TO OUR STOCKHOLDERS Our Company had a good third quarter in 1994. Earnings rose to $8.5 million, or 90 cents per share on 9,499,000 average shares outstanding, compared to earnings of $5.6 million, or 54 cents per share on 10,473,000 average shares outstanding for the third quarter of 1993. For the first nine months of 1994, earnings were $18.5 million, or $1.84 per share compared to earnings of $15.2 million, or $1.45 per share for the same period in 1993. Earnings in 1994 were favorably effected by the sale of selected natural resource assets and lower state and federal income tax provisions. Our earnings for the third quarter of 1994 and for the nine months ended September 24, 1994 are based on the last-in, first-out (LIFO) method of valuing the copper component of our inventories, instead of the first-in, first-out (FIFO) method previously used. In recent years, the market price of copper, our principal raw material, has been particularly volatile. For example, copper was 80 cents per pound on January 3, 1994, and increased by 60 percent, to $1.28 per pound on September 23, 1994. Consequently, the wide swings in copper prices have had a direct impact upon our earnings, sometimes favorably and sometimes unfavorably. The LIFO method of valuing the copper component of inventories should mitigate the income statement effect of copper price fluctuations by more closely matching current costs with current selling prices. The change to LIFO also involves restatement of our earnings for the first and second quarters of 1994, the effect of which is included in the attached statement of income for the nine months ended September 24, 1994. Further, by adopting LIFO, Mueller has established a LIFO inventory reserve of $9.6 million, as of September 24, 1994. Net sales for the third quarter of 1994 totalled $138.0 million compared to $122.1 million for the same quarter of 1993. In terms of pounds of product shipped, which we believe is a more relevant indicator of our sales activity, pounds increased during the third quarter of 1994 by eight percent over 1993 levels. In mid-September, Mueller acquired the DWV (drain, waste and vent) plastic fittings manufacturing operations of Colonial Engineering, Inc. These operations are located in Michigan and California, and will significantly increase our Polyvinyl Chloride (PVC) and Acrrylonitrile Butadiene Styrene (ABS) plastic fittings manufacturing capacity. In addition, this acquisition will allow us to leverage our existing sales and distribution network and reduce costs. In addition, we continue to make very good progress on other internal capital improvement projects including our Fulton copper tube expansion, installation of a new extrusion press at our Port Huron plant, and construction of a high volume copper fittings plant at Fulton, Mississippi. All of these projects were announced previously. The Internal Revenue Service (IRS) audit for 1992 and prior years was concluded in the third quarter of 1994 and resulted in no material changes. Following the conclusion of that audit, the Company entered into a Closing Agreement with the IRS which definitized the NOL (net operating loss) which the Company is entitled to utilize. This led to the recognition of additional tax benefits in the amount of $17.9 million, which has been added to paid-in capital in the third quarter of 1994. We believe business will remain strong for the balance of 1994. Demand for housing continues to be vigorous and that is good for our business. Sincerely, /s/Harvey L. Karp /s/William D. O'Hagan Harvey L. Karp William D. O'Hagan Chairman of the Board President and Chief Executive Officer October 14, 1994 MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except share data)
For the Quarter Ended For the Nine-months Ended Sep. 24, Sep. 25, Sep. 24, Sep. 25, 1994 1993 1994 1993 Net sales $137,975 $122,106 $395,363 $380,464 Costs and expenses 126,977 112,602 366,996 353,132 ------- ------- ------- ------- Operating income 10,998 9,504 28,367 27,332 Non operating income (expense), net 1,035 (494) (552) (2,628) ------- ------- ------- ------- Income before taxes 12,033 9,010 27,815 24,704 Income tax expense 3,515 3,375 9,337 9,544 ------- ------- ------- ------- Net income $ 8,518 $ 5,635 $ 18,478 $ 15,160 ======= ======= ======= ======= Earnings per common and common equivalent share: Primary $ .90 $ .54 $ 1.84 $ 1.45 ======= ======= ======= ======= Fully diluted $ .90 $ .54 $ 1.84 $ 1.44 ======= ======= ======= =======
MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data)
Sep. 24, 1994 Dec. 25, 1993 Assets Current assets $ 178,504 $ 194,411 Property, plant and equipment, net 173,869 154,403 Other assets 76,011 20,929 ------- ------- $ 428,384 $ 369,743 ======= ======= Liabilities and Stockholders' Equity Current liabilities $ 71,581 $ 50,906 Long-term debt 83,657 54,320 Other noncurrent liabilities 39,873 42,403 ------- ------- Total liabilities 195,111 147,629 ------- ------- Stockholders' equity: Common stock 100 100 Paid-in capital, common 254,275 236,406 Retained earnings (Accumulated deficit) since January, 1991 12,539 (5,939) Cumulative translation adjustments (2,048) (1,944) Treasury common stock at cost (31,593) (6,509) ------- ------- Total stockholders' equity 233,273 222,114 ------- ------- $ 428,384 $ 369,743 ======= ======= Book value per share $ 26.82 $ 23.18 ======= =======
DIRECTORS AND OFFICERS DIRECTORS Harvey L. Karp Chairman of the Board Mueller Industries, Inc. Rodman L. Drake (1) (2) President of Rodman L. Drake & Co., Inc. Allan Mactier (1) (2) (3) Private Investor William D. O'Hagan President and Chief Executive Officer Mueller Industries, Inc. Robert J. Pasquarelli (1) (3) Chief Executive Officer of New Jersey Steel Corporation OFFICERS Harvey L. Karp Chairman of the Board William D. O'Hagan President and Chief Executive Officer Earl W. Bunkers Executive Vice President and Chief Financial Officer Harvey W. Clements Vice President and General Manager - Tube Division John B. Hansen Vice President and General Manager- Fittings Division William H. Hensley Vice President, General Counsel and Secretary Lee R. Nyman Vice President - Manufacturing/ Management Engineering James H. Rourke Vice President and General Manager - Industrial Division Roy C. Harris Corporate Controller Kent A. McKee Treasurer and Assistant Secretary Mueller Industries, Inc./2959 N. Rock Road/Wichita, KS 67226/(316)636-6300 [FN] (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee EX-27.1 4 EXHIBIT 27.1 ARTICLE 5 FINANCIAL DATA SCHEDULES
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 24, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000089439 MUELLER INDUSTRIES, INC. 1,000 9-MOS DEC-31-1994 SEP-24-1994 39,832 0 72,897 3,594 64,656 178,504 211,106 37,237 428,384 71,581 83,657 100 0 0 233,173 428,384 395,363 395,363 325,483 325,483 41,513 0 5,300 27,815 9,337 18,478 0 0 0 18,478 1.84 1.84