portion of the taxes due on the sale
of the railroad. This tax benefit amounted to $12.7 million, or 34 cents
per share, in the third quarter of 2002.
Net sales for the third quarter were $238.5 million compared with net
sales of $247.6 million for the third quarter of 2001. Income from
continuing operations for the third quarter was $24.9 million, or 68 cents
per diluted share, compared with $18.2 million, or 49 cents, in the same
period of 2001. We shipped 175.9 million pounds of product versus 173.6
million pounds in the third quarter of last year.
Profit margins continued at sub-par levels, particularly in our copper
tube business. We believe better pricing will come when the national
economy improves.
Mueller's financial condition is excellent. We ended the quarter with
$185 million in cash on hand, and only $17.9 million in debt.
During the third quarter, we acquired certain assets of Colonial
Engineering, Inc.'s Fort Pierce, Florida operations. These operations
manufacture injected molded plastic pressure fittings for plumbing,
agricultural, and industrial use including an extensive line of PVC Schedule
40 and 80 and CPVC fittings. These operations generated sales of
approximately $15 million in 2001. The purchase price was approximately
$14.5 million. This acquisition will allow Mueller to offer our customers a
single source for DWV and pressure plastic fittings. Benefits should be
realized as we leverage our core manufacturing capabilities in injection
molding as well as our selling and distribution costs.
Also during the third quarter, Mueller acquired 100 percent of the
outstanding stock of Overstreet-Hughes, Co., Inc. Overstreet-Hughes,
located in Carthage, Tennessee, manufactures precision tubular components
and assemblies primarily for the OEM air-conditioning market and had sales
in 2001 of approximately $8.0 million. Total consideration paid at closing,
including assumption of debt, was approximately $6.4 million. A contingent
payment of up to $2 million will be paid if certain financial targets are
achieved. Acquiring Overstreet-Hughes positions Mueller to capitalize on
the growing trend by OEMs in the HVAC industries to outsource assemblies of
tubular components. Mueller currently serves many of the same customers in
these industries. By acquiring Overstreet-Hughes, we will be able to offer
additional value added products to existing and new customers.
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At the end of the third quarter, Mueller acquired a 16 percent equity
interest in Conbraco Industries, Inc. for $7.3 million in cash. Conbraco,
headquartered in Matthews, North Carolina, is a manufacturer of flow control
products including Apollo ball valves, automation products, backflow
preventers, butterfly valves, check valves, forged steel products, marine
valves, safety relief valves, strainers and plumbing and heating products
for commercial and industrial applications. We will be working with the
management of Conbraco to explore ways our companies can better supply our
customers with the full line of pipe, valves, and fittings (PVF). We are
confident that together both of our companies will benefit.
The housing industry has continued to be a bright spot in the national
economy. Mortgage rates are at a 40-year low and inventories of new homes
for sale are also low. On the other hand, mortgage foreclosure rates have
recently climbed. We believe that over the next year, the pace of the
housing and construction industry may moderate, but at a comparatively high
level.
Sincerely,
/S/HARVEY L. KARP /S/WILLIAM D. O'HAGAN
Harvey L. Karp William D. O'Hagan
Chairman of the Board President and Chief Executive
Officer
October 15, 2002
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended
September 28, 2002 September 29, 2001
Net sales $ 238,481 $ 247,568
Cost of goods sold 187,353 186,462
Depreciation and amortization 9,735 10,518
Selling, general, and
administrative expense 21,915 20,891
---------- ----------
Operating income 19,478 29,697
Nonoperating income (expense), net 302 (306)
---------- ----------
Income from continuing operations
before income taxes 19,780 29,391
Income tax (expense) benefit 5,086 (11,163)
---------- ----------
Income from continuing operations 24,866 18,228
Income from discontinued
operations, net of tax 643 773
Gain on sale of Other Businesses, net
of tax 21,123 -
---------- ----------
Net income $ 46,632 $ 19,001
========== ==========
Basic earnings per share:
Weighted average shares outstanding 34,269 33,424
---------- ----------
From continuing operations $ 0.72 $ 0.55
From discontinued operations 0.02 0.02
From gain on sale of Other Businesses 0.62 -
---------- ----------
Basic earnings per share $ 1.36 $ 0.57
========== ==========
Diluted earnings per share:
Weighted average shares outstanding
plus assumed conversions 36,837 37,298
---------- ----------
From continuing operations $ 0.68 $ 0.49
From discontinued operations 0.02 0.02
From gain on sale of Other Businesses 0.57 -
---------- ----------
Diluted earnings per share $ 1.27 $ 0.51
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Nine Months Ended
September 28, 2002 September 29, 2001
Net sales $ 771,649 $ 798,399
Cost of goods sold 604,329 615,363
Depreciation and amortization 29,011 31,220
Selling, general, and
administrative expense 67,500 65,845
---------- ----------
Operating income 70,809 85,971
Nonoperating income (expense), net 2,103 (945)
---------- ----------
Income from continuing operations
before income taxes 72,912 85,026
Income tax expense (13,957) (32,332)
---------- ----------
Income from continuing operations 58,955 52,694
Income from discontinued
operations, net of tax 2,955 2,551
Gain on sale of Other Businesses, net
of tax 21,123 -
---------- ----------
Net income $ 83,033 $ 55,245
========== ==========
Basic earnings per share:
Weighted average shares outstanding 33,905 33,396
---------- ----------
From continuing operations $ 1.74 $ 1.57
From discontinued operations 0.09 0.08
From gain on sale of Other Businesses 0.62 -
---------- ----------
Basic earnings per share $ 2.45 $ 1.65
========== ==========
Diluted earnings per share:
Weighted average shares outstanding
plus assumed conversions 37,123 37,237
---------- ----------
From continuing operations $ 1.59 $ 1.41
From discontinued operations 0.08 0.07
From gain on sale of Other Businesses 0.57 -
---------- ----------
Diluted earnings per share $ 2.24 $ 1.48
========== ==========
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 28, 2002 December 29, 2001
ASSETS
Cash and cash equivalents $ 184,570 $ 121,862
Accounts receivable, net 151,285 148,808
Inventories 137,475 126,629
Other current assets 4,414 6,614
---------- ----------
Total current assets 477,744 403,913
Property, plant, and equipment, net 361,818 387,533
Other assets 150,052 124,619
---------- ----------
$ 989,614 $ 916,065
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 3,652 $ 3,996
Accounts payable 40,059 34,209
Other current liabilities 68,992 63,283
---------- ----------
Total current liabilities 112,703 101,488
Long-term debt 14,224 46,977
Other noncurrent liabilities 95,778 94,396
---------- ----------
Total liabilities 222,705 242,861
Minority interest in subsidiaries 337 271
Stockholders' equity 766,572 672,933
---------- ----------
$ 989,614 $ 916,065
========== ==========
Statements in this release that are not strictly historical may be
"forward-looking" statements, which involve risks and uncertainties.
These include economic and currency conditions, market demand, pricing, and
competitive and technological factors, among others, as set forth in the
Company's SEC filings.
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