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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 endedSeptember 26, 2020Commission file number1-6770
mli-20200926_g1.jpg
MUELLER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware25-0790410
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
150 Schilling BoulevardSuite 100 
ColliervilleTennessee38017
(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 classTrading SymbolName of exchange on which registered
Common StockMLINYSE
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
  Page Number
 
   
  
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
   
2

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

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

For the Quarter EndedFor the Nine Months Ended
(In thousands, except per share data)September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Net sales$619,105 $608,602 $1,722,192 $1,886,777 
Cost of goods sold500,780 510,788 1,412,654 1,586,129 
Depreciation and amortization10,752 10,823 32,888 31,856 
Selling, general, and administrative expense38,346 40,739 114,714 121,838 
Asset impairments— — 3,035 — 
Litigation settlement, net— — (21,933)— 
Operating income69,227 46,252 180,834 146,954 
Interest expense(4,885)(6,148)(15,237)(20,135)
Other income, net522 533 3,634 823 
Income before income taxes64,864 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 income43,957 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 share55,816 55,832 55,805 55,771 
Effect of dilutive stock-based awards550 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.


3

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

 For the Quarter EndedFor the Nine Months Ended
(In thousands)September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Consolidated net income$43,957 $30,444 $106,395 $76,259 
Other comprehensive income (loss), net of tax:    
Foreign currency translation9,320 (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), net9,640 (5,563)(12,601)(1,444)
Consolidated comprehensive income53,597 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.




4

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 assets729,865 693,772 
Property, plant, and equipment, net368,736 363,128 
Operating lease right-of-use assets22,397 26,922 
Goodwill, net185,479 153,276 
Intangible assets, net62,474 60,082 
Investments in unconsolidated affiliates27,423 48,363 
Other assets23,638 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 liabilities252,752 234,287 
Long-term debt, less current portion342,972 378,724 
Pension liabilities5,773 9,126 
Postretirement benefits other than pensions12,413 13,082 
Environmental reserves19,809 19,972 
Deferred income taxes18,066 21,094 
Noncurrent operating lease liabilities16,464 22,388 
Other noncurrent liabilities12,412 10,131 
Total liabilities680,661 708,804 
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' equity717,621 643,468 
Noncontrolling interests21,730 18,668 
Total equity739,351 662,136 
Total liabilities and equity$1,420,012 $1,370,940 

See accompanying notes to condensed consolidated financial statements.
5

MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Nine Months Ended
(In thousands)September 26, 2020September 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 amortization33,127 32,095 
Stock-based compensation expense6,332 6,355 
Provision for doubtful accounts receivable953 (66)
Loss from unconsolidated affiliates20,213 23,740 
Loss (gain) on disposals of properties144 (24)
Impairment charges3,035 — 
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)
Inventories41,598 50,985 
Other assets9,053 (7,485)
Current liabilities25,913 1,687 
Other liabilities(5,813)(7,112)
Other, net2,294 (47)
Net cash provided by operating activities196,878 131,927 
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 assets12 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 debt150,027 100,658 
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 cash16,337 25,365 
Cash, cash equivalents, and restricted cash at the beginning of the period98,042 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.
6

MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
For the Quarter EndedFor the Nine Months Ended
(In thousands)September 26, 2020September 28, 2019September 26, 2020September 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 expense2,134 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)
7

MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(In thousands)For the Quarter EndedFor the Nine Months Ended
September 26, 2020September 28, 2019September 26, 2020September 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 stock6,098 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 interests1,255 1,351 3,322 3,457 
Foreign currency translation952 (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.

8

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.


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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.

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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 SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$409,414 $118,831 $97,604 $(6,744)$619,105 
Cost of goods sold339,904 95,717 70,450 (5,291)500,780 
Depreciation and amortization5,362 1,774 2,547 1,069 10,752 
Selling, general, and administrative expense19,285 2,992 6,451 9,618 38,346 
Operating income44,863 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 SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$390,917 $135,443 $90,938 $(8,696)$608,602 
Cost of goods sold330,418 117,893 70,523 (8,046)510,788 
Depreciation and amortization5,751 1,836 2,491 745 10,823 
Selling, general, and administrative expense18,738 3,115 9,961 8,925 40,739 
Operating income36,010 12,599 7,963 (10,320)46,252 
Interest expense    (6,148)
Other income, net    533 
Income before income taxes    $40,637 
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Segment information (continued):

 For the Nine Months Ended September 26, 2020
(In thousands)Piping SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$1,128,467 $338,652 $276,983 $(21,910)$1,722,192 
Cost of goods sold931,339 285,788 206,083 (10,556)1,412,654 
Depreciation and amortization16,517 5,771 7,770 2,830 32,888 
Selling, general, and administrative expense54,963 8,690 19,607 31,454 114,714 
Asset impairments3,035 — — — 3,035 
Litigation settlement, net— — — (21,933)(21,933)
Operating income122,613