TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES We are pleased to report that Mueller had an outstanding third quarter. The Company's earnings increased by 40 percent, compared with the same quarter of 1998. Net earnings were $26.3 million, or 66 cents per diluted share, in the third quarter of 1999, compared to $18.8 million, or 47 cents per diluted share, in the same quarter of 1998. Mueller shipped 196.0 million pounds of product in the third quarter, generating $287.9 million in net sales. This compares to 150.7 million pounds shipped and $212.7 million in net sales in the comparable period of 1998. Mueller's manufacturing operations performed well during the quarter. Copper tube enjoyed excellent results on favorable pricing and good volume. Copper and plastic fittings continue to deliver solid sales and profitability. Brass rod posted good volume and a modest rise in earnings versus the same period last year. Despite achieving significant cost reductions, our Europe operations continued to incur losses in the third quarter due to competitive pricing. However, we are optimistic that pricing conditions will improve in the near term. The Company has initiated a $10 million capital investment at our Port Huron, Michigan brass rod mill. This investment, which is expected to be completed near the end of 2000, will increase our casting capacity, improve yield and reduce conversion costs. In addition, major capital improvements are under way at our Wynne, Arkansas copper tube mill. Our casting facility in Fulton, Mississippi is complete, enabling substantial savings in material costs under the right market conditions. On August 30, 1999 Mueller repurchased 500,000 of its common shares. The shares were bought for $29.15 each, slightly below the closing price on the New York Stock Exchange on that date. Economic indicators continue to be positive for the U.S. economy and housing industry. This bodes well for our business for the balance of 1999, and into the year 2000. 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 12, 1999 -1- Historical Analysis (1994-1999) of Quarterly Earnings Before Tax and Earnings Per Share Mueller's earnings continue to grow. In the third quarter of 1999, our Company earned $38.2 million before tax, compared with $12.0 million for the same quarter of 1994, an increase of 218 percent. Diluted earnings per share have risen 200 percent, from $0.22 per share to $0.66 per share. [GRAPH] Third Quarter Diluted Earnings Per Share 1994 $0.22 1995 0.30 1996 0.41 1997 0.46 1998 0.47 1999 0.66 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 26.1 25.7 109.3 1999 31.2 37.4 38.2
Diluted Earnings Per Share
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 0.47 0.45 1.90 1999 0.55 0.64 0.66
-2- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Quarter Ended September 25, 1999 September 26, 1998 Net sales $ 287,880 $ 212,746 Cost of goods sold 216,341 163,952 Depreciation and amortization 9,268 5,650 Selling, general, and administrative expense 23,162 17,692 ---------- ---------- Operating income 39,109 25,452 Interest expense (3,078) (1,158) Environmental reserves - - Other income, net 2,143 1,809 ---------- ---------- Income before taxes 38,174 26,103 Income tax expense (11,834) (7,338) ---------- ---------- Net income $ 26,340 $ 18,765 ========== ========== Earnings per share: Basic: Weighted average shares outstanding 35,683 35,689 ========== ========== Basic earnings per share $ 0.74 $ 0.53 ========== ========== Diluted: Weighted average shares outstanding plus assumed conversions 39,814 39,800 ========== ========== Diluted earnings per share $ 0.66 $ 0.47 ========== ==========
-3- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Nine Months Ended September 25, 1999 September 26, 1998 Net sales $ 869,062 $ 665,265 Cost of goods sold 658,421 512,927 Depreciation and amortization 27,606 16,923 Selling, general, and administrative expense 74,229 53,946 ---------- ---------- Operating income 108,806 81,469 Interest expense (9,086) (3,701) Environmental reserves - (600) Other income, net 7,093 6,513 ---------- ---------- Income before taxes 106,813 83,681 Income tax expense (33,345) (25,941) ---------- ---------- Net income $ 73,468 $ 57,740 ========== ========== Earnings per share: Basic: Weighted average shares outstanding 35,772 35,338 ========== ========== Basic earnings per share $ 2.05 $ 1.63 ========== ========== Diluted: Weighted average shares outstanding plus assumed conversions 39,751 39,686 ========== ========== Diluted earnings per share $ 1.85 $ 1.45 ========== ==========
-4- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
September 25, 1999 December 26, 1998 ASSETS Cash and cash equivalents $ 156,619 $ 80,568 Accounts receivable, net 170,464 155,601 Inventories 111,807 134,732 Other current assets 4,385 11,423 ---------- ---------- Total current assets 443,275 382,324 Property, plant and equipment, net 375,939 379,082 Other assets 105,608 113,288 ---------- ---------- $ 924,822 $ 874,694 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $ 28,705 $ 19,980 Accounts payable 51,795 46,641 Other current liabilities 93,302 75,953 ---------- ---------- Total current liabilities 173,802 142,574 Long-term debt 131,427 174,569 Other noncurrent liabilities 61,208 55,075 ---------- ---------- Total liabilities 366,437 372,218 Minority interest in subsidiaries 354 354 Stockholders' equity 558,031 502,122 ---------- ---------- $ 924,822 $ 874,694 ========== ========== -5-