Commitments and Contingencies

9 Months Ended

Oct. 01, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

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, results of operations, or cash flows.  The Company may also realize the benefit of certain legal claims and litigation in the future; these gain contingencies are not recognized in the Condensed Consolidated Financial Statements.

Environmental Matters

The Company is subject to environmental standards imposed by federal, state, local, and foreign environmental laws and regulations.  Environmental costs related to non-operating properties are classified as a component of other income (expense), net and costs related to operating properties are classified as cost of goods sold.  Environmental reserves totaled $23.1 million at October 1, 2011 and $23.9 million at December 25, 2010.

The following is an update of recent developments for ongoing environmental matters:

Operating Properties

On April 25, 2011, the Company received approval from the Michigan Department of Environmental Quality (MDEQ) notifying it that the actions contained in the Company’s proposed Conceptual Interim Response Plan dated April 4, 2011, in respect of the soil remediation at the Belding site, are acceptable for implementation.  Soil sampling of 47 residential properties near that plant has identified 16 properties with lead levels above the Michigan residential clean-up standards.  The remediation is expected to be complete in the fourth quarter.  The Company does not anticipate any material adverse effect on its financial position, results of operations, or cash flows as a result of this remediation.

The Company has negotiated a draft administrative consent order (ACO) with the MDEQ to resolve a violation notice from the MDEQ dated December 28, 2009, alleging that the Company exceeded emission limits for lead, particulate matter and hydrogen chloride at the West Chip Dryer.  Additional controls were subsequently installed to ensure consistent compliance with the air permits.  Under the draft ACO, which is currently undergoing public review and comment, the Company does not admit violations and does not anticipate any material adverse effect on its financial position, results of operations, or cash flows.

Non-operating properties:

There have been no material changes with respect to environmental matters for non-operating properties during the third quarter of 2011.

United States Department of Commerce Antidumping Review

On December 24, 2008, the United States Department of Commerce (DOC) initiated an antidumping administrative review of the antidumping duty order covering circular welded non-alloy steel pipe and tube from Mexico to determine the final antidumping duties owed on U.S. imports during the period November 1, 2007, through October 31, 2008, by certain subsidiaries of the Company.  On April 19, 2010, the DOC published the final results of this review and assigned Mueller Comercial de Mexico, S. de R.L. de C.V. (Mueller Comercial) an antidumping duty rate of 48.3 percent.  The Company has appealed the final determination to the U.S. Court of International Trade.  The Company anticipates that certain of its subsidiaries will incur antidumping duties on subject imports made during the period of review and, as such, established a reserve of approximately $4.2 million for this matter.

On December 23, 2009, the DOC initiated an antidumping administrative review of the antidumping duty order covering circular welded non-alloy steel pipe and tube from Mexico for the November 1, 2008, through October 31, 2009, period of review.  The DOC selected Mueller Comercial as a respondent for this period of review.  On June 21, 2011, the DOC published the final results of this review and assigned Mueller Comercial an antidumping duty rate of 19.8 percent.  On July 8, 2011, the Company filed a notice of intent to seek judicial review of the final results.  The Company anticipates that certain of its subsidiaries will incur antidumping duties on subject imports made during the period of review and, as such, established a reserve of approximately $1.0 million for this matter.

On December 28, 2010, the DOC initiated an antidumping administrative review of the antidumping duty order covering circular welded non-alloy steel pipe and tube from Mexico for the November 1, 2009, through October 31, 2010, period of review.  The DOC selected Mueller Comercial as a respondent for this period of review.  In August 2011, the DOC issued a preliminary determination to rescind the review based on a finding that Mueller Comercial did not ship subject merchandise to the United States during the relevant period of review.  By the end of the year, the DOC is expected to issue a final determination which, if the result mirrors the preliminary determination, would result in zero antidumping liability for the Company and its subsidiaries for imports made during the period of review.  Until the final determination is issued, however, the Company cannot estimate the impact, if any, that this matter will have on its financial position, results of operations, or cash flows.

Other

During the third quarter of 2011, a portion of the Company’s Wynne, Arkansas, manufacturing operation was damaged by fire.  There were no reported injuries.  Certain inventories, production equipment, and portions of building structures were extensively damaged requiring further assessment which is underway; rehabilitation alternatives are also being evaluated.  The total value of the loss, including business interruption, cannot be determined at this time, but is expected to be covered by property and business interruption insurance subject to customary deductibles.  As a result of the fire, the Company reclassified $9.4 million representing the book value of inventories prior to potential scrap recoveries and $9.4 million representing the net book value of certain production equipment and building structures that were damaged.  The Company also recorded a receivable of $0.2 million for clean-up and other out of pocket costs incurred to date.  Any proceeds received for property damage in excess of the net book value of the related property will be recognized upon settlement of the insurance claim.  The Company has received an advance of $10.0 million from the insurance company for this claim resulting in a net receivable of $9.0 million, classified as accounts receivable on the Condensed Consolidated Balance Sheet at October 1, 2011.    The Company has deferred recognition of direct, identifiable costs associated with this matter.  These costs will be recognized upon settlement of the insurance claim.

Guarantees, in the form of letters of credit, are issued by the Company generally to assure the payment of insurance deductibles and certain retiree health benefits.  The terms of the Company’s guarantees are generally one year but are renewable annually as required.  These letters are primarily backed by the Company’s line of credit facility.  The maximum payments that the Company could have been required to make under its guarantees at October 1, 2011, was $11.4 million.