Document



	For the Quarter Ended						For the Nine Months Ended
(In thousands, except per share data)	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016

Net sales	$	550,363		$	506,584		$	1,742,549		$	1,583,464

Cost of goods sold	471,262			424,668			1,484,000			1,327,370
Depreciation and amortization	8,266			9,016			25,216			26,997
Selling, general, and administrative expense	33,276			32,413			102,953			102,707
Asset impairments	—			3,000			411			3,000

Operating income	37,559			37,487			129,969			123,390

Interest expense	(5,237		)	(1,830		)	(14,210		)	(5,370		)
Other (expense) income, net	(458		)	120			324			880

Income before income taxes	31,864			35,777			116,083			118,900

Income tax expense	(8,716		)	(10,837		)	(33,295		)	(38,963		)
(Loss) income from unconsolidated affiliates, net of tax	(394		)	1,122			(1,746		)	3,049

Consolidated net income	22,754			26,062			81,042			82,986

Net income attributable to noncontrolling interests	(496		)	(84		)	(1,164		)	(581		)

Net income attributable to Mueller Industries, Inc.	$	22,258		$	25,978		$	79,878		$	82,405

Weighted average shares for basic earnings per share	56,987			56,631			56,891			56,536
Effect of dilutive stock-based awards	456			586			542			589

Adjusted weighted average shares for diluted earnings per share	57,443			57,217			57,433			57,125

Basic earnings per share	$	0.39		$	0.46		$	1.40		$	1.46

Diluted earnings per share	$	0.39		$	0.45		$	1.39		$	1.44

Dividends per share	$	0.100		$	0.100		$	8.300		$	0.275



	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016

Consolidated net income	$	22,754		$	26,062		$	81,042		$	82,986

Other comprehensive income (loss), net of tax:
Foreign currency translation	7,154			(4,304		)	15,270			(15,601		)
Net change with respect to derivative instruments and hedging activities, net of tax of $23, $(119), $(162), $(606)	(132		)	(139		)	185			1,155
Net change in pension and postretirement obligation adjustments, net of tax of $102, $(255), $285, $(1,175)	(207		)	743			(572		)	3,445
Attributable to unconsolidated affiliates, net of tax of $415, $(2,888), $614, $(3,700)	(735		)	5,112			(1,086		)	6,550
Other, net	—			54			(380		)	77

Total other comprehensive income (loss), net	6,080			1,466			13,417			(4,374		)

Consolidated comprehensive income	28,834			27,528			94,459			78,612
Comprehensive (income) loss attributable to noncontrolling interests	(499		)	(480		)	(2,002		)	382

Comprehensive income attributable to Mueller Industries, Inc.	$	28,335		$	27,048		$	92,457		$	78,994

(Unaudited)



(In thousands, except share data)	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	106,344		$	351,317
Accounts receivable, less allowance for doubtful accounts of $854 in 2017 and $637 in 2016	276,678			256,291
Inventories	284,114			242,013
Other current assets	25,692			44,702

Total current assets	692,828			894,323

Property, plant, and equipment, net	283,845			295,231
Goodwill, net	139,445			123,993
Intangible assets, net	36,943			36,168
Investment in unconsolidated affiliates	73,664			77,110
Other assets	22,499			20,651

Total assets	$	1,249,224		$	1,447,476

Liabilities
Current liabilities:
Current portion of debt	$	14,450		$	13,655
Accounts payable	125,032			103,175
Accrued wages and other employee costs	34,096			35,121
Other current liabilities	71,581			67,041

Total current liabilities	245,159			218,992

Long-term debt, less current portion	388,818			213,709
Pension liabilities	14,947			14,890
Postretirement benefits other than pensions	16,930			16,383
Environmental reserves	21,365			21,208
Deferred income taxes	19,963			19,573
Other noncurrent liabilities	12,005			6,284

Total liabilities	719,187			511,039

Equity
Mueller Industries, Inc. stockholders' equity:
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding	—			—
Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 57,804,707 in 2017 and 57,395,209 in 2016	802			802
Additional paid-in capital	272,667			273,345
Retained earnings	743,560			1,141,831
Accumulated other comprehensive loss	(54,377		)	(66,956		)
Treasury common stock, at cost	(445,749		)	(450,338		)

Total Mueller Industries, Inc. stockholders' equity	516,903			898,684
Noncontrolling interests	13,134			37,753

Total equity	530,037			936,437

Commitments and contingencies	—			—
Total liabilities and equity	$	1,249,224		$	1,447,476

(Unaudited)



	For the Nine Months Ended
(In thousands)	September 30, 2017			October 1, 2016

Cash flows from operating activities
Consolidated net income	$	81,042		$	82,986
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization	25,439			27,267
Stock-based compensation expense	5,555			4,553
Loss (income) from unconsolidated affiliates	1,746			(3,049		)
Gain on sale of business	(1,491		)	—
Gain on disposals of properties	(26		)	(747		)
Gain on sales of securities	(611		)	—
Impairment charges	411			3,000
Deferred income taxes	624			6,491
Changes in assets and liabilities, net of businesses acquired and sold:
Receivables	(33,359		)	(45,780		)
Inventories	(40,920		)	(914		)
Other assets	(3,372		)	14,428
Current liabilities	20,967			(15,998		)
Other liabilities	(1,498		)	(2,101		)
Other, net	(973		)	450

Net cash provided by operating activities	53,534			70,586

Cash flows from investing activities
Capital expenditures	(17,297		)	(15,632		)
Acquisition of businesses, net of cash acquired	(18,396		)	(20,533		)
Proceeds from sale of business, net of cash sold	17,483			—
Net withdrawals from restricted cash balances	5,197			1,177
Investment in unconsolidated affiliates	(3,317		)	—
Proceeds from sales of assets	11,732			5,301
Proceeds from sales of securities	1,787			—

Net cash used in investing activities	(2,811		)	(29,687		)

Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.	(191,241		)	(15,555		)
Dividends paid to noncontrolling interests	(2,909		)	(3,765		)
Issuance of long-term debt	—			2,000
(Repayment) issuance of debt by consolidated joint ventures, net	(3,451		)	5,006
Net cash used to settle stock-based awards	(1,644		)	(1,356		)
Repayments of long-term debt	(100,917		)	(769		)

Net cash used in financing activities	(300,162		)	(14,439		)

Effect of exchange rate changes on cash	4,466			(3,511		)

(Decrease) increase in cash and cash equivalents	(244,973		)	22,949
Cash and cash equivalents at the beginning of the period	351,317			274,844

Cash and cash equivalents at the end of the period	$	106,344		$	297,793

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. Results of operations for the interim periods presented are not necessarily indicative of results which may be expected for any other interim period or for the year as a whole. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K, including the annual financial statements incorporated therein.

Basic per share amounts have been computed based on the average number of common shares outstanding. Diluted per share amounts reflect the increase in average common shares outstanding that would result from the assumed exercise of outstanding stock options and vesting of restricted stock awards, computed using the treasury stock method. Approximately 52 thousand and 218 thousand stock-based awards were excluded from the computation of diluted earnings per share for the quarters ended September 30, 2017 and October 1, 2016, respectively, because they were antidilutive.

On March 9, 2017, the Company distributed a special dividend of $3.00 in cash and $5.00 in principal amount of the Company’s 6% Subordinated Debentures (Debentures) due March 1, 2027 for each share of common stock outstanding. Interest on the Debentures is payable semiannually on September 1 and March 1, commencing September 1, 2017. At issuance, the Debentures were recorded at their estimated fair value. The fair value of the Debentures was estimated based on quoted market prices for the same or similar issues, the current rates offered to the Company for debt of the same remaining maturities, or the use of market standard models. The carrying value of the Debentures approximates fair value at September 30, 2017.

The Debentures are subordinated to all other funded debt of the Company and are callable, in whole or in part, at any time at the option of the Company, subject to declining call premiums during the first five years. The Debentures also grant each holder the right to require the Company to repurchase such holder’s Debentures in the event of a change in control at declining repurchase premiums during the first five years. The Debentures may be redeemed, subject to the conditions set forth above, at the following redemption price (expressed as a percentage of principal amount) plus any accrued but unpaid interest to, but excluding, the redemption date:

On May 31, 2017, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Pexcor Manufacturing Company Inc. (Pexcor) and Heatlink Group Inc. (Heatlink) for approximately $18.5 million, net of working capital adjustments. The total purchase price consisted of $16.3 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owners up to $2.2 million based on EBITDA growth of the acquired companies. Pexcor and Heatlink, based out of Calgary, Canada, produce and sell a complete line of products for PEX plumbing and radiant systems. These businesses complement the Company’s existing businesses within the Piping Systems segment.

The fair value of the assets acquired totaled $10.4 million, consisting primarily of inventories of $4.5 million, accounts receivable of $2.8 million, property, plant, and equipment of $2.0 million, other current assets of $0.5 million, and other assets of $0.6 million. The fair value of the liabilities assumed totaled $4.3 million, consisting primarily of accounts payable of $3.6 million, other current liabilities of $0.4 million, and other liabilities of $0.3 million. Of the remaining purchase price, $12.4 million was allocated to non-deductible goodwill and intangible assets. The purchase price allocation is provisional as of September 30, 2017 and subject to change upon completion of the final valuation of the long-lived assets, working capital, and contingent consideration during the measurement period.

On April 26, 2016, the Company entered into an agreement pursuant to which the Company acquired a 60 percent equity interest in Jungwoo Metal Ind. Co., LTD (Jungwoo-Mueller) for approximately $20.5 million in cash. Jungwoo-Mueller, which manufactures copper-based pipe joining products, is headquartered in Seoul, South Korea and serves markets worldwide. This business complements the Company’s existing copper fittings business in the Piping Systems segment and is reported in the Company’s Condensed Consolidated Financial Statements one month in arrears.

The fair value of the assets acquired totaled $49.0 million, consisting primarily of property, plant, and equipment of $24.2 million, inventories of $17.6 million, accounts receivable of $5.6 million, other current assets of $1.4 million, and deferred tax assets of $0.2 million. The fair value of the liabilities assumed totaled $17.9 million, consisting primarily of long-term debt of $8.7 million, accounts payable of $7.3 million, pension liabilities of $0.8 million, other current liabilities of $0.5 million, and other liabilities of $0.6 million. Of the remaining purchase price, $1.0 million was allocated to non-deductible goodwill and intangible assets. The noncontrolling interest in Jungwoo-Mueller is $11.6 million. The valuation of the business has been finalized. Changes to the purchase price allocation from the amounts presented in the Company’s 2016 Annual Report on Form 10-K were immaterial.

On June 21, 2017, the Company entered into a definitive equity transfer agreement with Jiangsu Xingrong Hi-Tech Co. Ltd. and Jiangsu Baiyang Industries Co. Ltd. (Baiyang), together, the minority partners in Mueller-Xingrong (the Company’s Chinese joint venture), pursuant to which the Company sold its 50.5 percent equity interest in Mueller-Xingrong to Baiyang for approximately $18.3 million. Mueller-Xingrong manufactures engineered copper tube primarily for air-conditioning applications in China and was included in the Piping Systems segment. Mueller-Xingrong reported net sales of $67.3 million and net losses of $9 thousand in the first nine months of 2017 compared to net sales of $69.6 million and net income of $426 thousand in the first nine months of 2016. The carrying value of the assets disposed totaled $56.7 million, consisting primarily of accounts receivable, inventories, and long-lived assets. The carrying value of the liabilities disposed (consisting primarily of current debt and accounts payable), noncontrolling interest, and amounts recognized in accumulated other comprehensive income (AOCI) totaled $36.2 million. Since the disposal constituted a complete liquidation of the Company’s investment in a foreign entity, the Company removed from AOCI and recognized a cumulative translation gain of $3.8 million. As a result of the disposal, the Company recognized a net gain on the sale of this business of $1.5 million as a reduction of selling, general, and administrative expense in the Condensed Consolidated Financial Statements.

Domestic Piping Systems Group manufactures copper tube and fittings, plastic fittings, and line sets. These products are manufactured in the U.S., sold in the U.S, and exported to markets worldwide. Outside the U.S., Great Lakes Copper manufactures copper tube and line sets and sells the products primarily in the U.S. and Canada, Pexcor & Heatlink produce a complete line of products for PEX plumbing and radiant systems in Canada, and the European Operations manufacture copper tube in the U.K. which is sold primarily in Europe. The Trading Group manufactures pipe nipples and imports and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products in the U.S. and Mexico. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment’s products are sold primarily to plumbing, refrigeration, and air-conditioning wholesalers, hardware wholesalers and co-ops, building product retailers, and air-conditioning original equipment manufacturers (OEMs).

Industrial Metals is composed of the following operating segments: Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. These businesses manufacture brass rod, impact extrusions, and forgings, as well as a wide variety of end products including plumbing brass, automotive components, valves, fittings, and gas assemblies. These products are manufactured in the U.S. and sold primarily to OEMs in the U.S., many of which are in the industrial, construction, heating, ventilation, and air-conditioning, plumbing, and refrigeration markets.



	For the Quarter Ended September 30, 2017
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	384,078	$	147,578	$	32,488	$	(13,781	)	$	550,363

Cost of goods sold	340,191		120,021		24,111		(13,061		)	471,262
Depreciation and amortization	5,290		1,845		636		495			8,266
Selling, general, and administrative expense	17,873		2,667		2,312		10,424			33,276

Operating income	20,724		23,045		5,429		(11,639		)	37,559

Interest expense										(5,237		)
Other (expense) income, net										(458		)

Income before income taxes										$	31,864



	For the Quarter Ended October 1, 2016
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	351,557	$	131,350	$	30,003	$	(6,326	)	$	506,584

Cost of goods sold	301,867		107,512		22,210		(6,921		)	424,668
Depreciation and amortization	5,905		1,964		612		535			9,016
Selling, general, and administrative expense	16,647		3,125		2,357		10,284			32,413
Asset impairments	3,000		—		—		—			3,000

Operating income	24,138		18,749		4,824		(10,224		)	37,487

Interest expense										(1,830		)
Other income, net										120

Income before income taxes										$	35,777



	For the Nine Months Ended September 30, 2017
( In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	1,205,697	$	451,919	$	103,403	$	(18,470	)	$	1,742,549

Cost of goods sold	1,049,098		377,036		77,124		(19,258		)	1,484,000
Depreciation and amortization	16,223		5,647		1,880		1,466			25,216
Selling, general, and administrative expense	54,293		8,761		7,244		32,655			102,953
Asset impairments	411		—		—		—			411

Operating income	85,672		60,475		17,155		(33,333		)	129,969

Interest expense										(14,210		)
Other income, net										324

Income before income taxes										$	116,083



	For the Nine Months Ended October 1, 2016
( In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	1,109,109	$	393,608	$	92,068	$	(11,321	)	$	1,583,464

Cost of goods sold	949,015		321,615		68,363		(11,623		)	1,327,370
Depreciation and amortization	17,341		6,219		1,829		1,608			26,997
Selling, general, and administrative expense	51,497		9,989		7,336		33,885			102,707
Asset impairments	3,000		—		—		—			3,000

Operating income	88,256		55,785		14,540		(35,191		)	123,390

Interest expense										(5,370		)
Other income, net										880

Income before income taxes										$	118,900

All derivatives are recognized in the Condensed Consolidated Balance Sheets at their fair value. On the date the derivative contract is entered into, it is either a) designated as a hedge of (i) a forecasted transaction or the variability of cash flow to be paid (cash flow hedge) or (ii) the fair value of a recognized asset or liability (fair value hedge), or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure (economic hedge), as the Company does not enter into derivative contracts for trading purposes. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in stockholders’ equity within AOCI, to the extent effective, until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the fair value of undesignated derivatives executed as economic hedges and the ineffective portion of designated derivatives are reported in current earnings.

The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable of occurring, hedge accounting is discontinued prospectively in accordance with the derecognition criteria for hedge accounting.

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. The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts. These futures contracts have been designated as cash flow hedges.

At September 30, 2017, the Company held open futures contracts to purchase approximately $11.8 million of copper over the next 15 months related to fixed price sales orders. The fair value of those futures contracts was a $165 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At September 30, 2017, this amount was approximately $133 thousand of deferred net losses, net of tax.

The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At September 30, 2017, the Company held open futures contracts to sell approximately $57.7 million of copper over the next six months related to copper inventory. The fair value of those futures contracts was a $726 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).

On February 20, 2013, the Company entered into a two-year forward-starting interest rate swap agreement with an effective date of January 12, 2015, and an underlying notional amount of $200.0 million, pursuant to which the Company receives variable interest payments based on one-month LIBOR and pays fixed interest at a rate of 1.4 percent. Based on the Company’s current variable premium pricing on its revolving credit facility, the all-in fixed rate is 2.98 percent. The interest rate swap will mature on December 11, 2017, and is structured to offset the interest rate risk associated with the Company’s floating-rate, LIBOR-based Credit Agreement. The swap was designated and accounted for as a cash flow hedge at inception. During the fourth quarter of 2016, the Company discontinued hedge accounting prospectively.

The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rate and the expected cash flows at the current market interest rate using observable benchmarks for LIBOR forward rates at the end of the period (level 2 within the fair value hierarchy). Interest payable and receivable under the swap agreement is accrued and recorded as an adjustment to interest expense. The fair value of the interest rate swap was a $49 thousand loss position at September 30, 2017, and there was $107 thousand of deferred losses, net of tax, included in AOCI that are expected to be reclassified into interest expense over the remaining term of the interest rate swap.



	Asset Derivatives							Liability Derivatives
		Fair Value							Fair Value
(In thousands)	Balance Sheet Location	September 30, 2017			December 31, 2016			Balance Sheet Location	September 30, 2017			December 31, 2016

Commodity contracts - gains	Other current assets	$	203		$	1,013		Other current liabilities	$	796		$	564
Commodity contracts - losses	Other current assets	(120		)	(148		)	Other current liabilities	(1,770		)	(920		)
Interest rate swap	Other current assets	—			—			Other current liabilities	(49		)	(787		)

Total derivatives ⁽¹⁾		$	83		$	865			$	(1,023	)	$	(1,143	)



		For the Quarter Ended						For the Nine Months Ended
(In thousands)	Location	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Fair value hedges:
Gain (loss) on commodity contracts (qualifying)	Cost of goods sold	$	—		$	(37	)	$	—		$	(420	)
Gain on hedged item - inventory	Cost of goods sold	—			32			—			382

Undesignated derivatives:
(Loss) gain on commodity contracts (nonqualifying)	Cost of goods sold	(3,083		)	855			(3,506		)	2,676

The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral. At September 30, 2017 and December 31, 2016, the Company had recorded restricted cash in other

The Company owns a 50 percent interest in Tecumseh Products Holdings LLC (Joint Venture), an unconsolidated affiliate that acquired Tecumseh Products Company (Tecumseh) during the third quarter of 2015. The Company also owns a 50 percent interest in a second unconsolidated affiliate that provided financing to Tecumseh in conjunction with the acquisition. These investments are recorded using the equity method of accounting, as the Company can exercise significant influence but does not own a majority equity interest or otherwise control the respective entities. Under the equity method of accounting, these investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions.

The Company records its proportionate share of the investees’ net income or loss one quarter in arrears as income (loss) from unconsolidated affiliates, net of tax, in the Condensed Consolidated Statements of Income and its proportionate share of the investees’ other comprehensive income (loss), net of income taxes, in the Condensed Consolidated Statements of Comprehensive Income. In general, the equity investment in unconsolidated affiliates is equal to the current equity investment plus the entities’ undistributed earnings.



	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016

Pension benefits:
Service cost	$	35		$	180		$	106		$	540
Interest cost	1,659			1,973			4,977			5,917
Expected return on plan assets	(2,184		)	(2,466		)	(6,552		)	(7,398		)
Amortization of net loss	536			760			1,608			2,280

Net periodic benefit cost	$	46		$	447		$	139		$	1,339

Other benefits:
Service cost	$	54		$	61		$	163		$	183
Interest cost	147			153			442			458
Amortization of prior service credit	(225		)	(224		)	(676		)	(672		)
Amortization of net gain	(10		)	(9		)	(30		)	(27		)

Net periodic benefit income	$	(34	)	$	(19	)	$	(101	)	$	(58	)

The Company is involved in certain litigation as a result of claims that arose in the ordinary course of business, which management believes will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. The Company may also realize the benefit of certain legal claims and litigation in the future; these gain contingencies are not recognized in the Condensed Consolidated Financial Statements.

U.S.S. Lead Refinery, Inc. (Lead Refinery), a non-operating wholly owned subsidiary of MRRC, has conducted corrective action and interim remedial activities (collectively, Site Activities) at Lead Refinery’s East Chicago, Indiana site pursuant to the Resource Conservation and Recovery Act since December 1996. Although the Site Activities have been substantially concluded, Lead Refinery is required to perform monitoring and maintenance-related activities pursuant to a post-closure permit issued by the Indiana Department of Environmental Management effective as of March 2, 2013. Approximate costs to comply with the post-closure permit, including associated general and administrative costs, are estimated at between $2.1 million and $4.7 million over the next 20 years.

On April 9, 2009, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the U.S. Environmental Protection Agency (EPA) added the Lead Refinery site and surrounding properties to the National Priorities List (NPL). On July 17, 2009, Lead Refinery received a written notice from the EPA indicating that it may be a PRP under CERCLA due to the release or threat of release of hazardous substances including lead into properties surrounding the Lead Refinery site. The EPA identified two other PRPs in connection with that matter. In November 2012, the EPA adopted a remedy for the surrounding properties and in September 2014, the EPA announced that it had entered into a settlement with the two other PRPs whereby they will pay approximately $26.0 million to fund the cleanup of approximately 300 properties surrounding the Lead Refinery site and perform certain remedial action tasks.

On November 8, 2016, the Company, its subsidiary Arava Natural Resources Company, Inc. (Arava), and Arava’s subsidiary MRRC each received general notice letters from the EPA asserting that they may be PRPs in connection with the Lead Refinery NPL site. The Company, Arava, and MRRC have denied liability for any remedial action and response costs associated with the Lead Refinery NPL site. In June 2017, the EPA requested that Lead Refinery conduct, and the Company fund, a remedial

investigation and feasibility study of the Lead Refinery NPL site pursuant to a proposed administrative settlement agreement and order on consent. The Company and Lead Refinery entered into that agreement in September 2017. The Company will make a capital contribution to Lead Refinery to conduct the remedial investigation and feasibility study and provide a financial guarantee in the amount of $1.0 million. The EPA has also informed the Company that the EPA’s position is that Mueller is a responsible party for the Lead Refinery NPL site, and accordingly is responsible for a share of remedial action and response costs at the site and in the adjacent residential area. At this juncture, the Company is unable to determine the likelihood of a material adverse outcome or the amount or range of a potential loss with respect to any remedial action related to the Lead Refinery NPL site.

On October 5, 2016, the Company received a demand letter from the Los Angeles District Office of the United States Equal Employment Opportunity Commission (EEOC). The EEOC alleges that between May 2011 and April 2015, various Company employees were terminated in violation of the Americans with Disabilities Act, and that certain of the Company’s employee leave and attendance policies were discriminatory in nature. On that basis, the EEOC’s letter includes a demand for monetary relief on behalf of an identified class of 20 individuals, and an unidentified class of 150 individuals, in addition to injunctive relief.

The Company believes the EEOC’s allegations are without merit. Notwithstanding the Company’s position, in consultation with its liability insurers, the Company entered into a conciliation process with the EEOC for purposes of resolving the claims. On April 12, 2017, the Company received a letter from the EEOC stating that the conciliation process had concluded without a resolution of the claims, and that the matter would be referred to its Legal Department for potential litigation. Due to the procedural stage of this matter, the Company is unable to determine the likelihood of a material adverse outcome in this matter, or the amount or range of a potential loss in excess of any available insurance coverage.

Guarantees, in the form of letters of credit, are issued by the Company generally to assure the payment of insurance deductibles and certain retiree health benefits. The terms of the guarantees are generally one year but are renewable annually as required. These letters are primarily backed by the Company’s revolving credit facility. The maximum payments that the Company could be required to make under its guarantees at September 30, 2017 were $8.4 million.

The Company’s effective tax rate for the third quarter of 2017 was 27 percent compared with 30 percent for the same period last year. The items impacting the effective tax rate for the third quarter of 2017 were primarily attributable to reductions for the U.S. production activities deduction of $0.6 million, the effect of foreign tax rates lower than statutory tax rates of $1.6 million, and the tax benefit of equity compensation deductions of $0.5 million.

For the third quarter of 2016, the difference between the effective tax rate and the amount computed using the U.S. federal statutory rate was primarily attributable to reductions for the U.S. production activities deduction of $0.6 million, the effect of foreign tax rates lower than statutory rates of $1.0 million, and the tax benefit of equity compensation deductions of $0.8 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $0.6 million.

The Company’s effective tax rate for the first nine months of 2017 was 29 percent compared with 33 percent for the same period last year. The items impacting the effective tax rate for the first nine months of 2017 were primarily attributable to reductions for the U.S. production activities deduction of $2.4 million, the effect of foreign tax rates lower than statutory tax rates of $4.6 million, the tax benefit of equity compensation deductions of $2.2 million, and the impact of investments in unconsolidated affiliates of $0.9 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $1.7 million.

For the first nine months of 2016, the difference between the effective tax rate and the amount computed using the U.S. federal statutory tax rate was primarily attributable to reductions for the U.S. production activities deduction of $2.5 million, the effect of foreign tax rates lower than statutory rates of $3.5 million, and the tax benefit of equity compensation deductions of $0.8 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $2.3 million and the impact of investments in unconsolidated affiliates of $1.2 million.

The Company files a consolidated U.S. federal income tax return and numerous consolidated and separate-company income tax returns in many state, local, and foreign jurisdictions. The statute of limitations is open for the Company’s federal tax return and most state income tax returns for 2014 and all subsequent years and is open for certain state and foreign returns for earlier tax years due to ongoing audits and differing statute periods. While the Company believes that it is adequately reserved for possible

AOCI includes certain foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges, adjustments to pension and OPEB liabilities, unrealized gains and losses on marketable securities classified as available-for-sale, and other comprehensive income attributable to unconsolidated affiliates.



	For the Nine Months Ended September 30, 2017
(In thousands)	Cumulative Translation Adjustment			Unrealized (Loss) Gain on Derivatives			Pension/OPEB Liability Adjustment			Unrealized Gain (Loss) on Equity Securities		Attributable to Unconsol. Affiliates			Total

Balance as of December 31, 2016	$	(49,965	)	$	(300	)	$	(23,046	)	380		$	5,975		$	(66,956	)

Other comprehensive income (loss) before reclassifications	18,209			(1,175		)	(1,309		)	(1	)	(1,086		)	14,638
Amounts reclassified from AOCI	(3,777		)	1,360			737			(379	)	—			(2,059		)

Net current-period other comprehensive income (loss)	14,432			185			(572		)	(380	)	(1,086		)	12,579

Balance as of September 30, 2017	$	(35,533	)	$	(115	)	$	(23,618	)	—		$	4,889		$	(54,377	)



	For the Nine Months Ended October 1, 2016
(In thousands)	Cumulative Translation Adjustment			Unrealized (Loss) Gain on Derivatives			Pension/OPEB Liability Adjustment			Unrealized Gain on Equity Securities	Attributable to Unconsol. Affiliates		Total

Balance as of December 26, 2015	$	(24,773	)	$	(2,009	)	$	(28,429	)	221	$	—	$	(54,990	)

Other comprehensive (loss) income before reclassifications	(14,638		)	1,446			2,258			77	6,550		(4,307		)
Amounts reclassified from AOCI	—			(291		)	1,187			—	—		896

Net current-period other comprehensive (loss) income	(14,638		)	1,155			3,445			77	6,550		(3,411		)

Balance as of October 1, 2016	$	(39,411	)	$	(854	)	$	(24,984	)	298	$	6,550	$	(58,401	)



	Amount reclassified from AOCI
	For the Quarter Ended						For the Nine Months Ended
( In thousands)	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016			Affected line item

Unrealized losses (gains) on derivatives:
Commodity contracts	$	223		$	848		$	1,247		$	(1,023	)	Cost of goods sold
Interest rate swap	232			91			696			291			Interest expense
	(69		)	(67		)	(583		)	441			Income tax (benefit) expense

	$	386		$	872		$	1,360		$	(291	)	Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	$	301		$	527		$	902		$	1,581		Selling, general, and administrative expense
	(55		)	(132		)	(165		)	(394		)	Income tax benefit

	$	246		$	395		$	737		$	1,187		Net of tax and noncontrolling interests

Sale of available-for-sale securities	$	—		$	—		$	(611	)	$	—		Other income
	$	—		$	—		$	232		$	—		Income tax expense

	$	—		$	—		$	(379	)	$	—		Net of tax and noncontrolling interests

Gain recognized upon sale of business	$	—		$	—		$	(3,777	)	$	—		Selling, general, and administrative expense
	$	—		$	—		$	—		$	—		Income tax expense

	$	—		$	—		$	(3,777	)	$	—		Net of tax and noncontrolling interests

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires employers that sponsor defined benefit pension and/or other postretirement benefit plans to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period and other components of net periodic benefits cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income. The guidance is effective for the Company in interim and annual periods beginning in 2018. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company does not expect the adoption of the standard to have a material impact on its Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates step two from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The updated guidance requires a prospective adoption. Early adoption is permitted. The guidance is effective for the Company beginning in 2020. The Company is in the process of evaluating the effects of the provisions of the ASU on its Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU provides guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The updated guidance requires a prospective adoption. Early adoption is permitted. This update will be effective for the Company beginning in 2018. The Company does not expect the provisions of the ASU to have a material impact on its Condensed Consolidated Financial Statements.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The ASU provides correction or improvement to the guidance previously issued in ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under the ASU, an entity will recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration that it expects to receive in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for the Company at the beginning of 2018. The standard permits the use of either the full retrospective or cumulative transition effect (modified retrospective) method. The Company currently expects to adopt the standard using the modified retrospective approach. The ASU requires revenue to be recognized over time (i.e., throughout the production process) rather than at a point in time (generally upon shipment to the customer) if performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. The Company is evaluating specific contract terms, primarily within the Industrial Metals and Climate segments, related to the production of customized products and payment rights to evaluate whether revenue from certain contracts will be recognized over time under the ASU. As part of the overall evaluation of the standard, the Company is assessing potential changes to its accounting policies, practices, and internal controls over financial reporting to support the standard.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance will be applied retrospectively and is effective for public business entities in interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect the adoption of the standard to have a material impact on its Condensed Consolidated Financial Statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The ASU requires companies to account for the income tax effects of intercompany transfers of assets other than inventory when the transfer occurs. Companies will still be required to defer the income tax effects of intercompany inventory transactions in an exception to the income tax accounting guidance. The guidance is effective for public business entities in annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period. The Company is still evaluating the effects that the provisions of the ASU will have on its Condensed Consolidated Financial Statements.



Delaware	25-0790410
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)



8285 Tournament Drive, Suite 150
Memphis, Tennessee	38125
(Address of principal executive offices)	(Zip Code)



Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐



		Page Number
Part I. Financial Information

	Item 1. – Financial Statements (Unaudited)

	a.) Condensed Consolidated Statements of Income	3

	b.) Condensed Consolidated Statements of Comprehensive Income	4

	c.) Condensed Consolidated Balance Sheets	5

	d.) Condensed Consolidated Statements of Cash Flows	6

	e.) Notes to Condensed Consolidated Financial Statements	7

	Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations	21

	Item 3. – Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4. – Controls and Procedures	32

Part II. Other Information

	Item 1. – Legal Proceedings	32

	Item 1A – Risk Factors	32

	Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 6. – Exhibits	34

Signatures		35



Year		Redemption Price

2017		106%
2018		105
2019		104
2020		103
2021		102
2022 and thereafter		100



For the quarterly period ended	September 30, 2017	Commission file number 1–6770



	For the Quarter Ended September 30, 2017
(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax			Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	(541	)	Cost of goods sold	$	237
Interest rate swap	—			Interest expense	149
Other	23			Other	—

Total	$	(518	)	Total	$	386



	For the Nine Months Ended October 1, 2016
( In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax			Classification Gains (Losses)	(Gain) Loss Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	1,903		Cost of goods sold	$	(477	)
Interest rate swap	(128		)	Interest expense	186
Other	(329		)	Other	—

Total	$	1,446		Total	$	(291	)



	September 30, 2017		December 31, 2016

Current assets	$	251,188	$	244,323
Noncurrent assets	132,000		130,400
Current liabilities	177,110		148,806
Noncurrent liabilities	59,334		71,681