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Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2017 Earnings

MEMPHIS, Tenn., February 6, 2018 -- Mueller Industries, Inc. (NYSE: MLI) announced today operating income of $22.0 million for the fourth quarter of 2017, compared with $29.3 million in the same quarter of 2016. Net income for the quarter was $5.7 million, or 10 cents per diluted share, on net sales of $523.5 million, compared with net income of $17.3 million, or 30 cents per diluted share, on net sales of $472.2 million in the fourth quarter of 2016.

On a full year basis, the Company reported operating income of $152.0 million, compared with $152.7 million in fiscal year 2016. Net income for the year was $85.6 million, or $1.49 per diluted share, on net sales of $2.3 billion, compared with net income of $99.7 million, or $1.74 per diluted share, on net sales of $2.1 billion in fiscal year 2016.

Financial and Operating Highlights:
•
During the fourth quarter of 2017, copper prices rose 4 percent and averaged $3.10 per pound. During the fourth quarter of 2016, copper prices rose 20 percent and averaged $2.39 per pound.
•
The effect of changes in copper prices during the quarter on inventory valuations and hedging positions compared with the prior year quarter, along with physical inventory adjustments, resulted in a $12.0 million negative swing in operating income in the fourth quarter of 2017 compared with the fourth quarter of 2016. Both the Piping Systems and Industrial Metals segments were impacted.
•
A casting outage in our brass rod mill impaired our ability to melt scrap returns in the fourth quarter of 2017 causing an excess build of $38.9 million in inventory. The line is now operating, and inventory levels are expected to normalize in 2018.
•
A $6.5 million pre-tax environmental charge was recorded in the quarter related to ongoing remediation activities at U.S.S. Lead, a non-operating property.
•
Interest expense for the quarter was $5.3 million, compared with $2.0 million in the same quarter of 2016. The increase was primarily due to interest on the Company’s 6% Subordinated Debentures.
•
The effective tax rate for the quarter of 42 percent reflects the net impact of the 2017 Tax Cuts and Jobs Act.

Regarding the business, Greg Christopher, Mueller CEO, said, “Our fourth quarter earnings were adversely affected by inventory impacts and, to a lesser but still important degree, the ongoing challenges in our U.S. copper tube business as previously reported. The modernization of our Fulton, Mississippi copper tube mill, combined with the costs associated with the startup of our new Cedar City, Utah mill, hampered our fourth quarter results. On a full year basis, cost overruns, start-up costs, throughput constraints, quality and yield challenges, along with an associated decline in market share, impacted our copper tube earnings by over $25.0 million.”

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In conclusion, he added “The international markets we serve remained stable and better than anticipated in 2017, and demand in the U.S. markets continued to remain positive. We anticipate these conditions will continue in 2018. We will be aggressive in regaining our market share positions and avoiding the same operational issues experienced in 2017, as we remain steadfast in our commitment to grow.”


Mueller Industries, Inc. is 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, South Korea, 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,” “encourage,” “anticipate,” “appear,” 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 Year Ended
(In thousands, except per share data)
December 30, 2017
 
December 31, 2016
 
December 30, 2017
 
December 31, 2016
 
 
 
 
 
 
 
 
Net sales
$
523,524

 
$
472,158

 
$
2,266,073

 
$
2,055,622

 
 
 
 
 
 
 
 
Cost of goods sold
456,617

 
396,129

 
1,940,617

 
1,723,499

Depreciation and amortization
8,728

 
8,136

 
33,944

 
35,133

Selling, general, and administrative expense
35,136

 
34,792

 
139,580

 
137,499

Gain on sale of assets
—

 
—

 
(1,491
)
 
—

Impairment charges
1,055

 
3,778

 
1,466

 
6,778

 
 
 
 
 
 
 
 
Operating income
21,988

 
29,323

 
151,957

 
152,713

 
 
 
 
 
 
 
 
Interest expense
(5,292
)
 
(2,017
)
 
(19,502
)
 
(7,387
)
Environmental expense
(6,221
)
 
(668
)
 
(7,284
)
 
(1,279
)
Other income, net
414

 
492

 
1,801

 
1,983

 
 
 
 
 
 
 
 
Income before income taxes
10,889

 
27,130

 
126,972

 
146,030

 
 
 
 
 
 
 
 
Income tax expense
(4,589
)
 
(9,174
)
 
(37,884
)
 
(48,137
)
(Loss) income from unconsolidated affiliates, net of tax
(331
)
 
(1,188
)
 
(2,077
)
 
1,861

 
 
 
 
 
 
 
 
Consolidated net income
5,969

 
16,768

 
87,011

 
99,754

 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interests
(249
)
 
554

 
(1,413
)
 
(27
)
 
 
 
 
 
 
 
 
Net income attributable to Mueller Industries, Inc.
$
5,720

 
$
17,322

 
$
85,598

 
$
99,727

 
 
 
 
 
 
 
 
Weighted average shares for basic earnings per share
57,026

 
56,680

 
56,925

 
56,572

Effect of dilutive stock-based awards
612

 
620

 
559

 
597

 
 
 
 
 
 
 
 
Adjusted weighted average shares for diluted earnings per share
57,638

 
57,300

 
57,484

 
57,169

 
 
 
 
 
 
 
 
Basic earnings per share
$
0.10

 
$
0.31

 
$
1.50

 
$
1.76

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.10

 
$
0.30

 
$
1.49

 
$
1.74

 
 
 
 
 
 
 
 
Dividends per share
$
0.100

 
$
0.100

 
$
8.400

 
$
0.375

 
 
 
 
 
 
 
 
Summary Segment Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
    Piping Systems Segment
$
359,253

 
$
320,480

 
$
1,564,950

 
$
1,429,589

    Industrial Metals Segment
150,212

 
127,452

 
602,131

 
521,060

    Climate Segment
28,045

 
27,690

 
131,448

 
119,758

    Elimination of intersegment sales
(13,986
)
 
(3,464
)
 
(32,456
)
 
(14,785
)
 
 
 
 
 
 
 
 
Net sales
$
523,524

 
$
472,158

 
$
2,266,073

 
$
2,055,622

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
    Piping Systems Segment
$
13,886

 
$
15,630

 
$
99,558

 
$
103,886

    Industrial Metals Segment
15,277

 
22,383

 
75,752

 
78,168

    Climate Segment
3,170

 
3,193

 
20,325

 
17,733

    Unallocated expenses
(10,345
)
 
(11,883
)
 
(43,678
)
 
(47,074
)
 
 
 
 
 
 
 
 
Operating income
$
21,988

 
$
29,323

 
$
151,957

 
$
152,713


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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands)
December 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Cash and cash equivalents
$
120,269

 
$
351,317

Accounts receivable, net
244,795

 
256,291

Inventories
327,901

 
242,013

Other current assets
46,150

 
44,702

 
 
 
 
    Total current assets
739,115

 
894,323

 
 
 
 
Property, plant, and equipment, net
304,321

 
295,231

Other assets
276,737

 
257,922

 
 
 
 
 
$
1,320,173

 
$
1,447,476

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current portion of debt
$
16,480

 
$
13,655

Accounts payable
102,503

 
103,175

Other current liabilities
123,269

 
102,162

 
 
 
 
    Total current liabilities
242,252

 
218,992

 
 
 
 
Long-term debt
448,592

 
213,709

Pension and postretirement liabilities
28,713

 
31,273

Environmental reserves
23,699

 
21,208

Deferred income taxes
19,403

 
19,573

Other noncurrent liabilities
21,486

 
6,284

 
 
 
 
    Total liabilities
784,145

 
511,039

 
 
 
 
Total Mueller Industries, Inc. stockholders’ equity
522,111

 
898,684

Noncontrolling interests
13,917

 
37,753

 
 
 
 
    Total equity
536,028

 
936,437

 
 
 
 
 
$
1,320,173

 
$
1,447,476













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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Year Ended
 (In thousands)
December 30, 2017
 
December 31, 2016
 
 
 
 
Cash flows from operating activities
 
 
 
Consolidated net income
$
87,011

 
$
99,754

Reconciliation of consolidated net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
34,247

 
35,702

Stock-based compensation expense
7,450

 
6,387

Loss (income) from unconsolidated affiliates
2,077

 
(1,861
)
Gain on disposal of assets
(2,115
)
 
(651
)
Insurance proceeds - noncapital related
500

 
—

Impairment charges
1,466

 
6,778

Deferred income taxes
(3,160
)
 
6,998

Changes in assets and liabilities, net of businesses acquired and sold:
 
 
 
Receivables
(1,779
)
 
(16,552
)
Inventories
(86,286
)
 
6,662

Other assets
(5,325
)
 
5,808

Current liabilities
10,678

 
5,646

Other liabilities
64

 
1,518

Other, net
(833
)
 
1,588

 
 
 
 
Net cash provided by operating activities
43,995

 
157,777

 
 
 
 
Cash flows from investing activities
 
 
 
Proceeds from sale of assets, net of cash transferred
31,564

 
10,304

Acquisition of businesses, net of cash acquired
(18,396
)
 
(20,533
)
Capital expenditures
(46,131
)
 
(37,497
)
Investment in unconsolidated affiliates
(3,317
)
 
—

Net withdrawals from (deposits to) restricted cash balances
2,858

 
(5,331
)
 
 
 
 
Net cash used in investing activities
(33,422
)
 
(53,057
)
 
 
 
 
Cash flows from financing activities
 
 
 
Dividends paid to stockholders of Mueller Industries, Inc.
(196,944
)
 
(21,224
)
Dividends paid to noncontrolling interests
(2,909
)
 
(3,765
)
Issuance of long-term debt
71,475

 
3,500

Repayments of long-term debt
(111,224
)
 
(1,074
)
(Repayment) issuance of debt by consolidated joint ventures, net
(3,369
)
 
2,265

Net cash used to settle stock-based awards
(1,595
)
 
(1,306
)
Debt issuance costs
—

 
(957
)
 
 
 
 
Net cash used in financing activities
(244,566
)
 
(22,561
)
 
 
 
 
Effect of exchange rate changes on cash
2,945

 
(5,686
)
 
 
 
 
(Decrease) increase in cash and cash equivalents
(231,048
)
 
76,473

Cash and cash equivalents at the beginning of the year
351,317

 
274,844

 
 
 
 
Cash and cash equivalents at the end of the year
$
120,269

 
$
351,317



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