Mueller Industries, Inc.
Annual Report 2019

Plain-text annual report

N Y S E : M L I S M E T S Y S G N I P I P S L A T E M L A I R T S U D N I S T C U D O R P E T A M L C I &2019 Annual Report 2020 Proxy Statement MUELLER INDUSTRIES, INC. RESULTS AT A GLANCE SUMMARY OF OPERATIONS (Dollars in thousands except per share data) Net Sales Operating income Net income Diluted earnings per share Dividends per share SUMMARY OF CASH FLOW (Dollars in thousands) Cash Flow from Operations Capital Expenditures Free-Cash Flow(1) SIGNIFICANT YEAR-END DATA (Dollars in thousands except per share data) Cash and cash equivalents Total Assets Total Debt Ratio of current assets to current liabilities Book value per share 2019 ($) 2018 ($) 2017 ($) 2016 ($) 2015 ($) 2,430,616 2,507,878 2,266,073 2,055,622 2,100,002 191,403 100,972 172,969 104,459 1.79 0.40 2019 ($) 1.82 0.40 2018 ($) 200,544 167,892 31,162 38,481 169,382 129,411 150,807 85,598 1.49 8.40 2017 ($) 43,995 46,131 (2,136) 154,401 99,727 138,704 87,864 1.74 0.38 2016 ($) 1.54 0.30 2015 ($) 157,777 159,609 37,497 28,834 120,280 130,775 2019 ($) 2018 ($) 2017 ($) 2016 ($) 2015 ($) 97,944 72,616 120,269 351,317 274,844 1,370,940 1,369,549 1,320,173 1,447,476 1,338,801 386,254 3.0 to 1 11.30 496,698 3.0 to 1 9.67 465,072 227,364 216,010 3.1 to 1 4.1 to 1 3.8 to 1 9.03 15.66 14.47 SOLID GROWTH IN OPERATING RESULTS Adjusted Operating Income CAGR of 10.8% since 2015 RETURN ON AVERAGE EQUITY $250,000 $200,000 $150,000 $100,000 $50,000 $- 2015 2016 2017 2018 2019 19.5% 16.9% 14.2% 11.1% 11.6% 12.0% 25% 20% 15% 10% 5% 0% Adusted Operating Income Adjusted EBITDA 2015 2016 2017 2018 2019 5-Yr. Avg. 2015 -2019 CAPITAL RETURNED TO SHAREHOLDERS 2015 -2019 STRONG 5 YEAR CASH FLOW HISTORY $600M RETURNED $105,943 Regular Dividends $35,325 Share Repurchases $174,158 Special Dividend - Cash $284,536 Special Dividend - Notes $182,105 Cap-X $730M OPERATING CASH FLOW $547,712 Free Cash Flow (1) Free cash flow is a non-GAAP financial measure which represents cash flow from operations minus capital expenditures. Both cash flow from operations and capital expenditures presented above are as reported in our Annual Report on Form 10-K for the years presented. (2) Adjusted operating income and adjusted EBITDA are non-GAAP financial measures which exclude the impact of certain items in order to better reflect the results of ongoing operations. See Appendix A for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.  z MESSAGE FROM OUR CHAIRMAN To Our Stockholders: In 2019, Mueller Industries achieved its second consecutive year of double-digit operating income growth, a solid performance that puts us on track with our ambitious 2024 Strategic Plan. In total, Mueller earned $191.4 million in operating income and generated $200.5 million in cash from operations on the year. Net income for 2019 was $101.0 million, declining slightly from the prior year, primarily due to losses incurred related to our Tecumseh investment, which included restructuring charges. Top-line, net sales ended at $2.4 billion, a 3.1% decline from 2018. Net sales, however, were dragged down by a decline in commodity prices and reduced volumes in our core U.S. tube and brass rod businesses. The average price of copper declined by 7.2% in 2019. Copper is the principal ingredient in products that make up 87% of Mueller’s net sales, and as such, declining copper prices had a predominant impact on net sales. Notwithstanding, our diversification strategy is paying off, as we have benefitted from growth in our value-added products and strategic acquisitions. “Copper is the principal ingredient in products that make up 87% of Mueller’s net sales” GREG CHRISTOPHER CHAIRMAN AND CHIEF EXECUTIVE OFFICER METAL PRICES Continuous Improvement in Operations $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 ) d n u o P r e P ( -5.6% -11.8% $0.5 Jan-18 Jun-18 Dec-18 Copper Jan-19 Jun-19 Dec-19 Zinc The majority of our capital spending in 2019 was directed toward the general maintenance of business, as well as environmental, health, and safety initiatives. Such expenditures remain relatively stable and well below depreciation. Investments aimed at reducing costs or increasing capacity, such as evolving automation and new process technologies, remain vitally important, but were much lower in 2019. This spending tends to be more variable — i.e., higher in some years, and lower in others. We strive to make our workplaces healthier and safer environments for our people and the communities in which we operate. Our safety record has continued to improve, as we reduced the number of accidents per hours worked by 1.7% in 2019. Our incidence rate has now been cut by more than half over the past ten years. In other encouraging news, our modernization investments in our flagship U.S. operations —our copper tube mill in Fulton, Mississippi, and our brass rod mill in Port Huron, Michigan — are paying off. In addition to improving capacity, cost, yield and quality, we are achieving important environmental benefits. For example, at our copper tube mill in Fulton, where water is a critical component of the production process, our investments have yielded substantial reductions in consumption on a per unit of production basis. Furthermore, at both operations, we have achieved significant reductions in errant emissions, ranging from 10% up to 85% for greenhouse gases and certain contaminants found in scrap, which we recycle to produce the majority of our products. RECYCLING OF COPPER 34% Primary Refined 66% Recycled Scrap At Port Huron, the throughput and yield improvements enabled us to finally complete the consolidation of all brass rod production from two plants into the Port Huron facility during the latter part of 2019.  Capital Allocation Strong cash generation has long been a hallmark of our financial performance. During the past five years, we have generated $730 million in cash from operations. For each of the past two years, we have achieved considerable growth in free cash flow. As a testament to the prudent and balanced manner in which we deploy cash, we have returned $600 million to our stockholders over the past five years, all while continuing to pay down debt, invest in operations, and fund acquisitions. 9% Regular Dividends 15% Special Dividend - Cash 51% Returned to Shareholders 24% Special Dividend - 6% Notes 49 % CAP-X / M&A 83% $1.18B AT-RISK DEPLOYED COMPENSATION 3% Share Repurchases Our balance sheet is solid, our debt modest, and we have even more opportunities to improve. The Outlook Our operations span seven countries, and our products are sold and distributed in more than a dozen more. Despite global uncertainties and geopolitical unrest, we believe that the construction markets — which are of particular importance to us — will fare better than the average economy in many of the regions we serve. The demand for investment in refrigeration/ food preservation and air conditioning/air quality, as well as the modernization of water management infrastructure, is on the upswing. These trends, if continued, will support Mueller’s long term growth, and the Company is well-positioned to take advantage of any such opportunities. As noted above, our major investments are in the early stages of their life cycles, and still have room for further improvement. We will continue to strive for higher yields, and enhanced efficiency and safety as our people adapt to evolving technologies. In Closing We operate with a mindset that preparation equals opportunity. We understand that the future is uncertain and that there are many influences outside our control. That said, with our 2024 Strategic Plan as our roadmap, we will incrementally adjust our strategies and actions to maximize our performance and results, whatever the climate. Although acquisitions will remain an important ingredient in our growth strategy, we will pursue them opportunistically, and with a sharp focus on value. We have built a solid foundation of well-capitalized businesses; our balance sheet and cash generation provide us strength and flexibility; and we have a diversity of talent, including both seasoned industry veterans and motivated, well-trained rising stars, driving our businesses. Mindful that wisdom is not something that is bought off the shelf, we are grateful for the longevity and loyalty of our long-serving employees. We encourage their continued stewardship of our Company, as well as their mentorship to our up and comers, the next generation of leaders who will propel us into the future. We conclude 2019 laser-focused on executing our plans and generating even higher returns for our stockholders in the coming years. Although we have said it before, it bears repeating that the engine that makes all of this work is our people. Their commitment and work ethic are incredible, and we greatly appreciate them and their unending passion to make Mueller Industries the best of the best. Very truly yours, THURSDAY, MAY 7, 2020 10:00 A.M., Central Time 150 Schilling Boulevard, Second Floor Collierville, Tennessee 38017 REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS: BY INTERNET http://www.proxyvote.com BY TELEPHONE Call the telephone number on your proxy card. BY MAIL Mark, date, sign and return your proxy card in the enclosed envelope. IN PERSON Attend the Annual meeting at the Company’s headquarters. It is important that your shares be represented at the Annual Meeting regardless of the size of your holdings. Whether or not you intend to be present at the meeting in person, we urge you to mark, date and sign the enclosed proxy card and return it in the enclosed self-addressed envelope, which requires no postage if mailed in the United States. NOTICE of Annual Meeting of Stockholders PURPOSE To vote on three proposals: 1. To elect eight directors, each to serve on the Company’s Board of Directors (the “Board”), until the next annual meeting of stockholders (tentatively scheduled for May 6, 2021), or until his or her successor is elected and qualified; 2. To consider and act upon a proposal to approve the appointment of Ernst & Young LLP, independent registered public accountants, as auditors of the Company for the fiscal year ending December 26, 2020; and 3. To conduct an advisory vote on the compensation of the Company’s named executive officers (“NEOs”). To conduct and transact such other business as may properly be brought before the Annual Meeting and any adjournment thereof. RECORD DATE Only stockholders of record at the close of business on March 20, 2020, will be entitled to notice of and to vote at the Annual Meeting or any adjournment(s) thereof. A complete list of stockholders entitled to vote at the Annual Meeting will be prepared and maintained at the Company’s corporate headquarters at 150 Schilling Boulevard, Suite 100, Collierville, Tennessee 38017. This list will be available for inspection by stockholders of record during normal business hours for a period of at least 10 days prior to the Annual Meeting. /s/ Christopher J. Miritello Christopher J. Miritello Corporate Secretary April 2, 2020 TABLE OF CONTENTS PROXY SUMMARY 8 COMPENSATION DISCUSSION AND ANALYSIS 24 8 2019 PERFORMANCE 8 ANNUAL MEETING OF STOCKHOLDERS 9 AGENDA AND VOTING MATTERS PROPOSAL 1: ELECTION OF DIRECTORS 9 PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS 9 PROPOSAL 3: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS 10 PROPOSAL 1: ELECTION OF DIRECTORS SELECTING NOMINEES TO THE BOARD DIRECTOR NOMINEE BIOGRAPHIES CORPORATE GOVERNANCE DIRECTOR INDEPENDENCE BOARD OF DIRECTORS AND ITS COMMITTEES BOARD LEADERSHIP STRUCTURE BOARD’S ROLE IN RISK OVERSIGHT STANDARDS OF CONDUCT COMMUNICATION WITH THE BOARD OF DIRECTORS RELATED PARTY TRANSACTIONS CORPORATE SOCIAL RESPONSIBILITY 2019 DIRECTOR COMPENSATION ELEMENTS OF DIRECTOR COMPENSATION 2019 NON-EMPLOYEE DIRECTOR COMPENSATION STOCK OWNERSHIP POLICY FOR DIRECTORS PROPOSAL 2: APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS 11 11 12 14 14 14 16 16 17 18 18 18 19 19 20 20 21 22 PROPOSAL 3: ADVISORY VOTE ON APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS 23 EXECUTIVE SUMMARY DETERMINATION OF EXECUTIVE COMPENSATION ELEMENTS OF COMPENSATION COMPENSATION RISK MANAGEMENT REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION 33 24 26 27 32 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION EXECUTIVE COMPENSATION TABLES 33 34 SUMMARY COMPENSATION TABLE FOR 2019 2019 GRANTS OF PLAN BASED AWARDS TABLE OUTSTANDING EQUITY AWARDS AT FISCAL 2019 YEAR-END 34 36 2019 STOCK VESTED AND OPTIONS EXERCISED POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL AS OF THE END OF 2019 PRINCIPAL STOCKHOLDERS BENEFICIAL OWNERSHIP OF COMMON STOCK BY INSIDERS DELINQUENT SECTION 16(a) REPORTS INFORMATION ABOUT VOTING AND THE ANNUAL MEETING 38 39 40 41 42 44 45 VOTING SECURITIES STOCKHOLDER NOMINATIONS FOR BOARD MEMBERSHIP AND OTHER PROPOSALS FOR THE 2021 ANNUAL MEETING 45 46 ADDITIONAL INFORMATION 47 NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2020 ANNUAL MEETING TO BE HELD ON MAY 7, 2020 47 47 HOUSEHOLDING OF ANNUAL MEETING MATERIALS MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 7  z PROXY SUMMARY THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION IN THIS PROXY STATEMENT. PLEASE REVIEW THE ENTIRE PROXY STATEMENT AND OUR ANNUAL REPORT ON FORM 10-K BEFORE VOTING YOUR SHARES. — 2019 PERFORMANCE OPERATING INCOME GROWTH CASH FLOW FROM OPERATIONS 10.7% REPORTED OPERATING INCOME 12.4% ADJUSTED(1) OPERATING INCOME 167.9M 2018 200.5M 2019 19.4% INCREASED OPERATING PERFORMANCE REPORTED DILUTED EPS $250,000 $200,000 $150,000 $100,000 $50,000 $- 2015 2016 2017 2018 2019 Operating Income Adj. Operating Income Adjusted EBITDA $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $- $1.74 $1.54 $1.49 $1.82 $1.79 2015 2016 2017 2018 2019 Adjusted operating income and adjusted EBITDA are non-GAAP financial measures which exclude certain items in order to better reflect results of on-going operations. See Appendix A for a reconciliation of non-GAAP financial measures to our results reported under GAAP. — ANNUAL MEETING OF STOCKHOLDERS Date and Time: Thursday, May 7, 2020 10:00 A.M., Central Time Place: 150 Schilling Boulevard Second Floor Collierville, Tennessee 38017 Record Date: March 20, 2020 8 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT PROXY SUMMARY Proposal 2: Ratification of Independent Auditors — AGENDA AND VOTING MATTERS We are asking you to vote on the following proposals at the Annual Meeting: Proposal Proposal 1 – Election of Directors Proposal 2 – Approval of Auditor Proposal 3 – Say-on-Pay Board Recommendation Page Reference FOR each nominee FOR FOR 11 21 23 — PROPOSAL 1: ELECTION OF DIRECTORS The following table provides summary information about each director nominee. The Board of Directors believes that these nominees reflect an appropriate composition to effectively oversee the performance of management in the execution of the Company’s strategy, and as such, recommends a vote “for” each of the eight nominees listed below. Name Gregory L. Christopher Chairman and Chief Executive Officer Elizabeth Donovan Gennaro J. Fulvio Gary S. Gladstein Scott J. Goldman John B. Hansen Terry Hermanson Lead Independent Director since January 1, 2019 Charles P. Herzog, Jr. Director Since Age Primary Occupation Independence Committee Memberships Current Other Public Boards 58 67 63 75 67 73 77 63 2010 2019 2002 2000 2008 2014 2003 2017 Chief Executive Officer, Mueller Industries, Inc. Retired, Chicago Board Options Exchange Member, Fulvio & Associates, LLP Private Investor, Consultant Chief Executive Officer, TextPower, Inc. Retired Executive Vice President, Mueller Industries, Inc. Principal, Mr. Christmas Incorporated Co-Founder and Principal, Atadex LLC & Vypin LLC N Y Y Y Y Y Y Y None NCG A* C* A, C A, NCG None C, NCG* None None None None None None None None A = Audit Committee C = Compensation and Stock Option Committee NCG = Nominating and Corporate Governance Committee * = Chair — PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS We ask our stockholders to approve the selection of Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the fiscal year ending December 26, 2020. Below is summary information about fees paid to EY for services provided in 2019 and 2018: Audit Fees Audit-Related Fees Tax Fees All Other Fees 2019 2018 $ 2,856,009 $ 2,893,000 50,250 422,350 — 219,730 348,699 — $ 3,328,609 $ 3,461,429 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 9 PROXY SUMMARY Proposal 3: Advisory Vote to Approve Compensation of Named Executive Officers — PROPOSAL 3: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS We are seeking your advisory vote to approve the compensation of our named executive officers (“NEOs”) as disclosed in this proxy statement. Our executive officers are responsible for achieving long-term strategic goals, and as such, their compensation is weighted toward rewarding long-term value creation for stockholders. Beyond base salary and traditional benefits, we maintain an annual cash incentive compensation program that is driven by a pay-for-performance philosophy and based on ambitious performance targets both at the Company and business line levels. We also maintain a long-term equity incentive compensation program, the primary objective of which is to motivate and retain top talent — a particularly vital goal given the uniquely competitive industry in which we operate. Accordingly, we utilize a combination of extended time-vesting schedules and performance-based vesting criteria to encourage executives and associates alike to enjoy lengthy tenures at the Company, develop industry expertise and relationships, and drive our long-term success. Our emphasis on creating long-term stockholder value is best illustrated in the following charts, which show that long-term incentive compensation accounts for the largest percentage of the NEOs’ overall compensation for 2019. Moreover, a majority of the NEOs’ compensation — consisting of target long-term and short-term incentive compensation combined — is performance- based or “at risk.” CEO 17% Base Salary 83% AT-RISK COMPENSATION 27% Annual Incentive %56 Long-Term Incentive $600 million Returned to Shareholders from OTHER NEOs Dividends and Share Repurchases over 5 years 29% Base Salary 40% Long-Term Incentive 71% AT-RISK COMPENSATION 31% Annual Incentive 10 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z PROPOSAL 1 z ELECTION OF DIRECTORS Eight director nominees will be elected at the Annual Meeting, each to serve until the next annual meeting (tentatively scheduled for May 6, 2021), or until the election and qualification of their successors. At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the following persons to serve as directors for the term beginning at the Annual Meeting: Gregory L. Christopher, Elizabeth Donovan, Gennaro J. Fulvio, Gary S. Gladstein, Scott J. Goldman, John B. Hansen, Terry Hermanson and Charles P. Herzog, Jr. (collectively, the “Nominees”). As previously disclosed by the Company on July 31, 2019, Paul J. Flaherty will be retiring from the Board of Directors at the conclusion of the current term, and contemporaneously therewith, the number of directors will be reduced to eight. All nominees have consented to stand for election and to serve if elected. However, if at the time of the Annual Meeting any nominee is unable or declines to serve, the individuals named in the proxy will vote the proxy for substitute nominees selected by them unless the number of directors has been reduced to the number of nominees willing and able to serve. Directors are elected by a plurality of the votes cast, which means that the individuals who receive the greatest number of votes cast “For” are elected as directors up to the maximum number of directors to be chosen at the Annual Meeting. Consequently, any shares not voted “For” a particular director (whether as a result of a direction to withhold or a broker non-vote) will not be counted in such director’s favor. The Board of Directors has adopted a majority vote policy in uncontested elections. An uncontested election means any stockholders meeting called for purposes of electing any director(s) in which (i) the number of director nominees for election is equal to the number of positions on the Board of Directors to be filled through the election to be conducted at such meeting, and/or (ii) proxies are being solicited for the election of directors solely by the Company. The election of directors solicited by this Proxy Statement is an uncontested election. In the event that a nominee for election in an uncontested election receives a greater number of votes “Withheld” for his or her election than votes “For” such election, such nominee will tender an irrevocable resignation to the Nominating and Corporate Governance Committee, which will decide whether to accept or reject the resignation and submit such recommendation for prompt consideration by the Board of Directors no later than ninety (90) days following the uncontested election. — SELECTING NOMINEES TO THE BOARD The Nominating and Corporate Governance Committee considers, among other things, the following criteria in selecting and reviewing director nominees: recommending director nominees, the Committee members take into account such factors as they determine appropriate, including recommendations made by the Board of Directors. z personal and professional integrity, and the highest ethical standards; z skills, business experience and industry knowledge useful to the oversight of the Company based on the perceived needs of the Company and the Board at any given time; z the ability and willingness to devote the required amount of time to the Company’s affairs, including attendance at Board and committee meetings; z the interest, capacity and willingness to serve the long-term interests of the Company; and z the lack of any personal or professional relationships that would adversely affect a candidate’s ability to serve the best interests of the Company and its stockholders. The Nominating and Corporate Governance Committee also assesses the contributions of the Company’s incumbent directors in connection with their potential re-nomination. In identifying and As reflected in its formal charter, the Nominating and Corporate Governance Committee considers the diversity of the Company’s Board and employees to be a tremendous asset. The Company is committed to maintaining a highly qualified and diverse Board, and as such, all candidates are considered regardless of their age, gender, race, color of skin, ethnic origin, political affiliation, religious preference, sexual orientation, country of origin, physical handicaps or any other category. These efforts to promote diversity are assessed annually to assure that the Board contains a balanced and effective mix of individuals capable of advancing the Company’s long-term interests. The Nominating and Corporate Governance Committee does not consider individuals nominated by stockholders for election to the Board. The Board believes that this is an appropriate policy because the Company’s Bylaws allow a qualifying stockholder to nominate an individual for election to the Board, said nomination of which can be brought directly before a meeting of stockholders. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 11 ELECTION OF DIRECTORS Director Nominee Biographies Procedures and deadlines for doing so are set forth in the Company’s Bylaws, the applicable provisions of which may be obtained, without charge, on the Company’s website or upon written request to the Secretary of the Company at the address set forth herein. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the procedures set forth in the Bylaws. See “Stockholder Nominations for Board Membership and Other Proposals for the 2021 Annual Meeting.” — DIRECTOR NOMINEE BIOGRAPHIES ✔ THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES FOR EACH OF THE NOMINEES. GREGORY L. CHRISTOPHER Chairman of the Board and Chief Executive Officer Age 58 Director Since 2010 Mr. Christopher has served as Chairman of the Board of Directors since January 1, 2016. Mr. Christopher has served as Chief Executive Officer of the Company since October 30, 2008. Prior to that, he served as the Company’s Chief Operating Officer. ELIZABETH DONOVAN Age 67 Director Since 2019 Ms. Donovan was an early member, and at the time, one of the few women on the Chicago Board Options Exchange. She subsequently became an independent broker representing major institutional options orders and has been retired from employment for more than five years. Ms. Donovan was nominated to serve as a director of the Company because of her knowledge of market dynamics and institutional trading practices, knowledge acquired through her 18-year tenure as a fiduciary representative amidst an array of market conditions. She currently serves on the Nominating and Corporate Governance Committee. GENNARO J. FULVIO Age 63 Mr. Fulvio, a Certified Public Accountant, has been a member of Fulvio & Associates, LLP, a CPA firm, since 1987. Director Since 2002 Mr. Fulvio was nominated to serve as a director of the Company because of his strength in the area of accounting, combined with his financial acumen, and his knowledge of and experience with tax and audit matters. He currently serves as Chairman of the Audit Committee. GARY S. GLADSTEIN Age 75 Director Since 2000 Mr. Gladstein served as Chairman of the Board of Directors of the Company from 2013 to 2015, and was previously a director of the Company from 1990 to 1994. Mr. Gladstein is currently an independent investor and consultant. From the beginning of 2000 to August 31, 2004, Mr. Gladstein was a Senior Consultant at Soros Fund Management. He was a partner and Chief Operating Officer at Soros Fund Management from 1985 until his retirement at the end of 1999. During the past five years, Mr. Gladstein also served as a director of Inversiones y Representaciones Sociedad Anónima, Darien Rowayton Bank and a number of private companies. Mr. Gladstein was nominated to serve as a director of the Company because of his financial and accounting expertise, combined with his years of experience providing strategic advisory services to complex organizations. In addition, having been a member of the compensation, audit and other committees of public company boards, Mr. Gladstein is deeply familiar with corporate governance issues. He currently serves as Chairman of the Compensation and Stock Option Committee. 12 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT ELECTION OF DIRECTORS Director Nominee Biographies SCOTT J. GOLDMAN Age 67 Director Since 2008 For ten years, Mr. Goldman has served as Chief Executive Officer of TextPower, Inc. The company, which Mr. Goldman also co-founded, provides software-integrated text messaging alerts to utilities, courts and universities, and cybersecurity services using a patented technology that authenticates identities and stops hackers. He also speaks, writes and educates enterprises about cybersecurity issues and best practices. He is a former Chief Executive Officer of the WAP Forum (now the Open Mobile Alliance), a global technology organization promoting standardized wireless and mobile Internet access. Prior to that, he founded and was principal of The Goldman Group, a consultancy that assisted Fortune 1000 companies in licensing, developing, building and operating wireless technologies and systems around the world. Mr. Goldman was nominated to serve as a director of the Company because of his extensive experience with cybersecurity, advanced technologies and global market strategies. He currently serves on the Audit and Compensation and Stock Option Committees. JOHN B. HANSEN Age 73 Director Since 2014 Prior to his retirement as an Executive Vice President of the Company in 2014, Mr. Hansen served the Company in a variety of roles, including President-Plumbing Business, President-Manufacturing Operations and Senior Vice President – Strategy and Industry Relations. Mr. Hansen was nominated to serve as a director because of his extensive industry experience and deep knowledge of the Company, its full array of operations and the global markets it serves. He currently serves on the Audit and Nominating and Corporate Governance Committees. TERRY HERMANSON Lead Independent Director Age 77 Director Since 2003 Mr. Hermanson has been the principal of Mr. Christmas Incorporated, a wholesale merchandising company, since 1978, and serves as its Chairman. Mr. Hermanson was nominated to serve as a director of the Company because of his extensive experience in management and strategic planning, as well as his thorough knowledge of wholesale merchandising and international business issues. CHARLES P. HERZOG, JR. Age 63 Director Since 2017 Since 2010, Mr. Herzog has been a principal at Atadex LLC, a firm he co-founded. He co-founded a second firm, Vypin LLC, in 2016. Atadex and Vypin provide advanced technological and data delivery solutions to support the transportation logistics industry. Mr. Herzog was nominated to serve as a director of the Company based on his extensive knowledge of the transportation logistics industry, and the developing technologies that support it. He currently serves on the Compensation and Stock Option Committee, and as Chairman of the Nominating and Corporate Governance Committee. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 13  z CORPORATE GOVERNANCE The Company adheres to an established set of Corporate Governance Guidelines for purposes of defining director independence, assigning responsibilities, setting high standards of professional and personal conduct, and ensuring compliance with such responsibilities and standards. Such Guidelines are periodically reviewed in light of evolving trends in corporate governance standards, regulations and related disclosure requirements, particularly as adopted by the NYSE and (with respect to the Audit Committee), the SEC. — DIRECTOR INDEPENDENCE In order for a director to qualify as “independent,” our Board of Directors must affirmatively determine, consistent with NYSE rules, that the director has no material relationship with the Company that would impair the director’s independence. Our Board of Directors undertook its annual review of director independence in February 2020. In applying the NYSE standards for independence, and after considering all relevant facts and circumstances, the Board of Directors has affirmatively determined that the Company’s current “independent” directors are: Elizabeth Donovan, Paul J. Flaherty, Gennaro J. Fulvio, Gary S. Gladstein, Scott J. Goldman, John B. Hansen, Terry Hermanson and Charles P. Herzog, Jr. In the course of the Board of Directors’ determination regarding the independence of each non-management director, the Board considered for: z Mr. Flaherty, the fact that the Company has utilized certain services of Aon and its affiliates, but recognizing the arms’ length nature of such transactions, the absence of any managerial role or specific pecuniary interest of Mr. Flaherty in such matters, and the de minimis percentage such transactions represented in respect of the annual revenues and assets of each of those companies. z Mr. Hansen, the fact that while he was previously an executive officer of the Company (until his retirement on April 30, 2014), more than five years have lapsed since the termination of his employment relationship with the Company. — BOARD OF DIRECTORS AND ITS COMMITTEES The Board of Directors and its committees meet regularly throughout the year, and may also hold special meetings and act by written consent from time to time. In 2019, the Board of Directors held four regularly scheduled meetings and two special meetings. During this time, our directors attended 100% of our Board of Directors meetings and meetings of the committees on which they served. The Company’s Corporate Governance Guidelines provide that the Company’s non-management directors shall hold annually at least two formal meetings independent from management. Our Lead Independent Director presides at these executive sessions of the Board of Directors. Three standing committees have been convened to assist the Board of Directors with various functions: the Audit Committee, the Compensation and Stock Option Committee, and the Nominating and Corporate Governance Committee. Each committee operates pursuant to a formal charter that may be obtained, free of charge, at the Company’s website at www.muellerindustries.com, or by requesting a print copy from our Corporate Secretary at the address listed herein. 14 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT CORPORATE GOVERNANCE Board of Directors and its Committees AUDIT COMMITTEE Current Members: Gennaro J. Fulvio (Chairman) Scott J. Goldman John B. Hansen Meetings in 2019: 6 The Audit Committee assists the Board of Directors in fulfilling its oversight functions with respect to matters involving financial reporting, independent and internal audit processes, disclosure controls and procedures, internal controls over financial reporting, related-party transactions, employee complaints, cybersecurity and risk management. In particular, the Audit Committee is responsible for: z appointing, retaining, compensating and evaluating the Company’s independent auditors; z reviewing and discussing with management and the independent auditors the Company’s annual and quarterly financial statements, and accounting policies; z reviewing the effectiveness of the Company’s internal audit procedures and personnel; z reviewing, evaluating and assessing the Company’s risk management programs, including with respect to cybersecurity; z reviewing the Company’s policies and procedures for compliance with disclosure requirements concerning conflicts of interest and the prevention of unethical, questionable or illegal payments; and z making such other reports and recommendations to the Board of Directors as it deems appropriate. The Board of Directors has determined that each Audit Committee member meets the standards for independence required by the New York Stock Exchange (the “NYSE”) and applicable SEC rules. Moreover, it has determined (i) that all members of the Audit Committee are financially literate; and (ii) that Gennaro J. Fulvio possesses accounting and related financial management expertise within the meaning of the listing standards of the NYSE, and therefore is an audit committee financial expert within the meaning of applicable SEC rules. In accordance with the rules and regulations of the SEC, the above paragraph regarding the independence of the members of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C of the Exchange Act or to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, notwithstanding any general incorporation by reference of this Proxy Statement into any other filed document. COMPENSATION AND STOCK OPTION COMMITTEE Current Members: The Compensation and Stock Option Committee is responsible for: Gary S. Gladstein (Chairman) Scott J. Goldman Charles P. Herzog, Jr. Meetings in 2019: 4 z providing assistance to the Board of Directors in discharging the Board of Directors’ responsibilities related to management organization, performance, compensation and succession; and z making such recommendations to the Board of Directors as it deems appropriate. The Board of Directors has determined that each member of the Compensation and Stock Option Committee meets the NYSE’s standards for independence. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE Current Members: The Nominating and Corporate Governance Committee is responsible for: Charles P. Herzog, Jr. (Chairman) Elizabeth Donovan John B. Hansen Meetings in 2019: 2 z recommending director nominees to the Board of Directors; z recommending committee assignments and responsibilities to the Board of Directors; z overseeing the evaluation of the Board of Directors and management effectiveness; z developing and recommending to the Board of Directors corporate governance guidelines; and z generally advising the Board of Directors on corporate governance and related matters. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee meets the NYSE’s standards for independence. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 15 CORPORATE GOVERNANCE Board Leadership Structure — BOARD LEADERSHIP STRUCTURE The Board of Directors has currently implemented a leadership structure in which Mr. Christopher serves as both Chief Executive Officer and Chairman of the Board. The Board has determined that having Mr. Christopher serve in this dual capacity is in the best interest of stockholders at this time. The Company believes that this structure currently allows ultimate leadership and accountability to reside in a single individual, who has both extensive knowledge of the Company’s business and critical relationships with the Company’s customer base. In order to coordinate the activities of the independent members of the Board of Directors, and to liaise between such directors and the Chairman of the Board, the Company has currently designated Mr. Hermanson to serve as Lead Independent Director. The Lead Independent Director’s responsibilities are set forth in a formal charter, which can be obtained free of charge from the Company’s website at www.muellerindustries.com, or may be requested in print by any stockholder. — BOARD’S ROLE IN RISK OVERSIGHT The Board of Directors is actively involved in oversight of risks that could affect the Company. These efforts can be summarized as follows: Oversees the full range of generalized risks affecting the Company, including strategic, reputational and Oversees the full range of generalized risks affecting the Company, including strategic, reputational and operational risks, combined with the risk management activities of management and the Board Committees operational risks, combined with the risk management activities of management and the Board Committees Board of Directors Board of Directors Audit Committee Audit Committee Oversees risk management Oversees risk management processes related to financial processes related to financial reporting, internal controls reporting, internal controls and financial risks, including and financial risks, including cybersecurity cybersecurity Compensation and Stock Option Committee Compensation and Stock Option Committee Oversees risks stemming from Oversees risks stemming from compensation policies and compensation policies and practices, including the practices, including the retention of organizational talent retention of organizational talent and culture and management and culture and management succession risks succession risks Nominating and Nominating and Corporate Governance Corporate Governance Committee Committee Oversees risks related to Oversees risks related to governance structure, Board governance structure, Board composition and succession composition and succession Management Management Handles day-to-day risk management at the Company Handles day-to-day risk management at the Company 16 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT CORPORATE GOVERNANCE Standards of Conduct — STANDARDS OF CONDUCT The Board of Directors has adopted various policies, including a comprehensive set of Corporate Governance Guidelines, by which the Company is governed. These policies are designed to promote sound corporate governance and prudent stewardship of the Company, both by the Board of Directors and management. results, as determined by the Compensation and Stock Option Committee. The Company’s right of recoupment pursuant to this policy applies to incentive awards received during the three-year period preceding the date on which the Company is required to prepare the restatement, based on the determination of the Company’s independent registered public accounting firm. Anti-Pledging Policy The Corporate Governance Guidelines include amendments adopted in February 2020 that prohibit the future pledging of the Company’s common stock as security under any obligation by our directors and executive officers. Insider Trading and Anti-Hedging Policies The Company maintains a policy which mandates compliance with insider trading laws and institutes safeguards to mitigate the risk of insider trading. Further, the Corporate Governance Guidelines prohibit any director, officer or employee of the Company from engaging in short sales, transactions in derivative securities (including put and call options), or other forms of hedging and monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, that allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities. Clawback Policy Under the Corporate Governance Guidelines, if the Company is required to restate its financial results due to material noncompliance with financial reporting requirements under the securities laws as a result of an executive’s (i.e., a President or Vice President level officer’s) willful, knowing or intentional misconduct or gross negligence (as determined by the Compensation and Stock Option Committee), the Company may take action to recoup from the executive all or any portion of an incentive award received by the executive, the amount of which had been determined in whole or in part upon specific performance targets relating to the restated financial results. In such an event, the Company shall be entitled to recoup up to the amount, if any, by which the incentive award actually received by the executive exceeded the payment that would have been received based on the restated financial Code of Business Conduct and Ethics The Company has adopted a Code of Business Conduct and Ethics, which is designed to help officers, directors and employees resolve ethical issues in an increasingly complex business environment. The Code of Business Conduct and Ethics is applicable to all of the Company’s officers, directors and employees, including the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and other persons performing similar functions. The Code of Business Conduct and Ethics covers topics, including but not limited to, conflicts of interest, confidentiality of information and compliance with laws and regulations. Director Responsibilities It is the duty of the Board of Directors to serve as prudent fiduciaries for stockholders and to oversee the management of the Company’s business. Accordingly, the Corporate Governance Guidelines include specifications for director qualification and responsibility, attendance, access to officers and employees, compensation, orientation, continuing education and self- evaluation. The Company’s policy is that all members of the Board of Directors attend annual meetings of stockholders, except where the failure to attend is due to unavoidable circumstances or conflicts discussed in advance with the Chairman of the Board. All members of the Board of Directors attended the Company’s 2019 Annual Meeting of Stockholders. Where to Find Our Key Governance Policies: The Corporate Governance Guidelines and Code of Business Conduct and Ethics can be obtained free of charge from the Company’s website at www.muellerindustries.com, or may be requested in print by any stockholder. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 17 CORPORATE GOVERNANCE Communication with the Board of Directors — COMMUNICATION WITH THE BOARD OF DIRECTORS Any stockholder or interested party who wishes to communicate with the Board of Directors, or specific individual directors, including the non-management directors as a group, may do so by directing a written request addressed to such directors or director in care of the Chairman of the Nominating and Corporate Governance Committee, Mueller Industries, Inc., 150 Schilling Boulevard, Suite 100, Collierville, Tennessee 38017. Communication(s) directed to the Chairman will be relayed to him, except to the extent that it is deemed unnecessary or inappropriate to do so pursuant to the procedures established by a majority of the independent directors. Communications directed to non-management directors will be relayed to the intended director except to the extent that doing so would be contrary to the instructions of the non-management directors. Any communication so withheld will nevertheless be made available to any non-management director who wishes to review it. — RELATED PARTY TRANSACTIONS Related party transactions may present potential or actual conflicts of interest, and create the appearance that Company decisions are based on considerations other than the best interests of the Company and its stockholders. Management carefully reviews all proposed related party transactions (if any), other than routine banking transactions, to determine if the transaction is on terms comparable to those that could be obtained in an arms-length transaction with an unrelated third party. Management reports to the Audit Committee, and then to the Board of Directors on all proposed material related party transactions. Upon the presentation of a proposed related party transaction to the Audit Committee or the Board of Directors, the related party is excused from participation in discussion and voting on the matter. — CORPORATE SOCIAL RESPONSIBILITY The Company assesses and manages environmental, social and governance (“ESG”) considerations that may be material to the long-term sustainability of our business. Among other matters, we focus on such issues as workplace health and safety, environmental stewardship, business ethics and compliance, supply chain management and the development of human capital. We also focus outwardly on the communities in which we operate, including through a foundation that makes charitable contributions to various causes and organizations. ESG-related risks and opportunities are integral to our strategic decision-making. Such matters are addressed by senior management and subject to the oversight of the Board of Directors and its committees. 18 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z 2019 DIRECTOR COMPENSATION — ELEMENTS OF DIRECTOR COMPENSATION Our non-employee director compensation for 2019 was awarded in a combination of cash and equity, as shown below.* Annual fee for the Lead Independent Director. For serving as Lead Independent Director, Mr. Hermanson received an annual fee of $90,000. Annual fee for other directors All other non-employee directors received an annual fee of $60,000. Meeting fees z $3,000 per full Board meeting attended z $3,000 per Audit Committee meeting attended z $1,000 per Compensation and Stock Option and/or Nominating and Corporate Governance Committee meeting attended Annual fees for Committee Chairs z $25,000 for the Audit Committee Chair z $6,000 each for the chairs of the Compensation and Stock Option and Nominating and Annual equity award Corporate Governance Committees z All non-employee directors received a grant of options to purchase 4,000 shares of our Common Stock (fully vested as of the date of grant), and were granted 2,000 shares of restricted stock. *In his capacity as Chairman of the Board of Directors, Mr. Christopher received neither a retainer nor any meeting fees. In addition, each director received reimbursement for such director’s expenses incurred in connection with any such Board or Committee meeting, and each Committee fee was paid whether or not such committee meeting was held in conjunction with a Board of Directors meeting. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 19 2019 DIRECTOR COMPENSATION 2019 Non-Employee Director Compensation — 2019 NON-EMPLOYEE DIRECTOR COMPENSATION The table below summarizes the total compensation we paid to our non-employee directors for the fiscal year ended December 28, 2019. Name Elizabeth Donovan Paul J. Flaherty Gennaro J. Fulvio Gary S. Gladstein Scott J. Goldman John B. Hansen Terry Hermanson Charles P. Herzog, Jr. Fees Earned or Paid in Cash ($) 79,000 80,000 88,000 121,000 85,000 96,000 110,000 91,000 Stock Awards ($)(1) 58,330 58,330 58,330 58,330 58,330 58,330 58,330 58,330 Option Awards ($)(1) 46,615(2) 35,980 35,980 35,980 35,980 35,980 35,980 35,980 Cash Dividends ($) — 800 800 800 800 800 800 800 Total ($) 183,945 175,110 183,110 216,110 180,110 191,110 205,110 186,110 (1) Represents the aggregate grant date fair value of awards granted to our directors in 2019, determined under Financial Accounting Standards Board Accounting Standards Codification 718. For information on the valuation assumptions with respect to awards made, refer to Note 17 - Stock-Based Compensation to the Company’s Consolidated Financial Statements filed with its Annual Report on Form 10-K for the fiscal year ended December 28, 2019. The amounts above reflect the Company’s aggregate expense for these awards and do not necessarily correspond to the actual value that will be recognized by the directors. As of December 28, 2019, the aggregate number of shares of our Common Stock subject to outstanding options held by our non-employee directors was as follows: Ms. Donovan, 6,000 shares, Mr. Flaherty, 41,333 shares, Mr. Fulvio, 31,555 shares, Mr. Gladstein, 41,333 shares, Mr. Goldman, 36,444 shares, Mr. Hansen, 21,778 shares, Mr. Hermanson, 12,000 shares, and Mr. Herzog, 10,000 shares. All non-employee directors each held 2,000 shares of non-vested restricted stock. In addition to the customary equity award directors receive in connection with the Annual Meeting of Stockholders, the reported value of options awarded to Ms. Donovan includes the fair value of fully vested options to purchase 2,000 shares of our Common Stock, which she received upon joining the Board effective January 1, 2019. (2) — STOCK OWNERSHIP POLICY FOR DIRECTORS To further align the Company’s goal of aligning directors’ economic interests with those of stockholders, the Company has adopted stock ownership guidelines for its non-employee directors recommending that they hold equity interests of the Company (including vested and unvested interests, provided that with respect to options, only vested options that are exercisable within 60 days of the applicable measurement date will be counted) with a value equal to three times the annual cash director fee payable to each such director. All directors are expected to comply with the stock ownership guidelines within five years of being elected to the Board of Directors, and current directors should comply as soon as practicable. Director compliance with the stock ownership guidelines is monitored on an ongoing basis by the Company’s General Counsel. 20 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z PROPOSAL 2 z APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has reappointed Ernst & Young LLP (“EY”) to audit and certify the Company’s financial statements for the fiscal year ending December 26, 2020, subject to ratification by the Company’s stockholders, which requires the affirmative vote of a majority of the outstanding shares of the Company present in person or by proxy at the Annual Meeting. If the appointment of EY is not so ratified, the Audit Committee will reconsider its action and will appoint auditors for the 2020 fiscal year without further stockholder action. Notwithstanding, the Audit Committee may at any time in the future in its discretion reconsider the appointment without submitting the matter to a vote of stockholders. Representatives of EY are expected to attend the Annual Meeting to answer questions and make a statement if they so choose. Fees for EY’s audit and other services for each of the two fiscal years ended December 28, 2019 and December 29, 2018 are set forth below: Audit Fees (professional services rendered for the audit of (i) the Company’s consolidated annual and interim/quarterly financial statements, and (ii) internal controls over financial reporting) Audit-Related Fees (assurance and other services, including international accounting and reporting compliance) Tax Fees (tax compliance, advice and planning) All Other Fees 2019 2018 2,856,009 2,893,000 50,250 219,730 422,350 348,699 — — $3,328,609 $3,399,369 The Audit Committee’s policy is to pre-approve all audit and non- audit services provided by the independent auditors. Pre-approval is generally provided for up to one year, and any such pre-approval is detailed as to the particular service or category of services. The Audit Committee has delegated pre-approval authority to its Chairman when expedition of services is necessary. The independent auditors and management are required periodically to report to the full Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. All of the services provided by the independent auditors during fiscal years 2019 and 2018, respectively, under the categories Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above were pre-approved. ✔ THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES FOR THE APPROVAL OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 21 APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS — REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under Public Company Accounting Oversight Board’s (PCAOB) Auditing Standard No. 1301. In addition, the Audit Committee discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures required by Public Company Accounting Oversight Board’s Rule 3526, and considered the compatibility of non-audit services provided by the independent auditors with the auditor’s independence. The Audit Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2019 for filing with the SEC. The Audit Committee and the Board has re-appointed, subject to stockholder approval, Ernst & Young LLP, independent auditors, to audit the consolidated financial statements of the Company for the fiscal year ending December 26, 2020. The Audit Committee is governed by a formal charter which can be accessed from the Company’s website at www.muellerindustries. com, or may be requested in print by any stockholder. The members of the Audit Committee are considered independent because they satisfy the independence requirements for Board members prescribed by the NYSE listing standards and Rule 10A-3 of the Exchange Act. Gennaro J. Fulvio, Chairman Scott J. Goldman John B. Hansen (1) This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing. 22 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z PROPOSAL 3 z ADVISORY VOTE ON APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS In accordance with Section 14A of the Exchange Act, stockholders are being asked to vote on an advisory, non-binding basis, on the compensation of the Company’s named executive officers. Specifically, the following resolution will be submitted for a stockholder vote at the Annual Meeting, the approval of which will require the affirmative vote of a majority of the outstanding shares of the Company present in person or by proxy at the Annual Meeting and entitled to vote thereon: “RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers listed in the 2019 Summary Compensation Table included in the proxy statement for the 2020 Annual Meeting, as such compensation is disclosed pursuant to Item 402 of Regulation S-K in this proxy statement under the section titled “Compensation Discussion and Analysis,” as well as the compensation tables and other narrative executive compensation disclosures thereafter.” Although the stockholder vote is not binding on either the Board of Directors or the Company, the views of stockholders on these matters are valued and will be taken into account in addressing future compensation policies and decisions. The Company’s Compensation and Stock Option Committee is comprised of knowledgeable and experienced independent directors, who are committed to regular review and effective oversight of our compensation programs. The Company’s executive compensation program is grounded in a pay for performance philosophy, and accordingly, has been designed to motivate the Company’s key employees to achieve the Company’s strategic and financial goals, and to support the creation of long-term value for stockholders. Moreover, given the particularly competitive markets in which we operate and nature of our business, a principal goal underlying the Company’s long-term incentive compensation program specifically is the long-term retention and motivation of critical executives and business leaders. The Company’s success depends upon their leadership, judgment and experience, and as such, our compensation program is designed to promote their enduring commitment to the Company. We encourage stockholders to read the Executive Compensation section of this proxy statement, including the Compensation Discussion and Analysis (CD&A) and compensation tables, for a more detailed discussion of the Company’s compensation programs and policies, and how they are appropriate and effective in promoting growth, creating value, and retaining key members of our team. ✔ THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 23  z COMPENSATION DISCUSSION AND ANALYSIS TABLE OF CONTENTS EXECUTIVE SUMMARY DETERMINATION OF EXECUTIVE COMPENSATION ELEMENTS OF COMPENSATION COMPENSATION RISK MANAGEMENT REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 24 26 27 32 33 33 — EXECUTIVE SUMMARY This Compensation Discussion and Analysis (“CD&A”) provides an overview of how our named executive officers were compensated in 2019, as well as how this compensation furthers our established compensation philosophy and objectives. Our Named Executive Officers The Company’s NEOs for fiscal year 2019 were: GREGORY L. CHRISTOPHER Chief Executive Officer & Chairman JEFFREY A. MARTIN Chief Financial Officer & Treasurer NICHOLAS W. MOSS President – B&K LLC(1) STEFFEN SIGLOCH Chief Manufacturing Officer GARY WESTERMEYER President – Refrigeration (1) Effective, January 1, 2020, Mr. Moss assumed the title of President – New Business Development. Our Compensation Philosophy and Guiding Principles We believe in a pay for performance philosophy, such that a material portion of a named executive officer’s compensation is dependent upon both the short-term and long-term strategic and financial performance of the Company, considered in light of general economic and specific Company, industry, and competitive conditions. For 2019, we continued to reward named executive officers in a manner consistent with this philosophy by setting annual incentive targets based on the Company’s achievement of certain levels of operating income. While also rooted in a pay for performance philosophy, our long-term equity incentive compensation focused primarily on promoting the retention of key executives and business leaders in our industry, where the competition for leadership talent is a foremost concern. Accordingly, we continued to grant equity awards, such that any long-term compensation opportunity will be directly tied to stock performance, and will only be received by key executives and business leaders who remain with and make long-term commitments to the Company’s success. The Compensation and Stock Option Committee (hereinafter referred to as “the Committee” for purposes of this CD&A section) evaluates, on an annual basis, the overall structure and design of our program, and believes it has and continues to reflect the best balance of the Company’s priorities. 24 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Executive Summary OUR COMPENSATION PHILOSOPHY AND GUIDING PRINCIPLES ALIGN COMPENSATION WITH STOCKHOLDER INTEREST PAY FOR PERFORMANCE ATTRACT AND RETAIN TALENT TRANSPARENCY AND SIMPLICITY OF DESIGN We emphasize long-term stockholder value creation by utilizing performance-based restricted stock units and stock options to deliver long-term compensation incentives while minimizing risk-taking behaviors that could undermine long-term objectives. Each executive has clear performance expectations and must contribute to the overall success of the Company, as opposed to solely objectives within his or her primary area of responsibility. The attraction and retention of key executives and business leaders is a core objective of our long-term incentive compensation program. In addition to performance-based criterion, our equity awards vest on longer time horizons to incentivize key executives to make longstanding commitments to the Company. The three main elements of our compensation program — base salary, annual cash incentive compensation and long-term equity incentive compensation — reflects an appropriate blend of goals and are based on easily understood objectives. Our Compensation Practices At a Glance Our pay and equity programs are designed to align executives’ interests with those of our stockholders, and to motivate and retain critical leaders. Below is a snapshot of our compensation practices: WHAT WE DO WHAT WE DON’T DO We maintain a fully independent Compensation and Stock Option Committee. We do not provide for single trigger severance upon a change in control. A higher percentage of our executives’ compensation is variable than fixed. We do not permit gross-up payments to cover excise taxes or perquisites. We utilize varying performance metrics under our short- term and long-term incentive plans. We do not permit the pledging or hedging of our common stock. Our annual incentive program is based on earnings performance and capped for maximum payouts. We do not support compensation programs or policies that reward material or excessive risk taking. Our equity awards include extended vesting schedules and performance-based criteria. We do not maintain any supplemental executive retirement plans. We have a clawback policy applicable to all senior employees, including all President and Vice President level personnel. 2019 Say-on-Pay Vote and Stockholder Engagement At our 2019 Annual Meeting, we held our annual non-binding stockholder advisory vote on executive compensation. Approximately 73% of our shares voted (excluding abstentions and broker non-votes) were in favor of the compensation of our named executive officers as disclosed in the proxy statement for the 2019 Annual Meeting. In response to the results of the 2019 say-on-pay vote, the Company’s management and Committee Chairman held in- person meetings with various stockholders to discuss the Company’s compensation practices and the philosophies underlying them. Those discussions afforded stockholders the opportunity to raise questions and concerns regarding the executive compensation program as presented in last year’s proxy solicitation. Through productive and informative engagement with its stockholders, the Company learned that the manner in which the Company had historically communicated MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 25 COMPENSATION DISCUSSION AND ANALYSIS Determination of Executive Compensation and presented its executive compensation program in its proxy solicitations was unclear, and did not adequately convey the Company’s compensation philosophy, priorities and the market and strategic considerations that support them. One specific aspect of the compensation program for which this was particularly true was the Company’s long-term equity incentive awards, and how the performance-based criterion underlying those equity awards were chosen to emphasize long-term strategic growth and to serve as a complement to the Company’s ambitious targets underlying its annual cash incentive program, in an effort to create a balanced and well- rounded incentive structure. As part of its robust response to the results of the 2019 say- on-pay vote, the Company has determined that in 2020, the long-term equity incentive awards given to its operational business leaders will, for the first time, be tied to achievement of the ambitious targets set forth in the Company’s 2024 Strategic Growth Plan. These awards will be made later in 2020 and discussed in next year’s proxy statement. We believe that this step will further align pay and performance, focus our operational leadership on long-term value creation, and be a strong motivating incentive and tool for retention. Further, in response to feedback received from stockholders following the 2019 say-on-pay vote, the Company has not only endeavored this year to more clearly and fully present its compensation program, but to dramatically revamp the look, format and substance of this year’s proxy statement. Our goal in doing so was to provide a more useful, appealing and granular tool to assist stockholders in evaluating our compensation program, including pay-for-performance alignment and whether it serves the vital strategic goal of attracting and retaining key executives in the competitive markets in which we participate. The Committee will consider the outcome of this year’s stockholder advisory vote on executive compensation as it makes future compensation decisions. — DETERMINATION OF EXECUTIVE COMPENSATION Guided by the philosophy and design outlined above, the Committee determines the compensation of our Chief Executive Officer. In turn, our Chief Executive Officer makes recommendations to the Committee regarding all components of our other NEOs’ compensation, including base salary, annual cash incentive compensation, and long-term equity incentive compensation. The Committee considers and acts upon those recommendations in setting the compensation of our other NEOs. In making compensation decisions, the Committee relies on the members’ general knowledge of our industry, supplemented by advice from our Chief Executive Officer based on his knowledge of our industry and the markets in which we participate. From time to time, we conduct informal analyses of compensation practices and our Compensation and Stock Option Committee may review broad-based third-party surveys to obtain a general understanding of current compensation practices. In determining compensation, we generally do not rely upon hierarchical or seniority-based levels or guidelines, nor did the Committee formally benchmark executive compensation (or any component thereof) against any particular peer group. Instead, we utilize a more flexible approach that allows us to adapt components and levels of compensation to motivate and reward individual executives within the context of our broader strategic and financial goals. This requires that we consider subjective factors including, but not limited to the following: z The nature of the executive’s position; z The performance record of the executive, combined with the value of the executive’s skills and capabilities in supporting the long-term performance of the Company; z The Company’s overall operational and financial performance; and z Whether each executive’s total compensation potential and structure is sufficient to ensure the retention of the executive officer when considering the compensation potential that may be available elsewhere. The Committee has chosen incentive operating income targets as the metric to measure performance for each named executive officer. The compensation of Messrs. Christopher and Martin is based upon their oversight of and responsibility for the entire Company. Accordingly, their compensation levels are reflective of the scope and breadth of their management responsibility, and the performance of the Company on a consolidated basis. For Messrs. Sigloch, Moss, and Westermeyer, a portion of their compensation is based upon the performance of specific business lines within their purviews. Notwithstanding, a portion of their compensation is still based upon consolidated Company performance to discourage parochialism and align their interests with those of our stockholders. 26 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Elements of Compensation — ELEMENTS OF COMPENSATION As outlined below, our compensation program for our NEOs is comprised of three primary elements: (i) base salary and traditional benefits, (ii) annual incentive compensation, and (iii) long-term equity incentive compensation. Each element plays an integral role in our overall compensation strategy. Moreover, the Committee has approved certain executive perquisites and post-employment change-in-control compensation to our NEOs for purposes of motivating them and retaining their services. Element of Compensation Purpose/Description Base Salary and traditional benefits Provide a base level of compensation for services performed, to encourage the continued service of our executive officers and to attract additional talented executive officers when necessary Form/Timing of Payment Cash/throughout the fiscal year Annual Incentive Compensation To attract, motivate and reward executives to achieve and surpass key performance target goals Cash/typically in February based upon the prior fiscal year’s performance Long-Term Equity Incentive Compensation To attract, motivate and reward executives to increase stockholder value, and encourage them to make long-term commitments to serve the Company Restricted stock units with performance and time vesting criteria/following the release of second quarter earnings Pay-for-Performance and At-Risk Compensation CEO 17% Base Salary 83% AT-RISK COMPENSATION 27% Annual Incentive %56 Long-Term Incentive OTHER NEOs $600 million Returned to Shareholders from Dividends and Share Repurchases over 5 years 29% Base Salary 40% Long-Term Incentive 71% AT-RISK COMPENSATION 31% Annual Incentive Base Salary and Traditional Benefits Annual Incentive Compensation Base salaries paid to our NEOs are set forth in the “Summary Compensation Table for 2019.” Base salary adjustments are determined by making reasoned subjective determinations about current economic conditions such as general wage inflation as well as the executive’s qualifications, experience, responsibilities, and past performance. In addition to base salaries, we provide traditional benefits such as group health, disability, and life insurance benefits, as well as matching contributions to our 401(k) plan. Each of our NEOs received annual incentive compensation for 2019, based upon the actual performance of the Company and, for Messrs. Moss, Sigloch and Westermeyer, the performance of the business lines which they oversee, relative to the performance targets (as described below) established by the Committee on February 4, 2019. The table below shows the target annual incentive award for each of our NEOs. For 2019, the amount of incentive compensation payable to each of our named executive officers was calculated as follows: BASE SALARY X INCENTIVE GRADE LEVEL FACTOR X PERFORMANCE FACTOR = ANNUAL INCENTIVE MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 27 COMPENSATION DISCUSSION AND ANALYSIS Elements of Compensation INCENTIVE GRADE LEVEL FACTOR Set forth below are the incentive grade level factors for each of our NEOs: NEO Mr. Christopher Mr. Martin Mr. Moss Mr. Sigloch Mr. Westermeyer Multiple of Base Salary 125% 90% 90% 90% 75% PERFORMANCE FACTOR Set forth below are the corresponding payout percentages tied to various levels of achievement above or below pre-approved operating income performance targets. To promote alignment between pay and performance, incentive compensation amounts are not paid to NEOs when the achievement level of the operating income performance target is less than 80%. Performance to Target Payout Percentage < 80% 80-84% 85-89% 90-94% 95-99% 100-104% 105-109% 110-114% 115% 0% 40% 55% 70% 85% 100% 115% 130% 150% Based on their incentive grade level factors, certain NEOs are entitled to an additional payout percentage of 10% for each additional percentage of achievement between 115% and 120% of the target, thereby resulting in a maximum payout percentage of 200%. For more information, please see the “2019 Grants of Plan Based Awards Table.” The performance factor applicable to each of the NEOs was determined based on the achievement level of the consolidated Company incentive operating income target, as shown in the following table: Name Incentive Operating Income Performance Criteria(1) Incentive Operating Income Performance Target Gregory L. Christopher Consolidated Company Jeffrey A. Martin Consolidated Company Nicholas W. Moss Consolidated Company Blended Business Lines Weighted Average Performance Steffen Sigloch Consolidated Company Blended Business Lines Weighted Average Performance Gary Westermeyer Consolidated Company Blended Business Lines Weighted Average Performance $178.0 million $178.0 million $178.0 million $18.5 million $178.0 million $45.7 million $178.0 million Weighting Performance 100% $197.1 million 100% $197.1 million 25% $197.1 million 75% 70% 30% 50% $18.6 million $197.1 million $40.1 million $197.1 million 2019 Achievement Level 2019 Performance Factor 110% 110% 110% 100% 110% 93% 110% 130% 130% 130% 100% 130% 74% 130% $20.4 million 50% $18.2 million 89% 68% (1) Incentive operating income is the performance criteria metric used for all bonus plans. Incentive operating income includes adjustments to operating income as presented in the Company’s audited financial statements for purposes of defining the performance criteria, such as: (i) certain standard adjustments made annually, including expenses associated with phantom shares granted to personnel in our European businesses, and FIFO variances; and (ii) certain adjustments made when applicable, including impairment charges, certain gains or losses on the sale of assets, certain gains stemming from insurance recoveries, severance and relocation expenses, adjustments to contingent consideration arrangements, and purchase accounting adjustments. 28 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Elements of Compensation 2019 NEO ANNUAL INCENTIVE CALCULATIONS As a result of 2019 performance, the annual incentive payments for the NEOs were calculated as follows: MR. CHRISTOPHER TARGET AWARD(1) $1,562,500 MR. MARTIN TARGET AWARD(1) $351,416 MR. MOSS TARGET AWARD(1) $351,452 MR. SIGLOCH TARGET AWARD(1) $305,177 MR. WESTERMEYER TARGET AWARD(1) $197,668 X X X X X WEIGHTED PERFORMANCE FACTOR 130% WEIGHTED PERFORMANCE FACTOR 130% WEIGHTED PERFORMANCE FACTOR 108% WEIGHTED PERFORMANCE FACTOR 113% WEIGHTED PERFORMANCE FACTOR 99% = = = = = ANNUAL INCENTIVE PAYOUT AS A % OF BASE SALARY 163% ANNUAL INCENTIVE PAYOUT AS A % OF BASE SALARY 117% ANNUAL INCENTIVE PAYOUT AS A % OF BASE SALARY 114% ANNUAL INCENTIVE PAYOUT AS A % OF BASE SALARY 96% ANNUAL INCENTIVE PAYOUT AS A % OF BASE SALARY 74% (1) The target award is determined by multiplying the NEO’s base salary by the applicable incentive grade level factor. Long-Term Equity Incentive Compensation Program OVERVIEW Our long-term equity-based incentive compensation program serves three goals: 1. Aligning our NEOs’ financial interests with the interests of our stockholders; 2. Retaining the services of talented and seasoned executives, and motivating them to make deep, long-term commitments to the Company; and 3. Rewarding our NEOs for advancing our long-term financial success and increasing stockholder value. The Committee has made the retention of executives and key employees a particular focus of the long-term equity incentive compensation program in recent years. The Committee has decided that the best way to meet the objectives of our long-term incentive program is to award a combination of time-based restricted stock and performance- based restricted stock, allocated as shown below. To promote our goal of executive and key employee retention, time-based restricted stock awards vest over the course of a five-year period, on one of two vesting schedules: (i) 30% after three years; 30% after four years; and 40% after five years, or (ii) 100% cliff vesting after five years. Performance-based restricted stock is also awarded, and provided performance criteria are met over a five year performance period, cliff vests 100% after approximately four and a half years. Unvested shares are generally forfeited if the recipient leaves the Company employ prior to the vesting date. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 29 COMPENSATION DISCUSSION AND ANALYSIS Elements of Compensation NEO LONG-TERM EQUITY MIX ALL LONG-TERM EQUITY MIX 53% Time-based Restricted Stock 47% Performance- based Restricted Stock 58% Time-based Restricted Stock 42% Performance- based Restricted Stock The Committee believes that the extended and cliff vesting schedules, and performance criteria described below will motivate our NEOs and key employees to remain with the Company and make long-term contributions to stockholder value generation. FIVE-YEAR VESTING SCHEDULE FOR TIME-BASED AND PERFORMANCE-BASED RESTRICTED STOCK To foster retention, the 2019 time-based restricted stock awards vest over the course of a five year period (i.e., either (i) 30% after three years; 30% after four years; and 40% after five years, or (ii) 100% after five years). For performance-based awards, the performance period is five years, and vesting occurs approximately four and a half years from the grant date. No portion of the equity awards granted to our executives or employees vest in less than three years. The Committee elected to use a long-term vesting schedule to promote executive retention in our competitive industry and to incentivize performance. However, given the importance of long-term equity incentive awards in our compensation program, the Committee provided for accelerated vesting in the event of death, disability or a change in control (as explained in more detail in the “2019 Grant of Plan Based Awards Table”). The Committee believes that accelerated vesting would be appropriate in those circumstances to encourage our executives to focus on the potential benefits of a change in control transaction for our stockholders without harboring concerns for their financial security. TIME-BASED RESTRICTED STOCK Five-Year Vesting Schedule 64% of total time-based awards 30% Vest 30% Vest 40% Vest JULY/AUG. 2019 AWARD GRANTED YEAR 1 YEAR 2 YEAR 3 YEAR 4 36% of total time-based awards PERFORMANCE-BASED RESTRICTED STOCK Five-Year Vesting Schedule DEC. 2018 PERFORMANCE PERIOD BEGINS YEAR 1 YEAR 2 YEAR 3 YEAR 4 July/Aug. 2019 Award Granted 30 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT YEAR 5 100% Vest YEAR 5 Feb. 2024 100% Vest DEC. 2023 PERFORMANCE PERIOD ENDS PERFORMANCE CRITERIA FOR PERFORMANCE-BASED RESTRICTED STOCK A portion of the long-term equity awards granted to our NEOs and key employees are performance-based, and vesting is contingent upon the Company’s performance on two metrics: total stockholder return (TSR) and diluted earnings per share (EPS). Using these two metrics ensures that performance-based awards will not vest unless the Company achieves specified growth targets over a five-year performance period, which for the 2019 grants, was December 30, 2018 to December 30, 2023. For this purpose, total stockholder return will be determined by dividing (i) an amount equal to the 30-day trailing average closing price of a share of stock at the end of the performance period, minus $23.44 (the 30-day trailing average closing price of a share of stock as of December 30, 2018), plus the value of any dividends and distributions paid during the performance period, by (ii) $23.44, and multiplying such amount by 100. To be clear, the growth targets established for our long-term equity incentive awards (i.e., a 3.5% compounded annual growth rate in TSR or EPS) are just one of a number of different, yet complementary performance metrics utilized by the Company in its efforts to design an overall compensation program that is appropriately balanced and furthers its underlying aims. For example, the Company’s performance-based compensation program also incorporates the ambitious short and long-term operating targets that underlie the Company’s annual cash incentive compensation program and long-term aspirations for strategic growth. Indeed, and as previously noted, the Company has determined that in 2020, the long-term equity incentive awards given to its operational business leaders will be tied to achievement of the ambitious targets set forth in the Company’s 2024 Strategic Growth Plan. The Company has traditionally maintained, and will continue to maintain lofty expectations and goals with respect to stockholder value creation. Nevertheless, given the primary retention aim of the long-term equity incentive compensation program, the Committee has concluded that the performance-based criterion for the equity awards granted to our NEOs are appropriate in the context of our well-balanced overall executive compensation program. COMPENSATION DISCUSSION AND ANALYSIS Elements of Compensation TIMING OF LONG-TERM EQUITY AWARD GRANTS Long-term equity incentive awards to our Chief Executive Officer are granted annually, typically in July, based on the determinations of the Committee. Long-term equity incentive awards to our other NEOs have traditionally been granted by the Committee (upon our Chief Executive Officer’s recommendation) following the release of the Company’s second quarter and six-month operating results. In 2019, the NEOs received their annual grants in August 2019. In granting long-term equity awards to our NEOs, the Committee applied no set formula for allocating awards, and instead made reasoned, subjective determinations based upon their performance, the importance of retaining their services, and their role in helping us achieve our long-term goals. In 2019, we granted shares of restricted stock to our NEOs covering an aggregate of 217,000 shares. In addition to Mr. Christopher’s annual grant, the Committee determined to grant him a special performance-based restricted stock award (conditioned on achievement of the performance- based criteria discussed above) in July 2019, in recognition of his outstanding service, leadership and commitment to the future and well-being of the Company. Perquisites We offer perquisites to our NEOs, which we view as an added element of our executive compensation program designed not only to attract, retain and reward our NEOs, but also to facilitate their performance of their duties on behalf of the Company. The perquisites we provided to our NEOs in fiscal year 2019 are set forth in the “Summary Compensation Table for 2019”, and included, among others, estate and tax planning, personal use of our Company airplane, and reimbursement of the income tax liabilities associated with certain perquisites. Estate and tax planning is provided to certain NEOs to complement our various compensation elements for the purpose of ensuring the NEOs understand the complexity of the long-term equity incentives and are thereby able to maximize the value of such benefits. We maintain a Company-owned airplane primarily to provide efficient transportation for executives, employees and customers to our geographically dispersed operations. From time to time, when our plane is not being used for business purposes, we allow certain NEOs to use the plane for personal travel. We have also provided executive physicals as a risk management tool and to ensure our NEOs are mindful of their personal health. Certain club memberships are provided, and serve the primary aim of facilitating networking with business clients. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 31 COMPENSATION DISCUSSION AND ANALYSIS Compensation Risk Management — COMPENSATION RISK MANAGEMENT In connection with its continued appraisal of our compensation program, management, with oversight from the Committee, reviews our compensation policies and practices, and the overall compensation program with respect to our risk management practices and any potential risk-taking incentives. This assessment includes a review of the primary elements of our compensation in light of potential risks: COMPENSATION PROGRAM RISK CONSIDERATIONS Pay Mix z Compensation program includes an appropriately balanced mix of short and long-term incentives, which mitigates the risk of undue focus on short-term targets while rewarding performance in areas that are key to our long-term success. z Base salaries are set at competitive levels to promote stability and give executives an element of compensation that is not at risk. Performance Metrics and Goals z Distinct performance metrics are used in both our short-term and long-term incentive plans. z Our annual incentive compensation program includes a payout scale (and cap) reflective of a pay for performance philosophy. Long-term Incentives z Our long-term equity incentive program is designed to retain key executives and business leaders and to align their interests with those of our stockholders. As previously detailed (see page 17), the Company has adopted a series of policies, including bans on pledging and hedging, and a clawback policy, to further mitigate risk taking behaviors. Beyond our Company clawback policy, which applies to all President and Vice President-level executives, our Chief Executive Officer and Chief Financial Officer are subject to clawback provisions under the Sarbanes Oxley Act of 2002. For these reasons, we believe that our compensation policies and practices are not likely to have a material adverse effect on the Company. Tax Considerations Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to certain executive officers, subject historically to an exception for qualifying “performance- based compensation.” The Tax Cuts and Jobs Act, enacted on December 22, 2017, substantially modified Section 162(m) of the Code and, among other things, eliminated the performance- based exception to the $1,000,000 deduction limit effective as of January 1, 2018. As a result, as of 2018, compensation paid to certain executive officers in excess of $1,000,000 is nondeductible, whether or not it is performance-based. In addition, beginning in 2018, the executive officers subject to Section 162(m) of the Code (the “Covered Employees”) will include any individual who served as the Chief Executive Officer and Chief Financial Officer at any time during the taxable year and the three other most highly compensated officers (other than the Chief Executive Officer and Chief Financial Officer) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual will remain a Covered Employee for all future years, including following any termination of employment. The Tax Cuts and Jobs Act includes a transition rule under which the changes to Section 162(m) of the Code described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and is not materially modified after that date. To the extent applicable to our existing contracts and awards, we may avail ourselves of this transition rule. However, because of uncertainties as to the application and interpretation of the transition rule, no assurances can be given at this time that our existing contracts and awards, even if in place on November 2, 2017, will meet the requirements of the transition rule. Moreover, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals in the best interest of the company, we do not limit our actions with respect to executive compensation to preserve deductibility under Section 162(m) of the Code if we determine that doing so is in the best interests of the Company and its stockholders. 32 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Compensation Committee Interlocks and Insider Participation — REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION The Compensation and Stock Option Committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Compensation and Stock Option Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. Gary S. Gladstein, Chairman Scott J. Goldman Charles P. Herzog, Jr. — COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During fiscal year 2019, Gennaro J. Fulvio, Scott J. Goldman and Charles P. Herzog, Jr. served on the Compensation and Stock Option Committee. No member of the Compensation and Stock Option Committee was, during fiscal year 2019, an officer or employee of the Company or was formerly an officer of the Company. In addition, no member of the Compensation and Stock Option Committee, during fiscal year 2019, had any relationship requiring disclosure by the Company as a related party transaction under Item 404 of Regulation S-K. No executive officer of the Company served on any board of directors or compensation committee of any other company for which any of the Company’s directors served as an executive officer at any time during fiscal year 2019. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 33  z EXECUTIVE COMPENSATION TABLES — SUMMARY COMPENSATION TABLE FOR 2019 The following table shows compensation of our principal executive officer, our principal financial officer, and other named executive officers for the 2019, 2018 and 2017 fiscal years, as applicable. Name and Principal Position Gregory L. Christopher Chief Executive Officer & Chairman Jeffrey A. Martin Chief Financial Officer & Treasurer Nicholas W. Moss President – B&K LLC(6) Steffen Sigloch Chief Manufacturing Officer Gary Westermeyer President – Refrigeration(9) Year 2019 2018 2017 2019 2018 2017 2019 2018 2017 2019 2018 2017 2019 Salary ($) 1,250,000(2) 1,117,308 1,100,000 390,462(2) 359,873 335,000 390,502(2) 387,205 378,967 339,085(2) 328,693 321,906 Bonus ($) — — — — — — — 26,136 — — — — 263,558(2) 60,000(10) Stock Awards ($)(1) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($) Total ($) 4,168,400(3) 2,031,250 615,056(4) 8,064,706 3,873,600 1,815,625 2,105,280 490,770 581,040 526,320 545,300 710,160 774,000 627,095 807,000 774,000 272,650 962,500 456,840 421,052 211,050 443,708 313,637 185,031 326,921 384,571 179,623 195,197 543,480 445,812 7,350,013 4,613,592 202,895(5) 1,540,967 68,553 58,519 1,430,518 1,130,889 332,033(7) 1,711,543 173,294 154,518 1,610,432 1,492,516 242,766(8) 1,535,867 227,048 114,222 1,747,312 1,389,751 17,015(11) 808,420 (1) This column represents the aggregate grant date fair value of awards granted to our NEOs and assuming, for purposes of any awards subject to performance-based vesting criteria, the probable outcome of the performance conditions. For information on the valuation assumptions with respect to these awards, refer to Note 17 - Stock-Based Compensation to the Company’s Consolidated Financial Statements filed with its Annual Report on Form 10-K for the fiscal year ended December 28, 2019. The amounts above reflect the Company’s aggregate expense for these awards and do not necessarily correspond to the actual value the named executive officers will recognize. (2) Effective May 13, 2019, Mr. Martin’s and Mr. Sigloch’s base salaries were increased by 6.7% and 4.0% respectively. Mr. Westemeyer’s base salary was increased by 10.4% effective January 14, 2019. Neither Mr. Christopher nor Mr. Moss received any base salary increases in 2019. (3) The reported amount includes the aggregate grant date fair value of a special award of 50,000 shares of performance-based restricted stock granted to Mr. Christopher in 2019 in recognition of outstanding service to the Company and leadership. (4) Mr. Christopher’s other compensation includes $503,823 in restricted stock dividends, including the Special Dividend in respect of shares of restricted stock that were unvested at the time the Special Dividend was declared and that vested in 2019. Other compensation includes $18,315 in premiums on a life insurance policy maintained on his behalf; a $20,902 reimbursement of the income tax liabilities associated with certain perquisites; $17,656 in club memberships; $5,245 in personal tax and estate planning; a $1,431 executive health physical; $15,143 in travel expenses for Company-sponsored events; and an $11,200 matching contribution to the Company’s 401(k) Plan. In addition, Mr. Christopher’s other compensation includes the incremental cost of $21,341 incurred by the Company in connection with Mr. Christopher’s personal use of the Company aircraft, calculated based on the cost of fuel, crew travel, trip-related maintenance and other similar variable costs. Fixed costs, which do not change based on usage, are excluded as the Company’s aircraft is used predominantly for business purposes. (5) Mr. Martin’s other compensation includes $166,382 in restricted stock dividends, including the Special Dividend in respect of shares of restricted stock that were unvested at the time of the Special Dividend was declared and that vested in 2019. Other compensation includes a $8,017 reimbursement of the income tax liabilities associated with certain perquisites; an $11,200 matching contribution to the Company’s 401(k) Plan; $12,356 in travel expenses for Company-sponsored events; and $4,940 in club memberships and personal tax and estate planning. (6) Effective January 1, 2020, Mr. Moss assumed the title of President – New Business Development. (7) Mr. Moss’s other compensation includes $309,183 in restricted stock dividends, including the Special Dividend in respect of shares of restricted stock that were unvested at the time the Special Dividend was declared and that vested in 2019. Other compensation includes a $2,400 executive health physical; an $11,200 matching contribution to the Company’s 401(k) Plan; and $9,250 in personal tax and estate planning. 34 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT EXECUTIVE COMPENSATION TABLES Summary Compensation Table for 2019 (8) Mr. Sigloch’s other compensation includes $230,991 in restricted stock dividends, including the Special Dividend in respect of shares of restricted stock that were unvested at the time of the Special Dividend was declared and that vested in 2019. Other compensation includes an $11,200 matching contribution to the Company’s 401(k) Plan, and $575 in personal tax and estate planning. (9) Mr. Westermeyer was not a NEO in 2017 or 2018. Accordingly, only his compensation for 2019 is listed on this table. (10) Represents a discretionary cash bonus awarded to Mr. Westermeyer in recognition of his outstanding leadership and service. (11) Mr. Westermeyer’s other compensation includes $5,815 in restricted stock dividends, including the Special Dividend in respect of shares of restricted stock that were unvested at the time the Special Dividend was declared and that vested in 2019. Other compensation includes an $11,200 matching contribution to the Company’s 401(k) Plan. Pay Ratio In 2019, the total compensation of Mr. Christopher, our Chief Executive Officer, was $8,064,706, as reported in the “Summary Compensation Table for 2019.” Based on the methodology described below, we determined that the median employee in terms of total 2019 compensation of all of our employees (other than Mr. Christopher) received an estimated $36,709 in total compensation for 2019. Therefore, the estimated ratio of 2019 total compensation of Mr. Christopher to the median employee was 220:1. In general, we offer employees base salary, company retirement plan contributions, the opportunity to receive incentive awards for performance, and other benefits. In accordance with SEC rules, the median employee compensation provided above reflects Company retirement plan contributions, incentive awards for 2019 performance and other benefits, but does not reflect benefits relating to group life or health plans generally available to all salaried employees. To determine median employee compensation, we took the following steps: z We identified our employee population as of December 28, 2019, which consisted of approximately 4,964 employees. z For each employee (other than Mr. Christopher), we determined the sum of his or her base salary for 2019, and incentive awards for 2019. Comparing the sums, we identified an employee whose compensation best reflects the Company employees’ median 2019 compensation, taking into account whether their compensation likely would reflect median employee compensation in future years. z In accordance with SEC rules, we then determined that employee’s 2019 total compensation was $36,709 using the approach required by the SEC when calculating our named executive officers’ compensation, as reported in the Summary Compensation Table. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 35 EXECUTIVE COMPENSATION TABLES 2019 Grants of Plan Based Awards Table — 2019 GRANTS OF PLAN BASED AWARDS TABLE The following table sets forth summary information regarding all grants of plan-based awards made to our named executive officers for the fiscal year ended December 28, 2019. Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) Estimated Future Payouts Under Equity Incentive Plan Awards(2) Name Grant Date Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) All Other Stock Awards: Number of Shares of Stock or Units (#)(3) Grant Date Fair Value of Stock Awards ($) Gregory L. Christopher — 625,000 1,562,500 3,125,000 7/25/2019 — — — Jeffrey A. Martin — 140,566 351,416 702,832 8/8/2019 — — — Nicholas W. Moss — 140,581 351,452 702,904 8/8/2019 — — — Steffen Sigloch — 122,071 305,177 610,353 8/8/2019 — — — Gary Westermeyer — 79,067 197,668 296,503 8/8/2019 — — — — — — — — — — — — — — 66,000 — 6,000 — 10,000 — 10,000 — 5,000 — — — — — — — — — — — — 70,000 4,168,400 — — 12,000 490,770 — — 10,000 545,300 — — 13,000 627,095 — — 5,000 272,650 (1) Represents annual cash incentive awards that could have been earned based on performance in 2019. These columns show awards that were possible at the threshold, target and maximum levels of performance for each NEO in 2019, determined by multiplying each named executive officer’s actual base salary paid during 2019, by the named executive officer’s incentive grade level factor, and then by a performance factor of 40% for the threshold level (for 80% achievement of the applicable performance criteria), 100% for the target level (for 100% achievement of the applicable performance criteria), capped at 200% (or, in the case of Mr. Westermeyer, 150%) for the maximum level (for 120% achievement of the applicable performance criteria). (2) Shares of performance-based restricted stock will vest 100% on February 28, 2024, conditioned upon the Company’s achievement of a 3.5% compounded annual growth rate in total shareholder return or diluted earnings per share over the reference period (December 30, 2018 to the last day of the 2023 fiscal year) and are subject to earlier vesting in connection with a change in control or a termination of employment due to death, disability or a qualifying retirement (subject, in the case of a qualifying retirement, to achievement of the performance criteria, measured through the last day of the fiscal year preceding the year in which such qualifying retirement occurs). Amounts reported represent the target (which also represents the threshold and maximum) number of performance-based shares of restricted stock that have the potential to vest pursuant to the foregoing vesting schedule. (3) Shares of time-based restricted stock will vest 30% on each of July 30, 2022 and July 30, 2023, and 40% on July 30, 2024 (or in the case of Mr. Westermeyer, 100% on July 30, 2024). They are subject to earlier vesting in connection with a change in control, or a termination of employment due to death or disability. Mr. Christopher’s grants also vest upon a termination of employment without cause or resignation for good reason. Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards Table Employment Agreement with Mr. Christopher On March 15, 2018, we entered into an indefinite term employment agreement (the “Employment Agreement”) with Mr. Christopher, pursuant to which he will continue to serve as the Company’s Chief Executive Officer, reporting directly to the Board. The Employment Agreement replaced Mr. Christopher’s prior employment agreement and, in so doing, eliminated the “single-trigger” severance to which Mr. Christopher would have been entitled upon the occurrence of a change in control of the Company. The Employment Agreement provides that Mr. Christopher will receive a base salary of not less than $1,100,000 per year and will be eligible to receive an annual bonus award. For each fiscal year, Mr. Christopher’s target annual bonus will be 125% of his base salary upon achievement of target performance levels, and he will be eligible for a maximum annual bonus of 250% of base salary when performance equals or exceeds 125% of the applicable performance objectives. The actual annual bonus payable to Mr. Christopher will be based upon the actual level of achievement of annual Company and individual performance objectives for the applicable year, as determined by the Committee. In addition, during the term of Mr. Christopher’s employment, the Company will maintain a term life insurance policy for him with a face value of at least $5 million, and Mr. Christopher will have the right to name the beneficiary of such term life insurance policy. In the event that Mr. Christopher’s employment is terminated for any reason (other than by the Company for “cause” (as defined in the Employment Agreement)), he will, subject to his execution of a general release in favor of the Company and his continued compliance with certain restrictive covenants (the “Conditions”), be entitled to receive the following: (i) any accrued but unpaid compensation and benefits; (ii) any unpaid annual bonus with 36 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT EXECUTIVE COMPENSATION TABLES 2019 Grants of Plan Based Awards Table respect to the previously completed fiscal year; (iii) subject to achievement of the applicable performance objectives for the fiscal year in which the termination occurs, payment of a prorated annual bonus for such fiscal year; and (iv) continued medical, dental and hospitalization coverage (or payment in lieu of coverage if coverage is not permitted by applicable law or the terms of the applicable plan) for Mr. Christopher, his spouse and covered dependents until the latest of Mr. Christopher’s 70th birthday, his spouse’s 70th birthday, and the 3rd anniversary of such termination. Additionally, if Mr. Christopher’s employment is terminated by the Company without “cause” or by Mr. Christopher for “good reason” (as defined in the Employment Agreement), and there has not been a “change in control” (as defined in the Employment Agreement) in the past 24 months, Mr. Christopher will, subject to the Conditions, be entitled to (i) continued payment of his base salary for 36 months; and (ii) an amount equal to 3 times Mr. Christopher’s target annual bonus in respect of the fiscal year in which such termination occurs (or prior fiscal year, if greater), such amount to be paid in equal installments over the 3 -year period following such termination at the same time such amounts would otherwise have been paid had no termination occurred. If Mr. Christopher’s employment is terminated by the Company without “cause” or by Mr. Christopher for “good reason” within 24 months of a “change in control,” Mr. Christopher will, subject to the Conditions, be entitled to (i) payment of his base salary for 36 months in a lump sum on the first regularly-scheduled payroll date following the 60th day following such termination; and (ii) an amount equal to 3 times Mr. Christopher’s target annual bonus in respect of the fiscal year in which such termination occurs (or prior fiscal year, if greater), paid in a lump sum on the first regularly-scheduled payroll date following the 60th day following such termination. The Employment Agreement does not provide for any “single-trigger” severance payments or benefits. The Employment Agreement does not provide any gross-up or tax assistance on the severance benefits. Instead, the Employment Agreement contains a “modified cutback” provision, which would act to reduce the benefits payable to Mr. Christopher to the extent necessary to avoid a “golden parachute excise tax,” but only if such reduction would result in Mr. Christopher retaining a larger after-tax amount. Mr. Christopher is subject to certain restrictive covenants during the term of his employment and thereafter, including customary non-compete restrictions that apply for one year post-termination and customary non-solicitation restrictions with respect to current and prospective employees that apply for one year post- termination. In addition, during the term of his employment and for one year thereafter, Mr. Christopher is prohibited from contacting any customer or prospective customer of the Company, or any representative of the same, for the purpose of providing any service or product competitive with any service or product sold or provided by the Company. Change in Control Agreements with Mssrs. Martin, Moss and Sigloch On July 26, 2016, the Company entered into change in control agreements with certain key members of the management team, including Messrs. Martin, Moss and Sigloch. Pursuant to those agreements, if, upon or within two years following a “change in control”, the executive’s employment is terminated by the Company without “cause” (other than on account of death or Disability), or by the executive for “good reason”, subject to execution of a general release of claims, the executive will be entitled to: (i) an amount equal to two times the executive’s base salary (as in effect immediately prior to the change in control or, if greater, the date of such termination); and (ii) an amount equal to two times the average annual bonus paid to the executive (including, for this purpose only, any amounts deferred) in respect of the three calendar years immediately preceding the calendar year in which the change in control occurs (or the three calendar years immediately preceding the calendar year of such termination, if greater). The terms “change in control” and “cause” are defined in the 2014 Incentive Plan and the term “good reason” is defined in each executive’s change in control agreement. The agreements also provide that for two years following termination under the circumstances described above, each of Messrs. Martin, Moss and Sigloch will receive (subject to the executive’s election of COBRA continuation coverage under the Company’s group health plan) continued coverage under the Company’s group health plan at the Company’s cost (or at the direction of the Company, reimbursement for COBRA premiums) for two years following such termination. We are not party to an employment or change in control agreement with Mr. Westermeyer. 2019 and 2014 Incentive Plans In 2019, we maintained the 2019 Incentive Plan and 2014 Incentive Plan (together, the “Plans”), which were approved by our stockholders at our Annual Meetings held in May 2019 and May 2014 respectively. The Committee administers the Plans and is authorized to, among other things, designate participants, grant awards, including cash-based awards that historically were intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code, determine the number of shares of Common Stock to be covered by awards and determine the terms and conditions of any awards, and construe and interpret the Plans and award agreements issued pursuant thereto. The 2014 Incentive Plan reserved 1,500,000  shares of our Common Stock for issuance, subject to adjustment in the event of any change in the outstanding Common Stock or the capital structure of the Company or any other similar corporate transaction or event. The 2019 Plan reserved 2,000,000 shares of our Common Stock for issuance, subject to adjustments under similar circumstances. A previously authorized 2009 Incentive Plan expired in February 2019. No remaining shares are authorized to be issued under that 2009 Incentive Plan. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 37 EXECUTIVE COMPENSATION TABLES Outstanding Equity Awards at Fiscal 2019 Year-End — OUTSTANDING EQUITY AWARDS AT FISCAL 2019 YEAR-END The following table sets forth summary information regarding the outstanding equity awards held by our named executive officers as of December 28, 2019. Option Awards(1) Stock Awards Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) Market Value of Shares or Units of Stock That Have Not Vested ($) — — — — — — — — — — — — — — — — — — — — 25,600 812,800 42,000 1,333,500 60,000 1,905,000 70,000 2,222,500 70,000 2,222,500 8,800 — 10.01 07/23/2020 — — Name Gregory L. Christopher(3) Jeffrey A. Martin Nicholas W. Moss Steffen Sigloch Grant Date 07/24/2015 07/28/2016 07/27/2017 07/26/2018 07/25/2019 07/23/2010 07/25/2014 (4) 07/24/2015(6) 07/28/2016 (7) 07/27/2017(8) 07/26/2018 (9) 08/08/2019 (10) 07/24/2015(6) 07/28/2016 (7) 07/27/2017 (8) 07/26/2018 (9) 08/08/2019 (10) 07/25/2014(4) 07/24/2015(6) 07/28/2016(7) 07/27/2017(8) 07/26/2018(9) 08/08/2019 (10) Gary Westermeyer 07/25/2014 07/24/2015 11/22/2016 (7) 07/27/2017 (8) 07/26/2018 (9) 08/08/2019 (10) 07/23/2010 24,445 — 10.01 07/23/2020 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 6,111 3,667 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 23.56 07/25/2014 2,444 26.52 07/24/2025 — — — — — — — — — — — — 7,000 222,250 10,600 336,550 7,000 222,250 10,000 12,000 12,000 — 10,000 16,100 21,000 18,000 10,000 317,500 381,000 381,000 — 317,500 511,175 666,750 571,500 317,500 9,000 285,750 15,400 10,500 15,000 15,000 13,000 — — 3,400 3,000 4,000 5,000 488,950 333,375 476,250 476,250 412,750 — — 107,950 95,250 127,000 158,750 — 10,000 8,000 50,000 66,000 — — — 8,000 7,000 6,000 6,000 — — 4,000 4,000 4,000 10,000 — — 12,000 10,000 10,000 10,000 — — — 3,000 3,000 5,000 — 317,500 254,000 1,587,500 2,095,500 — — — 254,000 222,250 190,500 190,500 — — 127,000 127,000 127,000 317,500 — — 381,000 317,500 317,500 317,500 — — — 95,250 95,250 158,750 (1) The options granted to Messrs. Martin and Moss in 2010 are fully vested. The options granted to Mr. Westermeyer in 2014 are fully vested, and of those granted to him in 2015, 2,444 are scheduled to vest on July 24, 2020. All outstanding vested options are exercisable until they expire on the tenth anniversary of the grant date, subject to earlier cancellation. All outstanding options were adjusted in March 2017 due to payment of the Special Dividend. The amount of outstanding options and the exercise prices shown in the above table are post-adjustment. 38 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT EXECUTIVE COMPENSATION TABLES 2019 Stock Vested and Options Exercised (2) Shares of performance-based restricted stock are conditioned upon the Company’s achievement of a 3.5% compounded annual growth rate in total stockholder return or diluted earnings per share over a defined reference period, and subject to earlier vesting in connection with a change in control or a termination of employment due to death, disability or a qualifying retirement (subject, in the case of a qualifying retirement, to achievement of the performance criteria, measured through the last day of the fiscal year preceding the year in which such qualifying retirement occurs). For the performance- based restricted stock granted to these executives on July 28, 2016, the vesting date is February 28, 2022, and the reference period is December 26, 2015, to the last day of the 2021 fiscal year. For the performance-based restricted sock granted to these executives on July 27, 2017, the vesting date is February 28, 2023, and the reference period is December 31, 2016, to the last day of the 2022 fiscal year. For the performance-based restricted stock granted to these executives on July 26, 2018, the vesting date is February 28, 2023, and the reference period is December 30, 2017, to the last day of the 2022 fiscal year. For the performance-based restricted stock granted to these executives on August 8, 2019 (or in the case of Mr. Christopher, July 25, 2019), the vesting date is February 28, 2024, and the reference period is December 30, 2018, to the last day of the 2023 fiscal year. (3) Shares of restricted stock will vest either (i) 20% per year on each of the first five anniversaries of the date of grant, or (ii) 30% on each of the third and fourth anniversaries of the vesting commencement date (July 30, 2015, July 30, 2016, July 30, 2017, July 30, 2018, or July 30, 2019, as the case may be), and 40% on the fifth anniversary of the vesting commencement date, in each case, subject to earlier vesting in connection with a change in control or a termination of employment due to death, disability, by us without cause or by Mr. Christopher for good reason. (4) Shares of restricted stock will vest either (i) 20% per year on each of the first five anniversaries of the date of grant, or (ii) 100% on December 31, 2020, subject to earlier vesting in connection with a change in control or a termination of employment due to death or disability. (5) Shares of restricted stock will vest 20% per year on each of the first five anniversaries of the date of grant, subject to earlier vesting in connection with a change in control or a termination of employment due to death or disability. (6) Shares of restricted stock will vest either (i) 30% on each of the third and fourth anniversaries of the vesting commencement date (July 30, 2015), and 40% on the fifth anniversary of the vesting commencement date, or (ii) 100% on December 31, 2021, subject to earlier vesting in connection with a change in control or a termination of employment due to death, or disability. (7) Shares of restricted stock will vest 30% on each of the third and fourth anniversaries of the vesting commencement date (July 30, 2016), and 40% on the fifth anniversary of the vesting commencement date, subject to earlier vesting in connection with a change in control or a termination of employment due to death, or disability. (8) Shares of restricted stock will vest 30% on each of the third and fourth anniversaries of the vesting commencement date (July 30, 2017), and 40% on the fifth anniversary of the vesting commencement date, subject to earlier vesting in connection with a change in control or a termination of employment due to death, or disability. (9) Shares of restricted stock will vest 30% on each of the third and fourth anniversaries of the vesting commencement date (July 30, 2018), and 40% on the fifth anniversary of the vesting commence date, subject to earlier vesting in connection with a change in control or a termination of employment due to death or disability. (10) Shares of restricted stock will vest 30% on each of July 30, 2022, and July 30, 2023, and 40% on July 30, 2024, subject to earlier vesting in connection with a change in control or a termination of employment due to death or disability. — 2019 STOCK VESTED AND OPTIONS EXERCISED The following table sets forth the value realized by each of our named executive officers as a result of the vesting of restricted stock and exercise of stock options during the fiscal year ended December 28, 2019. Name Gregory L. Christopher Jeffrey A. Martin Nicholas W. Moss Steffen Sigloch Gary Westermeyer Option Awards Stock Awards Number of Shares Acquired on Exercise (#) Value Realized on Exercise ($)(1) Number of Shares Acquired on Vesting (#) — 5,899 — — — — 164,593 — — — 50,000 16,320 30,434 22,696 600 Value Realized on Vesting ($)(2) 1,518,500 429,251 843,070 614,235 18,222 (1) The amounts shown in the Value Realized on Exercise Column equals the number of options exercised multiplied by the market value of the Company’s stock on the exercise date less the option exercise price. (2) The amounts shown in the Value Realized on Vesting Column equal the number of shares vested multiplied by the market value of the Company’s stock on the vesting date. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 39 EXECUTIVE COMPENSATION TABLES Potential Payments Upon Termination of Employment or Change in Control as of the End of 2019 — POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL AS OF THE END OF 2019 Pursuant to the employment agreement with our Chief Executive Officer, and the equity award and change in control agreements with our other named executive officers, upon a change in control or certain terminations of employment, our named executive officers are entitled to payments of compensation and benefits and/or accelerated vesting of equity awards, in each case as described below. The table below reflects the amount of compensation and benefits payable to each named executive officer in the event of (i) a change in control, (ii) an involuntary termination without cause or a resignation for good reason (specifically, for Messrs. Martin, Moss, and Sigloch, the occurrence of such a termination upon or within two years following a change in control), and (iii) a termination by reason of death or disability. The named executive officers are not entitled to any payments in connection with a termination for cause. The amounts shown assume the applicable triggering event occurred on December 28, 2019, and are estimates of the amounts that would be paid to the named executive officers upon the occurrence of such triggering event. Name Gregory L. Christopher Triggering Event Salary & Bonus ($) Termination Without Cause or for Good Reason 10,468,750 (1) Termination Due to Death or Disability 2,031,250 (2) Accelerated Vesting of Equity Awards ($) Total ($) 9,419,293 (4) 20,205,467 13,673,793 (4) 16,022,467 Benefits ($) 317,424 (3) 317,424 (3) Change in Control Termination Without Good Reason Jeffrey A. Martin Termination Without Cause or for Good Reason following a Change in Control Termination Due to Death or Disability Change in Control Nicholas W. Moss Termination Without Cause or for Good Reason following a Change in Control Termination Due to Death or Disability Change in Control Steffen Sigloch Termination Without Cause or for Good Reason following a Change in Control Termination Due to Death or Disability Change in Control Gary Westermeyer Termination Without Cause or for Good Reason following a Change in Control Termination Due to Death or Disability Change in Control — — — 13,673,793 (4) 13,673,793 317,424 (3) — 317,424 1,526,211 (5) 36,886 (5) 3,079,518 (4) 4,642,616 — — — — 3,079,518 (4) 3,079,518 3,079,518 (4) 3,079,518 1,426,679 (5) 50,313 (5) 3,424,179 (4) 4,901,171 — — — — 3,424,179 (4) 3,424,179 3,424,179 (4) 3,424,179 1,282,431 (5) 36,886 (5) 4,326,319 (4) 5,645,636 — — — — — — — — — — 4,326,319 (4) 4,326,319 4,326,319 (4) 4,326,319 965,285 (4) 965,285 965,285 (4) 965,285 (4) 965,285 965,285 (1) (2) (3) (4) (5) Includes the value of continuation of base salary and annual incentive compensation (determined based upon Mr. Christopher’s 2019 target bonus) for three years post-termination. Also includes the value of a pro-rata bonus for the year of termination, determined based on actual performance, which is payable upon a termination for any reason (other than by the Company for cause). The pro-rata bonus amount listed represents Mr. Christopher’s 2019 bonus paid pursuant to our 2019 annual incentive program. If Mr. Christopher is terminated without cause or resigns for good reason during the 24 month period following a change in control, the amounts will be paid in a lump sum within 60 days following termination. Includes the value of a pro-rata bonus for the year of termination. The pro-rata bonus amount listed represents Mr. Christopher’s 2019 bonus paid pursuant to our 2019 annual incentive program. Includes the value of continued participation in the Company’s benefit plans following termination of employment until Mr. Christopher’s spouse’s 70th birthday, which Mr. Christopher is entitled to following a termination for any reason (other than by the Company for cause). Includes the value of accelerated vesting of unvested shares of restricted stock as of December 28, 2019, based on a per share value of $31.75. Unvested shares of restricted stock granted to NEOs will vest automatically in connection with a termination due to death or disability or a change in control. Mr. Christopher is also entitled to accelerated vesting of certain of his awards upon an involuntary termination without cause or a resignation for good reason. Payments to which named executive officers are entitled upon the accelerated vesting of restricted stock included payments associated with declared dividends and interest. Includes the value of: (i) two times the executive’s base salary as in effect on December 28, 2019; (ii) two times the average annual bonus actually paid to the executive for the three calendar years preceding December 28, 2019; and (iii) the value of continued participation in Company’s group health plan for a period of two years. All amounts are payable on an involuntary termination without cause or upon a resignation by the executive for good reason that occurs upon or within two years following a change in control. Messrs. Martin, Moss, and Sigloch are not entitled to any amounts in connection with such an involuntary termination that occurs outside of this two-year, post-change in control window. 40 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z PRINCIPAL STOCKHOLDERS As of March 20, 2020, the following parties were known by the Company to be the “beneficial owner” of more than five percent of the Common Stock: Name and Address of Beneficial Owner Shares Beneficially Owned Percent of Class Blackrock, Inc. 55 East 52nd Street New York, NY 10055 GAMCO Investors, Inc. One Corporate Center Rye, NY 10580 The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 Wells Fargo & Company 420 Montgomery Street San Francisco, CA 94163 Wellington Management Group LLP 280 Congress Street Boston, MA 02210 8,493,358(1) 14.9%(2) 6,388,750(3) 11.2%(2) 5,799,081(4) 10.2%(2) 3,240,066(5) 5.7%(2) 3,121,354(6) 5.5%(2) (1) This information is based on a Schedule 13G/A filed by BlackRock, Inc. with the Securities and Exchange Commission (“SEC”) on February 4, 2020. BlackRock filed this Schedule 13G/A on its own behalf and on behalf of certain of its subsidiaries. The Schedule 13G/A reported that BlackRock has sole voting and dispositive power with respect to 8,366,446 and 8,493,358, respectively, of the shares shown. The Schedule 13G/A also reported that BlackRock Fund Advisors owned 5% or greater of the security class being reported on the Schedule 13G/A. (2) The percent of class shown was based on the shares of Common Stock reported on the Schedule 13G/A and the total number of shares outstanding as of December 28, 2019. The difference in the total number of shares outstanding on December 28, 2019 and March 20, 2020 does not materially affect the percentage of ownership of the class. (3) This information is based on a Schedule 13D/A filed by GAMCO Investors Inc. (“GBL”) and certain of its affiliates (collectively, the “Gabelli Reporters”) on October 27, 2016. The Schedule 13D/A reported that GAMCO Asset Management, Inc. (“GAMCO”) beneficially owns 4,144,650 of the shares reported; Gabelli Funds, LLC (“Gabelli Funds”) beneficially owns 2,142,100 of the shares reported; GGCP, Inc. beneficially owns 15,000 of shares reported; Mario J. Gabelli (“Gabelli”) beneficially owns 73,500 of the shares reported; Gabelli Foundation, Inc. beneficially owns 8,000 of the shares reported; MJG Associates, Inc. beneficially owns 1,000 of the shares reported; Associated Capital Group, Inc. beneficially owns 4,000 of the shares reported; and Gabelli Securities, Inc. beneficially owns 500 of the shares reported. In addition, the Schedule 13D/A reported that each Gabelli Reporter (and certain executives, directors and other related persons as disclosed on the Schedule 13D/A) has the sole power to vote or direct the vote and sole power to dispose or to direct the disposition of the Common Stock reported for it, either for its own benefit or for the benefit of its investment clients or its partners, as the case may be, except that (i) GAMCO does not have authority to vote 246,176 of the reported shares, (ii) Gabelli Funds, a wholly-owned subsidiary of GBL, has sole dispositive and voting power with respect to the shares of the Company held by certain funds (the “Funds”) for which it provides advisory services, so long as the aggregate voting interest of all joint filers does not exceed 25% of their total voting interest in the Company and, in that event, the Proxy Voting Committee of each Fund shall respectively vote that Fund’s shares, (iii) at any time, the Proxy Voting Committee of each such Fund may take and exercise in its sole discretion the entire voting power with respect to the shares held by such fund under special circumstances such as regulatory considerations, and (iv) the power of Gabelli, Associated, GBL, and GGCP is indirect with respect to Common Stock beneficially owned directly by other Gabelli Reporters. (4) This information is based on a Schedule 13G/A filed by The Vanguard Group, Inc. (“VGI”) with the SEC on February 12, 2020. According to the Schedule 13G/A, VGI has sole voting and dispositive power with respect to 87,365 and 5,704,741, respectively, of the shares shown. VGI also has shared voting power with respect to 13,213 of the shares shown, and shared dispositive power with respect to 94,340 of the shares shown. In addition, the Schedule 13G/A reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of VGI, is the beneficial owner of 81,127 of the shares shown as a result of its serving as investment manager of collective trust accounts. The Schedule 13G/A also reported that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of VGI, is the beneficial owner of 19,451 of the shares shown as a result of its serving as investment manager of Australian investment offerings. (5) This information is based on a Schedule 13G filing by Wells Fargo & Company on February 4, 2020. Wells Fargo filed this Schedule 13G on its own behalf and on behalf of certain of its subsidiaries. The Schedule 13G reported that Wells Fargo has sole voting and dispositive power with respect to 73,653 of the shares shown. The Schedule 13G also reported that Wells Fargo has shared voting and shared dispositive power with respect to 440,167 and 3,166,413, respectively, of the shares shown. Further, the Schedule 13G reported that Wells Capital Management Incorporated owned 5% or greater of the security class being reported on the Schedule 13G. (6) This information is based on a Schedule 13G/A filing by Wellington Management Group, LLP, in its capacity as an investment advisor on January 28, 2020. According to the Schedule 13G/A, Wellington has shared voting and dispositive power with respect to 2,799,996 and 3,121,354, respectively, of the shares shown. In addition, the Schedule 13G/A reported that the securities as to which the Schedule 13G/A relates are owned of record by clients of one or more Wellington-affiliated investment advisers directly, or indirectly owned by Wellington. The Schedule 13G/A discloses that (i) those clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities and (ii) no client is known to have such right or power with respect to more than five percent of this class of securities. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 41  z BENEFICIAL OWNERSHIP OF COMMON STOCK BY INSIDERS The following table sets forth, as of the close of business on March  20, 2020, information about the 1,634,107 shares of Common Stock (calculated based on 56,754,990 shares outstanding) beneficially owned by each of the Company’s current directors, nominees for director, executive officers and named executive officers. The “named executive officers” are those individuals set forth in the “Summary Compensation Table for 2019” included herein. Unless otherwise indicated, all directors, nominees for director, executive officers and named executive officers have sole voting and investment power with respect to the shares of Common Stock reported. The table and the accompanying footnotes set forth the foregoing persons’ current positions with the Company, principal occupations and employment over the preceding five years, age and directorships held in certain other publicly-owned companies. Principal Occupation, Employment, etc. Chairman and Chief Executive Officer Gregory L. Christopher(1) Independent Directors Elizabeth Donovan(2) Paul J. Flaherty(3) Gennaro J. Fulvio(4) Gary S. Gladstein(5) Scott J. Goldman(6) John B. Hansen(7) Terry Hermanson(8) Charles P. Herzog, Jr.(9) Section 16 Officers Devin Malone President - Streamline since January 1, 2019; age 38(10) Jeffrey A. Martin Chief Financial Officer and Treasurer since February 14, 2013; age 53(11) Common Stock Beneficially Owned as of March 20, 2020 Percent of Class 686,458 1.2% 9,000 56,406 58,754 154,296 49,744 80,885 43,126 23,024 25,617 154,956 * * * * * * * * * * Mark Millerchip — — Executive Director – European Operations since May 28, 2010; age 53(12) Christopher J. Miritello Vice President, General Counsel and Secretary since January 1, 2017; age 37(13) Christopher A. Mitchell President – Brass & Aluminum since January 1, 2020; age 46(14) Steffen Sigloch Chief Manufacturing Officer since May 4, 2017; age 51(15) Anthony J. Steinriede Vice President – Corporate Controller since April 23, 2015; age 43(16) Gary Westermeyer President – Refrigeration of the Company since May 4, 2017; age 55(17) 30,201 18,000 170,470 24,781 48,389 * * * * * SECTION 16 OFFICERS AND DIRECTORS AS A GROUP 1,634,107 2.9%** * ** Less than 1% Includes 244,686 shares of Common Stock which are subject to currently exercisable stock options and 715,700 shares of non-vested restricted stock held by executive officers and directors of the Company. 42 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT BENEFICIAL OWNERSHIP OF COMMON STOCK BY INSIDERS (1) The number of shares of Common Stock beneficially owned by Mr. Christopher includes (i) 401,600 shares of non-vested restricted stock, (ii) 123,500 shares owned by a trust in which his wife is beneficiary, (iii) 83,500 shares owned by a trust in which he is beneficiary and (iv) 6,800 shares of Common Stock which are owned by Mr. Christopher’s children. (2) The number of shares of Common Stock beneficially owned by Ms. Donovan includes (i) 6,000 shares of Common Stock which are subject to currently exercisable stock options, (ii) 1,000 shares of Common stock which are owned by Ms. Donovan’s spouse and (iii) 2,000 shares of non-vested restricted stock. (3) The number of shares of Common Stock beneficially owned by Mr. Flaherty includes (i) 41,333 shares of Common Stock which are subject to currently exercisable stock options and (ii) 2,000 shares of non-vested restricted stock. (4) The number of shares of Common Stock beneficially owned by Mr. Fulvio includes (i) 31,555 shares of Common Stock which are subject to currently exercisable stock options, (ii) 25,199 shares of Common Stock which are owned by Mr. Fulvio’s spouse and (iii) 2,000 shares of non-vested restricted stock. On June 27, 2017, pursuant to an Offer of Settlement, and without admitting or denying the findings contained therein, the PCAOB issued an Order Instituting Disciplinary Proceedings, Making Findings and Imposing Sanctions against Fulvio & Associates LLP (the “Firm”), Mr. Fulvio and certain other named affiliates of the Firm (collectively, “Respondents”) for Respondents’ having allegedly “violated PCAOB rules and standards in connection with their audit and examination engagement for a broker-dealer client, for the fiscal year ending June 30, 2014.” See PCAOB Release No. 105-2017-029 dated June 27, 2017. The Firm is currently registered with the PCAOB, and Mr. Fulvio may participate in audits pursuant to PCAOB standards. (5) The number of shares of Common Stock beneficially owned by Mr. Gladstein includes (i) 41,333 shares of Common Stock which are subject to currently exercisable stock options and (ii) 2,000 shares of non-vested restricted stock. (6) The number of shares of Common Stock beneficially owned by Mr. Goldman includes (i) 36,444 shares of Common Stock which are subject to currently exercisable stock options and (ii) 2,000 shares of non-vested restricted stock. (7) The number of shares of Common Stock beneficially owned by Mr. Hansen includes (i) 21,778 shares of Common Stock which are subject to currently exercisable stock options, (ii) 15,000 shares of Common Stock owned by a trust where his wife and children serve as beneficiaries and (iii) 2,000 shares of non-vested restricted stock. (8) The number of shares of Common Stock beneficially owned by Mr. Hermanson includes (i) 12,000 shares of Common Stock which are subject to currently exercisable stock options and (ii) 2,000 shares of non-vested restricted stock. (9) The number of shares of Common Stock beneficially owned by Mr. Herzog includes (i) 10,000 shares of Common Stock which are subject to currently exercisable stock options, (ii) 5,000 shares of Common Stock owned by a trust of which Mr. Herzog’s children are beneficiaries; (iii) 2,000 shares of Common Stock owned by a trust of which Mr. Herzog’s spouse is the beneficiary, and (iv) 2,000 shares of non-vested restricted stock. (10) Mr. Malone served (i) as Director of Marketing – Copper Tube and Line Sets from January 1, 2013 until February 3, 2015, (ii) as General Manager of Howell Metal Company from February 3, 2015 until July 4, 2017, and (iii) as Vice President-General Manager of Streamline from July 4, 2017 until January 1, 2019. The number of shares of Common Stock beneficially owned by Mr. Malone includes (i) 5,866 shares of Common Stock which are subject to currently exercisable stock options, and (ii) 19,300 shares of non-vested restricted stock. (11) Mr. Martin served (i) as Interim Chief Financial Officer of the Company from October 26, 2012 until February 14, 2013, (ii) as Vice President - Corporate Development of the Company from January 11, 2011 until October 26, 2012, (iii) as Vice President-Finance & Corporate Development from August 1, 2008 until January 11, 2011, and (iv) as Vice President-Operations, Standard Products Division prior to August 1, 2008. The number of shares of Common Stock beneficially owned by Mr. Martin includes (i) 8,800 shares which are subject to currently exercisable stock options, (ii) 60,556 shares of Common Stock owned jointly between Mr. Martin and his wife and (iii) 85,600 shares of non-vested restricted stock. (12) Mr. Millerchip served as Managing Director – Mueller Primaflow Limited prior to May 28, 2010. (13) Mr. Miritello served as Deputy General Counsel of the Company from September 15, 2015 to December 31, 2016. Prior to joining the Company, he was associated with the New York office of Willkie Farr & Gallagher LLP. The number of shares of Common Stock owned by Mr. Miritello includes (i) 8,800 shares of Common Stock which are subject to currently exercisable stock options and (ii) 20,900 shares of non-vested restricted stock. (14) Mr. Mitchell served (i) as Vice President-General Manager of Great Lakes Copper, Inc. (n/k/a Great Lakes Copper Ltd.) from July 1, 2013 until January 1, 2019 and (ii) as President – Canadian Operations from January 1, 2019 until October 22, 2019. The number of shares of Common Stock beneficially owned by Mr. Mitchell includes 18,000 shares of non-vested restricted stock. (15) Mr. Sigloch served as (i) President – Piping Systems North America of the Company from May 5, 2016 until May 4, 2017; (ii) President – Extruded Products of the Company from January 1, 2013 until May 5, 2016, (iii) Corporate Vice President – Engineering and Manufacturing of the Company from January 1, 2012 until January 1, 2013, and (iv) Vice President – Engineering and Manufacturing of Mueller Europe, Ltd, from July 1, 2011 until January 1, 2012. Prior to joining the Company on July 1, 2011, Mr. Sigloch served as Chief Executive Officer of Wieland Copper Products, LLC. The number of shares of Common Stock beneficially owned by Mr. Sigloch includes 119,900 shares of non-vested restricted stock. (16) Mr. Steinriede served as (i) Director of Finance at the Company from April 1, 2014 until April 23, 2015, (ii) Assistant Corporate Controller from September 1, 2010 until April 1, 2014, and (iii) Corporate Accounting Manager prior to September 1, 2010. The number of shares of Common Stock beneficially owned by Mr. Steinriede includes (i) 7,333 shares of Common Stock which are subject to currently exercisable stock options and (ii) 8,000 shares of non-vested restricted stock. (17) Mr. Westermeyer previously served as General Manager of Westermeyer Industries, Inc. (WII), a company he established in 2001, and which was acquired by the Company on August 16, 2012. In 2017, he also assumed duties as General Manager of Turbotec Products, Inc., another wholly-owned subsidiary acquired by the Company in 2015. The number of shares of Common Stock beneficially owned by Mr. Westermeyer includes (i) 9,778 shares of Common Stock which are subject to currently exercisable stock options, (ii) 4,319 shares of Common Stock which are beneficially owned by Mr. Westermeyer’s spouse (800 of which are non-vested restricted stock), and (iii) 26,400 shares of non-vested restricted stock. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 43 BENEFICIAL OWNERSHIP OF COMMON STOCK BY INSIDERS Delinquent Section 16(a) Reports — DELINQUENT SECTION 16(a) REPORTS Based solely upon its review of Forms 3 and 4 received by it, and written representations from certain reporting persons about whether any Form 5 filings were required, the Company believes that during 2019, all filing requirements applicable to its officers, directors and ten percent stockholders were complied with, except as follows: z On July 25, 2019, Mr. Hansen completed a transaction in Common Stock requiring a Form 4 report, but a Form 4 report was not timely filed (a Form 4 reporting the transaction was filed on July 30, 2019). z On March 17, 2020, Mr. Westermeyer filed a late Form 4 to report nine quarterly dividend reinvestment transactions that occurred between December 2017 and December 2019, which he discovered had occurred without his knowledge. 44 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z INFORMATION ABOUT VOTING AND THE ANNUAL MEETING When a proxy card is returned properly signed, the shares represented thereby will be voted in accordance with the stockholder’s directions appearing on the card. If the proxy card is signed and returned without directions, the shares will be voted for the nominees named herein and in accordance with the recommendations of the Company’s Board of Directors as set forth herein. A stockholder giving a proxy may revoke it at any time before it is voted at the Annual Meeting by giving written notice to the secretary of the Annual Meeting or by casting a ballot at the Annual Meeting. Votes cast by proxy or in person at the Annual Meeting will be tabulated by election inspectors appointed for the Annual Meeting. The election inspectors will also determine whether a quorum is present. The holders of a majority of the shares of common stock, $.01 par value per share (“Common Stock”), outstanding and entitled to vote who are present either in person or represented by proxy will constitute a quorum for the Annual Meeting. The cost of soliciting proxies will be borne by the Company. In addition to solicitation by mail, directors, officers and employees of the Company may solicit proxies by telephone or otherwise. The Company will reimburse brokers or other persons holding stock in their names or in the names of their nominees for their charges and expenses in forwarding proxies and proxy material to the beneficial owners of such stock. We are providing you with these proxy materials in connection with the solicitation by the Board of Directors of Mueller Industries, Inc. (the “Company”) of proxies for our 2020 Annual Meeting of Stockholders (the “Annual Meeting”), which will be held at 10:00 A.M., Central time on Thursday, May 7, 2020, at our corporate headquarters located at 150 Schilling Boulevard, Collierville, Tennessee 38017, in the second floor conference room. We intend to hold our Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our Annual Meeting website at www.muellerindustries.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting. This Proxy Statement, together with the Company’s Annual Report for the fiscal year ended December 28, 2019, is first being mailed to stockholders on or about April 2, 2020. Pursuant to rules adopted by the Securities and Exchange Commission, the Company is providing access to its proxy materials over the Internet at http://www.proxyvote.com. Record Date: March 20, 2020 — VOTING SECURITIES At the close of business on the Record Date, there were 56,754,990 shares of Common Stock outstanding, which are the only shares entitled to be voted at the Annual Meeting. Each share of Common Stock is entitled to one vote. Only stockholders of record at the close of business on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting. The Company’s Restated Certificate of Incorporation and Amended and Restated By-laws (“Bylaws”) do not provide for cumulative voting for the election of directors. On March 9, 2017, the Company paid a special dividend (the “Special Dividend”) consisting of $3.00 in cash and $5.00 in principal amount of the Company’s 6% Subordinated Debentures due 2027 (the “Debentures”) for each share of Common Stock outstanding as of the close of business on February 28, 2017. In connection with the Special Dividend, in accordance with the Company’s outstanding stock option plans and agreements, the Company adjusted the shares subject to and the per share exercise price with respect to outstanding options. This adjustment resulted in an increase in the number of shares subject to each outstanding option and an adjustment to the option purchase price designed to maintain the option holders’ intrinsic value following issuance of the Special Dividend. References in this Proxy Statement to beneficial stock ownership or outstanding options for periods following March 9, 2017 reflect the equitable adjustment made to options outstanding on February 28, 2017. MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 45 INFORMATION ABOUT VOTINg AND THE ANNUAL MEETINg Stockholder Nominations for Board Membership and Other Proposals for the 2021 Annual Meeting — STOCKHOLDER NOMINATIONS FOR BOARD MEMBERSHIP AND OTHER PROPOSALS FOR THE 2021 ANNUAL MEETING It is anticipated that the next Annual Meeting after the one scheduled for May 7, 2020 will be held on or about May 6, 2021. The Company’s Bylaws require that, for nominations of directors or other business to be properly brought before an Annual Meeting, written notice of such nomination or proposal for other business must be furnished to the Company. Such notice must contain certain information concerning the nominating or proposing stockholder and information concerning the nominee and must be furnished by the stockholder (who must be entitled to vote at the meeting) to the Secretary of the Company, in the case of the Annual Meeting to be held in 2021, no earlier than December 8, 2020 and no later than January 7, 2021. A copy of the applicable provisions of the Bylaws may be obtained by any stockholder, without charge, upon written request to the Secretary of the Company at the address set forth below. In addition to the foregoing, and in accordance with the rules of the SEC, in order for a stockholder proposal, relating to a proper subject, to be considered for inclusion in the Company’s proxy statement and form of proxy relating to the Annual Meeting to be held in 2021, such proposal must be received by the Secretary of the Company by December 3, 2020 in the form required under and subject to the other requirements of the applicable rules of the SEC. If the date of the Annual Meeting to be held in 2021 is changed to a date more than 30 days earlier or later than May 6, 2021, the Company will inform the stockholders in a timely fashion of such change and the date by which proposals of stockholders must be received for inclusion in the proxy materials. Any such proposal should be submitted by certified mail, return receipt requested, or other means, including electronic means, that allow the stockholder to prove the date of delivery. 46 MUELLER INDUSTRIES ● 2020 PROXY STATEMENT  z ADDITIONAL INFORMATION If any matter not described herein should properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by them as they deem appropriate. At the date of this Proxy Statement, the Company knew of no other matters which might be presented for stockholder action at the Annual Meeting. Consolidated financial statements for the Company are included in the Annual Report to Stockholders for the year ended December 28, 2019 that accompanies this Proxy Statement. These financial statements are also on file with the SEC, 100 F Street, N.E., Washington, D.C. 20549 and with the NYSE. The Company’s SEC filings are also available at the Company’s website at www.muellerindustries.com or the SEC’s website at www.sec.gov. A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K AS FILED FOR THE YEAR ENDED DECEMBER 28, 2019 (EXCLUDING EXHIBITS) OR, AS NOTED HEREIN, ANY OF THE COMPANY’S BOARD COMMITTEE CHARTERS, CORPORATE GOVERNANCE GUIDELINES, OR CODE OF ETHICS WILL BE FURNISHED, WITHOUT CHARGE, BY WRITING TO CHRISTOPHER J. MIRITELLO, CORPORATE SECRETARY, MUELLER INDUSTRIES, INC., AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS (150 SCHILLING BOULEVARD, SUITE 100, COLLIERVILLE, TENNESSEE 38017). UPON RECEIPT BY WRITING TO THE FOREGOING ADDRESS, THE COMPANY WILL ALSO FURNISH ANY OTHER EXHIBIT OF THE ANNUAL REPORT ON FORM 10-K UPON ADVANCE PAYMENT OF THE REASONABLE OUT-OF-POCKET EXPENSES OF THE COMPANY RELATED TO THE COMPANY’S FURNISHING OF SUCH EXHIBIT. — NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2020 ANNUAL MEETING TO BE HELD ON MAY 7, 2020 The Proxy Statement and Annual Report are available at: http://www.proxyvote.com You will need the Control Number included on your proxy card. For the date, time, and location of the Annual General Meeting, please refer to “Solicitation of Proxies.” For information on how to attend and vote in person at the Annual General Meeting, an identification of the matters to be voted upon at the Annual General Meeting and the Board’s recommendations regarding those matters, please refer to “Solicitation of Proxies,” “Election of Directors,” “Appointment of Independent Registered Accounting Firm”, and “Approval of the Compensation of the Company’s Named Executive Officers.” — HOUSEHOLDING OF ANNUAL MEETING MATERIALS The SEC has enacted a rule that allows multiple investors residing at the same address the convenience of receiving a single copy of annual reports, proxy statements, prospectuses and other disclosure documents if they consent to do so. This is known as “Householding.” Please note, if you do not respond, Householding will start 60 days after the mailing of this notice. We will allow Householding only upon certain conditions. Some of those conditions are: z You agree to or do not object to the Householding of your materials, z You have the same last name and exact address as another investor(s). If these conditions are met, and SEC regulations allow, your household will receive a single copy of annual reports, proxy statements, prospectuses and other disclosure documents. You may revoke a prior Householding consent at any time by contacting Broadridge, either by calling toll-free at (800) 542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717. We will remove you from the Householding program within 30 days of receipt of your response, following which you will receive an individual copy of our disclosure document. By order of the Board of Directors Christopher J. Miritello Corporate Secretary MUELLER INDUSTRIES ● 2020 PROXY STATEMENT 47 This page intentionally left blank 2019 FORM 10-K This page intentionally left blank 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 28, 2019 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) 25-0790410 (I.R.S. Employer Identification No.) 150 Schilling Boulevard Collierville Suite 100 Tennessee (Address of principal executive offices) 38017 (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 Common Stock, $0.01 Par Value Trading Symbol MLI Name of each exchange on which registered New York Stock Exchange Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No 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 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 No Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes 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. 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer Emerging growth company Accelerated filer Smaller reporting company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No 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 $1,597,828,319. The number of shares of the Registrant’s common stock outstanding as of February 21, 2020 was 56,995,167 excluding 23,187,837 treasury shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following document are incorporated by reference into this Report: Registrant’s Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders, scheduled to be mailed on or about March 26, 2020 (Part III). 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 Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Part I Part II Part III Part IV Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Item 15. Item 16. Exhibits, Financial Statement Schedules Form 10-K Summary Signatures Index to Consolidated Financial Statements 2 Page 3 6 9 10 11 11 12 15 15 15 15 16 16 19 19 19 19 20 20 21 23 24 F-1 PART I ITEM 1. BUSINESS Introduction Mueller Industries, Inc. (the Company) is a leading manufacturer of copper, brass, aluminum, and plastic products. The range of products we manufacture is broad: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; fabricated tubular products; pressure vessels; steel nipples; and insulated flexible duct systems. We also resell brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets, and plumbing specialty products. Our operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China. The Company was incorporated in Delaware on October 3, 1990. Each of our reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered. These are the Piping Systems, Industrial Metals, and Climate segments. 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 3 – Segment Information” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference. New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air- conditioning (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. In addition, our products are used in various transportation, automotive, and industrial applications. Piping Systems Segment The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper (Great Lakes), Pexcor Manufacturing Company and Heatlink Group Inc. (collectively, Heatlink Group), Die-Mold Tool Limited (Die-Mold), European Operations, Trading Group, and Jungwoo Metal Ind. Co., LTD (Jungwoo-Mueller). The Domestic Piping Systems Group manufactures copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Our copper tube ranges in size from 1/8 inch to 8 1/8 inch diameter and 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. Our copper fittings, line sets, and related components are produced for the plumbing and heating industry to be used in water distribution systems, heating systems, air-conditioning, and refrigeration applications, and drainage, waste, and vent systems. Great Lakes manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group manufactures a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. European Operations manufactures copper tube in the United Kingdom, which is sold throughout Europe. The Trading Group manufactures steel pipe nipples and resells 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 in North America. Jungwoo-Mueller, our South Korean joint venture, manufactures copper-based joining products that are sold worldwide. We acquired Great Lakes on July 31, 2015, a 60 percent equity interest in Jungwoo-Mueller on April 26, 2016, Heatlink Group on May 31, 2017, and Die-Mold on March 31, 2018. These acquisitions complement our existing copper tube, line sets, copper fittings, and plastics businesses in the Piping Systems segment. We disposed of Jiangsu Mueller-Xingrong Copper Industries Limited (Mueller-Xingrong), the Company’s Chinese joint venture, on June 21, 2017. This business manufactured engineered copper tube primarily for air-conditioning applications in China. 3 The segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs). It markets primarily through its own sales and distribution organization, which maintains sales offices and distribution centers throughout the United States and in Canada, Mexico, Europe, China, and South Korea. 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 Piping Systems segment as of December 28, 2019 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 Wieland 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 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. Industrial Metals Segment The Industrial Metals segment is composed of Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value- Added Products. Brass Rod & Copper Bar Products manufactures a broad range of brass rod, copper bar, and copper alloy shapes, as well as a wide variety of end products including plumbing brass, valves, and fittings sold primarily to OEMs in the industrial, HVAC, plumbing, and refrigeration industries. 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. Impacts & Micro Gauge manufactures cold-form aluminum and copper products for automotive, industrial, and recreational components, as well as high-volume machining of aluminum, steel, brass, and cast iron impacts and castings for automotive applications. It sells its products primarily to OEMs in the U.S., serving the automotive, military ordnance, aerospace, and general manufacturing industries. 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. Brass Value-Added Products manufactures brass and aluminum forgings; brass, aluminum, and stainless steel valves; fluid control solutions; and gas train assembles. Our forgings are used in a wide variety of products, including automotive components, brass fittings, industrial machinery, valve bodies, gear blanks, and computer hardware. Our valves, fluid control systems, and gas train assemblies are used in the compressed gas, pharmaceutical, construction, and gas appliance markets. On June 18, 2015, we acquired Sherwood Valve Products, LLC (Sherwood), which manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets. The acquisition of Sherwood complements our existing brass businesses in the Industrial Metals segment. The segment sells its products primarily to domestic OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets. The total amount of order backlog for the Industrial Metals segment as of December 28, 2019 was not significant. Competitors, primarily in the brass rod market, include Chase Brass and Copper Company LLC, a subsidiary of Global Brass and Copper Holdings, Inc., and others, both domestic and foreign. Climate Segment The Climate segment is composed of Refrigeration Products, Fabricated Tube Products, Westermeyer Industries, Inc. (Westermeyer), Turbotec Products, Inc. (Turbotec), ATCO Rubber Products, Inc. (ATCO), and Linesets, Inc. Refrigeration Products designs and manufactures valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets. Fabricated Tube Products manufactures tubular assemblies and fabrications for OEMs in the 4 HVAC and refrigeration markets. Westermeyer designs, manufactures, and distributes high-pressure components and accessories for the air-conditioning and refrigeration markets. 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. ATCO manufactures and distributes insulated HVAC flexible duct systems. We acquired Turbotec on March 30, 2015 and ATCO on July 2, 2018. These acquisitions complement our existing businesses in the Climate segment. The segment sells its products primarily to OEMs in the HVAC and refrigeration markets in the U.S. The total amount of order backlog for the Climate segment as of December 28, 2019 was not significant. Labor Relations At December 28, 2019, the Company employed approximately 4,964 employees, of which approximately 1,579 were represented by various unions. Those union contracts will expire as follows: Location Port Huron, Michigan (Local 218 IAM) Wynne, Arkansas (MCTP) Port Huron, Michigan (Local 44 UAW) Wynne, Arkansas (B&K LLC) North Wales, Pennsylvania Belding, Michigan Fulton, Mississippi Waynesboro, Tennessee Expiration Date May 7, 2023 November 30, 2024 June 26, 2022 June 28, 2021 July 31, 2021 September 17, 2021 October 2, 2021 November 3, 2021 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 to 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 2020. 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. 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 $1.7 million for 2019, $2.0 million for 2018, and $7.5 million for 2017. The reserve for environmental matters was $20.9 million at December 28, 2019 and $23.6 million at December 29, 2018. Environmental expenses related to non-operating properties are presented below operating income in the Consolidated Statements of Income, and costs related to operating properties are included in cost of goods sold. We currently anticipate that we will need to make expenditures of approximately $2.1 million for compliance activities related to existing environmental matters during the next three fiscal years. 5 For a description of material pending environmental proceedings, see “Note 14 – 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 2019, 2018, or 2017. No material portion of our business involves governmental contracts. Seasonality Our net sales typically moderate in the fourth quarter as a result of the seasonal construction markets and customer shutdowns for holidays, year-end plant maintenance, and physical inventory counts. Also, our working capital typically increases in the first quarter in preparation for the construction season. 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 plastic 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 to mitigate the impact could have a material adverse 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. 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. 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. 6 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. The impact of economic conditions 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 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 South Korean won, could have an adverse impact on our results of operations or financial position. The vote by the United Kingdom (U.K.) to leave the European Union (EU) and implementation of Brexit could adversely affect us. As of January 31, 2020, the U.K. is no longer a member of the EU (Brexit). As a result, we face risks and uncertainty regarding the form and consequences of the implementation of Brexit, including the possibility that the U.K. and the EU could fail to come to an agreement on the terms of the U.K. exit. The U.K. and the EU are currently in negotiations on the terms. Finalized terms are due on December 31, 2020. During this eleven month period, the U.K. will continue to follow all EU rules, and their trading relationship will remain the same. As a result of Brexit, we may be negatively impacted by increased volatility in exchange rates and interest rates and disruptions affecting our relationships with our existing and future customers, suppliers and employees. Brexit and its implementation could also adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations and financial condition. 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 and administrative actions, 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 7 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. We have a number of employees who are 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 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. 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, South Korea, the Middle East, 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. We may be subject to risks relating to our information technology systems. We rely on information technology systems to process, transmit and store electronic information and manage and operate our business. The incidence of cyber attacks, computer hacking, computer viruses, worms, and other disruptive software, denial of service attacks, and other malicious cyber activities are on the rise worldwide. A breach of our information technology systems or those of our commercial partners could expose us, our customers, our suppliers, and our employees to risks of misuse or improper 8 disclosure of data, business information (including intellectual property) and other confidential information. We operate globally, and the legal rules governing data storage and transfers are often complex, unclear, and changing. A breach could also result in manipulation and destruction of data, production downtimes and operations disruptions. Any such breaches or events could expose us to legal liability and adversely affect our reputation, competitive position, business or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 9 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 Piping Systems Segment Building Space (Sq. Ft.) Primary Use Owned or Leased Fulton, MS Wynne, AR New Market, VA Cedar City, UT North Wales, PA Covington, TN Ansonia, CT Phoenix, AZ Lawrenceville, GA Kansas City, MO Bilston, England London, Ontario, Canada Georgetown, Ontario, Canada Calgary, Alberta, Canada Calgary, Alberta, Canada Calgary, Alberta, Canada Monterrey, Mexico Monterrey, Mexico Yangju City, Gyeonggi Province, South Korea 778,065 Manufacturing, Packaging, & Distribution Owned Owned 400,000 Manufacturing & Distribution Owned 413,120 Manufacturing & Distribution Owned 260,000 Manufacturing & Distribution Owned 174,000 Manufacturing Owned 159,500 Manufacturing Manufacturing & Distribution Owned 89,396 Manufacturing Leased 61,000 Leased Manufacturing 42,000 Leased Manufacturing 30,500 Owned 402,500 Manufacturing Owned 200,400 Manufacturing Leased Manufacturing 20,000 Leased Manufacturing 21,117 Leased Manufacturing 20,000 Leased 6,600 Manufacturing Leased 152,000 Manufacturing Leased 132,000 Manufacturing Owned 343,909 Manufacturing Industrial Metals Segment Port Huron, MI Belding, MI Marysville, MI Brooklyn, OH Valley View, OH Brighton, MI Waynesboro, TN Middletown, OH Climate Segment Plainville, GA Fort Worth, TX Cartersville, GA Phoenix, AZ Tampa , FL Crawsfordville, IN Fort Worth, TX Vineland, NJ Sacramento, CA 450,000 Manufacturing 293,068 Manufacturing Manufacturing 81,500 Manufacturing 75,000 Manufacturing & Distribution 65,400 Machining 65,000 Manufacturing 57,000 Manufacturing 55,000 313,835 Manufacturing & Distribution 266,485 Manufacturing 260,924 Manufacturing 250,250 Manufacturing & Distribution 202,614 Manufacturing & Distribution 153,600 Manufacturing & Distribution 153,374 Manufacturing 136,000 Manufacturing & Distribution 121,240 Manufacturing & Distribution 10 Owned Owned Owned Leased Leased Leased Leased Owned Owned Owned Owned Owned Owned Owned Owned Owned Owned Location of Facility Bluffs, IL Fort Worth, TX Hickory, NC Hartsville, TN Houston, TX Carthage, TN Baltimore, MD Springdale, AR Gordonsville, TN Carrollton, TX Guadalupe, Mexico Xinbei District, Changzhou, China Primary Use Building Space (Sq. Ft.) 107,000 Manufacturing 103,125 Manufacturing & Distribution 100,000 Manufacturing Manufacturing 78,000 Manufacturing & Distribution 72,000 Manufacturing 67,520 Manufacturing & Distribution 62,500 Manufacturing & Distribution 57,600 Manufacturing 54,000 Manufacturing 9,230 130,110 Manufacturing Manufacturing 33,940 Owned or Leased Owned Owned Owned Owned Owned Owned Owned Owned Leased Leased Leased 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 14 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 11 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 21, 2020, the number of holders of record of Mueller’s common stock was 674. During fiscal 2018 and 2019, we paid a quarterly cash dividend of $0.10 per share of common stock. Payment of dividends in the future is dependent upon the Company’s financial condition, cash flows, capital requirements, earnings, and other factors. 12 Issuer Purchases of Equity Securities The Company’s Board of Directors has extended, until August 2020, 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 may cancel, suspend, or extend the time period for the purchase 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 its stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through December 28, 2019, the Company has repurchased approximately 6.2 million shares under this authorization. Below is a summary of the Company’s stock repurchases for the quarter ended December 28, 2019. (a) Total Number of Shares Purchased (1) (b) 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 (2) September 28, 2019 – October 26, 2019 October 27, 2019 – November 23, 2019 November 24, 2019 – December 28, 2019 Total — 10,109 5,128 15,237 — 32.09 32.34 — — — — 13,822,567 13,822,567 13,822,567 (1) Includes shares tendered to the Company by holders of stock-based awards in payment of the purchase price and/or withholding taxes upon exercise and/or vesting. (2) Shares available to be purchased under the Company’s 20 million share repurchase authorization until August 2020. The extension of the authorization was announced on October 23, 2019. 13 Company Stock Performance The following graph compares total stockholder return since December 27, 2014 to the Dow Jones U.S. Total Return Index (Total Return Index) and the Dow Jones U.S. Building Materials & Fixtures Index (Building Materials Index). Total return values for the Total Return Index, the Building Materials Index and the Company were calculated based on cumulative total return values assuming reinvestment of (i) regular quarterly dividends paid by the Company, (ii) the cash paid by the Company in conjunction with the special dividend and (iii) the proceeds of an assumed sale at par of the Debentures paid by the Company in connection with the special dividend. Mueller Industries, Inc. Dow Jones U.S. Total Return Index Dow Jones U.S. Building Materials & Fixtures Index 2014 2015 2016 2017 2018 2019 100.00 100.00 82.67 100.63 119.33 112.96 132.90 137.24 89.09 130.42 122.49 171.04 100.00 114.37 135.47 159.65 126.50 185.11 14 ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share data) For the fiscal year: (1) 2019 2018 2017 2016 2015 Net sales $ 2,430,616 $ 2,507,878 $ 2,266,073 $ 2,055,622 $ 2,100,002 Operating income (2) Net income attributable to Mueller Industries, Inc. Diluted earnings per share Cash dividends per share At year-end: Total assets 191,403 172,969 150,807 154,401 138,704 100,972 (3) 104,459 (4) 85,598 99,727 (5) 87,864 (6) 1.79 0.40 1.82 0.40 1.49 3.40 1.74 0.375 1.54 0.30 1,370,940 1,369,549 1,320,173 1,447,476 1,338,801 Long-term debt 378,724 489,597 448,592 213,709 204,250 (1) Includes activity of acquired businesses from the following purchase dates: ATCO Rubber Products, Inc., July 2, 2018; Die-Mold Tool Limited, March 31, 2018; Pexcor Manufacturing Company Inc. and Heatlink Group Inc., May 31, 2017; Jungwoo Metal Ind. Co., LTD, April 26, 2016; Great Lakes Copper Ltd., July 31, 2015; Sherwood Valve Products, LLC, June 18, 2015; and Turbotec Products, Inc., March 30, 2015. (2) Adjusted retroactively to reflect adoption of ASU 2017-07 that occurred during 2018. The components of net periodic benefit cost (income) other than the service cost component are included in other income (expense), net in the Consolidated Statements of Income. (3) (4) (5) (6) Includes net expense of $3.6 million resulting from the change in fair value of contingent consideration. Includes a pre-tax insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at the brass rod mill in Port Huron, Michigan. Includes pre-tax impairment charges of $6.8 million on fixed assets. 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. 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. 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-17. 15 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 28, 2019. 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 28, 2019 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 Exchange Act. 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. 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 28, 2019 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 28, 2019. 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. 16 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 28, 2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 17 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Mueller Industries, Inc. Opinion on Internal Control over Financial Reporting We have audited Mueller Industries, Inc.’s internal control over financial reporting as of December 28, 2019, 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). In our opinion, Mueller Industries, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 28, 2019, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2019 and December 29, 2018, 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 28, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 26, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Definition and Limitations of Internal Control Over Financial Reporting 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. Memphis, Tennessee February 26, 2020 18 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 2020 Annual Meeting of Stockholders to be filed with the SEC on or about March 26, 2020, 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 2019,” “2019 Grants of Plan Based Awards Table,” “Outstanding Equity Awards at Fiscal 2019 Year- End,” “2019 Option Exercises and Stock Vested,” “Potential Payments Upon Termination of Employment or Change in Control as of the End of 2019,” “2019 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 2020 Annual Meeting of Stockholders to be filed with the SEC on or about March 26, 2020, which is incorporated herein by reference. 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 28, 2019 (shares in thousands): (a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted average exercise price of outstanding options, warrants, and rights Equity compensation plans approved by security holders 939 $ 25.05 Equity compensation plans not approved by security holders — — Total 939 $ 25.05 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 1,900 — 1,900 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 19 2020 Annual Meeting of Stockholders to be filed with the SEC on or about March 26, 2020, 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 2020 Annual Meeting of Stockholders to be filed with the SEC on or about March 26, 2020, 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 2020 Annual Meeting of Stockholders to be filed with the SEC on or about March 26, 2020, which is incorporated herein by reference. 20 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: Certificate of Incorporation and Bylaws 3.1 3.2 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). Long-Term Debt Instruments 4.1 4.2 4.3 Indenture, dated March 9, 2017, among the Registrant (as issuer) and Regions Bank (as trustee) (Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, dated March 13, 2017). Form of 6% Subordinated Debenture due 2027 (Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, dated March 13, 2017). 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. 4.4 Description of securities Consulting, Employment, and Compensatory Plan Agreements 10.1 10.2 10.3 10.4 10.5 10.6 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 Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on March 26, 2009). 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). 2019 Incentive Plan (incorporated by reference to Annex 1 to the Company’s definitive proxy statement filed with the SEC on March 28, 2019). 21 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 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). Summary description of the Registrant’s 2020 incentive plan for certain key employees. Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Brian K. Barksdale (Incorporated herein by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016). Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Jeffrey A. Martin (Incorporated herein by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016). Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Mark Millerchip (Incorporated herein by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016). Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Nicholas W. Moss (Incorporated herein by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016). Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Steffen Sigloch (Incorporated herein by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q, for the period ended July 2, 2016, dated July 28, 2016). Change in Control Agreement, effective January 3, 2017 by and between the Registrant and Christopher J. Miritello (Incorporated herein by reference to Exhibit 10.25 of the Registrant’s Annual Report on Form 10-K, dated March 1, 2017, for the fiscal year ended December 31, 2016). Employment Agreement, dated as of March 15, 2018, by and between Mueller Industries, Inc. and Gregory L. Christopher (Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated March 19, 2018). Financing Agreements 10.16 10.17 Credit Agreement, dated as of December 6, 2016 among the Registrant (as borrower), Bank of America (as agent), and certain lenders named therein (Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, dated December 12, 2016). Amendment No. 1 to Credit Agreement among the Registrant (as borrower), Bank of America, N.A. (as agent), and certain lenders named therein dated April 22, 2019. Other Exhibits 21.0 23.0 31.1 31.2 32.1 32.2 Subsidiaries of the Registrant. Consent of Independent Registered Public Accounting Firm. 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 22 101.SCH XBRL Taxonomy Extension Schema ITEM 16. Form 10-K Summary None. 23 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 26, 2020. 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 /s/ Gregory L. Christopher Gregory L. Christopher Chief Executive Officer (Principal Executive Officer) and Chairman of the Board Date February 26, 2020 /s/ Terry Hermanson Terry Hermanson /s/ Elizabeth Donovan Elizabeth Donovan /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/ Charles P. Herzog, Jr. Charles P. Herzog, Jr. Lead Independent Director February 26, 2020 Director Director Director Director Director Director Director February 26, 2020 February 26, 2020 February 26, 2020 February 26, 2020 February 26, 2020 February 26, 2020 February 26, 2020 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 24 February 26, 2020 February 26, 2020 MUELLER INDUSTRIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Review Consolidated Statements of Income for the years ended December 28, 2019, December 29, 2018, and December 30, 2017 Consolidated Statements of Comprehensive Income for the years ended December 28, 2019, December 29, 2018, and December 30, 2017 Consolidated Balance Sheets for the years ended December 28, 2019 and December 29, 2018 Consolidated Statements of Cash Flows for the years ended December 28, 2019, December 29, 2018, and December 30, 2017 Consolidated Statements of Changes in Equity for the years ended December 28, 2019, December 29, 2018, and December 30, 2017 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 F-17 F-18 F-19 F-20 F-21 F-23 F-63 FINANCIAL STATEMENT SCHEDULE Schedule for the years ended December 28, 2019, December 29, 2018, and December 30, 2017 Valuation and Qualifying Accounts (Schedule II) F-66 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 products we manufacture is broad: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; fabricated tubular products; pressure vessels; steel nipples; and insulated flexible duct systems. We also resell brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets and plumbing specialty products. Mueller’s operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China. Each of the reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows: • Piping Systems: The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, Die-Mold, European Operations, Trading Group, and Jungwoo-Mueller (our South Korean joint venture). The Domestic Piping Systems Group manufactures copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group manufactures a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. European Operations manufacture copper tube in the United Kingdom, which is sold throughout Europe. The Trading Group manufactures pipe nipples and sources products for import distribution in North America. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air- conditioning original equipment manufacturers (OEMs). The Company disposed of Mueller-Xingrong (the Company’s Chinese joint venture) on June 21, 2017. This business manufactured engineered copper tube primarily for air-conditioning applications in China. • Industrial Metals: The Industrial Metals segment is composed of Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. The segment manufactures and sells brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; and gas valves and assemblies. The segment manufactures and sells its products primarily to domestic OEMs in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets. • Climate: The Climate segment is composed of Refrigeration Products, Fabricated Tube Products, Westermeyer, Turbotec, ATCO, and Linesets, Inc. The segment manufactures and sells refrigeration valves and fittings, line sets, fabricated tubular products, high pressure components, coaxial heat exchangers, and insulated HVAC flexible duct systems. The segment sells its products primarily to the heating, ventilation, air-conditioning, and refrigeration markets in the U.S. New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air- conditioning, refrigeration, and plumbing markets because the principal end use of a significant portion of our products is in the construction of single and multi-family housing and commercial buildings. Repairs and remodeling projects are also important drivers of underlying demand for these products. In addition, our products are used in various transportation, automotive, and industrial applications. Residential construction activity has shown improvement in recent years, but remains at levels below long-term historical averages. Per the U.S. Census Bureau, actual housing starts in the U.S. were 1.29 million in 2019, which compares to 1.25 million in 2018 F-2 and 1.20 million in 2017. Mortgage rates remain at historically low levels, as the average 30-year fixed mortgage rate was approximately 3.94 percent in 2019 and 4.54 percent in 2018. The private nonresidential construction sector, which includes offices, industrial, health care, and retail projects, has also shown improvement in recent years. Per the U.S. Census Bureau, the value of private nonresidential construction put in place was $450.5 billion in 2019, $450.9 billion in 2018, and $444.0 billion in 2017. Profitability of certain of our product lines depends upon the “spreads” between the cost of raw material and the selling prices of our products. The open market prices for copper cathode and copper and brass scrap, for example, influence the selling price of copper tube and brass rod, two principal products manufactured by the Company. We attempt to minimize the effects on profitability from fluctuations in material costs by passing through these costs to our customers. 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. 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. U.S. consumption of copper tube and brass rod is still predominantly supplied by U.S. manufacturers. 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 2019, 2018, and 2017: (In thousands) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Percent Change Net sales Operating income Net income $ $ 2,430,616 191,403 100,972 2,507,878 172,969 104,459 $ 2,266,073 150,807 85,598 (3.1)% 10.7 (3.3) 10.7% 14.7 22.0 The following are components of changes in net sales compared to the prior year: Net selling price in core product lines Unit sales volume in core product lines Acquisitions Dispositions Other 2019 vs. 2018 2018 vs. 2017 (3.7)% (4.4) 4.2 — 0.8 (3.1)% 4.4% 3.6 4.7 (3.0) 1.0 10.7% The decrease in net sales in 2019 was primarily due to (i) lower unit sales volume of $110.3 million in our core product lines, primarily brass rod and copper tube, and (ii) lower net selling prices of $91.7 million in our core product lines. These decreases were partially offset by (i) incremental sales of $100.1 million recorded by ATCO, acquired in July 2018, (ii) an increase in sales in our non-core product lines of $22.4 million, and (iii) incremental sales of $4.0 million recorded by Die-Mold, acquired in March 2018. The increase in net sales in 2018 was primarily due to (i) higher unit sales volume of $126.2 million in our domestic core product lines, primarily copper tube and brass rod, (ii) higher net selling prices of $99.8 million in our core product lines, (iii) sales of $90.0 million recorded by ATCO, acquired in July 2018, (iv) an increase in sales in our non-core product lines of $21.2 million, F-3 (v) incremental sales of $9.6 million of recorded by Heatlink Group, acquired in May 2017, and (vi) sales of $6.8 million recorded by Die-Mold, acquired in March 2018. These increases were partially offset by (i) the absence of sales of $67.3 million recorded by Mueller-Xingrong, a business we sold during June 2017, and (ii) lower unit sales volume of $44.5 million in our non-domestic core product lines. 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: The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2019, 2018, and 2017: (In thousands) 2019 2018 2017 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges Insurance recovery $ $ 2,035,610 42,693 162,358 (963) — (485) $ 2,150,400 39,555 148,888 (253) — (3,681) 1,940,617 33,944 140,730 (1,491) 1,466 — Operating expenses $ 2,239,213 $ 2,334,909 $ 2,115,266 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges Insurance recovery 2019 2018 2017 83.7% 1.8 6.6 — — — 85.7% 1.6 5.9 — — (0.1) 85.6% 1.5 6.2 (0.1) 0.1 — Operating expenses 92.1% 93.1% 93.3% F-4 The decrease in cost of goods sold in 2019 was primarily due to the decrease in sales volume in our core product lines and the decrease in the average cost of copper, our principal raw material. This was partially offset by the increase in sales volume resulting from the acquisition of ATCO. The increase in cost of goods sold in 2018 was primarily due to the increase in the average cost of copper, as well as the increase in sales volume in our domestic core product lines and related to businesses acquired. This was partially offset by the decrease in sales volume resulting from the sale of Mueller-Xingrong and lower sales volume in our non- domestic core product lines. Depreciation and amortization increased in 2019 as a result of long-lived assets of businesses acquired. Depreciation and amortization increased in 2018 as a result of long-lived assets of businesses acquired as well as several new long-lived assets being placed into service, partially offset by the impact of the sale of long-lived assets at Mueller-Xingrong. Selling, general, and administrative expenses increased in 2019 primarily due to (i) expense recognized for contingent consideration arrangements associated with businesses acquired of $5.7 million, (ii) an increase in employment costs, including employee healthcare, of $4.9 million, (iii) incremental expenses of $4.7 million associated with ATCO and Die-Mold, (iv) a reduction of $3.5 million in fees received for services provided under certain third-party sales and distribution arrangements, and (v) an increase in product liability costs of $1.6 million. These increases were partially offset by (i) income of $2.1 million recognized as a result of the reduction of contingent consideration arrangements associated with businesses acquired, (ii) a decrease in legal and professional fees of $1.4 million, (iii) higher foreign currency transaction gains of $1.4 million, (iv) a reduction of $0.8 million in fees received for services provided under certain equipment transfer and licensing agreements, and (v) a decrease in supplies and utilities of $0.5 million. The increase in selling, general, and administrative expenses in 2018 was primarily due to (i) incremental expenses of $9.8 million associated with ATCO, Heatlink Group, and Die-Mold and (ii) an increase in employment costs, including incentive compensation, of $4.7 million. These increases were partially offset by (i) fees of $3.5 million received for services provided under certain third-party sales and distribution arrangements in 2018 (fees from these arrangements are classified as a component of net sales in 2019), (ii) a reduction in product liability costs of $2.1 million, and (iii) the absence of expenses associated with Mueller-Xingrong of $1.2 million. During 2019, we recognized a net gain of $1.0 million on the sale of real property. We also recognized an insurance recovery gain of $0.5 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan. During 2018, we recognized a gain of $2.7 million on the sale of real property and a gain of $0.7 million on the sale of manufacturing equipment, which were offset by a loss of $3.1 million on the sale of a corporate aircraft. We also recognized an insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan. During 2017, we recognized fixed asset impairment charges for certain copper fittings manufacturing equipment of $1.5 million and a gain of $1.5 million on the sale of our interest in Mueller-Xingrong. Interest expense increased in 2019 primarily as a result of increased borrowing costs associated with our unsecured $350.0 million revolving credit facility. The increase in 2018 was primarily as a result of interest associated with the 6% Subordinated Debentures issued during the first quarter of 2017 as part of our special dividend, as well as increased borrowing costs associated with our unsecured $350.0 million revolving credit facility. Environmental expense for our non-operating properties was significantly higher in 2017 than in 2019 or 2018 primarily as a result of ongoing remediation activities related to the Lead Refinery site. Other income, net, was lower in 2019 primarily as a result of lower net periodic benefit income for our benefit plans, and higher in 2018 primarily as a result of higher net periodic benefit income for our benefit plans. Income tax expense was $35.3 million in 2019, representing an effective tax rate of 21.2 percent. This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes, net of the federal benefit, of $3.2 million, and (ii) the impact of investments in unconsolidated affiliates of $0.5 million. These increases were partially offset by other adjustments of $3.3 million. Income tax expense was $31.0 million in 2018, representing an effective tax rate of 20.6 percent. This rate was lower than what would be computed using the U.S. statutory federal rate primarily due to (i) a reduction of the calculation of federal tax on the Company’s accumulated foreign earnings under the Tax Cuts and Jobs Act (the Act) of $4.4 million and (ii) a reduction for the impact of investments in unconsolidated affiliates of $2.8 million. These reductions were partially offset by (i) the provision for state and local income taxes, net of the federal benefit, of $3.5 million and (ii) other adjustments of $3.1 million. F-5 Income tax expense was $37.9 million in 2017, representing an effective tax rate of 29.8 percent. This rate was lower than what would be computed using the U.S. statutory federal rate primarily due to (i) reductions for the effect of lower foreign tax rates when compared to the U.S. statutory rate and other foreign adjustments of $6.0 million, (ii) the U.S. production activities deduction of $1.6 million, (iii) the benefit of stock-based compensation deductions of $2.2 million, and (iv) the impact of the change in the federal tax rate under the Act on deferred taxes of $12.1 million. These reductions were partially offset by (i) the accrual of federal tax on the Company’s accumulated foreign earnings under the Act of $12.9 million, (ii) the provision for state and local income taxes, net of the federal benefit, of $1.1 million, and (iii) other adjustments of $1.2 million. During 2019, we recognized losses of $24.6 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $12.6 million in 2018. The loss on these investments for 2019 included net losses of $22.0 million for Tecumseh and net losses of $2.6 million for Mueller Middle East. Included in the losses for Tecumseh are $6.4 million of severance and restructuring expenses and a product liability settlement of $3.4 million. These expenses were offset by a gain on the sale of land of $1.8 million. During 2018, we recognized losses of $12.6 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $2.1 million in 2017. The loss on these investments for 2018 included net losses of $14.0 million and charges of $3.0 million related to certain labor claim contingencies, offset by a gain of $7.0 million related to a settlement with the Brazilian Federal Revenue Agency for Tecumseh. It also includes net losses of $2.6 million for Mueller Middle East. During 2017, the loss on these investments included net losses of $2.1 million for Tecumseh. Piping Systems Segment The following table compares summary operating results for 2019, 2018, and 2017 for the businesses comprising our Piping Systems segment: (In thousands) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Percent Change Net sales Operating income $ 1,542,456 131,879 $ 1,645,633 122,829 $ 1,564,950 99,596 (6.3)% 7.4 5.2% 23.3 The following are components of changes in net sales compared to the prior year: Net selling price in core product lines Unit sales volume in core product lines Acquisitions Dispositions Other 2019 vs. 2018 2018 vs. 2017 (4.4)% (2.3) 0.3 — 0.1 (6.3)% 4.5% 3.4 1.1 (4.3) 0.5 5.2% The decrease in net sales in 2019 was primarily attributable to (i) lower net selling prices of $70.6 million in the segment’s core product lines, primarily copper tube, and (ii) lower unit sales volume of $37.3 million in the segment’s core product lines. These decreases were partially offset by incremental sales of $4.0 million recorded by Die-Mold. The increase in net sales in 2018 was primarily attributable to (i) higher unit sales volume of $96.6 million in the segment’s domestic core product lines, primarily copper tube, (ii) higher net selling prices of $69.7 million in the segment’s core product lines, (iii) an increase in sales of $13.3 million in the segment’s non-core product lines, (iv) incremental sales of $9.6 million recorded by Heatlink Group, and (v) sales of $6.8 million recorded by Die-Mold. These increases were partially offset by (i) the absence of sales of $67.3 million recorded by Mueller-Xingrong and (ii) lower unit sales volume of $44.5 million in the segment’s non-domestic core product lines. F-6 The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2019, 2018, and 2017: (In thousands) 2019 2018 2017 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges $ $ 1,313,980 22,621 75,170 (1,194) — $ 1,426,729 23,304 74,864 (2,093) — 1,369,161 21,777 74,441 (1,491) 1,466 Operating expenses $ 1,410,577 $ 1,522,804 $ 1,465,354 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges 2019 2018 2017 85.2% 1.5 4.9 (0.1) — 86.7% 1.4 4.5 (0.1) — 87.5% 1.4 4.7 (0.1) 0.1 Operating expenses 91.5% 92.5% 93.6% The decrease in cost of goods sold in 2019 was primarily due to the decrease in the average cost of copper and the decrease in sales volume in the segment’s core product lines. The increase in cost of goods sold in 2018 was primarily due to the increase in the average cost of copper and the increase in sales volume in the segment’s domestic core product lines and related to the acquisitions of Heatlink Group and Die-Mold, partially offset by the decrease in sales volume resulting from the sale of Mueller- Xingrong. Depreciation and amortization decreased in 2019 as a result of several long-lived assets becoming fully depreciated. The increase in 2018 was a result of several new long-lived assets being placed into service as well as long-lived assets of Heatlink Group and Die-Mold, partially offset by the impact of the sale of long-lived assets at Mueller-Xingrong. Selling, general, and administrative expenses increased slightly for 2019, primarily due to (i) a reduction of $3.5 million in fees received for services provided under certain third-party sales and distribution arrangements, (ii) higher employment costs, including employee healthcare, of $0.9 million, and (iii) incremental expenses associated with Die-Mold of $0.6 million. These increases were partially offset by (i) income of $2.1 million recognized as a result of the reduction of contingent consideration arrangements associated with businesses acquired, (ii) higher foreign currency transaction gains of $1.4 million, and (iii) a decrease in supplies and utilities of $0.6 million. The increase in 2018 was primarily due to (i) incremental expenses associated with Die-Mold and Heatlink Group of $2.5 million, (ii) an increase in legal and professional fees of $1.6 million, (iii) an increase in foreign currency exchange rate losses of $0.6 million, and (iv) an increase in agent commissions of $0.5 million. These increases were partially offset by (i) fees of $3.5 million received for services provided under certain third-party sales and distribution arrangements in 2018 (fees from these arrangements are classified as a component of net sales in 2019) and (ii) the absence of expenses associated with Mueller-Xingrong of $1.2 million. During 2019, we recognized a gain of $1.2 million on the sale of real property. During 2018, we recognized a gain of $1.4 million on the sale of real property and a gain of $0.7 million on the sale of manufacturing equipment. During 2017, we recognized fixed asset impairment charges for certain copper fittings manufacturing equipment of $1.5 million and a gain of $1.5 million on the sale of our interest in Mueller-Xingrong. F-7 Industrial Metals Segment The following table compares summary operating results for 2019, 2018, and 2017 for the businesses comprising our Industrial Metals segment: (In thousands) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Percent Change Net sales Operating income $ 554,372 61,724 $ 651,061 75,607 $ 602,131 74,364 (14.9)% (18.4) 8.1% 1.7 The following are components of changes in net sales compared to the prior year: Net selling price in core product lines Unit sales volume in core product lines Other 2019 vs. 2018 2018 vs. 2017 (3.3)% (11.4) (0.2) (14.9)% 5.2% 5.1 (2.2) 8.1% The decrease in net sales in 2019 was primarily due to (i) lower unit sales volume of $73.0 million and (ii) lower net selling prices of $21.0 million in the segment’s core product lines, primarily brass rod. The increase in net sales during 2018 was primarily due to higher net selling prices of $30.0 million and (ii) higher unit sales volume of $29.6 million 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 2019, 2018, and 2017: (In thousands) 2019 2018 2017 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Loss (gain) on sale of assets, net Insurance recovery $ $ 473,010 7,489 12,359 275 (485) $ 559,367 7,568 13,501 (1,301) (3,681) 506,973 7,516 13,278 — — Operating expenses $ 492,648 $ 575,454 $ 527,767 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Loss (gain) on sale of assets, net Insurance recovery 2019 2018 2017 85.3% 1.4 2.3 — (0.1) 85.9% 1.2 2.1 (0.2) (0.6) 84.2% 1.2 2.2 — — Operating expenses 88.9% 88.4% 87.6% F-8 The decrease in cost of goods sold in 2019 was primarily due to the decrease in sales volume in the segment’s core product lines and the decrease in the average cost of copper. The increase in cost of goods sold in 2018 was primarily related to the increase in the average cost of copper and the increase in sales volume in the segment’s core product lines.. Depreciation and amortization in 2019 was consistent with 2018 and 2017. Selling, general, and administrative expenses decreased slightly in 2019 primarily due to lower employment costs, including incentive compensation, of $0.7 million. The increase in 2018 was primarily due to an increase in legal fees of $0.2 million. During 2019, we recognized a loss of $0.3 million on the sale of real property and an insurance recovery gain of $0.5 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan. During 2018, we recognized a gain of $1.3 million on the sale of real property and an insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at our brass rod mill in Port Huron, Michigan. Climate Segment The following table compares summary operating results for 2019, 2018, and 2017 for the businesses comprising our Climate segment: (In thousands) 2019 2018 2017 2019 vs. 2018 2018 vs. 2017 Percent Change Net sales Operating income $ 356,216 42,727 $ 229,069 24,118 $ 131,448 20,325 55.5% 77.2 74.3% 18.7 Net sales for 2019 increased primarily as a result of incremental sales of $100.1 million recorded by ATCO. Net sales for 2018 increased primarily as a result of sales of $90.0 million recorded by ATCO, as well as an increase in volume and improved product mix. The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2019, 2018, and 2017: (In thousands) 2019 2018 2017 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net $ $ 273,850 9,298 30,385 (44) $ 182,456 5,569 16,926 — 98,851 2,513 9,759 — Operating expenses $ 313,489 $ 204,951 $ 111,123 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net 2019 2018 2017 76.9% 2.6 8.5 — 79.7% 2.4 7.4 — 75.2% 1.9 7.4 — Operating expenses 88.0% 89.5% 84.5% Cost of goods sold increased in 2019 due to the increase in volume and change in product mix within the segment primarily resulting from the ATCO acquisition. The increase in cost of goods sold in 2018 was related to the increase in volume and change F-9 in product mix within the segment primarily resulting from the ATCO acquisition. In addition, it included additional expense of $2.2 million to adjust ATCO’s inventory to fair value as part of purchase price accounting during 2018. Depreciation and amortization increased in 2019 and 2018 primarily as a result of depreciation and amortization of the long-lived assets acquired at ATCO. Selling, general, and administrative expenses increased in 2019 as a result of (i) expense of $5.7 million recognized for a contingent consideration arrangement associated with an acquired business, (ii) incremental expenses of $4.6 million associated with ATCO, (iii) an increase in employment costs of $1.7 million, (iv) an increase in agent commissions of $0.5 million, and (v) an increase in supplies, utilities, and rent costs of $0.4 million. Selling, general, and administrative expenses increased in 2018 as a result of incremental expenses associated with ATCO. LIQUIDITY AND CAPITAL RESOURCES The following table presents selected financial information for 2019, 2018, and 2017: (In thousands) Increase (decrease) in: Cash, cash equivalents, and restricted cash Property, plant, and equipment, net Total debt Working capital, net of cash and current debt Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Cash Provided by Operating Activities 2019 2018 2017 $ $ 20,904 (7,505) (110,444) (35,231) (49,425) $ 66,312 31,626 11,228 200,544 (40,457) (139,694) 167,892 (187,096) (28,269) (233,906) 9,090 237,708 55,405 43,995 (36,280) (244,566) During 2019, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $106.2 million, (ii) depreciation and amortization of $43.0 million, (iii) a decrease in inventories of $39.6 million, (iv) losses from unconsolidated affiliates of $24.6 million, (v) stock-based compensation expense of $8.7 million, and (vi) a decrease in accounts receivable of $6.5 million. These cash increases were partially offset by (i) an increase in other assets of $15.6 million, (ii) a decrease in other liabilities of $7.9 million, and (iii) a decrease in current liabilities of $7.1 million. The fluctuations in accounts receivable and inventories were primarily due to decreased selling prices and sales volume in certain businesses and changes working capital needs in 2019. During 2018, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $106.8 million, (ii) depreciation and amortization of $39.9 million, (iii) a decrease in inventories of $27.5 million, (iv) a decrease in other assets of $14.4 million, (v) losses from unconsolidated affiliates of $12.6 million, and (vi) stock-based compensation expense of $8.0 million. These cash increases were offset by (i) a decrease in current liabilities of $15.7 million, (ii) a decrease in other liabilities of $14.8 million, and (iii) an increase in accounts receivable of $11.3 million. The decrease in inventories was primarily driven by the use of excess inventory built at the end of 2017 due to a casting outage in our brass rod mill that impaired our ability to melt scrap returns. The fluctuations in accounts receivable and current liabilities were primarily due to increased selling prices and sales volume in certain businesses and additional working capital needs in 2018. The changes in other assets and liabilities are primarily attributable to the change in estimate of the one-time transition tax liability on accumulated foreign earnings under the the Act. During 2017, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $87.0 million, (ii) depreciation and amortization of $34.2 million, and (iii) an increase in current liabilities of $10.7 million. These cash increases were offset by an increase in inventories of $86.3 million, primarily driven by the increase in the price of copper and an excess inventory build of $38.9 million at the end of 2017 due to a casting outage in our brass rod mill that impaired our ability to melt scrap returns. F-10 Cash Used in Investing Activities The major components of net cash used in investing activities in 2019 included (i) capital expenditures of $31.2 million and (ii) investments in our unconsolidated affiliates, Tecumseh and Mueller Middle East, of $16.0 million. These uses of cash were offset by (i) the $3.5 million working capital settlement received from the previous owners for the ATCO acquisition and (ii) proceeds on the sale of properties of $3.2 million. The major components of net cash used in investing activities in 2018 included (i) $167.7 million for the purchases of ATCO and Die-Mold, net of cash acquired, and (ii) capital expenditures of $38.5 million. These uses of cash were offset by proceeds on the sale of properties of $18.7 million. The major components of net cash used in investing activities in 2017 included (i) capital expenditures of $46.1 million, (ii) $18.4 million for the purchase of Heatlink Group, net of cash acquired, and (iii) investments in our joint venture in Bahrain of $3.3 million. These uses of cash were offset by (i) $17.5 million of proceeds from the sale of our 50.5 percent equity interest in Mueller- Xingrong, net of cash sold, (ii) proceeds from the sale of properties of $12.3 million, and (iii) proceeds from the sale of securities of $1.8 million. Cash Used in Financing Activities For 2019, net cash used in financing activities consisted primarily of (i) $205.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $22.3 million used for the payment of regular quarterly dividends to stockholders of the Company, (iii) $4.3 million used for repayment of debt by Jungwoo-Mueller, (iv) $3.2 million used for payment of contingent consideration related to ATCO, and (v) $1.8 million used to repurchase common stock. These uses of cash were offset by the issuance of debt under our Credit Agreement of $100.0 million. For 2018, net cash used in financing activities consisted primarily of (i) $165.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $33.6 million used to repurchase common stock, (iii) $22.7 million used for the payment of regular quarterly dividends to stockholders of the Company, and (iv) $2.9 million used for repayment of debt by Jungwoo-Mueller. These uses of cash were offset by the issuance of debt under our Credit Agreement of $200.0 million. For 2017, net cash used in financing activities consisted primarily of (i) $196.9 million used for the payment of the special dividend and the regular quarterly dividends to stockholders of the Company, (ii) $110.0 million used to reduce the debt outstanding under our Credit Agreement, (iii) $3.4 million used for repayment of debt by Jungwoo-Mueller and Mueller-Xingrong, and (iv) $2.9 million used for payment of dividends to noncontrolling interests. These uses of cash were partially offset by the issuance of debt of $70.0 million under our Credit Agreement. Liquidity and Outlook We believe that cash provided by operations, funds available under the Credit Agreement, and cash on hand will be adequate to meet our liquidity needs, including working capital, capital expenditures, and debt payment obligations. Our current ratio was 3.0 to 1 as of December 28, 2019. As of December 28, 2019, $65.3 million of our cash and cash equivalents were held by foreign subsidiaries. The undistributed earnings of most of the foreign subsidiaries are considered to be permanently reinvested. These earnings could be remitted to the U.S. with a minimal tax cost. Accordingly, no additional income tax liability has been accrued with respect to these earnings or on any additional outside basis differences that may exist with respect to these entities. We expect the reduction in the U.S. federal tax rate from 35 percent to 21 percent under the Act to provide ongoing benefits to liquidity. For 2020, we expect our effective tax rate on consolidated earnings to be in the range of 22 to 26 percent. 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, accounts receivable, and accounts payable. The price of copper has fluctuated significantly and averaged approximately $2.72 in 2019, $2.93 in 2018, and $2.80 in 2017. We have significant environmental remediation obligations which we expect to pay over future years. Approximately $4.4 million was spent during 2019 for environmental matters. As of December 28, 2019, we expect to spend $0.8 million in 2020, $0.7 million in 2021, $0.6 million in 2022, $0.8 million in 2023, $0.7 million in 2024, and $17.3 million thereafter for ongoing projects. F-11 Cash used to fund pension and other postretirement benefit obligations was $0.8 million in 2019 and $1.9 million in 2018. We anticipate making contributions of approximately $1.0 million to these plans in 2020. The Company declared and paid a quarterly cash dividend of 10.0 cents per common share during each quarter of 2017, 2018, and 2019. Additionally, during the first quarter of 2017 the Company distributed a special dividend composed of $3.00 in cash and $5.00 in principal amount of the Company’s 6% Subordinated Debentures (Debentures) due 2027 for each share of common stock outstanding. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, and other factors. Capital Expenditures During 2019 our capital expenditures were $31.2 million. We anticipate investing approximately $45.0 million to $50.0 million for capital expenditures in 2020. Long-Term Debt The Company’s Credit Agreement provides for an unsecured $350.0 million revolving credit facility which matures on December 6, 2021. Funds borrowed under the Credit Agreement may be used for working capital purposes and other general corporate purposes. In addition, the Credit Agreement provides a sublimit of $50.0 million for the issuance of letters of credit, a sublimit of $25.0 million for loans and letters of credit made in certain foreign currencies, and a swing line loan sublimit of $15.0 million. Outstanding letters of credit and foreign currency loans reduce borrowing availability under the Credit Agreement. Total borrowings under the Credit Agreement were $90.0 million at December 28, 2019. The Debentures distributed as part of our special dividend are subordinated to all other funded debt of the Company and are callable, in whole or in part, at any time at the option of the Company, subject to declining call premiums during the first five years. The Debentures also grant each holder the right to require the Company to repurchase such holder’s Debentures in the event of a change in control at declining repurchase premiums during the first five years. Interest is payable semiannually on September 1 and March 1. Total Debentures outstanding as of December 28, 2019 were $284.5 million. Jungwoo-Mueller has several secured revolving credit arrangements with a total borrowing capacity of KRW 25.8 billion (or approximately $21.9 million). Borrowings are secured by the real property and equipment of Jungwoo-Mueller and were bearing interest at a rate of 2.55 percent as of December 28, 2019. Total borrowings at Jungwoo-Mueller were $5.8 million as of December 28, 2019. As of December 28, 2019, the Company’s total debt was $386.3 million or 36.8 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 28, 2019, we were in compliance with all of our debt covenants. Share Repurchase Program The Company’s Board of Directors has extended, until August 2020, its authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. We 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 28, 2019, the Company had repurchased approximately 6.2 million shares under this authorization. F-12 CONTRACTUAL CASH OBLIGATIONS The following table presents payments due by the Company under contractual obligations with minimum firm commitments as of December 28, 2019: (In millions) Total 2020 2021-2022 2023-2024 Thereafter Payments Due by Year Total debt Operating and capital leases Heavy machinery and equipment Buildings Purchase commitments (1) Transition tax on accumulated foreign earnings Interest payments (2) $ $ 386.8 35.7 13.7 10.6 687.5 1.9 129.5 $ 7.5 6.6 11.1 10.6 686.4 — 20.0 $ 91.0 10.0 2.6 — 0.8 — 37.0 $ 1.4 5.3 — — 0.3 — 34.1 286.9 13.8 — — — 1.9 38.4 Total contractual cash obligations $ 1,265.7 $ 742.2 $ 141.4 $ 41.1 $ 341.0 (1) This includes contractual supply commitments totaling $634.3 million at year-end prices; these contracts contain variable pricing based on Comex and the London Metals Exchange quoted prices. These commitments are for purchases of raw materials, primarily copper cathode and brass scrap, that are expected to be consumed in the ordinary course of business. (2) These payments represent interest on long-term debt based on balances and rates in effect at December 28, 2019. 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. 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, we may periodically use financial instruments. Hedging transactions are authorized and executed pursuant to policies and procedures. Further, we do 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) in equity and reflected in earnings upon the sale of inventory. Periodic value fluctuations of the contracts generally offset the value fluctuations of the underlying fixed-price transactions or inventory. At December 28, 2019, we held open futures contracts to purchase approximately $21.3 million of copper over the next 12 months related to fixed-price sales orders and to sell approximately $1.9 million of copper over the next seven 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 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 28, 2019. F-13 Interest Rates The Company had variable-rate debt outstanding of $97.0 million at December 28, 2019 and $202.6 million at December 29, 2018. At this borrowing level, 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 exposure on variable-rate debt is based on LIBOR. 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 28, 2019, we had open forward contracts with a financial institution to sell approximately 0.1 million euros, 21.7 million Swedish kronor, and 8.1 million Norwegian kroner through April 2020. 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 South Korean won. 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 $397.1 million at December 28, 2019 and $376.6 million at December 29, 2018. 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 28, 2019 and December 29, 2018 amounted to $39.7 million and $37.7 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, the Canadian dollar, and the South Korean won. During 2019, the value of the British pound increased approximately three percent, the Mexican peso increased approximately 4 percent, the Canadian dollar increased approximately four percent, and the South Korean won decreased approximately four percent, relative to the U.S. dollar. The resulting net foreign currency translation gains were included in calculating net other comprehensive loss for the year ended December 28, 2019 and were recorded as a component of AOCI. 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 28, 2019 and December 29, 2018, our inventory valuation reserves were $6.3 million and $7.0 million, respectively. The expense recognized in each of these periods was immaterial to our Consolidated Financial Statements. F-14 Impairment of Goodwill As of December 28, 2019, we had $153.3 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 2019 we recorded $1.5 million in additional goodwill associated with our ATCO and Die-Mold acquisitions in conjunction with the finalization of the purchase price allocations. 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, management compares the fair value of a reporting unit with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. 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 Domestic Piping Systems, B&K LLC, Great Lakes, Heatlink Group, Die-Mold, European Operations, Jungwoo-Mueller, Westermeyer, Turbotec, and ATCO. 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. We evaluated each reporting unit during the fourth quarters of 2019 and 2018, as applicable. The estimated fair value of each of these reporting units exceeded its carrying values in 2019 and 2018, and we do not believe that any of these reporting units were at risk of impairment as of December 28, 2019. Pension and Other Postretirement Benefit Plans We sponsor several qualified and nonqualified pension and other postretirement benefit plans in the U.S. and certain foreign locations. We recognize the overfunded or underfunded status of the plans as an asset or liability in the Consolidated Balance Sheets with changes in the funded status recorded through comprehensive 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. We evaluate the 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 2019, the average remaining service period for the pension plans was nine years. 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 and third party estimates and analyses of cleanup costs and ongoing monitoring 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. 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 presented below operating income in the Consolidated Statements of Income. F-15 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. New Accounting Pronouncements See “Note 1 – Summary of Significant Accounting Policies” in our Consolidated Financial Statements. 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. 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-16 MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (In thousands, except per share data) 2019 2018 2017 (1) Net sales $ 2,430,616 $ 2,507,878 $ 2,266,073 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges Insurance recovery Operating income Interest expense Environmental expense Other income, net 2,035,610 42,693 162,358 (963) — (485) 2,150,400 39,555 148,888 (253) — (3,681) 1,940,617 33,944 140,730 (1,491) 1,466 — 191,403 172,969 150,807 (25,683) (1,321) 1,684 (25,199) (1,320) 3,967 (19,502) (7,284) 2,951 Income before income taxes 166,083 150,417 126,972 Income tax expense Loss from unconsolidated affiliates, net of foreign tax (35,257) (24,594) (30,952) (12,645) (37,884) (2,077) Consolidated net income 106,232 106,820 87,011 Net income attributable to noncontrolling interests (5,260) (2,361) (1,413) Net income attributable to Mueller Industries, Inc. $ 100,972 $ 104,459 $ 85,598 Weighted average shares for basic earnings per share Effect of dilutive stock-based awards 55,798 545 56,782 487 56,925 559 Adjusted weighted average shares for diluted earnings per share 56,343 57,269 57,484 Basic earnings per share Diluted earnings per share Dividends per share $ $ $ 1.81 1.79 0.40 $ $ $ 1.84 1.82 0.40 $ $ $ 1.50 1.49 8.40 See accompanying notes to consolidated financial statements. (1) The Consolidated Statement of Income for 2017 has been adjusted to reflect the adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in 2018. The components of net periodic benefit cost (income) other than the service cost component are included in other income, net in the Consolidated Statements of Income. F-17 MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (In thousands) 2019 2018 2017 Consolidated net income $ 106,232 $ 106,820 $ 87,011 Other comprehensive income (loss), net of tax: Foreign currency translation Net change with respect to derivative instruments and hedging activities, net of tax of $(195), $318, and $(541) Net change in pension and postretirement obligation adjustments, net of tax of $(671), $670, and $(1,071) Attributable to unconsolidated affiliates, net of tax of $244, $2,522, and $(505) Other, net 7,409 (16,876) 13,174 690 (1,173) 3,112 (3,339) (839) — (8,686) — 1,147 2,436 895 (380) Total other comprehensive income (loss), net 10,372 (30,074) 17,272 Consolidated comprehensive income Comprehensive income attributable to noncontrolling interests 116,604 (4,610) 76,746 (1,579) 104,283 (2,785) Comprehensive income attributable to Mueller Industries, Inc. $ 111,994 $ 75,167 $ 101,498 See accompanying notes to consolidated financial statements. F-18 MUELLER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS As of December 28, 2019 and December 29, 2018 2019 2018 (In thousands, except share data) Assets Current assets: Cash and cash equivalents Accounts receivable, less allowance for doubtful accounts of $770 in 2019 and $836 in $ 97,944 $ 72,616 2018 Inventories Other current assets Total current assets Property, plant, and equipment, net Operating lease right-of-use assets Goodwill, net Intangible assets, net Investment in unconsolidated affiliates Other noncurrent assets Total Assets Liabilities Current liabilities: Current portion of debt Accounts payable Accrued wages and other employee costs Current portion of operating lease liabilities Other current liabilities Total current liabilities Long-term debt, less current portion Pension liabilities Postretirement benefits other than pensions Environmental reserves Deferred income taxes Noncurrent operating lease liabilities Other noncurrent liabilities Total liabilities Equity Mueller Industries, Inc. stockholders' equity: 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 56,949,246 in 2019 and 56,702,997 in 2018 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury common stock, at cost Total Mueller Industries, Inc. stockholders' equity Noncontrolling interests Total equity Commitments and contingencies Total Liabilities and Equity See accompanying notes to consolidated financial statements. F-19 269,943 292,107 33,778 693,772 363,128 26,922 153,276 60,082 48,363 25,397 273,417 329,795 26,790 702,618 370,633 — 150,335 61,971 58,042 25,950 $ 1,370,940 $ 1,369,549 $ $ 7,530 85,644 41,673 5,250 94,190 234,287 378,724 9,126 13,082 19,972 21,094 22,388 10,131 708,804 7,101 103,754 38,549 — 83,397 232,801 489,597 14,237 14,818 20,009 16,615 — 18,212 806,289 — — 802 278,609 903,070 (68,770) (470,243) 643,468 18,668 662,136 — 802 276,849 824,737 (79,792) (474,240) 548,356 14,904 563,260 — $ 1,370,940 $ 1,369,549 MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (In thousands) 2019 2018 2017 (1) Operating activities: Consolidated net income Reconciliation of consolidated net income to net cash provided by operating activities: Depreciation Amortization of intangibles Amortization of debt issuance costs Loss from unconsolidated affiliates Insurance proceeds - noncapital related Change in the fair value of contingent consideration Insurance recovery Stock-based compensation expense Gain on sale of business Gain on disposals of assets Impairment charges Deferred income tax (benefit) expense Changes in assets and liabilities, net of effects of businesses acquired and sold: Receivables Inventories Other assets Current liabilities Other liabilities Other, net Net cash provided by operating activities Investing activities: Proceeds from sale of assets, net of cash transferred Acquisition of businesses, net of cash acquired Capital expenditures Insurance proceeds - capital related Investments in unconsolidated affiliates Net cash used in investing activities Financing activities: Dividends paid to stockholders of Mueller Industries, Inc. Dividends paid to noncontrolling interests Issuance of long-term debt Repayments of long-term debt Repayment of debt by consolidated joint ventures, net Repurchase of common stock Payment of contingent consideration Net cash used to settle stock-based awards Net cash used in financing activities Effect of exchange rate changes on cash Increase (decrease) in cash, cash equivalents, and restricted cash Cash, cash equivalents, and restricted cash at the beginning of the year $ 106,232 $ 106,820 $ 87,011 37,337 5,356 318 24,594 485 3,625 (485) 8,744 — (963) — (428) 6,505 39,561 (15,639) (7,076) (7,944) 322 200,544 3,240 3,465 (31,162) — (16,000) (40,457) (22,325) (846) 100,658 (206,718) (4,305) (1,763) (3,170) (1,225) (139,694) 511 20,904 77,138 35,118 4,437 318 12,645 2,306 — (3,681) 8,035 — (253) — 170 (11,342) 27,512 14,353 (15,680) (14,769) 1,903 167,892 18,703 (167,677) (38,481) 1,968 (1,609) (187,096) (22,705) (592) 204,233 (172,002) (2,915) (33,562) — (726) (28,269) (1,952) (49,425) 126,563 30,800 3,144 303 2,077 500 — — 7,450 (1,491) (624) 1,466 (3,160) (1,779) (86,286) (5,325) 10,678 64 (833) 43,995 31,564 (18,396) (46,131) — (3,317) (36,280) (196,944) (2,909) 71,475 (111,224) (3,369) — — (1,595) (244,566) 2,945 (233,906) 360,469 Cash, cash equivalents, and restricted cash at the end of the year $ 98,042 $ 77,138 $ 126,563 See accompanying notes to consolidated financial statements. Refer to Note 12 for discussion of significant noncash financing activities. (1) The Consolidated Statements of Cash Flows for prior periods have been adjusted to reflect the adoption of ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The Consolidated Statements of Cash Flows reflect the changes during the periods in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash activity is included with cash when reconciling the beginning-of-period and end-of-period total amounts shown. F-20 MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (In thousands) Common stock: Balance at beginning of year Balance at end of year Additional paid-in capital: Balance at beginning of year Issuance of shares under incentive stock option plans Stock-based compensation expense Issuance of restricted stock 2019 2018 2017 Shares Amount Shares Amount Shares Amount 80,183 80,183 $ $ 802 802 80,183 80,183 $ $ 802 802 80,183 80,183 $ $ 802 802 $ 276,849 $ 274,585 $ 273,345 (644) 8,744 (6,340) (278) 8,035 (5,493) (2,118) 7,450 (4,092) Balance at end of year $ 278,609 $ 276,849 $ 274,585 Retained earnings: Balance at beginning of year Net income attributable to Mueller Industries, Inc. Dividends paid or payable to stockholders of Mueller Industries, Inc. Reclassification of stranded effects of the Act Other adjustments $ 824,737 $ 743,503 $ 1,141,831 100,972 104,459 85,598 (22,639) (23,009) (483,926) — — (556) 340 — — Balance at end of year $ 903,070 $ 824,737 $ 743,503 Accumulated other comprehensive loss: Balance at beginning of year Total other comprehensive income (loss) attributable to Mueller Industries, Inc. Reclassification of stranded effects of the Act $ (79,792) $ (51,056) $ (66,956) 11,022 — (29,292) 556 15,900 — Balance at end of year $ (68,770) $ (79,792) $ (51,056) F-21 MUELLER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued) Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (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 2019 2018 2017 Shares Amount Shares Amount Shares Amount 23,480 $ (474,240) 22,373 $ (445,723) 22,788 $ (450,338) (94) 162 (314) 1,908 (4,251) 6,340 (57) 1,437 (273) 1,136 (35,146) 5,493 (395) 188 (208) 7,828 (7,305) 4,092 Balance at end of year 23,234 $ (470,243) 23,480 $ (474,240) 22,373 $ (445,723) Noncontrolling interests: Balance at beginning of year Sale of Mueller-Xingrong Dividends paid to noncontrolling interests Net income attributable to noncontrolling interests Foreign currency translation $ 14,904 — $ 13,917 — $ 37,753 (23,712) (846) 5,260 (650) (592) 2,361 (782) (2,909) 1,413 1,372 Balance at end of year $ 18,668 $ 14,904 $ 13,917 See accompanying notes to consolidated financial statements. F-22 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 impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; fabricated tubular products; pressure vessels; steel nipples; and insulated flexible duct systems. The Company also resells brass and plastic plumbing valves, plastic fittings, 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, South Korea, the Middle East, and China. Fiscal Years The Company’s fiscal year consists of 52 weeks ending on the last Saturday of December. These dates were December 28, 2019, December 29, 2018, and December 30, 2017. 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 interests represent separate private ownership interests of 40 percent of Jungwoo Metal Ind. Co., LTD (Jungwoo- Mueller) and 49.5 percent of Jiangsu Mueller-Xingrong Copper Industries Limited (Mueller-Xingrong), which the Company sold during 2017. See “Note 2 – Acquisitions and Dispositions” for additional information. Revenue Recognition Given the nature of the Company’s business and product offerings, sales transactions with customers are generally comprised of a single performance obligation that involves delivery of the products identified in the contracts with customers. Performance obligations are generally satisfied at the point in time of shipment and payment is generally due within sixty days. Variable consideration is estimated for future rebates on certain product lines and product returns. The Company records variable consideration as an adjustment to the transaction price in the period it is incurred. Since variable consideration is settled within a short period of time, the time value of money is not significant. The cost of shipping product to customers is expensed as incurred as a component of cost of goods sold. The Company’s Domestic Piping Systems Group engages in certain transactions where it acts as an agent. Revenue from these transactions is recorded on a net basis. 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 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 and Restricted Cash Temporary investments with original maturities of three months or less are considered to be cash equivalents. These investments are stated at cost. At December 28, 2019 and December 29, 2018, temporary investments consisted of money market mutual F-23 funds, commercial paper, bank repurchase agreements, and U.S. and foreign government securities totaling approximately $0.5 million and $0.6 million, respectively. Amounts included in restricted cash relate to required deposits in brokerage accounts that facilitate the Company’s hedging activities as well as imprest funds for the Company’s self-insured workers’ compensation program. See “Note 4 – Cash, Cash Equivalents, and Restricted Cash” for additional information. 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 and the non-material components of U.S. copper tube and copper fittings inventories are valued on a FIFO basis. The material component of its U.K. and Canadian copper tube inventories are valued on a FIFO basis. The material component of its brass rod and forgings inventories are valued on a FIFO basis. Certain inventories 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 5 – Inventories” for additional information. Leases The Company leases certain manufacturing facilities, distribution centers, office space, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet; expense for these leases is recognized on a straight line-basis over the term of the lease. Most of the Company’s leases include one or more options to renew up to five years and have remaining terms of one to fifteen years. These options are not included in the Company’s valuation of the right-of-use assets as the Company is not reasonably certain to exercise the options. The Company has certain vehicle leases that are financing; however, these leases are deemed immaterial for disclosure. See “Note 8 – Leases” 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 9 – Property, Plant, and Equipment, Net” for additional information. F-24 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 compares the fair value of a reporting unit with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. 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 10 – Goodwill and Other Intangible Assets” for additional information. Investments in Unconsolidated Affiliates The Company owns a 50 percent interest in an unconsolidated affiliate that acquired Tecumseh Products Company (Tecumseh). The Company also owns a 50 percent interest in a second unconsolidated affiliate that provides financing to Tecumseh. These investments are recorded 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 respective entities. Under the equity method of accounting, these investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. The Company records its proportionate share of the investees’ net income or loss, net of foreign taxes, one quarter in arrears as income (loss) from unconsolidated affiliates, net of foreign tax, in the Consolidated Statements of Income. The Company’s proportionate share of the investees’ other comprehensive income (loss), net of income taxes, is recorded in the Consolidated Statements of Comprehensive Income and Consolidated Statements of Changes in Equity. The U.S. tax effect of the Company’s proportionate share of Tecumseh’s income or loss is recorded in income tax expense in the Consolidated Statements of Income. In general, the equity investment in unconsolidated affiliates is equal to the current equity investment plus the investees’ net accumulated losses. The Company also owns a 40 percent interest in Mueller Middle East BSC. The investments in unconsolidated affiliates are assessed periodically for impairment and written down when the carrying amount is not considered fully recoverable. See “Note 11 – Investments in Unconsolidated Affiliates” 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 Sheets with changes in the funded status recorded through comprehensive income in the year in which those changes occur. The obligations for these plans are actuarially determined and affected by assumptions, including discount rates, F-25 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 2019, the average remaining service period for the pension plans was nine years. See “Note 13 – 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 and third party estimates and 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. 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 presented below operating income in the Consolidated Statements of Income. See “Note 14 – 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. There were no awards excluded from the computation of diluted earnings per share for the year ended December 28, 2019, and approximately 54 thousand stock-based awards excluded from the computation of diluted earnings per share for the year ended December 29, 2018, 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 was 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 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 15 – Income Taxes” for additional information. F-26 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 17 – 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 either a) designated as a hedge of (i) a forecasted transaction or the variability of cash flow to be paid (cash flow hedge) or (ii) the fair value of a recognized asset or liability (fair value hedge), or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure (economic hedge), as the Company does not enter into derivative contracts for trading purposes. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge are recorded in stockholders’ equity within 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 executed as economic hedges and the ineffective portion of designated derivatives are reported in current earnings. The Company documents all relationships between derivative instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments 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 derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flow or fair values of hedged items. When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable of occurring, 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 7 – Derivative Instruments and Hedging Activities” for additional information. F-27 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 28, 2019 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. Foreign Currency Translation For foreign subsidiaries for 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. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are recognized in selling, general, and administrative expense in the Consolidated Statements of Income. Included in the Consolidated Statements of Income were net transaction gains of $0.2 million in 2019, losses of $1.0 million in 2018, and losses of $0.4 million in 2017. 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 of long-lived assets (including goodwill). Recently Adopted Accounting Standard In July 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements and ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASUs clarify how to apply certain aspects of the new leasing standard, ASC 842. ASC 842 requires an entity to recognize a right-of-use asset and lease liability for each lease with a term of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a financing or operating lease. The guidance also requires certain quantitative and qualitative disclosures about leasing arrangements. The Company adopted the ASU during the first quarter of 2019 using a modified retrospective approach and applied the transition provisions at the beginning of the fiscal year. Financial results reported in periods prior to 2018 are unchanged. The Company elected a package of practical expedients, which, among other things, does not require the reassessment of lease classification. The Company does not separate lease and non-lease components of contracts. The Company implemented a system to identify its entire population of leases and tested the population for completeness. As of the effective date, the Company recognized noncurrent right-of-use assets of $29.5 million and corresponding current and noncurrent lease liabilities of $4.8 million and $25.4 million, respectively. As of the adoption date of ASC 842, discount rates for existing leases were based on an estimate of the Company’s incremental borrowing rate, adjusted for the term of the lease. Recently Issued Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Disclosure Framework - Measurement of Credit Losses on Financial Instruments. The ASU significantly changes the current incurred credit loss model under U.S. GAAP, which delays recognizing credit losses until it is probable a loss has been incurred to a current expected credit losses model which requires immediate recognition of management estimates of credit losses. The ASU will be effective for the annual period beginning in 2020. The updated guidance requires retrospective adoption, and early adoption is permitted. The Company does not expect the adoption of the ASU to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. For employers that sponsor defined benefit pension and/or other postretirement benefit plans, the ASU eliminates requirements for certain F-28 disclosures that are no longer considered cost beneficial, requires new disclosures related to the weighted-average interest crediting rate for cash balance plans and explanations for significant gains and losses related to changes in benefit obligations, and clarifies the requirements for entities that provide aggregate disclosures for two or more plans. The ASU will be effective for the annual period beginning in 2020. The updated guidance requires retrospective adoption, and early adoption is permitted. The Company does not expect the adoption of the ASU to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU eliminates requirements to disclose the amount and reasons for transfers between level 1 and level 2 of the fair value hierarchy, but requires public companies to disclose changes in unrealized gains and losses for the period included in other comprehensive income (OCI) for recurring level 3 fair value measurements or instruments held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements. The ASU will be effective for interim and annual periods beginning in 2020. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements, and can elect to early adopt in interim periods. The guidance on changes in unrealized gains and losses for the period included in OCI for recurring level 3 measurements, the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements, and the narrative description of measurement uncertainty is applied prospectively. All other amendments should be applied retrospectively. The Company does not expect the adoption of the ASU to have a material impact on its Consolidated Financial Statements. Note 2 – Acquisitions and Dispositions 2018 Acquisitions ATCO On July 2, 2018, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding capital stock of ATCO Rubber Products, Inc. (ATCO) for approximately $158.1 million, net of the working capital adjustments. The total purchase price consisted of $151.8 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $12.0 million based on EBITDA growth of the acquired business. ATCO is an industry leader in the manufacturing and distribution of insulated HVAC flexible duct systems and will support the Company’s strategy to grow its Climate Products businesses to become a more valuable resource to its HVAC customers. The acquired business is reported in the Company’s Climate segment. For the year ended December 28, 2019, ATCO had net sales of approximately $190.1 million. For the year ended December 29, 2018, the Company’s total net sales included $90.0 million of revenue recognized by ATCO from the date of acquisition. ATCO had revenues of approximately $166.0 million in its fiscal year ending December 31, 2017 (unaudited). The following table presents condensed pro forma consolidated results of operations as if the ATCO acquisition has occurred at the beginning of 2017. The pro forma information does not purport to be indicative of the results that would have been obtained if the operations had actually been combined during the periods presented and is not necessarily indicative of operating results to be expected in future periods. The most significant pro forma adjustments to the historical results of operations relate to the application of purchase accounting and the financing structure. (In thousands, except per share data) Net sales Net income Basic earnings per share Diluted earnings per share For the Year Ended 2018 2017 $ $ 2,595,454 111,482 1.96 1.95 $ $ 2,431,972 90,270 1.59 1.57 F-29 Die-Mold On March 31, 2018, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Die-Mold Tool Limited (Die-Mold) for approximately $13.6 million, net of working capital adjustments. The total purchase price consisted of $12.4 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owner up to $2.3 million based on EBITDA growth of the acquired business. Die-Mold, based out of Ontario, Canada, is a manufacturer of plastic PEX and other plumbing-related fittings and an integrated designer and manufacturer of plastic injection tooling. The business complements the Company’s existing businesses within the Piping Systems segment. 2017 Acquisition Heatlink Group On May 31, 2017, the Company entered into a share purchase agreement pursuant to which the Company acquired all of the outstanding shares of Pexcor Manufacturing Company Inc. and Heatlink Group Inc. (collectively, Heatlink Group) for approximately $17.2 million, net of working capital adjustments. The total purchase price consisted of $16.3 million in cash at closing and a contingent consideration arrangement which requires the Company to pay the former owners up to $2.2 million based on EBITDA growth of the acquired business. Heatlink Group, based out of Calgary, Alberta, Canada, produces and sells a complete line of products for PEX plumbing and radiant systems. The business complements the Company’s existing businesses within the Piping Systems segment. Purchase Price Allocations 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. The following table summarizes the allocation of the purchase price to acquire these businesses, which were financed by available cash balances, as well as the assets acquired and liabilities assumed at the respective acquisition dates. During 2019, the valuation of the ATCO acquisition was finalized. Changes to the purchase price allocation from the amounts presented in the Company’s 2018 Annual Report on Form 10-K included the valuation of the contingent consideration, intangible assets, and working capital. These changes resulted in a decrease to goodwill of $0.5 million. During 2019, the valuation of the Die-Mold acquisition was finalized. Changes to the purchase price allocation from the amounts presented in the Company’s 2018 Annual Report on Form 10-K included the recognition of a deferred tax liability of $2.0 million that resulted from a basis difference in the long-lived assets acquired. This change resulted in an increase to goodwill. F-30 (in thousands) ATCO Die-Mold Heatlink Group Total consideration $ 158,100 $ 13,629 $ 17,164 Allocated to: Accounts receivable Inventories Other current assets Property, plant, and equipment Goodwill Intangible assets Other assets Total assets acquired Accounts payable Other current liabilities Long-term debt Other noncurrent liabilities Total liabilities assumed Net assets acquired (1) Tax-deductible goodwill (1) 21,829 31,666 1,051 83,080 17,236 23,360 224 178,446 8,093 10,187 2,066 — 20,346 1,684 1,833 267 3,278 4,239 5,209 — 16,510 710 173 — 1,998 2,881 2,809 4,648 508 2,024 6,879 6,413 — 23,281 3,633 593 — 1,891 6,117 $ 158,100 $ 13,629 $ 17,164 The following details the total intangible assets identified in the allocation of the purchase price at the respective acquisition dates: (in thousands) Intangible asset type: Customer relationships Non-compete agreements Patents and technology Trade names, licenses, and other Supply contracts Total intangible assets 2017 Disposition Mueller-Xingrong Estimated Useful Life ATCO Die-Mold Heatlink Group 20 years $ 3-5 years 10-15 years 5-10 years 5 years $ 6,550 — 10,570 4,770 1,470 $ 3,077 70 1,512 550 — 4,265 74 1,466 608 — $ 23,360 $ 5,209 $ 6,413 On June 21, 2017, the Company entered into a definitive equity transfer agreement with Jiangsu Xingrong Hi-Tech Co. Ltd. and Jiangsu Baiyang Industries Co. Ltd. (Baiyang), together, the minority partners in Mueller-Xingrong (the Company’s Chinese joint venture), pursuant to which the Company sold its 50.5 percent equity interest in Mueller-Xingrong to Baiyang for approximately $18.3 million. Mueller-Xingrong manufactured engineered copper tube primarily for air-conditioning applications in China and was included in the Piping Systems segment. Mueller-Xingrong reported net sales of $67.3 million and net losses of $9 thousand in 2017, compared to net sales of $121.5 million and net income of $62 thousand in 2016. The carrying value of the assets disposed totaled $56.8 million, consisting primarily of accounts receivable, inventories, and long-lived assets. The carrying value of the liabilities disposed (consisting primarily of current debt and accounts payable), noncontrolling interest, and amounts recognized in AOCI totaled $36.2 million. Since the disposal constituted a complete liquidation of the Company’s investment in a foreign entity, the Company removed from AOCI and recognized a cumulative translation gain of $3.8 million. As a result of the disposal, the Company recognized a net gain on the sale of this business of $1.5 million in the Consolidated Financial Statements. F-31 Note 3 –Segment Information The Company’s reportable segments are Piping Systems, Industrial Metals, and Climate. Each of the reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows: Piping Systems Piping Systems is composed of the following operating segments: Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, Die-Mold, European Operations, Trading Group, and Jungwoo-Mueller (the Company’s South Korean joint venture). The Domestic Piping Systems Group manufactures copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Outside the U.S., Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group produces a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. European Operations manufacture copper tube in the U.K. which is sold primarily in Europe. The Trading Group manufactures pipe nipples and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products in the U.S. and Mexico. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment’s products are sold primarily to plumbing, refrigeration, and air-conditioning wholesalers, hardware wholesalers and co-ops, building product retailers, and air-conditioning OEMs. During 2019, the segment recognized a gain of $1.2 million on the sale of real property. During 2018, the segment recognized a gain of $1.4 million on the sale of real property and a gain of $0.7 million on the sale of manufacturing equipment. During 2017, the segment recognized a gain of $1.5 million on the sale of the Company’s interest in Mueller-Xingrong and impairment charges of $1.5 million on certain copper fittings manufacturing equipment. Industrial Metals Industrial Metals is composed of the following operating segments: Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. These businesses manufacture brass rod, impact extrusions, and forgings, as well as a wide variety of end products including plumbing brass, automotive components, valves, fittings, and gas assemblies. These products are manufactured in the U.S. and sold primarily to OEMs in the U.S., many of which are in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets. During 2019, the segment recognized a loss of $0.3 million on the sale of real property and an insurance recovery gain of $0.5 million related to the losses incurred due to the 2017 fire at the brass rod mill in Port Huron, Michigan. During 2018, the segment recognized a gain of $1.3 million on the sale of real property and an insurance recovery gain of $3.7 million related to the losses incurred due to the 2017 fire at the brass rod mill in Port Huron, Michigan. Climate Climate is composed of the following operating segments: Refrigeration Products, Fabricated Tube Products, Westermeyer, Turbotec, ATCO, and Linesets, Inc. These domestic businesses manufacture and fabricate valves, assemblies, high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, and line sets primarily for the heating, ventilation, air-conditioning, and refrigeration markets in the U.S. Performance of segments is generally evaluated by their operating income. 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 2019, 2018, and 2017, no single customer exceeded 10 percent of worldwide sales. F-32 The following tables represent a disaggregation of revenue from contracts with customers, along with the reportable segment for each category: (In thousands) Tube and fittings Brass rod and forgings OEM components, tube & assemblies Valves and plumbing specialties Other Intersegment sales Net sales (In thousands) Tube and fittings Brass rod and forgings OEM components, tube & assemblies Valves and plumbing specialties Other Intersegment sales Net sales For the Year Ended December 28, 2019 Piping Systems Industrial Metals Climate Total $ 1,271,558 — 29,103 241,795 — $ — $ 425,573 48,104 — 80,695 — $ — 133,651 — 222,565 1,271,558 425,573 210,858 241,795 303,260 $ 1,542,456 $ 554,372 $ 356,216 $ 2,453,044 (22,428) $ 2,430,616 For the Year Ended December 29, 2018 Piping Systems Industrial Metals Climate Total $ 1,352,875 — 29,578 263,180 — $ — $ 501,472 53,581 — 96,008 — $ — 139,113 — 89,956 1,352,875 501,472 222,272 263,180 185,964 $ 1,645,633 $ 651,061 $ 229,069 $ 2,525,763 (17,885) $ 2,507,878 F-33 Disaggregation of revenue from contracts with customers (continued): (In thousands) Tube and fittings Brass rod and forgings OEM components, tube & assemblies Valves and plumbing specialties Other Intersegment sales Net sales Summarized geographic information is as follows: For the Year Ended December 30, 2017 Piping Systems Industrial Metals Climate Total $ 1,238,258 — 94,383 232,309 — $ — $ 461,603 51,707 — 88,821 — $ — 131,448 — — 1,238,258 461,603 277,538 232,309 88,821 $ 1,564,950 $ 602,131 $ 131,448 $ 2,298,529 (32,456) $ 2,266,073 (In thousands) Net sales: United States United Kingdom Canada Asia Mexico (In thousands) Long-lived assets: United States United Kingdom Canada Asia Mexico 2019 2018 2017 $ $ 1,775,321 230,791 285,720 64,363 74,421 $ 1,820,857 245,458 292,798 59,730 89,035 1,556,825 231,039 280,140 121,295 76,774 $ 2,430,616 $ 2,507,878 $ 2,266,073 2019 2018 2017 $ $ 286,727 18,776 31,429 25,637 559 $ 295,735 16,313 33,144 24,930 511 238,752 17,661 21,327 25,973 608 $ 363,128 $ 370,633 $ 304,321 F-34 Summarized segment information is as follows: (In thousands) Net sales For the Year Ended December 28, 2019 Corporate and Eliminations Industrial Metals Climate Total Piping Systems $ 1,542,456 $ 554,372 $ 356,216 $ (22,428) $ 2,430,616 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense (Gain) loss on sale of assets, net Insurance recovery 1,313,980 22,621 75,170 (1,194) — 473,010 7,489 12,359 275 (485) 273,850 9,298 30,385 (44) — (25,230) 3,285 44,444 — — 2,035,610 42,693 162,358 (963) (485) Operating income 131,879 61,724 42,727 (44,927) 191,403 Interest expense Environmental expense Other income, net Income before income taxes (In thousands) Net sales (25,683) (1,321) 1,684 $ 166,083 Total For the Year Ended December 29, 2018 Corporate and Eliminations Industrial Metals Climate Piping Systems $ 1,645,633 $ 651,061 $ 229,069 $ (17,885) $ 2,507,878 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense (Gain) loss on sale of assets, net Insurance recovery 1,426,729 23,304 74,864 (2,093) — 559,367 7,568 13,501 (1,301) (3,681) 182,456 5,569 16,926 — — (18,152) 3,114 43,597 3,141 — 2,150,400 39,555 148,888 (253) (3,681) Operating income 122,829 75,607 24,118 (49,585) 172,969 Interest expense Environmental expense Other income, net Income before income taxes (25,199) (1,320) 3,967 $ 150,417 F-35 Segment information (continued): (In thousands) Net sales For the Year Ended December 30, 2017 Corporate and Eliminations Industrial Metals Climate Total Piping Systems $ 1,564,950 $ 602,131 $ 131,448 $ (32,456) $ 2,266,073 Cost of goods sold Depreciation and amortization Selling, general, and administrative expense Gain on sale of assets, net Impairment charges 1,369,161 21,777 74,441 (1,491) 1,466 506,973 7,516 13,278 — — 98,851 2,513 9,759 — — (34,368) 2,138 43,252 — — 1,940,617 33,944 140,730 (1,491) 1,466 Operating income 99,596 74,364 20,325 (43,478) 150,807 Interest expense Environmental expense Other income, net Income before income taxes (19,502) (7,284) 2,951 $ 126,972 (In thousands) Expenditures for long-lived assets (including those resulting from 2019 2018 2017 business acquisitions): Piping Systems Industrial Metals Climate General Corporate Segment assets: Piping Systems Industrial Metals Climate General Corporate $ $ $ $ 15,505 9,101 3,845 2,711 $ 31,362 8,066 85,471 37 18,124 5,322 2,191 22,518 31,162 $ 124,936 $ 48,155 $ 796,262 161,904 249,853 162,921 $ 818,303 173,725 246,851 130,670 801,468 212,638 73,458 232,609 $ 1,370,940 $ 1,369,549 $ 1,320,173 F-36 Note 4 – Cash, Cash Equivalents, and Restricted Cash (In thousands) Cash & cash equivalents Restricted cash included within other current assets Restricted cash included within other assets Total cash, cash equivalents, and restricted cash Note 5 – Inventories (In thousands) Raw materials and supplies Work-in-process Finished goods Valuation reserves Inventories $ $ $ 2019 2018 $ 97,944 — 98 72,616 4,414 108 98,042 $ 77,138 2019 2018 $ 85,769 48,814 163,842 (6,318) 89,641 58,643 188,506 (6,995) $ 292,107 $ 329,795 Inventories valued using the LIFO method totaled $16.8 million at December 28, 2019 and $18.8 million at December 29, 2018. At December 28, 2019 and December 29, 2018, the approximate FIFO cost of such inventories was $87.8 million and $91.8 million, respectively. Additionally, the Company values certain inventories on an average cost basis. At the end of 2019 and 2018, the FIFO value of inventory consigned to others was $5.5 million and $5.1 million, respectively. Note 6 – Consolidated Financial Statement Details Other Current Liabilities Included in other current liabilities as of December 28, 2019 and December 29, 2018 were the following: (i) accrued discounts, allowances, and customer rebates of $53.9 million and $48.6 million, respectively, (ii) accrued interest of $6.0 million and $5.8 million, respectively, (iii) current taxes payable of $4.7 million and $5.0 million, respectively, and (iv) current environmental liabilities of $0.9 million and $3.6 million, respectively. In addition, as of December 28, 2019 this included accruals for contingent consideration arrangements associated with acquired businesses of $7.0 million. Other Income, Net (In thousands) Net periodic benefit income Interest income Other Other income, net 2019 2018 2017 $ $ $ 465 722 497 $ 2,914 624 429 1,150 684 1,117 1,684 $ 3,967 $ 2,951 Note 7 – 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. F-37 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 28, 2019, the Company held open futures contracts to purchase approximately $21.3 million of copper over the next 12 months related to fixed price sales orders. The fair value of those futures contracts was a $1.4 million net gain position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At December 28, 2019, this amount was approximately $0.3 million of deferred net gains, net of tax. The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At December 28, 2019, the Company held open futures contracts to sell approximately $1.9 million of copper over the next five months related to copper inventory. The fair value of those futures contracts was a $0.1 million net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). 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: (In thousands) Balance Sheet Location 2019 2018 Balance Sheet Location 2019 2018 Asset Derivatives Fair Value Liability Derivatives Fair Value Commodity contracts Other current - gains assets $ 1,435 $ Commodity contracts Other current - losses assets (12) Other current liabilities 88 Other current liabilities (1) Total derivatives (1) 87 (1) Does not include the impact of cash collateral provided to counterparties. 1,423 $ $ $ $ 50 $ 103 (159) (1,382) (109) $ (1,279) The following table summarizes the effects of derivative instruments on the Consolidated Statements of Income: Location 2019 2018 (In thousands) Fair value hedges: Gain on commodity contracts (qualifying) Gain (loss) on hedged item - inventory Cost of goods sold Cost of goods sold Undesignated derivatives: Gain on commodity contracts (nonqualifying) Cost of goods sold $ $ — $ — 391 (385) 2,443 $ 4,227 The following tables summarize amounts recognized in and reclassified from AOCI during the period: F-38 (In thousands) Cash flow hedges: Commodity contracts Other Total (In thousands) Cash flow hedges: Commodity contracts Other Total Gain Recognized in AOCI (Effective Portion), Net of Tax Year Ended December 28, 2019 Classification Gains (Losses) $ $ 1,161 Cost of goods sold 15 Other 1,176 Total Loss Recognized in AOCI (Effective Portion), Net of Tax Year Ended December 29, 2018 Classification Gains (Losses) $ $ (793) Cost of goods sold (9) Other (802) Total Gain Reclassified from AOCI (Effective Portion), Net of Tax $ $ (486) — (486) Gain Reclassified from AOCI (Effective Portion), Net of Tax $ $ (371) — (371) 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 qualifying open hedge contracts through December 28, 2019 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 28, 2019 and December 29, 2018, the Company had recorded restricted cash in other current assets of $0.2 million and $3.6 million, respectively, as collateral related to open derivative contracts under the master netting arrangements. F-39 Note 8 – Leases The Company leases certain facilities, vehicles, and equipment which expire on various dates through 2033. The following table includes supplemental information with regards to the Company’s operating leases: (In thousands, except lease term and discount rate) Operating lease right-of-use assets Current portion of operating lease liabilities Noncurrent operating lease liabilities Total operating lease liabilities Weighted average discount rate Weighted average remaining lease term (in years) December 28, 2019 $ 26,922 5,250 22,388 $ 27,638 5.82% 8.35 Some of the Company’s leases include variable lease costs such as taxes, insurance, etc. These costs are immaterial for disclosure. The following table presents certain information related to operating lease costs and cash paid during the period: (In thousands) Operating lease costs Short term lease costs Total lease costs Cash paid for amounts included in the measurement of lease liabilities For the Year Ended December 28, 2019 $ $ $ 6,818 4,951 11,769 6,703 F-40 Maturities of the Company’s operating leases are as follows: (In thousands) 2020 2021 2022 2023 2024 2025 and thereafter Total lease payments Less imputed interest Total lease obligations Less current obligations Noncurrent lease obligations Note 9 – Property, Plant, and Equipment, Net (In thousands) Land and land improvements Buildings Machinery and equipment Construction in progress Less accumulated depreciation $ Amount 6,635 5,363 4,620 3,117 2,247 13,750 35,732 (8,094) 27,638 (5,250) $ 22,388 2019 2018 $ $ 31,987 203,762 640,642 18,920 32,132 201,176 635,173 22,618 895,311 (532,183) 891,099 (520,466) Property, plant, and equipment, net $ 363,128 $ 370,633 Depreciation expense for property, plant, and equipment was $37.3 million in 2019, $35.1 million in 2018, and $30.8 million in 2017. F-41 Note 10 – Goodwill and Other Intangible Assets Goodwill The changes in the carrying amount of goodwill by segment were as follows: (In thousands) Piping Systems Industrial Metals Climate Total Goodwill Accumulated impairment charges $ 166,428 (40,552) $ $ 8,854 (8,853) $ 4,416 — 179,698 (49,405) Balance at December 30, 2017: Additions (1) Currency translation Balance at December 29, 2018: Additions (2) Reductions (3) Currency translation Balance at December 28, 2019: Goodwill Accumulated impairment charges 125,876 5,049 (2,777) 128,148 1,999 — 1,476 1 — — 1 — — — 4,416 130,293 17,770 — 22,819 (2,777) 22,186 150,335 — (534) — 1,999 (534) 1,476 172,175 (40,552) 8,854 (8,853) 21,652 — 202,681 (49,405) Goodwill, net (1) Includes finalization of the purchase price allocation adjustment for Heatlink Group of $2.8 million. (2) Includes finalization of the purchase price allocation adjustment for Die-Mold of $2.0 million. (3) Includes finalization of the purchase price allocation adjustment for ATCO of $0.5 million. 131,623 $ $ 1 $ 21,652 $ 153,276 Reporting units with recorded goodwill include Domestic Piping Systems Group, B&K LLC, Great Lakes, Heatlink Group, Die- Mold, European Operations, Jungwoo-Mueller, Westermeyer, Turbotec, and ATCO. 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 2019, 2018, or 2017 annual impairment tests as the estimated fair value of each of the reporting units exceeded its carrying value. Other Intangible Assets The carrying amount of intangible assets at December 28, 2019 was as follows: (In thousands) Customer relationships Non-compete agreements Patents and technology Trade names and licenses Other Other intangible assets Gross Carrying Amount Accumulated Amortization Net Carrying Amount $ $ 44,832 2,499 19,804 10,155 1,676 (8,773) $ (2,156) (4,060) (3,249) (646) 36,059 343 15,744 6,906 1,030 $ 78,966 $ (18,884) $ 60,082 F-42 The carrying amount of intangible assets at December 29, 2018 was as follows: (In thousands) Customer relationships Non-compete agreements Patents and technology Trade names and licenses Other Other intangible assets Gross Carrying Amount Accumulated Amortization Net Carrying Amount $ $ 43,104 2,400 17,879 9,173 2,526 (6,309) $ (1,582) (2,595) (2,188) (437) 36,795 818 15,284 6,985 2,089 $ 75,082 $ (13,111) $ 61,971 Amortization expense for intangible assets was $5.4 million in 2019, $4.4 million in 2018, and $3.1 million in 2017. Future amortization expense is estimated as follows: (In thousands) 2020 2021 2022 2023 2024 Thereafter Expected amortization expense Note 11 – Investments in Unconsolidated Affiliates Tecumseh $ Amount 5,203 4,916 4,836 4,525 4,378 36,224 $ 60,082 The Company owns a 50 percent interest in an unconsolidated affiliate that acquired Tecumseh. The Company also owns a 50 percent interest in a second unconsolidated affiliate that provides financing to Tecumseh. 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. The following tables present summarized financial information derived from the Company’s equity method investees’ combined consolidated financial statements, which are prepared in accordance with U.S. GAAP. (In thousands) Current assets Noncurrent assets Current liabilities Noncurrent liabilities Net sales Gross profit Net loss 2019 2018 $ $ $ $ 198,559 87,218 147,801 51,219 488,270 58,494 (44,053) 228,214 114,257 175,371 57,216 509,517 59,385 (20,049) F-43 The Company’s loss from unconsolidated affiliates, net of foreign tax, for 2019 included net losses of $22.0 million for Tecumseh. The Company’s loss from unconsolidated affiliates, net of foreign tax, for 2018 included net losses of $14.0 million and charges of $3.0 million related to certain labor claim contingencies, offset by a gain of $7.0 million related to a settlement with the Brazilian Federal Revenue Agency for Tecumseh. Mueller Middle East 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 operates and brands its products under the Mueller Industries family of brands. The Company has invested approximately $5.0 million of cash to date and is the technical and marketing lead with a 40 percent ownership in the joint venture. The Company’s loss from unconsolidated affiliates, net of foreign tax, for 2019 and 2018 included net losses of $2.6 million for Mueller Middle East. Note 12 – Debt (In thousands) Subordinated Debentures with interest at 6.00%, due 2027 Revolving Credit Facility with interest at 3.20%, due 2021 Jungwoo-Mueller credit facility with interest at 2.86%, due 2019 Jungwoo-Mueller credit facility with interest at 2.55%, due 2020 2001 Series IRB's with interest at 3.03%, due 2021 Other Less debt issuance costs Less current portion of debt Long-term debt Subordinated Debentures $ 2019 2018 $ 284,479 90,000 — 5,768 1,250 5,295 386,792 284,479 195,000 5,264 5,104 2,250 5,458 497,555 (538) (7,530) (857) (7,101) $ 378,724 $ 489,597 On March 9, 2017, the Company distributed a special dividend of $3.00 in cash and $5.00 in principal amount of the Company’s 6% Subordinated Debentures (Debentures) due March 1, 2027 for each share of common stock outstanding. Interest on the Debentures is payable semiannually on September 1 and March 1. The Debentures are subordinated to all other funded debt of the Company and are callable, in whole or in part, at any time at the option of the Company, subject to declining call premiums during the first five years. The Debentures also grant each holder the right to require the Company to repurchase such holder’s Debentures in the event of a change in control at declining repurchase premiums during the first five years. The Debentures may be redeemed, subject to the conditions set forth above, at the following redemption price (expressed as a percentage of principal amount) plus any accrued but unpaid interest to, but excluding, the redemption date: F-44 If redeemed during the 12-month period beginning March 9: Year 2019 2020 2021 2022 and thereafter Revolving Credit Facility Redemption Price 104% 103 102 100 The Company’s Credit Agreement provides for an unsecured $350.0 million revolving credit facility (Revolving Credit Facility) that matures on December 6, 2021. Borrowings under the Revolving Credit Facility 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 28, 2019, the premium was 150.0 basis points for LIBOR loans and 50.0 basis points for Base Rate loans. Additionally, a commitment fee is payable quarterly on the total commitment less any outstanding loans or issued letters of credit, and varies from 15.0 to 30.0 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 $11.9 million at December 28, 2019. Terms of the letters of credit are generally renewable annually. Jungwoo-Mueller Jungwoo-Mueller has several secured revolving credit arrangements with a total borrowing capacity of KRW 25.8 billion (or approximately $21.9 million). Borrowings are secured by the real property and equipment of Jungwoo-Mueller. 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 28, 2019, the Company was in compliance with all debt covenants. Aggregate annual maturities of the Company’s debt are as follows: (In thousands) 2020 2021 2022 2023 2024 Thereafter Long-term debt $ Amount 7,530 90,502 525 804 540 286,891 $ 386,792 F-45 Net interest expense consisted of the following: (In thousands) Interest expense Capitalized interest 2019 2018 2017 $ $ $ 25,957 (274) $ 25,349 (150) 19,716 (214) 25,683 $ 25,199 $ 19,502 Interest paid in 2019, 2018, and 2017 was $25.4 million, $25.2 million, and $13.8 million, respectively. Note 13 – 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 2019 and 2018, 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 loss (gain) Benefit payments Settlement charge Foreign currency translation adjustment Pension Benefits Other Benefits 2019 2018 2019 2018 $ $ 166,739 — 5,972 17,061 (9,883) — 2,275 $ 186,766 88 5,745 (10,637) (10,368) — (4,855) $ 14,382 260 609 (1,860) (832) (198) 292 16,407 235 447 (1,185) (892) (171) (459) Obligation at end of year 182,164 166,739 12,653 14,382 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 164,603 26,734 — (9,883) 2,032 186,336 (8,282) 999 (10,368) (4,082) Fair value of plan assets at end of year 183,486 164,603 — — 832 (832) — — — — 892 (892) — — Funded (underfunded) status at end of year $ 1,322 $ (2,136) $ (12,653) $ (14,382) F-46 The following represents amounts recognized in AOCI (before the effect of income taxes): (In thousands) Pension Benefits Other Benefits 2019 2018 2019 2018 Unrecognized net actuarial loss Unrecognized prior service credit $ $ 36,195 — $ 39,101 — (1,609) $ (5,485) 170 (6,387) The Company sponsors one pension plan in the U.K. which comprised 43 and 45 percent of the above benefit obligation at December 28, 2019 and December 29, 2018, respectively, and 39 and 37 percent of the above plan assets at December 28, 2019 and December 29, 2018, respectively. As of December 28, 2019, $1.6 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 2020. 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 classified as long-term. As of December 28, 2019 and December 29, 2018, 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 Total funded (underfunded) status Pension Benefits Other Benefits 2019 2018 2019 2018 $ $ $ 8,592 — (7,270) $ 10,580 — (12,716) — $ (1,013) (11,640) — (1,080) (13,302) 1,322 $ (2,136) $ (12,653) $ (14,382) The components of net periodic benefit cost (income) are as follows: (In thousands) Pension benefits: Service cost Interest cost Expected return on plan assets Amortization of net loss Net periodic benefit income Other benefits: Service cost Interest cost Amortization of prior service credit Amortization of net (gain) loss Settlement charge $ $ $ 2019 2018 2017 — $ 5,972 (8,103) 1,950 $ 88 5,745 (9,522) 1,151 128 6,344 (9,374) 2,206 (181) $ (2,538) $ (696) $ 260 609 (902) (88) (2) $ 235 447 (902) 92 38 235 599 (901) (42) 17 Net periodic benefit income $ (123) $ (90) $ (92) F-47 The components of net periodic benefit cost (income) other than the service cost component are included in other income, net in the Consolidated Statements of Income. The weighted average assumptions used in the measurement of the Company’s benefit obligations are as follows: Pension Benefits Other Benefits 2019 2018 2019 2018 Discount rate Expected long-term return on plan assets Rate of compensation increases Rate of inflation 1.93% 3.84% N/A 3.20% 3.72% 5.05% N/A 3.40% 3.70% N/A 5.00% N/A 4.56% 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: 2019 Pension Benefits 2018 2017 2019 Other Benefits 2018 2017 3.72% 3.22% 3.61% 4.56% 3.89% 4.21% 5.05% N/A 3.40% 5.27% N/A 3.30% 5.56% N/A 3.30% N/A 5.00% N/A N/A 5.00% N/A N/A 5.00% N/A Discount rate Expected long-term return on plan assets Rate of compensation increases Rate of inflation 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 4.0 to 7.0 percent for 2020, gradually decrease to 4.1 percent through 2040, 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 Fixed income securities (includes fixed income mutual funds) Equity securities (includes equity mutual funds) Multi-asset securities Cash and equivalents (includes money market funds) Alternative investments Total F-48 Pension Plan Assets 2018 2019 55% 25 9 7 4 54% 35 — 8 3 100% 100% At December 28, 2019, the long-term target allocation, by asset category, of assets of the Company’s 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 3.84 percent for 2019 and 5.05 percent in 2018. 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. Mutual funds – Valued at the net asset value of shares held by the plans at December 28, 2019 and December 29, 2018, 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 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 Mutual funds (1) Limited partnerships Total (In thousands) Cash and money market funds Mutual funds (2) Limited partnerships Total Fair Value Measurements at December 28, 2019 Level 1 Level 2 Level 3 Total 12,318 — — $ — $ 163,253 — — $ — 7,915 12,318 163,253 7,915 12,318 $ 163,253 $ 7,915 $ 183,486 Fair Value Measurements at December 29, 2018 Level 1 Level 2 Level 3 Total 12,984 — — $ — $ 146,591 — — $ — 5,028 12,984 146,591 5,028 12,984 $ 146,591 $ 5,028 $ 164,603 $ $ $ $ F-49 (1) Approximately 80 percent of mutual funds are actively managed funds and approximately 20 percent of mutual funds are index funds. Additionally, 10 percent of the mutual funds’ assets are invested in non-U.S. multi-asset securities, 28 percent in non-U.S. equities, and 62 percent in U.S. fixed income securities. (2) Approximately 61 percent of mutual funds are actively managed funds and approximately 39 percent of mutual funds are index funds. Additionally, 5 percent of the mutual funds’ assets are invested in U.S. equities, 35 percent in non-U.S. equities, 59 percent in U.S. fixed income securities, and 1 percent in non-U.S. fixed income securities. 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 28, 2019: (In thousands) Balance, December 29, 2018 Redemptions Subscriptions Net appreciation in fair value Balance, December 28, 2019 Contributions and Benefit Payments Limited Partnerships $ $ 5,028 (3,825) 6,846 (134) 7,915 The Company does not expect to contribute to its pension plans, other than to reimburse expenses, and expects to contribute $1.0 million to its other postretirement benefit plans in 2020. In November 2019, the Company’s Board of Directors approved the termination of the Mueller Pension Plan effective January 2020. The termination is expected to be complete by the end of 2020. The Company expects future benefits to be paid from the plans as follows: (In thousands) 2020 2021 2022 2023 2024 2025-2029 Total Multiemployer Plan Pension Benefits Other Benefits $ $ 107,864 2,815 2,905 2,998 3,094 17,020 1,014 959 953 1,053 1,062 4,944 $ 136,696 $ 9,985 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 7, 2023 and June 26, 2022, 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. F-50 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 approximately $1.2 million in 2019, $1.3 million in 2018, and $1.1 million in 2017. 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. While the IAM Plan remains well-funded at 89 percent, for 2019, it has been certified in the yellow zone due to a declining credit balance. However, as a result of a challenging investment environment and the decline of the IAM Plan’s credit balance, the IAM National Pension Plan Board of Trustees has voluntarily elected to place the IAM Plan in the red zone for 2019. The action was taken to protect the IAM Plan’s participants’ core retirement benefits and strengthen the IAM Plan’s financial health over the long term. For 2018, the IAM Plan was determined to have green zone status. 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 $5.4 million in 2019, $5.1 million in 2018, and $5.1 million in 2017. 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 (1992 Act) was enacted. The 1992 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 1992 Act, the UMWA 1992 Benefit Plan. The ultimate amount of the Company’s liability under the 1992 Act will vary due to factors which include, among other things, the validity, interpretation, and regulation of the 1992 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 $223 thousand, $153 thousand, and $182 thousand for the years ended 2019, 2018, and 2017, respectively. Note 14 – 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 $1.7 million in 2019, $2.0 million in 2018, and $7.5 million in 2017 for pending environmental matters. Environmental reserves totaled $20.9 million at December 28, 2019 and $23.6 million at December 29, 2018. As of December 28, 2019, the Company expects to spend $0.8 million in 2020, $0.7 million in 2021, $0.6 million in 2022, $0.8 million in 2023, $0.7 million in 2024, and $17.3 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. Altoona. 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 design plan, which covers both on-site and certain off-site cleanup costs, was approved by the KDHE in 2016. Construction of the remedy was completed in 2018. F-51 East La Harpe. At the East La Harpe site, the Company and two other PRPs conducted a site study evaluation under KDHE supervision and prepared a site cleanup plan approved by KDHE. In 2016, the corporate parent (Peabody Energy) of a third party that the Company understands may owe indemnification obligations to one of the other PRPs (Blue Tee) in connection with the East La Harpe site filed for protection under Chapter 11 of the U.S. Bankruptcy Code. KDHE has extended the deadline for the PRPs to develop a repository design plan to allow for wetlands permitting to take place. In December 2018, KDHE provided a draft agreement which contemplates the use of funds KDHE obtained from two other parties (Peabody Energy and Blue Tee) to fund part of the remediation, and removes Blue Tee from the PRPs’ agreement with KDHE. The Company is currently negotiating the terms of the draft agreement. Lanyon. With respect to the Lanyon Site, in 2016, the Company received a general notice letter from the United States Environmental Protection Agency (EPA) asserting that the Company is a PRP, which the Company has denied. EPA issued an interim record of decision in 2017 and has been remediating properties at the site. The Company’s reserve for its proportionate share of the remediation costs associated with these three Southeast Kansas sites is $5.6 million. EPA issued an interim record of decision in 2017 and has been remediating properties at the site. 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 implementing various remedial measures, including sealing mine portals with concrete plugs in portals that 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 10-year permit will include an order requiring continued implementation of BMP through 2030 to address residual discharges of acid rock drainage. At this site, MRRC spent approximately $1.9 million from 2017 through 2019 for remediation, and currently estimates that it will spend between approximately $12.7 million and $17.7 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 is required 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 $0.7 million from 2017 through 2019 with respect to this site. Approximate costs to comply with the post-closure permit, including associated general and administrative costs, are estimated at between $1.8 million and $2.3 million over the next 17 years. 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 (NPL). 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 NPL site. The EPA identified two other PRPs in connection with that 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 NPL site (zones 1 and 3 of operable unit 1) and perform certain remedial action tasks. On November 8, 2016, the Company, its subsidiary Arava Natural Resources Company, Inc. (Arava), and Arava’s subsidiary MRRC each received general notice letters from the EPA asserting that they may be PRPs in connection with the Lead Refinery NPL site. The Company, Arava, and MRRC have denied liability for any remedial action and response costs associated with the Lead Refinery NPL site. In June 2017, the EPA requested that Lead Refinery conduct, and the Company fund, a remedial investigation and feasibility study of operable unit 2 of the Lead Refinery NPL site pursuant to a proposed administrative settlement agreement and order on consent. The Company and Lead Refinery entered into that agreement in September 2017. The Company F-52 has made a capital contribution to Lead Refinery to conduct the remedial investigation and feasibility study with respect to operable unit 2 and has provided financial assurance in the amount of $1.0 million. The EPA has also asserted its position that Mueller is a responsible party for the Lead Refinery NPL site, and accordingly is responsible for a share of remedial action and response costs at the site and in the adjacent residential area. In January 2018, the EPA issued two unilateral administrative orders (UAOs) directing the Company, Lead Refinery, and four other PRPs to conduct soil and interior remediation of certain residences at the Lead Refinery NPL site (zones 2 and 3 of operable unit 1). The Company and Lead Refinery have reached agreement with the four other PRPs to implement these two UAOs, with the Company agreeing to pay, on an interim basis, (i) an estimated $4.5 million (subject to potential change through a future reallocation process) of the approximately $25.0 million the PRPs currently estimate it will cost to implement the UAOs, which estimate is subject to change, and (ii) $2.0 million relating to past costs incurred by other PRPs for work conducted at the site, as well as the possibility of up to $0.7 million in further payments for ongoing work by those PRPs, $0.4 million of which has been incurred by those PRPs and paid for by the Company to date. As of year-end, the Company has made payments of approximately $7.0 million related to the aforementioned agreement with the other PRPs. The Company disputes that it was properly named in the UAOs, and has reserved its rights to petition the EPA for reimbursement of any costs incurred to comply with the UAOs upon the completion of the work required therein. In October 2017, a group of private plaintiffs sued the Company, Arava, MRRC, and Lead Refinery, along with other defendants, in a private tort action relating to the site; the Company, Arava, and MRRC were voluntarily dismissed from that litigation without prejudice in March 2018. A second civil action asserting similar claims was filed against the Company, Arava, MRRC, and Lead Refinery in September 2018. At this juncture, the Company is unable to determine the likelihood of a material adverse outcome or the amount or range of a potential loss in excess of the current reserve with respect to any remedial action or litigation relating to the Lead Refinery NPL site, either at Lead Refinery’s former operating site (operable unit 2) or the adjacent residential area (operable unit 1), including, but not limited to, EPA oversight costs for which EPA may attempt to seek reimbursement from the Company, and past costs for which other PRPs may attempt to seek contribution from the Company. Bonita Peak Mining District Following an August 2015 spill from the Gold King Mine into the Animas River near Silverton, Colorado, the EPA listed the Bonita Peak Mining District on the NPL. Said listing was finalized in September 2016. The Bonita Peak Mining District encompasses 48 mining sites within the Animas River watershed, including the Sunnyside Mine, the American Tunnel, and the Sunbank Group. On or about July 25, 2017, Washington Mining Company (Washington Mining) (a wholly-owned subsidiary of the Company’s wholly-owned subsidiary, Arava), received a general notice letter from the EPA stating that Washington Mining may be a PRP under CERCLA in connection with the Bonita Peak Mining District site and therefore responsible for the remediation of certain portions of the site, along with related costs incurred by the EPA. Shortly thereafter, the Company received a substantively identical letter asserting that it may be a PRP at the site and similarly responsible for the cleanup of certain portions of the site. The general notice letters identify one other PRP at the site, and do not require specific action by Washington Mining or the Company at this time. At this juncture, the Company is unable to determine the likelihood of a materially adverse outcome or the amount or range of a potential loss with respect to any remedial action related to the Bonita Peak Mining District NPL site. Operating Properties Mueller Copper Tube Products, Inc. In 1999, Mueller Copper Tube Products, Inc. (MCTP), a wholly owned subsidiary, commenced a cleanup and 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 estimated to approximate $0.6 million to $0.9 million over the next six 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, F-53 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 would 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 approximately $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 invoices, 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 and issues 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. Equal Employment Opportunity Commission Matter On October 5, 2016, the Company received a demand letter from the Los Angeles District Office of the United States Equal Employment Opportunity Commission (EEOC). The EEOC alleged that between May 2011 and April 2015, various Company employees were terminated in violation of the Americans with Disabilities Act (ADA), and that certain of the Company’s employee leave and attendance policies were discriminatory in nature. Thereafter, the Company, in consultation with its liability insurers, entered into conciliation and mediation efforts with the EEOC for purposes of resolving the claims. At the conclusion of those efforts, the Company and the EEOC reached agreement on a consensual resolution of the EEOC’s claims, which includes both monetary and equitable relief. On June 28, 2018, the EEOC filed a complaint against the Company on behalf of a group of unidentified claimants in the United States District Court for the Central District of California alleging that the Company engaged in unlawful employment practices in violation of the ADA. On July 13, 2018, the District Court approved a Consent Decree between the Company and the EEOC to resolve the EEOC’s claims. The Consent Decree, which is currently set to expire in January 2021, provided that the Company pay up to $1.0 million in monetary relief to fund individual claims for discrimination under the ADA as approved by the EEOC. That amount was fully within the limits of the Company’s applicable insurance coverage, and has been paid to claimants designated as eligible by the EEOC. The Consent Decree also required the Company to take a series of proactive measures to cultivate a work environment free from unlawful discrimination. Those measures have included, among others, assistance with the identification of potential claimants, employee, supervisory and managerial training regarding employee rights under the ADA, revised practices and procedures concerning reasonable workplace accommodations as required by the ADA, and related reporting and recordkeeping. Guarantees Guarantees, in the form of letters of credit, are issued by the Company generally to assure the payment of insurance deductibles, certain retiree health benefits, and debt at certain unconsolidated affiliates. The terms of the guarantees are generally one year but are renewable annually as required. These letters are primarily backed by the Company’s revolving credit facility. The maximum payments that the Company could be required to make under its guarantees at December 28, 2019 were $11.9 million. Other 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. F-54 Note 15 – Income Taxes The components of income before income taxes were taxed under the following jurisdictions: (In thousands) Domestic Foreign Income before income taxes 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 $ $ $ 2019 2018 2017 112,812 53,271 $ 105,455 44,962 $ 76,876 50,096 166,083 $ 150,417 $ 126,972 2019 2018 2017 $ 19,066 12,727 3,892 $ 17,974 9,650 3,158 28,584 10,219 2,241 35,685 30,782 41,044 1,725 (2,311) 158 (1,381) 551 1,000 (1,764) 1,118 (2,514) Deferred tax (benefit) expense (428) 170 (3,160) Income tax expense $ 35,257 $ 30,952 $ 37,884 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) 2019 2018 2017 Expected income tax expense State and local income tax, net of federal benefit Effect of foreign statutory rates different from U.S. and other foreign adjustments U.S. production activities deduction Investment in unconsolidated affiliates Benefit of stock-based compensation deductions Effect of tax on accumulated foreign earnings Effect of tax rate change on net deferred tax liability balance Other, net $ $ 34,892 3,234 $ 31,588 3,495 44,440 1,135 (771) — 538 (36) (111) — (2,489) 759 — (2,776) (41) (4,415) — 2,342 (6,026) (1,575) 216 (2,160) 12,893 (12,067) 1,028 Income tax expense $ 35,257 $ 30,952 $ 37,884 The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax F-55 rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on the accumulated earnings of certain foreign subsidiaries, and created new taxes on certain foreign-sourced earnings. The Company applied the guidance in Staff Accounting Bulletin No. 118 in accounting for the enactment date effects of the Act. At December 30, 2017, the Company made a reasonable estimate of the one-time transition tax on accumulated foreign earnings as well as the impact of the Act on its existing deferred tax balances. During the fourth quarter of 2018, the Company completed its accounting for all of the enactment-date income tax effects of the Act. The one-time transition tax is based on the Company’s total post-1986 earnings and profits (E&P) for which the accrual of U.S. income taxes had previously been deferred. The Company recorded a provisional amount for its one-time transition tax liability, resulting in an increase in income tax expense of $12.9 million, or 22 cents per diluted share, at December 30, 2017. During 2018, the Company continued to refine its calculation of the transition tax. Following the completion of this analysis, the Company recorded a reduction to income tax expense of $4.4 million, or eight cents per diluted share, to reduce this liability. During 2019, the Treasury Department finalized regulations related to the calculation of the transition tax, the impact of which was immaterial to the financial statements. The Company continues to assert that the undistributed earnings of most of its foreign subsidiaries are permanently reinvested. No taxes have been accrued with respect to these undistributed earnings or any outside basis differences. On December 30, 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent, resulting in an income tax benefit of $12.1 million, or 21 cents per diluted share. The Company has concluded that no further adjustment is needed related to this remeasurement. The global intangible low-taxed income (GILTI) provisions of the Act impose a tax on the GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred. The Company includes interest and penalties related to income tax matters as a component of income tax expense. The income tax expense related to penalties and interest was immaterial in 2019, 2018, and 2017. The statute of limitations is open for the Company’s federal tax return for 2015 and all subsequent years. The statutes of limitations for most state returns are open for 2016 and all subsequent years, and some state and foreign returns are also open for some earlier tax years due to differing statute periods. The Internal Revenue Service is currently auditing the Company’s 2015 and 2017 tax returns. 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. F-56 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) 2019 2018 Deferred tax assets: Inventories Other postretirement benefits and accrued items Other reserves Foreign tax attributes State tax attributes, net of federal benefit Stock-based compensation Right of Use Liability Basis difference in unconsolidated affiliates Total deferred tax assets Less valuation allowance Deferred tax assets, net of valuation allowance Deferred tax liabilities: Property, plant, and equipment Pension Right of Use Asset Other Liabilities Total deferred tax liabilities Net deferred tax liabilities $ $ 12,247 9,271 6,834 5,909 22,395 3,378 5,965 6,547 12,297 9,213 7,847 6,252 27,651 2,949 — 1,067 72,546 (23,130) 67,276 (25,311) 49,416 41,965 47,791 949 5,967 311 44,910 250 — — 55,018 45,160 $ (5,602) $ (3,195) As of December 28, 2019, after consideration of the federal impact, the Company had state income tax credit carryforwards of $2.3 million, all of which expire by 2022, and other state income tax credit carryforwards of $11.7 million with unlimited lives. The Company had state net operating loss (NOL) carryforwards with potential tax benefits of $8.4 million, after consideration of the federal impact, expiring between 2020 and 2034. The state tax credit and NOL carryforwards are offset by valuation allowances totaling $10.7 million. As of December 28, 2019, the Company had other foreign tax attributes with potential tax benefits of $5.0 million that have an unlimited life. These attributes were offset by a valuation allowance totaling $3.0 million. The Company also had other foreign tax attributes of $0.9 million, which have limited lives expiring between 2025 and 2039. Income taxes paid were approximately $41.8 million in 2019, $38.1 million in 2018, and $42.5 million in 2017. Note 16 – Equity The Company’s Board of Directors has extended, until August 2020, 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 28, 2019, the Company has repurchased approximately 6.2 million shares under this authorization. F-57 Note 17 – 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 grant date, as well as restricted stock awards. Generally, the awards vest within five years from the grant date. Any unexercised options expire after not more than ten years. During the years ended December 28, 2019, December 29, 2018, and December 30, 2017, the Company recognized stock-based compensation, as a component of selling, general, and administrative expense, in its Consolidated Statements of Income of $8.7 million, $8.0 million, and $7.5 million, respectively. 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 2019, 2018, and 2017 was $8.78, $9.64, and $9.38, 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 not estimated at the time of valuation; they are recognized as they occur. 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: Expected term Expected price volatility Risk-free interest rate Dividend yield 2019 2018 2017 7.8 years 28.6% 2.4% 1.4% 7.6 years 27.2% 2.9% 1.3% 7.7 years 28.9% 2.1% 1.3% 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 grant date 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. The total intrinsic value of options exercised was $1.6 million, $0.9 million, and $10.2 million in 2019, 2018, and 2017, respectively. The total fair value of options that vested was $1.0 million each year in 2019, 2018, and 2017. At December 28, 2019, the aggregate intrinsic value of all outstanding options was $6.3 million with a weighted average remaining contractual term of 5.5 years. Of the outstanding options, 613 thousand are currently exercisable with an aggregate intrinsic value of $5.8 million, a weighted average exercise price of $22.34, and a weighted average remaining contractual term of 4.5 years. The total compensation expense not yet recognized related to unvested options at December 28, 2019 was $1.5 million, with an average expense recognition period of 3.0 years. F-58 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 2019, 2018, and 2017 was $28.82, $32.04, and $30.97, respectively. The aggregate intrinsic value of outstanding and unvested awards was $33.7 million at December 28, 2019. Total compensation expense for restricted stock awards not yet recognized was $18.7 million with an average expense recognition period of 3.2 years. The total fair value of awards that vested was $5.6 million, $3.7 million, and $3.5 million in 2019, 2018, and 2017, 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: (Shares in thousands) Outstanding at December 29, 2018 Granted Exercised/Released Forfeited Outstanding at December 28, 2019 Stock Options Weighted Average Exercise Price Shares Restricted Stock Awards Weighted Average Grant Date Fair Value Shares $ 1,014 34 (94) (15) 939 23.90 28.82 13.37 29.31 25.05 $ 930 316 (182) (2) 1,062 32.14 28.82 31.06 34.12 31.34 Approximately 1.9 million shares were available for future stock incentive awards at December 28, 2019. Note 18 – 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, unrealized gains and losses on marketable securities classified as available-for-sale, and other comprehensive income attributable to unconsolidated affiliates. F-59 The following table provides changes in AOCI by component, net of taxes and noncontrolling interest (amounts in parentheses indicate debits to AOCI): (In thousands) Cumulative Translation Adjustment Unrealized Gain (Loss) on Derivatives Pension/ OPEB Liability Adjustment Attributable to Unconsol. Affiliates Total Balance at December 30, 2017 $ (38,163) $ 847 $ (20,610) $ 6,870 $ (51,056) Other comprehensive loss before reclassifications Amounts reclassified from AOCI Net current-period other comprehensive loss Reclassification of stranded effects of the Act (16,094) — (802) (371) (3,642) 303 (8,686) — (29,224) (68) (16,094) (1,173) (3,339) (8,686) (29,292) — 112 (1,018) 1,462 556 Balance at December 29, 2018 (54,257) (214) (24,967) (354) (79,792) Other comprehensive income (loss) before reclassifications Amounts reclassified from AOCI 8,059 — 1,176 (486) 2,315 797 (839) — 10,711 311 Balance at December 28, 2019 $ (46,198) $ 476 $ (21,855) $ (1,193) $ (68,770) F-60 Reclassification adjustments out of AOCI were as follows: (In thousands) 2019 2018 2017 Affected Line Item Amount reclassified from AOCI Unrealized losses (gains) on derivatives: Commodity contracts Interest rate swap Amortization of net loss and prior service cost on employee benefit plans Gain recognized upon sale of business Sale of available-for-sale securities $ $ $ $ $ $ $ $ (587) $ — 101 (429) $ — 58 1,309 Cost of goods sold 851 (624) Interest expense Income tax expense (benefit) (486) $ (371) $ 1,536 Net of tax and noncontrolling interests $ 960 (163) $ 341 (38) 1,263 Other income, net (221) Income tax benefit 797 $ 303 $ 1,042 Net of tax and noncontrolling interests — $ — — $ — (3,777) Gain on sale of assets, net — Income tax expense — $ — $ (3,777) Net of tax and noncontrolling interests — $ — — $ — (611) Other income, net 232 Income tax expense — $ — $ (379) Net of tax and noncontrolling interests F-61 Note 19 – Quarterly Financial Information (Unaudited) (1) (In thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter 2019 Net sales Gross profit (2) Consolidated net income Net income attributable to Mueller Industries, Inc. Basic earnings per share Diluted earnings per share Dividends per share 2018 Net sales Gross profit (2) Consolidated net income (3) Net income attributable to Mueller Industries, Inc. Basic earnings per share Diluted earnings per share Dividends per share $ $ $ $ 611,781 100,388 17,139 15,723 0.28 0.28 0.10 640,060 94,390 24,344 24,128 0.42 0.42 0.10 $ $ 666,394 102,446 28,676 27,986 0.50 0.50 0.10 662,773 98,953 33,882 33,182 0.58 0.58 0.10 $ $ 608,602 97,814 30,444 29,093 0.52 0.52 0.10 645,958 79,002 20,863 20,292 0.36 0.35 0.10 543,839 94,358 29,973 28,170 0.50 0.50 0.10 559,087 85,133 27,731 26,857 0.47 0.47 0.10 (1) (2) (3) 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. Gross profit is net sales less cost of goods sold, which excludes depreciation and amortization. Includes income earned by ATCO, acquired during Q3 2018, and Die-Mold, acquired during Q1 2018. Note 20 – Subsequent Events On February 12, 2020, Mueller Copper Tube Company, a wholly owned subsidiary of the Company, collected approximately $21.9 million related to its claim under the Deepwater Horizon Economic and Property Damage Settlement Program, which as previously reported by the Company, was originally approved in November 2018, subject to appeal. The collected amount represents settlement proceeds received after the payment of fees and expenses. On January 17, 2020, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding stock of Shoals Tubular, Inc. (STI) for approximately $15.4 million, net of working capital adjustments. STI is a manufacturer of brazed manifolds, headers, and distributor assemblies used primarily by manufactures of residential heating and air conditioning units. STI will be reported with and complements the Company’s existing business in its Climate segment. In January 2020, the Company completed the purchase of its corporate headquarters located in Collierville, TN for $10.6 million. In 2019, the building was leased and was included in the operating lease right-of-use assets line item in the Consolidated Balance Sheet. In 2020, it will be included in property, plant, and equipment, net. The corporate headquarters lease represents $9.3 million and $9.5 million of the total operating lease right-of-use-assets and related lease liabilities at year-end. Remaining lease payments under the previous agreement were $14.5 million at the end of 2019 and are included in the operating lease maturities table in “Note 8 – Leases.” F-62 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Mueller Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Mueller Industries, Inc. (the Company) as of December 28, 2019 and December 29, 2018, 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 28, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2019 and December 29, 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2019, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2019, 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 26, 2020 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-63 Description of the Matter Defined Benefit Pension Obligation At December 28, 2019, the aggregate defined benefit pension obligation was $182.2 million, and the fair value of pension plan assets was $183.5 million, resulting in an overfunded defined benefit pension obligation of $1.3 million. As disclosed in Notes 1 and 13 to the consolidated financial statements, the Company recognizes the overfunded or underfunded status of the plans as an asset or liability in the consolidated balance sheets with changes in the funded status recorded through comprehensive 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, and certain employee-related factors such as mortality. Auditing the defined benefit pension obligation is complex and required the involvement of our actuarial specialists due to the highly judgmental nature of actuarial assumptions (e.g., discount rate, expected return on plan assets, and mortality rate) used in the measurement process and the geographical differences of the plans, which require different considerations for the relevant assumptions based on the respective economic and demographic environments. These assumptions have a significant effect on the projected benefit obligation. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the measurement and valuation of the defined benefit pension obligation. For example, we tested controls over management’s review of the defined benefit pension obligation, including the significant actuarial assumptions used by management and the related data inputs. To test the defined benefit pension obligation, our audit procedures included, among others, evaluating the methodology used, the significant actuarial assumptions discussed above and testing the completeness and accuracy of the underlying data, including the participant data used by management. We involved our actuarial specialist to assist with our procedures. For example, we compared the actuarial assumptions used by management to historical trends and evaluated the change in the defined benefit pension obligation from prior year due to the change in service cost, interest cost, actuarial gains and losses, benefit payments, contributions and other activities. In addition, we evaluated management’s methodology for determining the discount rate that reflects the maturity and duration of the benefit payments that is used to measure the defined benefit pension obligation. As part of this assessment, we compared management’s selected discount rate to an independently developed range of reasonable discount rates. To evaluate the mortality rate assumption, we assessed whether the information is consistent with publicly available information, and whether any market data adjusted for entity-specific factors were applied. Lastly, to evaluate the expected return on plan assets, we assessed whether management’s assumption was consistent with a range of returns for a portfolio of comparative investments. Description of the Matter Valuation of Goodwill - Heatlink Group Reporting Unit At December 28, 2019, the Company’s goodwill was $153.3 million, of which $131.6 million related to the Piping Systems segment which includes the Heatlink Group reporting unit. As disclosed in Notes 1 and 10 to the consolidated financial statements, 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. Auditing management’s annual goodwill impairment test for the Heatlink Group reporting unit was complex and highly judgmental due to the significant estimates required to determine the fair value of the reporting unit. Fair value for the Heatlink Group reporting unit is determined using the income approach, incorporating market participant considerations and management’s assumptions on revenue growth rates, operating margins, discount rates and a terminal value, among other factors. Fair value estimates of reporting units with fair values that do not significantly exceed their carrying values are sensitive to these assumptions and are directly impacted by the condition of the markets in which the reporting unit operates. F-64 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the goodwill impairment process. For example, we tested controls over management’s review of the significant assumptions used in the reporting unit valuations as well as management’s review around the reasonableness of the data used in these valuations. To test the estimated fair value of the Heatlink Group reporting unit, we performed audit procedures that included, among others, evaluating methodologies used, involving our valuation specialists in testing the significant assumptions and valuation methodology described above and testing the underlying data used by the Company in its analysis for completeness and accuracy. We compared the significant assumptions used by management to current industry and economic trends, historical results and other guideline companies within the same industry, as well as other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the reporting unit resulting from changes in the inputs and assumptions. We evaluated the incorporation of the applicable assumptions into the model and tested the model’s computational accuracy. We have served as the Company’s auditor since 1991. Memphis, Tennessee February 26, 2020 F-65 MUELLER INDUSTRIES, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 28, 2019, December 29, 2018, and December 30, 2017 (In thousands) 2019 Allowance for doubtful accounts Environmental reserves Valuation allowance for deferred tax assets 2018 Allowance for doubtful accounts Environmental reserves Valuation allowance for deferred tax assets 2017 Allowance for doubtful accounts Environmental reserves Valuation allowance for deferred tax assets Additions Balance at beginning of year Charged to costs and expenses Other additions Deductions Balance at end of year $ $ $ $ $ $ $ $ $ 836 23,619 $ $ (81) $ 1,659 $ 263 — 25,311 $ 2,919 $ 290 980 28,004 $ $ (286) $ 1,981 $ 220 — 30,316 $ 1,209 $ 150 637 21,864 $ $ 422 7,491 $ $ (61) — $ $ $ $ $ $ $ $ 248 4,412 $ $ 770 20,866 5,390 $ 23,130 78 6,366 $ $ 836 23,619 6,364 $ 25,311 18 1,351 $ $ 980 28,004 18,681 $ 7 $ 11,628 (1) $ — $ 30,316 (1) The valuation allowance increased by $11.6 million during 2017 to a balance of $30.3 million as of December 30, 2017. The change to the valuation allowance was attributable to the recording of valuation allowances against tax attributes generated in 2017 primarily resulting from the Act and increased interest expense in state tax jurisdictions where the Company has no tax liability. F-66 APPENDIX A MUELLER INDUSTRIES, INC. RECONCILIATION OF OPERATING INCOME AS REPORTED TO NON-GAAP FINANCIAL MEASURES Operating Income, as reported $138,704 $154,401 $150,807 $172,969 $191,403 2015 2016 2017 2018 2019 Gain on Asset Sales Impairment Charges Insurance Proceeds Severance (15,376) — — 3,442 — 6,778 (1,491) 1,466 (253) (963) (3,641) (485) Adjusted Operating Income $126,770 $161,179 $150,782 $169,075 $189,955 Depreciation and Amortization 34,608 35,133 33,944 39,555 42,693 Adjusted EBITDA $161,378 $196,312 $184,726 $208,630 $232,648 This page intentionally left blank This page intentionally left blank This page intentionally left blank ANNUAL MEETING The Annual Meeting of Stockholders will be held at the Company’s headquarters at 150 Schilling Boulevard, Second Floor, Collierville, TN 38017, 10:00 a.m. local time (CDT), May 7, 2020. CAPITAL STOCK INFORMATION The Company declared and paid a quarterly cash dividend of 10 cents per common share in each quarter of 2018 and 2019. In addition, in 2017 the Company declared and paid a special dividend of $8 per share. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, and other factors. COMMON STOCK As of February 21, 2020, the number of holders of record of Mueller’s common stock was approximately 674. NEW YORK STOCK EXCHANGE On February 21, 2020, the closing price for Mueller’s common stock on the New York Stock Exchange was $33.18. 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 150 Schilling Blvd., Suite 100 Collierville, TN 38017 NYSE CERTIFICATIONS The Company submitted an unqualified Section 12(a) CEO Certification to the NYSE in 2019. 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 2019 and 2018. MARKET FOR MUELLER INDUSTRIES SECURITIES Common stock is traded on the NYSE (MLI). TRANSFER AGENT, REGISTRAR & 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: help@astfinancial.com Website: www.astfinancial.com BOARD OF DIRECTORS Gregory L. Christopher, Chairman Terry Hermanson, Lead Independent Director Elizabeth Donovan Paul J. Flaherty Gennaro J. Fulvio Gary S. Gladstein Scott J. Goldman John B. Hansen Charles P. Herzog, Jr. 150 Schilling Blvd., Suite 100 Collierville, TN 38017 (901) 753-3200 www.muellerindustries.com 

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