TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES
Mueller's net earnings increased 21 percent in the second quarter of 1998
over the same quarter of 1997. Gross profit, net earnings, and pounds of
product produced and shipped all reached record levels. Earnings for the
second quarter were $19.7 million, or 50 cents per diluted share, compared
to $16.3 million, or 42 cents per diluted share, for the second quarter of
1997.
Net sales for the second quarter of 1998 totaled $225.9 million, compared
with $215.4 million for the same quarter of 1997. This increase in net
sales was especially gratifying since the price of copper declined by 32
percent compared with the same period in 1997. The selling price of many
of Mueller's products tends to fluctuate based on the price of copper.
Mueller's manufacturing operations performed well during the second
quarter. The Fulton copper tube mill operated near full capacity and the
same was true of our Port Huron brass rod mill. Our plastic and copper
fittings businesses showed continued strength and margins were good.
Business was also brisk at our other manufacturing operations.
The bulk of Mueller's earnings increase was achieved in the U.S.
marketplace. We are taking important steps to rationalize our European
manufacturing operations, and in due course we expect to obtain increasing
benefits in efficiency and profitability.
We remain optimistic about our business for the balance of 1998. Long-term
mortgage rates in the United States are currently under 7 percent. Consumer
confidence remains high and inflation is at a low level. Moreover, most
leading economic indicators continue strong. We believe these favorable
factors signal a positive business outlook for the Company going forward.
In April, Mueller declared a two-for-one split of our common stock. The
stock commenced trading on a post-split basis on May 28, 1998. Accordingly,
all per share amounts in this report have been adjusted to reflect the
split.
Our Annual Stockholders' meeting was held in Memphis on May 7, 1998. At
the meeting, our stockholders reelected all Board members, approved an
increase in the number of authorized shares of common stock to 100,000,000
from 50,000,000, approved the adoption of a 1998 stock option plan, and
approved the reappointment of our independent auditors.
Sincerely,
/S/HARVEY L. KARP
Harvey L. Karp
Chairman of the Board
/S/WILLIAM D. O'HAGAN
William D. O'Hagan
President and Chief Executive Officer
July 16, 1998
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended For the Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
Net sales $225,867 $215,437 $452,519 $416,803
Cost of goods sold 173,518 172,685 348,975 328,469
Depreciation and amortization 5,689 4,984 11,273 9,816
Selling, general, and
administrative expense 18,412 15,234 36,254 30,730
------- ------- ------- -------
Operating income 28,248 22,534 56,017 47,788
Interest expense (1,191) (1,118) (2,543) (2,296)
Environmental reserves - - (600) (2,000)
Other income, net 1,981 2,166 4,704 3,196
------- ------- ------- -------
Income before taxes 29,038 23,582 57,578 46,688
Income tax expense (9,328) (7,243) (18,603) (14,591)
------- ------- ------- -------
Net income $ 19,710 $ 16,339 $ 38,975 $ 32,097
======= ======= ======= =======
Earnings per share:
Basic:
Weighted average
shares outstanding 35,225 35,011 35,163 34,979
======= ======= ======= =======
Basic earnings per share $ 0.56 $ 0.47 $ 1.11 $ 0.92
======= ======= ======= =======
Diluted:
Weighted average shares
outstanding plus
assumed conversions 39,712 39,158 39,629 39,227
======= ======= ======= =======
Diluted earnings per share $ 0.50 $ 0.42 $ 0.98 $ 0.82
======= ======= ======= =======
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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 27, 1998 Dec. 27, 1997
ASSETS
Cash and cash equivalents $ 87,914 $ 69,978
Accounts receivable, net 136,106 128,902
Inventories 98,401 98,181
Other current assets 13,201 11,990
--------- ---------
Total current assets 335,622 309,051
Property, plant and equipment, net 284,688 260,364
Other assets 34,920 41,361
--------- ---------
$ 655,230 $ 610,776
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 18,027 $ 18,980
Accounts payable 32,687 30,530
Other current liabilities 58,605 51,047
--------- ---------
Total current liabilities 109,319 100,557
Long-term debt 45,172 53,113
Other noncurrent liabilities 39,734 38,375
--------- ---------
Total liabilities 194,225 192,045
Minority interest in subsidiaries 390 691
Stockholders' equity 460,615 418,040
--------- ---------
$ 655,230 $ 610,776
========= =========
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Historical Analysis (1994-1998) of Quarterly
Earnings Before Tax and Earnings Per Share
Mueller's earnings have grown substantially over the past four years. In
the second quarter of 1998, our Company earned $29.0 million before tax,
compared with $9.1 million for the same quarter of 1994, an increase of 219
percent. Diluted earnings per share have risen 257 percent, from $0.14 to
$0.50.
[GRAPH]
Second Quarter Diluted Earnings Per Share
1994 $0.14
1995 0.28
1996 0.36
1997 0.42
1998 0.50
A similar progression is evident in each of the quarters from 1994 to the
present:
Earnings Before Tax (millions)
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
1994 $ 6.7 $ 9.1 $ 12.0 $ 13.0 $ 40.8
1995 14.7 15.6 17.0 17.2 64.5
1996 19.3 20.1 23.4 25.6 88.4
1997 23.1 23.6 25.8 28.3 100.8
1998 28.5 29.0
Diluted Earnings Per Share (restated to reflect two-for-one stock split
effective May 28, 1998)
Quarter
------------------------------------------------ Total
1st 2nd 3rd 4th Year
1994 $ 0.10 $ 0.14 $ 0.22 $ 0.25 $ 0.71
1995 0.27 0.28 0.30 0.32 1.17
1996 0.34 0.36 0.41 0.46 1.57
1997 0.40 0.42 0.46 0.50 1.78
1998 0.49 0.50
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