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| 8-K - FORM 8-K - MUELLER INDUSTRIES INC | v326426_8k.htm |
Mueller Industries, Inc. Reports Third Quarter Results
MEMPHIS, Tenn., Oct. 23, 2012 /PRNewswire/ --
Quarterly and Year-to-Date Earnings
Mueller Industries, Inc. (NYSE: MLI), announced today that net income in the third quarter was $15.5 million, or 41 cents per diluted share, on net sales of $514.2 million. This compares with net income of $10.5 million, or 27 cents per diluted share, on net sales of $585.8 million in the third quarter of 2011.
Year-to-date, the Company earned $66.0 million, or $1.72 per diluted share. For the same period of 2011, net income was $73.4 million, or $1.92 per diluted share, which includes a favorable litigation settlement gain of 18 cents per diluted share. Net sales for the first nine months of 2012 were $1.69 billion compared with net sales of $1.93 billion for the same period a year ago.
In the third quarter, the Company repurchased 10,422,859 shares of its outstanding common stock for an aggregate purchase price of $427.4 million, or $41.00 per share. As of the end of the third quarter, the total common stock outstanding was 27,970,180 shares (excluding dilutive equity awards). The privately negotiated transaction significantly reduced the outstanding shares which should result in significant accretion to earnings per share in future periods. On a pro forma basis (assuming the repurchase occurred at the beginning of the period), net income for the third quarter of 2012 would have been 51 cents per diluted share.
Financial and Operating Highlights
- The net sales decrease of $71.6 million was primarily due to lower selling prices. The average price of copper, the principal raw material of the Company, was $3.53 per pound in the third quarter of 2012, which compares with $4.07 per pound in the third quarter of 2011.
- The Plumbing & Refrigeration segment posted operating earnings of $17.6 million on net sales of $297.9 million compared with operating earnings of $13.9 million on net sales of $325.8 million in the third quarter of 2011. The decrease in net sales was primarily due to lower selling prices.
- The OEM segment posted operating earnings of $14.4 million during the third quarter of 2012 on net sales of $221.5 million, which compared with operating earnings of $12.2 million on net sales of $266.6 million for the same period in 2011. The decrease in net sales was attributable to lower selling prices on 6.9 percent lower unit volumes.
- The Company's total equity and cash balance decreased due to the share repurchase transaction noted above. At the end of the third quarter, cash was $165.8 million and total stockholders' equity was $495.0 million.
- The ratio of debt to total capitalization was 29.5 percent at the end of the third quarter of 2012. The increased leverage was due primarily to the borrowings under the Company's credit facility related to the share repurchase transaction.
- As of the end of the third quarter, the current ratio was 3.3 to 1.
Business Outlook
Regarding the outlook, Greg Christopher, CEO said, "We agree with the many economists who believe the construction industry is in the process of recovery. Most predict that 2013 will be a much better year for housing and thereafter commercial construction.
"Absent disruptions to the market from potential changes in federal tax and spending policies, we should see improved demand levels for our products, especially as we move into the seasonally stronger spring months."
Mueller Industries, Inc. is a leading manufacturer of copper tube and fittings, brass rod and forgings, and a broad array of flow control products in these metals as well as aluminum and plastics. Mueller's operations are located throughout the United States and in Canada, Mexico, Great Britain, and China. Mueller's business is importantly linked to the construction and improvement of homes and nonresidential structures, including office buildings, hotels, schools, hospitals, and manufacturing buildings.
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Statements in this release 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 SEC filings. The words "pro forma," "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.
MUELLER INDUSTRIES, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(In thousands, except per share data) | ||||||||
For the Quarter Ended | For the Nine Months Ended | |||||||
September 29, | October 1, | September 29, | October 1, | |||||
2012 | 2011 | 2012 | 2011 | |||||
(Unaudited) | (Unaudited) | |||||||
Net sales | $ 514,165 | $ 585,809 | $ 1,685,932 | $ 1,926,413 | ||||
Cost of goods sold | 449,718 | 523,984 | 1,465,744 | 1,687,735 | ||||
Depreciation and amortization | 7,870 | 8,716 | 23,318 | 27,581 | ||||
Selling, general, and administrative expense | 32,120 | 34,245 | 97,209 | 102,944 | ||||
Litigation settlement | - | - | - | (10,500) | ||||
Insurance settlement | - | - | (1,500) | - | ||||
Operating income | 24,457 | 18,864 | 101,161 | 118,653 | ||||
Interest expense | (353) | (2,822) | (5,711) | (9,004) | ||||
Other income, net | 219 | 102 | 963 | 1,425 | ||||
Income before income taxes | 24,323 | 16,144 | 96,413 | 111,074 | ||||
Income tax expense | (8,753) | (5,403) | (29,486) | (37,060) | ||||
Consolidated net income | 15,570 | 10,741 | 66,927 | 74,014 | ||||
Net income attributable to noncontrolling interest | (59) | (266) | (900) | (621) | ||||
Net income attributable to Mueller Industries, Inc. | $ 15,511 | $ 10,475 | $ 66,027 | $ 73,393 | ||||
Weighted average shares | ||||||||
for basic earnings per share | 37,505 | 37,878 | 37,849 | 37,779 | ||||
Effect of dilutive stock-based awards | 452 | 483 | 444 | 367 | ||||
Adjusted weighted average shares | ||||||||
for diluted earnings per share | 37,957 | 38,361 | 38,293 | 38,146 | ||||
Basic earnings per share | $ 0.41 | $ 0.28 | $ 1.74 | $ 1.94 | ||||
Diluted earnings per share | $ 0.41 | $ 0.27 | $ 1.72 | $ 1.92 | ||||
Dividends per share | $ 0.10 | $ 0.10 | $ 0.30 | $ 0.30 | ||||
Summary Segment Data: | ||||||||
Net sales: | ||||||||
Plumbing & Refrigeration Segment | $ 297,913 | $ 325,776 | $ 944,955 | $ 1,053,434 | ||||
OEM Segment | 221,468 | 266,560 | 760,995 | 899,982 | ||||
Elimination of intersegment sales | (5,216) | (6,527) | (20,018) | (27,003) | ||||
Net sales | $ 514,165 | $ 585,809 | $ 1,685,932 | $ 1,926,413 | ||||
Operating income: | ||||||||
Plumbing & Refrigeration Segment | $ 17,593 | $ 13,884 | $ 68,456 | $ 68,357 | ||||
OEM Segment | 14,421 | 12,172 | 54,203 | 60,634 | ||||
Unallocated expenses | (7,557) | (7,192) | (21,498) | (10,338) | ||||
Operating income | $ 24,457 | $ 18,864 | $ 101,161 | $ 118,653 | ||||
MUELLER INDUSTRIES, INC. | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(In thousands) | ||||
September 29, | December 31, | |||
2012 | 2011 | |||
(Unaudited) | ||||
ASSETS | ||||
Cash and cash equivalents | $ 165,755 | $ 514,162 | ||
Accounts receivable, net | 261,015 | 250,027 | ||
Inventories | 224,358 | 219,193 | ||
Other current assets | 38,381 | 43,317 | ||
Total current assets | 689,509 | 1,026,699 | ||
Property, plant, and equipment, net | 228,860 | 203,744 | ||
Other assets | 121,047 | 117,161 | ||
$ 1,039,416 | $ 1,347,604 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current portion of debt | $ 12,570 | $ 41,265 | ||
Accounts payable | 65,513 | 65,545 | ||
Other current liabilities | 133,027 | 106,434 | ||
Total current liabilities | 211,110 | 213,244 | ||
Long-term debt | 207,550 | 156,476 | ||
Pension and postretirement liabilities | 53,246 | 54,244 | ||
Environmental reserves | 22,811 | 22,892 | ||
Deferred income taxes | 18,604 | 14,856 | ||
Other noncurrent liabilities | 985 | 1,130 | ||
Total liabilities | 514,306 | 462,842 | ||
Total Mueller Industries, Inc. stockholders' equity | 495,047 | 855,688 | ||
Noncontrolling interest | 30,063 | 29,074 | ||
Total equity | 525,110 | 884,762 | ||
$ 1,039,416 | $ 1,347,604 | |||
MUELLER INDUSTRIES, INC. | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(In thousands) | ||||||
For the Nine Months Ended | ||||||
September 29, | October 1, | |||||
2012 | 2011 | |||||
(Unaudited) | ||||||
Operating activities: | ||||||
Consolidated net income | $ 66,927 | $ 74,014 | ||||
Reconciliation of consolidated net income to net cash provided by | ||||||
operating activities: | ||||||
Depreciation and amortization | 23,713 | 27,844 | ||||
Stock-based compensation expense | 3,042 | 2,583 | ||||
Loss (gain) on disposal of properties | 175 | (99) | ||||
Insurance settlement | (1,500) | - | ||||
Insurance proceeds - noncapital related | 14,250 | 10,000 | ||||
Deferred income taxes | 2,319 | (2,785) | ||||
Income tax benefit from exercise of stock options | (517) | (867) | ||||
Changes in assets and liabilities, net of businesses acquired: | ||||||
Receivables | (15,779) | (38,480) | ||||
Inventories | 585 | (10,432) | ||||
Other assets | (8,434) | (9,263) | ||||
Current liabilities | (21,120) | 13,703 | ||||
Other liabilities | 7,834 | 1,907 | ||||
Other, net | 1,271 | 759 | ||||
Net cash provided by operating activities | 72,766 | 68,884 | ||||
Investing activities: | ||||||
Capital expenditures | (43,841) | (13,128) | ||||
Acquisition of businesses | (11,503) | (6,882) | ||||
Insurance proceeds for property and equipment | 42,250 | - | ||||
Proceeds from sales of properties | 502 | 1,745 | ||||
Net withdrawals from (deposits into) restricted cash balances | 6,908 | (5,120) | ||||
Net cash used in investing activities | (5,684) | (23,385) | ||||
Financing activities: | ||||||
Dividends paid | (11,415) | (11,345) | ||||
Debt issuance costs | - | (1,942) | ||||
Net cash (used) received to settle stock-based awards | (740) | 3,674 | ||||
Repurchase of common stock | (427,448) | - | ||||
Income tax benefit from exercise of stock options | 517 | 867 | ||||
Repayments of long-term debt | (148,926) | (1,902) | ||||
Issuance of long-term debt | 200,000 | - | ||||
(Repayments) issuance of debt by joint venture, net | (28,955) | 19,316 | ||||
Net cash (used in) provided by financing activities | (416,967) | 8,668 | ||||
Effect of exchange rate changes on cash | 1,478 | 547 | ||||
(Decrease) increase in cash and cash equivalents | (348,407) | 54,714 | ||||
Cash and cash equivalents at the beginning of the period | 514,162 | 394,139 | ||||
Cash and cash equivalents at the end of the period | $ 165,755 | $ 448,853 | ||||
MUELLER INDUSTRIES, INC. | ||||||||||||
PRO FORMA CONDENSED STATEMENTS OF INCOME | ||||||||||||
QUARTER ENDED SEPTEMBER 29, 2012 | ||||||||||||
(In thousands, except per share data) | ||||||||||||
The following table illustrates the effects of the stock repurchase transaction (10,422,859 shares at $41.00 per share) on reported earnings as if it had occurred on the first day of the third quarter of 2012. Earnings including the effects of the stock repurchase transaction is a measurement not derived in accordance with generally accepted accounting principles. Including the effects of the stock repurchase transaction is useful as it measures the effects of increased borrowings and decreased available cash on hand to the operating results, and measures the impact of the decreased share count in the weighted average shares computation. These adjustments are helpful in illustrating the impact of these transactions on the reported earnings and diluted earnings per
share. The reconciliation of pro forma earnings including the effects of the stock repurchase transaction to net income as reported is as follows:
| ||||||||||||
For the Three Months Ended September 29, 2012 | ||||||||||||
Effect of | ||||||||||||
As | Stock | |||||||||||
Reported | Repurchase | Pro Forma | ||||||||||
(Unaudited) | ||||||||||||
Operating income | $ 24,457 | $ - | $ 24,457 | |||||||||
Interest expense | (353) | (1,731) | (a) | (2,084) | ||||||||
Other income, net | 219 | (121) | (b) | 98 | ||||||||
Income before income taxes | 24,323 | (1,852) | 22,471 | |||||||||
Income tax expense | (8,753) | 648 | (8,105) | |||||||||
Consolidated net income | 15,570 | (1,204) | 14,366 | |||||||||
Net income attributable to noncontrolling interest | (59) | - | (59) | |||||||||
Net income attributable to Mueller Industries, Inc. | $ 15,511 | $ (1,204) | $ 14,307 | |||||||||
Weighted average shares | ||||||||||||
for basic earnings per share | 37,505 | 27,655 | ||||||||||
Effect of dilutive stock-based awards | 452 | 452 | ||||||||||
Adjusted weighted average shares | ||||||||||||
for diluted earnings per share | 37,957 | 28,107 | ||||||||||
Diluted earnings per share | $ 0.41 | $ 0.51 | ||||||||||
(a) Represents the estimated increase in interest expense for the quarter, assuming an all-in borrowing rate of 3.75% applied to the amount borrowed to fund the stock repurchase transaction. | ||||||||||||
(b) Represents the estimated decrease in interest income for the quarter, assuming a weighted average return of 0.21% on the amount of the cash portion of the repurchase transaction. | ||||||||||||
CONTACT: Kent A. McKee, +1-901-753-3208