-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AnWwVELPN83cLddYBL8LVlUrsDAWRNE6o06y2Lh7B7YD4XByJzWVc97/Ws+23FdN mhxKYoJdjKaJWISeA1pTfw== 0000089439-07-000028.txt : 20071026 0000089439-07-000028.hdr.sgml : 20071026 20071026112926 ACCESSION NUMBER: 0000089439-07-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070929 FILED AS OF DATE: 20071026 DATE AS OF CHANGE: 20071026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUELLER INDUSTRIES INC CENTRAL INDEX KEY: 0000089439 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [3350] IRS NUMBER: 250790410 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06770 FILM NUMBER: 071192536 BUSINESS ADDRESS: STREET 1: SUITE 150 STREET 2: 8285 TOURNAMENT DRIVE CITY: MEMPHIS STATE: TN ZIP: 38125 BUSINESS PHONE: (901)753-3200 MAIL ADDRESS: STREET 1: SUITE 150 STREET 2: 8285 TOURNAMENT DRIVE CITY: MEMPHIS STATE: TN ZIP: 38125 FORMER COMPANY: FORMER CONFORMED NAME: SHARON STEEL CORP DATE OF NAME CHANGE: 19910103 10-Q 1 mli3q07.txt FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 2007 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 September 29, 2007 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, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] 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 October 25, 2007, was 37,077,960. -1- MUELLER INDUSTRIES, INC. FORM 10-Q For the Period Ended September 29, 2007 INDEX Part I. Financial Information Page Item 1. Financial Statements (Unaudited) a.) Condensed Consolidated Statements of Income for the quarters and nine months ended September 29, 2007 and September 30, 2006 3 b.) Condensed Consolidated Balance Sheets as of September 29, 2007 and December 30, 2006 7 c.) Condensed Consolidated Statements of Cash Flows for the nine months September 29, 2007 and September 30, 2006 9 d.) Notes to Condensed Consolidated Financial Statements 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 3. Quantitative and Qualitative Disclosures About Market Risk 28 Item 4. Controls and Procedures 30 Part II. Other Information Item 1. Legal Proceedings 31 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35 Item 5. Other Information 35 Item 6. Exhibits 36 Signatures 37 -2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Net sales $ 693,682 $ 635,998 Cost of goods sold 603,219 528,946 ---------- ---------- Gross profit 90,463 107,052 Depreciation and amortization 11,582 10,462 Selling, general, and administrative expense 36,246 34,787 Copper antitrust litigation settlement (8,865) - ---------- ---------- Operating income 51,500 61,803 Interest expense (5,384) (5,085) Other income, net 4,060 1,452 ---------- ---------- Income before income taxes 50,176 58,170 Income tax expense (18,852) (6,591) ---------- ---------- Net income $ 31,324 $ 51,579 ========== ========== See accompanying notes to condensed consolidated financial statements.
-3- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (continued) (Unaudited)
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Weighted average shares for basic earnings per share 37,075 36,976 Effect of dilutive stock options 234 379 ---------- ---------- Adjusted weighted average shares for diluted earnings per share 37,309 37,355 ---------- ---------- Basic earnings per share $ 0.84 $ 1.39 ========== ========== Diluted earnings per share $ 0.84 $ 1.38 ========== ========== Dividends per share $ 0.10 $ 0.10 ========== ========== See accompanying notes to condensed consolidated financial statements.
-4- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (continued) (Unaudited)
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Net sales $ 2,076,111 $ 1,966,700 Cost of goods sold 1,801,543 1,623,053 ---------- ---------- Gross profit 274,568 343,647 Depreciation and amortization 33,854 31,033 Selling, general, and administrative expense 110,144 109,435 Copper antitrust litigation settlement (8,865) - ---------- ---------- Operating income 139,435 203,179 Interest expense (16,567) (15,161) Other income, net 10,938 3,398 ---------- ---------- Income before income taxes 133,806 191,416 Income tax expense (47,171) (47,722) ---------- ---------- Net income $ 86,635 $ 143,694 ========== ========== See accompanying notes to condensed consolidated financial statements.
-5- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (continued) (Unaudited)
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Weighted average shares for basic earnings per share 37,054 36,853 Effect of dilutive stock options 185 396 ---------- ---------- Adjusted weighted average shares for diluted earnings per share 37,239 37,249 ---------- ---------- Basic earnings per share $ 2.34 $ 3.90 ========== ========== Diluted earnings per share $ 2.33 $ 3.86 ========== ========== Dividends per share $ 0.30 $ 0.30 ========== ========== See accompanying notes to condensed consolidated financial statements.
-6- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 29, December 30, 2007 2006 (In thousands) Assets Current assets: Cash and cash equivalents $ 273,211 $ 200,471 Accounts receivable, less allowance for doubtful accounts of $8,317 in 2007 and $6,806 in 2006 351,707 281,679 Inventories 231,228 258,647 Other current assets 35,669 35,397 ---------- ---------- Total current assets 891,815 776,194 Property, plant, and equipment, net 320,082 315,064 Goodwill 156,545 155,653 Other assets 33,430 21,996 ---------- ---------- $ 1,401,872 $ 1,268,907 ========== ========== See accompanying notes to condensed consolidated financial statements.
-7- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 29, December 30, 2007 2006 (In thousands, except share data) Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 33,669 $ 35,998 Accounts payable 134,569 96,095 Accrued wages and other employee costs 38,522 43,281 Other current liabilities 90,772 80,145 ---------- ---------- Total current liabilities 297,532 255,519 Long-term debt 307,988 308,154 Pension liabilities 20,774 19,900 Postretirement liabilities other than pensions 24,446 16,699 Environmental reserves 9,159 8,907 Deferred income taxes 42,030 46,408 Other noncurrent liabilities 1,995 2,206 ---------- ---------- Total liabilities 703,924 657,793 ---------- ---------- Minority interest in subsidiaries 22,419 22,300 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 37,077,960 in 2007 and 37,025,285 in 2006 401 401 Additional paid-in capital, common 258,917 256,906 Retained earnings 459,403 386,038 Accumulated other comprehensive income 22,711 12,503 Treasury common stock, at cost (65,903) (67,034) ---------- ---------- Total stockholders' equity 675,529 588,814 Commitments and contingencies - - ---------- ---------- $ 1,401,872 $ 1,268,907 ========== ========== See accompanying notes to condensed consolidated financial statements.
-8- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Cash flows from operating activities Net income $ 86,635 $ 143,694 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 34,107 31,225 Deferred income taxes (3,026) (11,193) Minority interest in subsidiaries, net of dividend paid (644) 2,526 Share-based compensation expense 1,975 2,041 (Gain) loss on disposal of properties (3,114) 1,913 Gain on sale of equity investment - (1,876) Income tax benefit from exercise of stock options (130) (1,217) Equity in earning of unconsolidated subsidiary - (964) Gain on early retirement of debt - (97) Changes in assets and liabilities, net of businesses acquired: Receivables (36,370) (59,227) Inventories 57,656 (96,979) Other assets (6,103) (5,340) Current liabilities 13,669 20,755 Other liabilities 3,754 2,770 Other, net (1,003) (2,987) ---------- ---------- Net cash provided by operating activities 147,406 25,044 ---------- ---------- Cash flows from investing activities Capital expenditures (22,776) (32,975) Acquisition of businesses, net of cash received (31,970) 3,632 Proceeds from sale of properties and equity investment 3,033 23,227 ---------- ---------- Net cash used in investing activities (51,713) (6,116) ---------- ---------- See accompanying notes to condensed consolidated financial statements.
-9- MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Cash flows from financing activities Issuance of debt by joint venture $ 4,506 $ 24,918 Dividends paid (11,117) (11,073) Proceeds from sale of treasury stock 1,093 7,116 Repayments of long-term debt (18,273) (1,922) Proceeds from issuance of debt - 1,902 Income tax benefit from exercise of stock options 130 1,217 Acquisition of treasury stock (54) (570) ---------- ---------- Net cash (used in) provided by financing activities (23,715) 21,588 ---------- ---------- Effect of exchange rate changes on cash 762 262 ---------- ---------- Increase in cash and cash equivalents 72,740 40,778 Cash and cash equivalents at the beginning of the period 200,471 129,685 ---------- ---------- Cash and cash equivalents at the end of the period $ 273,211 $ 170,463 ========== ========== See accompanying notes to condensed consolidated financial statements.
-10- 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, retiree health benefits, and certain operating costs of a foreign subsidiary. 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 September 29, 2007 was $10.3 million. -11- Note 3 - Copper Antitrust Litigation On June 12, 2003, two of the Company's subsidiaries, Mueller Copper Tube Products Inc. and Mueller Copper Tube Company Inc., brought a lawsuit against J.P. Morgan Chase & Co. and Morgan Guaranty Trust Company of New York (collectively Morgan) to recover damages the Company believes it suffered on first purchases of copper cathode resulting from an alleged conspiracy to manipulate the price of copper cathode by Morgan (and certain of its predecessors and affiliates) and others in violation of the federal antitrust laws. The Company's lawsuit was consolidated with those of certain other first purchasers of copper cathode and rod under the name In re Copper Antitrust Litigation. In July 2007, the parties finalized a settlement agreement terminating the lawsuit. The Company received a monetary settlement of approximately $8.9 million pursuant to the agreement in the third quarter of 2007. Note 4 - Inventories
September 29, December 30, 2007 2006 (In thousands) Raw materials and supplies $ 17,495 $ 48,265 Work-in-process 38,365 40,209 Finished goods 180,734 188,457 Valuation reserves (5,366) (18,284) ---------- ---------- Inventories $ 231,228 $ 258,647 ========== ==========
The Company has deferred recognizing potential gains resulting from liquidation of LIFO inventories during the first nine months of 2007. The Company expects to replenish these inventories by the end of 2007 and, as such, has not recognized the effects of liquidating LIFO layers. In the event the Company is unable to replenish these inventories due to lack of availability or operational reasons, a non-cash gain of up to approximately $30.0 million from the liquidation of LIFO quantities would be recognized. During the fourth quarter of 2006, certain inventories valued using the FIFO method and certain firm commitments to purchase inventories were written down to the lower of cost or market. The write down of approximately $14.2 million resulted from the open market price of copper falling below the inventories' net book value. -12- Note 5 - 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) and Engineered Products (EPD). 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 and fittings, plastic fittings, 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. 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, from its acquisition date of February 27, 2007, and assets of Extruded Metals, Inc. -13- Summarized segment information is as follows:
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands) Net sales: Plumbing & Refrigeration $ 397,855 $ 426,261 OEM 302,122 218,372 Elimination of intersegment sales (6,295) (8,635) ---------- ---------- $ 693,682 $ 635,998 ========== ========== Operating income: Plumbing & Refrigeration $ 52,260 $ 56,863 OEM 5,609 9,862 Unallocated expenses (6,369) (4,922) ---------- ---------- Total operating income 51,500 61,803 Interest expense (5,384) (5,085) Other income, net 4,060 1,452 ---------- ---------- Income before income taxes $ 50,176 $ 58,170 ========== ==========
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Net sales: Plumbing & Refrigeration $ 1,223,337 $ 1,364,360 OEM 868,053 628,472 Elimination of intersegment sales (15,279) (26,132) ---------- ---------- $ 2,076,111 $ 1,966,700 ========== ========== Operating income: Plumbing & Refrigeration $ 130,860 $ 179,384 OEM 29,102 42,326 Unallocated expenses (20,527) (18,531) ---------- ---------- Total operating income 139,435 203,179 Interest expense (16,567) (15,161) Other income, net 10,938 3,398 ---------- ---------- Income before income taxes $ 133,806 $ 191,416 ========== ==========
-14-
September 29, December 30, 2007 2006 (In thousands) Segment assets: Plumbing & Refrigeration $ 730,193 $ 760,147 OEM 374,229 280,692 General corporate 297,450 228,068 ---------- ---------- $ 1,401,872 $ 1,268,907 ========== ==========
Note 6 - Comprehensive Income Comprehensive income is as follows:
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands) Net income $ 31,324 $ 51,579 Other comprehensive income (loss), net of tax: Foreign currency translation 2,883 2,012 Amortization of prior service cost included in pension expense 47 - Amortization of actuarial gains and losses included in pension expense (10) - Change in the fair value of derivatives 228 (306) ---------- ---------- Other comprehensive income 3,148 1,706 ---------- ---------- Comprehensive income $ 34,472 $ 53,285 ========== ==========
-15-
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Net income $ 86,635 $ 143,694 Other comprehensive income (loss), net of tax: Foreign currency translation 9,360 7,913 Minimum pension liability - 4,315 Amortization of prior service cost included in pension expense 148 - Amortization of actuarial gains and losses included in pension expense 100 - Change in the fair value of derivatives 600 (203) ---------- ---------- Other comprehensive income 10,208 12,025 ---------- ---------- Comprehensive income $ 96,843 $ 155,719 ========== ==========
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 nine months of 2007, the value of the British pound sterling and the Chinese renmimbi increased 4.5 percent and 4.0 percent, respectively, compared to the U.S. dollar. Note 7 - Employee Benefits The Company sponsors several qualified and nonqualified pension plans and other postretirement benefit plans for certain of its employees. During the first quarter of 2007, the Company assumed certain pension and postretirement obligations totaling approximately $25.8 million and $7.5 million, respectively, and pension trust assets of $31.9 million in the acquisition of Extruded Metals, Inc. Net periodic pension benefit related to the pension plan is expected to be $0.7 million annually and net periodic benefit cost related to the postretirement plan is expected to be $0.6 million annually. -16- Net periodic benefit (income) cost is based on estimated values provided by independent actuaries. The components of net periodic benefit (income) cost are as follows:
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands) Pension benefits: Service cost $ 506 $ 592 Interest cost 2,078 2,320 Expected return on plan assets (2,952) (3,053) Amortization of prior service cost 78 94 Amortization of net loss 219 345 ---------- ---------- Net periodic benefit (income) cost $ (71) $ 298 ========== ========== Other benefits: Service cost $ (284) $ 1 Interest cost 437 159 Amortization of prior service cost (2) 2 Amortization of net loss 45 33 Curtailment gain (194) - ---------- ---------- Net periodic benefit cost $ 2 $ 195 ========== ==========
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Pension benefits: Service cost $ 1,518 $ 1,541 Interest cost 6,234 6,204 Expected return on plan assets (8,748) (7,902) Amortization of prior service cost 233 280 Amortization of net loss 658 763 ---------- ---------- Net periodic benefit (income) cost $ (105) $ 886 ========== ========== Other benefits: Service cost $ 849 $ 5 Interest cost 772 477 Amortization of prior service cost 2 6 Amortization of net loss 137 98 Curtailment gain (194) - ---------- ---------- Net periodic benefit cost $ 1,566 $ 586 ========== ==========
-17- The Company anticipates contributions to its pension plans for 2007 to be approximately $2.5 million. During the first nine months of 2007, approximately $1.9 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 $32.6 million in cash, including transaction costs of $0.6 million. Extruded, located in Belding, Michigan, manufactures brass rod products, and during 2006 had annual net sales of approximately $350 million. The acquisition of Extruded will complement the Company's existing brass rod product line. The total estimated fair values of the assets acquired totaled $76.2 million, consisting primarily of receivables of $29.5 million, inventories of $26.8 million, property, plant, and equipment of $12.7 million, and prepaid pension asset of $6.1 million. The total estimated fair values of liabilities assumed totaled $43.6 million, consisting primarily of a working capital debt facility of $10.0 million, accounts payable and accrued expenses of $24.0 million, and postretirement benefit obligations of $7.5 million. The debt assumed was extinguished by the Company immediately following the acquisition. During the third quarter of 2007, adjustments were recorded to the estimated fair value of assets acquired and liabilities assumed, resulting in a decrease in the postretirement benefit obligation of $4.1 million, a decrease in property, plant, and equipment of $2.6 million, and an increase in long term deferred tax liability of $1.5 million. Management will continue the process of refining the purchase price accounting estimates and expects to finalize these estimates in the fourth quarter of 2007. As a result, this purchase price allocation is subject to change. 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 periods presented. This information combines the historical results of operations of the Company and Extruded after the effects of estimated preliminary purchase accounting adjustments. Actual adjustments may differ from those reflected below. 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. -18-
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Pro forma: Net sales $ 693,682 $ 735,669 Net income 31,324 53,265 Earnings per share: Basic $ 0.84 $ 1.44 Diluted $ 0.84 $ 1.43
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands, except per share data) Pro forma: Net sales $ 2,133,539 $ 2,242,092 Net income 86,600 152,440 Earnings per share: Basic $ 2.34 $ 4.14 Diluted $ 2.33 $ 4.09
In December 2005, two subsidiaries of the Company received a business license from a Chinese industry and commerce authority, establishing a joint venture with Jiangsu Xingrong Hi-Tech Co., Ltd. and Jiangsu Baiyang Industries Ltd. The joint venture, in which the Company holds a 50.5 percent interest, produces inner groove and smooth tube in level-wound coils, pancake coils, and straight lengths, primarily to serve the Chinese domestic OEM air-conditioning market as well as to complement the Company's U.S. product line. The joint venture is located primarily in Jintan City, Jiangsu Province, China. The joint venture entity is named Jiangsu Mueller-Xingrong Copper Industries Limited (Mueller-Xingrong). During the first quarter of 2006, the Company contributed an additional $12.4 million, which completed its initial planned cash investment. Non-cash contributions from the other joint venture parties included long-lived assets of approximately $8.5 million during the first quarter of 2006. The results of operations of this joint venture are reported in the OEM segment and are included in the Company's Condensed Consolidated Financial Statements from January 1, 2006. -19- Note 9 - Income Taxes FIN 48 Adoption and 2007 Activity: At the beginning of fiscal 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). As a result of the adoption, the Company recorded an adjustment of approximately $2.2 million to reduce the opening balance of retained earnings. Additionally, as a result of the adoption of FIN 48, $3.5 million of federal income tax benefits associated with state tax uncertainties, which had been used to reduce the tax contingency liability in prior periods, were reclassified to deferred income taxes on the Company's Condensed Consolidated Balance Sheet. At adoption, the Company's unrecognized tax benefits totaled $25.6 million. Cumulative potential interest accrued related to unrecognized tax benefits at the date of adoption totaled $3.2 million. The Company includes interest related to income tax matters as a component of income tax expense. All unrecognized tax benefits at adoption would affect the effective tax rate, if recognized. During the nine months ended September 29, 2007, total unrecognized tax benefits increased to $26.3 million. The increase is primarily due to $1.2 million of derecognized tax benefits resulting from audit activity during the period and $2.3 million of derecognized tax benefits resulting from uncertainties arising or identified subsequent to the adoption date. Offsetting these items is the recognition of tax benefits of approximately $2.4 million due to a lapse in the statute of limitations. Cumulative potential interest accrued related to unrecognized tax benefits at September 29, 2007 totaled $3.2 million. At September 29, 2007, all unrecognized tax benefits would affect the effective tax rate, if recognized. The Company files a consolidated U.S. Federal return and numerous combined, unitary, and separate income tax returns in various 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 Extruded's 2005 U.S. Federal income tax return. Additionally, the Mississippi State Tax Commission and the California Franchise Tax Board are currently examining state income tax returns for certain of the Company's subsidiaries for years 2002 through 2005. The results of these examinations are not expected to have a material impact on the Company's financial position or results of operations. Discussion of Effective Tax Rate: The Company's effective tax rate for the third quarter of 2007 was 37.6 percent compared with 11.3 percent for the same period last year. The Company's effective tax rate for the first nine months of 2007 was 35.3 percent compared with 24.9 percent for the same period last year. The reduction in the rate in the prior year was primarily related to adjustments to reduce tax contingency reserves and changes in estimate regarding the future realization of certain state tax credit carryforwards. -20- In the current quarter, the difference between the effective tax rate and the U.S. Federal statutory tax rate is primarily related to (i) the provision for state taxes of $1.1 million, net of federal benefit, (ii) reconciliation of 2006 tax provision to final tax returns totaling $1.7 million, and (iii) additional expense of $1.2 million, net of federal benefit, resulting from unrecognized tax benefits. These items were partially offset by the recognition of a benefit from federal tax incentives of $0.7 million and the recognition of tax benefits and previously accrued interest of $2.2 million, net of federal benefit, due to a lapse in the statute of limitations. Income tax expense for the nine months ended September 29, 2007 includes a benefit of $7.8 million, or $0.21 per diluted share, for a reduction in the valuation allowance for state income tax credit carryforwards. During the first quarter, the Company changed its estimates regarding the future realization of these credit carryforwards as a result of tax plans initiated in the period which management determined were feasible and would be implemented. The estimates related to the future realization of these credit carryforwards are highly subjective and could be affected by changes in business conditions and the feasibility of tax planning strategies. Changes in any of these factors could have a material impact on future income tax expense. Also included in income tax expense are adjustments of $2.2 million, or $0.06 per diluted share, during the first quarter to correct the prior year income tax provision for deferred tax liabilities on U.S. pension plans, and $2.8 million, or $0.08 per diluted share, for a change in estimate during the first quarter which reduced deferred tax assets related to the determination that a certain tax plan was no longer economically beneficial to the Company and thus would not be executed. The effect of the correction is not material to the current period or the prior period presented. The net effect of these adjustments was a benefit of $2.7 million, or a reduction in the Company's effective tax rate of 2.0 percent for the period. Other factors that explain the difference between the effective tax rate and the U.S. Federal statutory tax rate for the first nine months of 2007 were (i) the provision for state taxes (excluding the effects of the change in estimate related to the state income tax credit carryforwards) of $3.6 million, net of federal benefit, (ii) a provision for repatriation of certain foreign earnings of $0.4 million, (iii) reconciliation of 2006 tax provision to final tax returns totaling $0.9 million, and (iv) additional expense of $3.0 million, net of federal benefit, resulting from unrecognized tax benefits. These items were partially offset by (i) the recognition of a benefit from federal tax incentives of $2.2 million, (ii) recognition of tax benefits of $2.2 million, net of federal benefit, due to a lapse of the statute of limitations, and (iii) the recognition of a benefit of a foreign tax holiday of approximately $1.0 million (without consideration of minority interest). -21- Note 10 - Other Income, Net
For the Quarter Ended September 29, September 30, 2007 2006 (In thousands) Interest income $ 3,168 $ 1,898 Environmental expense (119) (153) Minority interest in (income) loss of subsidiaries 626 (721) Gain (loss) on disposal of properties, net (23) (5) Rent, royalties, and other, net 408 433 ---------- ---------- Other income, net $ 4,060 $ 1,452 ========== ==========
For the Nine Months Ended September 29, September 30, 2007 2006 (In thousands) Interest income $ 8,100 $ 3,861 Gain on sale of equity investment - 1,876 Equity in earnings of unconsolidated subsidiary - 964 Gain on early retirement of debt - 97 Environmental expense (487) (418) Minority interest in (income) loss of subsidiaries (720) (2,526) Gain (loss) on disposal of properties, net 3,114 (1,913) Rent, royalties, and other, net 931 1,457 ---------- ---------- Other income, net $ 10,938 $ 3,398 ========== ==========
-22- Note 11 - Recently Issued Accounting Standards The FASB has issued SFAS No. 157, "Fair Value Measurements," which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosure about fair value measurements. The Company is required to adopt the provisions of this statement in the first quarter of fiscal 2008. Management is reviewing the potential effects of this statement; however, it does not expect the adoption of SFAS No. 157 to have a material impact on the Company's Condensed Consolidated Financial Statements. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the effect that adoption of this statement will have on the Company's Condensed Consolidated Financial Statements. 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 fittings and valves; refrigeration valves and fittings; and fabricated tubular products. The Company also resells imported brass and plastic plumbing valves, malleable iron fittings, steel nipples, faucets and plumbing specialty products. The Company's operations are located throughout the United States, and in Canada, Mexico, Great Britain, and China. 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, 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 -23- 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 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 conditions and trends including substitute products and imports. For plumbing applications, plastic systems are the primary substitute product; these products represent an increasing share of consumption. Imports of copper tubing from Mexico have increased in recent years, although U.S. consumption is still predominantly supplied by U.S. manufacturers. Results of Operations During the third quarter of 2007, the Company's net sales were $693.7 million, which compares with net sales of $636.0 million for the same period of 2006. Net sales were $2.08 billion in the first nine months of 2007 compared with $1.97 billion in the same period of 2006. The change in net sales for the quarter and nine-month period was primarily attributable to contributions from acquired businesses partially offset by reduced volumes in the Company's core product lines. The average price of copper was approximately 5 percent higher in the first nine months of 2007 compared with the same period of 2006. Extruded Metals, Inc. (Extruded) contributed $93.4 million of net sales in the third quarter and $222.9 million of net sales since its acquisition in February 2007. Cost of goods sold increased from $528.9 million in the third quarter of 2006 to $603.2 million in the same period of 2007. Cost of goods sold for the nine months ended September 29, 2007 was $1.80 billion compared with $1.62 billion for the first nine months of 2006. The current year increase was attributable to higher material costs and acquired businesses, partially offset by volume declines and lower conversion costs. Gross profit decreased to $90.5 million from $107.1 million in the third quarter -24- and decreased to $274.6 million from $343.6 million for the nine-month period due primarily to lower margins on copper tube and brass rod. During the first nine months of 2007, inventory quantities valued using the LIFO method declined. The Company expects to replenish these inventories by the end of 2007 and, as such, has not recognized the effects of liquidating LIFO layers. In the event the Company is unable to replenish these inventories due to lack of availability or operational reasons, a non-cash gain of up to approximately $30.0 million from the liquidation of LIFO quantities would be recognized. Selling, general, and administrative expense was $36.2 million for the third quarter of 2007 compared with $34.8 million for the same period of 2006. Year-to-date selling, general, and administrative expense was $110.1 million for 2007 compared with $109.4 million for the same period of 2006. The increase for the quarter and nine months was primarily due to expenses of Extruded since its acquisition date. During the third quarter of 2007, the Company received a monetary settlement of approximately $8.9 million pursuant to a settlement agreement terminating a lawsuit against J.P. Morgan Chase & Co. and Morgan Guaranty Trust Company of New York (collectively Morgan) to recover damages the Company believes it suffered on first purchases of copper cathode resulting from an alleged conspiracy to manipulate the price of copper cathode by Morgan (and certain of its predecessors and affiliates) and others in violation of the federal antitrust laws. For the third quarter of 2007, operating income at the Plumbing & Refrigeration segment was $52.3 million, which compares with $56.9 million in the same period of 2006. Operating income for the first nine months at the Plumbing & Refrigeration segment was $130.9 million, which compares with $179.4 million in the same period of 2006. The third quarter decreases were primarily attributable to lower selling prices and spreads in copper tube, partially offset by proceeds from the copper antitrust litigation settlement. The year-to-date decreases were primarily attributable to reduced volumes. Operating income at the OEM segment was $5.6 million in the third quarter of 2007 compared with $9.9 million in the third quarter of 2006. Operating income for the first nine months of 2007 at the OEM segment was $29.1 million, which compares with $42.3 million in the same period of 2006. Reduced operating income in the third quarter and first nine months of 2007 was due primarily to reduced volumes at the Port Huron brass rod mill partially offset by contributions from Extruded. Interest expense for the third quarter of 2007 totaled $5.4 million, compared with $5.1 million for the same period of 2006. For the first nine months of 2007, interest expense was $16.6 million compared with $15.2 million for the same period of 2006. The increase in interest expense for the third quarter and first nine months of 2007 is attributable to increased borrowings by Mueller-Xingrong to fund working capital. -25- Other income, net was $4.1 million for the third quarter of 2007 compared with $1.5 million for the same period of 2006. The current year increase was primarily due to increased interest income on higher invested cash balances and reduction of the elimination of minority interest in Mueller-Xingrong. Year-to-date, other income, net was $10.9 million in 2007 compared with $3.4 million for the same period of 2006. The current year increase is due primarily to the recognition of a $3.1 million gain in the first quarter of 2007 from the sale of non-operating royalty producing properties plus increased interest income on higher invested cash balances. In April 2006, the Company sold its approximately 38 percent interest in Conbraco Industries, Inc., which had a net book value of approximately $21.1 million. This transaction resulted in a pre-tax gain of approximately $1.9 million. Aggregate cash proceeds from the sale were approximately $23.0 million. The Company's effective tax rate for the third quarter of 2007 was 37.6 percent compared with 11.3 percent for the same period last year. The Company's effective tax rate for the first nine months of 2007 was 35.3 percent compared with 24.9 percent for the same period last year. The reduction in the rate in the prior year was primarily related to adjustments to reduce tax contingency reserves and changes in estimate regarding the future realization of certain state tax credit carryforwards. In the current quarter, the difference between the effective tax rate and the U.S. Federal statutory tax rate is primarily related to (i) the provision for state taxes of $1.1 million, net of federal benefit, (ii) reconciliation of 2006 tax provision to final tax returns totaling $1.7 million, and (iii) additional expense of $1.2 million, net of federal benefit, resulting from unrecognized tax benefits. These items were partially offset by the recognition of a benefit from federal tax incentives of $0.7 million and the recognition of tax benefits and previously accrued interest of $2.2 million, net of federal benefit, due to a lapse in the statute of limitations. Income tax expense for the nine months ended September 29, 2007 includes a benefit of $7.8 million, or $0.21 per diluted share, for a reduction in the valuation allowance for state income tax credit carryforwards. During the first quarter, the Company changed its estimates regarding the future realization of these credit carryforwards as a result of tax plans initiated in the period which management determined were feasible and would be implemented. The estimates related to the future realization of these credit carryforwards are highly subjective and could be affected by changes in business conditions and the feasibility of tax planning strategies. Changes in any of these factors could have a material impact on future income tax expense. Also included in income tax expense are adjustments of $2.2 million, or $0.06 per diluted share, during the first quarter to correct the prior year income tax provision for deferred tax liabilities on U.S. pension plans, and $2.8 million, or $0.08 per diluted share, for a change in estimate during the first quarter which reduced deferred tax assets related to the determination that a certain tax plan was no longer economically beneficial to the Company and thus would not be executed. The effect of the correction is not material to the current period or the prior period presented. The net effect of these adjustments was a benefit of $2.7 million, or a reduction in the Company's effective tax rate of 2.0 percent for the period. -26- Other factors that explain the difference between the effective tax rate and the U.S. Federal statutory tax rate for the first nine months of 2007 were (i) the provision for state taxes (excluding the effects of the change in estimate related to the state income tax credit carryforwards) of $3.6 million, net of federal benefit, (ii) a provision for repatriation of certain foreign earnings of $0.4 million, (iii) reconciliation of 2006 tax provision to final tax returns totaling $0.9 million, and (iv) additional expense of $3.0 million, net of federal benefit, resulting from unrecognized tax benefits. These items were partially offset by (i) the recognition of a benefit from federal tax incentives of $2.2 million, (ii) recognition of tax benefits of $2.2 million, net of federal benefit, due to a lapse of the statute of limitations, and (iii) the recognition of a benefit of a foreign tax holiday of approximately $1.0 million (without consideration of minority interest). Liquidity and Capital Resources Cash provided by operating activities during the first nine months of 2007 totaled $147.4 million, which is primarily attributable to net income, depreciation and amortization, decreased inventories, and increased current liabilities, partially offset by increased receivables and other assets. 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 nine months of 2007, the average COMEX copper price was approximately $3.21 per pound, which represents a 5 percent increase over the average price during the first nine months of 2006. This rise in the price of cathode has also resulted in sharp increases in the open market price for copper scrap and, to a lesser extent, the price of brass scrap. During the first nine months of 2007, cash used in investing activities was $51.7 million, consisting of capital expenditures totaling $22.8 million, plus the acquisition of Extruded for $32.0 million, partially offset by proceeds from the sale of properties of $3.0 million. Cash used in financing activities totaled $23.7 million for the first nine months of 2007 consisting primarily of repayment of long-term debt of $18.3 million and payment of dividends of $11.1 million, partially offset by issuance of debt of $4.5 million by the Company's Chinese joint venture. The Company has a $200 million unsecured line-of-credit (Credit Facility) which expires in December 2011. At September 29, 2007, the Company had no borrowings against the Credit Facility. Approximately $9.8 million in letters of credit were backed by the Credit Facility at the end of the third quarter of 2007. As of September 29, 2007, the Company's total debt was $341.7 million or 34 percent of its total capitalization. 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 September 29, 2007, the Company was in compliance with all of its debt covenants. -27- The Company declared and paid a regular quarterly cash dividend of ten cents per common share in each of the first three quarters of 2007. Payment of dividends in the future is dependent upon the Company's financial condition, cash flows, capital requirements, earnings, and other factors. The Company makes semi-annual interest payments of approximately $8.9 million each May 1 and November 1 on its 6% Subordinated Debentures. The Company may repurchase the Debentures through open market transactions or through privately negotiated transactions. Management believes that cash provided by operations and currently available cash of $273.2 million will be adequate to meet the Company's normal future capital expenditures and operational needs. The Company's current ratio was 3 to 1 at September 29, 2007. The Company's Board of Directors has authorized the repurchase until October 2008 of 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. Through September 29, 2007, the Company has repurchased approximately 2.4 million shares under this authorization. There have been no significant changes in the Company's contractual cash obligations reported at December 30, 2006. 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 -28- 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 September 29, 2007, the Company held open forward contracts to purchase approximately $6.1 million of copper over the next ten 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 September 29, 2007, the Company held no open forward contracts to purchase natural gas. Interest Rates At September 29, 2007, the Company had variable-rate debt outstanding of $33.7 million, the majority of which 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. 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 September 29, 2007, the Company held open forward contracts to purchase approximately 4.0 million U.S. dollars. 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. -29- 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 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 Securities and Exchange Commission'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. 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 September 29, 2007. 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 September 29, 2007, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. -30- 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, 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. Copper Tube Antitrust Litigation Beginning in September 2004, the Company has been named as a defendant in several purported class action complaints brought by direct and indirect purchasers alleging anticompetitive activities with respect to the sale of copper tubes in the United States (the Copper Tube Actions). Two such purported class actions were filed in the United States District Court for the Western District of Tennessee (the Federal Actions). The remaining Copper Tube Actions were filed in state courts in Tennessee, California and Massachusetts. Certain of the Copper Tube Actions purport to address the sale of copper plumbing tube in particular. Plaintiffs' motions to consolidate the Federal Actions and the actions pending in California state court, respectively, have been granted. All of the Copper Tube Actions, which are similar, seek monetary and other relief. Wholly owned Company subsidiaries, WTC Holding Company, Inc., Deno Holding Company, Inc., and Mueller Europe Ltd. (Mueller Europe), are named in all of the Copper Tube Actions, and Deno Acquisition Eurl is or was named in two of the Copper Tube Actions but has not been, or was not, served with the complaints in those actions. The claims against WTC Holding Company, Inc. and Deno Holding Company Inc. have been dismissed without prejudice in the Copper Tube Actions pending in California and Massachusetts state courts. In September 2006, the Federal Actions were dismissed as to Mueller Europe for lack of personal jurisdiction. In October 2006, the Federal Actions were dismissed in their entirety for lack of subject matter jurisdiction as to all defendants. Although plaintiffs filed a motion for reconsideration of the dismissal of Mueller Europe, the court has 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 a notice of appeal in the Federal Actions with the United States Court of Appeals for the Sixth Circuit. The Company, WTC Holding Company, Inc., Deno Holding Company, Inc., and Mueller Europe filed notices of cross- appeal in July 2007. -31- 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 Federal Actions and filed with the United States Court of Appeals for the Sixth Circuit a motion to stay or extend the briefing schedule in the appeal of the Federal Actions. Those motions remain pending. In May 2007, before either the Company or Mueller Europe had been required to respond to the complaint in the Massachusetts state court action, the court overseeing the Massachusetts state court action granted plaintiffs' voluntary motion to dismiss that action without prejudice. In September 2007, the court overseeing the Tennessee state court action dismissed that action without prejudice based on plaintiffs' lack of prosecution. The Company's demurrer to the complaint has been filed in the state court action in California. Mueller Europe has not yet been required to respond to the complaint in the state court action pending in California. The court overseeing the California state court action has stayed that action conditioned upon the parties' submitting periodic status reports on the status of the Federal Actions. The Company believes that the claims for relief in the Copper Tube Actions are without merit and intends to defend the Copper Tube Actions vigorously. In March 2006, the Company and Mueller Europe were named in a complaint brought by Carrier Corporation, Carrier S.A., and Carrier Italia S.p.A. alleging anticompetitive activities with respect to the sale of copper tubes used in the manufacturing of air-conditioning and refrigeration units (ACR copper tubes) in the United States and elsewhere (the Carrier Action). The Carrier Action was filed in United States District Court for the Western District of Tennessee. In July 2007, the Carrier Action was dismissed in its entirety for lack of subject matter jurisdiction as to all defendants. In August 2007, plaintiffs filed a notice of appeal in the Carrier Action with the United States Court of Appeals for the Sixth Circuit. The Company and Mueller Europe filed notices of cross-appeal in August 2007. In addition, beginning in April 2006, the Company and Mueller Europe have been named as defendants in several purported class action lawsuits brought by direct and indirect purchasers alleging anticompetitive activities with respect to the sale of ACR copper tubes in the United States and elsewhere (the ACR Class Actions, and with the Carrier Action, the ACR Actions). The Company and Mueller Europe are named in five ACR Class Actions filed in the United States District Court for the Western District of Tennessee. Three of the ACR Class Actions filed in the Western District of Tennessee have been consolidated to become the Direct ACR Class Actions. In July 2007, the Direct ACR Class Actions were dismissed in their entirety for lack of subject matter jurisdiction as to all defendants. In August 2007, plaintiffs filed a notice of appeal in the Direct ACR Class Actions with the United States Court of Appeals for the Sixth Circuit. The Company and Mueller Europe filed notices of cross-appeal in August 2007. -32- Two of the ACR Class Actions filed in the Western District of Tennessee have been consolidated to become the Indirect ACR Class Actions. The Company and Mueller Europe have been served, but have not yet been required to respond, in the Indirect ACR Class Actions. Pursuant to an order granting an agreed motion of the parties to the Indirect ACR Class Actions, neither the Company nor Mueller Europe will be required to respond to the complaint in the Indirect ACR Class Actions until after the United States Court of Appeals for the Sixth Circuit issues a mandate resolving the last of the pending appeals in the Direct ACR Class Actions and the Carrier Action. The Company, Mueller Europe, WTC Holding Company, Inc., Deno Holding Company, Inc., and Deno Acquisition Eurl are named in an ACR Class Action filed by indirect purchasers in the United States District Court for the Northern District of California (the California Indirect ACR Class Action). The California Indirect ACR Class Action alleges anticompetitive activities with respect to plumbing tubes as well as ACR copper tubes. The Company, Mueller Europe, WTC Holding Company, Inc., and Deno Holding Company, Inc. have been served, but have not yet been required to respond, in the California Indirect ACR Class Action. The Company believes that the claims for relief in the ACR Actions are without merit and intends to defend the ACR Actions vigorously. Copper Antitrust Litigation In connection with the previously disclosed In re Copper Antitrust Litigation, the Company finalized a settlement agreement terminating the lawsuit in July 2007. The Company recognized a monetary settlement of approximately $8.9 million pursuant to the agreement in the third quarter of 2007. 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 -33- 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. 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. The Company anticipates that future normal value reviews will be conducted on a periodic basis by the CBSA, which could affect the Company's ability to compete in Canada, depending on the level of normal values resulting from these future normal value reviews. 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 an undisclosed 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. That motion is pending. The Company does not anticipate any material adverse effect on its business or financial condition as a result of this litigation. Other Matters The Company is aware of an investigation of competition in markets in which it participates, or has participated in the past, in Canada. The Company does not anticipate any material adverse effect on its business or financial condition as a result of that investigation. -34- Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Issuer Purchases of Equity Securities The Company's Board of Directors has authorized the repurchase, until October 2008, of 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. Through September 29, 2007, the Company had repurchased approximately 2.4 million shares under this authorization. Below is a summary of the Company's stock repurchases for the quarterly period ended September 29, 2007.
(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) July 1- July 28,2007 - $ - July 29 - August 25, 2007 - - August 26 - September 29, 2007 - - (1) Shares available to be purchased under the Company's 10 million share repurchase authorization until October 2008. This repurchase plan was announced on October 26, 2007.
Item 5. Other Information On October 25, 2007, the Company's Board of Directors approved and adopted Amended and Restated By-Laws, effective as of October 25, 2007, to provide for (i) the position of Chief Operating Officer and (ii) the issuance and transfer of both certificated and uncertificated shares of capital stock of the Company. The amendments relating to uncertificated shares were adopted by the Company to comply with a recent amendment to the New York Stock Exchange ("NYSE") Listed Company Manual that requires NYSE listed companies to have their listed securities eligible to participate in -35- the Direct Registration System ("DRS"). DRS allows an investor's ownership to be recorded and maintained on the books of the issuer or the registrar of such stock without the issuance of a physical stock certificate. The summary of the Amended and Restated Bylaws is qualified in its entirety by reference to the full text of Amended and Restated Bylaws attached hereto as Exhibit 3.1. Item 6. Exhibits 3.1 Amended and Restated By-laws of the Registrant, adopted and effective as of October 25, 2007. 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, and 4 are not applicable and have been omitted. -36- 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. October 26, 2007 /s/ Kent A. McKee Date Kent A. McKee Executive Vice President and Chief Financial Officer October 26, 2007 /s/ Richard W. Corman Date Richard W. Corman Vice President - Controller -37- EXHIBIT INDEX Exhibits Description 3.1 Amended and Restated By-laws of the Registrant, adopted and effective as of October 25, 2007. 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. EX-3 2 ex31.txt AMENDED AND RESTATED BY-LAWS AS OF OCTOBER 25, 2007 EXHIBIT 3.1 AMENDED AND RESTATED BY-LAWS OF MUELLER INDUSTRIES, INC. (Adopted and effective as of October 25, 2007) ARTICLE I. OFFICES The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware. The Corporation also may have offices at such other places, within or without the State of Delaware, as the Board of Directors determines from time to time or the business of the Corporation requires. ARTICLE II. MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings, etc. Except as otherwise provided in these Amended and Restated By-laws ("By-laws"), all meetings of the stockholders shall be held at such dates, times and places, within or without the State of Delaware, as shall be determined by a majority of the Entire Board of Directors (as hereinafter defined) and as shall be stated in the notice of the meeting or in waivers of notice thereof. If the place of any meeting is not so fixed, it shall be held at the registered office of the Corporation in the State of Delaware. Section 2. Annual Meeting. The annual meeting of stockholders for the election of directors and the transaction of such other business as properly may be brought before the meeting shall be held on such date after the close of the Corporation's fiscal year, as a majority of the Entire Board of Directors may from time to time determine. Section 3. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, may be called by the Chairman or the President and shall be called by the Chairman upon the written request of a majority of the Entire Board of Directors. The request shall state the date, time, place and purpose or purposes of the proposed meeting. Section 4. Notice of Meetings. Except as otherwise required or permitted by law, whenever the stockholders are required or permitted to take any action at a meeting, written notice thereof shall be given, stating the place, date and time of the meeting and, unless it is the annual meeting, by or at whose direction it is being issued. The notice also shall designate the place where the stockholders' list is available for examination, unless the list is kept at the place where the meeting is to be held. Notice of a special meeting also shall state the purpose or purposes for which the meeting is called. A copy of the notice of any meeting shall be delivered personally or shall be mailed, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder or record entitled to vote at the meeting. If mailed, the notice shall be given when deposited in the United States mail, postage prepaid, and shall be directed to each stockholder at his address as it appears on the record of stockholders, unless he shall have filed with the -1- Secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at the other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend the meeting, except for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened, or who shall submit, either before or after the meeting, a signed waiver of notice. Unless the Board of Directors, after the adjournment, shall fix a new record date for an adjourned meeting or unless the adjournment is for more than thirty (30) days, notice of an adjourned meeting need not be given if the place, date and time to which the meeting shall be adjourned is announced at the meeting at which the adjournment is taken. Section 5. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, at all meetings of stockholders the holders of a majority of the outstanding shares of the Corporation entitled to vote at the meeting shall be present in person or by proxy in order to constitute a quorum for the transaction of business. Section 6. Voting. Except as otherwise provided by the Certificate of Incorporation of the Corporation, at any meeting of the stockholders every stockholder of record having the right to vote thereat shall be entitled to one vote for every share of stock standing in his name as of the record date and entitling him to so vote. A stockholder may vote in person or by proxy. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, any corporate action to be taken by a vote of the stockholders, other than the election of directors, shall be authorized by not less than a majority of the votes cast at a meeting by the stockholders present in person or by proxy and entitled to vote thereon. Directors shall be elected as provided in Section 2 of Article III of these By-laws. Written ballots shall not be required for voting on any matter unless ordered by the Chairman of the meeting. Section 7. Proxies. Every proxy shall be executed in writing by the stockholder or by his attorney-in-fact. Section 8. List of Stockholders. At least ten (10) days before every meeting of stockholders, a list of the stockholders (including their addresses) entitled to vote at the meeting and their record holdings as of the record date shall be open for examination by any stockholder, during ordinary business hours, at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list also shall be kept at and throughout the meeting. Section 9. Conduct of Meetings. At each meeting of the stockholders, the Chairman of the Board of Directors along with the President, or either of them acting individually in the event of the absence of the President or Chairman or, in their absence, one of the Vice Chairman, if any, shall act as Chairmen or Chairman of the meeting. The Secretary or, in his absence, any person appointed by the Chairmen or Chairman of the meeting shall act as Secretary of the meeting and shall keep the minutes thereof. The order of business at all meetings of the stockholders shall be as determined by the Chairmen or Chairman of the meeting. -2- Section 10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation of the Corporation, any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed, in person or by proxy, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted in person or by proxy. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing, but who were entitled to vote on the matter. Section 11. Notice of Stockholder Business and Nominations. (A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting delivered pursuant to Article II, Section 4 of these By-Laws, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who is entitled to vote at the meeting, who has complied with the notice procedures set forth in clauses (2) and (3) of this paragraph (A) and the other requirements of this Section 11 and who was a stockholder of record at the time such notice was delivered to the Secretary of the Corporation. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 11, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth (90) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60) day prior to such annual meeting or the tenth (10) day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected), or any successor rule or regulation; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) -3- as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 11 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least seventy (70) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth (10) day following the day on which such public announcement is first made by the Corporation. (B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting pursuant to Article II, Section 3 of these By-Laws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is entitled to vote at the meeting, who has complied with the notice procedures set forth in this Section 11 and who was a stockholder of record at the time such notice was delivered to the Secretary of the Corporation. Nomination by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice required by paragraph (A)(2) of this Section 11 shall have been delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth (90) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60) day prior to such special meeting or the tenth (10) day following the day on which public announcement is first made of the date of the special meeting. (C) General. (1) Only persons who are nominated in accordance with the procedures set forth in this Section 11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 11. Except as otherwise provided by law, the Certificate of Incorporation, as amended, or these By- Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 11 and, if any proposed nomination or business is not in compliance with this Section 11, to declare that such defective proposal or nomination shall be disregarded. -4- (2) For purposes of this by-Law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE III. BOARD OF DIRECTORS Section 1. Number of Board Members. The Board of Directors shall consist of one (1) or more members. Until such time as the Board of Directors determines otherwise, the number of directors shall be nine (9). The number of directors may be reduced or increased from time to time by resolution of a majority of the Entire Board of Directors, but no decrease may shorten the term of an incumbent director. When used in these By-laws, the phrase "Entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. Section 2. Election and Term. Except as otherwise provided by law or by these By-laws, the directors shall be elected at the annual meeting of the stockholders and the persons receiving a plurality of the votes cast shall be so elected. Subject to his earlier death, resignation or removal as provided in Section 3 of this Article III, each director shall hold office until his successor shall have been duly elected and shall have qualified. Section 3. Removal. A director may be removed, but only with cause, by action of a majority of the Entire Board of Directors or the stockholders. Section 4. Resignations. Any director may resign at any time by giving written notice of his resignation to the Corporation. A resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of a resignation shall not be necessary to make it effective. Section 5. Vacancies. Any vacancy in the Board of Directors arising from an increase in the number of directors or otherwise may be filled by the vote of a majority of the remaining directors on the Board of Directors. Subject to his earlier death, resignation or removal as provided in Section 3 of this Article III, each director so elected shall hold office until his successor shall have been duly elected and shall have qualified or for the unexpired term of his predecessor, as the case may be. -5- Section 6. Place of Meetings. Except as otherwise provided in these By-laws, all meetings of the Board of Directors shall be held at such places, within or without the State of Delaware, as the Board of Directors determines from time to time. Section 7. Annual Meeting. The annual meeting of the Board of Directors shall be held either (a) without notice immediately after the annual meeting of stockholders and in the same place, or (b) as soon as practicable after the annual meeting of stockholders on such date and at such time and place as the Board of Directors determines. Section 8. Regular Meetings. Regular meetings of the Board of Directors shall be held on such dates and at such places and times as the Board of Directors determines. Notice of regular meetings need not be given, except as otherwise required by law. Section 9. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President of the Corporation and shall be called by the Chairman of the Board of Directors, the President or the Secretary upon the written request of a majority of the Entire Board of Directors. The request shall state the date, time, place and purpose or purposes of the proposed meeting. Section 10. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each annual meeting held pursuant to subdivision (b) of Section 7 of this Article III) shall be given, not later than 48 hours before the meeting is scheduled to commence, by the Chairman of the Board of Directors, the President or the Secretary and shall state the place, date and time of the meeting. Notice of each meeting may be delivered to a director by hand or given to a director orally (whether by telephone or in person) or mailed or telegraphed to a director at his residence or usual place of business, provided, however, that if notice of less than 72 hours is given it may not be mailed. If mailed, the notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, and if telegraphed, the notice shall be deemed to have been given when the contents of the telegram are transmitted to the telegraph service with instructions that the telegram immediately be dispatched. Notice of any meeting need not be given to any director who shall submit, either before or after the meeting, a signed waiver of notice or who shall attend the meeting, except if such director shall attend for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened. Notice of any adjourned meeting, including the place, date and time of the new meeting, shall be given to all directors not present at the time of the adjournment, as well as to the other directors unless the place, date and time of the new meeting is announced at the adjourned meeting. Section 11. Quorum. A majority of the Entire Board of Directors shall constitute a quorum and be sufficient for the transaction of business, and any act of a majority of the Entire Board of Directors at which a quorum is present shall be the act of the Board of Directors. -6- Section 12. Conduct of Meetings. At each meeting of the Board of Directors, the Chairman of the Board of Directors along with the President, or either of them acting individually in the event of the absence of the Chairman or the President or, in their absence, one of the Vice Chairmen shall act as Chairmen or Chairman of the meeting. The Secretary or, in his absence, any person appointed by the Chairmen or Chairman of the meeting shall act as Secretary of the meeting and keep the minutes thereof. The order of business at all meetings of the Board of Directors shall be as determined by the Chairmen or Chairman of the meeting. Section 13. Committees of the Board. The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, may designate an executive committee and other committees, each consisting of one (1) or more directors. Each committee (including the members thereof) shall serve at the pleasure of the Board of Directors and shall keep minutes of its meetings and report the same to the Board of Directors. The Board of Directors shall initially have an Audit Committee, with the powers enumerated in Section 14 hereof. The Board of Directors may designate one or more directors as alternate members of any committee. Alternate members may replace any absent or disqualified member or members at any meeting of a committee. In addition, in the absence or disqualification of a member of a committee, if no alternate member has been designated by the Board of Directors, the members present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Except as limited by law, each committee, to the extent provided in the resolution establishing it, shall have and may exercise all the powers and authority of the Board of Directors with respect to all matters. Section 14. Audit Committee. The Audit Committee shall consist of at least two (2) members of the Board of Directors. The Audit Committee's powers shall include, but shall not be limited to, the following: to make recommendations to the Board of Directors regarding the appointment of the Corporation's independent accountants; to review and approve any major changes in accounting policy; to review the arrangements for, scope and results of the independent audit; to review and approve the scope of non- audit services to be performed by the Corporation's independent accountants and to consider the possible effect on the independence of the accountants; to review the effectiveness of the Corporation's internal auditing procedures and personnel; to review the Corporation's policies and procedures for compliance with disclosure requirements with respect to conflicts of interest and for prevention of unethical, questionable or illegal payments; and to take such other actions as the Board of Directors shall from time to time so authorize. Section 15. Compensation Committee. The Compensation Committee shall consist of at least two (2) members of the Board of Directors. The Compensation Committee's powers shall include, but shall not be limited to the following: to establish compensation policies, to recommend salary levels, salary increases and bonus payments, to grant stock options, to provide an overview of the Company's compensation programs and to take such other actions as the Board of Directors shall from time to time authorize. -7- Section 16. Operation of Committees. A majority of all the members of a committee shall constitute a quorum for the transaction of business, and the vote of a majority of all the members of a committee present at a meeting at which a quorum is present shall be the act of the committee. Each committee shall adopt whatever other rules of procedure it determines for the conduct of its activities. Section 17. Consent to Action. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 18. Meetings Held Other Than in Person. Members of the Board of Directors or any committee may participate in a meeting of the Board of Directors or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. ARTICLE IV. OFFICERS Section 1. Executive Officers, etc. The executive officers of the Corporation shall be a Chairman of the Board of Directors, a Chief Executive Officer, a President, a Chief Operating Officer, a Secretary and a Treasurer. The Board of Directors also may elect or appoint one or more Vice Chairmen of the Board of Directors (who, if so elected or appointed would be executive officers of the Corporation), one or more Vice Presidents (any of whom may be designated as Executive Vice Presidents or otherwise), or any other officers it deems necessary or desirable for the conduct of the business of the Corporation, each of whom shall have such powers and duties as the Board of Directors determines. Any officer may devote less than one hundred percent (100%) of his working time to his activities as such if the Board of Directors so approves. Section 2. Duties. (a) The Chairman of the Board of Directors. The Chairman of the Board of Directors shall perform, in the absence or disability of the Chief Executive Officer, the duties and exercise the powers of the Chief Executive Officer and shall have such other powers and duties as a majority of the Entire Board of Directors or the Chief Executive Officer assigns to him, including, if so assigned, general charge and control of the business and affairs of the Corporation. The Chairman of the Board of Directors along with the President shall preside at all meetings of the stockholders and the Board of Directors, and in the event of the absence of the Chairman of the Board of Directors the President alone shall preside. -8- (b) The Vice Chairman of the Board of Directors. The Vice Chairman or, if there shall be more than one, the Vice Chairmen, of the Board of Directors shall, subject to the control of the Board of Directors, have such powers and duties as the Chairman or a majority of the Entire Board of Directors assigns to him. Notwithstanding the granting of powers to and imposition of duties upon the Chairman of the Board of Directors and President under this Article, whenever these By-laws grant powers or impose duties jointly upon the Chairman or the President, those same powers are granted and those same duties are imposed upon the Vice Chairman, or Vice Chairmen if there shall be more than one. (c) The President. The President shall assist the Chief Executive Officer in the direction of the business and affairs of the Corporation, subject to the control of the Chief Executive Officer, the Chairman and the Vice Chairman or Vice Chairmen, if any, and he shall have such other powers and duties as a majority of the Entire Board of Directors assigns to him. The President along with the Chairman of the Board of Directors shall preside at all meetings of the stockholders and the Board of Directors, and in the event of the absence of the President, the Chairman alone shall preside. (d) The Vice President. The Vice President or, if there shall be more than one, the Vice Presidents, if any, in the order of their seniority or in any other order determined by the Board of Directors, shall perform, in the absence of disability of the President, the duties and exercise the powers of the President and shall have such other powers and duties as the Chief Executive Officer, the Chairman, the President, or a majority of the Entire Board of Directors assigns to him or to them. (e) The Secretary. Except as otherwise provided in these By-laws or as directed by the Board of Directors, the Secretary shall attend all meetings of the stockholders and the Board of Directors; he shall record the minutes of all proceedings in books to be kept for that purpose; he shall give notice of all meetings of the stockholders and special meetings of the Board of Directors; and he shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, he shall affix the same to any corporate instrument. The Secretary shall have such other powers and duties as the Board of Directors assigns to him. (f) The Treasurer. Subject to the control of the Board of Directors, the Treasurer shall have the care and custody of the corporate funds and the books relating thereto; he shall perform all duties incident to the office of Treasurer; and he shall have such other powers and duties as the Board of Directors assigns to him. (g) Chief Executive Officer. Subject to the control of the Board of Directors, the Chief Executive Officer shall have general charge and control of the business and affairs of the Corporation. (h) Chief Operating Officer. The Chief Operating Officer shall have responsibility for the day-to-day operation of the Corporation, subject to the control of the Chief Executive Officer, the Chairman and the Vice Chairman or Vice Chairmen, if any, and he shall have such other powers and duties as a majority of the Entire Board of Directors assigns to him. -9- Section 3. Election; Removal. Subject to his earlier death, resignation or removal as hereinafter provided, each officer shall hold his office until his successor shall have been duly elected and shall have qualified. Any officer may be removed at any time, with or without cause, by a majority of the Entire Board of Directors. Section 4. Resignations. Any officer may resign at any time by giving written notice of his resignation to the Corporation. A resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of a resignation shall not be necessary to make it effective. Section 5. Vacancies. If an office becomes vacant for any reason, a majority of the Entire Board of Directors may fill the vacancy, and each officer so elected shall serve for the remainder of his predecessor's term. ARTICLE V. PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS Section 1. Certificates. The shares of stock of the Corporation shall be represented by certificates, or shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. To the extent that shares are represented by certificates, such certificates whenever authorized by the Board of Directors, shall be in such form as required by law and as approved by the Board of Directors. Each certificate shall be signed in the name of the Corporation by the Chairman, a Vice Chairman, the President or any Vice President and by the Secretary, the Treasurer or any Assistant Secretary or any Assistant Treasurer and shall bear the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent or registered by a registrar, other than the Corporation or its employees, the signature of any officer of the Corporation may be a facsimile signature. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature was placed on any certificate shall have ceased to be such officer, transfer agent or registrar before the certificate shall be issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Lost Certificates, etc. The Corporation may issue a new certificate for shares, if such shares were certificated, in place of any certificate theretofore issued by it, alleged to have been lost, mutilated, stolen or destroyed, and the Board of Directors may require the owner of the lost, mutilated, stolen or destroyed certificate, or his legal representatives, to make an affidavit of that fact and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, mutilation, theft or destruction of the certificate or the issuance of a new certificate. -10- Section 3. Transfers of Shares. Transfers of shares shall be registered on the books of the Corporation maintained for that purpose after due presentation, if such shares are certificated, of the stock certificates therefore appropriately endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, or, if such shares are uncertificated, upon proper instructions from the registered holder thereof or by such holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary of the Corporation or the transfer agent for such stock, if any. Section 4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of any such meeting, nor more than sixty (60) days prior to any other action. ARTICLE VI. INDEMNIFICATION Section 1. Indemnification. The Corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may be hereafter amended or supplemented, or by any successor thereto, indemnify any and all persons whom it shall have power to indemnify under said Law from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Law. Such right of indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. No director shall have any personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of any director: a) for any breach of the director's duty of loyalty to the Corporation or its stockholders, b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, c) under Section 174 of the Delaware General Corporation Law, or d) for any transaction from which the director derived an improper personal benefit. Such right of indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under the Certificate of Incorporation of the Corporation, any agreement, vote of stockholders or disinterested directors or otherwise. -11- Section 2. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of Section 1 of the By-laws or under Section 145 of the General Corporation Law or any other provision of law. ARTICLE VII. GENERAL PROVISIONS Section 1. Dividends, etc. To the extent permitted by law, the Board of Directors shall have full power and discretion, subject to the provisions of the Certificate of Incorporation of the Corporation and the terms of any other corporate document or instrument binding upon the Corporation, to determine what, if any, dividends or distributions shall be declared and paid or made. Section 2. Seal. The Corporation's seal shall be in such form as is required by law and as shall be approved by the Board of Directors. Section 3. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 4. Voting Shares in Other Corporations. Unless otherwise directed by the Board of Directors, shares in other Corporations which are held by the Corporation shall be represented and voted only by the Chairman of the Board of Directors or the President or by a proxy or proxies appointed by either of them acting individually. ARTICLE VIII. AMENDMENTS By-laws may be adopted, amended or repealed by a majority of the Entire Board of Directors, subject to the right of the stockholders to adopt, amend or repeal any By-law made by a majority of the Entire Board of Directors. -12- EX-31 3 ex311.txt SECTION 302 CERTIFICATION FO CEO EXHIBIT 31.1 CERTIFICATION I, William D. O'Hagan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Mueller Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)), for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and -1- 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 26, 2007 /S/ WILLIAM D. O'HAGAN William D. O'Hagan President and Chief Executive Officer -2- EX-31 4 ex312.txt SECTION 302 CERTIFICATION FO CFO EXHIBIT 31.2 CERTIFICATION I, Kent A. McKee, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Mueller Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)), for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and -1- 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 26, 2007 /S/ KENT A. MCKEE Kent A. McKee Executive Vice President and Chief Financial Officer -2- EX-32 5 ex321.txt SECTION 906 CERTIFICATION FO CEO EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Mueller Industries, Inc. (the "Company") on Form 10-Q for the period ending September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William D. O'Hagan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ WILLIAM D. O'HAGAN William D. O'Hagan Chief Executive Officer October 26, 2007 EX-32 6 ex322.txt SECTION 906 CERTIFICATION FO CFO EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Mueller Industries, Inc. (the "Company") on Form 10-Q for the period ending September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kent A. McKee, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ KENT A. MCKEE Kent A. McKee Chief Financial Officer October 26, 2007 -----END PRIVACY-ENHANCED MESSAGE-----