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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | | | | | | | | | |
For the quarterly period ended | September 26, 2020 | Commission file number | 1-6770 |
MUELLER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
| | | | | |
Delaware | 25-0790410 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | | | | | | |
150 Schilling Boulevard | Suite 100 | |
Collierville | Tennessee | 38017 |
(Address of principal executive offices) | | (Zip Code) |
(901) 753-3200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of exchange on which registered |
Common Stock | MLI | NYSE |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares of the Registrant’s common stock outstanding as of October 16, 2020 was 57,080,225.
MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Quarterly Period Ended September 26, 2020
As used in this report, the terms “Company,” “Mueller,” and “Registrant” mean Mueller Industries, Inc. and its consolidated subsidiaries taken as a whole, unless the context indicates otherwise.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended | | | | For the Nine Months Ended | | |
(In thousands, except per share data) | | September 26, 2020 | | September 28, 2019 | | September 26, 2020 | | September 28, 2019 |
| | | | | | | | |
Net sales | | $ | 619,105 | | | $ | 608,602 | | | $ | 1,722,192 | | | $ | 1,886,777 | |
| | | | | | | | |
Cost of goods sold | | 500,780 | | | 510,788 | | | 1,412,654 | | | 1,586,129 | |
Depreciation and amortization | | 10,752 | | | 10,823 | | | 32,888 | | | 31,856 | |
Selling, general, and administrative expense | | 38,346 | | | 40,739 | | | 114,714 | | | 121,838 | |
Asset impairments | | — | | | — | | | 3,035 | | | — | |
Litigation settlement, net | | — | | | — | | | (21,933) | | | — | |
| | | | | | | | |
| | | | | | | | |
Operating income | | 69,227 | | | 46,252 | | | 180,834 | | | 146,954 | |
| | | | | | | | |
Interest expense | | (4,885) | | | (6,148) | | | (15,237) | | | (20,135) | |
Other income, net | | 522 | | | 533 | | | 3,634 | | | 823 | |
| | | | | | | | |
Income before income taxes | | 64,864 | | | 40,637 | | | 169,231 | | | 127,642 | |
| | | | | | | | |
Income tax expense | | (15,450) | | | (7,665) | | | (42,623) | | | (27,643) | |
Loss from unconsolidated affiliates, net of foreign tax | | (5,457) | | | (2,528) | | | (20,213) | | | (23,740) | |
| | | | | | | | |
Consolidated net income | | 43,957 | | | 30,444 | | | 106,395 | | | 76,259 | |
| | | | | | | | |
Net income attributable to noncontrolling interests | | (1,255) | | | (1,351) | | | (3,322) | | | (3,457) | |
| | | | | | | | |
Net income attributable to Mueller Industries, Inc. | | $ | 42,702 | | | $ | 29,093 | | | $ | 103,073 | | | $ | 72,802 | |
| | | | | | | | |
Weighted average shares for basic earnings per share | | 55,816 | | | 55,832 | | | 55,805 | | | 55,771 | |
Effect of dilutive stock-based awards | | 550 | | | 482 | | | 534 | | | 523 | |
| | | | | | | | |
Adjusted weighted average shares for diluted earnings per share | | 56,366 | | | 56,314 | | | 56,339 | | | 56,294 | |
| | | | | | | | |
Basic earnings per share | | $ | 0.77 | | | $ | 0.52 | | | $ | 1.85 | | | $ | 1.31 | |
| | | | | | | | |
Diluted earnings per share | | $ | 0.76 | | | $ | 0.52 | | | $ | 1.83 | | | $ | 1.29 | |
| | | | | | | | |
Dividends per share | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.30 | | | $ | 0.30 | |
See accompanying notes to condensed consolidated financial statements.
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended | | | | For the Nine Months Ended | | |
(In thousands) | | September 26, 2020 | | September 28, 2019 | | September 26, 2020 | | September 28, 2019 |
| | | | | | | | |
Consolidated net income | | $ | 43,957 | | | $ | 30,444 | | | $ | 106,395 | | | $ | 76,259 | |
| | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation | | 9,320 | | | (6,692) | | | (11,514) | | | (3,612) | |
Net change with respect to derivative instruments and hedging activities, net of tax of $(43), $56, $(53), and $(34) | | 151 | | | (195) | | | 192 | | | 133 | |
Net change in pension and postretirement obligation adjustments, net of tax of $92, $(232), $224, and $(323) | | (170) | | | 777 | | | (715) | | | 1,207 | |
Attributable to unconsolidated affiliates, net of tax of $(99), $(159), $163, and $(240) | | 339 | | | 547 | | | (564) | | | 828 | |
| | | | | | | | |
Total other comprehensive income (loss), net | | 9,640 | | | (5,563) | | | (12,601) | | | (1,444) | |
| | | | | | | | |
Consolidated comprehensive income | | 53,597 | | | 24,881 | | | 93,794 | | | 74,815 | |
Comprehensive income attributable to noncontrolling interests | | (2,207) | | | (857) | | | (3,062) | | | (2,044) | |
| | | | | | | | |
Comprehensive income attributable to Mueller Industries, Inc. | | $ | 51,390 | | | $ | 24,024 | | | $ | 90,732 | | | $ | 72,771 | |
See accompanying notes to condensed consolidated financial statements.
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | | |
| | (Unaudited) | | |
(In thousands, except share data) | | September 26, 2020 | | December 28, 2019 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 113,640 | | | $ | 97,944 | |
Accounts receivable, less allowance for doubtful accounts of $1,289 in 2020 and $770 in 2019 | | 320,035 | | | 269,943 | |
Inventories | | 271,310 | | | 292,107 | |
Other current assets | | 24,880 | | | 33,778 | |
| | | | |
Total current assets | | 729,865 | | | 693,772 | |
| | | | |
Property, plant, and equipment, net | | 368,736 | | | 363,128 | |
Operating lease right-of-use assets | | 22,397 | | | 26,922 | |
Goodwill, net | | 185,479 | | | 153,276 | |
Intangible assets, net | | 62,474 | | | 60,082 | |
Investments in unconsolidated affiliates | | 27,423 | | | 48,363 | |
Other assets | | 23,638 | | | 25,397 | |
| | | | |
Total assets | | $ | 1,420,012 | | | $ | 1,370,940 | |
| | | | |
Liabilities | | | | |
Current liabilities: | | | | |
Current portion of debt | | $ | 6,684 | | | $ | 7,530 | |
Accounts payable | | 108,063 | | | 85,644 | |
Accrued wages and other employee costs | | 49,016 | | | 41,673 | |
Current portion of operating lease liabilities | | 6,320 | | | 5,250 | |
Other current liabilities | | 82,669 | | | 94,190 | |
| | | | |
Total current liabilities | | 252,752 | | | 234,287 | |
| | | | |
Long-term debt, less current portion | | 342,972 | | | 378,724 | |
Pension liabilities | | 5,773 | | | 9,126 | |
Postretirement benefits other than pensions | | 12,413 | | | 13,082 | |
Environmental reserves | | 19,809 | | | 19,972 | |
Deferred income taxes | | 18,066 | | | 21,094 | |
Noncurrent operating lease liabilities | | 16,464 | | | 22,388 | |
Other noncurrent liabilities | | 12,412 | | | 10,131 | |
| | | | |
Total liabilities | | 680,661 | | | 708,804 | |
| | | | |
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 57,080,225 in 2020 and 56,949,246 in 2019 | | 802 | | | 802 | |
Additional paid-in capital | | 277,663 | | | 278,609 | |
Retained earnings | | 988,983 | | | 903,070 | |
Accumulated other comprehensive loss | | (81,111) | | | (68,770) | |
Treasury common stock, at cost | | (468,716) | | | (470,243) | |
| | | | |
Total Mueller Industries, Inc. stockholders' equity | | 717,621 | | | 643,468 | |
Noncontrolling interests | | 21,730 | | | 18,668 | |
| | | | |
Total equity | | 739,351 | | | 662,136 | |
| | | | |
| | | | |
| | | | |
Total liabilities and equity | | $ | 1,420,012 | | | $ | 1,370,940 | |
See accompanying notes to condensed consolidated financial statements.
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | |
| | For the Nine Months Ended | | |
(In thousands) | | September 26, 2020 | | September 28, 2019 |
| | | | |
Cash flows from operating activities | | | | |
Consolidated net income | | $ | 106,395 | | | $ | 76,259 | |
Reconciliation of consolidated net income to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 33,127 | | | 32,095 | |
Stock-based compensation expense | | 6,332 | | | 6,355 | |
Provision for doubtful accounts receivable | | 953 | | | (66) | |
Loss from unconsolidated affiliates | | 20,213 | | | 23,740 | |
| | | | |
Loss (gain) on disposals of properties | | 144 | | | (24) | |
| | | | |
Impairment charges | | 3,035 | | | — | |
| | | | |
Change in fair value of contingent consideration | | — | | | 4,500 | |
Deferred income tax benefit | | (836) | | | (1,593) | |
Changes in assets and liabilities, net of effects of business acquired: | | | | |
Receivables | | (45,530) | | | (47,367) | |
Inventories | | 41,598 | | | 50,985 | |
Other assets | | 9,053 | | | (7,485) | |
Current liabilities | | 25,913 | | | 1,687 | |
Other liabilities | | (5,813) | | | (7,112) | |
Other, net | | 2,294 | | | (47) | |
| | | | |
Net cash provided by operating activities | | 196,878 | | | 131,927 | |
| | | | |
Cash flows from investing activities | | | | |
Capital expenditures | | (29,204) | | | (20,162) | |
Acquisition of businesses, net of cash acquired | | (72,648) | | | 3,465 | |
| | | | |
Investments in unconsolidated affiliates | | — | | | (11,000) | |
Issuance of notes receivable | | (9,155) | | | — | |
Proceeds from sales of assets | | 12 | | | 385 | |
| | | | |
| | | | |
Net cash used in investing activities | | (110,995) | | | (27,312) | |
| | | | |
Cash flows from financing activities | | | | |
Dividends paid to stockholders of Mueller Industries, Inc. | | (16,754) | | | (16,738) | |
| | | | |
Repurchase of common stock | | (5,574) | | | (1,763) | |
Payment of contingent consideration | | (7,000) | | | (3,170) | |
Issuance of long-term debt | | 150,027 | | | 100,658 | |
Repayments of long-term debt | | (186,492) | | | (151,305) | |
Repayment of debt by consolidated joint ventures, net | | (299) | | | (4,352) | |
Net cash used to settle stock-based awards | | (160) | | | (1,069) | |
| | | | |
Net cash used in financing activities | | (66,252) | | | (77,739) | |
| | | | |
Effect of exchange rate changes on cash | | (3,294) | | | (1,511) | |
| | | | |
Increase in cash, cash equivalents, and restricted cash | | 16,337 | | | 25,365 | |
Cash, cash equivalents, and restricted cash at the beginning of the period | | 98,042 | | | 77,138 | |
| | | | |
Cash, cash equivalents, and restricted cash at the end of the period | | $ | 114,379 | | | $ | 102,503 | |
See accompanying notes to condensed consolidated financial statements.
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended | | | | For the Nine Months Ended | | |
(In thousands) | | September 26, 2020 | | September 28, 2019 | | September 26, 2020 | | September 28, 2019 |
| | | | | | | | |
Common stock: | | | | | | | | |
Balance at beginning of period | | $ | 802 | | | $ | 802 | | | $ | 802 | | | $ | 802 | |
| | | | | | | | |
Balance at end of period | | $ | 802 | | | $ | 802 | | | $ | 802 | | | $ | 802 | |
| | | | | | | | |
Additional paid-in capital: | | | | | | | | |
Balance at beginning of period | | $ | 281,856 | | | $ | 280,626 | | | $ | 278,609 | | | $ | 276,849 | |
Issuance of shares under incentive stock option plans | | (229) | | | (341) | | | (896) | | | (624) | |
Stock-based compensation expense | | 2,134 | | | 2,053 | | | 6,332 | | | 6,355 | |
Issuance of restricted stock | | (6,098) | | | (6,140) | | | (6,382) | | | (6,382) | |
| | | | | | | | |
Balance at end of period | | $ | 277,663 | | | $ | 276,198 | | | $ | 277,663 | | | $ | 276,198 | |
| | | | | | | | |
Retained earnings: | | | | | | | | |
Balance at beginning of period | | $ | 951,992 | | | $ | 857,121 | | | $ | 903,070 | | | $ | 824,737 | |
Net income attributable to Mueller Industries, Inc. | | 42,702 | | | 29,093 | | | 103,073 | | | 72,802 | |
Dividends paid or payable to stockholders of Mueller Industries, Inc. | | (5,711) | | | (5,677) | | | (17,160) | | | (17,002) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Balance at end of period | | $ | 988,983 | | | $ | 880,537 | | | $ | 988,983 | | | $ | 880,537 | |
| | | | | | | | |
Accumulated other comprehensive loss: | | | | | | | | |
Balance at beginning of period | | $ | (89,799) | | | $ | (74,754) | | | $ | (68,770) | | | $ | (79,792) | |
Total other comprehensive income (loss) attributable to Mueller Industries, Inc. | | 8,688 | | | (5,069) | | | (12,341) | | | (31) | |
| | | | | | | | |
| | | | | | | | |
Balance at end of period | | $ | (81,111) | | | $ | (79,823) | | | $ | (81,111) | | | $ | (79,823) | |
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | For the Quarter Ended | | | | For the Nine Months Ended | | |
| | September 26, 2020 | | September 28, 2019 | | September 26, 2020 | | September 28, 2019 |
| | | | | | | | |
Treasury stock: | | | | | | | | |
Balance at beginning of period | | $ | (474,170) | | | $ | (475,524) | | | $ | (470,243) | | | $ | (474,240) | |
Issuance of shares under incentive stock option plans | | (644) | | | (601) | | | 719 | | | (445) | |
Repurchase of common stock | | — | | | — | | | (5,574) | | | (1,763) | |
Issuance of restricted stock | | 6,098 | | | 6,059 | | | 6,382 | | | 6,382 | |
| | | | | | | | |
Balance at end of period | | $ | (468,716) | | | $ | (470,066) | | | $ | (468,716) | | | $ | (470,066) | |
| | | | | | | | |
Noncontrolling interests: | | | | | | | | |
Balance at beginning of period | | $ | 19,523 | | | $ | 16,091 | | | $ | 18,668 | | | $ | 14,904 | |
| | | | | | | | |
Net income attributable to noncontrolling interests | | 1,255 | | | 1,351 | | | 3,322 | | | 3,457 | |
Foreign currency translation | | 952 | | | (494) | | | (260) | | | (1,413) | |
| | | | | | | | |
Balance at end of period | | $ | 21,730 | | | $ | 16,948 | | | $ | 21,730 | | | $ | 16,948 | |
See accompanying notes to condensed consolidated financial statements.
MUELLER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
General
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.
The accompanying unaudited interim financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented herein.
Note 1 – Recent Accounting Standards
Adopted
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Disclosure Framework- Measurement of Credit Losses on Financial Instruments. The ASU significantly changes the current incurred credit loss model under U.S. GAAP, which delays the recognition of credit losses until it is probable a loss has been incurred, to a current expected credit losses model which requires immediate recognition of management estimates of credit losses. The Company adopted the ASU during the first quarter of 2020 using a retrospective approach. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. For employers that sponsor defined benefit pension and/or other postretirement benefit plans, the ASU eliminates requirements for certain 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 Company adopted the ASU during the first quarter of 2020 using a retrospective approach. The adoption of the ASU did not have a material impact on the Company’s 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 Company adopted the ASU during the first quarter of 2020. 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 are applied retrospectively. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
Note 2 – Earnings per Common Share
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 three thousand and 110 thousand stock-based awards were excluded from the computation of diluted earnings per share for the quarters ended September 26, 2020 and September 28, 2019, respectively, because they were antidilutive.
Note 3 – Acquisitions
Kessler Sales and Distribution, LLC
On August 3, 2020, the Company entered into an asset purchase agreement with Wieland-Kessler LLC, whereby the Company purchased the Kessler distribution business, which included inventory, manufacturing equipment, and related assets. The total purchase price was $57.2 million in cash paid at closing. The Company treated this as a business combination. The acquired business, Kessler Sales and Distribution, LLC, is a distributor of residential and commercial plumbing products. It is reported within and complements the Company’s existing businesses in the Piping Systems segment.
The provisional fair value of tangible assets acquired totaled $26.0 million, consisting primarily of inventory. Of the remaining purchase price, $31.2 million was allocated to tax-deductible goodwill and intangible assets. The purchase price allocation is provisional as of September 26, 2020 and subject to change upon completion of the final valuation of the long-lived assets during the measurement period.
Shoals Tubular, Inc.
On January 17, 2020, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding stock of Shoals Tubular, Inc. (STI) for approximately $15.4 million, net of working capital adjustments. The total purchase price consisted of $15.4 million in cash at closing. STI is a manufacturer of brazed manifolds, headers, and distributor assemblies used primarily by manufacturers of residential heating and air conditioning units. The acquired business is reported within and complements the Company’s existing businesses in the Climate segment.
The fair value of the tangible assets acquired totaled $6.2 million, consisting primarily of property, plant, and equipment of $3.7 million, inventories of $1.8 million, and accounts receivable of $0.7 million. The fair value of the liabilities assumed totaled $0.2 million, consisting primarily of accounts payable. Of the remaining purchase price, $9.4 million was allocated to tax-deductible goodwill and intangible assets. The purchase price allocation is provisional as of September 26, 2020 and subject to change upon completion of the final valuation of the long-lived assets and working capital during the measurement period.
Note 4 – Segment Information
Each of the Company’s reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:
Piping Systems
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. European Operations manufacture copper tube in the U.K. which is sold primarily in Europe. The Trading Group manufactures pipe nipples 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
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.
Climate
Climate is composed of the following operating segments: Refrigeration Products, Fabricated Tube Products, Westermeyer, Turbotec, ATCO, Linesets, Inc., and STI. These domestic businesses manufacture and fabricate valves, assemblies, high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, line sets, brazed manifolds, headers, and distributor assemblies primarily for the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.
Summarized segment information is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended September 26, 2020 | | | | | | | | |
(In thousands) | | Piping Systems | | Industrial Metals | | Climate | | Corporate and Eliminations | | Total |
| | | | | | | | | | |
Net sales | | $ | 409,414 | | | $ | 118,831 | | | $ | 97,604 | | | $ | (6,744) | | | $ | 619,105 | |
| | | | | | | | | | |
Cost of goods sold | | 339,904 | | | 95,717 | | | 70,450 | | | (5,291) | | | 500,780 | |
Depreciation and amortization | | 5,362 | | | 1,774 | | | 2,547 | | | 1,069 | | | 10,752 | |
Selling, general, and administrative expense | | 19,285 | | | 2,992 | | | 6,451 | | | 9,618 | | | 38,346 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Operating income | | 44,863 | | | 18,348 | | | 18,156 | | | (12,140) | | | 69,227 | |
| | | | | | | | | | |
Interest expense | | | | | | | | | | (4,885) | |
Other income, net | | | | | | | | | | 522 | |
| | | | | | | | | | |
Income before income taxes | | | | | | | | | | $ | 64,864 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended September 28, 2019 | | | | | | | | |
(In thousands) | | Piping Systems | | Industrial Metals | | Climate | | Corporate and Eliminations | | Total |
| | | | | | | | | | |
Net sales | | $ | 390,917 | | | $ | 135,443 | | | $ | 90,938 | | | $ | (8,696) | | | $ | 608,602 | |
| | | | | | | | | | |
Cost of goods sold | | 330,418 | | | 117,893 | | | 70,523 | | | (8,046) | | | 510,788 | |
Depreciation and amortization | | 5,751 | | | 1,836 | | | 2,491 | | | 745 | | | 10,823 | |
Selling, general, and administrative expense | | 18,738 | | | 3,115 | | | 9,961 | | | 8,925 | | | 40,739 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Operating income | | 36,010 | | | 12,599 | | | 7,963 | | | (10,320) | | | 46,252 | |
| | | | | | | | | | |
Interest expense | | | | | | | | | | (6,148) | |
Other income, net | | | | | | | | | | 533 | |
| | | | | | | | | | |
Income before income taxes | | | | | | | | | | $ | 40,637 | |
Segment information (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 26, 2020 | | | | | | | | |
(In thousands) | | Piping Systems | | Industrial Metals | | Climate | | Corporate and Eliminations | | Total |
| | | | | | | | | | |
Net sales | | $ | 1,128,467 | | | $ | 338,652 | | | $ | 276,983 | | | $ | (21,910) | | | $ | 1,722,192 | |
| | | | | | | | | | |
Cost of goods sold | | 931,339 | | | 285,788 | | | 206,083 | | | (10,556) | | | 1,412,654 | |
Depreciation and amortization | | 16,517 | | | 5,771 | | | 7,770 | | | 2,830 | | | 32,888 | |
Selling, general, and administrative expense | | 54,963 | | | 8,690 | | | 19,607 | | | 31,454 | | | 114,714 | |
Asset impairments | | 3,035 | | | — | | | — | | | — | | | 3,035 | |
Litigation settlement, net | | — | | | — | | | — | | | (21,933) | | | (21,933) | |
| | | | | | | | | | |
| | | | | | | | | | |
Operating income | | 122,613 | |