Exhibit 19.1 To Our Stockholders, Customers, and Employees We are pleased to report Mueller's net income for the third quarter was $51.6 million, or $1.38 per diluted share. This compares with income from continuing operations of $21.0 million, or 57 cents per diluted share, for the third quarter of fiscal 2005. Net sales for the three months ended September 30, 2006 were $636.0 million, compared with net sales of $434.1 million for the third quarter of 2005. This increase in net sales is primarily due to the increased cost of copper, the Company's principal raw material, which is generally passed through to customers by changes in selling prices. During the third quarter of 2006, the Company recorded additional state income tax benefits, the majority of which relate to certain state income tax credit carryforwards that were previously unrecognized. The total benefit related to these matters was $10.4 million, or 28 cents per diluted share, and resulted in reducing the overall effective tax rate to 11.3 percent for the third quarter of 2006. Year-to-date, the Company earned $143.7 million, or $3.86 per diluted share, on net sales of $1.97 billion. This compares with net income from continuing operations of $53.4 million, or $1.44 per diluted share, on net sales of $1.25 billion for the same period of 2005. Our Plumbing & Refrigeration segment posted operating earnings of $56.9 million on net sales of $426.3 million which compares with operating earnings of $31.0 million on net sales of $322.5 million in the third quarter of 2005. Unit volumes in our core product lines, particularly copper tube, were down substantially compared with the preceding quarter and the third quarter of 2005. The impact of these volume decreases on net sales was offset by rising copper prices. Overall, operating results remained strong despite lower volumes and margin pressures on our Trading Group. Our OEM segment posted operating earnings of $9.9 million during the third quarter of 2006 on net sales of $218.4 million, which compared with operating earnings of $5.7 million on net sales of $114.3 million for the same period in 2005. Included in the OEM segment is our Chinese joint venture which reported total operating income of $1.8 million. The OEM segment also was impacted by lower unit volumes. The housing market is in the midst of a much anticipated 'correction'. Housing starts for the third quarter of 2006 were 18.7 percent less than for the same quarter last year. Also, the inventory of new unsold homes has risen to a 6.6 months supply. The downturn in housing is likely to continue into next year, but may be moderated by prevailing low mortgage rates and positive demographic factors. The non-residential construction market continues to strengthen and the home improvement sector has shown steady growth. Mueller will continue to react to changing market conditions which present opportunities as well as challenges. 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 24, 2006 -1- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
For the Quarter Ended September 30, October 1, 2006 2005 (Unaudited) Net sales $ 635,998 $ 434,130 Cost of goods sold 528,946 360,514 Depreciation and amortization 10,462 10,082 Selling, general, and administrative expense 34,787 33,297 ---------- ---------- Operating income 61,803 30,237 Interest expense (5,085) (4,794) Other income, net 1,452 5,421 ---------- ---------- Income from continuing operations before income taxes 58,170 30,864 Income tax expense (6,591) (9,848) ---------- ---------- Income from continuing operations 51,579 21,016 Discontinued operations, net of tax - 3,324 ---------- ---------- Net income $ 51,579 $ 24,340 ========== ========== Basic earnings per share: Weighted average shares outstanding 36,976 36,625 ========== ========== From continuing operations $ 1.39 $ 0.57 From discontinued operations - 0.09 ---------- ---------- Basic earnings per share $ 1.39 $ 0.66 ========== ========== Diluted earnings per share: Weighted average shares outstanding plus assumed conversions 37,355 37,120 ========== ========== From continuing operations $ 1.38 $ 0.57 From discontinued operations - 0.09 ---------- ---------- Diluted earnings per share $ 1.38 $ 0.66 ========== ==========
-2- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
For the Nine Months Ended September 30, October 1, 2006 2005 (Unaudited) Net sales $ 1,966,700 $ 1,246,299 Cost of goods sold 1,623,053 1,040,201 Depreciation and amortization 31,033 30,571 Selling, general, and administrative expense 109,435 92,788 ---------- ---------- Operating income 203,179 82,739 Interest expense (15,161) (14,730) Other income, net 3,398 10,188 ---------- ---------- Income from continuing operations before income taxes 191,416 78,197 Income tax expense (47,722) (24,790) ---------- ---------- Income from continuing operations 143,694 53,407 Discontinued operations, net of tax - 3,324 ---------- ---------- Net income $ 143,694 $ 56,731 ========== ========== Basic earnings per share: Weighted average shares outstanding 36,853 36,576 ========== ========== From continuing operations $ 3.90 $ 1.46 From discontinued operations - 0.09 ---------- ---------- Basic earnings per share $ 3.90 $ 1.55 ========== ========== Diluted earnings per share: Weighted average shares outstanding plus assumed conversions 37,249 37,112 ========== ========== From continuing operations $ 3.86 $ 1.44 From discontinued operations - 0.09 ---------- ---------- Diluted earnings per share $ 3.86 $ 1.53 ========== ==========
-3- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
September 30, 2006 December 31, 2005 (Unaudited) Assets Cash and cash equivalents $ 170,463 $ 129,685 Accounts receivable, net 309,153 248,395 Inventories 298,140 196,987 Other current assets 43,294 36,919 ---------- ---------- Total current assets 821,050 611,986 Property, plant, and equipment, net 315,649 307,046 Other assets 170,699 185,606 ---------- ---------- $ 1,307,398 $ 1,104,638 ========== ========== Liabilities and Stockholders' Equity Current portion of long-term debt $ 33,255 $ 4,120 Accounts payable 142,577 124,216 Other current liabilities 131,569 123,056 ---------- ---------- Total current liabilities 307,401 251,392 Long-term debt 308,273 312,070 Pension and postretirement liabilities 35,939 35,236 Environmental reserves 8,965 9,073 Deferred income taxes 44,662 63,944 Other noncurrent liabilities 3,062 3,078 ---------- ---------- Total liabilities 708,302 674,793 Minority interest in subsidiaries 21,738 6,937 Stockholders' equity 577,358 422,908 ---------- ---------- $ 1,307,398 $ 1,104,638 ========== ==========
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, continued availability of raw materials, market demand, pricing, and competitive and technological factors, among others, as set forth in the Company's SEC filings. These filings are available through our website at www.muellerindustries.com. -4-