mli-20201226

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the fiscal year ended December 26, 2020
			OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ______ to ______
			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)

Registrant’s telephone number, including area code: (901) 753-3200

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value	MLI	New York Stock Exchange

Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by a 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, or a smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter was $1,346,053,993.

The number of shares of the Registrant’s common stock outstanding as of February 19, 2021 was 57,115,648 excluding 23,067,356 treasury shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following document are incorporated by reference into this Report: Registrant’s Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, scheduled to be mailed on or about March 25, 2021 (Part III).

MUELLER INDUSTRIES, INC.

_____________________

As used in this report, the terms “we,” “us,” “our,” “Company,” “Mueller,” and “Registrant” mean Mueller Industries, Inc. and its consolidated subsidiaries taken as a whole, unless the context indicates otherwise.

____________________

TABLE OF CONTENTS


			Page
Part I
	Item 1.	Business	3
	Item 1A.	Risk Factors	6
	Item 1B.	Unresolved Staff Comments	9
	Item 2.	Properties	10
	Item 3.	Legal Proceedings	11
	Item 4.	Mine Safety Disclosures	11

Part II
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
	Item 6.	Selected Financial Data	14
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	14
	Item 8.	Financial Statements and Supplementary Data	15
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	15
	Item 9A.	Controls and Procedures	16
	Item 9B.	Other Information	19

Part III
	Item 10.	Directors, Executive Officers and Corporate Governance	19
	Item 11.	Executive Compensation	19
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	19
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	20
	Item 14.	Principal Accountant Fees and Services	20

Part IV
	Item 15.	Exhibits, Financial Statement Schedules	21
	Item 16.	Form 10-K Summary	23

Signatures			24

Index to Consolidated Financial Statements			F-1

PART I


ITEM 1.			BUSINESS

Introduction

Mueller Industries, Inc. (the Company) is a leading manufacturer of copper, brass, aluminum, and plastic products. The range of products we manufacture is broad: copper tube and fittings; line sets; PEX plastic tube and fittings; steel nipples; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; compressed gas valves; refrigeration valves and fittings; fabricated tubular products; pressure vessels; coaxial heat exchangers; insulated flexible duct systems; brazed manifolds; headers; and distributor assemblies. We also resell brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets, and plumbing specialty products. Our operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China. The Company was incorporated in Delaware on October 3, 1990.

Each of our reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered. These are the Piping Systems, Industrial Metals, and Climate segments.

Certain administrative expenses and expenses related primarily to retiree benefits at inactive operations are combined into the Corporate and Eliminations classification.

Financial information concerning segments and geographic information appears under “Note 3 – Segment Information” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.

New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air-conditioning (HVAC), refrigeration, and plumbing markets because the principal end use of a significant portion of our products is in the construction of single and multi-family housing and commercial buildings. Repairs and remodeling projects are also important drivers of underlying demand for these products. In addition, our products are used in various transportation, automotive, and industrial applications.

Piping Systems Segment

The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper (Great Lakes), Pexcor Manufacturing Company and Heatlink Group Inc. (collectively, Heatlink Group), Die-Mold Tool Limited (Die-Mold), European Operations, Trading Group, and Jungwoo Metal Ind. Co., LTD (Jungwoo-Mueller).

The Domestic Piping Systems Group manufactures and distributes copper tube, fittings, line sets, and pipe nipples, and resells steel pipe, brass and plastic plumbing valves, malleable iron fittings and faucets, and plumbing specialties. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Our copper tube ranges in size from 1/8 inch to 8 1/8 inch diameter and is sold in various straight lengths and coils. We are a market leader in the air-conditioning and refrigeration service tube markets and we also supply a variety of water tube in straight lengths and coils used for plumbing applications in virtually every type of construction project. Our copper fittings, line sets, and related components are produced for the plumbing and heating industry to be used in water distribution systems, heating systems, air-conditioning, and refrigeration applications, and drainage, waste, and vent systems.

Great Lakes manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group manufactures 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 manufactures copper tube in the United Kingdom, which is sold throughout Europe. The Trading Group manufactures steel pipe nipples and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products to plumbing wholesalers, distributors to the manufactured housing and recreational vehicle industries, and building materials retailers in North America. Jungwoo-Mueller, our South Korean joint venture, manufactures copper-based joining products that are sold worldwide.

We acquired a 60 percent equity interest in Jungwoo-Mueller on April 26, 2016, Heatlink Group on May 31, 2017, Die-Mold on March 31, 2018 and Kessler Sales and Distribution on August 2, 2020. These acquisitions complement our existing copper tube, line sets, copper fittings, and plastics businesses in the Piping Systems segment.

We disposed of Jiangsu Mueller-Xingrong Copper Industries Limited (Mueller-Xingrong), the Company’s Chinese joint venture, on June 21, 2017. This business manufactured engineered copper tube primarily for air-conditioning applications in China.

The segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs). It markets primarily through its own sales and distribution organization, which maintains sales offices and distribution centers throughout the United States and in Canada, Mexico, Europe, China, and South Korea. Additionally, products are sold and marketed through a complement of agents, which, when combined with our sales organization, provide the Company broad geographic market representation.

The total amount of order backlog for the Piping Systems segment as of December 26, 2020 was not significant.

We compete with various companies, depending on the product line. In the U.S. copper tube business, domestic competition includes Cerro Flow Products LLC, and Cambridge-Lee Industries LLC (a subsidiary of Industrias Unidas S.A. de C.V.), as well as many actual and potential foreign competitors. In the European copper tube business, we compete with several European-based manufacturers of copper tube as well as other foreign-based manufacturers. In the Canadian copper tube business, our competitors include foreign-based manufacturers. In the copper fittings market, our domestic competitors include Elkhart Products Company (a subsidiary of Aalberts Industries N.V.) and NIBCO, Inc. We also compete with several foreign manufacturers. Additionally, our copper tube and fittings businesses compete with a large number of manufacturers of substitute products made from other metals and plastic.

Industrial Metals Segment

The Industrial Metals segment is composed of Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products.

Brass Rod & Copper Bar Products manufactures a broad range of brass rod, copper bar, and copper alloy shapes, as well as a wide variety of end products including plumbing brass, valves, and fittings sold primarily to OEMs in the industrial, HVAC, plumbing, and refrigeration industries. We extrude brass, bronze, and copper alloy rod in sizes ranging from 3/8 inches to 4 inches in diameter. These alloys are used in applications that require a high degree of machinability, wear and corrosion resistance, as well as electrical conductivity.

Impacts & Micro Gauge manufactures cold-form aluminum and copper products for automotive, industrial, and recreational components, as well as high-volume machining of aluminum, steel, brass, and cast iron impacts and castings for automotive applications. It sells its products primarily to OEMs in the U.S., serving the automotive, military ordnance, aerospace, and general manufacturing industries. Typical applications for impacts are high strength ordnance, high-conductivity electrical components, builders’ hardware, hydraulic systems, automotive parts, and other uses where toughness must be combined with varying complexities of design and finish.

Brass Value-Added Products manufactures brass and aluminum forgings; brass, aluminum, and stainless steel valves; fluid control solutions; and gas train assembles. Our forgings are used in a wide variety of products, including automotive components, brass fittings, industrial machinery, valve bodies, gear blanks, and computer hardware. Our valves, fluid control systems, and gas train assemblies are used in the compressed gas, pharmaceutical, construction, and gas appliance markets.

The segment sells its products primarily to domestic OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets. The total amount of order backlog for the Industrial Metals Segment as of December 26, 2020 was not significant.

Competitors, primarily in the brass rod market, include Wieland Chase, LLC, a subsidiary of Wieland-Werke AG and others, both domestic and foreign.

Climate Segment

The Climate segment is composed of Refrigeration Products, Fabricated Tube Products, Westermeyer Industries, Inc. (Westermeyer), Turbotec Products, Inc. (Turbotec), ATCO Rubber Products, Inc. (ATCO), Linesets, Inc., and Shoals Tubular, Inc. (Shoals).

Refrigeration Products designs and manufactures valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets. Fabricated Tube Products manufactures tubular assemblies and fabrications for

OEMs in the HVAC and refrigeration markets. Westermeyer designs, manufactures, and distributes high-pressure components and accessories for the air-conditioning and refrigeration markets. Turbotec manufactures coaxial heat exchangers and twisted tubes for the HVAC, geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets. ATCO manufactures and distributes insulated HVAC flexible duct systems. Shoals Tubular manufactures brazed manifolds, headers, and distributor assemblies.

We acquired ATCO on July 2, 2018 and Shoals on January 17, 2020. These acquisitions complement our existing businesses in the Climate segment.

The segment’s sales are approximately evenly split between the OEM and wholesale channels in the HVAC and refrigeration markets in the U.S. The total amount of order backlog for the Climate segment as of December 26, 2020 was not significant.

Human Capital Resources

As of December 26, 2020, the Company employed approximately 5,007 employees, of which approximately 1,678 were represented by various unions. Those union contracts will expire as follows:


Location			Expiration Date
Port Huron, Michigan (Local 218 IAM)			May 7, 2023
Wynne, Arkansas (MCTP)			November 30, 2024
Port Huron, Michigan (Local 44 UAW)			June 26, 2022
Wynne, Arkansas (B&K LLC)			June 28, 2021
North Wales, Pennsylvania			July 31, 2021
Belding, Michigan			September 17, 2021
Fulton, Mississippi			October 2, 2021
Waynesboro, Tennessee			November 3, 2021

The union agreements at the Company’s U.K. and Mexico operations are renewed annually. The Company expects to renew its union contracts without material disruption to its operations. We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees and directors through the granting of stock-based compensation awards. The health and safety of our employees is our high priority and in particular, in response to the COVID-19 pandemic. We have taken additional measures to limit possible infections at the workplace.

Furthermore, we expect that our employees and members of our Board of Directors will conduct themselves ethically and properly as a matter of course and comply with the guidelines set forth on our Code of Business Conduct and Ethics.

Raw Material and Energy Availability

A substantial portion of our base metal requirements (primarily copper) is normally obtained through short-term supply contracts with competitive pricing provisions (for cathode) and the open market (for scrap). Other raw materials used in the production of brass, including brass scrap, zinc, tin, and lead are obtained from zinc and lead producers, open-market dealers, and customers with brass process scrap. Raw materials used in the fabrication of aluminum and plastic products are purchased in the open market from major producers.

Adequate supplies of raw material have historically been available to us from primary producers, metal brokers, and scrap dealers. Sufficient energy in the form of natural gas, fuel oils, and electricity is available to operate our production facilities. While temporary shortages of raw material and fuels may occur occasionally, to date they have not materially hampered our operations.

Our copper tube facilities can accommodate both refined copper and certain grades of copper scrap as the primary feedstock. The Company has commitments from refined copper producers for a portion of its metal requirements for 2021. Adequate quantities of copper are currently available. While we will continue to react to market developments, resulting pricing volatility or supply disruptions, if any, could nonetheless adversely affect the Company.

Environmental Proceedings

Compliance with environmental laws and regulations is a matter of high priority for the Company. Mueller’s provision for environmental matters related to all properties was $4.2 million for 2020, $1.7 million for 2019, and $2.0 million for 2018. The reserve for environmental matters was $24.0 million at December 26, 2020 and $20.9 million at December 28, 2019. Environmental expenses related to non-operating properties are presented below operating income in the Consolidated Statements of Income, and costs related to operating properties are included in cost of goods sold. We currently anticipate that we will need to make expenditures of approximately $4.3 million for compliance activities related to existing environmental matters during the next three fiscal years.

For a description of material pending environmental proceedings, see “Note 14 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Other Business Factors

Our business is not materially dependent on patents, trademarks, licenses, franchises, or concessions held. In addition, expenditures for Company-sponsored research and development activities were not material during 2020, 2019, or 2018. No material portion of our business involves governmental contracts.

Seasonality

Our net sales typically moderate in the fourth quarter as a result of the seasonal construction markets and customer shutdowns for holidays, year-end plant maintenance, and physical inventory counts. Also, our working capital typically increases in the first quarter in preparation for the construction season.

SEC Filings

We make available through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). To retrieve any of this information, you may access our internet home page at www.muellerindustries.com, select Investors, and then select SEC Filings.


ITEM 1A.			RISK FACTORS

The Company is exposed to risk as it operates its businesses. To provide a framework to understand our operating environment, we are providing a brief explanation of the more significant risks associated with our businesses. Although we have tried to identify and discuss key risk factors, others could emerge in the future. These risk factors should be considered carefully when evaluating the Company and its businesses.

Increases in costs and the availability of energy and raw materials used in our products could impact our cost of goods sold and our distribution expenses, which could have a material adverse impact on our operating margins.

Both the costs of raw materials used in our manufactured products (copper, brass, zinc, aluminum, and plastic resins) and energy costs (electricity, natural gas and fuel) have been volatile during the last several years, which has resulted in changes in production and distribution costs. For example, recent and pending climate change regulation and initiatives on the state, regional, federal, and international levels that have focused on reducing greenhouse gas (GHG) emissions from the energy and utility sectors may affect energy availability and costs in the near future. While we typically attempt to pass costs through to our customers or to modify or adapt our activities to mitigate the impact of increases, we may not be able to do so successfully. Failure to fully pass increases to our customers or to modify or adapt our activities to mitigate the impact could have a material adverse impact on our operating margins. Additionally, if we are for any reason unable to obtain raw materials or energy, our ability to manufacture our products would be impacted, which could have a material adverse impact on our operating margins.

The unplanned departure of key personnel could disrupt our business.

We depend on the continued efforts of our senior management. The unplanned loss of key personnel, or the inability to hire and retain qualified executives, could negatively impact our ability to manage our business.

Economic conditions in the housing and commercial construction industries, as well as changes in interest rates, could have a material adverse impact on our business, financial condition, and results of operations.

Our business is sensitive to changes in general economic conditions, particularly in the housing and commercial construction industries. Prices for our products are affected by overall supply and demand in the market for our products and for our competitors’ products. In particular, market prices of building products historically have been volatile and cyclical, and we may be unable to control the timing and extent of pricing changes for our products. Prolonged periods of weak demand or excess supply in any of our businesses could negatively affect our revenues and margins and could result in a material adverse impact on our business, financial condition, and results of operations.

The markets that we serve, including, in particular, the housing and commercial construction industries, are significantly affected by movements in interest rates and the availability of credit. Significantly higher interest rates could have a material adverse effect on our business, financial condition, and results of operations. Our businesses are also affected by a variety of other factors beyond our control, including, but not limited to, employment levels, foreign currency exchange rates, unforeseen inflationary pressures, and consumer confidence. Since we operate in a variety of geographic areas, our businesses are subject to the economic conditions in each such area. General economic downturns or localized downturns in the regions where we have operations could have a material adverse effect on our business, financial condition, and results of operations.

The impact of economic conditions on the operations or liquidity of any party with which we conduct our business, including our suppliers and customers, may adversely impact our business.

Competitive conditions, including the impact of imports and substitute products and technologies, could have a material adverse effect on the demand for our products as well as our margins and profitability.

The markets we serve are competitive across all product lines. Some consolidation of customers has occurred and may continue, which could shift buying power to customers. In some cases, customers have moved production to low-cost countries such as China, or sourced components from there, which has reduced demand in North America for some of the products we manufacture. These conditions could have a material adverse impact on our ability to maintain margins and profitability. The potential threat of imports and substitute products is based upon many factors, including raw material prices, distribution costs, foreign exchange rates, production costs, and the development of emerging technologies and applications. The end use of alternative import and/or substitute products could have a material adverse effect on our business, financial condition, and results of operations. Likewise, the development of new technologies and applications could result in lower demand for our products and have a material adverse effect on our business.

Our exposure to exchange rate fluctuations on cross border transactions and the translation of local currency results into U.S. dollars could have an adverse impact on our results of operations or financial position.

We conduct our business through subsidiaries in several different countries and export our products to many countries. Fluctuations in currency exchange rates could have a significant impact on the competitiveness of our products as well as the reported results of our operations, which are presented in U.S. dollars. A portion of our products are manufactured in or acquired from suppliers located in lower cost regions. Cross border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange fluctuations. The strengthening of the U.S. dollar could expose our U.S. based businesses to competitive threats from lower cost producers in other countries such as China. Lastly, our sales are translated into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects when the results of foreign operations are translated into U.S. dollars. Accordingly, significant changes in exchange rates, particularly the British pound sterling, Mexican peso, Canadian dollar, and South Korean won, could have an adverse impact on our results of operations or financial position.

The exit by the United Kingdom (U.K.) from the European Union (EU) (Brexit) could adversely affect our business.

The U.K. left the EU on January 31, 2020 pursuant to the terms of a withdrawal agreement concluded between the UK government and the EU Council (Withdrawal Agreement). The Withdrawal Agreement allowed for a transition period during which the U.K.’s trading relationship with the EU remained largely unchanged while the future terms of that relationship were being negotiated. That transition period has now ended. On December 24, 2020, the U.K. and the EU announced that they had struck a new bilateral trade and cooperation deal governing the future relationship between the U.K. and the EU (Trade and Cooperation Agreement), which sets out the principles of the relationship between the EU and the U.K. following the end of the transition period. The Trade and Cooperation Agreement was formally approved by the 27 Member States of the EU on December 29, 2020, and was formally approved by the U.K. Parliament on December 30, 2020. As of the date of this Annual

Report on Form 10-K, the European Commission has proposed to apply the Trade and Cooperation Agreement on a provisional basis for a limited time until February 28, 2021, by which time the Trade and Cooperation Agreement must be approved by the European Parliament.

The Trade and Cooperation Agreement provides clarity in respect of the intended shape of the future relationship between the U.K. and the EU and some detailed matters of trade and cooperation. However, as of the date of this Annual Report on Form 10-K, there remain unavoidable uncertainties related to Brexit, and the new relationship between the U.K. and EU, which will continue to be developed and defined.

As a result of Brexit, we may be negatively impacted by increased volatility in exchange rates and interest rates and disruptions affecting our relationships with our existing and future customers, suppliers and employees. Brexit and its implementation could also adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations and financial condition.

We are subject to claims, litigation, and regulatory proceedings that could have a material adverse effect on us.

We are, from time-to-time, involved in various claims, litigation matters, and regulatory proceedings. These matters may include contract disputes, personal injury claims, environmental claims and administrative actions, Occupational Safety and Health Administration inspections or proceedings, other tort claims, employment and tax matters and other litigation including class actions that arise in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and there can be no assurance as to the ultimate outcome of any litigation or regulatory proceeding. Litigation and regulatory proceedings may have a material adverse effect on us because of potential adverse outcomes, defense costs, the diversion of our management’s resources, availability of insurance coverage and other factors.

A strike, other work stoppage or business interruption, or our inability to renew collective bargaining agreements on favorable terms, could impact our cost structure and our ability to operate our facilities and produce our products, which could have an adverse effect on our results of operations.

We have a number of employees who are covered by collective bargaining or similar agreements. If we are unable to negotiate acceptable new agreements with the unions representing our employees upon expiration of existing contracts, we could experience strikes or other work stoppages. Strikes or other work stoppages could cause a significant disruption of operations at our facilities, which could have an adverse impact on us. New or renewal agreements with unions representing our employees could call for higher wages or benefits paid to union members, which would increase our operating costs and could adversely affect our profitability. Higher costs and/or limitations on our ability to operate our facilities and manufacture our products resulting from increased labor costs, strikes or other work stoppages could have a material adverse effect on our results of operations.

In addition, unexpected interruptions in our operations or those of our customers or suppliers due to such causes as weather-related events or acts of God, such as earthquakes, could have an adverse effect on our results of operations. For example, the Environmental Protection Agency has found that global climate change would be expected to increase the severity and possibly the frequency of severe weather patterns such as hurricanes. Although the financial impact of such future events is not reasonably estimable at this time, should they occur, our operations in certain coastal and flood-prone areas or operations of our customers and suppliers could be adversely affected.

We are subject to environmental, health, and safety laws and regulations and future compliance may have a material adverse effect on our results of operations, financial position, or cash flows.

The nature of our operations exposes us to the risk of liabilities and claims with respect to environmental, health, and safety matters. While we have established accruals intended to cover the cost of environmental remediation at contaminated sites, the actual cost is difficult to determine and may exceed our estimated reserves. Further, changes to, or more rigorous enforcement or stringent interpretation of environmental or health and safety laws could require significant incremental costs to maintain compliance. Recent and pending climate change regulation and initiatives on the state, regional, federal, and international levels may require certain of our facilities to reduce GHG emissions. While not reasonably estimable at this time, this could require capital expenditures for environmental control facilities and/or the purchase of GHG emissions credits in the coming years. In addition, with respect to environmental matters, future claims may be asserted against us for, among other things, past acts or omissions at locations operated by predecessor entities, or alleging damage or injury or seeking other relief in connection with environmental matters associated with our operations. Future liabilities, claims, and compliance costs may

have a material adverse effect on us because of potential adverse outcomes, defense costs, diversion of our resources, availability of insurance coverage, and other factors. The overall impact of these requirements on our operations could increase our costs and diminish our ability to compete with products that are produced in countries without such rigorous standards; the long run impact could negatively impact our results and have a material adverse effect on our business.

If we do not successfully execute or effectively operate, integrate, leverage and grow acquired businesses, our financial results may suffer.

Our strategy for long-term growth, productivity and profitability depends in part on our ability to make prudent strategic acquisitions and to realize the benefits we expect when we make those acquisitions. In furtherance of this strategy, over the past several years, we have acquired businesses in Europe, Canada, South Korea, the Middle East, and the United States.

While we currently anticipate that our past and future acquisitions will enhance our value proposition to customers and improve our long-term profitability, there can be no assurance that we will realize our expectations within the time frame we have established, if at all, or that we can continue to support the value we allocate to these acquired businesses, including their goodwill or other intangible assets.

We may be subject to risks relating to our information technology systems.

We rely on information technology systems to process, transmit and store electronic information and manage and operate our business. The incidence of cyber attacks, computer hacking, computer viruses, worms, and other disruptive software, denial of service attacks, and other malicious cyber activities are on the rise worldwide. A breach of our information technology systems or those of our commercial partners could expose us, our customers, our suppliers, and our employees to risks of misuse or improper disclosure of data, business information (including intellectual property) and other confidential information. We operate globally, and the legal rules governing data storage and transfers are often complex, unclear, and changing. A breach could also result in manipulation and destruction of data, production downtimes and operations disruptions. Any such breaches or events could expose us to legal liability and adversely affect our reputation, competitive position, business or results of operations.

The novel coronavirus (COVID-19) and other possible pandemics and similar outbreaks, could result in material adverse effects on our business, financial position, results of operations and cash flows.

The novel coronavirus (COVID-19) pandemic, and the various governmental, industry and consumer actions related thereto, are having and could continue to have negative impacts on our business and have created or could create conditions in our other risk factors noted above. These impacts include, without limitation, potential significant volatility or decreases in the demand for our products, changes in customer and consumer behavior and preferences, disruptions in or closures of our manufacturing operations or those of our customers and suppliers, disruptions within our supply chain, limitations on our employees’ ability to work and travel, potential financial difficulties of customers and suppliers, significant changes in economic or political conditions, and related financial and commodity volatility, including volatility in raw material and other input costs.

It is uncertain what the impact of various legislation and other responses being taken in the U.S. and other countries will have on the economy, international trade, our industries, our businesses and the businesses of our customers and suppliers.

Despite our efforts to manage the impacts, the degree to which COVID-19 and related actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control including the duration, spread and severity of the outbreak, the actions taken to contain COVID-19 and mitigate its public health effects, the impact on the U.S. and global economies and demand for our products, and how quickly and to what extent normal economic and operating conditions resume.


ITEM 1B.			UNRESOLVED STAFF COMMENTS

None.


ITEM 2.			PROPERTIES

Information pertaining to our major operating facilities is included below. Except as noted, we own all of the principal properties. In addition, we own and/or lease other properties used as distribution centers and corporate offices. Our plants are in satisfactory condition and are suitable for the purpose for which they were designed and are now being used.

Location of Facility

Building Space
(Sq. Ft.)

Primary Use

Owned or Leased

Piping Systems Segment

Fulton, MS

778,065

Manufacturing, Packaging, & Distribution

Owned

New Market, VA

413,120

Manufacturing & Distribution

Owned

Bilston, England

402,500

Manufacturing

Owned

Wynne, AR

400,000

Manufacturing & Distribution

Owned

Yangju City, Gyeonggi Province, South Korea

343,909

Manufacturing

Owned

Cedar City, UT

260,000

Manufacturing & Distribution

Owned

Woodbridge, NJ

247,000

Distribution

Leased

London, Ontario, Canada

200,400

Manufacturing

Owned

North Wales, PA

174,000

Manufacturing

Owned

Covington, TN

159,500

Manufacturing

Owned

Monterrey, Mexico

152,000

Manufacturing

Leased

Monterrey, Mexico

132,000

Manufacturing

Leased

Ennis, TX

109,700

Distribution

Leased

University Park, IL

90,100

Distribution

Leased

Ansonia, CT

89,396

Manufacturing & Distribution

Owned

Kansas City, MO

85,000

Distribution

Leased

St Thomas, Ontario Canada

73,124

Warehouse

Leased

Shelby, OH

61,750

Distribution

Leased

Atlanta, GA

60,293

Distribution

Leased

Dallas, TX

55,585

Distribution

Leased

Ontario, CA

54,209

Distribution

Leased

Jacksonville, FL

48,000

Distribution

Leased

Glendale Heights, IL

43,295

Distribution

Leased

Calgary, Alberta, Canada

22,084

Manufacturing

Leased

Calgary, Alberta, Canada

21,117

Manufacturing

Leased

Georgetown, Ontario, Canada

20,000

Manufacturing

Leased

Calgary, Alberta, Canada

20,000

Office Space

Leased

Calgary, Alberta, Canada

12,100

Warehouse

Leased

Industrial Metals Segment

Port Huron, MI

450,000

Manufacturing

Owned

Belding, MI

293,068

Manufacturing

Owned

Brooklyn, OH

163,200

Manufacturing

Leased

Marysville, MI

81,500

Manufacturing

Owned

Brighton, MI

65,000

Machining

Leased

Waynesboro, TN

57,000

Manufacturing

Leased

Middletown, OH

55,000

Manufacturing

Owned

Pittsburgh, PA

5,760

Office Space

Leased

Climate Segment

Plainville, GA

313,835

Manufacturing & Distribution

Owned

Location of Facility

Building Space
(Sq. Ft.)

Primary Use

Owned or Leased

Fort Worth, TX

266,485

Manufacturing

Owned

Cartersville, GA

260,924

Manufacturing

Owned

Phoenix, AZ

250,250

Manufacturing & Distribution

Owned

Tampa , FL

202,614

Manufacturing & Distribution

Owned

Crawsfordville, IN

153,600

Manufacturing & Distribution

Owned

Fort Worth, TX

153,374

Manufacturing

Owned

Vineland, NJ

136,000

Manufacturing & Distribution

Owned

Guadalupe, Mexico

130,110

Manufacturing

Leased

Sacramento, CA

121,240

Manufacturing & Distribution

Owned

Bluffs, IL

107,000

Manufacturing

Owned

Fort Worth, TX

103,125

Manufacturing & Distribution

Owned

Hickory, NC

100,000

Manufacturing

Owned

Hartsville, TN

78,000

Manufacturing

Owned

Houston, TX

72,000

Manufacturing & Distribution

Owned

Carthage, TN

67,520

Manufacturing

Owned

Baltimore, MD

62,500

Manufacturing & Distribution

Owned

Florence, AL

62,000

Manufacturing

Leased

Springdale, AR

57,600

Manufacturing & Distribution

Owned

Gordonsville, TN

48,736

Manufacturing

Leased

Lawrenceville, GA

42,000

Manufacturing

Leased

Xinbei District, Changzhou, China

33,940

Manufacturing

Leased

Kansas City, MO

30,500

Manufacturing

Leased

Ansonia, CT

24,000

Manufacturing

Leased

Carrollton, TX

13,700

Office

Leased

ITEM 3.

LEGAL PROCEEDINGS

The Company is involved in certain litigation as a result of claims that arose in the ordinary course of business. Additionally, we may realize the benefit of certain legal claims and litigation in the future; these gain contingencies are not recognized in the Consolidated Financial Statements.

For a description of material pending legal proceedings, see “Note 14 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.


ITEM 4.			MINE SAFETY DISCLOSURES

Not applicable.

PART II


ITEM 5.			MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “MLI.” As of February 19, 2021, the number of holders of record of Mueller’s common stock was 653.

During fiscal 2019 and 2020, we paid a quarterly cash dividend of $0.10 per share of common stock.

Payment of dividends in the future is dependent upon the Company’s financial condition, cash flows, capital requirements, earnings, and other factors.

Issuer Purchases of Equity Securities

The Company’s Board of Directors has extended, until July 2021, the authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. The Company may cancel, suspend, or extend the time period for the purchase of shares at any time. Any repurchases will be funded primarily through existing cash and cash from operations. The Company may hold any shares repurchased in treasury or use a portion of the repurchased shares for its stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through December 26, 2020, the Company has repurchased approximately 6.4 million shares under this authorization. Below is a summary of the Company’s stock repurchases for the quarter ended December 26, 2020.


	(a) Total Number of Shares Purchased (1)	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (2)

September 27, 2020 – October 24, 2020	—	—	—	13,575,058
October 25, 2020 – November 21, 2020	8,150	34.11	—	13,575,058
November 22, 2020 – December 26, 2020	15,338	35.71	—	13,575,058
Total	23,488		—

(1) Includes shares tendered to the Company by holders of stock-based awards in payment of the purchase price and/or withholding taxes upon exercise and/or vesting.

(2) Shares available to be purchased under the Company’s 20 million share repurchase authorization until July 2021. The extension of the authorization was announced on October 21, 2020.

Company Stock Performance

The following graph compares total stockholder return since December 26, 2015 to the Dow Jones U.S. Total Return Index (Total Return Index) and the Dow Jones U.S. Building Materials & Fixtures Index (Building Materials Index). Total return values for the Total Return Index, the Building Materials Index and the Company were calculated based on cumulative total return values assuming reinvestment of (i) regular quarterly dividends paid by the Company, (ii) the cash paid by the Company in conjunction with the special dividend and (iii) the proceeds of an assumed sale at par of the Debentures paid by the Company in connection with the special dividend.


	2015	2016	2017	2018	2019	2020
Mueller Industries, Inc.	100.00	144.36	160.77	107.78	148.17	165.29
Dow Jones U.S. Total Return Index	100.00	112.25	136.38	129.60	169.96	204.63
Dow Jones U.S. Building Materials & Fixtures Index	100.00	118.45	139.59	110.61	161.86	200.83


ITEM 6.			SELECTED FINANCIAL DATA


(In thousands, except per share data)	2020			2019			2018			2017		2016

For the fiscal year: (1)

Net sales	$	2,398,043		$	2,430,616		$	2,507,878		$	2,266,073	$	2,055,622

Operating income (2)	245,838			191,403			172,969			150,807		154,401

Net income attributable to Mueller Industries, Inc.	139,493		(3)	100,972		(4)	104,459		(5)	85,598		99,727		(6)

Diluted earnings per share	2.47			1.79			1.82			1.49		1.74

Cash dividends per share	0.40			0.40			0.40			3.40		0.38

At year-end:

Total assets	1,528,568			1,370,940			1,369,549			1,320,173		1,447,476

Long-term debt	286,593			378,724			489,597			448,592		213,709

(1)Includes activity of acquired businesses from the following purchase dates: Kessler Sales & Distribution, August 3, 2020; Shoals Tubular, Inc., January 17, 2020; ATCO Rubber Products, Inc., July 2, 2018; Die-Mold Tool Limited, March 31, 2018; Pexcor Manufacturing Company Inc. and Heatlink Group Inc., May 31, 2017; Jungwoo Metal Ind. Co., LTD, April 26, 2016.

(2)Adjusted retroactively to reflect adoption of ASU 2017-07 that occurred during 2018. The components of net periodic benefit cost (income) other than the service cost component are included in other income (expense), net in the Consolidated Statements of Income.

(3)Includes litigation settlement gain of $22.1 million resulting from the Deepwater Horizon Economic and Property Damage Settlement, offset by charges of $17.8 million resulting from the termination of the U.S. defined benefit pension plan, and pre-tax impairment charges of $3.8 million on fixed assets.

(4)Includes net expense of $3.6 million resulting from the change in fair value of contingent consideration.

(5)Includes a pre-tax insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at the brass rod mill in Port Huron, Michigan.

(6)Includes pre-tax impairment charges of $6.8 million on fixed assets.


ITEM 7.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations is contained under the caption “Financial Review” submitted as a separate section of this Annual Report on Form 10-K commencing on page F-2.


ITEM 7A.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk are contained under the caption “Financial Review” submitted as a separate section of this Annual Report on Form 10-K commencing on page F-2.


ITEM 8.			FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements required by this item are contained in a separate section of this Annual Report on Form 10-K commencing on page F-17.


ITEM 9.			CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.			CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure information required to be disclosed in Company reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) of the Exchange Act as of December 26, 2020. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of December 26, 2020 to ensure that information required to be disclosed in Company reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Pursuant to the rules and regulations of the SEC, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

The Company acquired Shoals Tubular, Inc. and Kessler Sales & Distribution during 2020 and has excluded these businesses from management’s assessment of internal controls. The total value of assets for these businesses represents five percent of the Company’s consolidated total assets at December 26, 2020. Net sales and operating income from the dates of acquisition represent three percent of the Company’s consolidated net sales and less than one percent of operating income of the Company for 2020. Accordingly, these acquired businesses are not included in the scope of this report.

As required by Rule 13a-15(c) under the Exchange Act, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s internal control over financial reporting as of December 26, 2020 based on the control criteria established in a report entitled Internal Control—Integrated Framework, (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, management has concluded that our internal control over financial reporting was effective as of December 26, 2020.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting, which is included herein.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended December 26, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Mueller Industries, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Mueller Industries, Inc.’s internal control over financial reporting as of December 26, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Mueller Industries, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 26, 2020, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Shoals Tubular, Inc. and Kessler Sales & Distribution, which are included in the 2020 consolidated financial statements of the Company and constituted 5% of total assets as of December 26, 2020 and 3% and 0% of net sales and operating income, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Shoals Tubular, Inc. and Kessler Sales & Distribution.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 26, 2020 and December 28, 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 26, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Memphis, Tennessee
February 24, 2021


ITEM 9B.			OTHER INFORMATION

None.

PART III


ITEM 10.			DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by Item 10 is contained under the captions “Ownership of Common Stock by Directors and Executive Officers and Information about Director Nominees,” “Corporate Governance,” “Report of the Audit Committee of the Board of Directors,” and “Section 16(a) Beneficial Ownership Compliance Reporting” in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders to be filed with the SEC on or about March 25, 2021, which is incorporated herein by reference.

The Company has adopted a Code of Business Conduct and Ethics that applies to its chief executive officer, chief financial officer, and other financial executives. We have also made the Code of Business Conduct and Ethics available on the Company’s website at www.muellerindustries.com.


ITEM 11.			EXECUTIVE COMPENSATION

The information required by Item 11 is contained under the caption “Compensation Discussion and Analysis,” “Summary Compensation Table for 2020,” “2020 Grants of Plan Based Awards Table,” “Outstanding Equity Awards at Fiscal 2020 Year-End,” “2020 Option Exercises and Stock Vested,” “Potential Payments Upon Termination of Employment or Change in Control as of the End of 2020,” “2020 Director Compensation,” “Report of the Compensation Committee of the Board of Directors on Executive Compensation” and “Corporate Governance” in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders to be filed with the SEC on or about March 25, 2021, which is incorporated herein by reference.


ITEM 12.			SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table discloses information regarding the securities to be issued and the securities remaining available for issuance under the Registrant’s stock-based incentive plans as of December 26, 2020 (shares in thousands):


	(a)	(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders	793	$	26.81	1,635

Equity compensation plans not approved by security holders	—	—		—

Total	793	$	26.81	1,635

Other information required by Item 12 is contained under the captions “Principal Stockholders” and “Ownership of Common Stock by Directors and Executive Officers and Information about Director Nominees” in the Company’s Proxy Statement for

its 2021 Annual Meeting of Stockholders to be filed with the SEC on or about March 25, 2021, which is incorporated herein by reference.


ITEM 13.			CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is contained under the caption “Corporate Governance” in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders to be filed with the SEC on or about March 25, 2021, which is incorporated herein by reference.


ITEM 14.			PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is contained under the caption “Appointment of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders to be filed with the SEC on or about March 25, 2021, which is incorporated herein by reference.

PART IV


ITEM 15.			EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as part of this report:

1.Financial Statements: the financial statements, notes, and report of independent registered public accounting firm described in Item 8 of this Annual Report on Form 10-K are contained in a separate section of this Annual Report on Form 10-K commencing on page F-1.

2.Financial Statement Schedule: the financial statement schedule described in Item 8 of this report is contained in a separate section of this Annual Report on Form 10-K commencing on page F-1.

3.Exhibits:

Certificate of Incorporation and Bylaws

3.aRestated Certificate of Incorporation of the Registrant dated February 8, 2007 (Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2007, for the fiscal year ended December 30, 2006).

3.bAmended and Restated By-laws of the Registrant, effective as of January 15, 2016 (Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, dated January 19, 2016).

Long-Term Debt Instruments

4.1Indenture, dated March 9, 2017, among the Registrant (as issuer) and Regions Bank (as trustee) (Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, dated March 13, 2017).

4.2Form of 6% Subordinated Debenture due 2027 (Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, dated March 13, 2017).

4.3Certain instruments with respect to long-term debt of the Registrant have not been filed as Exhibits to this Report since the total amount of securities authorized under any such instruments does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of each such instrument upon request of the SEC.

4.4Description of securities

Consulting, Employment, and Compensatory Plan Agreements

10.1Mueller Industries, Inc. 2002 Stock Option Plan Amended and Restated as of February 16, 2006 (Incorporated herein by reference to Exhibit 10.20 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2007, for the fiscal year ended December 30, 2006).

10.2Mueller Industries, Inc. 2009 Stock Incentive Plan (Incorporated by reference from Appendix I to the Company’s 2009 Definitive Proxy Statement with respect to the Company’s 2009 Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on March 26, 2009).

10.3Mueller Industries, Inc. 2014 Stock Incentive Plan (Incorporated by reference from Appendix I to the Company’s 2014 Definitive Proxy Statement with respect to the Company’s 2014 Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on March 19, 2014).

10.4Amendment to the Mueller Industries, Inc. 2002 Stock Option Plan, dated July 11, 2011 (Incorporated herein by reference to Exhibit 10.16 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2012, for the fiscal year ended December 31, 2011).

10.5Amendment to the Mueller Industries, Inc. 2009 Stock Incentive Plan, dated July 11, 2011 (Incorporated herein by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2012, for the fiscal year ended December 31, 2011).

10.62019 Incentive Plan (incorporated by reference to Annex 1 to the Company’s definitive proxy statement filed with the SEC on March 28, 2019).

10.7Mueller Industries, Inc. 2011 Annual Bonus Plan (Incorporated herein by reference to Exhibit 10.18 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2012, for the fiscal year ended December 31, 2011).

10.8Summary description of the Registrant’s 2021 incentive plan for certain key employees.

10.9Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Brian K. Barksdale (Incorporated herein by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016).

10.10Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Jeffrey A. Martin (Incorporated herein by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016).

10.11Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Mark Millerchip (Incorporated herein by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016).

10.12Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Nicholas W. Moss (Incorporated herein by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016).

10.13Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Steffen Sigloch (Incorporated herein by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016).

10.14Change in Control Agreement, effective January 3, 2017 by and between the Registrant and Christopher J. Miritello (Incorporated herein by reference to Exhibit 10.25 of the Registrant’s Annual Report on Form 10-K, dated March 1, 2017, for the fiscal year ended December 31, 2016).

10.15Employment Agreement, dated as of March 15, 2018, by and between Mueller Industries, Inc. and Gregory L. Christopher (Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated March 19, 2018).

Financing Agreements

10.16Credit Agreement, dated as of December 6, 2016 among the Registrant (as borrower), Bank of America (as agent), and certain lenders named therein (Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated December 12, 2016).

10.17Amendment No. 1 to Credit Agreement among the Registrant (as borrower), Bank of America, N.A. (as agent), and certain lenders named therein dated April 22, 2019 (Incorporated herein by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K, dated February 26 , 20 20 , for the fiscal year ended December 28 , 201 9 ).

Other Exhibits

21.0Subsidiaries of the Registrant.

23.0Consent of Independent Consent of Independent Registered Public Accounting Firm.

31.1Certification of C hief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2Certification of Chie f Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.INS XBRL Instance Document

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Presentation Linkbase Document

101.SCH XBRL Taxonomy Extension Schema


ITEM 16.			Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2021.

MUELLER INDUSTRIES, INC.


			/s/ Gregory L. Christopher
			Gregory L. Christopher, Chief Executive Officer (Principal Executive Officer) and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.


Signature	Title	Date

/s/ Gregory L. Christopher Gregory L. Christopher	Chief Executive Officer (Principal Executive Officer) and Chairman of the Board	February 24, 2021

/s/ Terry Hermanson	Lead Independent Director	February 24, 2021
Terry Hermanson

/s/ Elizabeth Donovan	Director	February 24, 2021
Elizabeth Donovan

/s/ Gary S. Gladstein	Director	February 24, 2021
Gary S. Gladstein

/s/ Gennaro J. Fulvio	Director	February 24, 2021
Gennaro J. Fulvio

/s/ Scott J. Goldman	Director	February 24, 2021
Scott J. Goldman

/s/ John B. Hansen	Director	February 24, 2021
John B. Hansen

/s/ Charles P. Herzog, Jr.	Director	February 24, 2021
Charles P. Herzog, Jr.


			Signature and Title			Date

			/s/ Jeffrey A. Martin			February 24, 2021
			Jeffrey A. Martin
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

			/s/ Anthony J. Steinriede			February 24, 2021
			Anthony J. Steinriede
			Vice President – Corporate Controller

MUELLER INDUSTRIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Financial Review			F-2

Consolidated Statements of Income for the years ended December 2 6 , 20 20 , December 2 8 , 201 9 , and December 29 , 201 8			F-17

Consolidated Statements of Comprehensive Income for the years ended December 2 6 , 20 20 , December 2 8 , 201 9 , and December 29 , 201 8			F-18

Consolidated Balance Sheets for the years ended December 2 6 , 20 20 and December 2 8 , 201 9			F-19

Consolidated Statements of Cash Flows for the years ended December 2 6 , 20 20 , December 2 8 , 201 9 , and December 29 , 201 8			F-20

Consolidated Statements of Changes in Equity for the years ended December 2 6 , 20 20 , December 2 8 , 201 9 , and December 29 , 201 8			F-21

Notes to Consolidated Financial Statements			F-23

Report of Independent Registered Public Accounting Firm			F-61

FINANCIAL STATEMENT SCHEDULE



Schedule for the years ended December 26, 2020, December 28, 2019, and December 29, 2018

Valuation and Qualifying Accounts (Schedule II)			F-63

F-1

FINANCIAL REVIEW

The Financial Review section of our Annual Report on Form 10-K consists of the following: Management’s Discussion and Analysis of Results of Operations and Financial Condition (MD&A), the Consolidated Financial Statements, and Other Financial Information, all of which include information about our significant accounting policies, practices, and the transactions that impact our financial results. The following MD&A describes the principal factors affecting the results of operations, liquidity and capital resources, contractual cash obligations, and the critical accounting estimates of the Company. The discussion in the Financial Review section should be read in conjunction with the other sections of this Annual Report, particularly “Item 1: Business” and our other detailed discussion of risk factors included in this MD&A.

OVERVIEW

We are a leading manufacturer of copper, brass, aluminum, and plastic products. The range of products we manufacture is broad: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; fabricated tubular products; pressure vessels; coaxial heat exchangers; steel nipples; insulated flexible duct systems; and brazed manifolds, headers, and distributor assemblies. We also resell brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets and plumbing specialty products. Mueller’s operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China.

Each of the reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:

•Piping Systems: The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, Die-Mold, European Operations, Trading Group, and Jungwoo-Mueller (our South Korean joint venture). The Domestic Piping Systems Group manufactures and distributes copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group manufactures 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 United Kingdom, which is sold throughout Europe. The Trading Group manufactures pipe nipples and sources products for import distribution in North America. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs).

•Industrial Metals: The Industrial Metals segment is composed of Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. The segment manufactures and sells brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; and gas valves and assemblies. The segment manufactures and sells its products primarily to domestic OEMs in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets.

•Climate: The Climate segment is composed of Refrigeration Products, Fabricated Tube Products, Westermeyer, Turbotec, ATCO, Linesets, Inc., and Shoals. The segment manufactures and sells refrigeration valves and fittings, fabricated tubular products, high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, line sets, brazed manifolds, headers, and distributor assemblies. The segment sells its products primarily to the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.

New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air-conditioning, refrigeration, and plumbing markets because the principal end use of a significant portion of our products is in the construction of single and multi-family housing and commercial buildings. Repairs and remodeling projects are also important drivers of underlying demand for these products. In addition, our products are used in various transportation, automotive, and industrial applications.

According to the U.S. Census Bureau, actual housing starts in the U.S. were 1.38 million in 2020, which compares to 1.29 million in 2019 and 1.25 million in 2018. Mortgage rates remain at historically low levels, as the average 30-year fixed mortgage rate was approximately 3.11 percent in 2020 and 3.94 percent in 2019. The private nonresidential construction sector,

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includes offices, industrial, health care, and retail projects. According to the U.S. Census Bureau, the value of private nonresidential construction put in place was $471.7 billion in 2020, $486.3 billion in 2019, and $465.5 billion in 2018.

Profitability of certain of our product lines depends upon the “spreads” between the cost of raw material and the selling prices of our products. The open market prices for copper cathode and copper and brass scrap, for example, influence the selling price of copper tube and brass rod, two principal products manufactured by the Company. We attempt to minimize the effects on profitability from fluctuations in material costs by passing through these costs to our customers; however margins of our businesses that account for inventory on a FIFO basis may be impacted in periods of significant fluctuations in material costs. Our earnings and cash flow are dependent upon these spreads that fluctuate based upon market conditions.

Earnings and profitability are also impacted by unit volumes that are subject to market trends, such as substitute products, imports, technologies, and market share. In our core product lines, we intensively manage our pricing structure while attempting to maximize profitability. From time-to-time, this practice results in lost sales opportunities and lower volume. For plumbing systems, plastics are the primary substitute product; these products represent an increasing share of consumption. For certain air-conditioning and refrigeration applications, aluminum-based systems are the primary substitution threat. We cannot predict the acceptance or the rate of switching that may occur. U.S. consumption of copper tube and brass rod is still predominantly supplied by U.S. manufacturers. In recent years, brass rod consumption in the U.S. has declined due to the outsourcing of many manufactured products from offshore regions.

RESULTS OF OPERATIONS

Consolidated Results

The following table compares summary operating results for 2020, 2019, and 2018:


							Percent Change
(In thousands)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018

Net sales	$	2,398,043	$	2,430,616	$	2,507,878	(1.3)	%	(3.1)	%
Operating income	245,838		191,403		172,969		28.4		10.7
Net income	139,493		100,972		104,459		38.2		(3.3)

The following are components of changes in net sales compared to the prior year:


	2020 vs. 2019		2019 vs. 2018

Net selling price in core product lines	1.6	%	(3.7)	%
Unit sales volume in core product lines	(5.4)		(4.4)
Acquisitions	2.8		4.2

Other	(0.3)		0.8

	(1.3)	%	(3.1)	%

The decrease in net sales in 2020 was primarily due to lower unit sales volume of $130.9 million in our core product lines, primarily brass rod and copper tube. Lower unit sales volume was due in part to the impacts of the COVID-19 pandemic on demand for our products, particularly in the second quarter of 2020. This decrease was partially offset by (i) sales of $54.9 million recorded by Kessler, acquired in August 2020, (ii) higher net selling prices of $38.1 million in our core product lines, primarily copper tube, and (iii) sales of $12.2 million recorded by Shoals, acquired in January 2020.

The decrease in net sales in 2019 was primarily due to (i) lower unit sales volume of $110.3 million in our core product lines, primarily brass rod and copper tube, and (ii) lower net selling prices of $91.7 million in our core product lines. These decreases were partially offset by (i) incremental sales of $100.1 million recorded by ATCO, acquired in July 2018, (ii) an increase in sales in our non-core product lines of $22.4 million, and (iii) incremental sales of $4.0 million of recorded by Die-Mold, acquired in March 2018.

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Net selling prices generally fluctuate with changes in raw material costs. Changes in raw material costs are generally passed through to customers by adjustments to selling prices. The following graph shows the Comex average copper price per pound by quarter for the most recent three-year period:

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2020, 2019, and 2018:


(In thousands)	2020		2019		2018

Cost of goods sold	$	1,966,161	$	2,035,610	$	2,150,400
Depreciation and amortization	44,843		42,693		39,555
Selling, general, and administrative expense	159,483		162,358		148,888
Litigation settlement, net	(22,053)		—		—
Gain on sale of assets, net	—		(963)		(253)
Impairment charges	3,771		—		—
Insurance recovery	—		(485)		(3,681)

Operating expenses	$	2,152,205	$	2,239,213	$	2,334,909


	2020		2019		2018

Cost of goods sold	82.0	%	83.7	%	85.7	%
Depreciation and amortization	1.9		1.8		1.6
Selling, general, and administrative expense	6.6		6.6		5.9
Litigation settlement, net	(0.9)		—		—
Gain on sale of assets, net	—		—		—
Impairment charges	0.1		—		—
Insurance recovery	—		—		(0.1)

Operating expenses	89.7	%	92.1	%	93.1	%

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The decrease in cost of goods sold in 2020 was primarily due to the decrease in sales volume in our core product lines. This was partially offset by the increase in sales volume resulting from the acquisitions of Kessler and Shoals and an increase in the average cost of copper, our principal raw material. Gross margin as a percentage of sales was 18.0 percent compared with 16.3 percent in the prior year. This improvement was primarily due to an increased mix of sales from higher margin products, lower manufacturing costs, and lower employee healthcare costs. The decrease in cost of goods sold in 2019 was primarily due to the decrease in sales volume in our core product lines and the decrease in the average cost of copper. This was partially offset by the increase in sales volume resulting from the acquisition of ATCO.

Depreciation and amortization increased in 2020 and 2019 as a result of long-lived assets of businesses acquired.

Selling, general, and administrative expenses decreased in 2020 primarily due to (i) expense for contingent consideration arrangements associated with businesses acquired of $5.7 million recognized in the prior year, (ii) a decrease in travel and entertainment expense of $3.9 million, (iii) a decrease in employment costs of $3.0 million, and (iv) a decrease in lease expense of $1.5 million. These decreases were partially offset by (i) expenses of $7.4 million associated with Kessler and Shoals, (ii) income of $2.1 million recognized in the prior year as a result of the reduction of contingent consideration arrangements associated with businesses acquired, (iii) an increase in bad debt expense of $1.1 million, and (iv) plant consolidation costs of $0.9 million. The increase in selling, general, and administrative expenses in 2019 was primarily due to (i) expense recognized for contingent consideration arrangements associated with businesses acquired of $5.7 million, (ii) an increase in employment costs, including employee healthcare, of $4.9 million, (iii) incremental expenses of $4.7 million associated with ATCO and Die-Mold, (iv) a reduction of $3.5 million in fees received for services provided under certain third-party sales and distribution arrangements, and (v) an increase in product liability costs of $1.6 million. These increases were partially offset by (i) income of $2.1 million recognized as a result of the reduction of contingent consideration arrangements associated with businesses acquired, (ii) a decrease in legal and professional fees of $1.4 million, (iii) higher foreign currency transaction gains of $1.4 million, (iv) a reduction of $0.8 million in fees received for services provided under certain equipment transfer and licensing agreements, and (v) a decrease in supplies and utilities of $0.5 million.

During 2020, we recognized a gain of $22.1 million for the settlement of our claim under the Deepwater Horizon Economic and Property Damage Settlement Program and asset impairment charges of $3.8 million related to production equipment that was idled.

During 2019, we recognized a net gain of $1.0 million on the sale of real property. We also recognized an insurance recovery gain of $0.5 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan.

During 2018, we recognized a gain of $2.7 million on the sale of real property and a gain of $0.7 million on the sale of manufacturing equipment, which were offset by a loss of $3.1 million on the sale of a corporate aircraft. We also recognized an insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan.

Interest expense decreased in 2020 primarily as a result of lower principal outstanding and reduced interest rates associated with our unsecured $350.0 million revolving credit facility. The increase in 2019 was primarily as a result of increased borrowing costs associated with our unsecured $350.0 million revolving credit facility.

Environmental expense for our non-operating properties was higher in 2020 than in 2019 or 2018 primarily as a result of ongoing remediation activities.

During 2020, we recognized a $17.8 million expense to terminate our U.S. defined benefit pension plan, which consisted of an $11.6 million non-cash charge and $6.2 million in federal excise tax on surplus assets returned to the Company.

Other income, net, was higher in 2020 primarily as a result of a curtailment gain related to our benefit plans, and lower in 2019 primarily as a result of lower net periodic benefit income for our benefit plans.

Income tax expense was $55.3 million in 2020, representing an effective tax rate of 26.4 percent. This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes, net of the federal benefit, of $5.9 million, and (ii) the effect of foreign statutory rates different from the U.S. federal rate of $2.8 million, and (iii) other adjustments of $3.0 million. These increases were partially offset by the impact of investments in unconsolidated affiliates of $0.4 million.

Income tax expense was $35.3 million in 2019, representing an effective tax rate of 21.2 percent. This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes,

F-5

net of the federal benefit, of $3.2 million, and (ii) the impact of investments in unconsolidated affiliates of $0.5 million. These increases were partially offset by other adjustments of $3.3 million.

Income tax expense was $31.0 million in 2018, representing an effective tax rate of 20.6 percent. This rate was lower than what would be computed using the U.S. statutory federal rate primarily due to (i) a reduction of the calculation of federal tax on the Company’s accumulated foreign earnings under the Tax Cuts and Jobs Act of $4.4 million and (ii) a reduction for the impact of investments in unconsolidated affiliates of $2.8 million. These reductions were partially offset by (i) the provision for state and local income taxes, net of the federal benefit, of $3.5 million and (ii) other adjustments of $3.1 million.

During 2020, we recognized losses of $10.2 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $24.6 million in 2019. The loss on these investments for 2020 included net losses of $10.4 million for Tecumseh and net gains of $0.2 million for Mueller Middle East. Our Tecumseh investment showed improvement in 2020 due to a pre-tax gain of $11.6 million from a land sale and the early impacts of ongoing restructuring activities.

During 2019, we recognized losses of $24.6 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $12.6 million in 2018. The loss on these investments for 2019 included net losses of $22.0 million for Tecumseh and net losses of $2.6 million for Mueller Middle East. Included in the losses for Tecumseh were $6.4 million of severance and restructuring expenses and a product liability settlement of $3.4 million. These expenses were offset by a gain on the sale of land of $1.8 million.

During 2018, we recognized losses of $12.6 million on our investments in unconsolidated affiliates, net of foreign tax. The loss of these investments included net losses of $14.0 million and charges of $3.0 million related to certain labor claim contingencies, offset by a gain of $7.0 million related to a settlement with the Brazilian Federal Revenue Agency for Tecumseh. It also includes net losses of $2.6 million for Mueller Middle East.

Piping Systems Segment

The following table compares summary operating results for 2020, 2019, and 2018 for the businesses comprising our Piping Systems segment:


							Percent Change
(In thousands)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018

Net sales	$	1,583,002	$	1,542,456	$	1,645,633	2.6	%	(6.3)	%
Operating income	165,719		131,879		122,829		25.7		7.4

The following are components of changes in net sales compared to the prior year:


	2020 vs. 2019		2019 vs. 2018

Net selling price in core product lines	2.5	%	(4.4)	%
Unit sales volume in core product lines	(3.2)		(2.3)
Acquisitions	3.6		0.3

Other	(0.3)		0.1

	2.6	%	(6.3)	%

The increase in net sales in 2020 was primarily attributable to (i) sales of $54.9 million recorded by Kessler and (ii) higher net selling prices of $38.1 million in the segment’s core product lines, primarily copper tube. These increases were partially offset by lower unit sales volume of $48.7 million in the segment’s core product lines.

The decrease in net sales in 2019 was primarily attributable to (i) lower net selling prices of $70.6 million in the segment’s core product lines, primarily copper tube, and (ii) lower unit sales volume of $37.3 million in the segment’s core product lines. These decreases were partially offset by incremental sales of $4.0 million recorded by Die-Mold.

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The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2020, 2019, and 2018:


(In thousands)	2020		2019		2018

Cost of goods sold	$	1,311,697	$	1,313,980	$	1,426,729
Depreciation and amortization	23,071		22,621		23,304
Selling, general, and administrative expense	78,744		75,170		74,864
Gain on sale of assets, net	—		(1,194)		(2,093)
Impairment charges	3,771		—		—


Operating expenses	$	1,417,283	$	1,410,577	$	1,522,804


	2020		2019		2018

Cost of goods sold	82.9	%	85.2	%	86.7	%
Depreciation and amortization	1.5		1.5		1.4
Selling, general, and administrative expense	4.9		4.9		4.5
Gain on sale of assets, net	—		(0.1)		(0.1)
Impairment charges	0.2		—		—


Operating expenses	89.5	%	91.5	%	92.5	%

Gross margin as a percentage of sales was 17.1 percent compared with 14.8 percent in the prior year. This improvement was primarily due to an increased mix of sales from higher margin products, lower manufacturing costs, and lower employee healthcare costs. The decrease in cost of goods sold in 2019 was primarily due to the decrease in the average cost of copper and the decrease in sales volume in the segment’s core product lines.

Depreciation and amortization increased in 2020 as a result of long-lived assets of businesses acquired. The decrease in 2019 was a result of several long-lived assets becoming fully depreciated.

Selling, general, and administrative expenses increased for 2020, primarily due to (i) expenses of $5.5 million associated with Kessler, (ii) income of $2.1 million recognized in the prior year as a result of the reduction of contingent consideration arrangements associated with businesses acquired, and (iii) higher foreign currency transaction losses of $0.7 million. These increases were partially offset by (i) a reduction in employment costs of $2.2 million, (ii) a decrease in travel and entertainment expense of $2.0 million, (iii) a decrease in marketing expenses of $0.9 million, and (iv) a decrease in supplies and utilities of $0.6 million. The slight increase in 2019 was primarily due to (i) a reduction of $3.5 million in fees received for services provided under certain third-party sales and distribution arrangements, (ii) higher employment costs, including employee healthcare, of $0.9 million, and (iii) incremental expenses associated with Die-Mold of $0.6 million. These increases were partially offset by (i) income of $2.1 million recognized as a result of the reduction of contingent consideration arrangements associated with businesses acquired, (ii) higher foreign currency transaction gains of $1.4 million, and (iii) a decrease in supplies and utilities of $0.6 million.

During 2020, we recognized asset impairment charges of $3.8 million related to production equipment that was idled.

During 2019, we recognized a gain of $1.2 million on the sale of real property.

During 2018, we recognized a gain of $1.4 million on the sale of real property and a gain of $0.7 million on the sale of manufacturing equipment.

Industrial Metals Segment

The following table compares summary operating results for 2020, 2019, and 2018 for the businesses comprising our Industrial Metals segment:

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							Percent Change
(In thousands)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018

Net sales	$	472,159	$	554,372	$	651,061	(14.8)	%	(14.9)	%
Operating income	54,065		61,724		75,607		(12.4)		(18.4)

The following are components of changes in net sales compared to the prior year:


	2020 vs. 2019		2019 vs. 2018

Net selling price in core product lines	—	%	(3.3)	%
Unit sales volume in core product lines	(15.2)		(11.4)


Other	0.4		(0.2)

	(14.8)	%	(14.9)	%

The decrease in net sales in 2020 was primarily due to (i) lower unit sales volume of $82.3 million in the segment’s core product lines, primarily brass rod. Lower unit sales volume was due in part to the impacts of the COVID-19 pandemic on demand for our products, particularly in the second quarter of 2020.

The decrease in net sales during 2019 was primarily due to (i) lower unit sales volume of $73.0 million and (ii) lower net selling prices of $21.0 million in the segment’s core product lines.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2020, 2019, and 2018:


(In thousands)	2020		2019		2018

Cost of goods sold	$	398,000	$	473,010	$	559,367
Depreciation and amortization	7,528		7,489		7,568
Selling, general, and administrative expense	12,566		12,359		13,501
Loss (gain) on sale of assets, net	—		275		(1,301)

Insurance recovery	—		(485)		(3,681)

Operating expenses	$	418,094	$	492,648	$	575,454


	2020		2019		2018

Cost of goods sold	84.3	%	85.3	%	85.9	%
Depreciation and amortization	1.6		1.4		1.2
Selling, general, and administrative expense	2.6		2.3		2.1
Loss (gain) on sale of assets, net	—		—		(0.2)

Insurance recovery	—		(0.1)		(0.6)

Operating expenses	88.5	%	88.9	%	88.4	%

The decrease in cost of goods sold in 2020 was primarily due to the decrease in sales volume in the segment’s core product lines. The decrease in cost of goods sold in 2019 was primarily related to the decrease in sales volume in the segment’s core product lines and the decrease in the average cost of copper.

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Depreciation and amortization in 2020 was consistent with 2019 and 2018.

Selling, general, and administrative expense in 2020 was consistent with 2019. The decrease in 2019 was primarily due to lower employment costs, including incentive compensation, of $0.7 million.

During 2019, we recognized a loss of $0.3 million on the sale of real property and an insurance recovery gain of $0.5 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan.

During 2018, we recognized a gain of $1.3 million on the sale of real property and an insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan.

Climate Segment

The following table compares summary operating results for 2020, 2019, and 2018 for the businesses comprising our Climate segment:


							Percent Change
(In thousands)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018

Net sales	$	370,131	$	356,216	$	229,069	3.9	%	55.5	%
Operating income	56,802		42,727		24,118		32.9		77.2

Net sales for 2020 increased primarily as a result of sales of $12.2 million recorded by Shoals. Net sales for 2019 increased primarily as a result of incremental sales of $100.1 million recorded by ATCO.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2020, 2019, and 2018:


(In thousands)	2020		2019		2018

Cost of goods sold	$	276,274	$	273,850	$	182,456
Depreciation and amortization	10,249		9,298		5,569
Selling, general, and administrative expense	26,806		30,385		16,926
Gain on sale of assets, net	—		(44)		—



Operating expenses	$	313,329	$	313,489	$	204,951


	2020		2019		2018

Cost of goods sold	74.6	%	76.9	%	79.7	%
Depreciation and amortization	2.8		2.6		2.4
Selling, general, and administrative expense	7.3		8.5		7.4
Gain on sale of assets, net	—		—		—



Operating expenses	84.7	%	88.0	%	89.5	%

Cost of goods sold increased in 2020. Gross margin as a percentage of sales was 25.4 percent compared with 23.1 percent in the prior year. This improvement was primarily the result of improved spreads, an increased mix of sales from higher margin businesses, and lower operating costs. The increase in cost of goods sold in 2019 was related to the increase in volume and change in product mix within the segment primarily resulting from the ATCO acquisition. Depreciation and amortization increased in 2020 and 2019 primarily as a result of depreciation and amortization of the long-lived assets acquired at ATCO and Shoals. Selling, general, and administrative expenses decreased in 2020 as a result of expense of $5.7 million for a contingent

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consideration arrangement associated with an acquired business recognized in the prior year. This was partially offset by expenses associated with Shoals of $1.9 million. Selling, general, and administrative expenses increased in 2019 as a result of (i) expense of $5.7 million recognized for a contingent consideration arrangement associated with an acquired business, (ii) incremental expenses of $4.6 million associated with ATCO, (iii) an increase in employment costs of $1.7 million, (iv) an increase in agent commissions of $0.5 million, and (v) an increase in supplies, utilities, and rent costs of $0.4 million.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents selected financial information for 2020, 2019, and 2018:


(In thousands)	2020		2019		2018

Increase (decrease) in:
Cash, cash equivalents, and restricted cash	$	29,334	$	20,904	$	(49,425)
Property, plant, and equipment, net	13,444		(7,505)		66,312
Total debt	(58,378)		(110,444)		31,626
Working capital, net of cash and current debt	38,855		(35,231)		11,228

Net cash provided by operating activities	245,073		200,544		167,892
Net cash used in investing activities	(125,622)		(40,457)		(187,096)
Net cash used in financing activities	(92,264)		(139,694)		(28,269)

Cash Provided by Operating Activities

During 2020, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $143.6 million, (ii) an increase in current liabilities of $74.1 million, (iii) depreciation and amortization of $45.2 million, (iv) a decrease in other assets of $20.6 million, (v) a non-cash charge related to the termination of the U.S. pension plan of $11.6 million, (vi) losses from unconsolidated affiliates of $10.2 million, (vii) stock-based compensation expense of $8.6 million, and (viii) a decrease in inventories of $5.2 million. These cash increases were partially offset by an increase in accounts receivable of $76.4 million.

During 2019, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $106.2 million, (ii) depreciation and amortization of $43.0 million, (iii) a decrease in inventories of $39.6 million, (iv) losses from unconsolidated affiliates of $24.6 million, (v) stock-based compensation expense of $8.7 million, and (vi) a decrease in accounts receivable of $6.6 million. These cash increases were offset by (i) an increase in other assets of $15.6 million, (ii) a decrease in other liabilities of $7.9 million, and (iii) a decrease in current liabilities of $7.1 million. The fluctuations in accounts receivable and inventories were primarily due to decreased selling prices and sales volume in certain businesses and changes in working capital needs in 2019.

During 2018, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $106.8 million, (ii) depreciation and amortization of $39.9 million, (iii) a decrease in inventories of $27.5 million, (iv) a decrease in other assets of $14.4 million, (v) losses from unconsolidated affiliates of $12.6 million, and (vi) stock-based compensation expense of $8.0 million. These cash increases were offset by (i) a decrease in current liabilities of $15.7 million, (ii) a decrease in other liabilities of $14.8 million, and (iii) an increase in accounts receivable of $11.1 million. The decrease in inventories was primarily driven by the use of excess inventory built at the end of 2017 due to a casting outage in our brass rod mill that impaired our ability to melt scrap returns. The fluctuations in accounts receivable and current liabilities were primarily due to increased selling prices and sales volume in certain businesses and additional working capital needs in 2018. The changes in other assets and liabilities are primarily attributable to the change in estimate of the one-time transition tax liability on accumulated foreign earnings under the the Tax Cuts and Jobs Act.

Cash Used in Investing Activities

The major components of net cash used in investing activities in 2020 included (i) the $72.6 million for the purchases of Kessler and Shoals, net of cash acquired, (ii) capital expenditures of $43.9 million, and (iii) the issuance of notes receivable of $9.3 million.

F-10

The major components of net cash used in investing activities in 2019 included (i) capital expenditures of $31.2 million and (ii) investments in our unconsolidated affiliates, Tecumseh and Mueller Middle East, of $16.0 million. These uses of cash were offset by (i) the $3.5 million working capital settlement received from the previous owners for the ATCO acquisition and (ii) proceeds on the sale of properties of $3.2 million.

The major components of net cash used in investing activities in 2018 included (i) $167.7 million for the purchases of ATCO and Die-Mold, net of cash acquired, and (ii) capital expenditures of $38.5 million. These uses of cash were offset by proceeds on the sale of properties of $18.7 million.

Cash Used in Financing Activities

For 2020, net cash used in financing activities consisted primarily of (i) $245.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $22.3 million used for the payment of regular quarterly dividends to stockholders of the Company, (iii) $7.0 million used for payment of contingent consideration related to ATCO, and (iv) $5.6 million used to repurchase common stock. These uses of cash were offset by the issuance of debt under our Credit Agreement of $190.0 million.

For 2019, net cash used in financing activities consisted primarily of (i) $205.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $22.3 million used for the payment of regular quarterly dividends to stockholders of the Company, (iii) $4.3 million used for repayment of debt by Jungwoo-Mueller, (iv) $3.2 million used for the payment of contingent consideration related to ATCO, and (v) $1.8 million used to repurchase common stock. These uses of cash were offset by the issuance of debt under our Credit Agreement of $100.0 million.

For 2018, net cash used in financing activities consisted primarily of (i) $165.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $33.6 million used to repurchase common stock, (iii) $22.7 million used for the payment of regular quarterly dividends to stockholders of the Company, and (iv) $2.9 million used for repayment of debt by Jungwoo-Mueller. These uses of cash were offset by the issuance of debt under our Credit Agreement of $200.0 million.

Liquidity and Outlook

We believe that cash provided by operations, funds available under the Credit Agreement, and cash on hand will be adequate to meet our liquidity needs, including working capital, capital expenditures, and debt payment obligations. Our current ratio was 2.4 to 1 as of December 26, 2020.

As of December 26, 2020, $92.8 million of our cash and cash equivalents were held by foreign subsidiaries. The undistributed earnings of most of the foreign subsidiaries are considered to be permanently reinvested. These earnings could be remitted to the U.S. with a minimal tax cost. Accordingly, no additional income tax liability has been accrued with respect to these earnings or on any additional outside basis differences that may exist with respect to these entities.

We believe that cash held domestically, funds available through the Credit Agreement, and cash generated from U.S. based operations will be adequate to meet the future needs of our U.S. based operations.

Fluctuations in the cost of copper and other raw materials affect the Company’s liquidity. Changes in material costs directly impact components of working capital, primarily inventories, accounts receivable, and accounts payable. The price of copper has fluctuated significantly and averaged approximately $2.80 in 2020, $2.72 in 2019, and $2.93 in 2018.

We have significant environmental remediation obligations which we expect to pay over future years. Approximately $1.1 million was spent during 2020 for environmental matters. As of December 26, 2020, we expect to spend $2.7 million in 2021, $0.8 million in 2022, $0.8 million in 2023, $0.9 million in 2024, $0.8 million in 2025, and $18.0 million thereafter for ongoing projects.

Cash used to fund pension and other postretirement benefit obligations was $0.7 million in 2020 and $0.8 million in 2019. We anticipate making contributions of approximately $1.0 million to these plans in 2021.

The Company declared and paid a quarterly cash dividend of 10.0 cents per common share during each quarter of 2018, 2019, and 2020. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, and other factors.

F-11

Capital Expenditures

During 2020 our capital expenditures were $43.9 million. We anticipate investing approximately $30.0 million to $40.0 million for capital expenditures in 2021.

Long-Term Debt

The Company’s Credit Agreement provides for an unsecured $350.0 million revolving credit facility which matures on December 6, 2021. Funds borrowed under the Credit Agreement may be used for working capital purposes and other general corporate purposes. In addition, the Credit Agreement provides a sublimit of $50.0 million for the issuance of letters of credit, a sublimit of $25.0 million for loans and letters of credit made in certain foreign currencies, and a swing line loan sublimit of $15.0 million. Outstanding letters of credit and foreign currency loans reduce borrowing availability under the Credit Agreement. Total borrowings under the Credit Agreement were $35.0 million at December 26, 2020.

The Debentures distributed as part of our special dividend are subordinated to all other funded debt of the Company and are callable, in whole or in part, at any time at the option of the Company, subject to declining call premiums during the first five years. The Debentures also grant each holder the right to require the Company to repurchase such holder’s Debentures in the event of a change in control at declining repurchase premiums during the first five years. Interest is payable semiannually on September 1 and March 1. Total Debentures outstanding as of December 26, 2020 were $284.5 million.

Jungwoo-Mueller has several secured revolving credit arrangements with a total borrowing capacity of KRW 25.8 billion (or approximately $23.5 million). Borrowings are secured by the real property and equipment of Jungwoo-Mueller and were bearing interest at a rate of 1.90 percent as of December 26, 2020. Total borrowings at Jungwoo-Mueller were $5.8 million as of December 26, 2020.

As of December 26, 2020, the Company’s total debt was $327.9 million or 29.0 percent of its total capitalization.

Covenants contained in the Company’s financing obligations require, among other things, the maintenance of minimum levels of tangible net worth and the satisfaction of certain minimum financial ratios. As of December 26, 2020, we were in compliance with all of our debt covenants.

Share Repurchase Program

The Company’s Board of Directors has extended, until July 2021, its authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. We may cancel, suspend, or extend the time period for the repurchase of shares at any time. Any repurchases will be funded primarily through existing cash and cash from operations. The Company may hold any shares repurchased in treasury or use a portion of the repurchased shares for stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through December 26, 2020, the Company had repurchased approximately 6.4 million shares under this authorization.

F-12

CONTRACTUAL CASH OBLIGATIONS

The following table presents payments due by the Company under contractual obligations with minimum firm commitments as of December 26, 2020:


			Payments Due by Year
(In millions)	Total		2021		2022-2023		2024-2025		Thereafter

Total debt	$	328.1	$	41.3	$	0.4	$	0.4	$	286.0
Operating and capital leases	34.7		8.3		12.6		6.4		7.4
Heavy machinery and equipment	8.6		8.6		—		—		—

Purchase commitments (1)	831.5		830.7		0.6		0.2		—

Transition tax on accumulated foreign earnings	1.9		—		—		1.9		—
Interest payments (2)	107.1		17.6		34.1		34.1		21.3

Total contractual cash obligations	$	1,311.9	$	906.5	$	47.7	$	43.0	$	314.7

(1)This includes contractual supply commitments totaling $724.7 million at year-end prices; these contracts contain variable pricing based on Comex and the London Metals Exchange quoted prices. These commitments are for purchases of raw materials, primarily copper cathode and brass scrap, that are expected to be consumed in the ordinary course of business.

(2)These payments represent interest on long-term debt based on balances and rates in effect at December 26, 2020.

The above obligations will be satisfied with existing cash, funds available under the Credit Agreement, and cash generated by operations. The Company has no off-balance sheet financing arrangements.

MARKET RISKS

The Company is exposed to market risks from changes in raw material and energy costs, interest rates, and foreign currency exchange rates. To reduce such risks, we may periodically use financial instruments. Hedging transactions are authorized and executed pursuant to policies and procedures. Further, we do not buy or sell financial instruments for trading purposes. A discussion of the Company’s accounting for derivative instruments and hedging activities is included in “Note 1 - Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Cost and Availability of Raw Materials and Energy

Raw materials, primarily 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 our control. Significant increases in the cost of metal, to the extent not reflected in prices for our finished products, or the lack of availability could materially and adversely affect our business, results of operations and financial condition.

The Company occasionally enters into forward fixed-price arrangements with certain customers. We may utilize futures contracts to hedge risks associated with these forward fixed-price arrangements. We may also utilize futures contracts to manage price risk associated with inventory. Depending on the nature of the hedge, changes in the fair value of the futures contracts will either be offset against the change in fair value of the inventory through earnings or recognized as a component of accumulated other comprehensive income (AOCI) in equity and reflected in earnings upon the sale of inventory. Periodic value fluctuations of the contracts generally offset the value fluctuations of the underlying fixed-price transactions or inventory. At December 26, 2020, we held open futures contracts to purchase approximately $5.4 million of copper over the next 12 months related to fixed-price sales orders and to sell approximately $49.4 million of copper over the next five months related to copper inventory.

We may enter into futures contracts or forward fixed-price arrangements with certain vendors to manage price risk associated with natural gas purchases. The effective portion of gains and losses with respect to positions are deferred in equity as a component of AOCI and reflected in earnings upon consumption of natural gas. Periodic value fluctuations of the futures contracts generally offset the value fluctuations of the underlying natural gas prices. There were no open futures contracts to purchase natural gas at December 26, 2020.

F-13

Interest Rates

The Company had variable-rate debt outstanding of $41.1 million at December 26, 2020 and $97.0 million at December 28, 2019. At this borrowing level, a hypothetical 10 percent increase in interest rates would have had an insignificant unfavorable impact on our pre-tax earnings and cash flows. The primary interest rate exposure on variable-rate debt is based on LIBOR.

Foreign Currency Exchange Rates

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than an entity’s functional currency. The Company and its subsidiaries generally enter into transactions denominated in their respective functional currencies. We may utilize certain futures or forward contracts with financial institutions to hedge foreign currency transactional exposures. Gains and losses with respect to these positions are deferred in equity as a component of AOCI and reflected in earnings upon collection of receivables or payment of commitments. At December 26, 2020, we had open forward contracts with a financial institution to sell approximately 22.7 million Swedish kronor and 10.0 million Norwegian kroner through April 2021.

The Company’s primary foreign currency exposure arises from foreign-denominated revenues and profits and their translation into U.S. dollars. The primary currencies to which we are exposed include the Canadian dollar, the British pound sterling, the Mexican peso, and the South Korean won. The Company generally views its investments in foreign subsidiaries with a functional currency other than the U.S. dollar as long-term. As a result, we generally do not hedge these net investments. The net investment in foreign subsidiaries translated into U.S. dollars using the year-end exchange rates was $406.5 million at December 26, 2020 and $397.1 million at December 28, 2019. The potential loss in value of the Company’s net investment in foreign subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at December 26, 2020 and December 28, 2019 amounted to $40.7 million and $39.7 million, respectively. This change would be reflected in the foreign currency translation component of AOCI in the equity section of our Consolidated Balance Sheets until the foreign subsidiaries are sold or otherwise disposed.

We have significant investments in foreign operations whose functional currency is the British pound sterling, the Mexican peso, the Canadian dollar, and the South Korean won. During 2020, the value of the British pound increased approximately four percent, the Mexican peso decreased approximately five percent, the Canadian dollar increased approximately two percent, and the South Korean won increased approximately five percent, relative to the U.S. dollar. The resulting net foreign currency translation gains were included in calculating net other comprehensive loss for the year ended December 26, 2020 and were recorded as a component of AOCI.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s accounting policies are more fully described in “Note 1 - Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements. As disclosed in Note 1, the preparation of financial statements in conformity with general accepted accounting principles in the United States requires management to make estimates and assumptions about future events that affect amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. Management believes the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.

Inventory Valuation Reserves

Our inventories are valued at the lower-of-cost-or-market. The market price of copper cathode and scrap are subject to volatility. During periods when open market prices decline below net realizable value, the Company may need to provide an allowance to reduce the carrying value of its inventory. In addition, certain items in inventory may be considered excess or obsolete and, as such, we may establish an allowance to reduce the carrying value of those items to their net realizable value. Changes in these estimates related to the value of inventory, if any, may result in a materially adverse impact on our reported financial position or results of operations. The Company recognizes the impact of any changes in estimates, assumptions, and judgments in income in the period in which they are determined.

As of December 26, 2020 and December 28, 2019, our inventory valuation reserves were $7.1 million and $6.3 million, respectively. The expense recognized in each of these periods was immaterial to our Consolidated Financial Statements.

F-14

Impairment of Goodwill

As of December 26, 2020, we had $167.8 million of recorded goodwill from our business acquisitions, representing the excess of the purchase price over the fair value of the net assets we have acquired. During 2020 we recorded $13.7 million in additional goodwill associated with our Kessler and Shoals acquisitions.

Goodwill is subject to impairment testing, which is performed annually as of the first day of the fourth quarter unless circumstances indicate the need to accelerate the timing of the tests. These circumstances include a significant change in the business climate, operating performance indicators, competition, or sale or disposition of a significant portion of one of our businesses. In our evaluation of goodwill impairment, we perform a qualitative assessment at the reporting unit level that requires management judgment and the use of estimates to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, management compares the fair value of a reporting unit with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

We identify reporting units by evaluating components of our operating segments and combining those components with similar economic characteristics. Reporting units with significant recorded goodwill include Domestic Piping Systems, B&K LLC, Great Lakes, Heatlink Group, Die-Mold, European Operations, Jungwoo-Mueller, Westermeyer, Turbotec, ATCO, and Shoals.

The fair value of each reporting unit is estimated using a combination of the income and market approaches, incorporating market participant considerations and management’s assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Estimates used by management can significantly affect the outcome of the impairment test. Changes in forecasted operating results and other assumptions could materially affect these estimates.

We evaluated each reporting unit during the fourth quarters of 2020 and 2019, as applicable. The estimated fair value of each of these reporting units exceeded its carrying values in 2020 and 2019, and we do not believe that any of these reporting units were at risk of impairment as of December 26, 2020.

Pension and Other Postretirement Benefit Plans

We sponsor several qualified and nonqualified pension and other postretirement benefit plans in the U.S. and certain foreign locations. We recognize the overfunded or underfunded status of the plans as an asset or liability in the Consolidated Balance Sheets with changes in the funded status recorded through comprehensive income in the year in which those changes occur. The obligations for these plans are actuarially determined and affected by assumptions, including discount rates, expected long-term return on plan assets for defined benefit pension plans, and certain employee-related factors, such as retirement age and mortality. We evaluate the assumptions periodically and makes adjustments as necessary.

The expected return on plan assets is determined using the market value of plan assets. Differences between assumed and actual returns are amortized to the market value of assets on a straight-line basis over the average remaining service period of the plan participants using the corridor approach. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and actuarial assumptions. These unrecognized gains and losses are amortized when the net gains and losses exceed 10 percent of the greater of the market value of the plan assets or the projected benefit obligation. The amount in excess of the corridor is amortized over the average remaining service period of the plan participants. For 2020, the average remaining service period for the pension plans was 11.5 years.

Environmental Reserves

We recognize an environmental reserve when it is probable that a loss is likely to occur and the amount of the loss is reasonably estimable. We estimate the duration and extent of our remediation obligations based upon reports of outside consultants, internal and third party estimates and analyses of cleanup costs and ongoing monitoring costs, communications with regulatory agencies, and changes in environmental law. If we were to determine that our estimates of the duration or extent of our environmental obligations were no longer accurate, we would adjust our environmental reserve accordingly in the period that such determination is made. Estimated future expenditures for environmental remediation are not discounted to their present value.

Environmental expenses that relate to ongoing operations are included as a component of cost of goods sold. Environmental expenses related to non-operating properties are presented below operating income in the Consolidated Statements of Income.

F-15

Income Taxes

We estimate total income tax expense based on domestic and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting, and available credits and incentives.

Deferred income tax assets and liabilities are recognized for the future tax effects of temporary differences between the treatment of certain items for financial statement and tax purposes using tax rates in effect for the years in which the differences are expected to reverse. Realization of certain components of deferred tax assets is dependent upon the occurrence of future events.

Valuation allowances are recorded when, in the opinion of management, it is more likely than not that all or a portion of the deferred tax assets will not be realized. These valuation allowances can be impacted by changes in tax laws, changes to statutory tax rates, and future taxable income levels, and are based on our judgment, estimates, and assumptions. In the event we were to determine that we would not be able to realize all or a portion of the net deferred tax assets in the future, we would increase the valuation allowance through a charge to income tax expense in the period that such determination is made. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future, in excess of the net carrying amounts, we would decrease the recorded valuation allowance through a decrease to income tax expense in the period that such determination is made.

We record liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. These unrecognized tax benefits are retained until the associated uncertainty is resolved. Tax benefits for uncertain tax positions that are recognized in the Consolidated Financial Statements are measured as the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement. To the extent we prevail in matters for which a liability for an uncertain tax position is established or are required to pay amounts in excess of the liability, our effective tax rate in a given period may be materially affected.

New Accounting Pronouncements

See “Note 1 – Summary of Significant Accounting Policies” in our Consolidated Financial Statements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Annual Report contains various forward-looking statements and includes assumptions concerning the Company’s operations, future results, and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties, and may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. The forward-looking statements reflect knowledge and information available as of the date of preparation of the Annual Report, and the Company undertakes no obligation to update these forward-looking statements. We identify the forward-looking statements by using the words “anticipates,” “believes,” “expects,” “intends” or similar expressions in such statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important economic, political, and technological factors, among others, which could cause actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. In addition to those factors discussed under “Risk Factors” in this Annual Report on Form 10-K, such factors include: (i) the current and projected future business environment, including interest rates and capital and consumer spending; (ii) the domestic housing and commercial construction industry environment; (iii) availability and price fluctuations in commodities (including copper, natural gas, and other raw materials, including crude oil that indirectly affects plastic resins); (iv) competitive factors and competitor responses to the Company’s initiatives; (v) stability of government laws and regulations, including taxes; (vi) availability of financing; and (vii) continuation of the environment to make acquisitions, domestic and foreign, including regulatory requirements and market values of candidates.

F-16

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 26, 2020, December 28, 2019, and December 29, 2018


(In thousands, except per share data)	2020		2019		2018

Net sales	$	2,398,043	$	2,430,616	$	2,507,878

Cost of goods sold	1,966,161		2,035,610		2,150,400
Depreciation and amortization	44,843		42,693		39,555
Selling, general, and administrative expense	159,483		162,358		148,888
Litigation settlement, net	(22,053)		—		—
Gain on sale of assets, net	—		(963)		(253)
Impairment charges	3,771		—		—
Insurance recovery	—		(485)		(3,681)

Operating income	245,838		191,403		172,969

Interest expense	(19,247)		(25,683)		(25,199)
Environmental expense	(4,454)		(1,321)		(1,320)
Pension plan termination expense	(17,835)		—		—
Other income, net	4,887		1,684		3,967

Income before income taxes	209,189		166,083		150,417

Income tax expense	(55,321)