GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Mueller Industries Inc. Reports Operating Results (10-Q)

October 21, 2010 | About:
insider

10qk

18 followers
Mueller Industries Inc. (MLI) filed Quarterly Report for the period ended 2010-09-25.

Mueller Industries Inc. has a market cap of $1.1 billion; its shares were traded at around $29.04 with a P/E ratio of 19.8 and P/S ratio of 0.7. The dividend yield of Mueller Industries Inc. stocks is 1.4%.MLI is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net sales by the Plumbing & Refrigeration segment were $282.7 million in the third quarter of 2010, which was approximately an 17 percent increase from $240.9 million for the same period in 2009. The increase was due to increased selling prices resulting from higher average raw material costs. Domestic unit volumes increased slightly which were partially offset by volume decreases in the European and Mexican operations. Volumes continue to reflect adverse conditions in the residential and commercial construction markets. Of the $41.8 million increase in net sales, approximately $31.4 million was attributable to higher selling prices in the segment s core product lines consisting primarily of copper tube, line sets, and fittings and approximately $8.1 million related to unit volume increases in these same core product lines. Cost of goods sold increased from $200.0 million in the third quarter of 2009 to $245.0 million in the third quarter of 2010. This increase primarily resulted from increased raw material costs and increased volume. Depreciation and amortization decreased approximately $0.5 million reflecting certain assets becoming fully depreciated. Selling, general, and administrative expense increased to $20.1 million in the third quarter of 2010 from $18.3 million in the third quarter of 2009 due primarily to increased professional fees and increased employment costs including incentive compensation. Operating income for the segment decreased from $16.0 million in the third quarter of 2009 to $11.5 million in the third quarter of 2010 due primarily to decreased unit spreads in many of the segment s core product lines and increased unit conversion costs.

Net sales for the OEM segment increased approximately 26 percent to $229.0 million in the third quarter of 2010 from $181.6 million in the third quarter of 2009. The increase was due primarily to higher selling prices resulting from increased average costs of raw material and increased volume. Of the $47.4 million increase in net sales, approximately $25.8 million was due to increased selling prices in the segment s core product lines consisting primarily of brass rod, forgings, and commercial tube and $11.7 million was attributable to increased unit volume. Cost of goods sold increased from $156.4 million in the third quarter 2009 to $196.9 million in the third quarter of 2010. The increase was due primarily to increased sales volume, higher raw material costs, and higher aggregate conversion costs resulting from increased production. Depreciation and amortization remained consistent. Selling, general, and administrative expense increased moderately to $5.5 million in the third quarter of 2010 compared to $5.2 million in the third quarter of 2009, due primarily to increased employment costs, including incentive compensation. Operating income for the segment improved from $16.5 million in the third quarter of 2009 to $23.0 million in the third quarter of 2010 due primarily to increased sales volumes and improved spreads across all of the segment s core product lines, especially brass rod.

Cost of goods sold increased from $954.8 million in the first nine months of 2009 to $1.32 billion in the same period of 2010. The increase was primarily due to the increased average cost of raw material, volume increases, and to a lesser extent, increased aggregate conversion costs as a result of increased production. Depreciation and amortization decreased $0.9 million. Selling, general, and administrative expense was $99.6 million for the first nine months of 2010 compared with $89.1 million for the same period of 2009. The increase was primarily due to increased incentive compensation, increased foreign currency transaction losses of $2.3 million related to the British pound sterling, and increased bad debt expense of $3.2 million.

Net sales by the Plumbing & Refrigeration segment were $825.1 million in the nine months ended September 25, 2010, which was approximately a 25 percent increase from $661.0 million for the same period in 2009. The increase was due to increased selling prices resulting from higher average raw material costs. Unit volumes were consistent for both periods reflecting adverse conditions in the residential and commercial construction markets. The $164.1 million increase in net sales consisted of approximately $167.6 million attributable to higher selling prices in the segment s core product lines consisting primarily of copper tube, line sets, and fittings; partially offset by approximately $14.6 million unfavorable volume mix among the segment s product lines. Cost of goods sold increased from $545.3 million in the first nine months of 2009 to $696.0 million in the first nine months of 2010. This increase resulted from increased raw material costs. Depreciation and amortization decreased approximately $0.9 million reflecting certain assets becoming fully depreciated. Selling, general, and administrative expense increased $2.1 million in the first nine months of 2010 due primarily to increased incentive compensation. During the nine months ended September 25, 2010, the Company settled an insurance claim related to the November 2008 fire at its U.K. copper tube facility, resulting in a cumulative net gain of $21.3 million. Operating income for the segment increased from $38.2 million in the first nine months of 2009 to $71.7 million in the first nine months of 2010 due primarily to the insurance settlement gain at the U.K. copper tube facility and improved spreads in certain product lines including copper tube and the Company s Mexican operations.

Net sales for the OEM segment increased approximately 56 percent to $719.0 million in the nine months ended September 25, 2010 from $459.9 million in the same period of 2009. The increase was due primarily to higher selling prices resulting from increased average costs of raw material and increased volume. Of the $259.1 million increase in net sales, approximately $131.9 million was attributable to increased selling prices in the segment s core product lines consisting primarily of brass rod, forgings, and commercial tube and $103.3 million was due to increased unit volume in the same product lines. Cost of goods sold increased from $415.2 million in the first nine months of 2009 to $632.0 million in the first nine months of 2010. The increase was due primarily to increased sales volume, higher raw material costs, and higher aggregate conversion costs resulting from increased production. Depreciation and amortization remained consistent. Selling, general, and administrative expense increased $4.5 million to $20.2 million in the first nine months of 2010 due primarily to increased bad debt expense of $3.0 million and increased employment costs, including incentive compensation. Operating income for the segment improved from $18.3 million in the first nine months of 2009 to operating income of $56.1 million in the first nine months of 2010 due primarily to increased sales volume and improved spreads across all of the segment s core product lines.

During the first nine months of 2010, cash provided by investing activities totaled $3.1 million. The net cash inflow resulted from insurance proceeds of approximately $17.7 million related to the property and equipment damage claim with respect to the Company s U.K. copper tube facility, partially offset by $14.2 million of capital expenditures. On August 6, 2010 the Company purchased certain assets from Linesets, Inc., a manufacturer of assembled line sets. Cash paid for this acquisition of approximately $2.0 million was allocated primarily to inventory and machinery and equipment. Cash used in financing activities during the nine months ended September 25, 2010 totaled $9.9 million, which consisted primarily of dividends paid of $11.3 million and net repayment of debt at Mueller-Xingrong of $1.1 million, partially offset by proceeds from the exercise of stock options of $2.5 million.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 2.5/5 (2 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK