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
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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
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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
========== ==========
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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
========== ==========
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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.
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