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&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
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2019 FORM 10-K
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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
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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