Document



	For the Quarter Ended						For the Nine Months Ended
(In thousands, except per share data)	September 29, 2018			September 30, 2017 ⁽¹⁾			September 29, 2018			September 30, 2017 ⁽¹⁾

Net sales	$	645,958		$	550,363		$	1,948,791		$	1,742,549

Cost of goods sold	566,956			471,262			1,676,446			1,484,000
Depreciation and amortization	10,619			8,266			29,081			25,216
Selling, general, and administrative expense	38,889			33,214			112,077			104,676
Asset impairments	—			—			—			411
(Gain) loss on sale of assets	(2,691		)	140			(334		)	(1,491		)
Insurance recovery	(1,486		)	—			(1,486		)	—

Operating income	33,671			37,481			133,007			129,737

Interest expense	(6,746		)	(5,237		)	(18,728		)	(14,210		)
Other income (expense), net	411			(380		)	1,557			556

Income before income taxes	27,336			31,864			115,836			116,083

Income tax expense	(3,373		)	(8,716		)	(23,179		)	(33,295		)
Loss from unconsolidated affiliates, net of foreign tax	(3,100		)	(394		)	(13,568		)	(1,746		)

Consolidated net income	20,863			22,754			79,089			81,042

Net income attributable to noncontrolling interests	(571		)	(496		)	(1,487		)	(1,164		)

Net income attributable to Mueller Industries, Inc.	$	20,292		$	22,258		$	77,602		$	79,878

Weighted average shares for basic earnings per share	56,877			56,987			56,858			56,891
Effect of dilutive stock-based awards	540			456			524			542

Adjusted weighted average shares for diluted earnings per share	57,417			57,443			57,382			57,433

Basic earnings per share	$	0.36		$	0.39		$	1.36		$	1.40

Diluted earnings per share	$	0.35		$	0.39		$	1.35		$	1.39

Dividends per share	$	0.10		$	0.10		$	0.30		$	8.30

⁽¹⁾The Condensed Consolidated Statements of Income for the quarter and nine months ended September 30, 2017 have been adjusted to reflect the adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The components of net periodic benefit cost (income) other than the service cost component are included in other income (expense), net in the Condensed Consolidated Statements of Income. Refer to Note 1 for further discussion.



	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Consolidated net income	$	20,863		$	22,754		$	79,089		$	81,042

Other comprehensive income (loss), net of tax:
Foreign currency translation	1,111			7,154			(5,534		)	15,270
Net change with respect to derivative instruments and hedging activities, net of tax of $(33), $23, $243, and $(162)	131			(132		)	(896		)	185
Net change in pension and postretirement obligation adjustments, net of tax of $(79), $102, $(221), and $285	270			(207		)	769			(572		)
Attributable to unconsolidated affiliates, net of tax of $2,005, $415, $2,086, and $614	(6,907		)	(735		)	(7,187		)	(1,086		)
Other, net	—			—			—			(380		)

Total other comprehensive (loss) income, net	(5,395		)	6,080			(12,848		)	13,417

Consolidated comprehensive income	15,468			28,834			66,241			94,459
Comprehensive income attributable to noncontrolling interests	(34		)	(499		)	(1,097		)	(2,002		)

Comprehensive income attributable to Mueller Industries, Inc.	$	15,434		$	28,335		$	65,144		$	92,457

(Unaudited)



(In thousands, except share data)	September 29, 2018			December 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	104,735		$	120,269
Accounts receivable, less allowance for doubtful accounts of $795 in 2018 and $980 in 2017	308,231			244,795
Inventories	313,396			327,901
Other current assets	34,842			46,150

Total current assets	761,204			739,115

Property, plant, and equipment, net	360,655			304,321
Goodwill, net	150,407			130,293
Intangible assets, net	64,786			42,008
Investments in unconsolidated affiliates	58,054			80,286
Other assets	26,637			24,150

Total assets	$	1,421,743		$	1,320,173

Liabilities
Current liabilities:
Current portion of debt	$	9,254		$	16,480
Accounts payable	121,412			102,503
Accrued wages and other employee costs	37,703			33,546
Other current liabilities	75,914			89,723

Total current liabilities	244,283			242,252

Long-term debt, less current portion	510,032			448,592
Pension liabilities	9,941			11,606
Postretirement benefits other than pensions	16,903			17,107
Environmental reserves	21,339			23,699
Deferred income taxes	17,299			19,403
Other noncurrent liabilities	18,538			21,486

Total liabilities	838,335			784,145

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 57,840,053 in 2018 and 57,809,509 in 2017	802			802
Additional paid-in capital	274,767			274,585
Retained earnings	803,627			743,503
Accumulated other comprehensive loss	(62,957		)	(51,056		)
Treasury common stock, at cost	(447,253		)	(445,723		)

Total Mueller Industries, Inc. stockholders' equity	568,986			522,111
Noncontrolling interests	14,422			13,917

Total equity	583,408			536,028

Commitments and contingencies	—			—
Total liabilities and equity	$	1,421,743		$	1,320,173

(Unaudited)



	For the Nine Months Ended
(In thousands)	September 29, 2018			September 30, 2017 ⁽¹⁾

Cash flows from operating activities
Consolidated net income	$	79,089		$	81,042
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization	29,320			25,439
Stock-based compensation expense	5,953			5,555
Loss from unconsolidated affiliates	13,568			1,746
Gain on sale of business	—			(1,491		)
Gain on disposals of properties	(247		)	(26		)
Gain on sales of securities	—			(611		)
Impairment charge	—			411
Insurance recovery	(1,486		)	—
Deferred income taxes	(1,502		)	624
Changes in assets and liabilities, net of effects of businesses acquired and sold:
Receivables	(42,201		)	(33,359		)
Inventories	48,716			(40,920		)
Other assets	11,250			(3,372		)
Current liabilities	(7,947		)	20,967
Other liabilities	(13,862		)	(1,498		)
Other, net	1,864			(965		)

Net cash provided by operating activities	122,515			53,542

Cash flows from investing activities
Capital expenditures	(16,685		)	(17,297		)
Acquisition of businesses, net of cash acquired	(167,677		)	(18,396		)
Proceeds from sale of business, net of cash sold	—			17,483
Investments in unconsolidated affiliates	(609		)	(3,317		)
Proceeds from sales of assets	18,693			11,732
Proceeds from sales of securities	—			1,787

Net cash used in investing activities	(166,278		)	(8,008		)

Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.	(17,051		)	(191,241		)
Dividends paid to noncontrolling interests	(592		)	(2,909		)
Repurchase of common stock	(6,575		)	—
Issuance of long-term debt	194,131			—
Repayments of long-term debt	(139,518		)	(100,917		)
Repayment of debt by consolidated joint ventures, net	(2,978		)	(3,451		)
Net cash used to settle stock-based awards	(726		)	(1,644		)

Net cash provided by (used in) financing activities	26,691			(300,162		)

Effect of exchange rate changes on cash	(442		)	4,466

Decrease in cash, cash equivalents, and restricted cash	(17,514		)	(250,162		)
Cash, cash equivalents, and restricted cash at the beginning of the period	126,563			360,469

Cash, cash equivalents, and restricted cash at the end of the period	$	109,049		$	110,307

⁽¹⁾The Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 has been adjusted to reflect the adoption of ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The Condensed Consolidated Statements of Cash Flows reflects the changes during the periods in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash activity is included with cash when reconciling the beginning-of-period and end-of-period total amounts shown. Refer to Note 1 for further discussion.

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.

In February 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI). The ASU permits entities to reclassify tax effects stranded in AOCI as a result of tax reform to retained earnings. The guidance is effective for the Company in interim and annual periods beginning in 2019. Early adoption is permitted and can be applied retrospectively or in the period of adoption. The Company early adopted the ASU during the first quarter of 2018, which resulted in a net reclassification of $556 thousand from AOCI to retained earnings during the quarter.

In March 2017, the FASB issued 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 Company adopted the ASU during the first quarter of 2018 using a retrospective approach for each period presented, and elected to use the practical expedient that allows the Company to use the amounts previously presented in its Benefit Plans disclosure as the estimation basis for applying the retrospective presentation requirements. Prior to the adoption of the ASU, net periodic benefit cost (income) was reported within selling, general, and administrative expense in the Condensed Consolidated Statements of Income. The prior periods have been revised to conform to the current period presentation, resulting in the reclassification of $78 thousand and $232 thousand of net periodic benefit income from operating income to other income (expense), net for the quarter and nine months ended September 30, 2017, respectively.

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 prospective adoption. Early adoption is permitted. The Company early adopted the ASU during the first quarter of 2018 and the adoption had no 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 Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. 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. 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.

Given the nature of the Company’s business and product offerings, sales transactions with customers are generally comprised of a single performance obligation that involves delivery of the products identified in the contracts with customers. Performance obligations are generally satisfied at the point in time of shipment and payment is generally due within sixty days. Variable consideration is estimated for future rebates on certain product lines and product returns. The Company records variable consideration as an adjustment to the transaction price in the period it is incurred. Since variable consideration is settled within a short period of time, the time value of money is not significant.

The Company also evaluated specific contract terms, primarily within the Industrial Metals and Climate segments, related to the production of customized products and payment rights and determined that there are no significant changes to the timing or nature of revenue recognition under the ASU. As part of the overall evaluation of the standard, the Company has assessed and implemented necessary changes to its accounting policies, practices, and internal controls over financial reporting to support the standard.

The Company adopted the ASU during the first quarter of 2018 using the modified retrospective method for all contracts with customers. The adoption did not result in a significant impact on opening retained earnings. Revenue for prior periods have not been adjusted and continue to be reported under Revenue Recognition (Topic 605). No significant judgments were made in the application of the guidance in ASC 606 and there were no material contract assets, contract liabilities, or deferred contract costs as of September 29, 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The ASU requires entities to report 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 Company adopted the ASU during the first quarter of 2018 using a retrospective approach for each period presented. Prior to the adoption of the ASU, the Company presented the change in restricted cash balances separately as a cash flow from investing activity. Upon adoption, the Company included restricted cash in each of the balances of the cash, cash equivalents, and restricted cash at the beginning and end of periods in the Condensed Consolidated Statements of Cash Flows. The prior period has been revised to conform to the current period presentation, and as a result, net cash flows for the nine months ended September 30, 2017 increased by $4.0 million. A reconciliation of cash, cash equivalents, and restricted cash as of September 29, 2018 and December 30, 2017 is as follows:

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 Company adopted the ASU during the first quarter of 2018 and the adoption had no impact on its Condensed Consolidated Financial Statements.

disclosures that are no longer considered cost beneficial, requires new disclosures related to the weighted-average interest crediting rate for cash balance plans and explanations for significant gains and losses related to changes in benefit obligations, and clarifies the requirements for entities that provide aggregate disclosures for two or more plans. The ASU will be effective for the annual period beginning in 2020. The updated guidance requires retrospective adoption, and early adoption is permitted. The Company does not expect the adoption of the ASU to have a material impact on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU eliminates requirements to disclose the amount and reasons for transfers between level 1 and level 2 of the fair value hierarchy, but requires public companies to disclose changes in unrealized gains and losses for the period included in other comprehensive income (OCI) for recurring level 3 fair value measurements or instruments held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements. The ASU will be effective for interim and annual periods beginning in 2020. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements, and can elect to early adopt in interim periods. The guidance on changes in unrealized gains and losses for the period included in OCI for recurring level 3 measurements, the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements, and the narrative description of measurement uncertainty is applied prospectively. All other amendments should be applied retrospectively. The Company does not expect the adoption of the ASU to have a material impact on its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements and ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASUs provide entities with relief from the costs of implementation and clarify how to apply certain aspects of the new leasing standard, ASC 842. ASC 842 requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a financing or operating lease. The guidance also require certain quantitative and qualitative disclosures about leasing arrangements. The ASU will be effective for interim and annual periods beginning in 2019. Early adoption is permitted. ASC 842 requires a modified retrospective adoption, but ASU 2018-11 amends ASC 842 so that entities may elect not to recast their comparative periods in transition and allows entities to change their date of initial application to the beginning of the period of adoption. The future minimum lease payments under noncancelable operating leases were approximately $40.5 million as of December 30, 2017. The Company is still evaluating the effects that the provisions of the ASUs and the ASC will have on its Condensed Consolidated Financial Statements.

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 79 thousand and 52 thousand stock-based awards were excluded from the computation of diluted earnings per share for the quarters ended September 29, 2018 and September 30, 2017, respectively, because they were antidilutive.

On July 2, 2018, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding capital stock of ATCO Rubber Products, Inc. (ATCO) for approximately $156.7 million, net of working capital adjustments. The total purchase price consisted of $151.4 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $12.0 million based on EBITDA growth of the acquired business. ATCO is an industry leader in the manufacturing and distribution of insulated HVAC flexible duct systems and will support the Company’s strategy to grow its Climate Products businesses to become a more valuable resource to its HVAC customers. The acquired business is reported in the Company’s Climate segment.

The fair value of the assets acquired totaled $139.2 million, consisting primarily of property, plant, and equipment of $83.2 million, inventories of $33.1 million, accounts receivable of $21.8 million, other current assets of $0.8 million, and other assets of $0.3 million. The fair value of the liabilities assumed totaled $19.8 million, consisting primarily of accounts payable of $8.1 million, other current liabilities of $9.6 million, and other liabilities of $2.1 million. Of the remaining purchase price, $15.9 million was allocated to tax-deductible goodwill and $21.4 million was allocated to intangible assets, including technology, customer relationships, trade names, and supply contracts. The purchase price allocation is provisional as of September 29, 2018 and subject

The following table presents condensed pro forma consolidated results of operations as if the ATCO acquisition has occurred at the beginning of the periods presented. The pro forma information does not purport to be indicative of the results that would have been obtained if the operations had actually been combined during the periods presented, and is not necessarily indicative of operating results to be expected in future periods. The most significant pro forma adjustments to the historical results of operations relate to the application of purchase accounting and financing structure.

On March 31, 2018, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Die-Mold Tool Limited (Die-Mold) for approximately $13.6 million, net of working capital adjustments. The total purchase price consisted of $12.4 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $2.3 million based on EBITDA growth of the acquired business. Die-Mold, based out of Ontario, Canada, is a manufacturer of plastic PEX and other plumbing-related fittings and an integrated designer and manufacturer of plastic injection tooling. The business complements the Company’s existing businesses within the Piping Systems segment.

The fair value of the assets acquired totaled $7.0 million, consisting primarily of property, plant, and equipment of $3.3 million, inventories of $1.8 million, and accounts receivable of $1.7 million. The fair value of the liabilities assumed totaled $0.9 million, consisting primarily of accounts payable of $0.7 million and other current liabilities of $0.2 million. Of the remaining purchase price, $7.5 million was allocated to non-deductible goodwill and intangible assets. The purchase price allocation is provisional as of September 29, 2018 and subject to change upon completion of the final valuation of the long-lived assets and contingent consideration during the measurement period.

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. and Heatlink Group Inc. (collectively, Heatlink Group) for approximately $17.2 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 the EBITDA growth of the acquired business. Heatlink Group, based out of Calgary, Alberta, Canada, produces and sells a complete line of products for PEX plumbing and radiant systems. The business complements the Company’s existing businesses within the Piping Systems segment.

The fair value of the assets acquired totaled $9.9 million, consisting primarily of inventories of $4.6 million, accounts receivable of $2.8 million, property, plant, and equipment of $2.0 million, and other current assets of $0.5 million. The fair value of the liabilities assumed totaled $6.0 million, consisting primarily of accounts payable of $3.6 million, other current liabilities of $0.5 million, and deferred taxes of $1.9 million. Of the remaining purchase price, $13.3 million was allocated to non-deductible goodwill and intangible assets. The valuation of the business has been finalized. Changes to the purchase price allocation from the amounts presented in the Company’s 2017 Annual Report on Form 10-K included the valuation of the contingent consideration of $0.9 million and the recognition of a deferred tax liability of $1.9 million that resulted from a basis difference in the long-lived assets acquired. These changes resulted in an increase to goodwill.

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 2017. The carrying value of the assets disposed totaled $56.8 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 in the Condensed Consolidated Financial Statements for the nine months ended September 30, 2017.

Piping Systems is composed of the following operating segments: Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, Die-Mold, European Operations, Trading Group, and Jungwoo-Mueller (the Company’s South Korean joint venture). The Domestic Piping Systems Group manufactures copper tube, 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 in Canada and sells the products primarily in the U.S. and Canada, Heatlink Group produces a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S., Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S., 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, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets.



	For the Quarter Ended September 29, 2018
(In thousands)	Piping Systems			Industrial Metals			Climate		Corporate and Eliminations			Total

Net sales	$	410,525		$	158,709		$	81,619	$	(4,895	)	$	645,958

Cost of goods sold	363,174			141,435			66,832		(4,485		)	566,956
Depreciation and amortization	5,946			1,864			2,123		686			10,619
Selling, general, and administrative expense	17,387			3,086			6,890		11,526			38,889
(Gain) loss on sale of assets	(1,390		)	(1,301		)	—		—			(2,691		)
Insurance recovery	—			(1,486		)	—		—			(1,486		)

Operating income	25,408			15,111			5,774		(12,622		)	33,671

Interest expense												(6,746		)
Other income (expense), net												411

Income before income taxes												$	27,336



	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	17,516		3,014		2,312		10,372			33,214
(Gain) loss on sale of assets	140		—		—		—			140

Operating income	20,941		22,698		5,429		(11,587		)	37,481

Interest expense										(5,237		)
Other loss, net										(380		)

Income before income taxes										$	31,864



	For the Nine Months Ended September 29, 2018
(In thousands)	Piping Systems			Industrial Metals			Climate		Corporate and Eliminations			Total

Net sales	$	1,294,672		$	511,932		$	156,854	$	(14,667	)	$	1,948,791

Cost of goods sold	1,120,890			445,259			124,806		(14,509		)	1,676,446
Depreciation and amortization	17,568			5,715			3,371		2,427			29,081
Selling, general, and administrative expense	57,931			9,908			12,009		32,229			112,077
(Gain) loss on sale of assets	(2,093		)	(1,301		)	—		3,060			(334		)
Insurance recovery	—			(1,486		)	—		—			(1,486		)

Operating income	100,376			53,837			16,668		(37,874		)	133,007

Interest expense												(18,728		)
Other income, net												1,557

Income before income taxes												$	115,836



	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	55,133			9,802		7,244		32,497			104,676
Asset impairments	411			—		—		—			411
(Gain) loss on sale of assets	(1,491		)	—		—		—			(1,491		)

Operating income	86,323			59,434		17,155		(33,175		)	129,737

Interest expense											(14,210		)
Other income, net											556

Income before income taxes											$	116,083



	For the Quarter Ended September 29, 2018
(In thousands)	Piping Systems		Industrial Metals		Climate		Total

Tube and fittings	$	340,269	$	—	$	—	$	340,269
Brass rod and forgings	—		122,411		—		122,411
OEM components, tube & assemblies	7,618		12,292		35,555		55,465
Valves and plumbing specialties	62,638		—		—		62,638
Other	—		24,006		46,064		70,070

	410,525		158,709		81,619		650,853

Intersegment sales							(4,895		)

Net sales							$	645,958



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

Tube and fittings	$	319,115	$	—	$	—	$	319,115
Brass rod and forgings	—		112,592		—		112,592
OEM components, tube & assemblies	6,962		13,051		32,488		52,501
Valves and plumbing specialties	58,001		—		—		58,001
Other	—		21,935		—		21,935

	384,078		147,578		32,488		564,144

Intersegment sales							(13,781		)

Net sales							$	550,363



	For the Nine Months Ended September 29, 2018
(In thousands)	Piping Systems		Industrial Metals		Climate		Total

Tube and fittings	$	1,077,525	$	—	$	—	$	1,077,525
Brass rod and forgings	—		394,880		—		394,880
OEM components, tube & assemblies	22,128		41,956		110,790		174,874
Valves and plumbing specialties	195,019		—		—		195,019
Other	—		75,096		46,064		121,160

	1,294,672		511,932		156,854		1,963,458

Intersegment sales							(14,667		)

Net sales							$	1,948,791



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

Tube and fittings	$	945,914	$	—	$	—	$	945,914
Brass rod and forgings	—		346,555		—		346,555
OEM components, tube & assemblies	86,642		39,153		103,403		229,198
Valves and plumbing specialties	173,141		—		—		173,141
Other	—		66,211		—		66,211

	1,205,697		451,919		103,403		1,761,019

Intersegment sales							(18,470		)

Net sales							$	1,742,549

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 documents all relationships between derivative instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value hedges to specific assets and liabilities in the Condensed Consolidated Balance Sheets and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

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 29, 2018, the Company held open futures contracts to purchase approximately $66.0 million of copper over the next 15 months related to fixed price sales orders. The fair value of those futures contracts was an $839 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 29, 2018, this amount was approximately $90 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 29, 2018, the Company held open futures contracts to sell approximately $4.5 million of copper over the next three months related to copper inventory. The fair value of those futures contracts was a $32 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).



	Asset Derivatives							Liability Derivatives
		Fair Value							Fair Value
(In thousands)	Balance Sheet Location	September 29, 2018			December 30, 2017			Balance Sheet Location	September 29, 2018			December 30, 2017

Commodity contracts - gains	Other current assets	$	207		$	1,014		Other current liabilities	$	880		$	55
Commodity contracts - losses	Other current assets	(127		)	(5		)	Other current liabilities	(1,831		)	(3,210		)

Total derivatives ⁽¹⁾		$	80		$	1,009			$	(951	)	$	(3,155	)



		For the Quarter Ended						For the Nine Months Ended
(In thousands)	Location	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Fair value hedges:
Gain on commodity contracts (qualifying)	Cost of goods sold	$	—		$	—		$	391		$	—
Loss on hedged item - inventory	Cost of goods sold	—			—			(385		)	—

Undesignated derivatives:
(Loss) gain on commodity contracts (nonqualifying)	Cost of goods sold	(2,848		)	(3,083		)	5,579			(3,506		)

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 29, 2018 and December 30, 2017, the Company had recorded restricted cash in other current assets of $3.4 million and $5.3 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.

The fair value of long-term debt at September 29, 2018 approximates the carrying value on that date. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of long-term debt is classified as level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

The Company owns a 50 percent interest in an unconsolidated affiliate that acquired Tecumseh Products Company LLC (Tecumseh). The Company also owns a 50 percent interest in a second unconsolidated affiliate that provides financing to Tecumseh. 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’ income or loss, net of foreign taxes, one quarter in arrears as income (loss) from unconsolidated affiliates, net of foreign 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. The U.S. tax effect of the Company’s proportionate share of Tecumseh’s income or loss is recorded in income tax expense in the Condensed Consolidated Statements of Income. In general, the equity investment in unconsolidated affiliates is equal to the current equity investment plus the investees’ net accumulated losses.



	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017

Pension benefits:
Service cost	$	22		$	35		$	66		$	106
Interest cost	1,478			1,659			4,436			4,977
Expected return on plan assets	(2,290		)	(2,184		)	(6,869		)	(6,552		)
Amortization of net loss	293			536			877			1,608

Net periodic benefit (income) cost	$	(497	)	$	46		$	(1,490	)	$	139

Other benefits:
Service cost	$	59		$	54		$	175		$	163
Interest cost	147			147			441			442
Amortization of prior service credit	(226		)	(225		)	(677		)	(676		)
Amortization of net loss (gain)	14			(10		)	43			(30		)

Net periodic benefit income	$	(6	)	$	(34	)	$	(18	)	$	(101	)

The Kansas Department of Health and Environment (KDHE) has contacted the Company regarding environmental contamination at three former smelter sites in Kansas (Altoona, East La Harpe, and Lanyon). The Company is not a successor to the companies that operated these smelter sites, but is exploring possible settlement with KDHE and other potentially responsible parties (PRP) in order to avoid litigation. Another PRP conducted a site investigation of the Altoona site under a consent decree with KDHE and submitted a removal site evaluation report recommending a remedy. The remedial design plan, which covers both on-site and certain off-site cleanup costs, was approved by the KDHE in 2016. At the East La Harpe site, the Company and two other PRPs conducted a site study evaluation under KDHE supervision and prepared a site cleanup plan approved by KDHE. In 2016, the

corporate parent of a third party that the Company understands may owe indemnification obligations to one of the other PRPs in connection with the East La Harpe site filed for protection under Chapter 11 of the U.S. Bankruptcy Code. KDHE has extended the deadline for the PRPs to develop a repository design plan to allow for wetlands permitting to take place. With respect to the Lanyon Site, in 2016, the Company received a general notice letter from the United States Environmental Protection Agency (EPA) asserting that the Company is a PRP, which the Company has denied. The Company’s reserve for its proportionate share of the remediation costs associated with the Southeast Kansas sites is $5.6 million.

Mining Remedial Recovery Company (MRRC), a wholly owned subsidiary, owns certain inactive mines in Shasta County, California. MRRC has continued a program, begun in the late 1980s, of implementing various remedial measures, including sealing mine portals with concrete plugs in portals that were discharging water. The sealing program achieved significant reductions in the metal load in discharges from these adits; however, additional reductions are required pursuant to an order issued by the California Regional Water Quality Control Board (QCB). In response to a 1996 QCB Order, MRRC completed a feasibility study in 1997 describing measures designed to mitigate the effects of acid rock drainage. In December 1998, the QCB modified the 1996 order extending MRRC’s time to comply with water quality standards. In September 2002, the QCB adopted a new order requiring MRRC to adopt Best Management Practices (BMP) to control discharges of acid mine drainage, and again extended the time to comply with water quality standards until September 2007. During that time, implementation of BMP further reduced impacts of acid rock drainage; however, full compliance has not been achieved. The QCB is presently renewing MRRC’s discharge permit and will concurrently issue a new order. It is expected that the new 10-year permit will include an order requiring continued implementation of BMP through 2029 to address residual discharges of acid rock drainage. The Company currently estimates that it will spend between approximately $12.8 million and $17.6 million for remediation at these sites over the next 30 years.

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 $1.8 million and $3.0 million over the next 19 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 NPL 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 NPL site (zones 1 and 3 of operable unit 1) 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 operable unit 2 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 has made a capital contribution to Lead Refinery to conduct the remedial investigation and feasibility study with respect to operable unit 2 and has provided financial assurance in the amount of $1.0 million. The EPA has also asserted its position 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.

In January 2018, the EPA issued two unilateral administrative orders (UAOs) directing the Company, Lead Refinery, and four other PRPs to conduct soil and interior remediation of certain residences at the Lead Refinery NPL site (zones 2 and 3 of operable unit 1). The Company and Lead Refinery have reached agreement with the four other PRPs to implement these two UAOs, with the Company agreeing to pay, on an interim basis, (i) an estimated $4.5 million (subject to potential change through a future reallocation process) of the approximately $25.0 million the PRPs currently estimate it will cost to implement the UAOs, which estimate is subject to change, and (ii) $2.0 million relating to past costs incurred by other PRPs for work conducted at the site.

These amounts are included in the Company’s reserve for environmental liabilities as of December 30, 2017. The Company disputes that it was properly named in the UAOs, and has reserved its rights to petition the EPA for reimbursement of any costs incurred to comply with the UAOs upon the completion of the work required therein. In October 2017, a group of private plaintiffs sued the Company, Arava, MRRC, and Lead Refinery, along with other defendants, in a private tort action relating to the site; the Company, Arava, and MRRC were voluntarily dismissed from that litigation without prejudice in March 2018. A second civil action asserting similar claims was filed against the Company, Arava, MRRC, and Lead Refinery in September 2018. At this juncture, the Company is unable to determine the likelihood of a material adverse outcome or the amount o



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	27

	Item 3. – Quantitative and Qualitative Disclosures About Market Risk	37

	Item 4. – Controls and Procedures	38

Part II. Other Information

	Item 1. – Legal Proceedings	39

	Item 1A – Risk Factors	39

	Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	39

	Item 6. – Exhibits	40

Signatures		41



(In thousands)	September 29, 2018		December 30, 2017

Cash & cash equivalents	$	104,735	$	120,269
Restricted cash included within other current assets	4,206		6,189
Restricted cash included within other assets	108		105

Total cash, cash equivalents, and restricted cash	$	109,049	$	126,563



For the quarterly period ended	September 29, 2018	Commission file number 1–6770



	For the Quarter Ended September 29, 2018
(In thousands)	Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	305	Cost of goods sold	$	(180	)
Other	6		Other	—

Total	$	311	Total	$	(180	)



	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 September 29, 2018
(In thousands)	Loss Recognized in AOCI (Effective Portion), Net of Tax			Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	(438	)	Cost of goods sold	$	(455	)
Other	(3		)	Other	—

Total	$	(441	)	Total	$	(455	)