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| 8-K - FORM 8-K DATED MARCH 24, 2010 - MUELLER INDUSTRIES INC | form8k_32410.htm |
Exhibit
99.1
To
Our Stockholders, Customers & Employees
Mueller
emerged from our nation’s longest and deepest recession since World War II in
excellent financial condition and fully capable of vibrantly competing in the
markets we serve.
We ended
2009 with over $345 million in cash, and an untapped credit facility of $200
million. We remained profitable in 2009 and generated $77 million of
cash flow from operations.
2009
Results and Financial Position
Despite a
40 percent drop in net sales, Mueller posted operating income of $62.0 million
in 2009 (prior to a non-cash impairment charge of $29.8 million, see
below). Net income was $4.7 million on net sales of $1.5 billion
which compares with net income of $80.8 million on net sales of $2.6 billion for
2008. Of the $1.0 billion decrease in net sales, approximately $575
million was attributable to lower unit volumes.
At year
end, several of our business units were subject to goodwill impairment
reviews. As a result, we recorded noncash impairment charges totaling
$29.8 million in 2009, of which $19.5 million pertains to the Plumbing &
Refrigeration segment and $10.3 million pertains to the OEM
segment.
Our
financial leverage was modest with a debt to total capitalization ratio of less
than 20 percent at year end. If we repaid all outstanding
indebtedness, we would still have in excess of $150 million in cash. Our current
ratio was 4.4 to 1 and our working capital totaled $625.5
million. Stockholders’ equity was $713.2 million which equates to a
book value per share of $18.94.
Operations
Review
Demand
and consequently unit shipments in our core product lines of copper tube,
fittings and brass rod were significantly lower than last year. Our
focus on centralizing, consolidating, and streamlining our operations allowed us
to reduce our cost structure and adapt to market conditions.
Our brass
rod results were solid due to our preemptive cost reduction efforts, coupled
with providing our customers the best service ever. We also
successfully launched our new no lead alloy product and anticipate continued
growth in demand.
In July,
a fire broke out at our copper tube mill in Fulton, Mississippi, and damaged a
portion of our manufacturing operations. Fortunately, we were able to
continue to service our customers by shifting work to other equipment and
locations.
In our
copper fittings business, we commenced investment in a new manufacturing
platform. This investment will enable us to improve productivity,
quality and service reliability. We expect the majority of this investment and
work to be completed during 2010. We also launched a new proprietary
copper joining technology. This new and unique joining system,
StreamTECH®, was developed in conjunction with 3M Company over the past three
years. We have received national listings and the product has been
introduced to selected markets, and has achieved growing
acceptance. We are optimistic that StreamTECH® will carve out a
significant place in the copper fittings marketplace as the need for flameless
joining technology continues to expand.
In our
plastic fittings business, we have combined much of our production capacity for
DWV plastic fittings in Wynne, Arkansas, adjacent to our master distribution
center. This will reduce overhead and distribution costs which are
key factors in the overall delivered cost of plastic fittings.
Our
global products businesses, both in the U.S. and in the U.K., achieved superior
results in 2009, despite difficult trading conditions. In fact, our
U.S. global products business posted its best year ever.
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We have
initiated an analysis of our tube and rod production facilities to determine the
best locations to invest in for the future. We expect to commence
investment programs during 2010 with the objective of minimizing labor cost,
maximizing yield, and assuring outstanding quality. As with all of
our core products, our focus is to remain a low-cost, full-line
manufacturer.
The U.S.
Department of Commerce and U.S. International Trade Commission recently
commenced antidumping investigations of Chinese and Mexican copper tube
producers that will likely be finalized later in 2010. We believe
that the outcome will result in a fair and competitive marketplace.
Business
Outlook for 2010
The
recovery of the U.S. economy appears to be mixed. We believe the
residential construction sector has hit bottom and is moving up, after almost
four years of deep declines. We expect the recovery in residential
construction to be modest due to the continuing high rates of unemployment, the
impact of mounting foreclosures, the tightening of lending terms, and the phase
out of governmental stimulus spending. Even so, housing starts are
likely to rise more than 20 percent in 2010 to 700,000 units, up from the
extraordinarily low 550,000 units started in 2009. The private
non-residential construction sector, which includes offices, industrial and
retail projects, declined by over 20 percent in 2009, and the outlook is for a
further decline in 2010, with recovery commencing in 2011. We expect
the auto industry to have more stable and improved demand. We expect most of the
business conditions that impact our businesses will strengthen and improve as
the year 2010 progresses.
Our
strategy for 2010 is to maintain and enhance our operational
excellence. We will continue to promptly adjust our operations to the
on-going flow of business. We are committed to making the capital
investments that advance our strong competitive position in our
marketplace. Acquisitions have helped our Company grow over the past
20 years. We are keenly interested in acquisitions that expand our product lines
and would make us a more valuable resource for our customers.
We thank
our employees and management team for their dedication and accomplishments over
the past year. They did a tremendous job in the face of very
difficult circumstances. We also wish to thank our Board of Directors
for their continued support and guidance.
Sincerely,
/S/ Harvey L.
Karp
Harvey L.
Karp
Chairman
of the Board
/S/ Gregory L.
Christopher
Gregory
L. Christopher
Chief
Executive Officer
March 10,
2010
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