MUELLER INDUSTRIES, INC. General Overview
We are a leading manufacturer of copper, brass, aluminum, and plastic products.
The range of products we manufacture is broad: copper tube and fittings; line
sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings;
aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves
and fittings; compressed gas valves; pressure vessels; steel nipples; and
insulated flexible duct systems. We also resell brass and plastic plumbing
valves, plastic fittings, malleable iron fittings, faucets, and plumbing
specialty products. Our operations are located throughout
Each of our reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:
•Piping Systems: The Piping Systems segment is composed of
•Industrial Metals: The Industrial Metals segment is composed of Brass Rod, Impacts & Micro Gauge, Brass Value-Added Products, and Precision Tube. The segment manufactures and sells brass rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; gas valves and assemblies; and specialty copper, copper alloy, and aluminum tube. The segment manufactures and sells its products primarily to domestic OEMs in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets.
•Climate: The Climate segment is composed of Refrigeration Products,
Westermeyer, Turbotec, Flex Duct, and
New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air-conditioning, refrigeration, and plumbing markets because the principal end use of a significant portion of our products is in the construction of single and multi-family housing and commercial buildings. Repairs and remodeling projects are also important drivers of underlying demand for these products. In addition, our products are used in various transportation, automotive, and industrial applications.
According to the
Profitability of certain of our product lines depends upon the "spreads" between the cost of raw material and the selling prices of our products. The open market prices for copper cathode and copper and brass scrap, for example, influence the selling price of copper tube and brass rod, two principal products manufactured by the Company. We attempt to minimize the effects on profitability from fluctuations in material costs by passing through these costs to our customers; however, margins of our businesses that account for inventory on a FIFO basis may be impacted in periods of significant fluctuations in material costs. Our earnings and cash flow are dependent upon these spreads that fluctuate based upon market conditions.
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Earnings and profitability are also impacted by unit volumes that are subject to
market trends, such as substitute products, imports, technologies, and market
share. In our core product lines, we intensively manage our pricing structure
while attempting to maximize profitability. From time-to-time, this practice
results in lost sales opportunities and lower volume. For plumbing systems,
plastics are the primary substitute product; these products represent an
increasing share of consumption. For certain air-conditioning and refrigeration
applications, aluminum-based systems are the primary substitution threat. We
cannot predict the acceptance or the rate of switching that may occur.
Results of Operations
Consolidated Results
The following table compares summary operating results for the first quarter of
2022 and 2021:
For the Quarter Ended Percent Change
(In thousands) March 26, 2022 March 27, 2021 2022 vs. 2021
Net sales $ 1,010,002 $ 818,148 23.4 %
Operating income 212,701 92,540 129.8
Net income 158,316 63,107 150.9
The following are components of changes in net sales compared to the prior year:
Quarter-to-
Date
Net selling price in core product lines 20.4 %
Unit sales volume in core product lines (2.3)
Acquisitions 2.5
Dispositions (3.3)
Other 6.1
23.4 %
The increase in net sales during the first quarter of 2022 was primarily due to
(i) higher net selling prices of
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Net selling prices generally fluctuate with changes in raw material costs. Changes in raw material costs are generally passed through to customers by adjustments to selling prices. The following graph shows the Comex average copper price per pound by quarter for the current and prior fiscal years:
[[Image Removed: mli-20220326_g2.jpg]]
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first quarter of 2022 and 2021:
For the Quarter Ended
(In thousands) March 26, 2022 March 27, 2021
Cost of goods sold $ 744,511 $ 668,418
Depreciation and amortization 10,841 11,755
Selling, general, and administrative expense 47,456 45,435
Gain on sale of assets (5,507) -
Operating expenses $ 797,301 $ 725,608
For the Quarter Ended
March 26, 2022 March 27, 2021
Cost of goods sold 73.7 % 81.7 %
Depreciation and amortization 1.1 1.4
Selling, general, and administrative expense 4.6 5.6
Gain on sale of assets (0.5) -
Operating expenses 78.9 % 88.7 %
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Cost of goods sold increased in the first quarter of 2022 primarily due to the
factors noted above regarding the change in net sales. Gross margin as a
percentage of sales was 26.3 percent compared with 18.3 percent in the prior
year quarter. The increase in gross margin percent reflects effective price
management in response to significant inflation in wages, and material,
consumable, freight, and distribution costs. Depreciation and amortization
decreased in first quarter of 2022 as a result of long-lived assets of
businesses sold. Selling, general, and administrative expense increased in the
first quarter of 2022 primarily as a result of (i) an increase in agent
commissions of
Interest expense decreased for the first quarter of 2022 primarily as a result of the redemption of our Subordinated Debentures during the second quarter of 2021. Other income, net, was consistent with the first quarter of 2021.
Our effective tax rate for the first quarter of 2022 was 25 percent compared
with 25 percent for the same period last year. The items impacting the effective
tax rate were increases related to the provision for state income taxes, net of
the federal benefit, of
For the first quarter of 2021, the difference between the effective tax rate and
the amount computed using the
During the first quarter of 2022 and the first quarter of 2021, we recognized
income of
Piping Systems Segment
The following table compares summary operating results for the first quarter of 2022 and 2021 for the businesses comprising our Piping Systems segment:
For the Quarter Ended Percent Change
(In thousands) March 26, 2022 March 27, 2021 2022 vs. 2021
Net sales $ 703,430 $ 547,748 28.4 %
Operating income 160,488 67,098 139.2
The following are components of changes in net sales compared to the prior year:
Quarter-to-
Date
Net selling price in core product lines 26.8 %
Unit sales volume in core product lines (1.3)
Acquisitions 1.9
Dispositions (0.7)
Other 1.7
28.4 %
The increase in net sales during the first quarter of 2022 was primarily
attributable to (i) higher net selling prices in the segment's core product
lines, primarily copper tube and copper fittings, of
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The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first quarter of 2022 and 2021:
For the Quarter Ended
(In thousands) March 26, 2022 March 27, 2021
Cost of goods sold $ 514,187 $ 450,354
Depreciation and amortization 5,400 6,210
Selling, general, and administrative expense 23,355 24,086
Operating expenses $ 542,942 $ 480,650
For the Quarter Ended
March 26, 2022 March 27, 2021
Cost of goods sold 73.1 % 82.2 %
Depreciation and amortization 0.8 1.1
Selling, general, and administrative expense 3.3 4.5
Operating expenses 77.2 % 87.8 %
The increase in cost of goods sold during the first quarter of 2022 was
primarily due to the increase in the average cost of copper, our principal raw
material. Gross margin as a percentage of sales was 26.9 percent compared with
17.8 percent in the prior year quarter. The increase in gross margin percent
reflects effective price management in response to significant inflation in
wages, and material, consumable, freight, and distribution costs. Depreciation
and amortization decreased in first quarter of 2022 as a result of long-lived
assets of businesses sold. Selling, general, and administrative expense
decreased for the first quarter of 2022 primarily as a result of (i) lower
advertising and promotion expenses of
Industrial Metals Segment
The following table compares summary operating results for the first quarter of 2022 and 2021 for the businesses comprising our Industrial Metals segment:
For the Quarter Ended Percent Change
(In thousands) March 26, 2022 March 27, 2021 2022 vs. 2021
Net sales $ 174,312 $ 164,852 5.7 %
Operating income 23,259 18,847 23.4
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The following are components of changes in net sales compared to the prior year:
Quarter-to-
Date
Net selling price in core product lines 12.9 %
Unit sales volume in core product lines (7.2)
Dispositions (5.4)
Other 5.4
5.7 %
The increase in net sales during the first quarter of 2022 was primarily due to
higher net selling prices of
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first quarter of 2022 and 2021:
For the Quarter Ended
(In thousands) March 26, 2022 March 27, 2021
Cost of goods sold $ 145,710 $ 140,891
Depreciation and amortization 1,944 1,743
Selling, general, and administrative expense 3,399 3,371
Operating expenses $ 151,053 $ 146,005
For the Quarter Ended
March 26, 2022 March 27, 2021
Cost of goods sold 83.6 % 85.5 %
Depreciation and amortization 1.1 1.1
Selling, general, and administrative expense 2.0 2.0
Operating expenses 86.7 % 88.6 %
The increase in cost of goods sold during the first quarter of 2022 was primarily due to the increase in the price of copper. Gross margin as a percentage of sales was 16.4 percent compared with 14.5 percent in the prior year quarter. The increase in gross margin percent reflects effective price management in response to significant inflation in wages, and material, consumable, freight, and distribution costs. Depreciation and amortization and selling, general, and administrative expense were consistent with the first quarter of 2021.
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Climate Segment
The following table compares summary operating results for the first quarter of 2022 and 2021 for the businesses comprising our Climate segment:
For the Quarter Ended Percent Change
(In thousands)
Net sales$ 140,622 $ 111,026 26.7 % Operating income 36,700 17,335 111.7
Sales for the first quarter of 2022 increased primarily as a result of strong
demand and an increase in price in certain product lines, as well as incremental
sales of
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first quarter of 2022 and 2021:
For the Quarter Ended
(In thousands) March 26, 2022 March 27, 2021
Cost of goods sold $ 93,957 $ 84,082
Depreciation and amortization 2,352 2,629
Selling, general and administrative expense 7,613 6,980
Operating expenses $ 103,922 $ 93,691
For the Quarter Ended
March 26, 2022 March 27, 2021
Cost of goods sold 66.8 % 75.7 %
Depreciation and amortization 1.7 2.4
Selling, general and administrative expense 5.4 6.3
Operating expenses 73.9 % 84.4 %
Cost of goods sold increased during the first quarter of 2022, consistent with
the increase in net sales. Gross margin as a percentage of sales was 33.2
percent compared with 24.3 percent in the prior year quarter. The increase in
gross margin percent reflects effective price management in response to
significant inflation in wages, and material, consumable, freight, and
distribution costs. Depreciation and amortization decreased by
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Liquidity and Capital Resources
The following table presents selected financial information for the first quarter of 2022 and 2021: (In thousands) 2022 2021 Increase (decrease) in: Cash, cash equivalents, and restricted cash$ 60,821 $ 21,655 Property, plant, and equipment, net (4,851) 8,281 Total debt 35 64,864 Working capital, net of cash and current debt 101,058 110,409
Net cash provided by (used in) operating activities 62,859 (22,581) Net cash provided by (used in) investing activities 1,919 (21,526) Net cash (used in) provided by financing activities (4,258) 64,978
Cash Flows from Operating Activities
During the quarter ended
During the quarter ended
Cash Flows from Investing Activities
The major components of net cash provided by investing activities during the
quarter ended
The major components of net cash used in investing activities during the quarter
ended
Cash Flows from Financing Activities
For the quarter ended
For the quarter ended
Liquidity and Outlook
We believe that cash provided by operations, funds available under the Credit Agreement, and cash on hand will be adequate to meet our liquidity needs, including working capital, capital expenditures, and debt payment obligations.
As of
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We have significant environmental remediation obligations which we expect to pay
over future years. Cash used for environmental remediation activities was
approximately
The Company declared a quarterly cash dividend of
Long-Term Debt
As of
The Company's Credit Agreement provides for an unsecured
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
Share Repurchase Program
The Board of Directors has extended, until
Contractual Cash Obligations
There have been no significant changes in our contractual cash obligations
reported at
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