5-Year Review
(Dollars in thousands except per share data)
2015
2014
2013
2012
2011
SUMMARY OF OPERATIONS
Net sales
Operating income
Net income
Diluted earnings per share
Dividends per share
SIGNIFICANT YEAR-END DATA
$ 2,100,002
137,268
$
87,864
$
1.54
$
0.30
$
$ 2,364,227
153,996
$
101,560
$
1.79
$
0.30
$
$ 2,158,541
270,937
$
172,600
$
3.06
$
0.25
$
$ 2,189,938
126,705
$
82,395
$
$
1.15
0.2125
$
$ 2,417,797
139,802
$
86,321
$
1.13
$
0.20
$
Cash and cash equivalents
Ratio of current assets to current liabilities
Book value per share
$
$
274,844
3.8 to 1
14.47
$
$
352,134
4.0 to 1
13.39
$
$
311,800
4.0 to 1
12.43
$
$
198,934
2.9 to 1
9.02
$
$
514,162
4.8 to 1
11.19
Board of Directors
GREGORY L. CHRISTOPHER
Chairman of the Board and
Chief Executive Officer
Mueller Industries, Inc.
GARY S. GLADSTEIN
Lead Independent Director,
Mueller Industries, Inc.
Independent Investor & Consultant
SCOTT J. GOLDMAN
CEO and Co-Founder,
TextPower, Inc.
Executive Team
GREGORY L. CHRISTOPHER
Chief Executive Officer
BRIAN K. BARKSDALE
Vice President, Marketing
DANIEL R. CORBIN
Vice President, Corporate
PAUL J. FLAHERTY
Advisory Board Member,
AON Risk Services, Inc.
GENNARO J. FULVIO
Member,
Fulvio & Associates, LLP
JOHN B. HANSEN
Independent Investor & Consultant
TERRY HERMANSON
President,
Mr. Christmas Incorporated
HARVEY L. KARP
Chairman Emeritus,
Mueller Industries, Inc.
JEFFREY A. MARTIN
Chief Financial Officer and Treasurer
MARK MILLERCHIP
Executive Director, European Operations
NICHOLAS W. MOSS
President, B&K, LLC
NADIEM UMAR
President, International
DOUGLAS J. MURDOCK
President, Climate Products
GARY C. WILKERSON
Vice President, General Counsel
and Secretary
DONALD GLOVER
President, Industrial Metals
STEFFEN SIGLOCH
President, Piping Systems North America
Operational Business Groups
INDUSTRIAL METALS
Extruded Metals, Inc. | Lincoln Brass Works, Inc. | Micro Gauge Inc. | Mueller Brass Co. | Mueller Brass Forging Company, Inc.
Mueller Impacts Company, Inc. | Propipe Technologies, Inc. | Sherwood Valve, LLC
PIPING SYSTEMS
B&K, LLC | Great Lakes Copper, Ltd. | Howell Metal | Linesets, Inc. | Mueller Comercial de Mexico
Mueller Copper Tube Company | Mueller Europe Limited | Mueller Fittings Company, Inc.
Mueller Plastics Corporation, Inc. | Mueller-Xingrong | Precision Tube Company, LLC
CLIMATE PRODUCTS
Changzhou Mueller Refrigerant Valve Manufacturing Co., Ltd. | Fabricated Tube Products | Mueller Refrigeration, LLC
Turbotec Products, Inc. | Westermeyer Industries, Inc.
Mueller Industries’ net sales for 2015 totaled $2.1 billion, compared with
$2.4 billion for 2014. Net income was $87.9 million versus $101.6 million
for the prior year.
Business Overview
The housing and commercial construction industries enjoyed continued growth in 2015. New home construction
continued its multi-year upward trend with housing starts rising 10.7% over 2014. Spending in the commercial
construction segment was also up a healthy 9% over 2014, growing for the second consecutive year. All of this was
positive for Mueller Industries’ Piping Systems Group, which is largely dependent on the building construction sectors.
The Piping Systems Group comprises approximately 68% of the Company’s revenues.
Positive news in the building construction industry was offset by the contraction in demand in the industrial-related
markets, which both our Industrial Metals and our Climate Products Business Groups serve. Combined, these two
business groups make up the other 32% of our Company’s revenues, and both experienced associated declines.
Driven in large part by OEMs, the softening in these markets prompted customers to reduce inventories and to
in-source products to help maintain employment levels. In addition, the strengthening of the US dollar invited
increased import competition and with that, a few more challenges.
“ We note that the single most discernable impact on our results
in 2015 was the worldwide freefall of copper price ”
As a result, the Company’s overall unit volume ended the year on par with 2014. In addition to the contraction in the
industrial sectors, we did not benefit proportionately from the positive building construction environment in 2015.
During peak periods of demand, our supply was constrained in our US copper tube business as we were in a critical
phase of the Copper Tube modernization project, which temporarily hindered production. This is discussed in greater
detail below.
We note that the single most discernable impact on our results in 2015 was the worldwide freefall of copper prices,
which declined 20% from levels experienced in 2014. Copper is the principal material used in the majority of our
product offerings across all business segments. Consequently, copper’s price decline largely contributed to a 13.4%
decline in reported revenues, and had an adverse effect of more than $25 million on our operating income.
Operations Overview
Our Company made significant operational improvements in 2015, fueled by $201 million worth of investments
in capital expenditures and acquisitions throughout the year. Our most prominent spending for capex was in
our Brass Rod and Copper Tube mills, where we are committed to reinvest in our core businesses to be the
low-cost producer.
The culmination of a four-year effort, the modernization of our Port Huron, Michigan Brass Rod mill was
completed in 2015. The equipment is fully commissioned and operating as expected as of the latter part of the
fourth quarter. With this new, faster, more capable and reliable technology, we hope to achieve world-class levels
of quality and competitiveness.
Over the same time period, our Copper Tube plant located in Fulton, Mississippi also has been undergoing a
modernization effort. The Fulton project is considerably more extensive and costly. In 2015, we successfully
installed the bulk of the extrusion and drawing equipment, while we continued to operate our mill with
manageable disruption. We remain on track and anticipate completion of the Fulton modernization in 2017.
Projects such as these, from concept to completion, are quite expansive and complex. Long lead times for
building the equipment, extensive effort for preparing our facilities and coordinating installation, as well as the
commissioning of the equipment and training of our team members extend these projects over multiple years.
Our investments prepare these businesses well for the future.
We are committed to investing in areas that extend our core and build new competencies and capabilities for
future growth. In that spirit of commitment, we were pleased to complete the new Mueller Lineset manufacturing
plant in Fulton, Mississippi. Completed in November 2015, this new plant is optimally located adjacent to our
Fulton Copper Tube mill, which provides the feedstock for lineset production. The new plant will increase
capacity, reduce manufacturing and supply chain costs, and allow us to expand our product range, including the
manufacture and distribution of our new polyethylene linesets.
We also completed the building expansion at our Westermeyer Industries business in Bluffs, Illinois.
Westermeyer manufactures vessels that support the air-conditioning and refrigeration systems. The extension of
the facility enhances our capability to manufacture more and much larger vessels. In addition to supporting the
increasing demand of customers we currently serve, this investment enables us to grow into new markets such
as industrial refrigeration, chemicals, and the oil and gas industries.
Our investments extended across the Atlantic to Europe, where we completed the consolidation of the Yorkshire
Copper Tube mill in Kirkby, UK into our Wednesbury Copper Tube mill in Bilston, UK. Our Bilston operation is one
of the most modern of its kind in Europe, and all of the necessary improvements are complete and operational.
We closed the Kirkby operations in August of 2015, and all redundancy and related expenses were accounted for
and recorded by year-end.
In addition to these capex projects, our ongoing focus and investment in product development yielded the
commercialization of our new trans-critical CO2 (XHP) copper piping system. Our new XHP product was
developed to support the increasing demand for systems requiring extra high pressures and temperatures.
Mueller Industries has long been a trusted leader in refrigeration systems. XHP expands our offerings to meet
new regulatory requirements related to promoting greener, more efficient systems. XHP is a complete system
which includes pipe, valves, and fittings.
The above investments consumed a large percentage of the $29 million we recorded in capital project
spending in 2015. A more extensive amount of our cash was deployed in our landmark year for acquisitions.
The completion of four acquisitions during 2015 used a total of $172 million of cash on hand.
In March of 2015, we completed the acquisition of Turbotec Products. Located in Hickory, North Carolina,
Turbotec specializes in high performance heat exchange technologies, with approximately $22 million in annual
net sales. This acquisition complements our Climate Products Business Group and expands the product offerings
and customer base of our current shell and tube heat exchange business.
At the end of June, our second acquisition was completed with the purchase of Sherwood Valve Co. Sherwood
has operations in Washington, Pennsylvania and Cleveland, Ohio with net sales of $45 million. In addition to the
Sherwood line of compressed gas valves, Sherwood is the parent to the Superior refrigeration valve brand.
The Superior line of refrigeration valves complements Mueller Streamline’s own extensive history in refrigeration
products, including Streamline valves, driers, fittings, and other related products. The Sherwood acquisition also
carries with it strong competencies and capabilities in the areas of brass manufacturing, forging, and machining.
These will complement Mueller Industries’ brass forgings and machining businesses, and will support our
strategic growth plan in our brass value-added products platform.
“ Our investments contributed key puzzle pieces in
positioning our Company for the future ”
Our third acquisition, Great Lakes Copper, was completed in July. Great Lakes Copper is located in London,
Ontario, and had net sales just shy of $300 million US in the 12 months prior to our acquisition. Great Lakes
Copper is the sole manufacturer of copper tube and linesets in Canada. This acquisition not only expands our
manufacturing footprint geographically, but also broadens our capabilities in the US with the unique products
and process competencies that Great Lakes Copper possesses.
Our final and largest acquisition was completed in September. Early in 2015, Mueller Industries joined forces
with Atlas Holdings LLC, out of Greenwich, CT, to acquire Tecumseh Products Company (formerly Nasdaq
TECU). Tecumseh is a recognized leader in the manufacture of hermetically-sealed compressors that service
the refrigeration and HVAC markets globally. Operating in 8 countries with over 5,000 employees, Tecumseh’s
net annual sales exceed $600 million. We completed the transaction on September 22, 2015.
Our partnership with Atlas leverages Mueller Industries’ operational and commercial strengths in the
air-conditioning and refrigeration sector with Atlas’ proven excellence in rehabilitating companies with diverse
complexities and challenges like those faced by Tecumseh. In the short period of time since our acquisition,
our optimism about Tecumseh’s potential continues to increase, despite the long road ahead.
Outlook for 2016
Here in the US, despite consecutive years of improvement, housing starts remain at relatively low levels
by historical standards. With 30-year mortgage rates below 4%, unemployment at 8-year lows, and the
supply of homes for sale at historically low levels, the housing industry has ample potential to improve.
The commercial construction industry is also coming off consecutive years of improvement driven largely by
private sector spending. Eventual investment in US infrastructure, schools, and other public institutions would
encourage our expectation for continued improvement in the commercial construction industry, albeit at more
modest levels than we saw in 2015.
“ Our cash on hand, combined with a low level of
debt, gives us a rock-solid balance sheet ”
Globally, things have become clear as mud. Commodity deflation, currency weakness abroad, and the potential
of Brexit are all symptoms of broader economic uncertainty. The outlook for copper is centrally important to
Mueller Industries’ business. We believe that the significant impact to our FIFO businesses in 2015, due to
the decline in copper, is not likely to repeat itself. Copper ended the year at LME $4,702 per metric tonne
($2.13 per lb). Copper prices near $2.00 per lb are at or below the cash costs of production of some mining
properties, which may ultimately result in constrained supply.
As we navigate into 2016, we feel confident about our company as we head into our 99th year of business.
In 2015 our Company generated $160 million in cash from operations. Net of the $201 million in investments
we made, we ended the year with $275 million in cash on hand. This combined with a low level of debt gives us
a rock-solid balance sheet and the powder to continue to fund opportunities that we feel will support our growth
strategies and make us a better, stronger company for the future.
In Closing
In essence, our 2015 financial results belie the significant body of work completed this year. Our investments
contributed key puzzle pieces in positioning our Company for the future. All of the businesses within our
3 business groups – Piping Systems, Industrial Metals, and Climate Products – are well capitalized, excellently
led, and have very clear and focused roadmaps for 2016 and beyond. We welcome the vast number of
newcomers to our Company this past year. In conjunction with the talented and dedicated team of
Mueller Industries employees, they will continue the tradition of making Mueller Industries the best of
the best. We appreciate the dedication of all our employees and we are proud of their many accomplishments
this past year.
Sincerely,
Gregory L. Christopher
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 26, 2015
Commission file number 1–6770
MUELLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
8285 Tournament Drive, Suite 150
Memphis, Tennessee
(Address of principal executive offices)
25-0790410
(I.R.S. Employer
Identification No.)
38125
(Zip Code)
Registrant’s telephone number, including area code: (901) 753-3200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.01 Par Value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes S
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £
No £
No S
Indicate by a 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 S
No £
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files). Yes S
No £
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. S
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer S
Non-accelerated filer £
Accelerated filer £
Smaller reporting company £
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £
No S
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal
quarter was $1,997,772,278.
The number of shares of the Registrant’s common stock outstanding as of February 19, 2016 was 57,158,608 excluding 23,024,396 treasury shares.
Portions of the following document are incorporated by reference into this Report: Registrant’s Definitive Proxy Statement for the 2016 Annual Meeting of
Stockholders, scheduled to be mailed on or about March 24, 2016 (Part III).
DOCUMENTS INCORPORATED BY REFERENCE
MUELLER INDUSTRIES, INC.
_____________________
As used in this report, the terms “we,” “us,” “our,” “Company,” “Mueller,” and “Registrant” mean Mueller Industries,
Inc. and its consolidated subsidiaries taken as a whole, unless the context indicates otherwise.
____________________
TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Signatures
Index to Consolidated Financial Statements
Page
3
6
9
9
10
10
11
14
14
15
15
15
15
18
18
18
19
19
19
20
23
F-1
2
ITEM 1.
BUSINESS
Introduction
PART I
Mueller Industries, Inc. (the Company) is a leading manufacturer of copper, brass, aluminum, and plastic
products. The range of these products is broad: copper tube and fittings; line sets; 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; fabricated tubular products; and steel nipples. We also resell imported brass and
plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. Our operations are located
throughout the United States and in Canada, Mexico, Great Britain, and China.
Our businesses are aggregated into two reportable segments:
• Plumbing & Refrigeration: The Plumbing & Refrigeration segment is composed of Standard Products
(SPD), Great Lakes Copper Ltd. (Great Lakes), European Operations, and Mexican Operations. SPD
manufactures and sells copper tube, copper and plastic fittings, line sets, and valves in North America and
sources products for import distribution in North America. Great Lakes manufactures copper tube and line
sets in Canada and sells its products primarily in the U.S. and Canada.
European Operations manufacture
copper tube in the United Kingdom, which is sold throughout Europe. 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 sells products to wholesalers in the
heating, ventilation, and air conditioning (HVAC), plumbing, and refrigeration markets, to distributors to the
manufactured housing and recreational vehicle industries, and to building material retailers.
• Original Equipment Manufacturers (OEM): The OEM segment is composed of Industrial Products (IPD),
Engineered Products (EPD), and Jiangsu Mueller–Xingrong Copper Industries Limited (Mueller-Xingrong),
the Company’s Chinese joint venture. 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. Mueller-Xingrong manufactures
engineered copper tube primarily for air-conditioning applications; these products are sold primarily to
OEMs located in China. The OEM segment sells its products primarily to original equipment manufacturers,
many of which are in the HVAC, plumbing, refrigeration, and industrial markets.
Certain administrative expenses and expenses related primarily to retiree benefits at inactive operations are combined
into the Corporate and Eliminations classification.
Financial information concerning segments and geographic information appears under “Note 16 - Industry Segments”
in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
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 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.
Mueller was incorporated in Delaware on October 3, 1990.
Plumbing & Refrigeration Segment
The Plumbing & Refrigeration segment includes SPD, which manufactures a broad line of copper tube in sizes
ranging from 1/8 inch to 8 inch diameter that is sold in various straight lengths and coils. We are a market leader in the
air-conditioning and refrigeration service tube markets and we also supply a variety of water tube in straight lengths
and coils used for plumbing applications in virtually every type of construction project. Additionally, SPD
manufactures copper and plastic fittings, line sets, and related components for the plumbing and heating industry that
are used in water distribution systems, heating systems, air-conditioning, and refrigeration applications, and drainage,
3
waste, and vent systems. Lastly, SPD imports and redistributes residential and commercial plumbing products. A
major portion of SPD’s products are ultimately used in the domestic residential and commercial construction markets.
This segment also includes Great Lakes, which manufactures copper tube and line sets in Canada, European
Operations, which manufacture copper tube for distribution in Europe, and Mexican Operations, which fabricates steel
pipe nipples and resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing
specialty products to plumbing wholesalers, distributors to the manufactured housing and recreational vehicle
industries and building materials retailers.
We acquired Howell Metal Company (Howell) on October 17, 2013, Yorkshire Copper Tube (Yorkshire) on February
28, 2014, and Great Lakes Copper (Great Lakes) on July 31, 2015. Howell manufactures copper tube and line sets for
U.S. distribution while Yorkshire produces European standard copper distribution tubes. Great Lakes manufactures
copper tube and line sets for distribution in Canada and the U.S. These acquisitions complement our existing copper
tube businesses in the Plumbing & Refrigeration segment.
We disposed of Mueller Primaflow Limited (Primaflow), our U.K. based plumbing and heating systems import
distribution business, on November 21, 2014. This business was part of European Operations in the Plumbing &
Refrigeration segment.
This segment markets primarily through its own sales and distribution organization, which maintains sales offices and
distribution centers throughout the United States and in Canada, Mexico, and Europe. Additionally, products are sold
and marketed through a complement of agents, which, when combined with our sales organization, provide the
Company broad geographic market representation.
The total amount of order backlog for the Plumbing & Refrigeration segment as of December 26, 2015 was not
significant.
We compete with various companies, depending on the product line. In the U.S. copper tube business, domestic
competition includes Cerro Flow Products LLC, Cambridge-Lee Industries LLC (a subsidiary of Industrias Unidas
S.A. de C.V.), and KobeWieland Copper Products LLC, as well as many actual and potential foreign competitors. In
the European copper tube business, we compete with several European-based manufacturers of copper tube as well as
other foreign-based manufacturers. In the Canadian copper tube business, our competitors include Wolseley plc and
Crane Plumbing, as well as other foreign-based manufacturers. In the copper fittings market, our domestic
competitors include Elkhart Products Company (a subsidiary of Aalberts Industries N.V.) and NIBCO, Inc. We also
compete with several foreign manufacturers. Additionally, our copper tube and fittings businesses compete with a
large number of manufacturers of substitute products made from other metals and plastic. The plastic fittings
competitors include NIBCO, Inc., Charlotte Pipe & Foundry, and other companies.
OEM Segment
The OEM segment includes IPD, which manufactures brass rod, nonferrous forgings, and impact extrusions that are
sold primarily to OEMs in the plumbing, refrigeration, fluid power, and automotive industries, as well as to other
manufacturers and distributors. We extrude brass, bronze, and copper alloy rod in sizes ranging from 3/8 inches to 4
inches in diameter. These alloys are used in applications that require a high degree of machinability, wear and
corrosion resistance, as well as electrical conductivity. IPD also manufactures brass and aluminum forgings, which
are used in a wide variety of products, including automotive components, brass fittings, industrial machinery, valve
bodies, gear blanks, and computer hardware. Lastly, IPD serves the automotive, military ordnance, aerospace, and
general manufacturing industries with cold-formed aluminum and copper impact extrusions. Typical applications for
impacts are high strength ordnance, high-conductivity electrical components, builders’ hardware, hydraulic systems,
automotive parts, and other uses where toughness must be combined with varying complexities of design and finish.
This segment also includes EPD and Mueller-Xingrong. EPD manufactures and fabricates valves and custom OEM
products for refrigeration, air-conditioning, gas appliance, and barbecue grill applications, Mueller-Xingrong
manufactures engineered copper tube primarily for air-conditioning applications. The total amount of order backlog
for the OEM segment as of December 26, 2015 was not significant.
4
On August 16, 2012, we acquired 100 percent of the outstanding stock of Westermeyer Industries, Inc.
(Westermeyer), located in Bluffs, Illinois. Westermeyer designs, manufactures, and distributes high-pressure
components and accessories for the air-conditioning and refrigeration markets.
On March 30, 2015, we acquired 100 percent of the outstanding stock of Turbotec Products, Inc. (Turbotec) with
locations in Hickory, North Carolina and Bloomfield, Connecticut. Turbotec manufactures coaxial heat exchangers
and twisted tubes for the HVAC, geothermal, refrigeration, swimming pool heat pump, marine, ice machine,
commercial boiler, and heat reclamation markets.
On June 18, 2015, we acquired all of the outstanding membership interests of Sherwood Valve Products, LLC
(Sherwood) with locations in Washington, Pennsylvania, Valley View, Ohio, and Brooklyn, Ohio. Sherwood
manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets.
The acquisitions of Westermeyer, Turbotec, and Sherwood complement our existing refrigeration business.
IPD and EPD primarily sell directly to OEM customers. Competitors, primarily in the brass rod market, include
Chase Brass and Copper Company, a subsidiary of Global Brass and Copper Holdings, Inc., and others, both domestic
and foreign. Outside of North America, IPD and EPD sell products through various channels.
Labor Relations
At December 26, 2015, the Company employed approximately 4,104 employees, of which approximately 1,865 were
represented by various unions. Those union contracts will expire as follows:
Location
Port Huron, Michigan (Local 218 IAM)
Port Huron, Michigan (Local 44 UAW)
Port Huron, Michigan (Local 119 SPFPA)
Belding, Michigan
Wynne, Arkansas
Fulton, Mississippi
North Wales, Pennsylvania
Washington, Pennsylvania
Waynesboro, Tennessee
Expiration Date
May 1, 2016
July 20, 2016
April 1, 2016
September 14, 2018
June 28, 2018
September 30, 2018
July 31, 2018
July 25, 2016
November 2, 2018
The union agreements at the Company’s U.K. and Mexico operations are renewed annually. The Company expects to
renew its union contracts without material disruption of its operations.
Raw Material and Energy Availability
A substantial portion of our base metal requirements (primarily copper) is normally obtained through short-term
supply contracts with competitive pricing provisions (for cathode) and the open market (for scrap). Other raw
materials used in the production of brass, including brass scrap, zinc, tin, and lead are obtained from zinc and lead
producers, open-market dealers, and customers with brass process scrap. Raw materials used in the fabrication of
aluminum and plastic products are purchased in the open market from major producers.
Adequate supplies of raw material have historically been available to us from primary producers, metal brokers, and
scrap dealers. Sufficient energy in the form of natural gas, fuel oils, and electricity is available to operate our
production facilities. While temporary shortages of raw material and fuels may occur occasionally, to date they have
not materially hampered our operations.
Our copper tube facilities can accommodate both refined copper and certain grades of copper scrap as the primary
feedstock. The Company has commitments from refined copper producers for a portion of its metal requirements for
2016. Adequate quantities of copper are currently available. While we will continue to react to market developments,
resulting pricing volatility or supply disruptions, if any, could nonetheless adversely affect the Company.
5
Environmental Proceedings
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 $0.1 million for 2015, $1.2 million for 2014, and $1.0
million for 2013. The reserve for environmental matters was $21.7 million at December 26, 2015 and $22.7 million at
December 27, 2014. Environmental costs related to non-operating properties are classified as a component of other
income, net and costs related to operating properties are included in cost of goods sold. We do not currently anticipate
that we will need to make material expenditures for compliance activities related to existing environmental matters
during the 2016 fiscal year, or for the next two fiscal years.
For a description of material pending environmental proceedings, see “Note 9 – Commitments and Contingencies” in
the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
Other Business Factors
Our business is not materially dependent on patents, trademarks, licenses, franchises, or concessions held. In addition,
expenditures for company-sponsored research and development activities were not material during 2015, 2014, or
2013. No material portion of our business involves governmental contracts. Seasonality of the Company’s sales is
not significant.
SEC Filings
We make available through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission (SEC). To retrieve any of this information, you may access our internet home
page at www.muellerindustries.com, select Investors, and then select SEC Filings.
ITEM 1A.
RISK FACTORS
The Company is exposed to risk as it operates its businesses. To provide a framework to understand our operating
environment, we are providing a brief explanation of the more significant risks associated with our
businesses. Although we have tried to identify and discuss key risk factors, others could emerge in the future. These
risk factors should be considered carefully when evaluating the Company and its businesses.
Increases in costs and the availability of energy and raw materials used in our products could impact our cost
of goods sold and our distribution expenses, which could have a material adverse impact on our operating
margins.
Both the costs of raw materials used in our manufactured products (copper, brass, zinc, aluminum, and PVC and ABS
resins) and energy costs (electricity, natural gas and fuel) have been volatile during the last several years, which has
resulted in changes in production and distribution costs. For example, recent and pending climate change regulation
and initiatives on the state, regional, federal, and international levels that have focused on reducing greenhouse gas
(GHG) emissions from the energy and utility sectors may affect energy availability and costs in the near future. While
we typically attempt to pass costs through to our customers or to modify or adapt our activities to mitigate the impact
of increases, we may not be able to do so successfully. Failure to fully pass increases to our customers or to modify or
adapt our activities
impact on our operating
margins. Additionally, if we are for any reason unable to obtain raw materials or energy, our ability to manufacture
our products would be impacted, which could have a material adverse impact on our operating margins.
impact could have a material adverse
to mitigate
the
The unplanned departure of key personnel could disrupt our business.
We depend on the continued efforts of our senior management. The unplanned loss of key personnel, or the inability
to hire and retain qualified executives, could negatively impact our ability to manage our business.
6
Economic conditions in the housing and commercial construction industries, as well as changes in interest
rates, could have a material adverse impact on our business, financial condition, and results of operations.
Our business is sensitive to changes in general economic conditions, particularly in the housing and commercial
construction industries. Prices for our products are affected by overall supply and demand in the market for our
products and for our competitors’ products. In particular, market prices of building products historically have been
volatile and cyclical, and we may be unable to control the timing and extent of pricing changes for our
products. Prolonged periods of weak demand or excess supply in any of our businesses could negatively affect our
revenues and margins and could result in a material adverse impact on our business, financial condition, and results of
operations.
The markets that we serve, including, in particular, the housing and commercial construction industries, are
significantly affected by movements in interest rates and the availability of credit. Significantly higher interest rates
could have a material adverse effect on our business, financial condition, and results of operations. Our businesses are
also affected by a variety of other factors beyond our control, including, but not limited to, employment levels, foreign
currency exchange rates, unforeseen inflationary pressures, and consumer confidence. Since we operate in a variety
of geographic areas, our businesses are subject to the economic conditions in each such area. General economic
downturns or localized downturns in the regions where we have operations could have a material adverse effect on our
business, financial condition, and results of operations.
Although conditions improved in 2013 and continued to improve in 2014 and 2015, the deterioration of the general
economic environment has had a significant negative impact on businesses and consumers around the world since the
crisis began in 2008. In addition, the impact of the economy on the operations or liquidity of any party with which we
conduct our business, including our suppliers and customers, may adversely impact our business.
Competitive conditions, including the impact of imports and substitute products and technologies, could have a
material adverse effect on the demand for our products as well as our margins and profitability.
The markets we serve are competitive across all product lines. Some consolidation of customers has occurred and
may continue, which could shift buying power to customers. In some cases, customers have moved production to
low-cost countries such as China, or sourced components from there, which has reduced demand in North America for
some of the products we manufacture. These conditions could have a material adverse impact on our ability to
maintain margins and profitability. The potential threat of imports and substitute products is based upon many factors,
including raw material prices, distribution costs, foreign exchange rates, production costs, and the development of
emerging technologies and applications. The end use of alternative import and/or substitute products could have a
material adverse effect on our business, financial condition, and results of operations. Likewise, the development of
new technologies and applications could result in lower demand for our products and have a material adverse effect on
our business.
Our exposure to exchange rate fluctuations on cross border transactions and the translation of local currency
results into U.S. dollars could have an adverse impact on our results of operations or financial position.
We conduct our business through subsidiaries in several different countries and export our products to many
countries. Fluctuations in currency exchange rates could have a significant impact on the competitiveness of our
products as well as the reported results of our operations, which are presented in U.S. dollars. A significant and
growing portion of our products are manufactured in or acquired from suppliers located in lower cost regions. Cross
border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign
exchange fluctuations. The strengthening of the U.S. dollar could expose our U.S. based businesses to competitive
threats from lower cost producers in other countries such as China. Lastly, our sales are translated into U.S. dollars for
reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects when the
results of foreign operations are translated into U.S. dollars. Accordingly, significant changes in exchange rates,
particularly the British pound sterling, Mexican peso, Canadian dollar, and Chinese renminbi, could have an adverse
impact on our results of operations or financial position.
7
We are subject to claims, litigation, and regulatory proceedings that could have a material adverse effect on us.
We are, from time-to-time, involved in various claims, litigation matters, and regulatory proceedings. These matters
may include contract disputes, personal injury claims, environmental claims, Occupational Safety and Health
Administration inspections or proceedings, other tort claims, employment and tax matters and other litigation
including class actions that arise in the ordinary course of our business. Although we intend to defend these matters
vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and there can
be no assurance as to the ultimate outcome of any litigation or regulatory proceeding. Litigation and regulatory
proceedings may have a material adverse effect on us because of potential adverse outcomes, defense costs, the
diversion of our management’s resources, availability of insurance coverage and other factors.
A strike, other work stoppage or business interruption, or our inability to renew collective bargaining
agreements on favorable terms, could impact our cost structure and our ability to operate our facilities and
produce our products, which could have an adverse effect on our results of operations.
As of December 26, 2015, approximately 1,865 of our 4,104 employees were covered by collective bargaining or
similar agreements. If we are unable to negotiate acceptable new agreements with the unions representing our
employees upon expiration of existing contracts, we could experience strikes or other work stoppages. Strikes or
other work stoppages could cause a significant disruption of operations at our facilities, which could have an adverse
impact on us. New or renewal agreements with unions representing our employees could call for higher wages or
benefits paid to union members, which would increase our operating costs and could adversely affect our
profitability. Higher costs and/or limitations on our ability to operate our facilities and manufacture our products
resulting from increased labor costs, strikes or other work stoppages could have a material adverse effect on our results
of operations.
In addition, unexpected interruptions in our operations or those of our customers or suppliers due to such causes as
weather-related events or acts of God, such as earthquakes, could have an adverse effect on our results of
operations. For example, the Environmental Protection Agency (EPA) has found that global climate change would be
expected to increase the severity and possibly the frequency of severe weather patterns such as hurricanes. Although
the financial impact of such future events is not reasonably estimable at this time, should they occur, our operations in
certain coastal and flood-prone areas or operations of our customers and suppliers could be adversely affected.
We are subject to environmental, health, and safety laws and regulations and future compliance may have a
material adverse effect on our results of operations, financial position, or cash flows.
The nature of our operations exposes us to the risk of liabilities and claims with respect to environmental, health, and
safety matters. While we have established accruals intended to cover the cost of environmental remediation at
contaminated sites, the actual cost is difficult to determine and may exceed our estimated reserves. Further, changes
to, or more rigorous enforcement or stringent interpretation of environmental or health and safety laws could require
significant incremental costs to maintain compliance. Recent and pending climate change regulation and initiatives
on the state, regional, federal, and international levels may require certain of our facilities to reduce GHG
emissions. While not reasonably estimable at this time, this could require capital expenditures for environmental
control facilities and/or the purchase of GHG emissions credits in the coming years. In addition, with respect to
environmental matters, future claims may be asserted against us for, among other things, past acts or omissions at
locations operated by predecessor entities, or alleging damage or injury or seeking other relief in connection with
environmental matters associated with our operations. Future liabilities, claims, and compliance costs may have a
material adverse effect on us because of potential adverse outcomes, defense costs, diversion of our resources,
availability of insurance coverage, and other factors. The overall impact of these requirements on our operations
could increase our costs and diminish our ability to compete with products that are produced in countries without such
rigorous standards; the long run impact could negatively impact our results and have a material adverse effect on our
business.
8
If we do not successfully execute or effectively operate, integrate, leverage and grow acquired businesses, our
financial results may suffer.
Our strategy for long-term growth, productivity and profitability depends in part on our ability to make prudent
strategic acquisitions and to realize the benefits we expect when we make those acquisitions. In furtherance of this
strategy, over the past several years, we have acquired businesses in Europe, Canada, and the United States.
While we currently anticipate that our past and future acquisitions will enhance our value proposition to customers and
improve our long-term profitability, there can be no assurance that we will realize our expectations within the time
frame we have established, if at all, or that we can continue to support the value we allocate to these acquired
businesses, including their goodwill or other intangible assets.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Information pertaining to our major operating facilities is included below. Except as noted, we own all of the principal
properties. In addition, we own and/or lease other properties used as distribution centers and corporate offices. Our
plants are in satisfactory condition and are suitable for the purpose for which they were designed and are now being
used.
Location of Facility
Building
Space (Sq. Ft.)
Primary Use
Owned or Leased
Plumbing & Refrigeration Segment
Fulton, MS
New Market, VA
Wynne, AR
Ontario, CA
Covington, TN
Phoenix, AZ
Lawrenceville, GA
Bilston, England
London, Ontario, Canada
Monterrey, Mexico
OEM Segment
Port Huron, MI
Belding, MI
North Wales, PA
Washington, PA
Bluffs, IL
Hickory, NC
Marysville, MI
649,500
413,120
400,000
211,000
159,500
61,000
56,000
402,500
200,400
152,000
450,000
293,068
174,000
108,275
107,000
100,000
81,500
579,500 Owned;
70,000 Leased
Owned
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Manufacturing &
Packaging
Manufacturing
Manufacturing &
Distribution
Manufacturing &
Distribution
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
9
Location of Facility
OEM Segment (cont.)
Hartsville, TN
Brooklyn, OH
Carthage, TN
Valley View, OH
Brighton, MI
Waynesboro, TN
Middleton, OH
Gordonsville, TN
Bloomfield, CT
Carrolton, TX
Jintan City, Jiangsu Province,
China
Xinbei District, Changzhou,
China
Guadalupe, Mexico
Building
Space (Sq. Ft.)
Primary Use
Owned or Leased
78,000
75,000
67,520
65,400
65,000
57,000
55,000
54,000
26,900
9,230
322,580
Manufacturing
Manufacturing
Manufacturing
Manufacturing &
Distribution
Machining
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Owned
33,940
Manufacturing
Leased
130,110
Manufacturing
Leased
ITEM 3.
LEGAL PROCEEDINGS
The Company is involved in certain litigation as a result of claims that arose in the ordinary course of
business. Additionally, we may realize the benefit of certain legal claims and litigation in the future; these gain
contingencies are not recognized in the Consolidated Financial Statements.
For a description of material pending legal proceedings, see “Note 9 – Commitments and Contingencies” in the Notes
to Consolidated Financial Statements, which is incorporated herein by reference.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
10
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “MLI.” As of February 19,
2016, the number of holders of record of Mueller’s common stock was approximately 810. The following table sets
forth, for the periods indicated, the high and low sales prices as reported by the NYSE and the cash dividends paid per
share of common stock.
2015
Fourth quarter
Third quarter
Second quarter
First quarter
2014
Fourth quarter
Third quarter
Second quarter
First quarter
Sales Prices
High
Low
Dividend
$
$
33.04 $
35.65
37.18
36.47
26.86 $
28.94
34.57
31.34
0.075
0.075
0.075
0.075
34.39 $
30.35
30.99
32.13
27.10 $
27.71
27.47
27.38
0.075
0.075
0.075
0.075
Payment of dividends in the future is dependent upon the Company’s financial condition, cash flows, capital
requirements, earnings, and other factors.
11
Issuer Purchases of Equity Securities
The Company’s Board of Directors has extended, until October 2016, the authorization to repurchase up to 20 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 its stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999
through December 26, 2015, the Company had repurchased approximately 4.7 million shares under this
authorization. Below is a summary of the Company’s stock repurchases for the quarter ended December 26, 2015.
(a)
(b)
Total Number
of Shares
Purchased
Average Price
Paid per Share
(c)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d)
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs
15,287,060 (1)
September 27 – October 24, 2015
1,036 (2) $
31.85
October 25 – November 21, 2015
155 (2)
31.53
November 22 – December 26, 2015
—
—
—
—
—
(1) Shares available to be purchased under the Company’s 20 million share repurchase authorization until
October 2016. The extension of the authorization was announced on October 21, 2015.
(2) Shares tendered to the Company by holders of stock-based awards in payment of purchase price and/or
withholding taxes upon exercise. In addition, includes restricted stock forfeitures.
12
Company Stock Performance
The following graph compares total stockholder return since December 25, 2010 to the Dow Jones U.S. Total Market
Index (Total Market Index) and the Dow Jones U.S. Building Materials & Fixtures Index (Building Materials
Index). Total return values for the Total Market Index, the Building Materials Index and the Company were
calculated based on cumulative total return values assuming reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Mueller Industries, Inc., the Dow Jones US Total Return Index,
and the Dow Jones US Building Materials & Fixtures Index
$300
$250
$200
$150
$100
$50
$0
12/25/10
12/31/11
12/29/12
12/28/13
12/27/14
12/26/15
Mueller Industries, Inc.
Dow Jones US Total Return
Dow Jones US Building Materials & Fixtures
*$100 invested on 12/25/10 in stock or 12/31/10 in index, including reinvestment of
dividends.
Indexes calculated on month-end basis.
Copyright© 2016 Dow Jones & Co. All rights reserved.
Mueller Industries, Inc.
Dow Jones U.S. Total Return
Index
Dow Jones U.S. Building
2010
100.00
2011
2012
2013
2014
117.53
152.12
195.49
215.09
2015
177.80
100.00
101.34
117.89
156.76
177.06
178.18
Materials & Fixtures Index
100.00
103.16
157.03
201.31
222.58
254.55
13
ITEM 6.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
2015
2014
2013
2012
2011
For the fiscal year: (1)
Net sales
$ 2,100,002 $ 2,364,227 $ 2,158,541 $ 2,189,938 $ 2,417,797
Operating income
137,268
153,996
270,937 (5) 126,705 (6) 139,802 (7)
Net income attributable to Mueller Industries,
Inc.
87,864 (3) 101,560 (4) 172,600 82,395 86,321
Diluted earnings per share (2)
1.54
1.79
3.06
1.16 (8)
1.13
Cash dividends per share (2)
0.30
0.30
0.25 0.2125
0.20
At year-end:
Total assets
Long-term debt
1,338,801 1,328,096 1,247,767 1,104,155 1,347,604
204,250 205,250 206,250 207,300 156,476
(1) Includes activity of acquired businesses from the following purchase dates: Great Lakes Copper Ltd., July 31,
2015; Sherwood Valve Products, LLC, June 18, 2015; Turbotec Products, Inc., March 30, 2015; Yorkshire
Copper Tube, February 28, 2014; Howell Metal Company, October 17, 2013; and Westermeyer Industries,
Inc., August 16, 2012.
(2) Adjusted retroactively to reflect the two-for-one stock split that occurred on March 14, 2014.
(3)
Includes $15.4 million pre-tax gain from the sale of certain assets, severance charges of $3.4 million and a
permanent adjustment to a deferred tax liability of $4.2 million.
(4)
Includes $6.3 million pre-tax gain on sale of assets, reversal of valuation allowance of $5.7 million, and $7.3
million of pre-tax charges related to severance.
(5) Includes $106.3 million pre-tax gain from settlement of insurance claims, $39.8 million pre-tax gain from the sale
of the Company’s Schedule 40 pressure plastic fittings business along with the sale of certain other plastic
fittings manufacturing assets, and pre-tax impairment charges of $4.3 million primarily related to real
property associated with the aforementioned plastics sale transaction.
(6)
Includes deferred recognition of $8.0 million gain from liquidation of LIFO inventory layers, $4.1 million net
gain from settlement of litigation, $1.5 million gain from settlement of insurance claims, and severance
charges of $3.4 million.
(7) Includes $10.5 million gain from settlement of litigation.
(8) Includes the impact of 10.4 million shares repurchased from Leucadia National Corporation in September 2012.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations is contained under the caption
“Financial Review” submitted as a separate section of this Annual Report on Form 10-K commencing on page F-2.
14
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are contained under the caption “Financial Review”
submitted as a separate section of this Annual Report on Form 10-K commencing on page F-2.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements required by this item are contained in a separate section of this Annual Report on Form 10-K
commencing on page F-16.
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A.
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 SEC’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(e) of the Exchange Act as of December 26, 2015. Based on that evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are
effective as of December 26, 2015 to ensure that information required to be disclosed in Company reports filed under
the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC
rules and forms and (ii) accumulated and communicated to management, including the Company’s principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Pursuant to the
rules and regulations of the SEC, internal control over financial reporting is a process designed by, or under the
supervision of, the Company’s principal executive and principal financial officers, and effected by the Company’s
Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States and includes those policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made only in accordance with authorizations of the Company’s management and
directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements. Due to
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further,
because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.
15
The Company acquired Turbotec Products, Inc., Sherwood Valve Products, LLC, and Great Lakes Copper Ltd. during
2015 and has excluded these businesses from management’s assessment of internal controls. The total value of assets
for these businesses at year-end was $152.8 million, which represents 11.4 percent of the Company’s consolidated
total assets at December 26, 2015. Net sales from the dates of acquisition represents 6.1 percent of the consolidated
net sales of the Company for 2015. Operating income from the date of acquisitions represents 4.3 percent of the
consolidated operating income of the Company for 2015. Accordingly, these acquired businesses are not included in
the scope of this report.
As required by Rule 13a-15(c) under the Exchange Act, 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
internal control over financial reporting as of December 26, 2015 based on the control criteria established in a report
entitled Internal Control—Integrated Framework, (2013 Framework) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on such evaluation, management has concluded that our
internal control over financial reporting was effective as of December 26, 2015.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial
statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal
control over financial reporting, which is included herein.
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
ended December 26, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
16
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mueller Industries, Inc.
We have audited Mueller Industries, Inc.’s internal control over financial reporting as of December 26, 2015, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 Framework) (the COSO criteria). Mueller Industries, Inc.’s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the
internal controls of Turbotec Products, Inc., Sherwood Valve Products, LLC, or Great Lakes Copper Ltd., which are
included in the 2015 consolidated financial statements of Mueller Industries, Inc. and constituted $152.8 million and
$106.9 million of total and net assets, respectively, as of December 26, 2015, and $128.0 million and $5.9 million of
net sales and operating income, respectively, for the year then ended. Our audit of internal control over financial
reporting of Mueller Industries, Inc. also did not include an evaluation of the internal control over financial reporting
of Turbotec Products, Inc., Sherwood Valve Products, LLC, or Great Lakes Copper Ltd.
In our opinion, Mueller Industries, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 26, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Mueller Industries, Inc. as of December 26, 2015 and December 27, 2014,
and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each
of the three years in the period ended December 26, 2015 and our report dated February 24, 2016 expressed an
unqualified opinion thereon.
Memphis, Tennessee
February 24, 2016
17
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by Item 10 is contained under the captions “Ownership of Common Stock by Directors and
Executive Officers and Information about Director Nominees,” “Corporate Governance,” “Report of the Audit
Committee of the Board of Directors,” and “Section 16(a) Beneficial Ownership Compliance Reporting” in the
Company’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the SEC on or about March
24, 2016, which is incorporated herein by reference.
The Company has adopted a Code of Business Conduct and Ethics that applies to its chief executive officer, chief
financial officer, and other financial executives. We have also made the Code of Business Conduct and Ethics
available on the Company’s website at www.muellerindustries.com.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by Item 11 is contained under the caption “Compensation Discussion and Analysis,”
“Summary Compensation Table for 2015,” “2015 Grants of Plan Based Awards Table,” “Outstanding Equity Awards
at Fiscal 2015 Year-End,” “2015 Option Exercises and Stock Vested,” “Potential Payments Upon Termination of
Employment or Change in Control as of the End of 2015,” “2015 Director Compensation,” “Report of the
Compensation Committee of the Board of Directors on Executive Compensation” and “Corporate Governance” in the
Company’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the SEC on or about March
24, 2016, which is incorporated herein by reference.
18
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table discloses information regarding the securities to be issued and the securities remaining available
for issuance under the Registrant’s stock-based incentive plans as of December 26, 2015 (shares in thousands):
(a)
(b)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
Weighted average
exercise price of
outstanding options,
warrants, and rights
(c)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
1,198 $
20.59
1,146
Plan category
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
1,198 $
20.59
—
—
—
1,146
Other information required by Item 12 is contained under the captions “Principal Stockholders” and “Ownership of
Common Stock by Directors and Executive Officers and Information about Director Nominees” in the Company’s
Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the SEC on or about March 24, 2016,
which is incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by Item 13 is contained under the caption “Corporate Governance” in the Company’s Proxy
Statement for its 2016 Annual Meeting of Stockholders to be filed with the SEC on or about March 24, 2016, which is
incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is contained under the caption “Appointment of Independent Registered Public
Accounting Firm” in the Company’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC on or about March 24, 2016, which is incorporated herein by reference.
19
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
1.
2.
3.
The following documents are filed as part of this report:
Financial Statements: the financial statements, notes, and report of independent registered public
accounting firm described in Item 8 of this Annual Report on Form 10-K are contained in a separate
section of this Annual Report on Form 10-K commencing on page F-1.
Financial Statement Schedule: the financial statement schedule described in Item 8 of this report is
contained in a separate section of this Annual Report on Form 10-K commencing on page F-1.
Exhibits:
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Restated Certificate of Incorporation of the Registrant dated February 8, 2007 (Incorporated
herein by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K, dated
February 28, 2007, for the fiscal year ended December 30, 2006).
Amended and Restated By-laws of the Registrant, effective as of January 15, 2016
(Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on
Form 8-K, dated January 19, 2016).
Certain instruments with respect to long-term debt of the Registrant have not been filed as
Exhibits to this Report since the total amount of securities authorized under any such
instruments does not exceed 10 percent of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of each such instrument
upon request of the SEC.
Amended and Restated Consulting Agreement, dated October 25, 2007, by and between the
Registrant and Harvey Karp (Incorporated herein by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K, dated October 25, 2007).
Amendment No. 1, dated December 2, 2008, to the Amended and Restated Consulting
Agreement, dated October 25, 2007, by and between the Registrant and Harvey Karp
(Incorporated herein by reference to Exhibit 10.7 of the Registrant’s Annual Report on
Form 10-K, dated February 24, 2009, for the fiscal year ended December 27, 2008).
Letter Agreement with Harvey Karp, dated as of May 11, 2011 (Incorporated herein by
reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated
May 16, 2011).
Amended and Restated Employment Agreement, effective October 30, 2008, by and between
the Registrant and Gregory L. Christopher (Incorporated herein by reference to Exhibit 10.1
of the Registrant’s Current Report on Form 8-K, dated December 26, 2008).
Amendment No. 1 to Amended and Restated Employment Agreement by and between the
Registrant and Gregory L. Christopher, dated February 14, 2013 (Incorporated by reference
to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated February 14, 2013).
Mueller Industries, Inc. 2002 Stock Option Plan Amended and Restated as of February 16,
2006 (Incorporated herein by reference to Exhibit 10.20 of the Registrant’s Annual Report on
Form 10-K, dated February 28, 2007, for the fiscal year ended December 30, 2006).
Mueller Industries, Inc. 2009 Stock Incentive Plan (Incorporated by reference from Appendix
I to the Company’s 2009 Definitive Proxy Statement with respect to the Company’s 2009
20
Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on
March 26, 2009).
10.8
10.9
10.10
10.11
Mueller Industries, Inc. 2014 Stock Incentive Plan (Incorporated by reference from Appendix
I to the Company’s 2014 Definitive Proxy Statement with respect to the Company’s 2014
Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on
March 19, 2014).
Amendment to the Mueller Industries, Inc. 2002 Stock Option Plan, dated July 11, 2011
(Incorporated herein by reference to Exhibit 10.16 of the Registrant’s Annual Report on Form
10-K, dated February 28, 2012, for the fiscal year ended December 31, 2011).
Amendment to the Mueller Industries, Inc. 2009 Stock Incentive Plan, dated July 11, 2011
(Incorporated herein by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form
10-K, dated February 28, 2012, for the fiscal year ended December 31, 2011).
Mueller Industries, Inc. 2011 Annual Bonus Plan (Incorporated herein by reference to Exhibit
10.18 of the Registrant’s Annual Report on Form 10-K, dated February 28, 2012, for the
fiscal year ended December 31, 2011).
10.12
Summary description of the Registrant’s 2016 incentive plan for certain key employees.
10.13
10.14
10.15
10.16
10.18
10.19
Amended Credit Agreement, dated as of March 7, 2011, among the Registrant (as Borrower)
and Bank of America, N.A. (as agent), and certain lenders named therein, following adoption
of Amendment No. 2 dated December 11, 2012 (Incorporated herein by reference to Exhibit
10.20 of the Registrant’s Annual Report on Form 10-K, dated February 27, 2013, for the
fiscal year ended December 29, 2012).
Amendment No. 1 to Credit Agreement among the Registrant (as borrower), Bank of
America, N.A. (as agent), and certain lenders named therein dated August 12, 2011
(Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on
Form 10-Q, for the Quarterly period ended October 1, 2011, dated October 27, 2011).
Amendment No. 2 to Credit Agreement among the Registrant (as borrower), Bank of
America, N.A. (as agent), and certain lenders named therein dated December 11, 2012
(Incorporated herein by reference to Exhibit 10.22 of the Registrant’s Annual Report on Form
10-K, dated February 27, 2013, for the fiscal year ended December 29, 2012).
Membership Interest Purchase Agreement by and between Sherwood Valve Products, Inc.
and Taylor-Wharton International LLC, dated as of June 18, 2015 (Incorporated herein by
reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated June 19,
2015).
Share Purchase Agreement among Great Lakes Copper Inc. and Mueller Copper Tube
Products, Inc. dated July 31, 2015. (Incorporated herein by reference to Exhibit 10.1 of the
Registrant’s Quarterly Report on Form 10-Q, dated October 21, 2015 for the period ended
September 26, 2015).
Agreement and Plan of Merger, dated as of August 5, 2015, by and among Tecumseh
Products Company, MA Industrial JV LLC and MA Industrial Sub Inc. (Incorporated herein
by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, dated August 7,
2015).
21.0
Subsidiaries of the Registrant.
23.0
Consent of Independent Registered Public Accounting Firm.
21
31.1
31.2
32.1
32.2
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.INS XBRL Instance Document
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Presentation Linkbase Document
101.SCH XBRL Taxonomy Extension Schema
22
Pursuant to the requirements of Section 13 or 15(d) 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, on February 24, 2016.
SIGNATURES
MUELLER INDUSTRIES, INC.
/s/ GREGORY L. CHRISTOPHER
Gregory L. Christopher, Chief Executive Officer
(Principal Executive Officer) and Chairman of
the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature
Title
Date
/s/ GREGORY L. CHRISTOPHER
Gregory L. Christopher
Chief Executive Officer (Principal Executive
Officer) and Chairman of the Board
February 24, 2016
/s/ GARY S. GLADSTEIN
Gary S. Gladstein
/s/ PAUL J. FLAHERTY
Paul J. Flaherty
/s/ GENNARO J. FULVIO
Gennaro J. Fulvio
/s/ SCOTT J. GOLDMAN
Scott J. Goldman
/s/ JOHN B. HANSEN
John B. Hansen
/s/ TERRY HERMANSON
Terry Hermanson
Lead Independent Director
February 24, 2016
Director
Director
Director
Director
Director
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature and Title
Date
/s/ JEFFREY A. MARTIN
Jeffrey A. Martin
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
/s/ ANTHONY J. STEINRIEDE
Anthony J. Steinriede
Vice President – Corporate Controller
February 24, 2016
February 24, 2016
23
MUELLER INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Review
Consolidated Statements of Income
for the years ended December 26, 2015, December 27, 2014, and December 28, 2013
Consolidated Statements of Comprehensive Income
for the years ended December 26, 2015, December 27, 2014, and December 28, 2013
Consolidated Balance Sheets
as of December 26, 2015 and December 27, 2014
Consolidated Statements of Cash Flows
for the years ended December 26, 2015, December 27, 2014, and December 28, 2013
Consolidated Statements of Changes in Equity
for the years ended December 26, 2015, December 27, 2014, and December 28, 2013
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
F- 2
F- 16
F- 17
F- 18
F- 19
F- 20
F- 22
F- 58
FINANCIAL STATEMENT SCHEDULE
Schedule for the years ended December 26, 2015, December 27, 2014, and December 28, 2013
Valuation and Qualifying Accounts (Schedule II)
F- 59
F-1
FINANCIAL REVIEW
The Financial Review section of our Annual Report on Form 10-K consists of the following: Management’s
Discussion and Analysis of Results of Operations and Financial Condition (MD&A), the Consolidated Financial
Statements, and Other Financial Information, all of which include information about our significant accounting
policies, practices, and the transactions that impact our financial results. The following MD&A describes the
principal factors affecting the results of operations, liquidity and capital resources, contractual cash obligations and the
critical accounting estimates of the Company. The discussion in the Financial Review section should be read in
conjunction with the other sections of this Annual Report, particularly “Item 1: Business” and our other detailed
discussion of risk factors included in this MD&A.
OVERVIEW
We are a leading manufacturer of copper, brass, aluminum, and plastic products. The range of these products is
broad: copper tube and fittings; line sets; 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; fabricated tubular
products; and steel nipples. We also resell imported brass and plastic plumbing valves, malleable iron fittings, faucets
and plumbing specialty products. Mueller’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:
• Plumbing & Refrigeration: The Plumbing & Refrigeration segment is composed of Standard Products
(SPD), Great Lakes Copper Ltd. (Great Lakes), European Operations, and Mexican Operations. SPD
manufactures and sells copper tube, copper and plastic fittings, line sets, and valves in North America and
sources products for import distribution in North America. Great Lakes manufactures copper tube and line
sets in Canada and sells its products primarily in the U.S. and Canada.
European Operations manufacture
copper tube in the United Kingdom, which is sold throughout Europe. 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 sells products to wholesalers in the
HVAC, plumbing, and refrigeration markets, to distributors to the manufactured housing and recreational
vehicle industries, and to building material retailers.
• OEM: The OEM segment is composed of Industrial Products, (IPD), Engineered Products (EPD), and
Jiangsu Mueller–Xingrong Copper Industries Limited (Mueller-Xingrong), the Company’s Chinese joint
venture. 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. Mueller-Xingrong manufactures engineered copper tube
primarily for air-conditioning applications; these products are sold primarily to OEMs located in China. The
OEM segment sells its products primarily to original equipment manufacturers, many of which are in the
HVAC, plumbing, refrigeration, and industrial 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 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.
Residential construction activity has shown improvement in recent years, but remains at levels below long-term
historical averages. Continued improvement is expected, but may be tempered by continuing low labor participation
rates, the pace of household formations, higher interest rates, and tighter lending standards. Per the U.S. Census
Bureau, actual housing starts in the U.S. were 1.1 million in 2015, which compares to 1.0 million in 2014 and 925
thousand in 2013. Mortgage rates remain at historically low levels, as the average 30-year fixed mortgage rate was
approximately 3.85 percent in 2015 and 4.17 percent in 2014.
The private nonresidential construction sector, which includes offices, industrial, health care, and retail projects,
began showing improvement in 2015, 2014, and 2013 after declines in previous years. Per the U.S. Census Bureau,
F-2
the actual (not seasonally adjusted) value of private nonresidential construction put in place was $389.3 billion in
2015, $347.7 billion in 2014, and $312.3 billion in 2013. We expect that most of these conditions will continue to
improve.
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 products. The open market prices for copper cathode and scrap, for example, influence the
selling price of copper tube, a principal product 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. Our earnings and
cash flow are dependent upon these spreads that fluctuate based upon market conditions.
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. U.S. consumption of copper tube is still predominantly supplied by
U.S. manufacturers. 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. In recent years,
brass rod consumption in the U.S. has declined due to the outsourcing of many manufactured products from offshore
regions.
RESULTS OF OPERATIONS
Consolidated Results
The following table compares summary operating results for 2015, 2014, and 2013:
(In thousands)
2015
2014
2013
Percent Change
2015 vs. 2014 2014 vs. 2013
Net sales
Operating income
Net income
$ 2,100,002 $ 2,364,227 $ 2,158,541
137,268 153,996 270,937
87,864 101,560 172,600
(11.2 )%
(10.9 )
(13.5 )
9.5 %
(43.2 )
(41.2 )
The following are components of changes in net sales compared to the prior year:
2015 vs. 2014 2014 vs. 2013
Net selling price in core product lines
Unit sales volume in core product lines
Acquisitions & new products
Dispositions
Other
(9.4 ) %
(4.3 )
5.8
(2.6 )
(0.7 )
(3.1 ) %
2.1
9.5
—
1.0
(11.2 ) %
9.5 %
The decrease in net sales in 2015 was primarily due to (i) lower net selling prices of $221.5 million in our core product
lines, primarily copper tube and brass rod, (ii) lower unit sales volume of $102.3 million in our core product lines,
primarily in the OEM segment, and (iii) the absence of sales of $57.5 million recorded by Primaflow, a business we
sold during November 2014. These decreases were offset by $90.5 million of sales recorded by Great Lakes Copper
Ltd. (Great Lakes), acquired in July 2015, $20.8 million of sales recorded by Sherwood Valve Products, LLC
(Sherwood), acquired in June 2015, and $16.8 million of sales recorded by Turbotec Products, Inc. (Turbotec),
acquired in March 2015.
The increase in net sales in 2014 was primarily due to (i) incremental sales of $91.7 million contributed by Yorkshire
Copper Tube (Yorkshire), acquired in February 2014, (ii) $109.1 million of sales contributed by Howell Metals
F-3
Company (Howell), acquired in October 2013, (iii) an increase in unit sales in our other core product lines of $49.9
million, and (iv) an increase in net sales of $20.3 million from our non-core product lines. These increases were
offset by lower selling prices of $65.4 million in our core products.
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 most recent three-year period:
Average Copper Price per Pound
$4.10
$3.60
$3.10
$2.60
$2.10
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Comex
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales
for 2015, 2014, and 2013:
(In thousands)
2015
2014
2013
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlements
Gain on sale of assets
Impairment charges
Severance
$ 1,809,702
34,608
130,358
$ 2,043,719
33,735
131,740
—
(15,376 )
—
—
(6,259 )
—
3,442
7,296
$ 1,862,089
32,394
134,914
(106,332 )
(39,765 )
4,304
—
Operating expenses
$ 1,962,734
$ 2,210,231
$ 1,887,604
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlements
Gain on sale of assets
Impairment charges
Severance
2015
Percent of Net Sales
2014
2013
86.2 %
1.6
6.2
—
(0.7 )
—
0.2
86.4 %
1.4
5.7
—
(0.3 )
—
0.3
86.3 %
1.5
6.1
(4.9 )
(1.8 )
0.2
—
Operating expenses
93.5 %
93.5 %
87.4 %
The decrease in cost of goods sold in 2015 was primarily due to the decrease in the average cost of copper, our
principal raw material, and the decrease in sales volume. The increase in 2014 as compared to 2013 was largely
related to the increase in sales volume. Depreciation and amortization increased in 2015 and 2014 as a result of
F-4
depreciation and amortization of long-lived assets for businesses acquired.
Selling, general, and administrative expenses decreased slightly in 2015, primarily due to (i) lower employment costs,
including incentive compensation, of $5.4 million, (ii) a decrease of $10.2 million in selling, general, and
administrative expenses related to the sale of Primaflow, and (iii) a decrease of $1.6 million in agent commissions as a
result of lower sales. These decreases were offset by (i) selling, general, and administrative expenses of $6.6 million
associated with businesses acquired in 2015, (ii) higher net periodic pension costs of $5.1 million, and (iii) increased
professional fees of $1.6 million related to the upgrade of our ERP system. In addition, there was $1.9 million of
equipment relocation costs and losses on the sale of assets related to the rationalization of Yorkshire in in 2015.
Lastly, during 2014 there was a reduction in accruals related to legal matters of $0.5 million. The decrease in 2014
was a result of a decrease in legal fees of $4.8 million and lower net periodic pension costs of $5.0 million, offset by
incremental costs associated with Howell and Yorkshire.
During 2015, our operating results were positively impacted by a net gain of $15.4 million recorded on the sale of
certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.
Our operating results in 2014 were positively impacted by a net gain of $6.3 million recorded for the sale of our plastic
pipe manufacturing assets, the land and building in Portage, Michigan, and our United Kingdom based import
distribution business. This was offset by $7.3 million in severance charges related to the rationalization of Yorkshire.
During 2013, our operating results were positively impacted by a $106.3 million gain recognized in the settlement of
our insurance claim related to the September 2011 fire at the Wynne, Arkansas manufacturing operation. In addition,
we sold certain of our plastic fittings manufacturing assets and recognized a pre-tax gain of $39.8 million, or 41 cents
per diluted share after tax, and recognized fixed asset impairment charges of $4.3 million.
Interest expense increased $1.9 million in 2015 primarily as a result of additional costs of $2.3 million due to the terms
of our interest rate swap agreements that became effective in January 2015, offset by decreased borrowing costs of
$0.3 million at Mueller-Xingrong to fund working capital. The increase of $1.8 million in 2014 was related to
increased borrowings by MEL and higher borrowing costs at Mueller-Xingrong to fund working capital.
Other income, net, was $2.2 million in 2015 compared to other expense, net, of $0.2 million in 2014 and other income,
net, of $4.5 million in 2013. The change in 2015 was primarily related to lower postretirement benefit costs of $1.4
million, lower environmental costs of $0.8 million, and higher interest income of $0.5 million. The income in 2013
resulted primarily from a $3.0 million gain on the sale of a non-operating property.
Income tax expense was $43.4 million in 2015, for an effective tax rate of 32.9 percent. This rate was lower than
what would be computed using the U.S. statutory federal rate primarily attributable to reductions to the Company’s
deferred tax liabilities of $4.2 million resulting from the acquisition of a foreign subsidiary and the U.S. production
activities deduction of $3.5 million. These reductions were partially offset by state tax expense (net of federal
benefit) of $2.7 million and $2.3 million of other adjustments.
Income tax expense was $45.5 million in 2014, for an effective tax rate of 31 percent. This rate was lower than what
would be computed using the U.S. statutory federal rate primarily due to decreases in valuation allowances of $5.7
million; the U.S. production activities deduction benefit of $4.0 million; and the effect of lower foreign tax rates and
other foreign adjustments of $1.1 million. These decreases were partially offset by state tax expense (net of federal
benefit) of $3.3 million and $1.2 million of other adjustments.
Income tax expense was $98.1 million in 2013, for an effective rate of 36 percent. This rate was higher than what
would be computed using the U.S. statutory federal rate primarily due to state tax expense, net of federal benefit, of
$6.4 million, and the impact of goodwill disposition of $1.8 million. These increases were partially offset by the U.S.
production activities deduction benefit of $4.4 million and the effect of lower foreign tax rates and other foreign
adjustments of $1.0 million.
F-5
Plumbing & Refrigeration Segment
The following table compares summary operating results for 2015, 2014, and 2013 for the businesses comprising our
Plumbing & Refrigeration segment:
(In thousands)
2015
2014
2013
Percent Change
2015 vs. 2014 2014 vs. 2013
Net sales
Operating income
$ 1,260,273 $ 1,416,701 $ 1,225,306
93,230 219,146
90,072
(11.0 )%
(3.4 )
15.6 %
(57.5 )
The following are components of changes in net sales compared to the prior year:
2015 vs. 2014 2014 vs. 2013
Net selling price in core product lines
Unit sales volume in core product lines
Acquisitions & new products
Dispositions
Other
(10.1 ) %
(2.3 )
6.4
(4.4 )
(0.6 )
(2.8 ) %
(0.1 )
17.0
—
1.5
(11.0 ) %
15.6 %
The decrease in net sales during 2015 was primarily due to (i) lower net selling prices of $142.2 million in the
segment’s core product lines, primarily copper tube, (ii) the absence of sales of $57.5 million recorded by Primaflow,
and (iii) lower unit sales volume of $32.7 million in the segment’s core product lines. These decreases were offset by
$90.5 million of sales recorded by Great Lakes.
The increase in net sales in 2014 was primarily due to (i) incremental sales of $91.7 million contributed by Yorkshire,
(ii) $109.1 million of sales contributed by Howell, and (iii) an increase in net sales of $23.2 million from the segment’s
non-core product lines.
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales
for 2015, 2014, and 2013:
(In thousands)
2015
2014
2013
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlements
Gain on sale of assets
Impairment charges
Severance
$ 1,082,493 $ 1,215,282 $ 1,043,059
17,117
19,613
19,237
85,471
87,539
80,405
(103,895 )
(39,765 )
4,173
—
—
(6,259 )
(15,376 )
—
—
—
7,296
3,442
Operating expenses
$ 1,170,201
$ 1,323,471
$ 1,006,160
F-6
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlements
Gain on sale of assets
Impairment charges
Severance
2015
Percent of Net Sales
2014
2013
85.9 %
1.5
6.4
—
(1.2 )
—
0.3
85.8 %
1.4
6.2
—
(0.4 )
—
0.4
85.1 %
1.4
7.0
(8.5 )
(3.2 )
0.3
—
Operating expenses
92.9 %
93.4 %
82.1 %
The decrease in cost of goods sold in 2015 was primarily due to the decrease in the average cost of copper. The
increase in 2014 was primarily due to the increase in net sales related to acquisitions. Depreciation and amortization
for 2015 was consistent with the expense recorded for 2014. The increase in 2014 was related to depreciation and
amortization of businesses acquired.
Selling, general, and administrative expenses decreased in 2015, primarily due to (i) a decrease of $10.2 million in
selling, general, and administrative expenses related to the sale of Primaflow, (ii) lower employment costs, including
incentive compensation, of $3.3 million, and (iii) a decrease of $1.5 million in agent commissions as a result of lower
sales. These decreases were offset by (i) selling, general, and administrative expenses of $3.6 million associated with
Great Lakes, (ii) increased professional fees of $1.2 million related to the upgrade of our ERP system, and (iii) higher
net periodic pension costs of $1.7 million. In addition, there was $1.9 million of equipment relocation costs and
losses on the sale of assets related to the rationalization of Yorkshire. Lastly, during 2014 there was a reduction in
accruals related to legal matters of $0.5 million. The increase in 2014 was primarily a result of higher employment
costs, including incentive compensation, of $2.8 million and incremental costs associated with Howell and Yorkshire.
This was offset by a reduction in expense related to legal matters of $3.0 million.
During 2015, our operating results were positively impacted by a net gain of $15.4 million recorded on the sale of
certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.
Our operating results in 2014 were positively impacted by a net gain of $6.3 million recorded for the sale of our plastic
pipe manufacturing assets, the land and building in Portage, Michigan, and our United Kingdom based import
distribution business. This was offset by $7.3 million in severance charges related to the rationalization of Yorkshire.
During 2013, our operating results were positively impacted by a $106.3 million gain recognized in the settlement of
our insurance claim related to the September 2011 fire at the Wynne, Arkansas manufacturing operation. In addition,
we sold certain of our plastic fittings manufacturing assets and recognized a pre-tax gain of $39.8 million, or 41 cents
per diluted share after tax, and recognized fixed asset impairment charges of $4.3 million.
OEM Segment
The following table compares summary operating results for 2015, 2014, and 2013 for the businesses comprising our
OEM segment:
(In thousands)
2015
2014
2013
2015 vs. 2014
2014 vs. 2013
Percent Change
Net sales
Operating income
$ 849,538 $ 959,914 $ 947,784
72,648 85,714 76,631
(11.5 )%
(15.2 )
1.3 %
11.9
F-7
The following are components of changes in net sales compared to the prior year:
2015 vs. 2014 2014 vs. 2013
Net selling price in core product lines
Unit sales volume in core product lines
Acquisitions & new products
Other
(8.3 ) %
(7.3 )
4.9
(0.8 )
(3.3 ) %
4.9
—
(0.3 )
(11.5 ) %
1.3 %
The decrease in net sales in 2015 was primarily due to lower net selling prices of $79.3 million in the segment’s core
product lines, primarily brass rod, forgings, and commercial tube, and lower unit sales volume of $69.6 million in the
segment’s core product lines. These decreases were offset by $16.8 million of sales recorded by Turbotec and $20.8
million of sales recorded by Sherwood.
The increase in net sales in 2014 was primarily due to an increase in unit sales volume of $46.2 million, offset by a
decrease of $31.4 million due to lower net selling prices in the segment’s core product lines.
The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales
for 2015, 2014, and 2013:
(In thousands)
2015
2014
2013
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Impairment charges
$ 736,878 $ 840,823 $ 833,518
13,025
11,919
13,535
24,479
21,458
26,477
131
—
—
Operating expenses
$ 776,890
$ 874,200
$ 871,153
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Impairment charges
2015
Percent of Net Sales
2014
2013
86.7 %
1.6
3.1
—
87.6 %
1.2
2.3
—
87.9 %
1.4
2.6
—
Operating expenses
91.4 %
91.1 %
91.9 %
The decrease in cost of goods sold in 2015 and the increase in 2014 were related to factors consistent with those noted
regarding changes in net sales. Depreciation and amortization increased in 2015 as a result of depreciation and
amortization of long-lived assets for businesses acquired. The decrease in 2014 was a result of several assets
becoming fully depreciated. Selling, general, and administrative expenses increased in 2015 primarily as a result of
higher net periodic pension costs of $3.2 million, as well as additional selling, general, and administrative expenses of
$3.0 million for Turbotec and Sherwood. This was offset by lower employment costs, including incentive
compensation, of $0.8 million. The decrease in 2014 was due to lower net periodic pension costs of $3.5 million.
F-8
LIQUIDITY AND CAPITAL RESOURCES
The following table presents selected financial information and statistics for 2015, 2014, and 2013:
(In thousands)
2015
2014
2013
Cash and cash equivalents
Property, plant, and equipment, net
Total debt
Working capital, net of cash and current debt
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Cash Provided by Operating Activities
$ 274,844 $ 352,134 $ 311,800
280,224 245,910 244,457
216,010 241,444 235,333
387,204
327,888
372,744
159,609
128,513
(2,985 )
(41,258 ) (10,551 ) (13,643 )
90,605
(38,424 )
(190,807 )
During 2015, cash provided by operating activities was primarily attributable to consolidated net income of $88.4
million, depreciation and amortization of $34.6 million, a decrease in receivables of $51.7 million, and a decrease in
inventories of $41.1 million. These cash increases were offset by a decrease in current liabilities of $54.2 million.
These changes were primarily due to decreases in the price of copper and an overall decrease in working capital needs.
During 2014, cash provided by operating activities was primarily attributable to consolidated net income of $102.5
million and depreciation and amortization of $34.1 million. These cash increases were offset by increased
receivables of $21.4 million, an increase in other assets of $23.7 million, and a decrease in other liabilities of $2.2
million. These changes were primarily due to increased sales volume in certain businesses and additional working
capital needs of acquired businesses.
Cash Used in Investing Activities
The major components of net cash used in investing activities in 2015 included $105.9 million for the acquisition of
Turbotec, Sherwood, and Great Lakes, $65.9 million for our investment in MA Industrial JV LLC, the joint venture
that acquired Tecumseh Products Company, and capital expenditures of $28.8 million. These cash decreases were
offset by $5.5 million in proceeds from the sale of certain assets and net withdrawals from restricted cash balances of
$4.3 million.
The major components of net cash used in investing activities in 2014 included $30.1 million for the acquisition of
Yorkshire, capital expenditures of $39.2 million, and deposits into restricted cash of $2.9 million. These decreases
were partially offset by $33.8 million proceeds from the sales of assets.
Cash Used in Financing Activities
For 2015, net cash used in financing activities consisted primarily of $23.6 million used for the repayment of debt by
Mueller-Xingrong and $16.9 million used for payment of regular quarterly dividends to stockholders of the Company.
For 2014, net cash used in financing activities consisted primarily of $16.8 million for payment of regular quarterly
dividends to stockholders of the Company, offset by $7.3 million received for the issuance of debt by
Mueller-Xingrong.
Liquidity and Outlook
Management believes that cash provided by operations, funds available under the credit agreement, and cash and cash
equivalents on hand, which totaled $274.8 million at December 26, 2015, will be adequate to meet our liquidity needs,
including working capital, capital expenditures, and debt payment obligations. Our current ratio was 3.8 to 1 as of
December 26, 2015.
F-9
As of December 26, 2015, $79.4 million of our cash and cash equivalents were held by foreign subsidiaries. We
expect to repatriate $2.5 million of this cash and have accrued deferred tax on these earnings. All other earnings of the
foreign subsidiaries are considered to be permanently reinvested, and it is not practicable to compute the potential
deferred tax liability associated with these undistributed foreign earnings. We believe that cash held domestically,
funds available through the credit agreement, and cash generated from U.S. based operations will be adequate to meet
the future needs of our U.S. based operations.
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. The price of copper
has fluctuated significantly and averaged approximately $2.51 in 2015, $3.12 in 2014, and $3.34 in 2013.
We have significant environmental remediation obligations which we expect to pay over future years.
Approximately $1.1 million was spent during 2015 for environmental matters. As of December 26, 2015, we expect
to spend $0.6 million in 2016, $0.6 million in 2017, $0.6 million in 2018, $0.7 million in 2019, $0.7 million in 2020,
and $18.5 million thereafter for ongoing projects.
Cash used to fund pension and other postretirement benefit obligations was $2.6 million in 2015 and $4.4 million in
2014. For 2016, we anticipate making contributions of approximately $2.7 million to these plans.
The Company declared a regular quarterly dividend of 7.5 cents per share for each quarter of fiscal 2015 and 2014, and
6.25 cents per share on our common stock for each fiscal quarter of 2013. Payment of dividends in the future is
dependent upon our financial condition, cash flows, capital requirements, and other factors.
Capital Expenditures
During 2015 our capital expenditures were $28.8 million and related primarily to upgrading equipment and
implementing new manufacturing technologies in our copper tube and brass rod mills. We anticipate investing
approximately $30.0 million for capital expenditures in 2016.
Long-Term Debt
The Company’s credit agreement provides for an unsecured $200.0 million revolving credit facility (the Revolving
Credit Facility) and a $200.0 million Term Loan Facility, both of which mature on December 11, 2017. The
Revolving Credit Facility backed approximately $8.8 million in letters of credit at the end of 2015.
On February 2, 2015, Mueller-Xingrong entered into a secured revolving credit agreement with a total borrowing
capacity of RMB 230 million (or approximately $36.0 million). In addition, Mueller-Xingrong occasionally finances
working capital through various accounts receivable and bank draft discount arrangements. Total borrowings at
Mueller-Xingrong were $10.8 million at December 26, 2015.
As of December 26, 2015, the Company’s total debt was $216.0 million or 20.1 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 December 26,
2015, we were in compliance with all of our debt covenants.
Share Repurchase Program
The Company’s Board of Directors has extended, until October 2016, its authorization to repurchase up to 20 million
shares of the Company’s common stock through open market transactions or through privately negotiated
transactions. The Company has no obligation to repurchase any shares and may cancel, suspend, or extend the time
period for the repurchase of shares at any time. Any repurchases will be funded primarily through existing cash and
cash from operations. The Company may hold any shares repurchased in treasury or use a portion of the repurchased
shares for stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in
1999 through December 26, 2015, the Company had repurchased approximately 4.7 million shares under this
authorization.
F-10
CONTRACTUAL CASH OBLIGATIONS
The following table presents payments due by the Company under contractual obligations with minimum firm
commitments as of December 26, 2015:
(In millions)
Deb
Total
2016
2017-2018 2019-2020 Thereafter
Payments Due by Year
Total debt
Consulting agreement (1)
Operating leases
Heavy machinery and equipment
commitments
Purchase commitments (2)
Interest payments (3)
$
216.0 $
1.3
28.8
6.9
560.6
11.1
11.8 $
0.7
7.8
202.0 $
0.6
10.4
6.9
560.4
5.5
—
0.1
5.5
2.0 $
—
3.7
—
0.1
0.1
0.2
—
6.9
—
—
—
Total contractual cash obligations
$
824.7 $
593.1 $
218.6 $
5.9 $
7.1
(1) See Note 9 to Consolidated Financial Statements.
(2) The Company has contractual supply commitments for raw materials totaling $529.9 million at year-end prices;
these contracts contain variable pricing based on Comex and the London Metals Exchange. These
commitments are for purchases of raw materials that are expected to be consumed in the ordinary course of
business.
(3) These payments represent interest on variable rate debt based on rates in effect at December 26, 2015. The
Company entered into an interest rate swap, effective January 12, 2015, which fixed the interest rate
associated with the majority of its variable rate debt.
The above obligations will be satisfied with existing cash, funds available under the credit agreement, and cash
generated by operations. The Company has no off-balance sheet financing arrangements except for the operating
leases identified above.
MARKET RISKS
The Company is exposed to market risks 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. Hedging
transactions are authorized and executed pursuant to policies and procedures. Further, the Company does not buy or
sell financial instruments for trading purposes. A discussion of the Company’s accounting for derivative instruments
and hedging activities is included in “Note 1 - Summary of Significant Accounting Policies” in the Notes to
Consolidated Financial Statements.
Cost and Availability of Raw Materials and Energy
Raw materials, primarily 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 our
control. Significant increases in the cost of metal, to the extent not reflected in prices for our finished products, or the
lack of availability could materially and adversely affect our business, results of operations and financial condition.
The Company occasionally enters into forward fixed-price arrangements with certain customers. We may utilize
futures contracts to hedge risks associated with these forward fixed-price arrangements. We may also utilize futures
contracts to manage price risk associated with inventory. Depending on the nature of the hedge, changes in the fair
value of the futures contracts will either be offset against the change in fair value of the inventory through earnings or
recognized as a component of accumulated other comprehensive income (AOCI) and reflected in earnings upon the
F-11
sale of inventory. Periodic value fluctuations of the contracts generally offset the value fluctuations of the underlying
fixed-price transactions or inventory. At year-end, we held open futures contracts to purchase approximately $33.9
million of copper over the next 12 months related to fixed-price sales orders and to sell approximately $13.6 million of
copper over the next three months related to copper inventory.
We may enter into futures contracts or forward fixed-price arrangements with certain vendors to manage price risk
associated with natural gas purchases. The effective portion of gains and losses with respect to futures positions are
deferred in equity as a component of AOCI and reflected in earnings upon consumption of natural gas. Periodic value
fluctuations of the futures contracts generally offset the value fluctuations of the underlying natural gas prices. There
were no open futures contracts to purchase natural gas at December 26, 2015.
Interest Rates
The Company had variable-rate debt outstanding of $216.0 million at December 26, 2015 and $241.4 million at
December 27, 2014. At these borrowing levels, a hypothetical 10 percent increase in interest rates would have had an
insignificant unfavorable impact on our pre-tax earnings and cash flows. The primary interest rate exposures on
floating-rate debt are based on LIBOR and the base-lending rate published by the People’s Bank of China. There was
no fixed-rate debt outstanding as of December 26, 2015 or December 27, 2014.
Included in the variable-rate debt outstanding is the Company’s $200.0 million Term Loan Facility which bears
interest based on LIBOR. We have reduced our exposure to increases in LIBOR by entering into interest rate swap
contracts. These contracts have been designated as cash flow hedges. The fair value of these contracts has been
recorded in the Consolidated Balance Sheets, and the related gains and losses on the contracts are deferred in
stockholders’ equity as a component of AOCI. Deferred gains or losses on the contracts will be recognized in interest
expense in the period in which the related interest payment being hedged is expensed. The interest rate swap
agreement had an effective date of January 12, 2015.
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. We may utilize certain futures or
forward contracts with financial institutions to hedge foreign currency transactional exposures. Gains and losses with
respect to these positions are deferred in equity as a component of AOCI and reflected in earnings upon collection of
receivables or payment of commitments. At December 26, 2015, the Company had open forward contracts with a
financial institution to sell approximately 1.5 million euros, 8.6 million Swedish kronor, and 3.5 million Norwegian
kroner through March 2016. It also held open futures contracts to buy approximately 4.8 million euros through
November 2016.
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 we are exposed include the Canadian dollar, the British
pound sterling, the Mexican peso, and the Chinese renminbi. The Company generally views its investments in foreign
subsidiaries with a functional currency other than the U.S. dollar as long-term. As a result, we generally do not hedge
these net investments. The net investment in foreign subsidiaries translated into U.S. dollars using the year-end
exchange rates was $249.5 million at December 26, 2015 and $185.6 million at December 27, 2014. The potential
loss in value of the Company’s net investment in foreign subsidiaries resulting from a hypothetical 10 percent adverse
change in quoted foreign currency exchange rates at December 26, 2015 and December 27, 2014 amounted to $25.0
million and $18.6 million, respectively. This change would be reflected in the foreign currency translation component
of AOCI in the equity section of our Consolidated Balance Sheets until the foreign subsidiaries are sold or otherwise
disposed.
We have significant investments in foreign operations whose functional currency is the British pound sterling, the
Mexican peso, and the Canadian dollar. During 2015, the value of the British pound decreased approximately five
percent, the Mexican peso decreased approximately 15 percent, and the Canadian dollar decreased approximately 16
percent relative to the U.S. dollar. The resulting foreign currency translation losses were recorded as a component of
AOCI.
F-12
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s accounting policies are more fully described in “Note 1 - Summary of Significant Accounting
Policies” in the Notes to Consolidated Financial Statements. As disclosed in Note 1, the preparation of financial
statements in conformity with general accepted accounting principles in the United States requires management to
make estimates and assumptions about future events that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ significantly from those estimates. Management believes the
following discussion addresses our most critical accounting policies, which are those that are most important to the
portrayal of the Company’s financial condition and results of operations and require management’s most difficult,
subjective, and complex judgments.
Inventory Valuation Reserves
Our inventories are valued at the lower-of-cost-or-market. The market price of copper cathode and scrap are subject
to volatility. During periods when open market prices decline below net realizable value, the Company may need to
provide an allowance to reduce the carrying value of its inventory. In addition, certain items in inventory may be
considered excess or obsolete and, as such, we may establish an allowance to reduce the carrying value of those items
to their net realizable value. Changes in these estimates related to the value of inventory, if any, may result in a
materially adverse impact on our reported financial position or results of operations. The Company recognizes the
impact of any changes in estimates, assumptions, and judgments in income in the period in which they are determined.
As of December 26, 2015 and December 27, 2014, our inventory valuation reserves were $6.2 million and $5.2
million, respectively. The expense recognized in each of these periods was immaterial to our Consolidated Financial
Statements.
Impairment of Goodwill
As of December 26, 2015, we had $120.3 million of recorded goodwill from our business acquisitions, representing
the excess of the purchase price over the fair value of the net assets we have acquired. During 2015 we recorded
$21.2 million in additional goodwill associated with our Great Lakes and Turbotec acquisitions.
Goodwill is subject to impairment testing, which is performed annually as of the first day of the fourth quarter unless
circumstances indicate the need to accelerate the timing of the tests. These circumstances include a significant
change in the business climate, operating performance indicators, competition, or sale or disposition of a significant
portion of one of our businesses. In our evaluation of goodwill impairment, we perform a qualitative assessment at
the reporting unit level that requires management judgment and the use of estimates to determine if it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not
conclusive, we proceed to a two-step process to test goodwill for impairment. The first step is to compare the fair
value of the reporting unit to its carrying value (including attributable goodwill). If this process indicates that the fair
value is less than the carrying value, a second step of impairment testing is performed to measure the potential amount
of goodwill impairment loss. In step two, we allocate the fair value of the reporting unit determined in step one to its
assets and liabilities as if it had just been acquired in a business combination and the purchase price was equivalent to
the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to its
assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of goodwill is then
compared to the actual carrying value of goodwill. If the implied fair value is less than the carrying value, we would
be required to recognize an impairment loss for that excess.
We identify reporting units by evaluating components of our operating segments and combining those components
with similar economic characteristics. Reporting units with significant recorded goodwill include SPD, Great Lakes,
European Operations, Westermeyer (reported in the EPD operating segment), and Turbotec, (reported in the EPD
operating segment).
The fair value of each reporting unit is estimated using a combination of the income and market approaches,
incorporating market participant considerations and management’s assumptions on revenue growth rates, operating
margins, discount rates and expected capital expenditures. Estimates used by management can significantly affect the
outcome of the impairment test. Changes in forecasted operating results and other assumptions could materially
affect these estimates.
F-13
We evaluated each reporting unit during the fourth quarters of 2015 and 2014, as applicable. The estimated fair value
of each of these reporting units exceeded its carrying values in 2015 and 2014, and we do not believe that any of these
reporting units were at risk of impairment as of December 26, 2015.
Environmental Reserves
We recognize an environmental reserve when it is probable that a loss is likely to occur and the amount of the loss is
reasonably estimable. We estimate the duration and extent of our remediation obligations based upon reports of
outside consultants; internal analyses of cleanup costs; communications with regulatory agencies; and changes in
environmental law. If we were to determine that our estimates of the duration or extent of our environmental
obligations were no longer accurate, we would adjust our environmental reserve accordingly in the period that such
determination is made. Estimated future expenditures for environmental remediation are not discounted to their
present value. Accrued environmental liabilities are not reduced by potential insurance reimbursements.
Environmental expenses that relate to ongoing operations are included as a component of cost of goods
sold. Environmental expenses related to non-operating properties are included in other income, net in the
Consolidated Statements of Income.
Income Taxes
We estimate total income tax expense based on domestic and international statutory income tax rates in the tax
jurisdictions where we operate, permanent differences between financial reporting and tax reporting, and available
credits and incentives.
Deferred income tax assets and liabilities are recognized for the future tax effects of temporary differences between
the treatment of certain items for financial statement and tax purposes using tax rates in effect for the years in which
the differences are expected to reverse. Realization of certain components of deferred tax assets is dependent upon the
occurrence of future events.
Valuation allowances are recorded when, in the opinion of management, it is more likely than not that all or a portion
of the deferred tax assets will not be realized. These valuation allowances can be impacted by changes in tax laws,
changes to statutory tax rates, and future taxable income levels, and are based on our judgment, estimates, and
assumptions. In the event we were to determine that we would not be able to realize all or a portion of the net deferred
tax assets in the future, we would increase the valuation allowance through a charge to income tax expense in the
period that such determination is made. Conversely, if we were to determine that we would be able to realize our
deferred tax assets in the future, in excess of the net carrying amounts, we would decrease the recorded valuation
allowance through a decrease to income tax expense in the period that such determination is made.
We record liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which,
additional taxes will be due. These unrecognized tax benefits are retained until the associated uncertainty is resolved.
Tax benefits for uncertain tax positions that are recognized in the Consolidated Financial Statements are measured as
the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized
upon ultimate settlement. To the extent we prevail in matters for which a liability for an uncertain tax position is
established or are required to pay amounts in excess of the liability, our effective tax rate in a given period may be
materially affected.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report contains various forward-looking statements and includes assumptions concerning the
Company’s operations, future results, and prospects. These forward-looking statements are based on current
expectations and are subject to risk and uncertainties, and may be influenced by factors that could cause actual
outcomes and results to be materially different from those predicted. The forward-looking statements reflect
knowledge and information available as of the date of preparation of the Annual Report, and the Company undertakes
no obligation to update these forward-looking statements. We identify the forward-looking statements by using the
words “anticipates,” “believes,” “expects,” “intends” or similar expressions in such statements.
F-14
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company
provides the following cautionary statement identifying important economic, political, and technological factors,
among others, which could cause actual results or events to differ materially from those set forth in or implied by the
forward-looking statements and related assumptions. In addition to those factors discussed under “Risk Factors” in
this Annual Report on Form 10-K, such factors include: (i) the current and projected future business environment,
including interest rates and capital and consumer spending; (ii) the domestic housing and commercial construction
industry environment; (iii) availability and price fluctuations in commodities (including copper, natural gas, and other
raw materials, including crude oil that indirectly affects plastic resins); (iv) competitive factors and competitor
responses to the Company’s initiatives; (v) stability of government laws and regulations, including taxes; (vi)
availability of financing; and (vii) continuation of the environment to make acquisitions, domestic and foreign,
including regulatory requirements and market values of candidates.
F-15
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
(In thousands, except per share data)
2015
2014
2013
Net sales
$ 2,100,002 $ 2,364,227 $ 2,158,541
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlements
Gain on sale of assets
Impairment charges
Severance
Operating income
Interest expense
Other income (expense), net
Income before income taxes
Income tax expense
Consolidated net income
1,809,702 2,043,719 1,862,089
34,608 33,735 32,394
130,358 131,740 134,914
(106,332 )
(39,765 )
4,304
(15,376 )
—
—
(6,259 )
—
7,296
—
3,442
—
137,268 153,996 270,937
(7,667 )
2,188
(5,740 )
(243 )
(3,990 )
4,451
131,789 148,013 271,398
(43,382 ) (45,479 ) (98,109 )
88,407 102,534 173,289
Less net income attributable to noncontrolling interest
(543 )
(974 )
(689 )
Net income attributable to Mueller Industries, Inc.
$
87,864 $ 101,560 $ 172,600
Weighted average shares for basic earnings per share
Effect of dilutive stock-based awards
56,316 56,042 55,742
742
652
726
Adjusted weighted average shares for diluted earnings per share
56,968 56,768 56,484
Basic earnings per share
$
1.56 $
1.81 $
3.10
Diluted earnings per share
$
1.54 $
1.79 $
3.06
Dividends per share
$
0.30 $
0.30 $
0.25
See accompanying notes to consolidated financial statements.
F-16
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
(In thousands)
2015
2014
2013
Consolidated net income
$
88,407 $ 102,534 $ 173,289
Other comprehensive (loss) income, net of tax:
Foreign currency translation
Net change with respect to derivative instruments and hedging
(19,108 )
(6,766 )
3,285
activities(1)
Net actuarial gain (loss) on pension and postretirement
obligations(2)
Other, net
(1,056 )
(2,499 )
1,713
6,735 (23,006 )
15
(49 )
27,369
151
Total other comprehensive (loss) income
(13,478 ) (32,256 )
32,518
Comprehensive income
Comprehensive loss (income) attributable to noncontrolling interest
74,929 70,278 205,807
(1,404 )
(822 )
867
Comprehensive income attributable to Mueller Industries, Inc.
$
75,796 $
69,456 $ 204,403
See accompanying notes to consolidated financial statements.
(1) Net of taxes of $575 in 2015, $1,362 in 2014, and $(962) in 2013
(2) Net of taxes of $(3,221) in 2015, $10,180 in 2014, and $(15,015) in 2013
F-17
MUELLER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 26, 2015 and December 27, 2014
(In thousands, except share data)
Assets
Current assets:
2015
2014
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $623 in 2015 and
$ 274,844 $ 352,134
$666 in 2014
Inventories
Other current assets
Total current assets
Property, plant, and equipment, net
Goodwill, net
Intangible assets
Investment in unconsolidated affiliate
Other assets
Total Assets
Liabilities
Current liabilities:
Current portion of debt
Accounts payable
Accrued wages and other employee costs
Other current liabilities
Total current liabilities
Long-term debt, less current portion
Pension liabilities
Postretirement benefits other than pensions
Environmental reserves
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Equity
Mueller Industries, Inc. stockholders’ equity:
251,571 275,065
239,378 256,585
34,608 57,429
800,401 941,213
280,224 245,910
120,252 102,909
40,636
65,900
18,464
—
31,388 19,600
$ 1,338,801 $ 1,328,096
11,760 $
$
36,194
88,051 100,735
35,636 41,595
73,982 59,545
209,429 238,069
204,250 205,250
17,449 20,070
17,427 21,486
20,943 21,842
7,161 24,556
1,389
2,440
479,099 532,662
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding
Common stock - $.01 par value; shares authorized 100,000,000; issued
80,183,004; outstanding 57,158,608 in 2015 and 56,901,445 in 2014
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury common stock, at cost
Total Mueller Industries, Inc. stockholders’ equity
Noncontrolling interest
Total equity
Commitments and contingencies
Total Liabilities and Equity
See accompanying notes to consolidated financial statements.
F-18
—
—
802
802
271,158 268,575
1,063,543 992,798
(54,990 ) (42,923 )
(453,228 ) (457,102 )
827,285 762,150
32,417 33,284
859,702 795,434
—
—
$ 1,338,801 $ 1,328,096
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
(In thousands)
Operating activities:
Consolidated net income
$
Reconciliation of net income to net cash provided by operating activities:
2015
2014
2013
88,407 $ 102,534 $ 173,289
Depreciation
Amortization of intangibles
Amortization of debt issuance costs
Stock-based compensation expense
Insurance settlements
Gain on disposal of assets
Insurance proceeds – noncapital related
Impairment charges
Income tax benefit from exercise of stock options
Deferred income taxes
Recovery of doubtful accounts receivable
Changes in assets and liabilities, net of businesses acquired and sold:
3,530
341
6,265
4,052
432
6,244
—
30,556 30,205 30,946
1,448
299
5,704
— (106,332 )
(42,300 )
— 32,395
—
(837 )
4,304
(719 )
(6,495 ) 19,213
—
—
(972 )
(15,818 )
(130 )
(500 )
(273 )
(14,815 )
(5,405 )
Receivables
Inventories
Other assets
Current liabilities
Other liabilities
Other, net
51,660 (21,432 ) 19,383
5,963
1,381
41,086
12,449 (23,652 )
562
5,849 (14,139 )
(45,585 )
(1,935 )
(2,223 )
436
705
1,044
1,607
Net cash provided by operating activities
159,609 90,605 128,513
Investing activities:
Proceeds from sale of assets, net of cash transferred
Acquisition of businesses, net of cash acquired
Capital expenditures
Investment in unconsolidated affiliate
Insurance proceeds
Net withdrawals from (deposits into) restricted cash balances
5,538 33,788 65,147
(105,944 ) (30,137 ) (55,276 )
(28,834 ) (39,173 ) (41,349 )
(65,900 )
—
4,333
—
—
— 29,910
(2,902 )
(1,417 )
Net cash used in investing activities
(190,807 ) (38,424 )
(2,985 )
Financing activities:
Dividends paid to stockholders of Mueller Industries, Inc.
Repayments of long-term debt
(Repayment) issuance of debt by joint venture, net
Net cash used to settle stock-based awards
Income tax benefit from exercise of stock options
Debt issuance costs
(16,903 ) (16,819 ) (13,941 )
(1,000 )
857
(228 )
719
(50 )
(1,000 )
(23,567 )
(760 )
972
—
(1,050 )
7,258
(777 )
837
—
Net cash used in financing activities
(41,258 ) (10,551 ) (13,643 )
Effect of exchange rate changes on cash
(4,834 )
(1,296 )
981
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(77,290 ) 40,334 112,866
352,134 311,800 198,934
Cash and cash equivalents at the end of the year
$ 274,844 $ 352,134 $ 311,800
See accompanying notes to consolidated financial statements.
F-19
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
(In thousands)
Common stock:
Balance at beginning of year
Issuance of shares under
two-for-one stock split
2015
2014
2013
Shares
Amount Shares
Amount Shares
Amount
80,183 $
802 80,183 $
401 80,183 $
401
—
—
—
401
—
—
Balance at end of year
80,183 $
802 80,183 $
802 80,183 $
401
Additional paid-in capital:
Balance at beginning of year
Issuance of shares under
incentive stock option
plans
Stock-based compensation
expense
Income tax benefit from
exercise of stock options
Issuance of shares under
two-for-one stock split
Issuance of restricted stock
$ 268,575
$ 267,142
$ 267,826
(1,074 )
(1,646 )
6,244
972
—
(3,559 )
6,265
837
(401 )
(3,622 )
(1,205 )
5,704
719
—
(5,902 )
Balance at end of year
$ 271,158
$ 268,575
$ 267,142
Retained earnings:
Balance at beginning of year
Net income attributable to
Mueller Industries, Inc.
Dividends paid or payable to
stockholders of Mueller
Industries, Inc.
$ 992,798
$ 908,274
$ 749,777
87,864
101,560
172,600
(17,119 )
(17,036 )
(14,103 )
Balance at end of year
$ 1,063,543
$ 992,798
$ 908,274
Accumulated other
comprehensive (loss) income:
Balance at beginning of year
Total other comprehensive
(loss) income attributable
to Mueller Industries, Inc.
$
(42,923 )
$
(10,819 )
$
(42,623 )
(12,067 )
(32,104 )
31,804
Balance at end of year
$
(54,990 )
$
(42,923 )
$
(10,819 )
F-20
MUELLER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(continued)
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
(In thousands)
Treasury stock:
Balance at beginning of year
Issuance of shares under
incentive stock option
plans
Repurchase of common stock
Issuance of restricted stock
2015
2014
2013
Shares
Amount Shares
Amount Shares
Amount
23,282
$ (457,102 ) 23,578 $ (461,593 ) 23,984 $ (468,473 )
(149 )
84
(193 )
2,930
(2,840 )
3,784
(208 )
107
(195 )
4,504
(3,832 )
3,819
(244 )
140
(302 )
4,716
(3,738 )
5,902
Balance at end of year
23,024
$ (453,228 ) 23,282
$ (457,102 ) 23,578 $ (461,593 )
Noncontrolling interest:
Balance at beginning of year
Net income attributable to
noncontrolling interest
Foreign currency translation
$
33,284
$
32,462
$
31,058
543
(1,410 )
974
(152 )
689
715
Balance at end of year
$
32,417
$
33,284
$
32,462
See accompanying notes to consolidated financial statements.
F-21
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Nature of Operations
The principal business of Mueller Industries, Inc. is the manufacture and sale of copper tube and fittings; line sets;
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; fabricated tubular products; and steel nipples. The
Company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing
specialty products. The Company markets its products to the HVAC, plumbing, refrigeration, hardware, and other
industries. Mueller’s operations are located throughout the United States and in Canada, Mexico, Great Britain, and
China.
Fiscal Years
The Company’s fiscal year consists of 52 weeks ending on the last Saturday of December. These dates were
December 26, 2015, December 27, 2014, and December 28, 2013.
Reclassifications
Certain reclassifications have been made to the prior years’ Consolidated Financial Statements to conform to the
current year’s presentation.
Basis of Presentation
The Consolidated Financial Statements include the accounts of Mueller Industries, Inc. and its majority owned
subsidiaries. The noncontrolling interest represents a separate private ownership of 49.5 percent of Jiangsu
Mueller-Xingrong Copper Industries Limited (Mueller-Xingrong), which manufactures and sells copper tube and
fittings in China. The Consolidated Financial Statements also include the Company’s investment in MA Industrial JV
LLC, the joint venture (Joint Venture) that acquired Tecumseh Products Company (Tecumseh), which manufactures
compressors and related products globally. This investment is accounted for using the equity method of accounting.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Common Stock Split
On February 21, 2014, the Company announced a two-for-one stock split of its common stock effected in the form of
a stock dividend of one share for each outstanding share. The record date for the stock split was March 14, 2014, and
the additional shares were distributed on March 28, 2014. Accordingly, all references to share and per share amounts
presented in the Consolidated Financial Statements and this Annual Report on Form 10-K have been adjusted
retroactively to reflect the stock split.
Revenue Recognition
Revenue is recognized when title and risk of loss pass to the customer, provided collection is determined to be
probable and no significant obligations remain for the Company. Estimates for future rebates on certain product lines
and product returns are recognized in the period in which the revenue is recorded. The cost of shipping product to
customers is expensed as incurred as a component of cost of goods sold.
Acquisitions
Accounting for acquisitions requires the Company to recognize separately from goodwill the assets acquired and
liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of the purchase price over
the net amount allocated to the identifiable assets acquired and liabilities assumed. While management uses its best
estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the
estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may
F-22
be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities
assumed with the corresponding offset to goodwill. The operating results generated by the acquired businesses are
included in the Consolidated Statements of Income from their respective dates of acquisition. Acquisition related
costs are expensed as incurred. See “Note 2 – Acquisitions and Dispositions” for additional information.
Cash Equivalents
Temporary investments with original maturities of three months or less are considered to be cash equivalents. These
investments are stated at cost. At December 26, 2015 and December 27, 2014, temporary investments consisted of
money market mutual funds, commercial paper, bank repurchase agreements, and U.S. and foreign government
securities totaling $106.4 million and $144.9 million, respectively. Included in other current assets is restricted cash
of $3.7 million and $8.1 million at December 26, 2015 and December 27, 2014, respectively. These amounts
represent required deposits into brokerage accounts that facilitate the Company’s hedging activities and deposits that
secure certain short-term notes issued under Mueller-Xingrong’s credit facility.
Allowance for Doubtful Accounts
The Company provides an allowance for receivables that may not be fully collected. In circumstances where the
Company is aware of a customer’s inability to meet their financial obligations (e.g., bankruptcy filings or substantial
credit rating downgrades), it records an allowance for doubtful accounts against amounts due to reduce the net
recognized receivable to the amount it believes most likely will be collected. For all other customers, the Company
recognizes an allowance for doubtful accounts based on its historical collection experience. If circumstances change
(e.g., greater than expected defaults or an unexpected material change in a major customer’s ability to meet their
financial obligations), the Company could change its estimate of the recoverability of amounts due by a material
amount.
Inventories
The Company’s inventories are valued at the lower-of-cost-or-market. The material component of its U.S. copper
tube and copper fittings inventories is valued on a LIFO basis. Other manufactured inventories, including the
non-material components of U.S. copper tube and copper fittings, are valued on a FIFO basis. Certain inventories
purchased for resale are valued on an average cost basis. Elements of cost in finished goods inventory in addition to
the cost of material include depreciation, amortization, utilities, maintenance, production wages, and transportation
costs.
The market price of copper cathode and scrap is subject to volatility. During periods when open market prices decline
below net book value, the Company may need to provide an allowance to reduce the carrying value of its inventory. In
addition, certain items in inventory may be considered obsolete and, as such, the Company may establish an allowance
to reduce the carrying value of those items to their net realizable value. Changes in these estimates related to the value
of inventory, if any, may result in a materially adverse impact on the Company’s reported financial position or results
of operations. The Company recognizes the impact of any changes in estimates, assumptions, and judgments in
income in the period in which it is determined. See “Note 3 – Inventories” for additional information.
Property, Plant, and Equipment
Property, plant, and equipment is stated at cost less accumulated depreciation. Expenditures for major additions and
improvements are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred.
Depreciation of buildings, machinery, and equipment is provided on the straight-line method over the estimated useful
lives ranging from 20 to 40 years for buildings and five to 20 years for machinery and equipment. Leasehold
improvements are amortized over the lesser of their useful life or the remaining lease term.
The Company continually evaluates these assets to determine whether events or changes in circumstances have
occurred that may warrant revision of the estimated useful life or whether the remaining balance should be evaluated
for possible impairment. See “Note 5 – Property, Plant, and Equipment, Net” for additional information.
F-23
Goodwill
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible
net assets of businesses acquired. Several factors give rise to goodwill in business acquisitions, such as the expected
benefit from synergies of the combination and the existing workforce of the acquired business. Goodwill is evaluated
annually for possible impairment as of the first day of the fourth quarter unless circumstances indicate the need to
accelerate the timing of the evaluation. In the evaluation of goodwill impairment, management performs a qualitative
assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. If the qualitative assessment is not conclusive, management proceeds to a two-step process to test goodwill
for impairment, including comparing the fair value of the reporting unit to its carrying value (including attributable
goodwill). If this process indicates that the fair value is less than the carrying value, a second step of impairment
testing is performed to measure the potential amount of goodwill impairment loss.
Fair value for the Company’s reporting units is determined using a combination of the income and market approaches
(Level 3 within the fair value hierarchy), incorporating market participant considerations and management’s
assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. The
market approach measures the fair value of a business through the analysis of publicly traded companies or recent
sales of similar businesses. The income approach uses a discounted cash flow model to estimate the fair value of
reporting units based on expected cash flows (adjusted for capital investment required to support operations) and a
terminal value. This cash flow stream is discounted to its present value to arrive at a fair value for each reporting
unit. Future earnings are estimated using the Company’s most recent annual projections, applying a growth rate to
future periods. Those projections are directly impacted by the condition of the markets in which the Company’s
businesses participate. The discount rate selected for the reporting units is generally based on rates of return available
for comparable companies at the date of valuation. Fair value determinations may include both internal and
third-party valuations. See “Note 6 – Goodwill and Other Intangible Assets” for additional information.
Investment in Unconsolidated Affiliate
The Company owns a 50 percent interest in the Joint Venture, an unconsolidated affiliate that acquired Tecumseh.
This investment is accounted for using the equity method of accounting as the Company can exercise significant
influence but does not own a majority equity interest or otherwise control the Joint Venture. Under the equity method
of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our
proportionate share of earnings or losses and distributions.
The Company records its proportionate share of the investee’s net income one quarter in arrears as equity in earnings
of the unconsolidated affiliate in the Consolidated Statements of Income. Due to the timing of the investment in
2015, there was no amount recorded during the year ended December 26, 2015. The Company’s proportionate share
of the investee’s other comprehensive income (loss), net of income taxes, is recorded in the Consolidated Statements
of Changes in Equity and Consolidated Statements of Comprehensive Income. In general, the equity investment in the
unconsolidated affiliate is equal to the current equity investment plus that entity’s undistributed earnings.
The investment in the unconsolidated affiliate is assessed periodically for impairment and is written down when the
carrying amount is not considered fully recoverable. See “Note 7 - Equity Method Investment” for additional
information.
Self-Insurance Accruals
The Company is primarily self-insured for workers’ compensation claims and benefits paid under certain employee
health care programs. Accruals are primarily based on estimated undiscounted cost of claims, which includes incurred
but not reported claims, and are classified as accrued wages and other employee costs.
Pension and Other Postretirement Benefit Plans
The Company sponsors several qualified and nonqualified pension and other postretirement benefit plans in the U.S.
and certain foreign locations. The Company recognizes the overfunded or underfunded status of the plans as an asset
or liability in the Consolidated Balance Sheet with changes in the funded status recorded through comprehensive
F-24
income in the year in which those changes occur. The obligations for these plans are actuarially determined and
affected by assumptions, including discount rates, expected long-term return on plan assets for defined benefit pension
plans, and certain employee-related factors, such as retirement age and mortality. The Company evaluates its
assumptions periodically and makes adjustments as necessary.
The expected return on plan assets is determined using the market value of plan assets. Differences between assumed
and actual returns are amortized to the market value of assets on a straight-line basis over the average remaining
service period of the plan participants using the corridor approach. The corridor approach defers all actuarial gains
and losses resulting from variances between actual results and actuarial assumptions. These unrecognized gains and
losses are amortized when the net gains and losses exceed 10 percent of the greater of the market value of the plan
assets or the projected benefit obligation. The amount in excess of the corridor is amortized over the average
remaining service period of the plan participants. For 2015, the average remaining service period for the pension
plans was nine years. See “Note 14 –Benefit Plans” for additional information.
Environmental Reserves and Environmental Expenses
The Company recognizes an environmental liability when it is probable the liability exists and the amount is
reasonably estimable. The Company estimates the duration and extent of its remediation obligations based upon
reports of outside consultants; internal analyses of cleanup costs and ongoing monitoring costs; communications with
regulatory agencies; and changes in environmental law. If the Company were to determine that its estimates of the
duration or extent of its environmental obligations were no longer accurate, it would adjust environmental liabilities
accordingly in the period that such determination is made. Estimated future expenditures for environmental
remediation are not discounted to their present value. Accrued environmental liabilities are not reduced by potential
insurance reimbursements.
Environmental expenses that relate to ongoing operations are included as a component of cost of goods
sold. Environmental expenses related to non-operating properties are included in other income, net on the
Consolidated Statements of Income. See “Note 9 – Commitments and Contingencies” for additional information.
Earnings Per Share
Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted
earnings per share reflects the increase in weighted average common shares outstanding that would result from the
assumed exercise of outstanding stock options and vesting of restricted stock awards calculated using the treasury
stock method. Approximately 427 thousand and 180 thousand stock-based awards were excluded from the
computation of diluted earnings per share for the years ended December 26, 2015 and December 27, 2014,
respectively, because they were antidilutive.
Income Taxes
Deferred income tax assets and liabilities are recognized when differences arise between the treatment of certain items
for financial statement and tax purposes. Realization of certain components of deferred tax assets is dependent upon
the occurrence of future events. The Company records valuation allowances to reduce its deferred tax assets to the
amount it believes is more likely than not to be realized. These valuation allowances can be impacted by changes in
tax laws, changes to statutory tax rates, and future taxable income levels and are based on the Company’s judgment,
estimates, and assumptions regarding those future events. In the event the Company was to determine that it would
not be able to realize all or a portion of the net deferred tax assets in the future, it would increase the valuation
allowance through a charge to income tax expense in the period that such determination is made. Conversely, if it
were to determine that it would be able to realize its deferred tax assets in the future, in excess of the net carrying
amounts, the Company would decrease the recorded valuation allowance through a decrease to income tax expense in
the period that such determination is made.
The Company provides for uncertain tax positions and the related interest and penalties, if any, based upon
management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax
authorities. Tax benefits for uncertain tax positions that are recognized in the financial statements are measured as the
largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon
F-25
ultimate settlement. To the extent the Company prevails in matters for which a liability for an uncertain tax position is
established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial
statement period may be affected.
These estimates are highly subjective and could be affected by changes in business conditions and other
factors. Changes in any of these factors could have a material impact on future income tax expense. See “Note 10 –
Income Taxes” for additional information.
Taxes Collected from Customers and Remitted to Governmental Authorities
Taxes assessed by a governmental authority that are directly imposed on a revenue producing transaction between the
Company and its customers, primarily value added taxes in foreign jurisdictions, are accounted for on a net (excluded
from revenues and costs) basis.
Stock-Based Compensation
The Company has in effect stock incentive plans under which stock-based awards have been granted to certain
employees and members of its Board of Directors. Stock-based compensation expense is recognized in the
Consolidated Statements of Income as a component of selling, general, and administrative expense based on the grant
date fair value of the awards. See “Note 12 – Stock-Based Compensation” for additional information.
Concentrations of Credit and Market Risk
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers
comprising the Company’s customer base, and their dispersion across different geographic areas and different
industries, including HVAC, plumbing, refrigeration, hardware, automotive, OEMs, and others.
The Company minimizes its exposure to base metal price fluctuations through various strategies. Generally, it prices
an equivalent amount of copper raw material, under flexible pricing arrangements it maintains with its suppliers, at the
time it determines the selling price of finished products to its customers.
Derivative Instruments and Hedging Activities
The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign
currency exchange rates, and interest rates. The Company uses derivative instruments such as commodity futures
contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures.
All derivatives are recognized in the Consolidated Balance Sheets at their fair value. On the date the derivative
contract is entered into, it is designated as (i) a hedge of a forecasted transaction or the variability of cash flow to be
paid (cash flow hedge), or (ii) a hedge of the fair value of a recognized asset or liability (fair value hedge). Changes in
the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge are recorded in
accumulated other comprehensive income (AOCI), to the extent effective, until they are reclassified to earnings in the
same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative
that is qualified, designated, and highly effective as a fair value hedge, along with the gain or loss on the hedged
recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the
fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are
reported in current earnings.
The Company documents all relationships between hedging instruments and hedged items, as well as the
risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all
derivatives that are designated as fair value hedges to specific assets and liabilities in the Consolidated Balance Sheets
and linking cash flow hedges to specific forecasted transactions or variability of cash flow.
The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives
that are used in hedging transactions are highly effective in offsetting changes in cash flow or fair values of hedged
items. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is
F-26
no longer probable, hedge accounting is discontinued prospectively, in accordance with the derecognition criteria for
hedge accounting.
The Company primarily executes derivative contracts with major financial institutions. These counterparties expose
the Company to credit risk in the event of non-performance. The amount of such exposure is limited to the fair value
of the contract plus the unpaid portion of amounts due to the Company pursuant to terms of the derivative instruments,
if any. If a downgrade in the credit rating of these counterparties occurs, management believes that this exposure is
mitigated by provisions in the derivative arrangements which allow for the legal right of offset of any amounts due to
the Company from the counterparties with any amounts payable to the counterparties by the Company. As a result,
management considers the risk of loss from counterparty default to be minimal. See “Note 15 – Derivative
Instruments and Hedging Activities” for additional information.
Fair Value of Financial Instruments
The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value
due to the short-term maturity of these instruments.
The fair value of long-term debt at December 26, 2015 approximates the carrying value on that date. The estimated
fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and
maturities. The fair value of long-term debt is classified as Level 2 within the fair value hierarchy. This
classification is defined as a fair value determined using market-based inputs other than quoted prices that are
observable for the liability, either directly or indirectly.
Outstanding borrowings have variable interest rates that
re-price frequently at current market rates.
Foreign Currency Translation
For foreign subsidiaries in which the functional currency is not the U.S. dollar, balance sheet accounts are translated at
exchange rates in effect at the end of the year and income statement accounts are translated at average exchange rates
for the year. Translation gains and losses are included in equity as a component of AOCI. Included in the
Consolidated Statements of Income were transaction losses of $1.7 million in 2015, gains of $0.1 million in 2014, and
losses of $0.1 million in 2013.
Use of and Changes in Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United
States (U.S. GAAP) requires management to make estimates, assumptions, and judgments that affect the amounts
reported in the financial statements and accompanying notes. Management makes its best estimate of the ultimate
outcome for these items based on historical trends and other information available when the financial statements are
prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is
typically in the period when new information becomes available to management. Areas where the nature of the
estimate makes it reasonably possible that actual results could materially differ from amounts estimated include but
are not limited to: pension and other postretirement benefit plan obligations, tax liabilities, loss contingencies,
litigation claims, environmental reserves, and impairment assessments on long-lived assets (including goodwill).
Change in Segment Reporting
Beginning in fiscal year 2016, the Company will change its operating segments and report future results as three
separate segments: Piping Systems, Industrial Metals, and Cold Climate.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU
2014-09). The ASU will supersede virtually all existing revenue recognition guidance under U.S. GAAP and will be
effective for annual reporting periods beginning after December 15, 2017. The fundamental principles of the new
guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to
customers and the amount of revenue recognized reflects the consideration that a company expects to receive for the
F-27
goods and services provided. The new guidance establishes a five-step approach for the recognition of revenue. The
Company is in the process of evaluating the impact of ASU 2014-09 on its Consolidated Financial Statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Topic 835-30): Simplifying the
Presentation of Debt Issue Costs (ASU 2015-03). The ASU simplifies the presentation of debt issuance costs by
requiring debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct
deduction from the debt liability rather than as a separate asset. In circumstances in which there is not an associated
debt liability amount recorded in the financial statements when the debt issuance costs are incurred, they will be
reported on the balance sheet as an asset until the debt liability is recorded. The guidance is effective for public
business entities in interim and fiscal periods beginning after December 15, 2015. Retrospective application is
required, and early adoption is permitted. The Company does not expect the adoption to have a material impact on its
Consolidated Financial Statements.
In April 2015, the FASB issued ASU No. 2015-04, Compensation – Retirement Benefits (Topic 715): Practical
Expedient for the Measurement Date of an Employers’ Defined Benefit Obligation and Plan Assets (ASU 2015-04).
The ASU allows employers with fiscal year-ends that do not coincide with a calendar month-end to make an
accounting policy election to measure defined benefit plan assets and obligations as of the end of the month closest to
their fiscal year-ends. The new guidance is effective for public business entities in interim and fiscal periods
beginning after December 15, 2015. Prospective application is required, and early adoption is permitted. The
Company will continue to measure its defined benefit plan assets and obligation at fiscal year-end and will not elect to
change the measurement date to a calendar month-end.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory
(ASU 2015-11). The ASU simplifies the subsequent measurement of inventory by requiring inventory to be
measured at the lower of cost and net realizable value, defined as the estimated selling price in the normal course of
business less reasonably predictable costs of completion, sale, and transportation. It does not impact existing
impairment models to inventories that are accounted for using LIFO. The guidance is effective for public business
entities in interim and fiscal periods beginning after December 15, 2016. Early adoption is permitted and prospective
application is required. The Company has elected early adoption of ASU 2015-11 effective December 26, 2015 in
order to simplify the measurement of inventory. The adoption of the ASU did not have a material impact on the
Company’s Consolidated Financial Statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments (ASU 2015-16). The ASU eliminates the requirement for an
acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead,
acquirers must recognize measurement-period adjustments during the period in which they determine the amounts,
including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had
been completed at the acquisition date. The new guidance is effective for public business entities for fiscal years
beginning after December 15, 2015. Early adoption is permitted and the ASU applies to open measurement periods
after the effective date, regardless of the acquisition date. The Company has elected early adoption of ASU 2015-16
effective September 27, 2015.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet Classification of
Deferred Taxes (ASU 2015-17). The ASU simplifies the presentation of deferred income taxes by requiring that all
deferred tax liabilities and assets be classified as noncurrent in the Consolidated Balance Sheets. In addition,
companies will no longer allocate valuation allowances between current and noncurrent deferred tax assets. This
guidance is effective for public business entities in interim and fiscal periods beginning after December 15, 2016.
Prospective or retrospective application is allowed, and early adoption is permitted. The Company has elected early
adoption of ASU 2015-17 effective December 26, 2015 on a prospective basis; prior periods were not retrospectively
adjusted. As a result of the adoption, $24.6 million of deferred tax assets that were previously classified as current
assets were reclassified to noncurrent assets in the Consolidated Balance Sheet as of December 26, 2015.
F-28
Note 2 – Acquisitions and Dispositions
2015 Acquisitions
Great Lakes Copper
On July 31, 2015, the Company entered into a Share Purchase Agreement with Great Lakes Copper, Inc. providing for
the purchase of all of the outstanding shares of Great Lakes Copper Ltd. (Great Lakes) for $70.0 million in cash,
including a $1.5 million post-closing working capital adjustment. Great Lakes manufactures copper tube products in
Canada. This acquisition complements the Company’s existing copper tube businesses in the Plumbing &
Refrigeration segment.
Sherwood Valve Products
On June 18, 2015, the Company entered into a Membership Interest Purchase Agreement with Sherwood Valve
Products, LLC (Sherwood) providing for the purchase of all of the outstanding equity interests of Sherwood for $21.8
million in cash, net of a post-closing working capital adjustment. Sherwood manufactures valves and fluid control
solutions for the HVAC, refrigeration, and compressed gas markets. The acquisition of Sherwood complements the
Company’s existing refrigeration business, a component of the OEM segment.
Turbotec Products, Inc.
On March 30, 2015, the Company entered into a Stock Purchase Agreement with Turbotec Products, Inc. (Turbotec)
providing for the purchase of all of the outstanding capital stock of Turbotec for approximately $14.1 million in cash,
net of a post-closing working capital adjustment. Turbotec manufactures coaxial heat exchangers and twisted tubes for
the heating, ventilation, and air-conditioning (HVAC), geothermal, refrigeration, swimming pool heat pump, marine,
ice machine, commercial boiler, and heat reclamation markets. The acquisition of Turbotec complements the
Company’s existing refrigeration business, a component of the OEM segment.
2014 Acquisition
Yorkshire Copper Tube
On February 28, 2014, the Company entered into a definitive agreement with KME Yorkshire Limited to acquire
certain assets and assume certain liabilities of its copper tube business. Yorkshire Copper Tube (Yorkshire) produces
European standard copper distribution tubes. The purchase price was approximately $30.1 million, paid in
cash. The acquisition of Yorkshire complements the Company’s existing copper tube businesses in the Plumbing &
Refrigeration segment.
The Company recognized approximately $3.4 million of severance costs related to the reorganization of Yorkshire
during 2015, compared to $7.3 million in 2014. The Company does not expect to incur further severance costs for the
rationalization of the business.
2013 Acquisition
Howell Metals Company
On October 17, 2013, the Company entered into a Stock Purchase Agreement with Commercial Metals Company and
Howell Metal Company (Howell) providing for the purchase of all of the outstanding capital stock of Howell for
approximately $55.3 million in cash, net of working capital adjustments. Howell manufactures copper tube and line
sets for U.S. distribution. The acquisition of Howell complements the Company’s copper tube and line sets
businesses, both components of the Plumbing & Refrigeration segment.
These acquisitions were accounted for using the acquisition method of accounting whereby the total purchase price
was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.
F-29
The following table summarizes the allocation of the purchase price to acquire these businesses, which was financed
by available cash balances, as well as the assets acquired and liabilities assumed at the respective acquisition dates.
For the Great Lakes, Sherwood, and Turbotec acquisitions, the purchase price allocations are provisional as of
December 26, 2015 and subject to change upon completion of the final valuation of the long-lived assets during their
respective measurement periods.
(in thousands)
Great Lakes Sherwood Turbotec
Yorkshire
Howell
Total consideration
$
70,011 $
21,795 $
14,138 $
30,137 $
55,276
Allocated to:
Accounts receivable
Inventories
Other current assets
Property, plant, and equipment
Goodwill(1)
Intangible assets
Other assets
Total assets acquired
26,079
15,233
22
22,771
19,087 (1)
27,468
1,413
112,073
6,490
11,892
260
10,327
—
(38 )
—
28,931
1,936
3,247
72
9,080
2,088
880
59
17,362
—
17,579
1,034
2,103
8,075 (1)
16,937
—
45,728
14,564
27,615
571
20,293
1,358 (1)
2,320
—
66,721
Accounts payable
Accrued wages & other employee
costs
Other current liabilities
Postretirement benefits other than
pensions
Other noncurrent liabilities
Total liabilities assumed
36,026
6,022
1,603
10,188
9,208
—
381
471
487
356
51
1,167
4,236
5,655
—
42,062
—
156
7,136
—
1,214
3,224
—
—
15,591
703
1,534
—
—
11,445
Net assets acquired
$
70,011 $
21,795 $
14,138 $
30,137 $
55,276
(1) Tax-deductible goodwill
The following details the total intangible assets identified in the allocation of the purchase price at the respective
acquisition dates:
(in thousands)
Useful Life
Great Lakes
Turbotec
Yorkshire
Howell
Estimated
Intangible asset type:
Customer relationships
Non-compete agreements
Patents and technology
Trade names and licenses
Other
$
20 years
3-5 years
10-15 years
5-10 years
2-5 years
$
20,273
2,269
3,104
2,453
(631 )
350 $
90
220
220
—
$
10,699
4,504
—
1,055
679
1,910
—
—
410
—
Total intangible assets
$
27,468
$
880 $
16,937
$
2,320
The results of operations of the acquired businesses were included in the Company’s Consolidated Financial
F-30
Statements from their respective acquisition dates.
2015 Disposition
On June 1, 2015, the Company sold certain assets. Simultaneously, the Company entered into a lease agreement with
the purchaser of the assets for their continued use for a period of approximately 22 months (Lease Period).
The total sales price was $20.2 million, of which $5.0 million was received on June 1, 2015; the Company will receive
$5.0 million on December 30, 2016 and the remaining $10.2 million will be received at the end of the Lease Period.
This transaction resulted in a pre-tax gain of $15.4 million in the second quarter of 2015, or 17 cents per diluted share
after tax. This gain was recognized in the Plumbing & Refrigeration segment.
The net book value of the assets disposed was $2.3 million. For goodwill testing purposes, these assets were part of
the SPD reporting unit, which is a component of the Company’s Plumbing & Refrigeration segment. Because these
assets met the definition of a business, $2.4 million of the SPD reporting unit’s goodwill balance was allocated to the
disposal group. The amount of goodwill allocated was based on the relative fair values of the asset group that was
disposed and the portion of the SPD reporting unit that was retained.
2014 Dispositions
On November 21, 2014, the Company entered into a Share Purchase Agreement with Travis Perkins PLC to sell all of
the outstanding capital stock of Mueller Primaflow Limited (Primaflow), the Company’s United Kingdom based
plumbing and heating systems import distribution business, for approximately $24.9 million. Primaflow, which
serves markets in the United Kingdom and Ireland, was included in the Plumbing & Refrigeration segment and
reported net sales of $57.5 million and after-tax net income of $4.4 million for the 2014 fiscal year. The carrying
value of the assets disposed totaled $25.3 million, consisting primarily of accounts receivable and inventories. The
carrying value of the liabilities disposed totaled $7.1 million, consisting primarily of accounts payable and other
current liabilities. In addition, the Company recognized a cumulative translation loss of $6.0 million. The net gain
on the sale of this business was immaterial to the Consolidated Financial Statements.
During November 2014, the Company sold its ABS plastic pipe manufacturing assets. These assets had a carrying
value of approximately $1.9 million and were part of the SPD reporting unit, which is a component of the Plumbing &
Refrigeration segment. The sales price was $6.0 million, which resulted in a pre-tax gain of $4.1 million.
2013 Disposition
On August 9, 2013, the Company sold certain of its plastic fittings manufacturing assets located in Portage, Michigan
and Ft. Pierce, Florida. Simultaneously, the Company entered into a lease agreement with the purchaser of the assets
to continue to manufacture and distribute Schedule 40 plastic fittings utilizing the Ft. Pierce assets for a period of
approximately eight to 14 months (Transition Period). The total sale price was $66.2 million, of which $61.2 million
was received on August 9, 2013; the remaining $5.0 million was received during the second quarter of 2014. This
transaction resulted in a pre-tax gain of $39.8 million in the third quarter of 2013, or 41 cents per diluted share after
tax.
The net book value of the plastic fittings manufacturing assets disposed was $15.9 million. For goodwill testing
purposes, these assets were part of the SPD reporting unit, which is a component of the Company’s Plumbing &
Refrigeration segment. Because these assets met the definition of a business, $10.5 million of the SPD reporting
unit’s goodwill balance was allocated to the disposal group. The amount of goodwill allocated was based on the
relative fair values of the asset group that was disposed and the portion of the SPD reporting unit that was retained.
The Company has continued to manufacture and supply plastic drain, waste, and vent (DWV) fittings, and extended its
third party supply agreement to complement its product offering with purchased products it does not manufacture with
the remaining assets. This supply agreement was originally entered into after the majority of the Company’s plastic
manufacturing assets were destroyed in the 2011 fire at its Wynne, Arkansas facility.
F-31
With the decision to cease the Company’s manufacturing operations in Portage, there was an evaluation of the
remaining long-lived assets for impairment, and it was determined that the carrying values of the land and building
were no longer recoverable. An impairment charge of $3.2 million was recognized during the third quarter of 2013 to
adjust the carrying values of the land and building to their estimated fair value. The fair value estimate was
determined by obtaining and evaluating recent sales data for similar assets (Level 2 within the fair value hierarchy).
During March 2014, the land and building in Portage were sold for $4.7 million, resulting in a pre-tax gain of $1.4
million.
Note 3 – Inventories
(In thousands)
Raw materials and supplies
Work-in-process
Finished goods
Valuation reserves
Inventories
2015
2014
58,987 $
$
53,586
25,161 39,707
161,410 168,481
(5,189 )
(6,180 )
$ 239,378 $ 256,585
Inventories valued using the LIFO method totaled $27.6 million at December 26, 2015 and $25.9 million at December
27, 2014. At December 26, 2015 and December 27, 2014, the approximate FIFO cost of such inventories was $80.7
million and $104.8 million, respectively. Additionally, the Company values certain inventories purchased for resale
on an average cost basis. The value of those inventories was $48.8 million at December 26, 2015 and $47.7 million at
December 27, 2014.
At the end of 2015 and 2014, the FIFO value of inventory consigned to others was $3.7 million and $4.3 million,
respectively.
Note 4 – Consolidated Financial Statement Details
Other Current Liabilities
Included in other current liabilities were accrued discounts and allowances of $46.6 million at December 26, 2015 and
$45.3 million at December 27, 2014 and taxes payable of $10.3 million at December 26, 2015 and $0.9 million at
December 27, 2014.
Other (Expense) Income, Net
(In thousands)
Gain on the sale of non-operating property
Interest income
Environmental expense, non-operating properties
Other
2015
2014
2013
$
— $
1,029
(46 )
1,205
— $
573
(822 )
6
3,000
906
(823 )
1,368
Other (expense) income, net
$
2,188 $
(243 ) $
4,451
F-32
Note 5 – Property, Plant, and Equipment, Net
(In thousands)
Land and land improvements
Buildings
Machinery and equipment
Construction in progress
Less accumulated depreciation
Property, plant, and equipment, net
Note 6 – Goodwill and Other Intangible Assets
Goodwill
2015
2014
13,046 $
$
12,198
128,322 120,035
597,209 561,093
47,746 44,787
786,323 738,113
(506,099 ) (492,203 )
$ 280,224 $ 245,910
The changes in the carrying amount of goodwill were as follows:
(In thousands)
Plumbing &
Refrigeration
Segment
OEM Segment
Total
Goodwill
Accumulated impairment charges
$
131,462
(39,434 )
12,300
(9,971 )
143,762
(49,405 )
Balance at December 28, 2013:
92,028
2,329
94,357
Additions(1)
Currency translation
9,123
(571 )
—
—
9,123
(571 )
Balance at December 27, 2014:
100,580
2,329
102,909
Additions
Disposition
Currency translation
Balance at December 26, 2015:
Goodwill
Accumulated impairment charges
19,087
(2,418 )
(1,414 )
2,088
—
—
21,175
(2,418 )
(1,414 )
155,269
(39,434 )
14,388
(9,971 )
169,657
(49,405 )
Goodwill, net
$
115,835 $
4,417 $
120,252
(1) Includes finalization of the purchase price allocation adjustment for Howell of $1.0 million
Reporting units with recorded goodwill include SPD, Great Lakes, European Operations, Westermeyer (reported in
the EPD operating segment), and Turbotec (reported in the EPD operating segment). Several factors give rise to
goodwill in the Company’s acquisitions, such as the expected benefit from synergies of the combination and the
existing workforce of the acquired businesses. There were no impairment charges resulting from the 2015, 2014, or
2013 annual impairment tests as the estimated fair value of each of the reporting units exceeded its carrying value.
F-33
Other Intangible Assets
The gross and net book value of other intangible assets included in other assets at December 26, 2015 was as follows:
(In thousands)
Customer relationships
Non-compete agreements
Patents and technology
Trade names and licenses
Other
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
30,882 $
6,534
9,798
4,160
213
(1,488 ) $
(2,838 )
(5,323 )
(574 )
(728 )
29,394
3,696
4,475
3,586
(515 )
Other intangible assets
$
51,587 $
(10,951 ) $
40,636
The carrying amount of intangible assets at December 27, 2014 was as follows:
(In thousands)
Customer relationships
Non-compete agreements
Patents and technology
Trade names and licenses
Other
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
11,852 $
4,495
6,852
1,670
877
(526 ) $
(1,307 )
(4,744 )
(252 )
(453 )
11,326
3,188
2,108
1,418
424
Other intangible assets
$
25,746 $
(7,282 ) $
18,464
Amortization expense for intangible assets was $4.1 million in 2015, $3.5 million in 2014, and $1.4 million in 2013.
Future amortization expense is estimated as follows:
(In thousands)
2016
2017
2018
2019
2020
Thereafter
Expected amortization expense
Note 7 – Equity Method Investment
Amount
$
4,296
3,014
2,709
2,647
2,480
25,490
$
40,636
During the third quarter of 2015, the Company entered into a joint venture agreement with affiliates of Atlas Holdings
LLC to form the Joint Venture, which simultaneously entered into a definitive merger agreement with MA Industrial
Sub, Inc. and Tecumseh to commence a cash tender offer to acquire all of the outstanding shares of Tecumseh. On
September 21, 2015, the tender offer and back-end merger was completed and Mueller contributed $65.9 million for a
50 percent ownership interest in the Joint Venture. Tecumseh is a global manufacturer of hermetically sealed
compressors for residential and specialty air conditioning, household refrigerators and freezers, and commercial
refrigeration applications, including air conditioning and refrigeration compressors, as well as condensing units, heat
pumps, and complete refrigeration systems.
F-34
The Company accounts for this investment using the equity method of accounting, and the total investment, including
net tangible assets, identifiable intangible assets, and goodwill, is classified as the investment in unconsolidated
affiliate on the Company’s Consolidated Balance Sheets.
The following tables present summarized financial information derived from the Company’s equity method investee’s
consolidated financial statements, which are prepared in accordance with U.S. GAAP. The Company records its
proportionate share of the investee’s net income one quarter in arrears as equity in earnings of the unconsolidated
affiliate in the Consolidated Statements of Income. As such, the balances shown below are as of September 30, 2015.
The allocation of the Joint Venture’s purchase price is provisional as of December 26, 2015 and therefore subject to
change upon final valuation of assets and review of working capital. Changes to the final purchase price allocation
could impact the Company’s accounting for its equity method investment in the Joint Venture.
(In thousands)
Balance sheet data:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Note 8 – Debt
(In thousands)
Term Loan Facility with interest at 2.66%, due 2017
Mueller-Xingrong credit facility with interest at 5.60%, due 2016
2001 Series IRB’s with interest at 1.23%, due through 2021
Other
Less current portion of debt
Long-term debt
2015
$ 251,389
112,156
178,784
63,643
2015
2014
$ 200,000 $ 200,000
5,275 29,968
5,250
5,485
6,250
5,226
216,010 241,444
(11,760 ) (36,194 )
$ 204,250 $ 205,250
The Company’s credit agreement provides for an unsecured $200.0 million revolving credit facility (the Revolving
Credit Facility) and a $200.0 million term loan facility, both maturing December 11, 2017. Borrowings under the
Credit Agreement bear interest, at the Company’s option, at LIBOR or Base Rate as defined by the Credit Agreement,
plus a variable premium. LIBOR advances may be based upon the one, three, or six-month LIBOR. The variable
premium is based upon the Company’s debt to total capitalization ratio, and can range from 112.5 to 162.5 basis points
for LIBOR-based loans and 12.5 to 62.5 basis points for Base Rate loans. At December 26, 2015, the premium was
137.5 basis points for LIBOR-based loans and 37.5 basis points for Base Rate loans. Additionally, a facility fee is
payable quarterly on the total commitment and varies from 25.0 to 37.5 basis points based upon the Company’s debt to
total capitalization ratio. Availability of funds under the Revolving Credit Facility is reduced by the amount of certain
outstanding letters of credit, which are used to secure the Company’s payment of insurance deductibles and certain
retiree health benefits, totaling approximately $8.8 million at December 26, 2015. Terms of the letters of credit are
generally one year but are renewable annually. There were no borrowings outstanding on the Revolving Credit
Facility at the end of 2015.
On February 2, 2015, Mueller-Xingrong entered into a secured revolving credit agreement with a total borrowing
capacity of RMB 230 million (or approximately $36.0 million). In addition, Mueller-Xingrong occasionally finances
working capital through various accounts receivable and bank draft discount arrangements. Total borrowings at
Mueller-Xingrong were $10.8 million at December 26, 2015.
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. At December 26, 2015,
the Company was in compliance with all debt covenants.
F-35
Aggregate annual maturities of the Company’s debt are as follows:
(In thousands)
2016
2017
2018
2019
2020
Thereafter
Long-term debt
Amount
$
11,760
201,000
1,000
1,000
1,000
250
$ 216,010
Net interest expense consisted of the following:
(In thousands)
Interest expense
Capitalized interest
2015
2014
2013
$
8,335 $
(668 )
6,393 $
(653 )
5,147
(1,157 )
$
7,667 $
5,740 $
3,990
Interest paid in 2015, 2014, and 2013 was $8.1 million, $5.7 million, and $4.9 million, respectively.
Note 9 – Commitments and Contingencies
Environmental
The Company is subject to federal, state, local, and foreign environmental laws and regulations. For all properties, the
Company has provided and charged to expense $0.1 million in 2015, $1.2 million in 2014, and $1.0 million in 2013 for
pending environmental matters. Environmental reserves totaled $21.7 million at December 26, 2015 and $22.7
million at December 27, 2014. As of December 26, 2015, the Company expects to spend $0.6 million in 2016, $0.6
million in 2017, $0.6 million in 2018, $0.7 million in 2019, $0.7 million in 2020, and $18.5 million thereafter for
ongoing projects.
Non-operating Properties
Southeast Kansas Sites
The Kansas Department of Health and Environment (KDHE) has contacted the Company regarding environmental
contamination at three former smelter sites in Kansas (Altoona, East La Harpe, and Lanyon). The Company is not a
successor to the companies that operated these smelter sites, but is exploring possible settlement with KDHE and other
potentially responsible parties (PRP) in order to avoid litigation. Another PRP conducted a site investigation of the
Altoona site under a consent decree with KDHE and submitted a removal site evaluation report recommending a
remedy. The remedial plan, which covers both on-site and certain off-site cleanup costs, was approved by the agency
in 2015. At the East La Harpe site, the Company and two other PRPs conducted a site study evaluation under KDHE
supervision, prepared a site cleanup plan approved by KDHE in 2015, and are discussing sharing the costs of a
possible cleanup. Additionally, during 2015 the Company, with the assistance of an independent environmental
consultant, estimated on-site cleanup costs for the Lanyon Site. As a result, the Company updated its estimate and
decreased its reserve for its proportionate share of the remediation of the Southeast Kansas Sites from $9.5 million to
$5.6 million in 2015, or four cents per diluted share after tax.
F-36
Shasta Area Mine Sites
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 1980s, of sealing mine portals with concrete
plugs in mine adits, which were discharging water. The sealing program 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 QCB Order, 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, and again 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 ten-year permit will include an order requiring continued
implementation of BMP through 2025 to address residual discharges of acid rock drainage. During 2015, the
Company revised its future cost estimate for the remediation of this site from 20 to 30 years in order to correspond
with similar studies for other sites. As a result of this change, the Company increased its reserve for the remediation
of the Shasta Area Mine Sites from $10.5 million to $13.3 million in 2015, or three cents per diluted share after tax.
At this site, MRRC spent approximately $1.3 million from 2013 through 2015 and currently estimates that it will
spend between approximately $13.3 million and $20.1 million over the next 30 years.
Lead Refinery Site
U.S.S. Lead Refinery, Inc. (Lead Refinery), a non-operating wholly owned subsidiary of MRRC, has conducted
corrective action and interim remedial activities (collectively, Site Activities) at Lead Refinery’s East Chicago,
Indiana site pursuant to the Resource Conservation and Recovery Act since December 1996. Although the Site
Activities have been substantially concluded, Lead Refinery
to perform monitoring and
maintenance-related activities pursuant to a post-closure permit issued by the Indiana Department of Environmental
Management effective as of March 2, 2013. Lead Refinery spent approximately $0.2 million in 2015 and $0.1 million
annually in 2014 and 2013 with respect to this site. Approximate costs to comply with the post-closure permit,
including associated general and administrative costs, are estimated at between $2.1 million and $5.8 million over the
next 21 years.
is required
On April 9, 2009, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), the U.S. Environmental Protection Agency (EPA) added the Lead Refinery site and surrounding
properties to the National Priorities List. On July 17, 2009, Lead Refinery received a written notice from the EPA
indicating that it may be a PRP under CERCLA due to the release or threat of release of hazardous substances
including lead into properties surrounding the Lead Refinery site. The EPA has identified two other PRPs in
connection with the matter. In November 2012, the EPA adopted a remedy for the surrounding properties and in
September 2014, the EPA announced that it had entered into a settlement with the two other PRPs whereby they will
pay approximately $26.0 million to fund the cleanup of approximately 300 properties surrounding the Lead Refinery
site and perform certain remedial action tasks.
In 2015, the EPA conducted a review of the Company’s records for the purpose of identifying parties to pay for the
investigation and cleanup of properties surrounding the Lead Refinery site in connection with the November 2012
remedy. The EPA has not contacted Lead Refinery regarding settlement of the agency’s potential claims related to
the properties surrounding the Lead Refinery site, proposed remedies for the Lead Refinery site, or informed Lead
Refinery that it is a PRP at the Lead Refinery site. The Company is unable to determine the likelihood of a material
adverse outcome or the amount or range of a potential loss with respect to placement of the Lead Refinery site and
adjacent properties on the NPL.
Operating Properties
Mueller Copper Tube Products, Inc.
In 1999, Mueller Copper Tube Products, Inc. (MCTP), a wholly owned subsidiary, commenced a cleanup and
F-37
remediation of soil and groundwater at its Wynne, Arkansas plant to remove trichloroethylene, a cleaning solvent
formerly used by MCTP. On August 30, 2000, MCTP received approval of its Final Comprehensive Investigation
Report and Storm Water Drainage Investigation Report addressing the treatment of soils and groundwater from the
Arkansas Department of Environmental Quality (ADEQ). The Company established a reserve for this project in
connection with the acquisition of MCTP in 1998. Effective November 17, 2008, MCTP entered into a Settlement
Agreement and Administrative Order by Consent to submit a Supplemental Investigation Work Plan (SIWP) and
subsequent Final Remediation Work Plan (RWP) for the site. By letter dated January 20, 2010, ADEQ approved the
SIWP as submitted, with changes acceptable to the Company. On December 16, 2011, MCTP entered into an
amended Administrative Order by Consent to prepare and implement a revised RWP regarding final remediation for
the Site. The remediation system was activated in February 2014. Costs to implement the work plans, including
associated general and administrative costs, are approximately $0.7 million to $1.1 million over the next nine years.
United States Department of Commerce Antidumping Review
On December 24, 2008, the 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 for the November 1,
2007 through October 31, 2008 period of review. The DOC selected Mueller Comercial as a respondent in the
review. On April 19, 2010, the DOC published the final results of the review and assigned Mueller Comercial an
antidumping duty rate of 48.33 percent. On May 25, 2010, the Company appealed the final results to the U.S. Court
of International Trade (CIT). On December 16, 2011, the CIT issued a decision remanding the Department’s final
results. While the matter was still pending, the Company and the United States reached an agreement to settle the
appeal. Subject to the conditions of the agreement, the Company anticipated that certain of its subsidiaries will incur
antidumping duties on subject imports made during the period of review and, as such, established a reserve for this
matter. After the lapse of the statutory period of time during which U.S. Customs and Border Protection (CBP) was
required, but failed, to liquidate the entries at the settled rate, the Company released the reserve. Between October 30,
2015 and November 27, 2015, CBP sent a series of invoices to Southland Pipe Nipples Co., Inc. (Southland),
requesting payment of $3.0 million in duties and interest in connection with 795 import entries made during the
November 1, 2007 through October 31, 2008 period. On January 26, 2016 and January 27, 2016, Southland filed
protests with CBP in connection with these bills, noting that CBP's asserted claims were not made in accordance with
applicable law, including statutory provisions governing deemed liquidation. The Company believes in the merits of
the legal objections raised in Southland's protests, and CBP's response to Southland's protests is currently pending.
Given the procedural posture of and issued raised by this legal dispute, the Company cannot estimate the amount of
potential duty liability, if any, that may result from CBP's asserted claims.
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 in the review. On June 21, 2011, the
DOC published the final results of the review and assigned Mueller Comercial an antidumping duty rate of 19.8
percent. On August 22, 2011, the Company appealed the final results to the CIT. On December 21, 2012, the CIT
issued a decision upholding the Department’s final results in part. The CIT issued its final judgment on May 2,
2013. On May 6, 2013, the Company appealed the CIT decision to the U.S. Court of Appeals for the Federal Circuit
(Federal Circuit). On May 29, 2014, the Federal Circuit issued its decision vacating the CIT’s decision and
remanding the case back to DOC to reconsider the Company’s rate. The Company and the United States reached an
agreement to settle the appeal. Subject to the conditions of the agreement, the Company anticipated 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 $1.1 million for this matter. The Company has paid all requested bills
covering the 2008-2009 period where it appears that CBP acted in a timely manner under the antidumping statute. In
connection with certain entries that the Company believes CBP failed to liquidate in a timely manner, the Company
has protested the liquidations and requested that they be cancelled along with the related bills for increased duties.
Subsequent to October 31, 2009, Mueller Comercial did not ship subject merchandise to the United States. Therefore,
there is zero anticipated antidumping duty liability with respect to the subject merchandise for periods of review after
October 31, 2009.
F-38
Leases
The Company leases certain facilities, vehicles, and equipment under operating leases expiring on various dates
through 2028. The lease payments under these agreements aggregate to approximately $7.8 million in 2016, $5.7
million in 2017, $4.7 million in 2018, $2.2 million in 2019, $1.6 million in 2020, and $6.9 million thereafter. Total
lease expense amounted to $9.7 million in 2015, $9.8 million in 2014, and $9.1 million in 2013.
Consulting Agreement
During 2004, the Company entered into a consulting and non-compete agreement (the Consulting Agreement) with
Mr. Harvey L. Karp, at that time Chairman of the Board. The Consulting Agreement provides for post-employment
services to be provided by Mr. Karp for a six-year period. During the first four years of the Consulting Agreement, an
annual fee equal to two-thirds of the executive’s Final Base Compensation (as defined in the Consulting Agreement) is
payable. During the final two years, the annual fee is set at one-third of the executive’s Final Base
Compensation. During the term of the Consulting Agreement, Mr. Karp agrees not to engage in Competitive Activity
(as defined in the Consulting Agreement) and is entitled to receive certain other benefits from the Company.
On November 3, 2011, Mr. Karp notified the Company that he would resign as Chairman of the Company and as a
member of the Board of Directors of the Company effective as of December 31, 2011. Following his resignation, on
January 1, 2012, the Consulting Agreement commenced. Based upon the value of the non-compete provisions of the
Consulting Agreement, the Company expenses the value of the Consulting Agreement over its term. The maximum
amount payable under the remaining term of the Consulting Agreement is $1.3 million.
Other
In September 2011, a portion of the Company’s Wynne, Arkansas manufacturing operation was damaged by
fire. Certain inventories, production equipment, and building structures were extensively damaged. During 2013, the
Company settled the claim with its insurer for total proceeds of $127.3 million, net of the deductible of $0.5
million. As a result of the settlement with its insurer, all proceeds received and all costs previously deferred (which
were recorded as other current liabilities in prior periods) were recognized, resulting in a pre-tax gain of $106.3
million in 2013, or $1.17 per diluted share after tax. The Company received proceeds of $62.3 million and $55.0
million in 2013 and 2012, respectively.
Additionally, 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. It may also realize the benefit of certain legal claims and litigation in the future;
these gain contingencies are not recognized in the Consolidated Financial Statements.
Note 10 – Income Taxes
The components of income before income taxes were taxed under the following jurisdictions:
(In thousands)
Domestic
Foreign
2015
2014
2013
$ 121,614 $ 135,445 $ 262,220
9,178
10,175 12,568
Income before income taxes
$ 131,789 $ 148,013 $ 271,398
F-39
Income tax expense consists of the following:
(In thousands)
Current tax expense:
Federal
Foreign
State and local
Current tax expense
Deferred tax (benefit) expense:
Federal
Foreign
State and local
Deferred tax (benefit) expense
Income tax expense
2015
2014
2013
$
50,272 $
4,042
4,886
45,723 $
2,346
3,905
69,565
2,608
6,723
59,200 51,974 78,896
(13,739 )
(1,180 )
(899 )
(2,469 ) 17,694
(376 )
1,895
890
(4,916 )
(15,818 )
(6,495 ) 19,213
$
43,382 $
45,479 $
98,109
No provision is made for U.S. income taxes applicable to undistributed earnings of foreign subsidiaries that are
indefinitely reinvested in foreign operations. It is not practicable to compute the potential deferred tax liability
associated with these undistributed foreign earnings. The Company has approximately $81.0 million of undistributed
foreign earnings for which it has not recorded deferred tax liabilities.
The difference between the reported income tax expense and a tax determined by applying the applicable U.S. federal
statutory income tax rate to income before income taxes is reconciled as follows:
(In thousands)
2015
2014
2013
Expected income tax expense
State and local income tax, net of federal benefit
Effect of foreign statutory rate different from U.S. and other foreign
$
46,126 $
2,673
51,805 $
3,355
94,989
6,405
adjustments
Valuation allowance changes
U.S. production activities deduction
Goodwill disposition
Tax contingency changes
Permanent adjustment to deferred tax liabilities
Other, net
(654 )
—
(3,500 )
646
—
(4,218 )
2,309
(1,094 )
(5,732 )
(4,025 )
—
—
—
1,170
(1,026 )
—
(4,445 )
1,790
(140 )
—
536
Income tax expense
$
43,382 $
45,479 $
98,109
During 2015, the Company had an adjustment to a deferred tax liability of $4.2 million, or seven cents per diluted
share, resulting from the acquisition of a foreign subsidiary.
During 2014, the Company released a valuation allowance of $5.7 million, or ten cents per diluted share, related to
certain state income tax credits. As a result of legislative changes enacted in 2014, the Company now expects to be
able to use such credits within the foreseeable future.
The Company includes interest and penalties related to income tax matters as a component of income tax expense.
The net reduction to income tax expense related to penalties and interest was immaterial in 2015, 2014, and 2013.
The Internal Revenue Service is currently auditing the Company’s 2013 tax return and completed its audit of the
Company’s 2012 tax return during 2014, the result of which was immaterial to the consolidated financial statements.
The Company is currently under audit in various other jurisdictions.
F-40
The statute of limitations is still open for the Company’s federal tax return and most state income tax returns for 2012
and all subsequent years. The statutes of limitations for certain state and foreign returns are also open for some earlier
tax years due to differing statute periods. While the Company believes that it is adequately reserved for possible audit
adjustments, the final resolution of these examinations cannot be determined with certainty and could result in final
settlements that differ from current estimates.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities are presented below:
(In thousands)
2015
2014
Deferred tax assets:
Inventories
Other postretirement benefits and accrued items
Pension
Other reserves
Federal and foreign tax attributes
State tax attributes, net of federal benefit
Share-based compensation
Total deferred tax assets
Less valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Property, plant, and equipment
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
14,802 $
$
12,815
15,294 14,550
4,792
2,349
9,823 10,262
6,451
7,403
21,716 22,928
3,016
3,397
74,784 74,814
(17,650 ) (17,119 )
57,134 57,695
43,592 57,089
1,721
1,546
45,138 58,810
$
11,996 $
(1,115 )
As of December 26, 2015, after consideration of the federal impact, the Company had state income tax credit
carryforwards of $3.3 million, all of which expire by 2018, and other state income tax credit carryforwards of $10.1
million with unlimited lives. The Company had state net operating loss (NOL) carryforwards with potential tax
benefits of $8.4 million expiring between 2017 and 2030. The state tax credit and NOL carryforwards are offset by
valuation allowances totaling $11.6 million.
As of December 26, 2015, the Company had foreign tax attributes with potential tax benefits of $7.3 million which
have an unlimited life. These attributes were offset by valuation allowances of $3.7 million.
Income taxes paid were approximately $49.9 million in 2015, $47.3 million in 2014, and $80.1 million in 2013.
Note 11 – Equity
The Company’s Board of Directors has extended, until October 2016, its authorization to repurchase up to 20 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 its stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999
through December 26, 2015, the Company has repurchased approximately 4.7 million shares under this authorization.
F-41
Note 12 – Stock-Based Compensation
The Company has in effect stock incentive plans under which stock-based awards have been granted to certain
employees and members of its Board of Directors. Under these existing plans, the Company may grant options to
purchase shares of common stock at prices not less than the fair market value of the stock on the date of grant, as well
as restricted stock awards. Generally, the awards vest annually over a five-year period beginning one year from the
date of grant. Any unexercised options expire after not more than ten years.
In May 2014, the Company’s stockholders approved the 2014 Incentive Plan (2014 Plan). The 2014 Plan authorizes
the award of stock-based incentives to employees and non-employee directors. Awards include options to purchase
stock at specified prices during specified time periods, restricted stock, restricted stock units, stock appreciation rights,
and performance awards, including cash awards. The 2014 Plan reserved 1.5 million shares of common stock which
may be issued or transferred upon the exercise of options.
During the years ended December 26, 2015, December 27, 2014, and December 28, 2013, the Company recognized
stock-based compensation, as a component of selling, general, and administrative expense, in its Consolidated
Statements of Income of $6.2 million, $6.3 million, and $5.7 million, respectively. The tax benefit from the exercise
of share-based awards was $1.0 million in 2015, $0.8 million in 2014, and $0.7 million in 2013.
Stock Options
The fair value of each option is estimated as a single award and amortized into compensation expense on a straight-line
or accrual basis over its vesting period based on its vesting schedule. The weighted average grant-date fair value of
options granted during 2015, 2014, and 2013 was $7.58, $9.00, and $8.77, respectively.
The Company estimates the fair value of all stock option awards as of the grant date by applying the
Black-Scholes-Merton option pricing model. The use of this valuation model in the determination of compensation
expense involves certain assumptions that are judgmental and/or highly sensitive including the expected life of the
option, stock price volatility, risk-free interest rate, and dividend yield. Additionally, forfeitures are estimated at the
time of valuation and reduce expense ratably over the vesting period. The forfeiture rate, which is adjusted
periodically based on actual forfeitures, was 16.1 percent in 2015 and 16.4 percent in 2014. Due to the nature of the
awards granted in 2013, a forfeiture rate was not considered necessary. The weighted average of key assumptions
used in determining the fair value of options granted and a discussion of the methodology used to develop each
assumption are as follows:
2015
2014
2013
Expected term
Expected price volatility
Risk-free interest rate
Dividend yield
5.5 years 5.6 years 5.9 years
39.7%
0.7%
0.9%
26.2%
1.7%
0.9%
34.3%
1.7%
1.0%
Expected term – This is the period of time estimated based on historical experience over which the options granted are
expected to remain outstanding. An increase in the expected term will increase compensation expense.
Expected price volatility – This is a measure of the amount by which a price has fluctuated or is expected to
fluctuate. The Company uses actual historical changes in the market value of its stock to calculate the volatility
assumption. Daily market value changes from the date of grant over a past period representative of the expected term
of the options are used. An increase in the expected price volatility rate will increase compensation expense.
Risk-free interest rate – This is the U.S. Treasury rate for the week of the grant, having a term representative of the
expected term of the options. An increase in the risk-free rate will increase compensation expense.
Dividend yield – This rate is the annual dividends per share as a percentage of the Company’s stock price. An increase
in the dividend yield will decrease compensation expense.
F-42
The total intrinsic value of options exercised was $3.1 million, $3.5 million, and $2.9 million in 2015, 2014, and 2013,
respectively. The total fair value of options that vested was $0.8 million, $1.0 million, and $1.1 million in 2015,
2014, and 2013, respectively.
At December 26, 2015, the aggregate intrinsic value of all outstanding options was $10.1 million with a weighted
average remaining contractual term of 5.3 years. Of the outstanding options, 789 thousand are currently exercisable
with an aggregate intrinsic value of $9.9 million, a weighted average exercise price of $15.82, and a weighted average
remaining contractual term of 3.7 years.
The total compensation expense not yet recognized related to unvested options at December 26, 2015 was $1.9 million
with an average expense recognition period of 3.1 years.
Restricted Stock Awards
The fair value of each restricted stock award equals the fair value of the Company’s stock on the grant date and is
amortized into compensation expense on a straight-line or accrual basis over its vesting period based on its vesting
schedule. The weighted average grant-date fair value of awards granted during 2015, 2014, and 2013 was $32.54,
$28.80, and $28.32, respectively.
The aggregate intrinsic value of outstanding and unvested awards was $19.9 million at December 26, 2015. Total
compensation expense for restricted stock awards not yet recognized was $14.4 million with an average expense
recognition period of 3.3 years. The total fair value of awards that vested was $4.8 million, $4.2 million, and $1.8
million in 2015, 2014, and 2013, respectively.
The Company generally issues treasury shares when options are exercised or restricted stock awards are granted. A
summary of the activity and related information follows:
Stock Options
Restricted Stock
Awards
(Shares in thousands)
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Grant
Date Fair
Value
Outstanding at December 27, 2014
Granted
Exercised
Forfeited
1,127 $
223
(149 )
(3 )
17.38
32.59
13.95
30.61
727 $
193
(214 )
(1 )
25.21
32.54
22.49
28.28
Outstanding at December 26, 2015
1,198
20.59
705
28.08
Approximately 1.1 million shares were available for future stock incentive awards at December 26, 2015.
F-43
Note 13 – Accumulated Other Comprehensive Income (Loss)
AOCI includes certain foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as
their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow
hedges, adjustments to pension and OPEB liabilities, and unrealized gains and losses on marketable securities
classified as available-for-sale.
The following table provides changes in AOCI by component, net of taxes and noncontrolling interest (amounts in
parentheses indicate debits to AOCI):
(In thousands)
Unrealized
(Losses)/
Gains on
Minimum
Pension/
OPEB
Liability
Unrealized
Gains on
Equity
Derivatives
Adjustment
Investments
Total
Cumulative
Translation
Adjustment
Balance at December 28, 2013
$
$
(462 )
$
1,546
$
(12,158 )
255 $
(10,819 )
Other comprehensive income
(loss) before
reclassifications
Amounts reclassified from AOCI
(12,613 )
5,999
(2,766 )
267
(23,475 )
469
15
—
(38,839 )
6,735
Balance at December 27, 2014
(7,076 )
(953 )
(35,164 )
270
(42,923 )
Other comprehensive income
(loss) before
reclassifications
Amounts reclassified from AOCI
(17,697 )
—
(4,604 )
3,548
4,766
1,969
(49 )
—
(17,584 )
5,517
Balance at December 26, 2015
$
(24,773 ) $
(2,009 ) $
(28,429 ) $
221 $
(54,990 )
F-44
Reclassification adjustments out of AOCI were as follows:
(In thousands)
2015
2014
2013
Affected Line Item
Amount reclassified from AOCI
Unrealized losses on derivatives:
Commodity contracts
Foreign currency contracts
Interest rate swap
$
4,486 $
—
372
(1,310 )
328 $
—
—
(61 )
5,618 Cost of goods sold
54 Depreciation expense
— Interest expense
(1,857 ) Income tax expense
3,548
—
267
—
3,815 Net of tax
— Noncontrolling interest
$
3,548
$
$
267
3,815
noncontrolling interest
Net of tax and
Amortization of net loss and prior service
cost on employee benefit plans
$
$
2,688
(719 )
$
541
(72 )
3,844
(1,326 ) Income tax expense
and administrative expense
Selling, general,
1,969
—
469
—
2,518 Net of tax
— Noncontrolling interest
$
1,969
$
469
$
2,518
interest
Net of tax and noncontrolling
Loss recognized upon sale of business
$
— $
—
5,999 $
—
— Gain on sale of assets
— Income tax benefit
—
—
5,999
—
— Net of tax
— Noncontrolling interest
$
— $
5,999 $
—
noncontrolling interest
Net of tax and
F-45
Note 14 – Benefit Plans
Pension and Other Postretirement Plans
The Company sponsors several qualified and nonqualified pension plans and other postretirement benefit plans for
certain employees. The following tables provide a reconciliation of the changes in the plans’ benefit obligations and
the fair value of the plans’ assets for 2015 and 2014, and a statement of the plans’ aggregate funded status:
(In thousands)
Change in benefit obligation:
Obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Plan amendments
Business acquisitions
Benefit payments
Foreign currency translation adjustment
Pension Benefits
2014
2015
Other Benefits
2015
2014
$ 207,738 $ 184,058 $
973
803
8,032
8,590
(9,163 ) 30,138
—
—
—
—
(10,795 ) (11,064 )
(4,957 )
(3,854 )
19,307 $
363
1,005
270
(9,094 )
5,655
(1,037 )
(626 )
15,381
348
685
4,272
—
—
(1,142 )
(237 )
Obligation at end of year
192,761 207,738 15,843 19,307
Change in fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefit payments
Foreign currency translation adjustment
190,016 188,870
(1,682 ) 12,716
3,275
1,513
(10,795 ) (11,064 )
(3,781 )
(2,975 )
—
—
1,037
(1,037 )
—
—
—
1,142
(1,142 )
—
Fair value of plan assets at end of year
176,077 190,016
—
—
Underfunded status at end of year
$
(16,684 ) $
(17,722 ) $
(15,843 ) $
(19,307 )
During 2015 the Company amended one of its postretirement benefit plans to remove certain benefits, resulting in a
$9.1 million reduction in the obligation.
The following represents amounts recognized in AOCI (before the effect of income taxes):
(In thousands)
Pension Benefits
2014
2015
Other Benefits
2015
2014
Unrecognized net actuarial loss
Unrecognized prior service (credit) cost
$
48,681 $
—
49,830 $
—
767 $
(9,087 )
473
14
The Company sponsors one pension plan in the U.K. which comprised 41 and 40 percent of the above benefit
obligation at December 26, 2015 and December 27, 2014, respectively, and 35 and 34 percent of the above plan assets
at December 26, 2015 and December 27, 2014, respectively.
As of December 26, 2015, $3.1 million of the actuarial net loss and $0.9 million of the prior service credit will, through
amortization, be recognized as components of net periodic benefit cost in 2016.
The aggregate status of all overfunded plans is recognized as an asset and the aggregate status of all underfunded plans
is recognized as a liability in the Consolidated Balance Sheets. The amounts recognized as a liability are classified as
current or long-term on a plan-by-plan basis. Liabilities are classified as current to the extent the actuarial present
value of benefits payable within the next 12 months exceeds the fair value of plan assets, with all remaining amounts
F-46
being classified as long-term.
As of December 26, 2015 and December 27, 2014, the total funded status of the plans recognized in the Consolidated
Balance Sheets was as follows:
(In thousands)
Long-term asset
Current liability
Long-term liability
Pension Benefits
2014
2015
Other Benefits
2015
2014
$
—
2,348 $
(1,251 )
—
(17,449 ) (20,070 ) (14,622 ) (18,056 )
765 $
—
(1,221 )
— $
Total underfunded status
$
(16,684 ) $
(17,722 ) $
(15,843 ) $
(19,307 )
The components of net periodic benefit cost are as follows:
(In thousands)
Pension benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net loss
2015
2014
2013
$
973 $
8,590
803 $
8,032
948
7,774
(10,289 ) (13,669 ) (11,059 )
1
4,005
—
2,710
1
752
Net periodic benefit cost (income)
$
1,256 $
(3,353 ) $
1,669
Other benefits:
Service cost
Interest cost
Amortization of prior service cost (credit)
Amortization of net gain
$
363 $
1,005
6
(28 )
348 $
685
6
(218 )
413
647
(2 )
(160 )
Net periodic benefit cost
$
1,346 $
821 $
898
The weighted average assumptions used in the measurement of the Company’s benefit obligations are as follows:
Pension Benefits
2014
2015
Other Benefits
2015
2014
Discount rate
Expected long-term return on plan assets
Rate of compensation increases
Rate of inflation
4.02 %
5.59 %
N/A
3.20 %
4.03 %
5.58 %
N/A
3.10 %
4.25 %
N/A
5.00 %
N/A
4.33 %
N/A
5.00 %
N/A
The weighted average assumptions used in the measurement of the Company’s net periodic benefit cost are as follows:
2015
Pension Benefits
2014
2013
2015
Other Benefits
2014
2013
Discount rate
Expected long-term return on
plan assets
Rate of compensation increases
Rate of inflation
4.03 %
4.82 %
4.13 %
4.33 %
4.89 %
4.06 %
5.58 %
N/A
3.10 %
7.40 %
N/A
3.40 %
7.15 %
N/A
2.70 %
N/A
5.00 %
N/A
N/A
5.50 %
N/A
N/A
5.04 %
N/A
F-47
The Company’s Mexican postretirement plans use the rate of compensation increase in the benefit formulas. Past
service in the U.K. pension plan will be adjusted for the effects of inflation. All other pension and postretirement
plans use benefit formulas based on length of service.
The annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is
assumed to range from 6.8 to 9.0 percent for 2016, gradually decrease to 3.0 percent through 2036, and remain at that
level thereafter. The health care cost trend rate assumption does not have a significant effect on the amounts reported.
Pension Assets
The weighted average asset allocation of the Company’s pension fund assets are as follows:
Asset category
Equity securities (includes equity mutual funds)
Fixed income securities (includes fixed income mutual funds)
Cash and equivalents (includes money market funds)
Alternative investments
Total
Pension Plan Assets
2015
2014
51 %
37
9
3
49 %
4
44
3
100 %
100 %
At December 26, 2015, the long-term target allocation, by asset category, of assets of its defined benefit pension plans
was: (i) fixed income securities – at least 60 percent; (ii) equity securities, including equity index funds – not more
than 30 percent; and (iii) alternative investments – not more than 5 percent.
The pension plan obligations are long-term and, accordingly, the plan assets are invested for the long-term. Plan
assets are monitored periodically. Based upon results, investment managers and/or asset classes are redeployed when
considered necessary. None of the plans’ assets are expected to be returned to the Company during the next fiscal
year. The assets of the plans do not include investments in securities issued by the Company.
The estimated rates of return on plan assets are the expected future long-term rates of earnings on plan assets and are
forward-looking assumptions that materially affect pension cost. Establishing the expected future rates of return on
pension assets is a judgmental matter. The Company reviews the expected long-term rates of return on an annual
basis and revises as appropriate. The expected long-term rate of return on plan assets was 5.59 percent for 2015 and
5.58 percent in 2014.
The Company’s investments for its pension plans are reported at fair value. The following methods and assumptions
were used to estimate the fair value of the Company’s plan asset investments:
Cash and money market funds – Valued at cost, which approximates fair value.
Common stock – Valued at the closing price reported on the active market on which the individual securities are
traded.
Mutual funds – Valued at the net asset value of shares held by the plans at December 26, 2015 and December 27, 2014,
respectively, based upon quoted market prices.
Limited partnerships – Limited partnerships include investments in various Cayman Island multi-strategy hedge
funds. The plans’ investments in limited partnerships are valued at the estimated fair value of the class shares owned
by the plans based upon the equity in the estimated fair value of those shares. The estimated fair values of the limited
partnerships are determined by the investment managers. In determining fair value, the investment managers of the
limited partnerships utilize the estimated net asset valuations of the underlying investment entities. The
underlying investment entities value securities and other financial instruments on a mark-to-market or estimated fair
value basis. The estimated fair value is determined by the investment managers based upon, among other things, the
F-48
type of investments, purchase price, marketability, current financial condition, operating results, and other
information. The estimated fair values of substantially all of the investments of the underlying investment entities,
which may include securities for which prices are not readily available, are determined by the investment managers or
management of the respective underlying investment entities and may not reflect amounts that could be realized upon
immediate sale. Accordingly, the estimated fair values may differ significantly from the values that would have been
used had a ready market existed for these investments.
The following table sets forth by level, within the fair value hierarchy, the assets of the plans at fair value:
(In thousands)
Cash and money market funds
Common stock (1)
Mutual funds (2)
Limited partnerships
Fair Value Measurements at December 26, 2015
Level 1
Level 3
Level 2
Total
$
16,632 $
25,229
— $
—
9,666 119,960
—
—
— $
16,632
— 25,229
— 129,626
4,590
4,590
Total
$
51,527 $ 119,960 $
4,590 $ 176,077
(In thousands)
Cash and money market funds
Common stock (3)
Mutual funds (4)
Limited partnerships
Fair Value Measurements at December 27, 2014
Level 1
Level 3
Level 2
Total
— $
$
84,377 $
—
26,105
11,397 63,067
—
—
— $
84,377
— 26,105
— 74,464
5,070
5,070
Total
$ 121,879 $
63,067 $
5,070 $ 190,016
(1) Approximately 50 percent of common stock represents investments in U.S. companies primarily in the
health care, utilities, financials, consumer staples, industrials, and information technology
sectors. All investments in common stock are listed on U.S. stock exchanges.
(2) Approximately 67 percent of mutual funds are actively managed funds and approximately 33 percent of
mutual funds are index funds. Additionally, 12 percent of the mutual funds’ assets are invested in U.S.
equities, 38 percent in non-U.S. equities, 46 percent in U.S. fixed income securities, and 4 percent in
non-U.S. fixed income securities.
(3) Approximately 51 percent of common stock represents investments in U.S. companies primarily in the
health care, utilities, financials, consumer staples, industrials, and information technology
sectors. All investments in common stock are listed on U.S. stock exchanges.
(4) Approximately 40 percent of mutual funds are actively managed funds and approximately 60 percent of
mutual funds are index funds. Additionally, 23 percent of the mutual funds’ assets are invested in U.S.
equities, 67 percent in non-U.S. equities, and 10 percent in non-U.S. fixed income securities.
F-49
The table below reflects the changes in the assets of the plan measured at fair value on a recurring basis using
significant unobservable inputs (Level 3 of fair value hierarchy) during the year ended December 26, 2015:
(In thousands)
Balance, December 27, 2014
Redemptions
Subscriptions
Net depreciation in fair value
Balance, December 26, 2015
Contributions and Benefit Payments
Limited
Partnerships
$
5,070
(697 )
250
(33 )
$
4,590
The Company expects to contribute approximately $1.5 million to its pension plans and $1.2 million to its other
postretirement benefit plans in 2016. The Company expects future benefits to be paid from the plans as follows:
(In thousands)
2016
2017
2018
2019
2020
2021-2025
Total
Multiemployer Plan
Pension
Benefits
Other
Benefits
$
10,832 $
10,856
10,910
10,994
11,033
60,251
1,221
1,112
1,147
1,111
1,356
5,973
$ 114,876 $
11,920
The Company contributes to the IAM National Pension Fund, National Pension Plan (IAM Plan), a multiemployer
defined benefit plan. Participation in the IAM Plan was negotiated under the terms of two collective bargaining
agreements in Port Huron, Michigan, the Local 218 IAM and Local 44 UAW that expire on May 1, 2016 and July 20,
2016, respectively. The Employer Identification Number for this plan is 51-6031295.
The risks of participating in multiemployer plans are different from single-employer plans in the following
aspects: (i) Assets contributed to the multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers; (ii) if a participating employer stops contributing to the plan, the
underfunded obligations of the plan may be borne by the remaining participating employers; (iii) if the Company
chooses to stop participating in the plan, the Company may be required to pay the plan an amount based on the
underfunded status of the plan, referred to as a withdrawal liability.
The Company makes contributions to the IAM Plan trusts that cover certain union employees; contributions by
employees are not permitted. Contributions to the IAM Plan were $1.1 million in 2015, $1.0 million in 2014, and $0.9
million in 2013. The Company’s contributions are less than five percent of total employer contributions made to the
IAM Plan indicated in the most recently filed Form 5500.
Under the Pension Protection Act of 2006, the IAM Plan’s actuary must certify the plan’s zone status annually. Plans
in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and
plans in the green zone are at least 80 percent funded. If a plan is determined to be in endangered status, red zone or
yellow zone, the plan’s trustees must develop a formal plan of corrective action, a Financial Improvement Plan and/or
a Rehabilitation Plan. For 2015 and 2014 the IAM Plan was determined to have green zone status; therefore, no
formal plan of corrective action is either pending or has been implemented.
F-50
401(k) Plans
The Company sponsors voluntary employee savings plans that qualify under Section 401(k) of the Internal Revenue
Code of 1986. Compensation expense for the Company’s matching contribution to the 401(k) plans was $4.2 million
in 2015, $4.1 million in 2014, and $3.2 million in 2013. The Company match is a cash contribution. Participants
direct the investment of their account balances by allocating among a range of asset classes including mutual funds
(equity, fixed income, and balanced funds), and money market funds. The plans do not allow direct investment in
securities issued by the Company.
UMWA Benefit Plans
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992 (the Act) was enacted. The Act mandates a
method of providing for postretirement benefits to the United Mine Workers of America (UMWA) current and retired
employees, including some retirees who were never employed by the Company. In October 1993, beneficiaries were
assigned to the Company and the Company began its mandated contributions to the UMWA Combined Benefit Fund,
a multiemployer trust. Beginning in 1994, the Company was required to make contributions for assigned beneficiaries
under an additional multiemployer trust created by the Act, the UMWA 1992 Benefit Plan. The ultimate amount of
the Company’s liability under the Act will vary due to factors which include, among other things, the validity,
interpretation, and regulation of the Act, its joint and several obligation, the number of valid beneficiaries assigned,
and the extent to which funding for this obligation will be satisfied by transfers of excess assets from the 1950 UMWA
pension plan and transfers from the Abandoned Mine Reclamation Fund. Contributions to the plan were $214
thousand, $249 thousand, and $290 thousand for the years ended 2015, 2014, and 2013, respectively.
Note 15 – Derivative Instruments and Hedging Activities
The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign
currency exchange rates, and interest rates. The Company uses derivative instruments such as commodity futures
contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures.
Commodity Futures Contracts
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. The Company
occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is
generally managed with commodity futures contracts. These futures contracts have been designated as cash flow
hedges.
At December 26, 2015, the Company held open futures contracts to purchase approximately $33.9 million of copper
over the next 12 months related to fixed price sales orders. The fair value of those futures contracts was a $1.5 million
loss position, which was determined by obtaining quoted market prices (Level 1 within the fair value hierarchy). In
the next twelve months, the Company will reclassify into earnings realized gains or losses relating to cash flow
hedges. At December 26, 2015, this amount was approximately $1.0 million of deferred net losses, net of tax.
The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At
December 26, 2015, the Company held open futures contracts to sell approximately $13.6 million of copper over the
next three months related to copper inventory. The fair value of those futures contracts was a $30 thousand loss
position, which was determined by obtaining quoted market prices (Level 1 within the fair value hierarchy).
Interest Rate Swap
On February 20, 2013, the Company entered into a two-year forward-starting interest rate swap agreement with an
effective date of January 12, 2015, and an underlying notional amount of $200.0 million, pursuant to which the
Company receives variable interest payments based on one-month LIBOR and pays fixed interest at a rate of 1.4
percent. Based on the Company’s current variable premium pricing on its Term Loan Facility, the all-in fixed rate on
the effective date is 2.7 percent. The interest rate swap will mature on December 11, 2017, and is structured to offset
the interest rate risk associated with the Company’s floating-rate, LIBOR-based Term Loan Facility Agreement. The
F-51
swap was designated and accounted for as a cash flow hedge from inception.
The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash
flows calculated at the contracted interest rate and the expected cash flows at the current market interest rate using
observable benchmarks for LIBOR forward rates at the end of the period (Level 2 within the fair value
hierarchy). Interest payable and receivable under the swap agreement is accrued and recorded as an adjustment to
interest expense. The fair value of the interest rate swap was a $1.7 million loss position recorded in other liabilities at
December 26, 2015, and there was $1.1 million of deferred net losses, net of tax, included in AOCI that is expected to
be reclassified into interest expense over the term of the hedged item.
The Company presents its derivative assets and liabilities in the Consolidated Balance Sheets on a net basis by
counterparty. The following table summarizes the location and fair value of the derivative instruments and
disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:
Asset Derivatives
Liability Derivatives
Fair Value
Fair Value
Balance Sheet
Location
2015
2014
Balance Sheet
Location
2015
2014
(In thousands)
Hedging
instrument:
Commodity
contracts -
gains
Commodity
Other current
assets
$
60 $
contracts -
losses
Other current
assets
Foreign currency
contracts -
gains
Foreign currency
contracts -
losses
Other current
assets
Other current
assets
Interest rate swap Other assets
—
—
—
—
Other current
liabilities
99
Other current
liabilities
(4 )
Other current
liabilities
—
Other current
liabilities
—
— Other liabilities
$
238 $
15
(1,864 )
(832 )
34
—
(75 )
(1,692 )
(81 )
(927 )
Total derivatives (1)
$
60 $
95
$
(3,359 ) $
(1,825 )
(1) Does not include the impact of cash collateral provided to counterparties.
The following tables summarize the effects of derivative instruments on the Consolidated Statements of Income:
(In thousands)
Fair value hedges:
Gain on commodity contracts (qualifying)
Loss on hedged item - Inventory
Undesignated derivatives:
Gain on commodity contracts (nonqualifying)
Location
2015
2014
Cost of goods sold $
Cost of goods sold
3,374 $
(3,665 )
6,783
(5,958 )
Cost of goods sold $
3,474 $
1,466
F-52
The following tables summarize amounts recognized in and reclassified from AOCI during the period:
Year Ended December 26, 2015
(Loss) Gain
Recognized in AOCI
(Effective Portion), Net
of Tax
Classification Gains
(Losses)
Loss (Gain)
Reclassified from AOCI
(Effective Portion), Net
of Tax
(In thousands)
Cash flow hedges:
Commodity contracts
$
Foreign currency contracts
Interest rate swap
Other
(3,817 ) Cost of goods sold
$
(39 ) Depreciation expense
(727 ) Interest expense
(21 ) Other
Year Ended December 27, 2014
3,310
—
238
—
(Loss) Gain
Recognized in AOCI
(Effective Portion), Net
of Tax
Classification Gains
(Losses)
Loss (Gain)
Reclassified from AOCI
(Effective Portion), Net
of Tax
(In thousands)
Cash flow hedges:
$
Commodity contracts
Foreign currency contracts
Interest rate swap
Other
(1,088 ) Cost of goods sold
$
(275 ) Depreciation expense
(1,435 ) Interest expense
32 Other
267
—
—
—
The Company enters into futures and forward contracts that closely match the terms of the underlying
transactions. As a result, the ineffective portion of the open hedge contracts through December 26, 2015 was not
material to the Consolidated Statements of Income.
The Company primarily enters into International Swaps and Derivatives Association master netting agreements with
major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts.
Under these master netting agreements, net settlement generally permits the Company or the counterparty to
determine the net amount payable for contracts due on the same date and in the same currency for similar types of
derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding
contracts with the counterparty in the case of an event of default or a termination event. The Company does not offset
fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash
collateral. At December 26, 2015 and December 27, 2014, the Company had recorded restricted cash in other current
assets of $2.6 million and $0.5 million, respectively, as collateral related to open derivative contracts under the master
netting arrangements.
Note 16 – Industry Segments
The Company’s reportable segments are Plumbing & Refrigeration and OEM. For disclosure purposes, certain
operating segments are aggregated into reportable segments. The Plumbing & Refrigeration segment is composed of
Standard Products (SPD), Great Lakes, European Operations, and Mexican Operations. The OEM segment is
composed of Industrial Products (IPD), Engineered Products (EPD), and Mueller-Xingrong. These segments are
classified primarily by the markets for their products. Performance of segments is generally evaluated by their
operating income.
SPD manufactures and sells copper tube, copper and plastic fittings, line sets, and valves and imports and resells brass
and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. These products are
manufactured in the U.S. Outside the U.S., Great Lakes manufactures copper tube and line sets in Canada and sells
its products primarily in the U.S. and Canada.
European Operations manufacture copper tube in the United
Kingdom, which is sold throughout Europe. 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 products are sold primarily to plumbing, refrigeration, and air-conditioning
F-53
wholesales, hardware wholesalers and co-ops, and building material 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. EPD manufactures and fabricates valves and assemblies for the
refrigeration, air-conditioning, gas appliance, and barbecue grill markets and specialty copper, copper-alloy, and
aluminum
for air-conditioning
applications. These products are sold primarily to OEM customers.
tube. Mueller-Xingrong manufactures engineered copper
tube primarily
Summarized product line, geographic, and segment information is shown in the following tables. Geographic sales
data indicates the location from which products are shipped. Unallocated expenses include general corporate
expenses, plus certain charges or credits not included in segment activity.
During 2015, 2014, and 2013, no single customer exceeded 10 percent of worldwide sales.
Net Sales by Major Product Line:
(In thousands)
2015
2014
2013
Tube and fittings
Brass rod and forgings
OEM components, tube & assemblies
Valves and plumbing specialties
Other
Geographic Information:
(In thousands)
Net sales:
United States
United Kingdom
Canada
Other
(In thousands)
Long-lived assets:
United States
United Kingdom
Canada
Other
$ 1,053,761 $ 1,143,164 $ 972,107
436,456 556,985 553,896
342,651 345,991 337,772
198,012 262,504 239,822
69,122 55,583 54,944
$ 2,100,002 $ 2,364,227 $ 2,158,541
2015
2014
2013
$ 1,519,456 $ 1,752,548 $ 1,651,138
240,823 326,832 229,659
97,967
9,807
13,666
241,756 275,040 264,078
$ 2,100,002 $ 2,364,227 $ 2,158,541
2015
2014
2013
$ 223,398 $ 203,522 $ 198,837
15,248 19,007 21,220
20,460
—
—
21,118 23,381 24,400
$ 280,224 $ 245,910 $ 244,457
F-54
Segment Information:
(In thousands)
Net sales
For the Year Ended December 26, 2015
Plumbing &
Refrigeration
Segment
OEM
Corporate
and
Segment
Eliminations Total
$
1,260,273 $ 849,538 $
(9,809 ) $ 2,100,002
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Gain on sale of assets
Severance
1,082,493 736,878
19,237 13,535
80,405 26,477
—
(15,376 )
—
3,442
(9,669 ) 1,809,702
1,836 34,608
23,476 130,358
— (15,376 )
3,442
—
Operating income
90,072 72,648
(25,452 )
137,268
Interest expense
Other income, net
Income before income taxes
(In thousands)
Net sales
(7,667 )
2,188
$ 131,789
For the Year Ended December 27, 2014
Plumbing &
Refrigeration
Segment
OEM
Corporate
and
Segment
Eliminations Total
$
1,416,701 $ 959,914 $
(12,388 ) $ 2,364,227
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Gain on sale of assets
Severance
1,215,282 840,823
19,613 11,919
87,539 21,458
—
(6,259 )
—
7,296
(12,386 ) 2,043,719
2,203 33,735
22,743 131,740
(6,259 )
7,296
—
—
Operating income
93,230 85,714
(24,948 )
153,996
Interest expense
Other expense, net
Income before income taxes
(5,740 )
(243 )
$ 148,013
F-55
(In thousands)
Net sales
For the Year Ended December 28, 2013
Plumbing &
Refrigeration
Segment
OEM
Corporate
and
Segment
Eliminations Total
$
1,225,306 $ 947,784 $
(14,549 ) $ 2,158,541
Cost of goods sold
Depreciation and amortization
Selling, general, and administrative expense
Insurance settlement
Gain on sale of plastic fittings manufacturing assets
Impairment charges
1,043,059 833,518
17,117 13,025
85,471 24,479
—
—
131
(103,895 )
(39,765 )
4,173
(14,488 ) 1,862,089
2,252 32,394
24,964 134,914
(2,437 ) (106,332 )
— (39,765 )
4,304
—
Operating income
219,146 76,631
(24,840 ) 270,937
Interest expense
Other income, net
Income before income taxes
(3,990 )
4,451
$ 271,398
(In thousands)
2015
2014
2013
Expenditures for long-lived assets (including business acquisitions):
Plumbing & Refrigeration
OEM
General corporate
Segment assets:
Plumbing & Refrigeration
OEM
General corporate
41,456 $
$
43,543
29,420 10,788 14,845
3,254
30,087 $
136
401
$
71,012 $
41,276 $
61,642
$ 709,447 $ 664,784 $ 625,371
302,875 313,245 305,052
326,479 350,067 317,344
$ 1,338,801 $ 1,328,096 $ 1,247,767
F-56
Note 17 – Quarterly Financial Information (Unaudited) (7)
(In thousands, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2015
Net sales
Gross profit (1)
Consolidated net income (2)
Net income attributable to Mueller Industries, Inc.
Basic earnings per share
Diluted earnings per share
Dividends per share
2014
Net sales
Gross profit (1)
Consolidated net income (5)
Net income attributable to Mueller Industries, Inc.
Basic earnings per share
Diluted earnings per share
Dividends per share
$ 537,242 $ 555,593 $ 535,184
85,228 68,017
33,862 (3) 18,095 (4)
33,651 17,800
0.32
0.31
0.075
76,408
22,340
21,978
0.39
0.39
0.075
0.60
0.59
0.075
$ 471,983
60,647
14,110
14,435
0.26
0.25
0.075
$ 574,374 $ 649,691 $ 602,820
91,916 81,542
35,209
24,322
35,045 23,823
0.42
0.42
0.075
78,597
24,954
24,706
0.44
0.44
0.075
0.63
0.62
0.075
$ 537,342
68,453
18,049 (6)
17,987
0.32
0.32
0.075
(1) Gross profit is net sales less cost of goods sold, which excludes depreciation and amortization.
(2) Includes income earned by Turbotec, acquired during Q2 2015, Sherwood, acquired during Q2 2015, and
Great Lakes, acquired during Q3 2015.
(3) Includes $15.4 million pre-tax gain on sale of assets and $3.4 million of pre-tax charges related to severance.
(4) During Q3 2015, the Company recorded a permanent adjustment to a deferred tax liability of $4.2 million.
(5) Includes losses incurred by Yorkshire, acquired during Q1 2014.
(6) Includes $4.8 million pre-tax gain on sale of assets and $4.2 million of pre-tax charges related to severance.
(7) The sum of quarterly amounts may not equal the annual amounts reported due to rounding. In addition, the
earnings per share amounts are computed independently for each quarter, while the full year is based on the
weighted average shares outstanding.
Note 18 – Subsequent Events
On December 30, 2015, the Company entered into a joint venture agreement with Cayan Ventures and Bahrain
Mumtalakat Holding Company to build a copper tube mill in Bahrain. The business will operate and brand its
products under the Mueller Industries family of brands. Under the agreement, the Company will invest
approximately $5.5 million of cash and will be the technical and marketing lead in return for 40 percent ownership in
the joint venture.
In February 2016, the Company entered into an agreement providing for the purchase of a 60 percent equity interest in
Jungwoo Metal Ind. Co., LTD (Jungwoo) for approximately $21.0 million. Jungwoo is a manufacturer of
copper-based pipe joining products headquartered in Seoul, South Korea and serves markets worldwide. The
transaction is subject to certain closing conditions, including Korean regulatory approval, and is expected to be
completed in the first quarter of 2016.
F-57
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Mueller Industries, Inc.
We have audited the accompanying consolidated balance sheets of Mueller Industries, Inc. as of December 26, 2015
and December 27, 2014, and the related consolidated statements of income, comprehensive income, changes in equity
and cash flows for each of the three years in the period ended December 26, 2015. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Mueller Industries, Inc. at December 26, 2015 and December 27, 2014, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 26, 2015, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Mueller Industries, Inc.’s internal control over financial reporting as of December 26, 2015, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 Framework) and our report dated February 24, 2016 expressed an unqualified opinion
thereon.
Memphis, Tennessee
February 24, 2016
F-58
MUELLER INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 26, 2015, December 27, 2014, and December 28, 2013
Additions
(In thousands)
of year
Balance at Charged to
beginning costs and Other
Balance
at end
expenses additions Deductions of year
2015
Allowance for doubtful accounts
Environmental reserves
$
$
666 $
(130 ) $
201 (1) $
114 $
623
22,661 $
76 $
— $
1,070 $
21,667
Valuation allowance for deferred tax assets $
17,119 $
(5 ) $
536 $
— $
17,650
2014
Allowance for doubtful accounts
Environmental reserves
$
$
2,391 $
(500 ) $
18 (1) $
1,243 $
666
23,637 $
1,187 $
— $
2,163 $
22,661
Valuation allowance for deferred tax assets $
22,544 $
(5,630 ) $ 2,282 $
2,077 $
17,119
2013
Allowance for doubtful accounts
Environmental reserves
$
$
1,644 $
273 $
812 (1) $
338 $
2,391
24,635 $
986 $
— $
1,984 $
23,637
Valuation allowance for deferred tax assets $
30,394 $
332 $
— $
8,182 $
22,544
(1) Other consists primarily of bad debt recoveries as well as the effect of fluctuating foreign currency exchange
rates in all years presented.
F-59
Exhibits Description
EXHIBIT INDEX
10.12
Summary description of the Registrant’s 2016 incentive plan for certain key
employees.
21.0
Subsidiaries of the Registrant.
23.0
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. 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. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.INS XBRL Instance Document
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Presentation Linkbase Document
101.SCH XBRL Taxonomy Extension Schema
BLANK
(Dollars in thousands except per share data)
2015
2014
2013
2012
2011
$ 2,100,002
$ 2,364,227
$ 2,158,541
$ 2,189,938
$ 2,417,797
$
$
$
$
$
$
137,268
87,864
1.54
0.30
274,844
3.8 to 1
14.47
$
$
$
$
$
$
153,996
101,560
1.79
0.30
352,134
4.0 to 1
13.39
$
$
$
$
$
$
270,937
172,600
3.06
0.25
311,800
4.0 to 1
12.43
$
$
$
$
$
$
126,705
82,395
1.15
0.2125
198,934
2.9 to 1
9.02
$
$
$
$
$
$
139,802
86,321
1.13
0.20
514,162
4.8 to 1
11.19
PAUL J. FLAHERTY
Advisory Board Member,
AON Risk Services, Inc.
GENNARO J. FULVIO
Member,
Fulvio & Associates, LLP
TERRY HERMANSON
President,
Mr. Christmas Incorporated
HARVEY L. KARP
Chairman Emeritus,
Mueller Industries, Inc.
Independent Investor & Consultant
JOHN B. HANSEN
Independent Investor & Consultant
5-Year Review
SUMMARY OF OPERATIONS
Net sales
Operating income
Net income
Diluted earnings per share
Dividends per share
SIGNIFICANT YEAR-END DATA
Cash and cash equivalents
Ratio of current assets to current liabilities
Book value per share
Board of Directors
GREGORY L. CHRISTOPHER
Chairman of the Board and
Chief Executive Officer
Mueller Industries, Inc.
GARY S. GLADSTEIN
Lead Independent Director,
Mueller Industries, Inc.
SCOTT J. GOLDMAN
CEO and Co-Founder,
TextPower, Inc.
Executive Team
GREGORY L. CHRISTOPHER
Chief Executive Officer
BRIAN K. BARKSDALE
Vice President, Marketing
DANIEL R. CORBIN
Vice President, Corporate
JEFFREY A. MARTIN
MARK MILLERCHIP
Chief Financial Officer and Treasurer
Executive Director, European Operations
NICHOLAS W. MOSS
President, B&K, LLC
NADIEM UMAR
President, International
DOUGLAS J. MURDOCK
President, Climate Products
GARY C. WILKERSON
Vice President, General Counsel
and Secretary
DON GLOVER
STEFFEN SIGLOCH
President, Industrial Metals
President, Piping Systems North America
Operational Business Groups
INDUSTRIAL METALS
PIPING SYSTEMS
CLIMATE PRODUCTS
Extruded Metals, Inc. | Lincoln Brass Works, Inc. | Micro Gauge Inc. | Mueller Brass Co. | Mueller Brass Forging Company, Inc.
Mueller Impacts Company, Inc. | Propipe Technologies, Inc. | Sherwood Valve, LLC
B&K, LLC | Great Lakes Copper, Ltd. | Howell Metal | Linesets, Inc. | Mueller Comercial de Mexico
Mueller Copper Tube Company | Mueller Europe Limited | Mueller Fittings Company, Inc.
Mueller Plastics Corporation, Inc. | Mueller-Xingrong | Precision Tube Company, LLC
Changzhou Mueller Refrigerant Valve Manufacturing Co., Ltd. | Fabricated Tube Products | Mueller Refrigeration, LLC
Turbotec Products, Inc. | Westermeyer Industries, Inc.
Capital Stock Information
The Company’s Board of Directors declared a regular quarterly dividend on its common stock of 7.5 cents per share during each
quarter of 2015 and 2014. Payment of dividends in the future is dependent upon the Company’s financial condition, cash flows, capital
requirements, earnings, and other factors.
The high, low, and closing prices of Mueller Industries' common stock on the New York Stock Exchange for each fiscal quarter of 2015
and 2014 were as follows:
As of February 19, 2016, the number of holders of record of
Mueller Industries' common stock was approximately 810.
On February 19, 2016, the closing price for Mueller Industries'
common stock on the New York Stock Exchange was $25.79.
MARKET FOR MUELLER INDUSTRIES SECURITIES
Common stock is traded on the NYSE–Symbol MLI.
NYSE CERTIFICATIONS
The Company submitted an unqualified Section 12(a)
CEO Certification to the NYSE in 2015. The Company filed
with the SEC the CEO/CFO Certifications required under
Section 302 of the Sarbanes-Oxley Act as an exhibit to the
Company’s Annual Report on Form 10-K for 2015 and 2014.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Memphis, Tennessee
2015
Fourth quarter
Third quarter
Second quarter
First quarter
2014
Fourth quarter
Third quarter
Second quarter
First quarter
HIGH
$ 33.04
35.65
37.18
36.47
$ 34.39
30.35
30.99
32.13
$
$
LOW
26.86
28.94
34.57
31.34
27.10
27.71
27.47
27.38
$
$
CLOSE
28.00
29.90
35.69
35.69
34.18
28.91
29.30
29.34
Security Holder Information
ANNUAL MEETING
The annual meeting of stockholders will be held at the
Company’s headquarters at Suite 150, 8285 Tournament Drive,
Memphis, TN 38125, 10:00 a.m. local time, May 5, 2016.
FORM 10-K
The Company’s Annual Report on Form 10-K is available
on the Company’s website at www.muellerindustries.com
or upon written request:
c/o Mueller Industries, Inc.
Attention: Investor Relations
Suite 150
8285 Tournament Drive
Memphis, TN 38125
TRANSFER AGENT, REGISTRAR AND PAYING AGENT
To notify the Company of address changes, lost
certificates, dividend payments, or account
consolidations, security holders should contact:
American Stock Transfer & Trust Company, LLC
Shareholder Services Department
6201 15th Avenue
Brooklyn, NY 11219
Toll Free: (800) 937-5449
Local & International: (718) 921-8124
Email: info@amstock.com
Web site: www.amstock.com