TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES The second quarter of 1999 was, by far, the best quarter in Mueller's history. Product shipments, sales, net income and earnings per share all increased by more than 25 percent versus the same quarter of 1998. Net income was $25.4 million, or 64 cents per share, compared to $19.7 million or 50 cents per share in the same quarter last year. Sales for the second quarter were $293.3 million, a 30 percent increase over sales of $225.9 million for the same quarter of 1998. Product shipments of 211.1 million pounds (including volume from businesses acquired in 1998) grew 33 percent over the like period last year. Net income for the first half of 1999 was $47.1 million, an increase of 21 percent over the first half of 1998. Product shipments in the first half of 1999 grew to 419.0 million pounds, compared to 315.3 million pounds in the first half of 1998. Net sales and operating income showed similar improvements. These outstanding results are the consequence of an excellent economic environment, the major operational improvements that Mueller has implemented in its product lines, and of the Company's recent strategic acquisitions. Housing starts for the first five months of 1999 were 9.3 percent ahead of 1998's pace, even though 30-year mortgage rates are currently more than 100 basis points higher than last year's low. Measures of housing affordability remain strong. Consumer confidence is at a high level. Inflation and unemployment are modest, and the index of leading indicators remains near its high for the decade. Demographics also favor continuing strength in the U.S. housing market due to increasingly affluent baby boomers, rising homeownership rates, and strong household formations. Overall, these are positive factors for the housing industry and for our business. Mueller is continuing to invest in major capital improvements. In May, our Board of Directors approved a $24 million dollar program to upgrade our recently-acquired copper tube mill in Wynne, Arkansas. This investment has the objective of transforming Wynne into a world-class facility, substantially reducing its production costs. Major new extruding and drawing equipment will be installed over the next 18 months. We are also continuing to invest in our copper and plastic fittings plants, and in the brass rod mill. These investments should continue to improve manufacturing flexibility and ratchet down costs. We are continuing to make operational improvements in our European tube businesses, with the goal of reducing manufacturing and distribution costs. Despite these operational improvements, our European businesses incurred losses in the second quarter due to competitive pricing, particularly in the United Kingdom. Nonetheless, we believe the opportunities in Europe will become increasingly attractive due to the likelihood of consolidation in the copper fabrication industry. -1- The Company continues to achieve its long-term plan of divesting certain natural resource properties and businesses. On April 26, 1999, the Company sold its interests in Alaska Gold Company, realizing a modest gain in the second quarter. Moreover, the Company will realize an ordinary federal income tax deduction reducing our current tax obligation by approximately $25 million. Our Annual Stockholders' meeting was held at Mueller's new corporate headquarters in Memphis on May 6, 1999. The stockholders reelected all Board members 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 13, 1999 -2- Historical Analysis (1994-1999) of Quarterly Earnings Before Tax and Earnings Per Share Mueller's earnings have grown substantially over the past five years. In the second quarter of 1999, our Company earned $37.4 million before tax, compared with $9.1 million for the same quarter of 1994, an increase of 311 percent. Diluted earnings per share have risen 357 percent, from $0.14 to $0.64. [GRAPH] Second Quarter Diluted Earnings Per Share 1994 $0.14 1995 0.28 1996 0.36 1997 0.42 1998 0.50 1999 0.64