UNITED STATES
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 quarterly period ended March 29, 2008 Commission 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.)
8285 Tournament Drive, Suite 150
Memphis, Tennessee 38125
(Address of principal executive offices) (Zip Code)
(901) 753-3200
(Registrant's telephone number, including area code)
Indicate by 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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated
filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ X ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
The number of shares of the Registrant's common stock outstanding as of
April 23, 2008, was 37,102,898.
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MUELLER INDUSTRIES, INC.
FORM 10-Q
For the Quarterly Period Ended March 29, 2008
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Condensed Consolidated Statements of Income
for the quarters ended March 29, 2008
and March 31, 2007 3
b.) Condensed Consolidated Balance Sheets
as of March 29, 2008 and December 29, 2007 4
c.) Condensed Consolidated Statements of Cash Flows
for the quarters ended March 29, 2008
and March 31, 2007 6
d.) Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 22
Part II. Other Information
Item 1. Legal Proceedings 23
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 28
Item 6. Exhibits 29
Signatures 30
-2-
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands, except per share data)
Net sales $ 704,108 $ 609,782
Cost of goods sold 611,797 536,578
---------- ----------
Gross profit 92,311 73,204
Depreciation and amortization 10,984 10,966
Selling, general, and
administrative expense 38,291 34,927
---------- ----------
Operating income 43,036 27,311
Interest expense (5,467) (5,494)
Other income, net 4,017 4,953
---------- ----------
Income before income taxes 41,586 26,770
Income tax expense (14,231) (7,857)
---------- ----------
Net income $ 27,355 $ 18,913
========== ==========
Weighted average shares
for basic earnings per share 37,089 37,027
Effect of dilutive stock options 192 117
---------- ----------
Adjusted weighted average shares
for diluted earnings per share 37,281 37,144
---------- ----------
Basic earnings per share $ 0.74 $ 0.51
========== ==========
Diluted earnings per share $ 0.73 $ 0.51
========== ==========
Dividends per share $ 0.10 $ 0.10
========== ==========
See accompanying notes to condensed consolidated financial statements.
-3-
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 29, 2008 December 29, 2007
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 274,280 $ 308,618
Accounts receivable, less allowance
for doubtful accounts of $7,138
2008 and $5,015 in 2007 386,607 323,003
Inventories 273,596 269,032
Other current assets 47,256 39,694
---------- ----------
Total current assets 981,739 940,347
Property, plant, and equipment, net 306,982 308,383
Goodwill 153,713 153,263
Other assets 47,537 47,211
---------- ----------
$ 1,489,971 $ 1,449,204
========== ==========
See accompanying notes to condensed consolidated financial statements.
-4-
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
March 29, 2008 December 29, 2007
(In thousands, except share data)
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 69,885 $ 72,743
Accounts payable 151,840 140,497
Accrued wages and other employee costs 29,178 39,984
Other current liabilities 95,935 81,829
---------- ----------
Total current liabilities 346,838 335,053
Long-term debt, less current portion 282,242 281,738
Pension liabilities 14,458 14,805
Postretirement liabilities other
than pensions 21,345 21,266
Environmental reserves 8,893 8,897
Deferred income taxes 52,287 52,156
Other noncurrent liabilities 1,949 2,029
---------- ----------
Total liabilities 728,012 715,944
---------- ----------
Minority interest in subsidiary 24,171 22,765
Stockholders' equity:
Preferred stock - shares authorized
5,000,000; none outstanding - -
Common stock - $.01 par value; shares
authorized 100,000,000; issued
40,091,502; outstanding 37,096,674
in 2008 and 37,079,903 in 2007 401 401
Additional paid-in capital 260,241 259,611
Retained earnings 508,180 484,534
Accumulated other comprehensive income 34,458 31,808
Treasury common stock, at cost (65,492) (65,859)
---------- ----------
Total stockholders' equity 737,788 710,495
---------- ----------
Commitments and contingencies - -
---------- ----------
$ 1,489,971 $ 1,449,204
========== ==========
See accompanying notes to condensed consolidated financial statements.
-5-
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands)
Cash flows from operating activities
Net income $ 27,355 $ 18,913
Reconciliation of net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 11,110 11,012
Minority interest in subsidiary 552 402
Gain on early retirement of debt (2,408) -
Deferred income taxes (429) (1,156)
Loss (gain) on disposal
of properties 339 (3,132)
Stock-based compensation expense 731 628
Income tax benefit from exercise
of stock options - (66)
Changes in assets and liabilities,
net of business acquired:
Receivables (62,218) (59,857)
Inventories (3,664) 66,512
Other assets (6,780) (314)
Current liabilities 14,264 13,445
Other liabilities 2,566 23
Other, net (2,708) 719
---------- ----------
Net cash (used in) provided by
operating activities (21,290) 47,129
---------- ----------
Cash flows from investing activities
Capital expenditures (8,573) (8,725)
Acquisition of business, net of
cash received - (31,970)
Proceeds from sales of properties - 3,032
Net withdrawals from restricted
cash balances 85 -
---------- ----------
Net cash used in
investing activities (8,488) (37,663)
---------- ----------
See accompanying notes to condensed consolidated financial statements.
-6-
MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands)
Cash flows from financing activities
Dividends paid $ (3,709) $ (3,703)
Repayments of long-term debt (22,979) (17,429)
Issuance of debt by joint venture 21,032 5,434
Issuance of shares under incentive
stock option plans from treasury 266 155
Income tax benefit from exercise
of stock options - 66
---------- ----------
Net cash used in financing
activities (5,390) (15,477)
---------- ----------
Effect of exchange rate changes on cash 830 29
---------- ----------
Decrease in cash and
cash equivalents (34,338) (5,982)
Cash and cash equivalents at the
beginning of the period 308,618 200,471
---------- ----------
Cash and cash equivalents at the
end of the period $ 274,280 $ 194,489
========== ==========
See accompanying notes to condensed consolidated financial statements.
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MUELLER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
General
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States 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.
The accompanying unaudited interim financial statements include all
normal recurring 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
Basic per share amounts have been computed based on the average number
of common shares outstanding. Diluted per share amounts reflect the
increase in average common shares outstanding that would result from the
assumed exercise of outstanding stock options, computed using the treasury
stock method.
Note 2 - Commitments and Contingencies
The Company is involved in certain litigation as a result of claims
that arose in the ordinary course of business, which management believes
will not have a material adverse effect on the Company's financial position
or results of operations. Additionally, the Company may realize the
benefit of certain legal claims and litigation in the future; these gain
contingencies are not recognized in the Condensed Consolidated Financial
Statements.
Guarantees, in the form of letters of credit, are issued by the
Company generally to guarantee the payment of insurance deductibles and
retiree health benefits. The terms of the Company's guarantees are
generally one year but are renewable annually as required. The maximum
potential amount of future payments the Company could have been required to
make under its guarantees at March 29, 2008 was $10.1 million.
-8-
Note 3 - Inventories
March 29, 2008 December 29, 2007
(In thousands)
Raw material and supplies $ 61,604 $ 82,875
Work-in-process 69,959 51,898
Finished goods 262,173 232,404
LIFO reserve (114,456) (91,127)
Valuation reserves (5,684) (7,018)
---------- ----------
Inventories $ 273,596 $ 269,032
========== ==========
The Company has deferred recognizing potential gains resulting from
liquidation of LIFO inventories during the first three months of 2008. The
Company expects to replenish these inventories by the end of 2008 and, as
such, has not recognized the effects of liquidating LIFO layers.
Note 4 - Industry Segments
The Company's reportable segments are Plumbing & Refrigeration and
OEM. For disclosure purposes, as permitted under Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information," certain operating segments are
aggregated into reportable segments. The Plumbing & Refrigeration segment
is composed of Standard Products (SPD), European Operations, and Mexican
Operations. The OEM segment is composed of Industrial Products (IPD),
Engineered Products (EPD), and Mueller-Xingrong, the Company's Chinese
joint venture. These segments are classified primarily by the markets for
their products. Performance of segments is generally evaluated by their
operating income.
SPD manufactures copper tube, copper and plastic fittings, plastic
pipe, and line sets. These products are manufactured in the U.S. SPD also
imports and resells in North America brass and plastic plumbing valves,
malleable iron fittings, faucets, and plumbing specialty products.
European Operations consist of copper tube manufacturing, with such
products being sold in Europe and the Middle East, and import distribution
of fittings, valves, and plumbing specialties primarily in the U.K. and
Ireland. Mexican Operations consist of pipe nipple manufacturing and
import distribution businesses including product lines of malleable iron
fittings and other plumbing specialties. The Plumbing & Refrigeration
segment's products are sold primarily to plumbing, refrigeration, and air-
conditioning wholesalers, hardware wholesalers and co-ops, and building
product retailers.
-9-
IPD manufactures brass rod, impact extrusions, and forgings as well as
a variety of end products including plumbing brass; automotive components;
valves and fittings; and specialty copper, copper-alloy, and aluminum
tubing. EPD manufactures and fabricates valves and assemblies for the
refrigeration, air-conditioning, gas appliance, and barbecue grill markets.
The OEM segment sells its products primarily to original equipment
manufacturers, many of which are in the HVAC, plumbing, and refrigeration
markets. Included in the OEM segment are the results of operations of
Extruded Metals, Inc. since its acquisition on February 27, 2007.
Summarized segment information is as follows:
Quarter Ended March 29, 2008
Plumbing &
Refrigeration OEM Corporate and
Segment Segment Eliminations Total
(In thousands)
Net sales $ 383,884 $ 326,207 $ (5,983) $ 704,108
Cost of goods sold 327,999 289,481 (5,683) 611,797
---------- ---------- ---------- ----------
Gross profit 55,885 36,726 (300) 92,311
Depreciation and
amortization 7,258 3,450 276 10,984
Selling, general, and
administrative expense 23,543 7,702 7,046 38,291
---------- ---------- ---------- ----------
Operating income 25,084 25,574 (7,622) 43,036
Interest expense (5,467)
Other income, net 4,017
----------
Income before
income taxes $ 41,586
==========
-10-
Quarter Ended March 31, 2007
Plumbing &
Refrigeration OEM Corporate and
Segment Segment Eliminations Total
(In thousands)
Net sales $ 369,996 $ 243,730 $ (3,944) $ 609,782
Cost of goods sold 311,496 229,457 (4,375) 536,578
---------- ---------- ---------- ----------
Gross profit 58,500 14,273 431 73,204
Depreciation and
amortization 7,339 3,350 277 10,966
Selling, general, and
administrative expense 24,307 5,429 5,191 34,927
---------- ---------- ---------- ----------
Operating income 26,854 5,494 (5,037) 27,311
Interest expense (5,494)
Other income, net 4,953
----------
Income before
income taxes $ 26,770
==========
-11-
Note 5 - Comprehensive Income
Comprehensive income is as follows:
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands)
Net income $ 27,355 $ 18,913
Other comprehensive income,
net of tax
Foreign currency translation 1,850 1,393
Amortization of prior service
cost included in pension
expense 65 -
Amortization of actuarial
gains and losses included
in pension expense 97 -
Change in the fair value
of derivatives 638 518
---------- ----------
Other comprehensive income 2,650 1,911
---------- ----------
Comprehensive income $ 30,005 $ 20,824
========== ==========
The change in cumulative foreign currency translation adjustment
primarily relates to the Company's investment in its foreign subsidiaries
and fluctuations in exchange rates between their local currencies and the
U.S. dollar, plus the tax effect of certain intercompany transactions.
During the first quarter of 2008, the value of the Mexican peso and the
Chinese renminbi increased 2.0 percent and 3.7 percent, respectively,
compared to the U.S. dollar.
-12-
Note 6 - Other Income, Net
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands)
Gain on early retirement of debt $ 2,408 $ -
Interest income 2,385 2,272
(Loss) gain on disposal of
properties, net (339) 3,132
Minority interest in income of
subsidiary (552) (402)
Environmental expense,
non-operating properties (118) (111)
Other 233 62
---------- ----------
Other income, net $ 4,017 $ 4,953
========== ==========
During the first quarter of 2008, the Company repurchased and
extinguished $25.5 million of its 6% Subordinated Debentures for $23.0
million. The Company also wrote off $0.1 million of debt issuance costs in
connection with this transaction, resulting in a net gain of approximately
$2.4 million.
-13-
Note 7 - Employee Benefits
The Company sponsors several qualified and nonqualified pension plans
and other postretirement benefit plans for certain of its employees. The
components of net periodic benefit cost (income) are as follows:
For the Quarter Ended
March 29, 2008 March 31, 2007
(In thousands)
Pension benefits:
Service cost $ 739 $ 539
Interest cost 3,417 2,131
Expected return on plan assets (4,922) (2,796)
Amortization of prior service cost 102 93
Amortization of net loss 54 233
---------- ----------
Net periodic benefit (income) cost $ (610) $ 200
========== ==========
Other benefits:
Service cost $ 80 $ 76
Interest cost 379 158
Amortization of prior service cost 1 2
Amortization of net loss 56 46
---------- ----------
Net periodic benefit cost $ 516 $ 282
========== ==========
The Company anticipates contributions to its pension plans for 2008 to
be approximately $2.4 million. During the first quarter of 2008,
approximately $0.6 million of contributions have been made to certain
pension plans.
Note 8 - Acquisitions
On February 27, 2007, the Company acquired 100 percent of the
outstanding stock of Extruded Metals, Inc. (Extruded) for $32.8 million in
cash, including transaction costs of $0.8 million. Extruded, located in
Belding, Michigan, manufactures brass rod products, and during 2006 had
annual sales of approximately $360 million. The acquisition of Extruded
complements the Company's existing brass rod product line. The total
estimated fair values of the assets acquired totaled $74.5 million,
consisting primarily of receivables of $29.5 million, inventories of $29.1
million, property, plant, and equipment of $5.8 million, and prepaid
pension asset of $6.9 million. The total estimated fair values of
liabilities assumed totaled $41.7 million, consisting primarily of a
working capital debt facility of $10.0 million, accounts payable and
accrued expenses of $24.0 million, and postretirement obligations of $7.5
million. The debt assumed was extinguished by the Company immediately
following the acquisition.
-14-
The results of operations for Extruded are reported in the Company's
OEM segment and have been included in the accompanying Condensed
Consolidated Financial Statements from the acquisition date. The following
table presents condensed pro forma consolidated results of operations as if
the Extruded acquisition had occurred at the beginning of the prior period
presented. This information combines the historical results of operations
of the Company and Extruded after the effects of purchase accounting
adjustments. The pro forma information does not purport to be indicative
of the results that would have been obtained if the operations had actually
been combined during the periods presented and is not necessarily
indicative of operating results to be expected in future periods.
For the Quarter Ended
March 31, 2007
(In thousands)
Net sales $ 667,210
Net income 18,844
Pro Forma earnings per share:
Basic earnings per share $ 0.51
Diluted earnings per share $ 0.51
Note 9 - Income Taxes
The Company's effective tax rate for the first quarter of 2008 was
34.2 percent compared with 29.4 percent for the same period last year.
Factors that explain the difference between the effective tax rate and what
would be computed using the U.S. Federal statutory tax rate for the first
quarter of 2008 were (i) the effect of foreign statutory rates different
from the U.S. and other foreign adjustments of $0.2 million, (ii) the U.S.
production activities deduction effect of $0.7 million, and (iii) other
items totaling $0.6 million. These items were partially offset by state
and local income tax expense, net of federal benefit, of $1.2 million. The
difference between the effective tax rate and the statutory tax rate for
the first quarter of 2007 was primarily related to a net reduction to
certain valuation allowances.
Changes in tax contingencies had an immaterial effect on the effective
tax rate during the first quarter of 2008. Total unrecognized tax benefits
at the end of first quarter were $11.3 million, without consideration of
any applicable federal benefit, and this amount includes $2.2 million of
accrued interest. The Company includes interest and penalties related to
income tax matters as a component of income tax expense. Of the $11.3
million, approximately $9.3 million would impact the effective tax rate, if
recognized. A benefit of $0.4 million, without consideration of any
applicable federal benefit, was recorded as a result of various audit
settlements and was partially offset by interest accruals for the quarter
on other unrecognized tax benefits of $0.3 million. Due to ongoing federal
and state income tax audits and potential lapses of the statutes of
limitations in various taxing jurisdictions, it is reasonably possible that
this reserve may change in the next twelve months by up to $5.5 million.
-15-
The Company files a consolidated U.S. Federal income tax return and
files numerous consolidated and separate income tax returns in many state,
local, and foreign jurisdictions. The Company is no longer subject to U.S.
Federal income tax examinations for years before 2004 and with few
exceptions is no longer subject to state, local, or foreign income tax
examinations by tax authorities for years before 2001. The Internal
Revenue Service is currently examining the Company's 2005 consolidated U.S.
Federal income tax return. Additionally, various state taxing authorities
are currently examining a number of the Company's state income tax returns
for years from 2002 forward. The results of these examinations are not
expected to have a material impact on the Company's financial position or
results of operations.
Note 10 - Recently Issued Accounting Standards
In 2006, the Financial Accounting Standards Board (FASB) Issued SFAS
No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans" (SFAS No. 158). SFAS No. 158 requires employers to
recognize the funded status of all pension and other postretirement plans
in the statement of financial position, and requires employers to use its
fiscal year-end as the measurement date for assets and liabilities of all
its defined benefit pension and postretirement plans. Any adjustment as a
result of the adoption of the measurement period provisions of SFAS No. 158
would be recorded as an adjustment to retained earnings. The Company
adopted the measurement and disclosure provisions of SFAS No. 158 on
December 30, 2006. The measurement period provisions of SFAS No. 158 are
required to be adopted in fiscal years ending after December 15, 2008. In
prior years, the Company used November 30 as the measurement date for the
majority of its pension and postretirement plans. The Company will adopt
the measurement period provisions for its fiscal year-end in 2008 and does
not expect the impact of the adoption to be material.
Effective December 30, 2007, the Company adopted SFAS No. 157, "Fair
Value Measurements," which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and
expands disclosure about fair value measurements. The impact of adoption
was not material.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Overview
The Company is a leading manufacturer of copper, brass, plastic, and
aluminum products. The range of these products is broad: copper tube and
fittings; brass and copper alloy rod, bar, and shapes; aluminum and brass
forgings; aluminum and copper impact extrusions; plastic pipe, fittings and
valves; refrigeration valves and fittings; fabricated tubular products; and
steel nipples. The Company also resells imported brass and plastic
plumbing valves, malleable iron fittings, faucets and plumbing specialty
products. The Company's operations are located throughout the United
States, and in Canada, Mexico, Great Britain, and China.
-16-
The Company's businesses are aggregated into two reportable segments:
the Plumbing & Refrigeration segment and the OEM segment. For disclosure
purposes, as permitted under SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," certain operating segments are
aggregated into reportable segments. The Plumbing & Refrigeration segment
is composed of the Standard Products Division (SPD), European Operations,
and Mexican Operations. The OEM segment is composed of the Industrial
Products Division (IPD) and Engineered Products Division (EPD). These
reportable segments are described in more detail below. SPD manufactures
and sells copper tube, copper and plastic fittings, plastic pipe, and
valves in North America and sources products for import distribution in
North America. European Operations manufactures copper tube in Europe,
which is sold in Europe and the Middle East; activities also include import
distribution in the U.K. and Ireland. Mexican Operations include pipe
nipple manufacturing and import distribution businesses including product
lines of malleable iron fittings and other plumbing specialties. The
Plumbing & Refrigeration segment sells products to wholesalers in the HVAC
(heating, ventilation, and air-conditioning), plumbing, and refrigeration
markets, to distributors to the manufactured housing and recreational
vehicle industries, and to building material retailers. The OEM segment
manufactures and sells brass and copper alloy rod, bar, and shapes;
aluminum and brass forgings; aluminum and copper impact extrusions;
refrigeration valves and fittings; fabricated tubular products; and gas
valves and assemblies. The Company's Chinese joint venture (Mueller-
Xingrong) manufactures engineered copper tube for refrigeration
applications; these products are sold primarily to OEM's located in China
and its results are included in the OEM segment. The OEM segment sells its
products primarily to original equipment manufacturers, many of which are
in the HVAC, plumbing, and refrigeration markets.
New housing starts and commercial construction are important
determinants of the Company's sales to the HVAC, 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 and commercial buildings. Repairs and remodeling projects are also
important factors affecting the underlying demand for these products.
Profitability of certain of the Company's product lines depends upon
the "spreads" between the cost of raw material and the selling prices of
its completed products. The open market prices for copper cathode and
scrap, for example, influence the selling price of copper tubing, a
principal product manufactured by the Company. The Company attempts to
minimize the effects on profitability from fluctuations in material costs
by passing through these costs to its customers. The Company's earnings
and cash flow are dependent upon these spreads that fluctuate based upon
market conditions.
Earnings and profitability are also subject to market trends such as
substitute products and imports. Plastic plumbing systems are the primary
substitute product; these products represent an increasing share of
consumption. U.S. consumption of copper tubing is still predominantly
supplied by U.S. manufacturers, although imports from Mexico is a
significant factor. Brass rod consumption in the U.S. has steadily
declined over the past five years, due to the outsourcing of many
manufactured products.
-17-
Results of Operations
During the first quarter of 2008, the Company's net sales were $704.1
million, a 15 percent increase over the same period of 2007. The increase
in net sales is primarily due to the acquisition of Extruded Metals, Inc.
(Extruded) on February 27, 2007, which contributed net sales in the first
quarter of 2008 of $111.4 million compared with $32.1 million in the first
quarter of 2007. The increase is also due to the higher cost of copper,
the Company's principal raw material, which was largely passed through to
customers, offset by reduced unit sales volume primarily in SPD and
European Operations. The COMEX average price of copper was $3.53 per pound
in the first quarter of 2008, a 31 percent increase over the first quarter
of 2007.
Cost of goods sold increased from $536.6 million in the first quarter
of 2007 to $611.8 million in the same period of 2008. This increase was
primarily attributable to higher material costs and increased volume from
the acquisition of Extruded. Gross profit increased from $73.2 million to
$92.3 million due primarily to increased volume following the acquisition
of Extruded, and higher spreads in the brass rod business. The Company has
deferred recognizing potential gains resulting from liquidation of LIFO
inventories during the first three months of 2008. The Company expects to
replenish these inventories by the end of 2008 and, as such, has not
recognized the effects of liquidating LIFO layers.
Depreciation and amortization expense for the first quarter of 2008
was $11.0 million, which is comparable to the first quarter of 2007.
Selling, general, and administrative expense was $38.3 million for the
first quarter of 2008 compared with $34.9 million for the same period of
2007. The increase was primarily attributable to $0.7 million from the
acquisition of Extruded and additional bad debt provision of $1.9 million
in 2008.
Interest expense totaled $5.5 million in the first quarter of 2008 and
2007. The Company incurred lower interest following the early
extinguishment of $25.5 million of its 6% Subordinated Debentures; however,
this decrease was offset by interest from increased borrowings at Mueller-
Xingrong. Other income, net was $4.0 million for the first quarter of 2008
compared with $5.0 million for the same period of 2007. The decrease was
primarily due to the nonrecurring items included in each period. During
the first quarter of 2007, the Company recognized a $3.1 million gain from
the sale of non-operating royalty producing properties, and during the
first quarter of 2008 the Company extinguished $25.5 million in principal
value of its 6% Subordinated Debentures resulting in a net gain of $2.4
million.
The Company's effective tax rate for the first quarter of 2008 was
34.2 percent compared with 29.4 percent for the same period last year.
Factors that explain the difference between the effective tax rate and what
would be computed using the U.S. Federal statutory tax rate for the first
quarter of 2008 were (i) the effect of foreign statutory rates different
from the U.S. and other foreign adjustments of $0.2 million, (ii) the U.S.
production activities deduction effect of $0.7 million, and (iii) other
items totaling $0.6 million. These items were partially offset by state
and local income tax expense, net of federal benefit, of $1.2 million. The
-18-
difference between the effective tax rate and the statutory tax rate for
the first quarter of 2007 was primarily related to a net reduction to
certain valuation allowances.
Plumbing & Refrigeration Segment
Net sales by the Plumbing & Refrigeration segment were $383.9 million
in the first quarter of 2008 compared with $370.0 million in the first
quarter of 2007. The increase is primarily due to the increase in the cost
of copper, partially offset by lower unit sales volume in the majority of
the segment's product lines. Cost of goods sold increased from $311.5
million in 2007 to $328.0 million in 2008 due primarily to the increased
price of copper. Gross margin decreased from $58.5 million in 2007 to
$55.9 million in 2008 due to reduced sales volume and lower spreads in
copper tube and DWV plastic fittings, partially offset by increased spreads
in other product lines. Depreciation and amortization remained consistent
at approximately $7.3 million in 2007 and in 2008. Selling, general, and
administrative expenses declined from $24.3 million in 2007 to $23.5
million in 2008 due primarily to lower sales and distribution expense
resulting from lower sales unit volume.
OEM Segment
The OEM segment's net sales were $326.2 million in the first quarter
of 2008 compared with $243.7 million in the first quarter of 2007. The
increase is primarily due to the acquisition of Extruded, which contributed
net sales in 2008 of $111.4 million compared with $32.1 million in 2007,
and the increase in the raw material cost which was passed on to customers.
Cost of goods sold increased from $229.4 million in 2007 to $289.5 million
in 2008 due to the acquisition of Extruded and increased cost of raw
material. Gross margin increased from $14.3 million in 2007 to $36.7
million in 2008 due primarily to increased volume following the acquisition
of Extruded and higher spreads at our brass rod operations. Depreciation
and amortization for the OEM segment remained consistent in the first
quarter of 2008 compared to 2007 at $3.4 million. Selling, general, and
administrative expenses increased from $5.4 million in 2007 to $7.7 million
in the first quarter of 2008 resulting primarily from increased bad debt
expense in 2008 and additional expense following the acquisition of
Extruded.
Liquidity and Capital Resources
Cash used in operating activities in the first quarter of 2008 totaled
$21.3 million, which is primarily attributable to a significant increase in
receivables and inventory, partially offset by an increase in current
liabilities. Fluctuations in the cost of copper and other raw materials
affect the Company's liquidity. Changes in material costs directly impact
components of working capital, primarily inventories and accounts
receivable. During the first three months of 2008, the average COMEX
copper price was approximately $3.53 per pound, which represents a 31
percent increase over the average price during the first three months of
2007. This rise in the price of cathode has also resulted in increases in
the open market price for copper scrap and, to a lesser extent, the price
of brass scrap. Subsequent to the end of the first quarter, copper prices
-19-
continued to rise, trading above $4.00 per pound. Consequently, the
Company has funded increases in inventories and accounts receivable with
cash on hand.
During the first quarter of 2008, cash used in investing activities
totaled $8.5 million, which consisted primarily of capital expenditures.
Cash used in financing activities during the first quarter totaled $5.4
million. During the quarter, the Company repurchased and extinguished
$25.5 million of its 6% Subordinated Debentures for $23.0 million, which
after inclusion of the write-off of related debt issuance costs, resulted
in a net gain of approximately $2.4 million. Additionally, the Company
used $3.7 million in cash during the quarter for the payment of dividends.
These decreases in cash were partially offset by $21.0 million of increased
borrowings by Mueller-Xingrong.
The Company has a $200 million unsecured line-of-credit (Credit
Facility) which expires in December 2011. At March 29, 2008, the Company
had no borrowings against the Credit Facility. Approximately $9.7 million
in letters of credit were backed by the Credit Facility and $0.4 million in
letters of credit were backed by cash deposits at the end of the first
quarter of 2008. As of March 29, 2008, the Company's total debt was $352.1
million or 32 percent of its total capitalization. During the first
quarter of 2008, Mueller-Xingrong's credit agreement, which was scheduled
to mature in April 2008, was extended for a period of 90 days.
Covenants contained in the Company's financing obligations require,
among other things, the maintenance of minimum levels of tangible net worth
and the satisfaction of certain minimum financial ratios. As of March 29,
2008, the Company was in compliance with all of its debt covenants.
The Company declared and paid a regular quarterly cash dividend of ten
cents per common share in the first quarter of 2008. Payment of dividends
in the future is dependent upon the Company's financial condition, cash
flows, capital requirements, earnings, and other factors. On May 1, 2008,
the Company will pay approximately $8.2 million in interest on its 6%
Subordinated Debentures.
Management believes that cash provided by operations and currently
available cash of $274.3 million will be adequate to meet the Company's
normal future capital expenditures and operational needs. The Company's
current ratio was 2.8 to 1 at March 29, 2008.
The Company's Board of Directors has extended, until October 2008, its
authorization to repurchase up to ten million shares of the Company's
Common Stock through open market transactions or through privately
negotiated transactions. The Company has no obligation to purchase any
shares and may cancel, suspend, or extend the time period for the purchase
of shares at any time. Any purchases will be funded primarily through
existing cash and cash from operations. The Company may hold any shares
purchased in treasury or use a portion of the repurchased shares for
employee benefit plans, as well as for other corporate purposes. From its
initial authorization in 1999 through March 29, 2008, the Company had
repurchased approximately 2.4 million shares under this authorization.
-20-
There have been no significant changes in the Company's contractual
cash obligations reported at December 29, 2007.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in raw material and
energy costs, interest rates, and foreign currency exchange rates. To
reduce such risks, the Company may periodically use financial instruments.
All hedging transactions are authorized and executed pursuant to policies
and procedures. Further, the Company does not buy or sell financial
instruments for trading purposes.
Cost and Availability of Raw Materials and Energy
Copper and brass represent the largest component of the Company's
variable costs of production. The cost of these materials is subject to
global market fluctuations caused by factors beyond the Company's control.
Significant increases in the cost of metal, to the extent not reflected in
prices for the Company's finished products, or the lack of availability
could materially and adversely affect the Company's business, results of
operations and financial condition.
The Company occasionally enters into forward fixed-price arrangements
with certain customers. The Company may utilize forward contracts to hedge
risks associated with forward fixed-price arrangements. The Company may
also utilize forward contracts to manage price risk associated with
inventory. Depending on the nature of the hedge, changes in the fair value
of the forward contracts will either be offset against the change in fair
value of the inventory through earnings or recognized as a component of
comprehensive income and reflected in earnings upon the sale of inventory.
Periodic value fluctuations of the contracts generally offset the value
fluctuations of the underlying fixed-price transactions or inventory. At
March 29, 2008, the Company held open forward contracts to purchase
approximately $13.2 million of copper over the next four months related to
fixed-price sales orders.
Futures contracts may also be used to manage price risk associated
with natural gas purchases. The effective portion of gains and losses with
respect to these positions are deferred in stockholders' equity as a
component of comprehensive income and reflected in earnings upon
consumption of natural gas. Periodic value fluctuations of the contracts
generally offset the value fluctuations of the underlying natural gas
prices. At March 29, 2008, the Company held no open forward contracts to
purchase natural gas.
Interest Rates
At March 29, 2008, the Company had variable-rate debt outstanding of
$72.1 million, the majority of which was related to the debt issued by
Mueller-Xingrong. At these borrowing levels, a hypothetical 10 percent
increase in interest rates would have had an insignificant unfavorable
impact on the Company's pretax earnings and cash flows. The primary
interest rate exposure on floating-rate debt is based on LIBOR and on the
base-lending rate published by the People's Bank of China.
-21-
Foreign Currency Exchange Rates
Foreign currency exposures arising from transactions include firm
commitments and anticipated transactions denominated in a currency other
than an entity's functional currency. The Company and its subsidiaries
generally enter into transactions denominated in their respective
functional currencies. Foreign currency exposures arising from
transactions denominated in currencies other than the functional currency
are not material; however, the Company may utilize certain forward fixed-
rate contracts to hedge such transactional exposures. Gains and losses
with respect to these positions are deferred in stockholders' equity as a
component of comprehensive income and reflected in earnings upon collection
of receivables. At March 29, 2008, the Company held no open forward
contracts to hedge transactional exposures.
The Company's primary foreign currency exposure arises from foreign-
denominated revenues and profits and their translation into U.S. dollars.
The primary currencies to which the Company is exposed include the Canadian
dollar, the British pound sterling, the Euro, the Mexican peso, and the
Chinese renminbi. The Company generally views as long-term its investments
in foreign subsidiaries with a functional currency other than the U.S.
dollar. As a result, the Company generally does not hedge these net
investments.
Cautionary Statement Regarding Forward Looking Information
Statements in this Quarterly Report on Form 10-Q that are not strictly
historical may be "forward-looking" statements, which involve risks and
uncertainties. These include economic and currency conditions, continued
availability of raw materials and energy, market demand, pricing,
competitive and technological factors, and the availability of financing,
among others, as set forth in the Company's filings with the Securities and
Exchange Commission (the SEC). The words "outlook," "estimate," "project,"
"intend," "expect," "believe," "target," and similar expressions are
intended to identify forward-looking statements. The reader should not
place undue reliance on forward-looking statements, which speak only as of
the date of this report. The Company has no obligation to publicly update
or revise any forward-looking statements to reflect events after the date
of this report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to
ensure information required to be disclosed in Company reports filed under
the Securities Exchange Act of 1934, as amended (the Exchange Act), is
recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures
are designed to provide reasonable assurance that information required to
be disclosed in Company reports filed under the Exchange Act is accumulated
and communicated to management, including the Company's Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
-22-
The Company's management, with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures pursuant
to Rule 13a-15(b) of the Exchange Act as of the end of the period covered
by this report. Based on that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures were effective as of March 29, 2008 to
ensure that information required to be disclosed in Company reports filed
under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms and (ii)
accumulated and communicated to management, including the Company's
principal executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial
reporting during the Company's fiscal quarter ending March 29, 2008, that
have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting. However, during
the first quarter of 2008, the Company began its implementation of an
upgrade to its transaction processing system. The implementation process
is ongoing.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
General
The Company is involved in certain litigation as a result of claims
that arose in the ordinary course of business. Additionally, the Company
may realize the benefit of certain legal claims and litigation in the
future; these gain contingencies are not recognized in the Condensed
Consolidated Financial Statements.
Copper Tube Antitrust Litigation
The Company has been named as a defendant in several pending
litigations (the Copper Tube Actions) brought by direct and indirect
purchasers of various forms of copper tube. The Copper Tube Actions allege
anticompetitive activities with respect to the sale of copper plumbing
tubes (copper plumbing tubes) and/or copper tubes used in, among other
things, the manufacturing of air-conditioning and refrigeration units (ACR
copper tubes). All of the Copper Tube Actions seek monetary and other
relief.
Direct-Purchaser Plumbing Tube Action
Two Copper Tube Actions were filed in September and October of 2004 in
the United States District Court for the Western District of Tennessee and
were consolidated to become the Direct-Purchaser Plumbing Tube Action. The
Direct-Purchaser Plumbing Tube Action was a purported class action brought
on behalf of direct purchasers of copper plumbing tubes in the United
-23-
States and alleged anticompetitive activities with respect to the sale of
copper plumbing tubes. Wholly owned Company subsidiaries, WTC Holding
Company, Inc. (WTC Holding Company), Deno Holding Company, Inc. (Deno
Holding Company), and Mueller Europe Ltd. (Mueller Europe), were named in
the Direct-Purchaser Plumbing Tube Action.
In September 2006, the Direct-Purchaser Plumbing Tube Action was
dismissed as to Mueller Europe for lack of personal jurisdiction. In
October 2006, the Direct-Purchaser Plumbing Tube Action was dismissed in
its entirety for lack of subject matter jurisdiction as to all defendants.
Although plaintiffs in the Direct-Purchaser Plumbing Tube Action filed
a motion for reconsideration of the dismissal of Mueller Europe, the court
held that such motion was mooted by its dismissal of the case for lack of
subject matter jurisdiction. Plaintiffs filed a motion to alter or amend
the judgment dismissing the complaint for lack of subject matter
jurisdiction, which the court denied in May 2007.
In June 2007, plaintiffs filed with the United States Court of Appeals
for the Sixth Circuit a notice of appeal from the judgment and orders
dismissing the complaint in the Direct-Purchaser Plumbing Tube Action. The
Company, WTC Holding Company, Inc., Deno Holding Company, Inc., and Mueller
Europe filed notices of cross-appeal in July 2007.
In September 2007, plaintiffs filed with the United States District
Court for the Western District of Tennessee a motion to vacate the judgment
and orders dismissing the complaint in the Direct-Purchaser Plumbing Tube
Action, which the court denied in November 2007. In November 2007,
plaintiffs filed a notice of appeal from the order denying the motion to
vacate.
In March 2008, the parties filed, and the court granted, a joint
motion and stipulation to dismiss all appeals in the Direct-Purchaser
Plumbing Tube Action.
Indirect-Purchaser Plumbing Tube Action
Four Copper Tube Actions were filed in October 2004 in state court in
California and were consolidated to become the Indirect-Purchaser Plumbing
Tube Action. The Indirect-Purchaser Plumbing Tube Action is a purported
class action brought on behalf of indirect purchasers of copper plumbing
tubes in California and alleges anticompetitive activities with respect to
the sale of copper plumbing tubes. WTC Holding Company, Deno Holding
Company, Mueller Europe, and Deno Acquisition Eurl are named in the
Indirect-Purchaser Plumbing Tube Action. Deno Acquisition Eurl has not
been served with the complaint in the Indirect-Purchaser Plumbing Tube
Action.
The claims against WTC Holding Company and Deno Holding Company have
been dismissed without prejudice in the Indirect-Purchaser Plumbing Tube
Action. Mueller Europe has not yet been required to respond in the
Indirect-Purchaser Plumbing Tube Action. The Company's demurrer to the
complaint has been filed in the Indirect-Purchaser Plumbing Tube Action.
The court overseeing the Indirect-Purchaser Plumbing Tube Action has stayed
that action conditioned upon the parties' submitting periodic status
reports on the status of the Direct-Purchaser Plumbing Tube Action.
-24-
Direct-Purchaser ACR Tube Action
Three Copper Tube Actions were filed in April 2006 in the United
States District Court for the Western District of Tennessee and were
consolidated to become the Direct-Purchaser ACR Tube Action. The Direct-
Purchaser ACR Tube Action was a purported class action brought on behalf of
direct purchasers of ACR copper tubes in the United States and alleged
anticompetitive activities with respect to the sale of ACR copper tubes.
The Company and Mueller Europe were named in the Direct-Purchaser ACR Tube
Action.
In July 2007, the Direct-Purchaser ACR Tube Action was dismissed in
its entirety for lack of subject matter jurisdiction as to all defendants.
In August 2007, plaintiffs filed with the United States Court of Appeals
for the Sixth Circuit a notice of appeal from the judgment and order
dismissing the complaint in the Direct-Purchaser ACR Tube Action. The
Company and Mueller Europe filed notices of cross-appeal in August 2007.
In December 2007, plaintiffs filed with the United States Court of Appeals
for the Sixth Circuit a motion to dismiss the cross-appeals in the Direct-
Purchaser ACR Tube Action. That motion was still pending when, in March
2008, the parties filed, and the court granted, a joint motion and
stipulation to dismiss all appeals in the Direct-Purchaser ACR Tube Action.
Indirect-Purchaser ACR Tube Action
Two Copper Tube Actions were filed in June and August 2006 in the
United States District Court for the Western District of Tennessee and were
consolidated to become the Indirect-Purchaser ACR Tube Action. The
Indirect-Purchaser ACR Tube Action is a purported class action brought on
behalf of indirect purchasers of ACR copper tubes in the United States and
alleges anticompetitive activities with respect to the sale of ACR copper
tubes. The Company and Mueller Europe are named in the Indirect-Purchaser
ACR Tube Action. The Company and Mueller Europe have been served, but have
not yet been required to respond, in the Indirect-Purchaser ACR Tube
Action.
Carrier ACR Tube Action
A Copper Tube Action (the Carrier ACR Tube Action) was filed in March
2006 in the United States District Court for the Western District of
Tennessee by Carrier Corporation, Carrier S.A., and Carrier Italia S.p.A.
(collectively, Carrier). The Carrier ACR Tube Action alleges
anticompetitive activities with respect to the sale to Carrier of ACR
copper tubes. The Company and Mueller Europe are named in the Carrier ACR
Tube Action.
In July 2007, the Carrier ACR Tube Action was dismissed in its
entirety for lack of subject matter jurisdiction as to all defendants. In
August 2007, plaintiffs filed with the United States Court of Appeals for
the Sixth Circuit a notice of appeal from the judgment and order dismissing
the complaint in the Carrier Action. The Company and Mueller Europe filed
notices of cross-appeal in August 2007.
-25-
In October 2007, Carrier filed with the United States Court of Appeals
for the Sixth Circuit a motion to dismiss the cross-appeals, which the
Court denied in December 2007. All appeals in the Carrier ACR Tube Action
remain pending.
Indirect-Purchaser Copper Tube Action
A Copper Tube Action (the Indirect-Purchaser Copper Tube Action) was
filed in July 2006 in the United States District Court for the Northern
District of California. The Indirect-Purchaser Copper Tube Action is a
purported class action brought on behalf of indirect purchasers of copper
plumbing tubes and ACR copper tubes in the United States and alleges
anticompetitive activities with respect to the sale of both copper plumbing
tubes and ACR copper tubes.
The Company, Mueller Europe, WTC Holding Company, Deno Holding
Company, and Deno Acquisition Eurl are named in the Indirect-Purchaser
Copper Tube Action. The Company, Mueller Europe, WTC Holding Company, and
Deno Holding Company have been served, but have not yet been required to
respond, in the Indirect-Purchaser Copper Tube Action.
Although the Company believes that the claims for relief in the Copper
Tube Actions are without merit, due to the procedural stage of the Copper
Tube Actions, the Company is unable to determine the likelihood of a
materially adverse outcome in the Copper Tube Actions or the amount or
range of a potential loss in the Copper Tube Actions.
Canadian Dumping and Countervail Investigation
In June 2006, the Canada Border Services Agency (CBSA) initiated an
investigation into the alleged dumping of certain copper pipe fittings from
the United States and from South Korea, and the dumping and subsidizing of
these same goods from China. The Company and certain affiliated companies
were identified by the CBSA as exporters and importers of these goods.
On January 18, 2007, the CBSA issued a final determination in its
investigation. The Company was found to have dumped subject goods during
the CBSA's investigation period. On February 19, 2007, the Canadian
International Trade Tribunal (CITT) concluded that the dumping of the
subject goods from the United States had caused injury to the Canadian
industry.
As a result of these findings, exports of subject goods to Canada by
the Company made on or after October 20, 2006 will be subject to
antidumping measures. Under Canada's system of prospective antidumping
enforcement, the CBSA has issued normal values to the Company. Antidumping
duties will be imposed on the Company's Canadian customers only to the
extent that the Company's future exports of copper pipe fittings are made
at net export prices which are below these normal values. If net export
prices for subject goods exceed normal values, no antidumping duties will
be payable. These measures will remain in place for five years, at which
time an expiry review will be conducted by Canadian authorities to
determine whether these measures should be maintained for another five
years or allowed to expire.
-26-
On July 16, 2007, the CBSA completed a review process pursuant to
which revised normal values were issued to exporters of subject goods,
including the Company. The Company does not anticipate any substantial
impairment of its ability to compete in Canada compared to the situation
that existed prior to July 16, 2007. On April 1, 2008, the CBSA initiated
a new review process, which will result in the issuance of revised normal
values on or before August 27, 2008. Depending on the level of these
revised normal values, the Company's ability to compete in Canada could be
affected. However, given the small percentage of its products that are sold
for export to Canada, the Company does not anticipate any material adverse
effect on its financial condition as a result of the antidumping case in
Canada.
Employment Litigation
On June 1, 2007, the Company filed a lawsuit in the Circuit Court of
Dupage County, Illinois against Peter D. Berkman and Jeffrey A. Berkman,
former executives of the Company and B&K Industries, Inc. (B&K), a wholly-
owned subsidiary of the Company, relating to their alleged breach of
fiduciary duties and contractual obligations to the Company through, among
other things, their involvement with a supplier of B&K during their
employment with B&K. The lawsuit alleges appropriation of corporate
opportunities for personal benefit, failure to disclose competitive
interests or other conflicts of interest, and unfair competition, as well
as breach of employment agreements in connection with the foregoing. The
lawsuit seeks compensatory and punitive damages, and other appropriate
relief. In August, the defendants filed an answer to the complaint
admitting Peter Berkman had not sought authorization to have an ownership
interest in a supplier, and a counterclaim against the Company, B&K and
certain of the Company's officers and directors alleging defamation,
tortious interference with prospective economic relations, and conspiracy,
and seeking damages in unspecified amounts. In September, Homewerks
Worldwide LLC, an entity formed by Peter Berkman, filed a complaint as an
intervenor based on substantially the same allegations included in the
Berkmans' counterclaim. In October, the Company filed a motion seeking to
have the Berkmans' counterclaim dismissed as a matter of law. On January
3, 2008 the Court overruled that motion and the case is proceeding to
discovery of the relevant facts. The Company believes that these
counterclaims are without merit and intends to defend them vigorously. The
Company does not anticipate any material adverse effect on its business or
financial condition as a result of this litigation.
-27-
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company's Board of Directors has extended, until October 2008, its
authorization to repurchase up to ten million shares of the Company's
Common Stock through open market transactions or through privately
negotiated transactions. The Company has no obligation to purchase any
shares and may cancel, suspend, or extend the time period for the purchase
of shares at any time. Any purchases will be funded primarily through
existing cash and cash from operations. The Company may hold any shares
purchased in treasury or use a portion of the repurchased shares for
employee benefit plans, as well as for other corporate purposes. From its
initial authorization in 1999 through March 29, 2008, the Company had
repurchased approximately 2.4 million shares under this authorization.
Below is a summary of the Company's stock repurchases for the period ended
March 29, 2008.
(a) (b) (c) (d)
Total
Number of Maximum
Shares Number of
Purchased Shares that
as Part of May Yet Be
Total Publicly Purchased
Number of Average Announced Under the
Shares Price Paid Plans or Plans or
Purchased per Share Programs Programs
7,647,030(1)
December 30, 2007 -
January 26, 2008 - $ -
January 27 -
February 23, 2008 - -
February 24 -
March 29, 2008 - -
(1) Shares available to be purchased under the Company's 10 million share
repurchase authorization until October 2008. The extension of the
authorization was announced on October 26, 2007.
-28-
Item 6. Exhibits
19.1 Mueller Industries, Inc.'s Quarterly Report to Stockholders for
the quarter ended March 29, 2008. 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.
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Items 1A, 3, 4 and 5 are not applicable and have been omitted.
-29-
SIGNATURES
Pursuant to the requirements 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.
MUELLER INDUSTRIES, INC.
April 25, 2008 /s/ Kent A. McKee
Date Kent A. McKee
Executive Vice President and
Chief Financial Officer
April 25, 2008 /s/ Richard W. Corman
Date Richard W. Corman
Vice President - Controller
-30-
EXHIBIT INDEX
Exhibits Description
19.1 Mueller Industries, Inc.'s Quarterly Report to Stockholders
for the quarter ended March 29, 2008. 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.
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.