Mueller Industries, Inc. Reports Third Quarter 2015 Earnings

MEMPHIS, Tenn., October 20, 2015 -- Mueller Industries, Inc. (NYSE: MLI) announced today net income of $17.8 million, or 31 cents per diluted share, for the third quarter of 2015.  This compares to net income of $23.8 million, or 42 cents per diluted share, during the third quarter of 2014.  Net sales for the third quarter of 2015 were $535.2 million compared with $602.8 million for the same quarter of the prior year.
Both revenues and earnings in the third quarter of 2015 were impacted by lower copper prices and lower unit volume in the OEM Segment.  The average price of copper was $2.40 per pound in the third quarter of 2015 compared to $3.16 per pound in the third quarter of 2014.  During the third quarter of 2015, copper declined $0.37 per pound, or 49 percent of the year-over-year decline.
The sharp decline of copper in the quarter put pressure on margins of our FIFO accounting businesses.  OEM volumes in the US continued to be impacted by soft demand in the industrial segment and increased import competition due to the stronger dollar.  OEM volumes in China were impacted by slowing demand due to general domestic economic conditions.

Financial and Operating Highlights for the third quarter of 2015:
-
The impact of the copper decline represented $63.3 million of the $67.6 million reduction in net sales and $13.5 million in lower gross margins.
-
The effective tax rate for the quarter reflects a benefit of $4.2 million related to a reduction to the Company's deferred tax liabilities.
-
The rationalization of the UK copper tube business acquired in 2014 was completed during the quarter.  All associated impairments and redundancy expenses are now complete.
-
During the quarter we completed the acquisition of Great Lakes Copper and invested in a joint venture that acquired Tecumseh Products Company for a total cash investment of $137.4 million.
-
The Company recognized $2.2 million in expenses related to transaction costs linked to the investment in Tecumseh Products Company in the final week of the quarter.
-
Cash provided from operations in the quarter was $78.3 million with the quarter end cash totaling $220.7 million, or $3.86 per share.
-
Debt to total capitalization was 20.5 percent and the current ratio was 3.6 to 1.

Regarding the outlook, Greg Christopher, Mueller's CEO, said "Construction remains positive in both residential and non-residential segments and we expect this trend to continue.  However, uncertainty in the industrial sectors looks to continue into the next few quarters."  He adds, "We have completed the rationalizations of our Yorkshire and Howell acquisitions and we are pleased with their continuing improvement.  Our balance sheet remains solid and cash remains strong after investing $173.3 million in acquisitions and $22.5 million in capital improvements year-to-date 2015."
 
 
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Mueller Industries, Inc. is a an industrial manufacturer that specializes in copper and copper alloy manufacturing while also producing goods made from aluminum, steel, and plastics.  It is headquartered in Memphis, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, and China.  Its products include tubing, fittings, valves, vessels, and related items for plumbing and HVACR related piping systems, as well as rod, forgings, extrusions, and various components for OEM applications.  Products are distributed into sectors such as building construction, appliance, defense, energy, and automotive.


*********************
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 and energy, market demand, pricing, competitive and technological factors, and the availability of financing, among others, as set forth in the Company's SEC filings. The words "outlook," "estimate," "project," "intend," "expect," "believe," "target," and similar expressions are intended to identify forward-looking statements.  The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report.  The Company has no obligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.

CONTACT
Jeffrey A. Martin
 (901)753-3226

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 
  
For the Quarter Ended
    
For the Nine Months Ended
  
(In thousands, except per share data)
  
September 26, 2015
    
September 27, 2014
    
September 26, 2015
    
September 27, 2014
  
 
  
   
   
   
 
Net sales
  
$
535,184
    
$
602,820
    
$
1,628,019
    
$
1,826,885
  
 
                                
Cost of goods sold
    
467,167
      
521,278
      
1,398,366
      
1,574,830
  
Depreciation and amortization
    
8,749
      
8,952
      
24,790
      
25,651
  
Selling, general, and administrative expense
    
32,241
      
34,004
      
98,492
      
100,512
  
Gain on sale of assets
    
—
      
—
      
(15,376
)
    
(1,417
)
Severance
    
—
      
860
      
3,442
      
3,072
  
 
                                
    Operating income
    
27,027
      
37,726
      
118,305
      
124,237
  
 
                                
Interest expense
    
(1,682
)
    
(1,430
)
    
(5,977
)
    
(3,913
)
Other income, net
    
164
      
225
      
534
      
440
  
 
                                
    Income before income taxes
    
25,509
      
36,521
      
112,862
      
120,764
  
 
                                
Income tax expense
    
(5,223
)
    
(12,199
)
    
(36,374
)
    
(36,279
)
Income/(loss) from unconsolidated subsidiary, net of tax
    
(2,191
)
    
—
      
(2,191
)
    
—
  
 
                                
    Consolidated net income
    
18,095
      
24,322
      
74,297
      
84,485
  
 
                                
Net income attributable to noncontrolling interest
    
(295
)
    
(499
)
    
(868
)
    
(911
)
 
                                
    Net income attributable to Mueller Industries, Inc.
  
$
17,800
    
$
23,823
    
$
73,429
    
$
83,574
  
 
                                
Weighted average shares for basic earnings per share
    
56,375
      
56,107
      
56,272
      
55,999
  
Effect of dilutive stock-based awards
    
598
      
637
      
690
      
746
  
 
                                
Adjusted weighted average shares for diluted earnings per share
    
56,973
      
56,744
      
56,962
      
56,745
  
 
                                
Basic earnings per share
  
$
0.32
    
$
0.42
    
$
1.30
    
$
1.49
  
 
                                
Diluted earnings per share
  
$
0.31
    
$
0.42
    
$
1.29
    
$
1.47
  
 
                                
Dividends per share
  
$
0.075
    
$
0.075
    
$
0.225
    
$
0.225
  
 
                                
Summary Segment Data:
                                
 
                                
Net sales:
                                
    Plumbing & Refrigeration Segment
  
$
325,022
    
$
357,843
    
$
957,375
    
$
1,093,060
  
    OEM Segment
    
212,596
      
247,883
      
678,293
      
743,322
  
    Elimination of intersegment sales
    
(2,434
)
    
(2,906
)
    
(7,649
)
    
(9,497
)
 
                                
Net sales
  
$
535,184
    
$
602,820
    
$
1,628,019
    
$
1,826,885
  
 
                                
Operating income:
                                
    Plumbing & Refrigeration Segment
  
$
19,559
    
$
20,156
    
$
75,033
    
$
76,371
  
    OEM Segment
    
13,278
      
23,977
      
62,627
      
68,479
  
    Unallocated expenses
    
(5,810
)
    
(6,407
)
    
(19,355
)
    
(20,613
)
 
                                
Operating income
  
$
27,027
    
$
37,726
    
$
118,305
    
$
124,237
  

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands)
September 26, 2015
  
December 27, 2014
  
ASSETS
    
Cash and cash equivalents
  
$
220,745
    
$
352,134
  
Accounts receivable, net
    
299,417
      
275,065
  
Inventories
    
250,799
      
256,585
  
Other current assets
    
54,538
      
57,429
  
 
                
    Total current assets
    
825,499
      
941,213
  
 
                
Property, plant, and equipment, net
    
270,655
      
245,910
  
Other assets
    
277,372
      
140,973
  
 
                
 
  
$
1,373,526
    
$
1,328,096
  
 
                
LIABILITIES AND STOCKHOLDERS' EQUITY
            
Current portion of debt
  
$
13,756
    
$
36,194
  
Accounts payable
    
113,597
      
100,735
  
Other current liabilities
    
102,188
      
101,140
  
 
                
    Total current liabilities
    
229,541
      
238,069
  
 
                
Long-term debt
    
204,500
      
205,250
  
Pension and postretirement liabilities
    
44,024
      
41,556
  
Environmental reserves
    
21,566
      
21,842
  
Deferred income taxes
    
22,142
      
24,556
  
Other noncurrent liabilities
    
3,570
      
1,389
  
 
                
    Total liabilities
    
525,343
      
532,662
  
 
                
Total Mueller Industries, Inc. stockholders' equity
    
815,433
      
762,150
  
Noncontrolling interest
    
32,750
      
33,284
  
 
                
    Total equity
    
848,183
      
795,434
  
 
                
 
  
$
1,373,526
    
$
1,328,096
  
 
                
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
  
For the Nine Months Ended
  
 (In thousands)
  
September 26, 2015
    
September 27, 2014
  
 
  
 
Cash flows from operating activities
  
   
 
  Consolidated net income
  
$
74,297
    
$
84,485
  
  Reconciliation of consolidated net income to net cash
     provided by operating activities:
                
     Depreciation and amortization
    
25,132
      
25,888
  
     Stock-based compensation expense
    
4,611
      
4,957
  
     Equity in losses of unconsolidated subsidiary
    
2,191
      
—
  
     Gain on disposal of assets
    
(14,875
)
    
(1,146
)
     Impairment charges
    
570
      
—
  
     Deferred income taxes
    
(8,262
)
    
(6,908
)
     Income tax benefit from exercise of stock options
    
(953
)
    
(829
)
     Changes in assets and liabilities, net of businesses acquired:
                
       Receivables
    
5,249
      
(62,854
)
       Inventories
    
29,901
      
(14,868
)
       Other assets
    
4,302
      
(15,272
)
       Current liabilities
    
(27,580
)
    
(8,675
)
       Other liabilities
    
740
      
(797
)
       Other, net
    
145
      
223
  
 
                
Net cash provided by operating activities
    
95,468
      
4,204
  
 
                
Cash flows from investing activities
                
  Capital expenditures
    
(22,502
)
    
(28,406
)
  Businesses acquired, net of cash acquired
    
(107,405
)
    
(30,137
)
  Net withdrawals from restricted cash balances
    
1,822
      
2,507
  
  Investment in unconsolidated subsidiary
    
(65,900
)
    
—
  
  Proceeds from the sales of assets
    
5,521
      
4,920
  
 
                
Net cash used in investing activities
    
(188,464
)
    
(51,116
)
 
                
Cash flows from financing activities
                
  Dividends paid to stockholders of Mueller Industries, Inc.
    
(12,669
)
    
(12,606
)
  Issuance of debt by Mueller Europe, Limited, net
    
—
      
12,008
  
  Repayment of debt by joint venture, net
    
(21,597
)
    
(3,170
)
  Net cash used to settle stock-based awards
    
(718
)
    
(887
)
  Repurchase of common stock
    
—
      
(58
)
  Repayments of long-term debt
    
(750
)
    
(800
)
  Income tax benefit from exercise of stock options
    
953
      
829
  
 
                
Net cash used in financing activities
    
(34,781
)
    
(4,684
)
 
                
Effect of exchange rate changes on cash
    
(3,612
)
    
(346
)
 
                
Decrease in cash and cash equivalents
    
(131,389
)
    
(51,942
)
Cash and cash equivalents at the beginning of the period
    
352,134
      
311,800
  
 
                
Cash and cash equivalents at the end of the period
  
$
220,745
    
$
259,858
  
 
                




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