Mueller Industries Inc. Reports Operating Results (10-K)
Mueller Industries Inc. has a market cap of $1.28 billion; its shares were traded at around $33.92 with a P/E ratio of 20.68 and P/S ratio of 0.62. The dividend yield of Mueller Industries Inc. stocks is 1.18%.Hedge Fund Gurus that owns MLI: Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns MLI: Chuck Royce of Royce& Associates, Mario Gabelli of GAMCO Investors.
Highlight of Business Operations:The majority of the Company s manufacturing facilities operated at significantly below capacity during 2010 and 2009 due to the reduced demand for the Company s products arising from the general economic conditions in the U.S. and foreign markets that the Company serves. The U.S. housing and residential construction market has been adversely affected in the recent economic downturn. Per the U.S. Census Bureau, new housing starts in the U.S. were 588 thousand in 2010, which was a six percent increase compared with 554 thousand in 2009 and much lower than the historical amounts of 906 thousand in 2008 and 1.4 million in 2007. The December 2010 seasonally adjusted annual rate of new housing starts was 529 thousand, which is a decrease of eight percent compared with the December 2009 rate of 576 thousand. Housing construction activity and new home sales slowed significantly following the expiration of homebuyer tax incentives in April 2010. This is reflected in the year over year increase in housing starts and the year over year decrease in the December seasonally adjusted annual rates. Mortgage rates have remained at low levels during 2010 and 2009, as the average 30-year fixed mortgage rate was 4.71 percent in December 2010 and 4.93 percent in December 2009. Commercial construction has also declined significantly in the past two years. According to the U.S. Census Bureau, the private nonresidential value of construction put in place was $265.9 billion in 2010, $346.7 billion in 2009, and $408.6 billion in 2008. Business conditions in the U.S. automotive industry have also been exceptionally difficult in the economic downturn, which affected the demand for various products in the Company s OEM segment; however, some improvements have recently occurred. All of these conditions have significantly affected the demand for virtually all of the Company s core products.
Compliance with environmental laws and regulations is a matter of high priority for the Company. Mueller s provision for environmental matters related to all properties was $5.4 million for 2010 and $1.1 million for 2009. The reserve for environmental matters was $23.9 million at December 25, 2010 and $23.3 million at December 26, 2009. Environmental costs related to non-operating properties are classified as a component of other (expense) income, net and costs related to operating properties are included in cost of goods sold. The Company does not anticipate that it will need to make material expenditures for compliance activities related to existing environmental matters during the remainder of the 2011 fiscal year, or for the next two fiscal years.
On December 2, 2010, the United States District Court for Utah entered a consent decree between the Company, the United States and the State of Utah. The decree resolves the claims asserted by the U.S. and the State of Utah related to Eureka Mills Superfund Site located in Juab County, Utah. The Company s connection to the Eureka Mills Site is through land within the site that was owned by Sharon Steel Corporation (Sharon), its predecessor, and a 1979 transaction with UV Industries (UV) in which Sharon allegedly assumed certain of UV s liabilities. The Company has provided $2.5 million to settle its claims, of which $250 thousand was paid to the State of Utah in December 2010 and the remainder was paid to the U.S. in February 2011.
Mining Remedial Recovery Company (MRRC), a wholly owned subsidiary, owns certain inactive mines in Shasta County, California. MRRC has continued a program, begun in the late 1980 s, of sealing mine portals with concrete plugs in mine adits which were discharging water. The sealing program has achieved significant reductions in the metal load in discharges from these adits; however, additional reductions are required pursuant to an order issued by the California Regional Water Quality Control Board (QCB). In response to a 1996 Order issued by the QCB, MRRC completed a feasibility study in 1997 describing measures designed to mitigate the effects of acid rock drainage. In December 1998, the QCB modified the 1996 order extending MRRC s time to comply with water quality standards. In September 2002, the QCB adopted a new order requiring MRRC to adopt Best Management Practices (BMP) to control discharges of acid mine drainage. That order extended the time to comply with water quality standards until September 2007. During that time, implementation of BMP further reduced impacts of acid rock drainage; however full compliance has not been achieved. The QCB is presently renewing MRRC s discharge permit and will concurrently issue a new order. It is expected that the new permit will include an order requiring continued implementation of BMP through 2015 to address residual discharges of acid rock drainage. At this site, MRRC spent approximately $0.7 million in 2010, $0.5 million in 2009, and $0.5 million in 2008, and estimates that it will spend between approximately $8.6 million and $11.3 million over the next 20 years.
U.S.S. Lead Refinery, Inc. (Lead Refinery), a non-operating wholly owned subsidiary of MRRC, has conducted corrective action and interim remedial activities and studies (collectively, Site Activities) at Lead Refinery s East Chicago, Indiana site pursuant to the Resource Conservation and Recovery Act. Site Activities, which began in December 1996, have been substantially concluded. Lead Refinery is required to perform monitoring and maintenance activities with respect to Site Activities pursuant to a post-closure permit issued by the Indiana Department of Environmental Management (IDEM) effective as of January 22, 2008. Lead Refinery spent approximately $0.1 million annually in 2010, 2009, and 2008 with respect to this site. Approximate costs to comply with the post-closure permit, including associated general and administrative costs, are between $2.1 million and $3.2 million over the next 20 years.
On January 25, 2010, the Company received Citations and a Notification of Penalties from the Occupational Safety and Health Administration (OSHA) proposing civil penalties totaling approximately $0.7 million for various health and safety violations following inspections in 2009 of certain plants operated by subsidiaries in Fulton, Mississippi. The Company has executed a final agreement with OSHA and the penalties have been reduced to approximately $0.4 million. The resolution of these matters did not have a material adverse effect on the Company s financial condition, results of operations or cash flows.
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