1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarter ended March 30, 1996 Commissions file number 1-6770 MUELLER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 25-0790410 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2959 N. ROCK ROAD WICHITA, KANSAS 67226-1191 (Address of principal executive offices) Registrant's telephone number, including area code: (316) 636-6300 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $ 0.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 /X/ No / / The number of shares of the Registrant's common stock outstanding as of April 12, 1996 was 17,372,698. MUELLER INDUSTRIES, INC. FORM 10-Q For the Period Ended March 30, 1996 INDEX Part I. Financial Information Page Item 1. Financial Statements (Unaudited) a.) Consolidated Statements of Income for the quarters ended March 30, 1996 and April 1, 1995....................................3 b.) Consolidated Balance Sheets as of March 30, 1996 and December 30, 1995...........4 c.) Consolidated Statements of Cash Flows for the quarters ended March 30, 1996 and April 1, 1995........................................6 d.) Notes to Consolidated Financial Statements...........7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K.........................10 Signatures...........................................................10 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Quarter Ended March 30, 1996 April 1, 1995 Net sales $ 180,515 $ 171,770 Cost of goods sold 143,532 140,560 ------- ------- Gross profit 36,983 31,210 Depreciation and amortization 4,450 3,646 Selling, general, and administrative expense 13,904 12,967 ------- ------- Operating income 18,629 14,597 Interest expense (1,240) (1,377) Other income, net 1,880 1,473 ------- ------- Income before income taxes 19,269 14,693 Current income tax expense (5,261) (4,268) Deferred income tax expense (716) (375) ------- ------- Total income tax expense (5,977) (4,643) ------- ------- Net income $ 13,292 $ 10,050 ======= ======= Net income per share: Primary: Average shares outstanding 19,368 18,898 Net income $ 0.69 $ 0.53 ======= ======= Fully diluted: Average shares outstanding 19,464 18,956 Net income $ 0.68 $ 0.53 ======= ======= See accompanying notes to consolidated financial statements.
MUELLER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
March 30, 1996 December 30, 1995 Assets Current assets: Cash and cash equivalents $ 45,471 $ 48,357 Accounts receivable, less allowance for doubtful accounts of $3,021 in 1996 and $2,986 in 1995 99,328 83,712 Inventories: Raw material and supplies 8,433 14,538 Work-in-process 18,803 17,133 Finished goods 37,495 34,689 ------- ------- Total inventories 64,731 66,360 Current deferred income taxes 7,354 7,354 Other current assets 7,826 5,255 ------- ------- Total current assets 224,710 211,038 Property, plant and equipment, net 224,116 221,012 Deferred income taxes 12,458 13,174 Other assets 5,894 5,611 ------- ------- $ 467,178 $ 450,835 ======= ======= See accompanying notes to consolidated financial statements.
MUELLER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data)
March 30, 1996 December 30, 1995 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 16,837 $ 16,249 Accounts payable 23,159 16,931 Accrued wages and other employee costs 14,393 14,499 Other current liabilities 21,430 20,205 ------- ------- Total current liabilities 75,819 67,884 Long-term debt 55,792 59,653 Pension and postretirement liabilities 14,822 15,976 Environmental reserves 9,087 9,585 Deferred income taxes 2,734 2,734 Other noncurrent liabilities 9,248 9,128 ------- ------- Total liabilities 167,502 164,960 ------- ------- Minority interest in subsidiaries 325 - Stockholders' equity: Preferred stock - shares authorized 4,985,000; none outstanding - - Series A junior participating preferred stock - $1.00 par value; shares authorized 15,000; none outstanding - - Common stock - $.01 par value; shares authorized 20,000,000; issued 20,000,000; outstanding 17,372,698 in 1996 and 17,349,498 in 1995 200 200 Additional paid-in capital, common 253,842 253,969 Retained earnings (Since January 1, 1991) 80,102 66,810 Cumulative translation adjustment (2,514) (2,545) Treasury common stock, at cost (32,279) (32,559) ------- ------- Total stockholders' equity 299,351 285,875 Commitments and contingencies (Note 2) - - ------- ------- $ 467,178 $ 450,835 ======= ======= See accompanying notes to consolidated financial statements.
MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
For the Quarter Ended March 30, 1996 April 1, 1995 Cash flows from operating activities Net income $ 13,292 $ 10,050 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 4,450 3,646 Minority interest in subsidiaries 325 - Deferred income taxes 716 375 Gain on disposal of properties (1,065) (310) Changes in assets and liabilities: Receivables (15,616) (21,463) Inventories 1,629 (2,523) Other assets (3,192) (1,846) Current liabilities 7,347 11,481 Other liabilities (1,532) (626) Other, net 43 26 ------- ------- Net cash provided (used) by operating activities 6,397 (1,190) ------- ------- Cash flows from investing activities Capital expenditures (7,228) (8,707) Proceeds from sales of properties 1,065 530 Escrowed IRB financing - 4,580 ------- ------- Net cash used by investing activities (6,163) (3,597) ------- ------- Cash flows from financing activities Repayments of long-term debt (3,273) (3,863) Proceeds from sale of treasury stock 153 98 Acquisition of treasury stock - (2,055) ------- ------- Net cash used by financing activities (3,120) (5,820) ------- ------- Decrease in cash and cash equivalents (2,886) (10,607) Cash and cash equivalents at the beginning of the period 48,357 34,492 ------- ------- Cash and cash equivalents at the end of the period $ 45,471 $ 23,885 ======= ======= See accompanying notes to consolidated financial statements.
MUELLER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) General Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles 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 by reference. The accompanying unaudited interim financial statements include all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Note 1 - Earnings Per Common Share Primary earnings per common share are based upon the weighted average number of common and common equivalent shares outstanding during the period. Fully diluted earnings per share are based upon the weighted average number of common shares outstanding plus the dilutive effects of all outstanding stock options. In 1995, the Company declared and effected a two-for-one stock split in the form of a 100 percent stock dividend. All presentations of share data herein, including earnings per share, have been restated to reflect the split for all periods presented. Note 2 - Commitments and Contingencies The Company is subject to normal environmental standards imposed by federal, state and local environmental laws and regulations. Based upon information currently available, management believes that the outcome of pending environmental matters will not materially affect the overall financial position and results of operations of the Company. In addition, the Company is involved in certain litigation as either plaintiff or defendant as a result of claims that arise in the ordinary course of business which management believes will not have a material effect on the Company's financial condition. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Overview The Company's principal business is the manufacture and sale of copper tube, brass rod, fittings and other products made of copper, brass, bronze, plastic and aluminum. These core manufacturing businesses have been in operation for over 75 years. New housing starts and commercial construction are important determinants of the Company's sales to the air-conditioning, refrigeration and plumbing markets because the principal end use of a significant portion of the Company's products is in the construction of single and multi-family housing units and commercial buildings. Profitability of certain of the Company's product lines is dependent upon the "spreads" between the cost of material and the selling prices of its completed products. The open market price for copper cathode, for example, directly influences the selling price of copper tubing, a principal product manufactured by the Company. The Company attempts to minimize the effects of changes in copper prices by passing base metal costs through to its customers. The Company uses the LIFO method of accounting for the copper component of certain of its copper tube and fittings inventories. Management believes the LIFO method results in a better matching of current costs with current revenues. The market price of copper does, however, indirectly effect the carrying value (FIFO basis) of the Company's brass and other inventories. The Company's copper and brass inventories customarily total between 30 to 40 million pounds. "Spreads" fluctuate based upon competitive market conditions. The Company also owns various natural resource properties in the Western United States and Canada. It operates a short line railroad in Utah and a placer gold mining operation in Alaska. Additionally, certain other natural resource properties produce rental or royalty income. Results of Operations Net income was $13.3 million, or 69 cents per common share, for the first quarter of 1996, which compares with net income of $10.1 million, or 53 cents per common share, for the same period of 1995. During the first quarter of 1996 the Company's net sales were $180.5 million, which compares to net sales of $171.8 million, or a 5.1 percent increase over the same period of 1995. The increase in net sales was primarily attributable to the core manufacturing businesses, which shipped 5.6 percent more pounds of product. These core manufacturing businesses shipped 109.3 million pounds of product in the first quarter of 1996 which compares to 103.4 million pounds in the same quarter of 1995. First quarter operating income increased primarily due to: (i) productivity improvements at its manufacturing plants; (ii) higher sales volumes; and (iii) selective price increases in the tube, fittings and brass rod markets. Interest expense for 1996 of approximately $1.2 million is net of capitalized interest of $.3 million related to capital improvement programs at the brass rod mill. The effective tax rate of 31 percent in the first quarter of 1996 reflects the benefits of a lower federal provision relating to the recognition of net operating loss carryforwards and a lower state provision associated with incentive IRB financings. Liquidity and Capital Resources Cash provided by operating activities in the first quarter of 1996 totalled $6.4 million which is primarily attributable to net income and depreciation and amortization, offset by increased accounts receivables. During the first quarter of 1996, the Company's capital expenditures totalled $7.2 million which was provided for primarily by cash from operations. The Company has a $50 million unsecured line-of-credit agreement (the Credit Facility) which expires on June 30, 1997, but may be extended for successive one year periods by agreement of the parties. At the Company's option, borrowings bear interest at prime less 1/2 of one percent. There are no outstanding borrowings under the Credit Facility. At March 30, 1996, the Company's total debt was $72.6 million or 19.5 percent of its capitalization. The Company's financing obligations contain various covenants which require, among other things, the maintenance of minimum levels of working capital, tangible net worth, and debt service coverage ratios. The Company is in compliance with all debt covenants. Management believes that cash provided by operations and currently available cash of $45.5 million will be adequate to meet the Company's normal future capital expenditure and operational needs. The Company's current ratio remains strong at 3.0 to 1. The Company's modernization of its low-volume copper fittings plant in Covington, Tennessee will require approximately $7.1 million. This commitment will be funded with cash generated by operations. Update on Major Capital Improvement Programs Mueller has substantially completed the upgrade of its brass rod mill manufacturing processes with an expansion that includes the installation of a new, state-of-the-art indirect extrusion press, new billet heating furnaces, and new material handling systems. Production on the new equipment commenced during the first quarter of 1996, and production transition should be completed by summer. Mueller's capital improvement project at its Fulton copper tube mill to upgrade technology and install state-of-the-art tube drawing and handling equipment became operational in the fourth quarter of 1995. The Company expects continued refinements which should further improve operational performance in the mill during 1996. The Company's new, high-volume copper fittings plant at Fulton, Mississippi also became operational in the second and third quarters of 1995 and most production lines in this new plant are running today. Yield and productivity continue to improve. Another important ongoing program is the modernization of the Company's low-volume copper fittings plant in Covington, Tennessee. Modernization of this facility, which produces a broad range of low-volume copper fittings, is estimated to require approximately $7.1 million in capital improvements and will be completed in 1997. Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 19.1 Mueller Industries, Inc.'s Quarterly Report to Stockholders for the quarter ended March 30, 1996. Such report is being furnished for the information of the Securities and Exchange Commission only and is not to be deemed filed as part of this Quarterly Report on Form 10-Q. 99.1 Press Release issued by Mueller Industries, Inc. on April 18, 1996. (b) During the quarter ended March 30, 1996, the Registrant filed no Current Reports on Form 8-K. Items 1, 2, 3, 4, and 5 are not applicable and have been omitted. 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 April 18, 1996. MUELLER INDUSTRIES, INC. /S/ EARL W. BUNKERS Earl W. Bunkers, Executive Vice President and Chief Financial Officer /S/ KENT A. MCKEE Kent A. McKee Vice President Business Development/ Investor Relations /S/ RICHARD W. CORMAN Richard W. Corman Director of Corporate Accounting