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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly report ended June 29, 2024
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
mlilogocoppera04.jpg
MUELLER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware25-0790410
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
150 Schilling BoulevardSuite 100 
ColliervilleTennessee38017
(Address of principal executive offices)(Zip Code)
(901) 753-3200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common StockMLINYSE
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  
Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  

The number of shares of the Registrant’s common stock outstanding as of July 19, 2024 was 113,324,148.



MUELLER INDUSTRIES, INC.

FORM 10-Q

For the Quarterly Period Ended June 29, 2024
As used in this report, the terms “Company,” “Mueller,” and “Registrant” mean Mueller Industries, Inc. and its consolidated subsidiaries taken as a whole, unless the context indicates otherwise.

INDEX
  Page Number
 
   
  
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
   
2


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

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

For the Quarter EndedFor the Six Months Ended
(In thousands, except per share data)June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Net sales$997,745 $896,984 $1,847,399 $1,868,176 
Cost of goods sold724,990 639,272 1,333,693 1,318,070 
Depreciation and amortization10,018 10,416 19,187 21,073 
Selling, general, and administrative expense52,731 56,062 101,088 108,693 
Gain on insurance settlement (19,466) (19,466)
Operating income210,006 210,700 393,431 439,806 
Interest expense(107)(135)(222)(278)
Interest income14,383 7,732 31,628 13,967 
Realized and unrealized gains on short-term investments 20,820 365 22,730 
Other (expense) income, net(1,356)1,841 (726)2,167 
Income before income taxes222,926 240,958 424,476 478,392 
Income tax expense(58,384)(62,122)(110,218)(123,479)
(Loss) income from unconsolidated affiliates, net of foreign tax(1,095)715 (9,102)(269)
Consolidated net income163,447 179,551 305,156 354,644 
Net income attributable to noncontrolling interests(3,282)(1,840)(6,628)(3,694)
Net income attributable to Mueller Industries, Inc.$160,165 $177,711 $298,528 $350,950 
Weighted average shares for basic earnings per share (1)
111,216 111,320 111,316 111,354 
Effect of dilutive stock-based awards (1)
2,763 2,680 2,746 2,046 
Adjusted weighted average shares for diluted earnings per share (1)
113,979 114,000 114,062 113,400 
Basic earnings per share (1)
$1.44 $1.60 $2.68 $3.15 
Diluted earnings per share (1)
$1.41 $1.56 $2.62 $3.09 
Dividends per share (1)
$0.20 $0.15 $0.40 $0.30 

See accompanying notes to condensed consolidated financial statements.

(1) Adjusted retroactively to reflect the two-for-one stock split that occurred on October 20, 2023. Refer to Note 2 - Earnings per Common Share for additional information.

3


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

 For the Quarter EndedFor the Six Months Ended
(In thousands)June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Consolidated net income$163,447 $179,551 $305,156 $354,644 
Other comprehensive (loss) income, net of tax:    
Foreign currency translation(7,871)7,725 (12,026)17,976 
Net change with respect to derivative instruments and hedging activities, net of tax of $214, $775, $121 and $503
(746)(2,679)(419)(1,725)
Net change in pension and postretirement obligation adjustments, net of tax of $38, $1, $21 and $12
(93)9 (57)1 
Attributable to unconsolidated affiliates, net of tax of $65, $(103), $460 and $(476)
(221)353 (1,583)1,638 
Total other comprehensive (loss) income, net(8,931)5,408 (14,085)17,890 
Consolidated comprehensive income154,516 184,959 291,071 372,534 
Comprehensive income attributable to noncontrolling interests(2,759)(1,546)(5,484)(3,658)
Comprehensive income attributable to Mueller Industries, Inc.$151,757 $183,413 $285,587 $368,876 

See accompanying notes to condensed consolidated financial statements.




4


MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands, except share data)June 29,
2024
December 30,
2023
Assets  
Current assets:  
Cash and cash equivalents
$825,655 $1,170,893 
Short-term investments 98,146 
Accounts receivable, less allowance for doubtful accounts of $2,549 in 2024 and $2,830 in 2023
522,572 351,561 
Inventories406,217 380,248 
Other current assets
50,347 39,173 
Total current assets1,804,791 2,040,021 
Property, plant, and equipment, net471,443 385,165 
Operating lease right-of-use assets34,534 35,170 
Goodwill, net608,919 151,820 
Intangible assets, net43,466 46,208 
Investments in unconsolidated affiliates77,450 83,436 
Other assets25,582 17,481 
Total assets$3,066,185 $2,759,301 
5


MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)June 29,
2024
December 30,
2023
Liabilities  
Current liabilities:  
Current portion of debt
$785 $796 
Accounts payable
198,537 120,485 
Accrued wages and other employee costs
42,259 55,644 
Current portion of operating lease liabilities
8,000 7,893 
Other current liabilities
137,647 132,320 
Total current liabilities387,228 317,138 
Long-term debt, less current portion74 185 
Pension liabilities2,708 2,832 
Postretirement benefits other than pensions8,988 9,230 
Environmental reserves14,808 15,030 
Deferred income taxes20,023 19,134 
Noncurrent operating lease liabilities26,330 26,683 
Other noncurrent liabilities33,168 10,353 
Total liabilities493,327 400,585 
Equity  
Mueller Industries, Inc. stockholders' equity:  
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding
  
 Common stock - $.01 par value; shares authorized 250,000,000; issued 160,366,008; outstanding 113,403,336 in 2024 and 114,157,918 in 2023
1,604 1,604 
Additional paid-in capital325,763 312,171 
Retained earnings2,847,420 2,594,300 
Accumulated other comprehensive loss(60,162)(47,221)
Treasury common stock, at cost(568,522)(523,409)
Total Mueller Industries, Inc. stockholders' equity2,546,103 2,337,445 
Noncontrolling interests26,755 21,271 
Total equity2,572,858 2,358,716 
Commitments and contingencies  
Total liabilities and equity$3,066,185 $2,759,301 
See accompanying notes to condensed consolidated financial statements.
6


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

 For the Six Months Ended
(In thousands)June 29, 2024July 1, 2023
Cash flows from operating activities  
Consolidated net income$305,156 $354,644 
Reconciliation of consolidated net income to net cash provided by operating activities:  
Depreciation and amortization19,349 21,252 
Stock-based compensation expense13,476 12,459 
Provision for doubtful accounts receivable(67)(80)
Loss from unconsolidated affiliates9,102 269 
Dividends from unconsolidated affiliates3,541  
Insurance proceeds - noncapital related15,000 9,854 
Gain on disposals of properties(1,286)(141)
Unrealized gain on short-term investments (20,820)
Gain on sales of securities(365) 
Gain on insurance settlement (19,466)
Deferred income tax (benefit) expense(1,509)2,406 
Changes in assets and liabilities, net of effects of businesses acquired:  
Receivables(132,012)(77,701)
Inventories6,706 (12,149)
Other assets8,511 (5,571)
Current liabilities30,276 (14,460)
Other liabilities(2,375)(976)
Other, net872 1,310 
Net cash provided by operating activities$274,375 $250,830 
Cash flows from investing activities  
Capital expenditures$(25,603)$(29,221)
Acquisition of businesses, net of cash acquired(566,577) 
Investments in unconsolidated affiliates(8,700) 
Insurance proceeds - capital related 24,646 
Purchase of short-term investments (106,231)
Purchase of long-term investments(7,976) 
Proceeds from the maturity of short-term investments 217,863 
Proceeds from the sale of securities96,465  
Issuance of notes receivable(3,800) 
Proceeds from sales of assets3,976 142 
Dividends from unconsolidated affiliates 797 
Net cash (used in) provided by investing activities$(512,215)$107,996 


7



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

For the Six Months Ended
(In thousands)June 29, 2024July 1, 2023
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.$(44,488)$(33,402)
Repurchase of common stock(42,994)(19,303)
Repayments of debt(111)(130)
Issuance (repayment) of debt by consolidated joint ventures, net11 (143)
Net cash used to settle stock-based awards(2,002)(2,588)
Net cash used in financing activities$(89,584)$(55,566)
Effect of exchange rate changes on cash(4,784)4,825 
(Decrease) increase in cash, cash equivalents, and restricted cash(332,208)308,085 
Cash, cash equivalents, and restricted cash at the beginning of the period1,174,223 465,296 
Cash, cash equivalents, and restricted cash at the end of the period$842,015 $773,381 

See accompanying notes to condensed consolidated financial statements.
8


MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

For the Quarter EndedFor the Six Months Ended
(In thousands)June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Common stock:    
Balance at beginning of period$1,604 $802 $1,604 $802 
Balance at end of period$1,604 $802 $1,604 $802 
Additional paid-in capital:    
Balance at beginning of period$318,684 $303,133 $312,171 $297,270 
Acquisition of shares under incentive stock option plans61 208 343 434 
Stock-based compensation expense7,245 6,822 13,476 12,459 
Issuance of restricted stock(227)(458)(227)(458)
Balance at end of period$325,763 $309,705 $325,763 $309,705 
Retained earnings:     
Balance at beginning of period$2,709,950 $2,215,939 $2,594,300 $2,059,796 
Net income attributable to Mueller Industries, Inc.160,165 177,711 298,528 350,950 
Dividends paid or payable to stockholders of Mueller Industries, Inc.(22,695)(17,032)(45,408)(34,128)
Balance at end of period$2,847,420 $2,376,618 $2,847,420 $2,376,618 
Accumulated other comprehensive loss:    
Balance at beginning of period$(51,754)$(51,951)$(47,221)$(64,175)
Total other comprehensive (loss) income attributable to Mueller Industries, Inc.(8,408)5,702 (12,941)17,926 
Balance at end of period$(60,162)$(46,249)$(60,162)$(46,249)
9


MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

For the Quarter EndedFor the Six Months Ended
(In thousands)June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Treasury stock:    
Balance at beginning of period$(554,110)$(505,616)$(523,409)$(502,779)
Issuance (acquisition) of shares under incentive stock option plans425 (185)(2,346)(3,022)
Repurchase of common stock(15,064)(19,303)(42,994)(19,303)
Issuance of restricted stock227 458 227 458 
Balance at end of period$(568,522)$(524,646)$(568,522)$(524,646)
Noncontrolling interests:    
Balance at beginning of period$23,996 $25,162 $21,271 $23,050 
Net income attributable to noncontrolling interests3,282 1,840 6,628 3,694 
Foreign currency translation(523)(294)(1,144)(36)
Balance at end of period$26,755 $26,708 $26,755 $26,708 

See accompanying notes to condensed consolidated financial statements.

10


MUELLER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

General

Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted.  Results of operations for the interim periods presented are not necessarily indicative of results which may be expected for any other interim period or for the year as a whole.  This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K, including the annual financial statements incorporated therein.

The accompanying unaudited interim financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented herein.  Certain prior year balances have been reclassified to conform to current year presentation.

Note 1 – Recent Accounting Standards

Adopted

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The new guidance was issued to clarify existing guidance measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduce new disclosure requirements for applicable equity securities. The ASU was effective for fiscal years beginning after December 15, 2023 for public entities. The guidance requires prospective adoption, and early adoption was permitted. The Company adopted the ASU during the first quarter of 2024. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Issued

In March 2024, the Securities and Exchange Commission issued final rules on the enhancement and standardization of climate-related disclosures. The rules require disclosure of, among other things: material climate-related risks, activities to mitigate or adapt to such risks, governance and management of such risks, and material greenhouse gas (GHG) emissions from operations owned or controlled (Scope 1) and/or indirect emissions from purchased energy consumed in operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. The rules will become effective on a phased-in timeline in fiscal years beginning in 2025. The Company is in the process of analyzing the impact of the rules on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance primarily enhances and expands both the income tax rate reconciliation disclosure and the income taxes paid disclosure. The ASU is effective for annual periods beginning after December 15, 2024 for public entities on a prospective basis. Early adoption is permitted. The Company is in the process of analyzing the impact of the standard on its disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new guidance requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU applies to all public entities and is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The guidance requires retrospective adoption, and early adoption is permitted. The Company is in the process of analyzing the impact of the standard on its disclosures.

Note 2 – Earnings per Common Share

Basic per share amounts have been computed based on the average number of common shares outstanding.  Diluted per share amounts reflect the increase in average common shares outstanding that would result from the assumed exercise of outstanding stock options and vesting of restricted and performance stock awards, computed using the treasury stock method.

11


On September 26, 2023, the Company’s shareholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the total number of authorized shares of Common Stock from 100,000,000 to 250,000,000. Subsequently, the Company’s Board of Directors announced a two-for-one stock split of its common stock effected in the form of a stock dividend of one share for each outstanding share. The record date for the stock split was October 6, 2023, and the additional shares were distributed on October 20, 2023. All references to share and per share amounts presented in the Condensed Consolidated Financial Statements and this Quarterly Report on Form 10-Q have been adjusted retroactively to reflect the stock split.

Note 3 – Acquisitions and Dispositions

Acquisition

Nehring Electrical Works Company

On April 19, 2024, the Company entered into an equity purchase agreement to acquire Nehring Electrical Works Company and certain of its affiliated companies (collectively, “Nehring”). The transaction closed on May 28, 2024, whereby the Company purchased all of the outstanding equity of Nehring for approximately $594.6 million, net of working capital adjustments. The total purchase price consisted of $566.6 million in cash on hand at closing and a contingent consideration arrangement which requires the Company to pay the sellers up to $25.0 million based on EBITDA growth of the acquired business. Nehring produces high-quality wire and cable solutions for the utility, telecommunication, electrical distribution, and OEM markets. Nehring provides the Company a substantial platform for expansion in the energy infrastructure space. The acquired business is reported in the Company’s Industrial Metals segment.

The provisional fair value of the assets acquired totaled $164.5 million, consisting primarily of property, plant, and equipment of $82.4 million, accounts receivable of $44.2 million, inventories of $36.1 million, and other current assets of $1.8 million. The fair value of the liabilities assumed totaled $27.8 million, consisting primarily of accounts payable of $19.6 million and other current liabilities of $8.2 million. Of the remaining purchase price, $457.9 million was allocated to tax-deductible goodwill and intangible assets. The purchase price allocation is provisional as of June 29, 2024 and subject to change upon the completion of the final valuation of the long-lived assets, working capital, and contingent consideration during the measurement period.

For the twelve months ended December 31, 2023, Nehring’s annual net sales were approximately $400.0 million.

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

For the Six Months Ended
(In thousands, except per share data)June 29, 2024July 1, 2023
Net sales$1,981,861 $2,081,325 
Net income306,525 371,445 
Basic earnings per share$2.75 $3.34 
Diluted earnings per share2.69 3.28 

Disposition

Heatlink Group

On September 2, 2021, the Company entered into a contribution agreement with a limited liability company in the retail distribution business, pursuant to which the Company exchanged the outstanding common stock of Die-Mold for a 17 percent equity interest in the limited liability company. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. and was included in the Piping Systems segment.
12



Effective July 3, 2023, the Company transferred 100 percent of the outstanding shares of Heatlink Group, Inc. and Heatlink Group USA, LLC for an additional 11 percent equity interest in the limited liability company. Heatlink Group produces a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S. and was included in the Piping Systems segment. Heatlink Group reported net sales of $15.6 million and operating income of $1.7 million in the first half of 2023. As a result of the transaction, the Company recognized a gain of $4.1 million in the third quarter of 2023 based on the excess of the fair value of the consideration received (the 11 percent equity interest) over the carrying value of Heatlink Group. The Company equally weighted an income discounted cash flow approach and market comparable companies approach using an EBITDA multiple to determine the fair value of the consideration received of $26.0 million, which is recognized within the Investments in unconsolidated affiliates line of the Condensed Consolidated Balance Sheet. The excess of the fair value of the deconsolidated subsidiary over its carrying value resulted in the gain.

Note 4 – Segment Information

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

Piping Systems

Piping Systems is composed of the following operating segments: Domestic Piping Systems Group, Great Lakes Copper, European Operations, Trading Group, Jungwoo-Mueller (the Company’s South Korean joint venture), and Mueller Middle East (the Company’s Bahraini 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.  Outside the U.S., Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. European Operations manufactures copper tube in the U.K. which is sold primarily in Europe.  The Trading Group manufactures pipe nipples and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products in the U.S. and Mexico.  Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide.  Mueller Middle East manufactures copper tube and serves markets in the Middle East and Northern Africa. The Piping Systems segment’s products are sold primarily to plumbing, refrigeration, and air-conditioning wholesalers, hardware wholesalers and co-ops, building product retailers, and air-conditioning original equipment manufacturers (OEMs).

Industrial Metals

Industrial Metals is composed of the following operating segments: Brass Rod, Impacts & Micro Gauge, Brass Value-Added Products, Precision Tube, and Nehring (acquired in fiscal June 2024).  These businesses manufacture brass rod, impact extrusions, forgings, specialty copper, copper alloy, and aluminum tube, as well as a wide variety of end products including plumbing brass, automotive components, valves, fittings, gas assemblies, and high-quality wire and cable solutions.  These products are manufactured in the U.S. and sold primarily to OEMs and utilities in the U.S., many of which are in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, energy, telecommunication, and electrical transmission and distribution markets.

Climate

Climate is composed of the following operating segments: Refrigeration Products, Westermeyer, Turbotec, Flex Duct, and Linesets, Inc. The segment manufactures and sells refrigeration valves and fittings, high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, and line sets primarily for the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.

13


Summarized segment information is as follows:

 For the Quarter Ended June 29, 2024
(In thousands)Piping SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$688,469 $195,341 $130,532 $(16,597)$997,745 
Cost of goods sold500,826 159,265 82,291 (17,392)724,990 
Depreciation and amortization4,932 2,368 1,646 1,072 10,018 
Selling, general, and administrative expense20,453 4,015 7,602 20,661 52,731 
Operating income162,258 29,693 38,993 (20,938)210,006 
Interest expense    (107)
Interest income14,383 
Other expense, net    (1,356)
Income before income taxes    $222,926 

 For the Quarter Ended July 1, 2023
(In thousands)Piping SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$638,005 $146,266 $123,954 $(11,241)$896,984 
Cost of goods sold452,866 123,097 77,064 (13,755)639,272 
Depreciation and amortization5,252 1,804 2,202 1,158 10,416 
Selling, general, and administrative expense28,745 3,394 7,087 16,836 56,062 
Gain on insurance settlement  (19,466) (19,466)
Operating income151,142 17,971 57,067 (15,480)210,700 
Interest expense    (135)
Interest income7,732 
Realized and unrealized gains on short-term investments20,820 
Other income, net    1,841 
Income before income taxes    $240,958 

14


Segment information (continued):

For the Six Months Ended June 29, 2024
(In thousands)Piping SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$1,278,637 $351,408 $247,342 $(29,988)$1,847,399 
Cost of goods sold921,767 285,869 157,882 (31,825)1,333,693 
Depreciation and amortization9,492 4,288 3,241 2,166 19,187 
Selling, general, and administrative expense42,440 7,287 14,651 36,710 101,088 
Operating income304,938 53,964 71,568 (37,039)393,431 
Interest expense(222)
Interest income31,628 
Realized and unrealized gains on short-term investments365 
Other expense, net(726)
Income before income taxes$424,476 

For the Six Months Ended July 1, 2023
( In thousands)Piping SystemsIndustrial MetalsClimateCorporate and EliminationsTotal
Net sales$1,300,484 $311,500 $276,908 $(20,716)$1,868,176 
Cost of goods sold920,476 256,267 165,876 (24,549)1,318,070 
Depreciation and amortization10,810 3,576 4,355 2,332 21,073 
Selling, general, and administrative expense54,202 6,471 15,088 32,932 108,693 
Gain on insurance settlement  (19,466) (19,466)
Operating income314,996 45,186 111,055 (31,431)439,806 
Interest expense(278)
Interest income13,967 
Realized and unrealized gains on short-term investments22,730 
Other income, net2,167 
Income before income taxes$478,392 


15


The following table presents total assets attributable to each segment:

(In thousands)June 29,
2024
December 30, 2023
Segment assets:
Piping Systems$1,112,550 $1,029,821 
Industrial Metals821,011 157,761 
Climate275,872 252,561 
General Corporate856,752 1,319,158 
$3,066,185 $2,759,301 

The following tables represent a disaggregation of revenue from contracts with customers, along with the reportable segment for each category:

For the Quarter Ended June 29, 2024
(In thousands)Piping SystemsIndustrial MetalsClimateTotal
Tube and fittings$568,849 $ $ $568,849 
Brass rod and forgings 131,709  131,709 
OEM components, tube & assemblies 20,418 30,569 50,987 
Valves and plumbing specialties119,620   119,620 
Flex duct and other HVAC components  99,963 99,963 
Other 43,214  43,214 
 688,469 195,341 130,532 1,014,342 
Intersegment sales(16,597)
Net sales$997,745 

For the Quarter Ended July 1, 2023
(In thousands)Piping SystemsIndustrial MetalsClimateTotal
Tube and fittings$518,712 $ $ $518,712 
Brass rod and forgings 113,563  113,563 
OEM components, tube & assemblies 21,073 33,007 54,080 
Valves and plumbing specialties119,293   119,293 
Flex duct and other HVAC components  90,947 90,947 
Other 11,630  11,630 
 638,005 146,266 123,954 908,225 
Intersegment sales(11,241)
Net sales$896,984 


16


Disaggregation of revenue from contracts with customers (continued):

For the Six Months Ended June 29, 2024
(In thousands)Piping SystemsIndustrial MetalsClimateTotal
Tube and fittings$1,047,325 $ $ $1,047,325 
Brass rod and forgings 255,768  255,768 
OEM components, tube & assemblies 39,375 60,586 99,961 
Valves and plumbing specialties231,312   231,312 
Flex duct and other HVAC components  186,756 186,756 
Other 56,265  56,265 
 1,278,637 351,408 247,342 1,877,387 
Intersegment sales(29,988)
Net sales$1,847,399 

For the Six Months Ended July 1, 2023
(In thousands)Piping SystemsIndustrial MetalsClimateTotal
Tube and fittings$1,062,940 $ $ $1,062,940 
Brass rod and forgings 243,903  243,903 
OEM components, tube & assemblies 43,582 66,409 109,991 
Valves and plumbing specialties237,544   237,544 
Flex duct and other HVAC components  210,499 210,499 
Other 24,015  24,015 
1,300,484 311,500 276,908 1,888,892 
Intersegment sales(20,716)
Net sales$1,868,176 

Note 5 – Cash, Cash Equivalents, and Restricted Cash

(In thousands)June 29,
2024
December 30,
2023
Cash & cash equivalents$825,655 $1,170,893 
Restricted cash included within other current assets16,258 3,228 
Restricted cash included within other assets102 102 
Total cash, cash equivalents, and restricted cash$842,015 $1,174,223 

Amounts included in restricted cash relate to required deposits in brokerage accounts that facilitate the Company’s hedging activities as well as imprest funds for the Company’s self-insured workers’ compensation program.

17


Note 6 – Inventories

(In thousands)June 29,
2024
December 30,
2023
Raw materials and supplies$115,258 $111,843 
Work-in-process80,599 61,793 
Finished goods222,501 220,629 
Valuation reserves(12,141)(14,017)
Inventories$406,217 $380,248 

Note 7 – Financial Instruments

Short-Term Investments

The fair value of short-term investments at December 30, 2023, consisting of marketable securities, approximates the carrying value on that date. These marketable securities are stated at fair value and classified as level 1 within the fair value hierarchy. This classification is defined as a fair value determined using observable inputs that reflect quoted prices in active markets for identical assets.

Derivative Instruments and Hedging Activities

The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, and interest rates.  The Company uses derivative instruments such as commodity futures contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures.

All derivatives are recognized in the Condensed Consolidated Balance Sheets at their fair values.  On the date the derivative contract is entered into, it is either a) designated as a hedge of a forecasted transaction or the variability of cash flow to be paid (cash flow hedge) or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure (economic hedge), as the Company does not enter into derivative contracts for trading purposes.  Changes in the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge are recorded in stockholders’ equity within AOCI, to the extent effective, until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings.  Changes in the fair value of undesignated derivatives executed as economic hedges are reported in current earnings.

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

The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items.  When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable of occurring, hedge accounting is discontinued prospectively in accordance with the derecognition criteria for hedge accounting.

Commodity Futures Contracts

Copper and brass represent the largest component of the Company’s variable costs of production.  The cost of these materials is subject to global market fluctuations caused by factors beyond the Company’s control.  The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts.  These futures contracts have been designated as cash flow hedges.  

At June 29, 2024, the Company held open futures contracts to purchase approximately $18.5 million of copper over the next 13 months related to fixed price sales orders.  The fair value of those futures contracts was a $453 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).  In the next 12 months, the
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Company will reclassify into earnings realized gains or losses relating to cash flow hedges.  At June 29, 2024, this amount was approximately $348 thousand of deferred net losses, net of tax.

The Company may also enter into futures contracts to protect the value of inventory against market fluctuations.  At June 29, 2024, the Company held $123.4 million open futures contracts to sell copper over the next six months related to copper inventory.  The fair value of those futures contracts was a $7.3 million net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).

The Company presents its derivative assets and liabilities in the Condensed Consolidated Balance Sheets on a net basis by counterparty.  The following table summarizes the location and fair value of the derivative instruments and disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:

 Asset DerivativesLiability Derivatives
   Fair Value Fair Value
(In thousands)Balance Sheet LocationJune 29,
2024
December 30,
2023
Balance Sheet LocationJune 29,
2024
December 30,
2023
      
Commodity contracts - gains
Other current assets
$ $589 
Other current liabilities
$2,131 $16 
Commodity contracts - losses
Other current assets
 (281)
Other current liabilities
(9,919)(383)
Total derivatives (1)
 $ $308  $(7,788)$(367)
(1) Does not include the impact of cash collateral provided to counterparties.

The following tables summarize the effects of derivative instruments on the Company’s Condensed Consolidated Statements of Income:

   For the Quarter EndedFor the Six Months Ended
(In thousands)LocationJune 29, 2024July 1, 2023June 29, 2024July 1, 2023
Undesignated derivatives: 
(Loss) gain on commodity contracts (nonqualifying)Cost of goods sold$(7,146)$427 $(6,658)$(2,057)

The following tables summarize amounts recognized in and reclassified from AOCI during the period:

 For the Quarter Ended June 29, 2024
(In thousands)Gain (Loss) Recognized in AOCI (Effective Portion), Net of TaxClassification Gains (Losses)Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:   
Commodity contracts$462 Cost of goods sold$(1,197)
Other(11)Other 
Total$451 Total$(1,197)
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Amounts recognized in and reclassified from AOCI (continued):

 For the Quarter Ended July 1, 2023
(In thousands)(Loss) Gain Recognized in AOCI (Effective Portion), Net of TaxClassification Gains (Losses)Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:   
Commodity contracts$(1,961)Cost of goods sold$(742)
Other24 Other 
Total$(1,937)Total$(742)

 For the Six Months Ended June 29, 2024
(In thousands)Gain Recognized in AOCI (Effective Portion), Net of TaxClassification Gains (Losses)Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:   
Commodity contracts$1,129 Cost of goods sold$(1,570)
Other22 Other 
Total$1,151 Total$(1,570)

 For the Six Months Ended July 1, 2023
(In thousands)Gain (Loss) Recognized in AOCI (Effective Portion), Net of TaxClassification Gains (Losses)Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:   
Commodity contracts$1,008 Cost of goods sold$(2,731)
Other(2)Other 
Total$1,006 Total$(2,731)

The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts.  Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions.  The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event.  The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral.  At June 29, 2024 and December 30, 2023, the Company had recorded restricted cash in other current assets of $16.1 million and $3.2 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.

Long-Term Debt

The fair value of long-term debt at June 29, 2024 approximates the carrying value on that date.  The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities.  The fair
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value of long-term debt is classified as level 2 within the fair value hierarchy.  This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.  

Note 8 – Investments in Unconsolidated Affiliates

Tecumseh

The Company owns a 50 percent interest in an unconsolidated affiliate that acquired Tecumseh Products Company LLC (Tecumseh) and an entity that provides financing to Tecumseh.  This investment is recorded using the equity method of accounting, as the Company can exercise significant influence but does not own a majority equity interest or otherwise control the entity.  Under the equity method of accounting, this investment is stated at initial cost and is adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions.

The Company records its proportionate share of the investee’s net income or loss, net of foreign taxes, one quarter in arrears as income (loss) from unconsolidated affiliates, net of foreign tax, in the Condensed Consolidated Statements of Income and its proportionate share of the investee’s other comprehensive income (loss), net of income taxes, in the Condensed Consolidated Statements of Comprehensive Income and the Condensed Consolidated Statements of Changes in Equity. The U.S. tax effect of the Company’s proportionate share of Tecumseh’s income or loss is recorded in income tax expense in the Condensed Consolidated Statements of Income. In general, the equity investment in unconsolidated affiliates is equal to the current equity investment plus the investee’s net accumulated losses. 

The Company’s net loss from unconsolidated affiliates, net of foreign tax, for the quarter ended June 29, 2024 included losses of $4.0 million for Tecumseh. The Company’s net income from unconsolidated affiliates, net of foreign tax, for the quarter ended July 1, 2023 included losses of $0.6 million for Tecumseh.

The Company’s net loss from unconsolidated affiliates, net of foreign tax, for the six months ended June 29, 2024 and July 1, 2023 included losses of $14.3 million and $3.0 million, respectively, for Tecumseh.

During the first half of 2024, the Company advanced Tecumseh $12.5 million, which was comprised of a capital contribution of $8.7 million and a note receivable of $3.8 million. These advances did not change the Company’s proportionate ownership of Tecumseh.

Retail Distribution

The Company owns a 28 percent noncontrolling equity interest in a limited liability company in the retail distribution business. This investment is recorded using the equity method of accounting. The Company records its proportionate share of the investee’s net income or loss one month in arrears as income (loss) from unconsolidated affiliates in the Condensed Consolidated Statements of Income. The Company’s proportionate share of the investee’s other comprehensive income (loss), net of income taxes, is recorded in the Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statement of Changes in Equity.

The Company’s net loss from unconsolidated affiliates, net of foreign tax, for the quarter ended June 29, 2024 included income of $2.9 million for the retail distribution business. The Company’s net income from unconsolidated affiliates, net of foreign tax, for the quarter ended July 1, 2023 included income of $1.3 million for the retail distribution business.

The Company’s net loss from unconsolidated affiliates, net of foreign tax, for the six months ended June 29, 2024 and July 1, 2023 included income of $5.2 million and $2.7 million, respectively, for the retail distribution business.

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Note 9 – Benefit Plans

The Company sponsors several qualified and nonqualified pension plans and other postretirement benefit plans for certain of its employees.  The components of net periodic benefit cost (income) are as follows:

 For the Quarter EndedFor the Six Months Ended
(In thousands) June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Pension benefits:    
Interest cost$582 $595 $1,163 $1,189 
Expected return on plan assets(604)(842)(1,208)(1,683)
Amortization of net loss33  66  
Net periodic benefit cost (income)$11 $(247)$21 $(494)
Other benefits:   
Service cost$55 $50