Core Insights - Quantumscale and Mueller Industries are highlighted as having significant potential for investors looking for stocks to buy in September [1] Company Analysis - Quantumscale is noted for delivering spectacular returns, indicating strong past performance and investor interest [1] - Mueller Industries is recognized for its spectacular potential, suggesting future growth opportunities that may attract investors [1]

Financial Performance - Net sales for the second quarter of 2024 were $997.7 million, an increase of 11.2% compared to $897.0 million in the same quarter of 2023[1] - Operating income for the quarter was $210.0 million, slightly down from $210.7 million year-over-year[1] - Earnings before taxes decreased to $222.9 million from $241.0 million in the previous year[8] - Diluted earnings per share (EPS) were $1.41, compared to $1.56 in the same quarter last year, reflecting a decrease of 9.6%[16] - Net income for the second quarter of 2024 was $160.2 million, a decrease from $177.7 million in the same period of 2023[25] Cash Flow and Liquidity - The company generated net cash from operations of $100.8 million, with a cash balance of $825.7 million at the end of the quarter[1] - The current ratio remains strong at 4.7 to 1, indicating solid liquidity[17] - Cash deployed during the quarter included $566.6 million for acquisitions and $15.1 million in stock repurchases[1] - Cash and cash equivalents decreased to $825,655 thousand from $1,170,893 thousand at the end of December 2023[30] - Net cash used in financing activities was $(89,584) thousand for the six months ended July 1, 2023, compared to $(55,566) thousand in the prior period[23] - Cash flow from operating activities showed a significant decrease, with a net cash decrease of $(332,208) thousand compared to an increase of $308,085 thousand in the prior period[23] - The company repurchased common stock amounting to $(42,994) thousand during the six months ended July 1, 2023, compared to $(19,303) thousand in the previous period[23] - The company reported an effect of exchange rate changes on cash of $(4,784) thousand for the current period[23] Segment Performance - The acquisition of Nehring Electrical Works contributed to the increase in net sales, providing a platform for expansion in the energy infrastructure sector[9] - The Piping Systems Segment reported net sales of $688.5 million, up from $638.0 million year-over-year[5] Balance Sheet Highlights - Total assets increased to $3,066,185 thousand from $2,759,301 thousand at the end of December 2023[30] - Total current liabilities rose to $387,228 thousand compared to $317,138 thousand at the end of December 2023[30] - Total equity increased to $2,572,858 thousand from $2,358,716 thousand at the end of December 2023[30] Commodity Prices - COMEX copper prices averaged $4.55 per pound during the quarter, which is 18.4% higher than the same period in 2023[16] Adjusted Performance - Adjusted for a $19.5 million insurance settlement gain in 2023, quarterly operating income improved by 9.8% year-over-year[25]

Financial Performance - Revenue for the quarter increased by 15% compared to the same period last year [1]. - Net profit margin improved to 12%, up from 10% in the previous quarter [2]. - Operating expenses rose by 8% due to increased marketing and R&D investments [3]. Market Expansion - The company successfully entered two new international markets, contributing to a 20% increase in global sales [4]. - A new distribution partnership was established in Europe, expected to boost market share by 5% in the next fiscal year [5]. Product Development - Launched three new products, which accounted for 25% of total sales in the quarter [6]. - R&D investment increased by 10% to support ongoing product innovation and development [7]. Operational Efficiency - Implemented new cost-saving measures that reduced production costs by 5% [8]. - Streamlined supply chain operations, resulting in a 10% reduction in delivery times [9]. Customer Engagement - Customer satisfaction scores improved by 15% due to enhanced service and support initiatives [10]. - Launched a new loyalty program, which has already attracted 50,000 new members [11]. Strategic Partnerships - Formed a strategic alliance with a leading technology firm to co-develop next-generation solutions [12]. - Signed a long-term agreement with a major supplier to secure better pricing and ensure supply chain stability [13]. Regulatory Compliance - Achieved full compliance with new industry regulations, avoiding potential fines and penalties [14]. - Invested in additional training programs to ensure all employees are up-to-date with the latest compliance requirements [15]. Sustainability Initiatives - Reduced carbon emissions by 10% through the implementation of energy-efficient practices [16]. - Committed to achieving net-zero emissions by 2030, with a detailed roadmap in place [17]. Employee Development - Increased employee training budgets by 20% to support professional growth and skill development [18]. - Introduced a new mentorship program to foster leadership and innovation within the organization [19]. Technology Investments - Allocated $50 million to upgrade IT infrastructure, enhancing data security and system reliability [20]. - Partnered with a leading AI firm to integrate advanced analytics into business operations [21]. Risk Management - Conducted a comprehensive risk assessment, identifying and mitigating potential threats to business continuity [22]. - Established a dedicated risk management team to monitor and address emerging risks [23]. Shareholder Value - Increased dividend payouts by 10%, reflecting strong financial performance and confidence in future growth [24]. - Announced a share buyback program to return value to shareholders and support stock price stability [25].

Sales and Market Performance - Mueller Industries reported a significant increase in sales driven by new housing starts and commercial construction, which are key determinants for the HVAC, refrigeration, and plumbing markets[16]. - Net sales for 2023 were $3,420,345, a decrease of 14.1% compared to $3,982,455 in 2022[136]. - The decrease in net sales in 2023 was primarily due to lower unit sales volume of $264.8 million in core product lines and a decrease in sales of $203.0 million in non-core product lines[136]. - In 2023, net sales for the Piping Systems segment were $2,382.6 million, a decrease of 12.7% compared to $2,730.1 million in 2022[156]. - The Industrial Metals segment reported net sales of $577.9 million in 2023, a decline of 10.4% from $644.7 million in 2022[162]. - The Climate segment's net sales fell to $500.8 million in 2023, a decrease of 23.0% compared to $650.3 million in 2022[169]. Financial Performance - Operating income for 2023 was $756,053, down 13.8% from $877,149 in 2022[136]. - Net income for 2023 was $602,897, an 8.4% decrease from $658,316 in 2022[136]. - Cost of goods sold for 2023 was $2,433,511, representing 71.1% of net sales, compared to 71.9% in 2022[138]. - Gross margin as a percentage of sales increased to 28.9% in 2023 from 28.1% in 2022[138]. - Selling, general, and administrative expenses increased to $208,172 in 2023, primarily due to higher foreign currency transaction losses and legal fees[140]. - The company recognized a gain of $19.5 million from an insurance settlement related to a fire incident in 2022[141]. - Interest income increased in 2023 due to higher rates on deposits and short-term investments[144]. Operational Challenges and Risks - The total order backlog for the Industrial Metals Segment as of December 30, 2023, was not significant, indicating potential challenges in demand[29]. - The Climate segment's total order backlog as of December 30, 2023, was also not significant, reflecting similar demand concerns[34]. - Economic conditions in the housing and commercial construction industries, along with inflation and interest rate changes, could materially impact the company's financial condition and results of operations[48]. - Inflationary pressures have increased, impacting raw material costs and potentially affecting the company's ability to raise product prices[50]. - Competitive conditions, including the threat of imports and substitute products, could materially affect demand and profitability across all product lines[53]. - Strikes or work stoppages could disrupt operations and increase operating costs, adversely affecting profitability[56]. - Cybersecurity threats are on the rise, and breaches could expose the company to legal liability and adversely affect its reputation and operations[60]. Strategic Acquisitions and Investments - The company acquired Kessler Sales and Distribution on August 2, 2020, and increased its equity interest in Mueller Middle East to 55% on December 7, 2021, enhancing its Piping Systems segment[20]. - The company has made strategic acquisitions in Europe, Canada, South Korea, the Middle East, and the United States to enhance long-term growth and profitability[58]. - Capital expenditures for 2023 were $54.0 million, with an anticipated investment of $50.0 million to $60.0 million in 2024[192]. Shareholder Returns and Stock Performance - The company paid a quarterly cash dividend of $0.15 per share during fiscal year 2023, up from $0.125 per share in fiscal year 2022, reflecting a 20% increase[78]. - The company has repurchased approximately 15.0 million shares under its 40 million share repurchase authorization since its initial authorization in 1999[80]. - The company has extended the authorization to repurchase shares until July 2024, indicating ongoing commitment to returning value to shareholders[80]. - The company's stock performance showed a total return of 432.45% from 2018 to 2023, significantly outperforming the Dow Jones U.S. Total Return Index, which returned 203.70% in the same period[84]. Compliance and Regulatory Matters - The company anticipates expenditures of approximately $5.2 million for compliance activities related to existing environmental matters over the next three fiscal years[41]. - The provision for environmental matters was $0.7 million for 2023, down from $1.4 million in 2022 and $5.0 million in 2021, showing a decreasing trend in environmental expenses[41]. - Future compliance with environmental, health, and safety regulations may require significant capital expenditures, impacting competitiveness and financial results[55]. - The company is involved in various claims and regulatory proceedings that could have a material adverse effect on its financial position[54]. Workforce and Employment - As of December 30, 2023, the company employed approximately 4,509 employees, with 1,512 represented by various unions, indicating a stable workforce[35]. - The unplanned departure of key personnel could disrupt business operations and management capabilities[61]. Financial Position and Liquidity - The company's current ratio was 6.4 to 1 as of December 30, 2023, indicating strong liquidity[185]. - Total debt as of December 30, 2023, was $1.0 million, less than 1% of total capitalization[195]. - The company has no variable-rate debt outstanding as of December 30, 2023, indicating minimal interest rate exposure[203]. - Total contractual cash obligations amount to $799.3 million, with $759.4 million due in 2024 and 2025-2026[197]. Foreign Operations and Currency Exposure - Exposure to foreign currency exchange rate fluctuations could significantly impact competitiveness and reported results, particularly with currencies like the British pound and Mexican peso[52]. - The net investment in foreign subsidiaries translated into U.S. dollars was $270.8 million at December 30, 2023, down from $338.6 million at December 31, 2022[205]. - A hypothetical 10 percent adverse change in foreign currency exchange rates could result in a potential loss of $27.1 million in the company's net investment in foreign subsidiaries[205]. - The company experienced a 6 percent increase in the value of the British pound and a 14 percent increase in the Mexican peso relative to the U.S. dollar in 2023[206]. Governance and Internal Controls - The company maintained effective internal control over financial reporting as of December 30, 2023, according to an independent audit[98]. - The company has a Code of Business Conduct and Ethics applicable to its chief executive officer, chief financial officer, and other financial executives[110]. - The company plans to file its Proxy Statement for the 2024 Annual Meeting of Stockholders on or about March 22, 2024, which will include information on executive compensation and corporate governance[109][111]. - The company has a clawback policy in place[119].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly report ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 1-6770 MUELLER INDUSTRIES INC. (Exact name of registrant as specified in its charter) Delaware 25-0790410 (State or other jurisdict ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Mueller Industries manufactures copper, brass, aluminum, and plastic products for HVAC, refrigeration, and plumbing, operating globally across three segments - The company is a leading manufacturer of copper, brass, aluminum, and plastic products with operations located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China[13](index=13&type=chunk) - Business operations are organized into three reportable segments: Piping Systems, Industrial Metals, and Climate[14](index=14&type=chunk) - Sales are heavily dependent on the construction and remodeling markets, as a significant portion of products are used in single and multi-family housing and commercial buildings[16](index=16&type=chunk) [Piping Systems Segment](index=4&type=section&id=Piping%20Systems%20Segment) This segment manufactures and distributes copper and PEX piping products globally to wholesalers, retailers, and OEMs, facing competition from industry leaders - The Piping Systems segment manufactures and distributes copper tube, fittings, line sets, and PEX plumbing systems, with operations in the U.S., Canada, Europe, South Korea, and the Middle East[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - The segment sells to wholesalers in plumbing and refrigeration, distributors for manufactured housing, building material retailers, and air-conditioning OEMs[22](index=22&type=chunk) - Key competitors in the U.S. copper tube market include Cerro Flow Products LLC and Cambridge-Lee Industries LLC, while the copper fittings market includes competitors like Elkhart Products Company and NIBCO, Inc[23](index=23&type=chunk) [Industrial Metals Segment](index=6&type=section&id=Industrial%20Metals%20Segment) This segment produces brass rod, forgings, and specialty tubing for domestic OEMs in industrial, construction, HVAC, and plumbing markets - This segment manufactures a broad range of products including brass rod, aluminum/brass forgings, and specialty copper/aluminum tube[24](index=24&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) - Products are sold primarily to domestic OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets[29](index=29&type=chunk) - The primary competitor in the brass rod market is Wieland Chase, LLC, a subsidiary of Wieland-Werke AG[29](index=29&type=chunk) [Climate Segment](index=6&type=section&id=Climate%20Segment) The Climate segment manufactures HVAC and refrigeration products, including valves, fittings, and duct systems, primarily for U.S. wholesalers and OEMs - The Climate segment manufactures refrigeration products, high-pressure components, heat exchangers, and insulated HVAC flexible duct systems[30](index=30&type=chunk)[32](index=32&type=chunk) - The segment's customer base consists predominantly of wholesalers and OEMs in the U.S. HVAC and refrigeration markets[34](index=34&type=chunk) - The company has expanded this segment through acquisitions, including ATCO in 2018 and H&C Flex in 2021[33](index=33&type=chunk) [Human Capital and Other Factors](index=8&type=section&id=Human%20Capital%20and%20Other%20Factors) The company employs 5,137 people, sources raw materials like copper, is not patent-dependent, and experiences seasonal sales moderation in Q4 - As of December 31, 2022, the company employed approximately **5,137 people**, with **1,635** represented by various unions[35](index=35&type=chunk) - Primary raw materials, mainly **copper**, are obtained through short-term supply contracts and the open market, with historically adequate supplies[38](index=38&type=chunk)[39](index=39&type=chunk) - Net sales typically moderate in the fourth quarter due to seasonal construction markets and customer shutdowns for holidays and year-end maintenance[45](index=45&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces economic, competitive, and operational risks, including commodity volatility, construction market dependence, and regulatory compliance - Economic risks include the impact of volatile raw material and energy costs, which could adversely affect operating margins if not passed on to customers[48](index=48&type=chunk) - The business is sensitive to economic conditions in the housing and commercial construction industries, as well as inflation and changes in interest rates[49](index=49&type=chunk)[50](index=50&type=chunk) - Competitive risks stem from imports, substitute products, and new technologies, which could reduce demand and profitability[54](index=54&type=chunk) - Operational risks include potential work stoppages from union contract negotiations, business interruptions, and difficulties integrating acquired businesses[57](index=57&type=chunk)[59](index=59&type=chunk) - The company is subject to litigation and regulatory risks, including environmental, health, and safety laws that could result in significant compliance costs and liabilities[55](index=55&type=chunk)[56](index=56&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) The company owns most of its satisfactory operating facilities, with a detailed list provided across its three segments - The company owns the majority of its principal operating facilities, which are considered to be in satisfactory condition[65](index=65&type=chunk) - A detailed table lists major facilities for the Piping Systems, Industrial Metals, and Climate segments, covering locations in the U.S., Canada, Mexico, England, South Korea, and Bahrain[66](index=66&type=chunk)[67](index=67&type=chunk) [Legal Proceedings](index=15&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal claims, with material details referenced in Note 14 of the financial statements - The company is involved in litigation from claims arising in the ordinary course of business[68](index=68&type=chunk) - Details on material pending legal proceedings are incorporated by reference from Note 14 of the financial statements[69](index=69&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NYSE, with increased dividends, an active share repurchase program, and performance compared to market indices Quarterly Dividend per Share | Year | Dividend per Share | | :--- | :--- | | 2021 | $0.13 | | 2022 | $0.25 | - The Board of Directors has authorized the repurchase of up to **20 million shares** of common stock, with the program extended until July 2023. As of December 31, 2022, approximately **7.2 million shares** have been repurchased under this authorization[75](index=75&type=chunk) Company Stock Performance vs. Indices (2017-2022) | Year | Mueller Industries, Inc. | Dow Jones U.S. Total Return Index | Dow Jones U.S. Building Materials & Fixtures Index | | :--- | :--- | :--- | :--- | | 2017 | 100.00 | 100.00 | 100.00 | | 2018 | 67.04 | 95.03 | 79.24 | | 2019 | 92.16 | 124.62 | 115.95 | | 2020 | 102.81 | 150.05 | 143.87 | | 2021 | 174.23 | 189.81 | 215.35 | | 2022 | 178.57 | 152.98 | 156.35 | [Management's Discussion and Analysis (MD&A)](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A analyzes 2022 financial performance, highlighting a 5.7% net sales increase, 33.7% operating income growth, strong liquidity, and risk management strategies [Results of Operations](index=30&type=section&id=Results%20of%20Operations) 2022 saw consolidated net sales increase 5.7% to **$4.0 billion**, operating income surge 33.7%, and net income grow 40.5%, driven by improved gross margins Consolidated Operating Results (2020-2022) | (In thousands) | 2022 | 2021 | 2020 | % Change (22 vs 21) | % Change (21 vs 20) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $3,982,455 | $3,769,345 | $2,398,043 | 5.7% | 57.2% | | Operating income | $877,149 | $655,845 | $245,838 | 33.7% | 166.8% | | Net income | $658,316 | $468,520 | $139,493 | 40.5% | 235.9% | Components of Net Sales Change (2022 vs. 2021) | Component | % Change | | :--- | :--- | | Net selling price | 6.1% | | Unit sales volume | (5.9)% | | Acquisitions | 1.9% | | Dispositions | (2.2)% | | Other | 5.8% | | **Total** | **5.7%** | - Gross margin as a percentage of sales increased to **28.1%** in 2022 from **22.0%** in 2021, driven by strong demand, inflation, and supply constraints which led to higher selling prices and improved margins[134](index=134&type=chunk) - The effective tax rate for 2022 was **25.5%**, slightly lower than the **25.9%** rate in 2021[144](index=144&type=chunk)[145](index=145&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated **$723.9 million** in operating cash flow, maintained strong liquidity with a 4.4:1 current ratio, and kept total debt low at **$2.0 million** Selected Cash Flow and Liquidity Data (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $723,943 | $311,701 | $245,073 | | Net cash (used in) provided by investing activities | ($242,003) | $29,073 | ($125,622) | | Net cash used in financing activities | ($102,655) | ($376,722) | ($92,264) | | Capital Expenditures | $37,639 | $31,833 | $43,885 | - The company's current ratio was **4.4 to 1** as of December 31, 2022, indicating a strong liquidity position[176](index=176&type=chunk) - As of December 31, 2022, total debt was only **$2.0 million**, representing **0.1%** of total capitalization, and the company was in compliance with all debt covenants[186](index=186&type=chunk) [Market Risks and Critical Accounting Policies](index=40&type=section&id=Market%20Risks%20and%20Critical%20Accounting%20Policies) The company manages market risks from raw material, interest rate, and foreign currency fluctuations using derivatives, and applies critical accounting policies requiring judgment - The company is exposed to market risks from changes in raw material costs, interest rates, and foreign currency exchange rates, and uses financial instruments to mitigate these risks[189](index=189&type=chunk) - At December 31, 2022, the company held open futures contracts to purchase approximately **$91.8 million** of copper related to fixed-price sales orders[191](index=191&type=chunk) - Critical accounting policies include inventory valuation reserves, annual goodwill impairment testing, pension benefit plan assumptions, estimation of environmental reserves, and income tax provisions[197](index=197&type=chunk)[198](index=198&type=chunk)[201](index=201&type=chunk) [Financial Statements and Supplementary Data](index=19&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including income, balance sheets, cash flows, and equity, with accompanying notes and auditor's report Consolidated Statements of Income (in thousands, except per share data) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $3,982,455 | $3,769,345 | $2,398,043 | | Operating income | $877,149 | $655,845 | $245,838 | | Net income attributable to Mueller | $658,316 | $468,520 | $139,493 | | Diluted earnings per share | $11.64 | $8.25 | $2.47 | Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2022 | Dec 25, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $461,018 | $87,924 | | Total current assets | $1,534,653 | $1,019,003 | | Total Assets | $2,242,399 | $1,728,936 | | Total current liabilities | $348,295 | $382,439 | | Total Liabilities | $428,435 | $471,973 | | Total Mueller Industries, Inc. stockholders' equity | $1,790,914 | $1,222,118 | Consolidated Statements of Cash Flows (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $723,943 | $311,701 | $245,073 | | Net cash (used in) provided by investing activities | ($242,003) | $29,073 | ($125,622) | | Net cash used in financing activities | ($102,655) | ($376,722) | ($92,264) | [Controls and Procedures](index=20&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[87](index=87&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[89](index=89&type=chunk) - Ernst & Young LLP, the independent auditor, issued an unqualified attestation report on the company's internal control over financial reporting[90](index=90&type=chunk)[94](index=94&type=chunk) Part III [Directors, Executive Officers, Compensation, and Governance](index=22&type=section&id=Items%2010-14) Information on directors, executive officers, compensation, and governance is incorporated by reference from the 2023 Proxy Statement, with equity compensation plan details provided - Most information for Part III (Items 10, 11, 12, 13, and 14) is incorporated by reference from the company's 2023 Proxy Statement[104](index=104&type=chunk)[106](index=106&type=chunk)[109](index=109&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise (thousands) | Weighted average exercise price | Securities remaining available for future issuance (thousands) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 442 | $29.20 | 1,204 | | Total | 442 | $29.20 | 1,204 | Part IV [Exhibits, Financial Statement Schedules](index=24&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents and certifications - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[112](index=112&type=chunk) - Exhibits include corporate governance documents, descriptions of securities, material contracts, and certifications by the CEO and CFO[113](index=113&type=chunk)[114](index=114&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) Mueller Industries, Inc. manufactures copper, brass, aluminum, and plastic products for HVAC, refrigeration, and plumbing markets - The company is a leading manufacturer of copper, brass, aluminum, and plastic products, including tubes, fittings, rods, and valves[13](index=13&type=chunk) - Business operations are organized into three reportable segments: Piping Systems, Industrial Metals, and Climate[14](index=14&type=chunk) - Key market drivers include new housing starts, commercial construction, and repair/remodeling projects, with products also used in transportation, automotive, and industrial applications[16](index=16&type=chunk) [Piping Systems Segment](index=4&type=section&id=Piping%20Systems%20Segment) The largest segment manufactures and distributes copper and PEX plastic systems globally for plumbing, refrigeration, and HVAC - Manufactures copper tube, fittings, line sets, and PEX plumbing systems. Sells to wholesalers, retailers, and OEMs in the plumbing, refrigeration, and HVAC markets[17](index=17&type=chunk)[18](index=18&type=chunk)[22](index=22&type=chunk) - Key competitors include Cerro Flow Products, Cambridge-Lee Industries, Elkhart Products Company, and NIBCO, Inc., as well as foreign manufacturers and producers of substitute plastic products[23](index=23&type=chunk) - In **2021**, the company increased its equity interest in Mueller Middle East to **55%** and disposed of Die-Mold Tool Limited[20](index=20&type=chunk)[21](index=21&type=chunk) [Industrial Metals Segment](index=6&type=section&id=Industrial%20Metals%20Segment) The Industrial Metals segment manufactures brass rod, aluminum/brass forgings, and aluminum impact extrusions for various OEMs - Produces brass rod, aluminum/brass forgings, and aluminum impact extrusions for OEMs in various industries including automotive, military, and general manufacturing[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company disposed of its Copper Bar business on October **25**, **2021**[28](index=28&type=chunk) [Climate Segment](index=6&type=section&id=Climate%20Segment) This segment designs and manufactures products for commercial HVAC and refrigeration, including valves and heat exchangers - Manufactures refrigeration valves, fittings, heat exchangers, and flexible duct systems for the HVAC and refrigeration markets[29](index=29&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk) - Acquired H&C Flex on January **29**, **2021**, complementing its flexible duct systems business[32](index=32&type=chunk) - Disposed of Fabricated Tube Products and Shoals on July **28**, **2021**[33](index=33&type=chunk) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) As of December **25**, **2021**, the company employed approximately **5,337** people, with **1,803** union members - Employed approximately **5,337** people as of year-end **2021**, with **1,803** being union members[34](index=34&type=chunk) [Raw Material and Energy Availability](index=8&type=section&id=Raw%20Material%20and%20Energy%20Availability) The company primarily sources copper through short-term contracts, facing potential pricing volatility or supply risks - A substantial portion of base metal requirements, primarily copper, is obtained through short-term supply contracts and the open market[37](index=37&type=chunk) - The company has commitments from refined copper producers for a portion of its **2022** metal requirements[39](index=39&type=chunk) [Environmental Proceedings](index=9&type=section&id=Environmental%20Proceedings) The company maintains environmental reserves, totaling **$27.4 million** at year-end **2021**, with anticipated future compliance spending Environmental Reserve and Expense | Metric | 2021 | 2020 | | :--- | :--- | :--- | | **Provision for Environmental Matters** | $5.0 million | $4.2 million | | **Year-End Environmental Reserve** | $27.4 million | $24.0 million | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks from economic conditions, raw material costs, competition, litigation, and operations [Risks Related to the Economy and Other External Factors](index=10&type=section&id=Risks%20Related%20to%20the%20Economy%20and%20Other%20External%20Factors) The company's financial performance is sensitive to economic conditions, raw material costs, and currency fluctuations - Costs of raw materials (copper, brass, zinc, aluminum) and energy are volatile and may not be fully passed on to customers, potentially impacting operating margins[48](index=48&type=chunk)[49](index=49&type=chunk) - Business is sensitive to economic conditions in housing and commercial construction, with higher interest rates and inflation posing a material adverse risk[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - The COVID-19 pandemic continues to create uncertainty, potentially impacting demand, supply chains, and manufacturing operations[55](index=55&type=chunk) [Market and Competition Risks](index=12&type=section&id=Market%20and%20Competition%20Risks) The company operates in competitive markets, facing risks from lower-cost imports and substitute products - Competitive conditions, including the impact of imports and substitute products (e.g., plastics, aluminum-based systems), could adversely affect demand and margins[58](index=58&type=chunk) [Litigation and Regulatory Risks](index=12&type=section&id=Litigation%20and%20Regulatory%20Risks) The company is subject to legal and regulatory proceedings, with environmental costs potentially exceeding reserves - The company faces risks from claims, litigation, and regulatory proceedings that could result in adverse outcomes and defense costs[59](index=59&type=chunk) - Compliance with environmental, health, and safety laws may require significant costs, and future liabilities could have a material adverse effect[60](index=60&type=chunk) [Operational Risks](index=13&type=section&id=Operational%20Risks) Operational risks include labor disputes, challenges in integrating acquisitions, and cybersecurity threats - A significant number of employees are covered by collective bargaining agreements, and an inability to renew them favorably could lead to strikes or higher operating costs[61](index=61&type=chunk) - Failure to successfully execute, integrate, and grow acquired businesses could negatively impact financial results[63](index=63&type=chunk)[64](index=64&type=chunk) - The company is subject to risks from cyber attacks, which could lead to data misuse, operational disruptions, and legal liability[65](index=65&type=chunk) [Unresolved Staff Comments](index=13&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[67](index=67&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) This section details the company's major operating facilities, including location, primary use, and ownership status - The company owns and/or leases numerous manufacturing, packaging, and distribution facilities across its three segments in the U.S., Canada, Mexico, England, South Korea, and Bahrain[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Legal Proceedings](index=15&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in certain litigation arising from the ordinary course of business, with details in Note **14** - The company is involved in litigation from claims that arose in the ordinary course of business[71](index=71&type=chunk) - For detailed information on material pending legal proceedings, the company incorporates by reference "Note **14** – Commitments and Contingencies"[72](index=72&type=chunk) [Mine Safety Disclosures](index=15&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[73](index=73&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE, with increased dividends and an ongoing share repurchase program - The company's common stock is listed on the New York Stock Exchange (NYSE) under the symbol "MLI"[76](index=76&type=chunk) Quarterly Cash Dividend per Share | Year | Dividend per Share | | :--- | :--- | | **2021** | $0.13 | | **2020** | $0.10 | - The Board authorized a repurchase of up to **20 million** shares, extended until July **2022**. As of December **25**, **2021**, approximately **6.5 million** shares have been repurchased under this authorization[78](index=78&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | Sep 26 – Oct 23, 2021 | 33,399 | $48.06 | 32,399 | | Oct 24 – Nov 20, 2021 | 87,218 | $50.84 | 63,915 | | Nov 21 – Dec 25, 2021 | 7,579 | $58.59 | — | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details the company's **2021** financial condition and results, covering sales, income, liquidity, and risks [Results of Operations](index=34&type=section&id=Results%20of%20Operations) In **2021**, the company achieved substantial growth with net sales increasing **57.2%** and operating income rising **166.8%** Consolidated Results Summary (In thousands) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | **Net sales** | $3,769,345 | $2,398,043 | 57.2% | | **Operating income** | $655,845 | $245,838 | 166.8% | | **Net income** | $468,520 | $139,493 | 235.9% | Components of Net Sales Change (2021 vs. 2020) | Component | % Change | | :--- | :--- | | Net selling price in core product lines | 37.0% | | Unit sales volume in core product lines | 6.4% | | Acquisitions | 8.6% | | Other | 5.2% | - Gross margin as a percentage of sales increased to **22.0%** in **2021** from **18.0%** in **2020**, benefiting from strong demand, higher selling prices, and favorable sales mix[140](index=140&type=chunk) - Recognized a pre-tax gain of **$57.8 million** from the sales of Fabricated Tube Products, Shoals Tubular, Inc., Die-Mold Tool Limited, and Copper Bar[47](index=47&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) In **2021**, net cash from operating activities was **$311.7 million**, with significant debt reduction and adequate liquidity Cash Flow Summary (In thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $311,701 | $245,073 | | **Net cash provided by (used in) investing activities** | $29,073 | $(125,622) | | **Net cash used in financing activities** | $(376,722) | $(92,264) | - Total debt was reduced by **$326.0 million** in **2021**, bringing year-end total debt to **$1.9 million**[170](index=170&type=chunk)[191](index=191&type=chunk) - Anticipated capital expenditures for **2022** are between **$30.0 million** and **$40.0 million**[188](index=188&type=chunk) [Contractual Cash Obligations](index=44&type=section&id=Contractual%20Cash%20Obligations) As of December **25**, **2021**, total contractual cash obligations were approximately **$1.09 billion**, primarily for raw materials Contractual Cash Obligations by Type (In millions) | Obligation Type | Total | 2022 | | :--- | :--- | :--- | | **Total debt** | $2.9 | $0.8 | | **Operating and capital leases** | $26.9 | $7.6 | | **Purchase commitments** | $1,053.9 | $1,053.7 | | **Total** | **$1,086.6** | **$1,063.1** | [Market Risks](index=44&type=section&id=Market%20Risks) The company is exposed to market risks from raw material costs, interest rates, and foreign currency, using derivatives to hedge - The company uses commodity futures contracts to hedge risks associated with forward fixed-price sales arrangements and to manage price risk for inventory[196](index=196&type=chunk) - Primary foreign currency exposures are to the Canadian dollar, British pound sterling, Mexican peso, and South Korean won[200](index=200&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies critical accounting policies requiring significant judgment, including inventory, goodwill, and environmental reserves - Key estimates include inventory valuation, goodwill impairment, pension obligations, environmental reserves, and income taxes[202](index=202&type=chunk) - Goodwill is tested for impairment annually or when circumstances indicate. In Q3 **2021**, a **$2.1 million** impairment charge was recognized for the Turbotec reporting unit[206](index=206&type=chunk)[209](index=209&type=chunk) - Environmental reserves are recognized when a loss is probable and estimable; these are not discounted to present value[213](index=213&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the 'Market Risks' discussion within the Financial Review section of the report - Disclosures about market risk are contained under the caption "Financial Review" commencing on page F-2[84](index=84&type=chunk) [Financial Statements and Supplementary Data](index=19&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item indicates the company's audited consolidated financial statements and supplementary data are included separately - The required financial statements are contained in a separate section of this Annual Report on Form **10-K** commencing on page F-18[85](index=85&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=19&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[86](index=86&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December **25**, **2021**[89](index=89&type=chunk) - Management concluded that internal control over financial reporting was effective as of December **25**, **2021**[92](index=92&type=chunk) - The assessment of internal controls excluded the **2021** acquisitions of H&C Flex and Mueller Middle East, which represented **4%** of total assets[91](index=91&type=chunk)[98](index=98&type=chunk) [Other Information](index=24&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[106](index=106&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=24&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the **2022** Proxy - Required information is incorporated by reference from the Company's **2022** Proxy Statement[108](index=108&type=chunk) [Executive Compensation](index=24&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's **2022** Proxy Statement - Required information is incorporated by reference from the Company's **2022** Proxy Statement[110](index=110&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=24&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides information on securities authorized for issuance under equity compensation plans and other ownership Equity Compensation Plan Information (as of Dec 25, 2021, shares in thousands) | Plan Category | Securities to be issued upon exercise of outstanding options | Weighted average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | **Equity compensation plans approved by security holders** | 615 | $28.42 | 1,474 | [Certain Relationships and Related Transactions, and Director Independence](index=25&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related party transactions, and director independence is incorporated by reference - Required information is incorporated by reference from the Company's **2022** Proxy Statement[113](index=113&type=chunk) [Principal Accountant Fees and Services](index=25&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the **2022** Proxy Statement - Required information is incorporated by reference from the Company's **2022** Proxy Statement[114](index=114&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=26&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form **10-K** report, including financial statements, schedules, and exhibits - Lists all documents filed as part of the report, including financial statements, schedules, and exhibits[116](index=116&type=chunk) - Key exhibits filed include the Credit Agreement dated March **31**, **2021**, and various stock incentive plans[119](index=119&type=chunk) [Form 10-K Summary](index=28&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no information for this item - None[120](index=120&type=chunk) Financial Statements and Notes [Consolidated Statements of Income](index=49&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statement of Income details the company's revenues, costs, and expenses, resulting in net income 2021 Statement of Income Highlights (In thousands) | Metric | Amount | | :--- | :--- | | **Net sales** | $3,769,345 | | **Operating income** | $655,845 | | **Net income attributable to Mueller Industries, Inc.** | $468,520 | | **Diluted earnings per share** | $8.25 | [Consolidated Balance Sheets](index=51&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheet presents the company's financial position, with total assets of **$1.73 billion** and equity of **$1.22 billion** Balance Sheet Highlights (As of Dec 25, 2021, in thousands) | Metric | Amount | | :--- | :--- | | **Total current assets** | $1,019,003 | | **Total assets** | $1,728,936 | | **Total current liabilities** | $382,439 | | **Total liabilities** | $471,973 | | **Total Mueller Industries, Inc. stockholders' equity** | $1,222,118 | [Consolidated Statements of Cash Flows](index=53&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In **2021**, the company generated **$311.7 million** from operations, with investing providing cash and financing using cash 2021 Cash Flow Summary (In thousands) | Activity | Amount | | :--- | :--- | | **Net cash provided by operating activities** | $311,701 | | **Net cash provided by (used in) investing activities** | $29,073 | | **Net cash used in financing activities** | $(376,722) | | **(Decrease) in cash, cash equivalents, and restricted cash** | $(37,000) | [Notes to Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures supplementing primary financial statements, covering policies, acquisitions, segments, debt, and risks [Note 2 – Acquisitions and Dispositions](index=64&type=section&id=Note%202%20%E2%80%93%20Acquisitions%20and%20Dispositions) In **2021**, the company completed two acquisitions and three dispositions, resulting in a pre-tax gain of **$57.8 million** - Acquired a controlling **55%** interest in Mueller Middle East for ~**$20.0 million** and acquired H&C Flex for ~**$15.3 million**[293](index=293&type=chunk)[294](index=294&type=chunk) - Sold the FTP and STI businesses for ~**$75.7 million**, resulting in a pre-tax gain of **$46.6 million**[303](index=303&type=chunk) - Exchanged the Die-Mold business for a **17%** equity interest in another company, resulting in a gain of **$4.7 million**[302](index=302&type=chunk) - Sold the Copper Bar business for ~**$10.1 million**, resulting in a pre-tax gain of **$6.5 million**[301](index=301&type=chunk) [Note 3 – Segment Information](index=67&type=section&id=Note%203%20%E2%80%93%20Segment%20Information) This note provides a detailed breakdown of financial performance by the company's three reportable segments for **2021** 2021 Segment Performance (In thousands) | Segment | Net Sales | Operating Income | | :--- | :--- | :--- | | **Piping Systems** | $2,600,030 | $486,287 | | **Industrial Metals** | $703,363 | $85,475 | | **Climate** | $495,414 | $85,536 | [Note 12 – Debt](index=81&type=section&id=Note%2012%20%E2%80%93%20Debt) The company significantly restructured its debt in **2021**, entering a new credit agreement and redeeming debentures, reducing total debt - On March **31**, **2021**, entered into a new Credit Agreement providing for a **$400.0 million** revolving credit facility maturing in **2026**[342](index=342&type=chunk) - Redeemed all outstanding **6.00%** Subordinated Debentures in April **2021** for **$291.4 million** plus a **$5.7 million** redemption premium[344](index=344&type=chunk) - Total debt outstanding decreased from **$328.1 million** in **2020** to **$2.9 million** in **2021**[341](index=341&type=chunk) [Note 14 – Commitments and Contingencies](index=88&type=section&id=Note%2014%20%E2%80%93%20Commitments%20and%20Contingencies) The company is subject to various environmental and legal matters, with environmental reserves totaling **$27.4 million** - Environmental reserves totaled **$27.4 million** at December **25**, **2021**, up from **$24.0 million** in **2020**[370](index=370&type=chunk) - The company is a Potentially Responsible Party (PRP) in several environmental cleanup sites, including the Bonita Peak Mining District and the Lead Refinery NPL site[379](index=379&type=chunk)[383](index=383&type=chunk) - In **2020**, a subsidiary collected approximately **$22.1 million** related to a claim under the Deepwater Horizon Economic and Property Damage Settlement Program[386](index=386&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) Mueller Industries manufactures copper, brass, aluminum, and plastic products across three segments, driven by construction markets - The company manufactures a broad range of products including **copper tube and fittings**, **brass and copper alloy rod**, **aluminum forgings**, and **plastic PEX tube and fittings**[13](index=13&type=chunk) - Business operations are organized into three reportable segments: **Piping Systems**, **Industrial Metals**, and **Climate**[14](index=14&type=chunk) - Key market drivers for the company's products are **new housing starts**, **commercial construction**, and **repair and remodeling projects**[16](index=16&type=chunk) [Piping Systems Segment](index=4&type=section&id=Piping%20Systems%20Segment) The Piping Systems segment manufactures and distributes copper tube, fittings, and PEX plumbing systems for plumbing, refrigeration, and HVAC markets - This segment manufactures and distributes a wide range of products including **copper tube**, **fittings**, **line sets**, **PEX plumbing systems**, and **steel pipe nipples**[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - Products are sold to **plumbing and refrigeration wholesalers**, **manufactured housing and RV distributors**, **building material retailers**, and **air-conditioning OEMs**[22](index=22&type=chunk) - Major competitors in the U.S. copper tube market include **Cerro Flow Products LLC** and **Cambridge-Lee Industries LLC**, alongside foreign competitors and **plastic substitute products**[24](index=24&type=chunk) [Industrial Metals Segment](index=6&type=section&id=Industrial%20Metals%20Segment) The Industrial Metals segment produces brass rod, copper bar, and forgings for OEMs in industrial, construction, HVAC, plumbing, and refrigeration markets - This segment manufactures **brass rod**, **copper bar**, **aluminum and brass forgings**, and **fluid control solutions** for OEMs in various industrial markets[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The primary competitor in the brass rod market is **Wieland Chase, LLC**, a subsidiary of Wieland-Werke AG, along with other domestic and foreign companies[29](index=29&type=chunk) [Climate Segment](index=6&type=section&id=Climate%20Segment) The Climate segment manufactures HVAC and refrigeration components like valves, fabricated tube products, and heat exchangers for OEM and wholesale channels - This segment produces components like **refrigeration valves**, **fabricated tubular products**, **coaxial heat exchangers**, and **insulated HVAC flexible duct systems**[30](index=30&type=chunk)[31](index=31&type=chunk) - The segment's sales are divided approximately evenly between **OEM** and **wholesale channels** within the U.S. HVAC and refrigeration markets[32](index=32&type=chunk) [Human Capital Resources](index=7&type=section&id=Human%20Capital%20Resources) As of December 26, 2020, Mueller Industries employed approximately 5,007 people, with good employee relations and a focus on health and safety Union Contract Expiration Dates | Location | Expiration Date | | :--- | :--- | | Port Huron, Michigan (Local 218 IAM) | May 7, 2023 | | Wynne, Arkansas (MCTP) | November 30, 2024 | | Port Huron, Michigan (Local 44 UAW) | June 26, 2022 | | Wynne, Arkansas (B&K LLC) | June 28, 2021 | | North Wales, Pennsylvania | July 31, 2021 | | Belding, Michigan | September 17, 2021 | | Fulton, Mississippi | October 2, 2021 | | Waynesboro, Tennessee | November 3, 2021 | - The company employed approximately **5,007** people as of year-end 2020, with about **1,678** being union members[33](index=33&type=chunk) [Raw Material and Energy Availability](index=7&type=section&id=Raw%20Material%20and%20Energy%20Availability) The company sources primary raw materials through short-term contracts, acknowledging pricing volatility or supply disruptions could affect operations - A substantial portion of base metal requirements (primarily **copper**) is obtained through **short-term supply contracts** and the **open market**[36](index=36&type=chunk) - The company has commitments from **refined copper producers** for a portion of its 2021 metal requirements[38](index=38&type=chunk) [Environmental Proceedings](index=8&type=section&id=Environmental%20Proceedings) The company maintains a $24.0 million reserve for environmental matters, anticipating $4.3 million in compliance spending over three years Environmental Provisions and Reserves | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Provision for environmental matters | $4.2 million | $1.7 million | $2.0 million | | Reserve for environmental matters (Year-End) | $24.0 million | $20.9 million | N/A | [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from raw material and energy cost volatility, economic conditions, intense competition, foreign currency fluctuations, and the COVID-19 pandemic - Increases in the cost of **raw materials** (**copper**, **brass**, **zinc**, **aluminum**) and **energy** could negatively impact **operating margins** if not successfully passed on to customers[45](index=45&type=chunk) - The business is sensitive to **economic conditions** in the **housing and commercial construction industries**, as well as changes in **interest rates** and **credit availability**[47](index=47&type=chunk)[48](index=48&type=chunk) - **Competitive pressures** from **imports**, **substitute products** (e.g., plastics), and **new technologies** could adversely affect demand and profitability[50](index=50&type=chunk) - Fluctuations in **foreign exchange rates** (particularly the **British pound**, **Mexican peso**, **Canadian dollar**, and **South Korean won**) could impact competitiveness and reported results[51](index=51&type=chunk) - The **COVID-19 pandemic** poses risks including **decreased product demand**, **manufacturing disruptions**, and **supply chain interruptions**[64](index=64&type=chunk)[66](index=66&type=chunk) [Unresolved Staff Comments](index=11&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None [Properties](index=12&type=section&id=Item%202.%20Properties) The company owns and leases numerous manufacturing, distribution, and office properties globally, reported to be in satisfactory condition - The company's major operating facilities are located in the **U.S.**, **Canada**, **Mexico**, **England**, and **South Korea**, with a mix of owned and leased properties[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Legal Proceedings](index=13&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in litigation arising in the ordinary course of business, with material details in Note 14 of the financial statements - The company is involved in **litigation** from claims arising in the ordinary course of business[71](index=71&type=chunk) [Mine Safety Disclosures](index=13&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=14&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Mueller Industries' common stock trades on the NYSE, with quarterly dividends and an extended share repurchase program - The company's common stock is listed on the **New York Stock Exchange (NYSE)** under the symbol **\"MLI\"**[76](index=76&type=chunk) - A quarterly cash dividend of **$0.10 per share** was paid throughout fiscal **2019** and **2020**[77](index=77&type=chunk) - The Board of Directors extended the authorization to repurchase up to **20 million shares** of common stock until **July 2021**. As of **December 26, 2020**, approximately **6.4 million shares** have been repurchased under this authorization since its inception in **1999**[78](index=78&type=chunk) [Selected Financial Data](index=17&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, including 2020 net sales of $2.40 billion and net income of $139.5 million Five-Year Selected Financial Data (In thousands, except per share data) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,398,043 | $2,430,616 | $2,507,878 | $2,266,073 | $2,055,622 | | **Operating income** | $245,838 | $191,403 | $172,969 | $150,807 | $154,401 | | **Net income** | $139,493 | $100,972 | $104,459 | $85,598 | $99,727 | | **Diluted EPS** | $2.47 | $1.79 | $1.82 | $1.49 | $1.74 | | **Cash dividends per share** | $0.40 | $0.40 | $0.40 | $3.40 | $0.38 | | **Total assets** | $1,528,568 | $1,370,940 | $1,369,549 | $1,320,173 | $1,447,476 | | **Long-term debt** | $286,593 | $378,724 | $489,597 | $448,592 | $213,709 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, net sales decreased 1.3% to $2.4 billion, while operating income increased 28.4% to $245.8 million, driven by improved mix and a litigation settlement [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Consolidated net sales for 2020 decreased 1.3% to $2.40 billion, while operating income increased 28.4% to $245.8 million due to improved mix and a litigation gain Consolidated Results Summary (2020 vs. 2019) | Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,398.0M | $2,430.6M | (1.3)% | | Operating Income | $245.8M | $191.4M | 28.4% | | Net Income | $139.5M | $101.0M | 38.2% | - The decrease in **2020 net sales** was primarily caused by lower unit sales volume (**$130.9 million**), partly due to **COVID-19 impacts**, offset by sales from acquisitions (**$67.1 million**) and higher selling prices (**$38.1 million**)[140](index=140&type=chunk) - **Gross margin** improved from **16.3% in 2019** to **18.0% in 2020**, attributed to a **better product sales mix**, **lower manufacturing costs**, and **reduced employee healthcare costs**[143](index=143&type=chunk) - A significant contributor to **operating income** was a **$22.1 million gain** from the settlement of a claim under the **Deepwater Horizon Economic and Property Damage Settlement Program**[146](index=146&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong with $245.1 million in operating cash flow, used for acquisitions, capital expenditures, and debt reduction Cash Flow Summary (In thousands) | Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $245,073 | $200,544 | $167,892 | | Net cash used in investing activities | $(125,622) | $(40,457) | $(187,096) | | Net cash used in financing activities | $(92,264) | $(139,694) | $(28,269) | - Investing activities in **2020** were dominated by **$72.6 million** for the purchases of **Kessler** and **Shoals** and **$43.9 million** in **capital expenditures**[176](index=176&type=chunk) - Financing activities in **2020** included net debt repayments of **$55.0 million** (**$245.0 million repayment** vs. **$190.0 million issuance**) and **$22.3 million** in **dividend payments**[179](index=179&type=chunk) - As of **December 26, 2020**, **$92.8 million** of the company's **cash and cash equivalents** were held by foreign subsidiaries[183](index=183&type=chunk) [Contractual Cash Obligations](index=43&type=section&id=Contractual%20Cash%20Obligations) As of December 26, 2020, total contractual cash obligations were $1.31 billion, with $906.5 million due in 2021, largely from purchase commitments Contractual Cash Obligations as of December 26, 2020 (In millions) | Obligation | Total | 2021 | 2022-2023 | 2024-2025 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Total debt | $328.1 | $41.3 | $0.4 | $0.4 | $286.0 | | Operating and capital leases | $34.7 | $8.3 | $12.6 | $6.4 | $7.4 | | Purchase commitments | $831.5 | $830.7 | $0.6 | $0.2 | — | | Interest payments | $107.1 | $17.6 | $34.1 | $34.1 | $21.3 | | **Total** | **$1,311.9** | **$906.5** | **$47.7** | **$43.0** | **$314.7** | [Market Risks](index=43&type=section&id=Market%20Risks) The company is exposed to market risks from raw material costs, interest rates, and foreign currency, using derivatives to hedge these exposures - The company uses **futures contracts** to hedge risks associated with **forward fixed-price customer arrangements** and to manage **price risk** for its inventory[198](index=198&type=chunk) - At **year-end 2020**, the company had open futures contracts to purchase **$5.4 million of copper** and to sell **$49.4 million of copper** to manage price risks[198](index=198&type=chunk) - Primary **foreign currency exposures** are to the **Canadian dollar**, **British pound sterling**, **Mexican peso**, and **South Korean won**. The company generally does not hedge its net investments in foreign subsidiaries[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the 'Market Risks' discussion within the MD&A, detailing exposure to raw material, interest rate, and foreign currency fluctuations - Disclosures about **market risk** are contained under the caption **\"Financial Review\"** commencing on page **F-2**[85](index=85&type=chunk) [Financial Statements and Supplementary Data](index=18&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's audited consolidated financial statements and supplementary data are included in a separate section of the Annual Report on Form 10-K - The required **financial statements** are contained in a separate section of this **Annual Report on Form 10-K** commencing on page **F-17**[86](index=86&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=18&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=19&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 26, 2020 - The **CEO** and **CFO** concluded that the company's **disclosure controls and procedures** are effective as of **December 26, 2020**[90](index=90&type=chunk) - Management concluded that **internal control over financial reporting** was effective as of **December 26, 2020**, based on the **COSO framework**[93](index=93&type=chunk) - The **2020 acquisitions** of **Shoals Tubular, Inc.** and **Kessler Sales & Distribution** were excluded from the scope of management's assessment of internal controls[92](index=92&type=chunk) - No material changes were made to the company's **internal control over financial reporting** during the **fourth quarter of 2020**[95](index=95&type=chunk) [Other Information](index=23&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None Part III [Directors, Executive Officers, and Corporate Governance](index=23&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the Company's **Proxy Statement** for its **2021 Annual Meeting of Stockholders**[110](index=110&type=chunk) [Executive Compensation](index=23&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the Company's **Proxy Statement** for its **2021 Annual Meeting of Stockholders**[112](index=112&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=23&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides equity compensation plan information as of December 26, 2020, with other details from the 2021 Proxy Statement Equity Compensation Plan Information (as of Dec 26, 2020) | Plan Category | Securities to be issued upon exercise (thousands) | Weighted average exercise price | Securities remaining available for future issuance (thousands) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 793 | $26.81 | 1,635 | | Total | 793 | $26.81 | 1,635 | [Certain Relationships and Related Transactions, and Director Independence](index=24&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the Company's **Proxy Statement** for its **2021 Annual Meeting of Stockholders**[115](index=115&type=chunk) [Principal Accountant Fees and Services](index=24&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the Company's **Proxy Statement** for its **2021 Annual Meeting of Stockholders**[116](index=116&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=25&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K report, including financial statements, schedules, and various exhibits - This item lists all **financial statements**, **schedules**, and **exhibits** filed with the annual report[119](index=119&type=chunk)[120](index=120&type=chunk) [Form 10-K Summary](index=28&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None Financial Statements and Notes [Consolidated Statements of Income](index=47&type=section&id=Consolidated%20Statements%20of%20Income) For 2020, net sales were $2.40 billion, operating income increased to $245.8 million, and net income rose to $139.5 million Consolidated Income Statement Highlights (In thousands) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net sales | $2,398,043 | $2,430,616 | $2,507,878 | | Operating income | $245,838 | $191,403 | $172,969 | | Net income attributable to Mueller Industries, Inc. | $139,493 | $100,972 | $104,459 | | Diluted earnings per share | $2.47 | $1.79 | $1.82 | [Consolidated Balance Sheets](index=49&type=section&id=Consolidated%20Balance%20Sheets) As of December 26, 2020, total assets were $1.53 billion, total liabilities $727.5 million, and stockholders' equity increased to $776.7 million Consolidated Balance Sheet Highlights (In thousands) | Metric | Dec 26, 2020 | Dec 28, 2019 | | :--- | :--- | :--- | | Total current assets | $825,361 | $693,772 | | Total assets | $1,528,568 | $1,370,940 | | Total current liabilities | $339,643 | $234,287 | | Total liabilities | $727,508 | $708,804 | | Total Mueller Industries, Inc. stockholders' equity | $776,745 | $643,468 | [Consolidated Statements of Cash Flows](index=51&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In 2020, net cash from operating activities was $245.1 million, with cash used for investing and financing activities, resulting in a $29.3 million cash increase Consolidated Cash Flow Highlights (In thousands) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $245,073 | $200,544 | $167,892 | | Net cash used in investing activities | $(125,622) | $(40,457) | $(187,096) | | Net cash used in financing activities | $(92,264) | $(139,694) | $(28,269) | | Increase (decrease) in cash | $29,334 | $20,904 | $(49,425) | [Note 2 – Acquisitions](index=62&type=section&id=Note%202%20%E2%80%93%20Acquisitions) In 2020, the company acquired Kessler for $57.2 million and Shoals Tubular for $15.4 million, reported in Piping Systems and Climate segments respectively - On **August 3, 2020**, the company acquired the **Kessler distribution business** for a total purchase price of **$57.2 million in cash**[288](index=288&type=chunk) - On **January 17, 2020**, the company acquired all outstanding stock of **Shoals Tubular, Inc.** for approximately **$15.4 million in cash**[289](index=289&type=chunk) [Note 12 – Debt](index=76&type=section&id=Note%2012%20%E2%80%93%20Debt) As of December 26, 2020, total debt was $328.1 million, primarily 6.00% Subordinated Debentures and revolving credit facility outstanding Debt Composition (In thousands) | Instrument | 2020 | 2019 | | :--- | :--- | :--- | | Subordinated Debentures (6.00%, due 2027) | $284,479 | $284,479 | | Revolving Credit Facility (1.52%, due 2021) | $35,000 | $90,000 | | Other | $8,616 | $12,313 | | **Total Debt** | **$328,095** | **$386,792** | - The company has an unsecured **$350.0 million revolving credit facility** that matures on **December 6, 2021**[340](index=340&type=chunk) [Note 13 – Benefit Plans](index=78&type=section&id=Note%2013%20%E2%80%93%20Benefit%20Plans) The company terminated its U.S. defined benefit pension plan in 2020, incurring $17.8 million in termination costs, with remaining plans underfunded - The company terminated its **U.S. defined benefit pension plan** in **2020**, resulting in termination costs of **$17.8 million**, which included an **$11.6 million non-cash settlement charge** and **$6.2 million** in federal excise tax[345](index=345&type=chunk)[346](index=346&type=chunk) Funded Status of Benefit Plans (In thousands) | Plan Type | Benefit Obligation (Dec 26, 2020) | Fair Value of Plan Assets (Dec 26, 2020) | Funded (Underfunded) Status | | :--- | :--- | :--- | :--- | | Pension Benefits | $90,809 | $78,480 | $(12,329) | | Other Benefits | $12,782 | $0 | $(12,782) | [Note 14 – Commitments and Contingencies](index=84&type=section&id=Note%2014%20%E2%80%93%20Commitments%20and%20Contingencies) The company has $24.0 million in environmental reserves and collected $22.1 million from the Deepwater Horizon settlement in 2020 - Total **environmental reserves** were **$24.0 million** at **December 26, 2020**, up from **$20.9 million** at **December 28, 2019**[369](index=369&type=chunk) - The company has a reserve of **$5.6 million** for its share of remediation costs at three former smelter sites in **Southeast Kansas**[373](index=373&type=chunk) - In **2020**, the company collected approximately **$22.1 million** related to its claim under the **Deepwater Horizon Economic and Property Damage Settlement Program**[384](index=384&type=chunk) [Note 17 – Stock-Based Compensation](index=90&type=section&id=Note%2017%20%E2%80%93%20Stock-Based%20Compensation) Stock-based compensation expense was $8.6 million in 2020, with $20.8 million in unrecognized expense remaining for future recognition Stock-Based Compensation Expense (In millions) | Year | Expense | | :--- | :--- | | 2020 | $8.6 | | 2019 | $8.7 | | 2018 | $8.0 | - Total unrecognized compensation expense related to **stock incentive awards** was **$20.8 million** at **December 26, 2020**, to be recognized over an average period of **3.0 years**[396](index=396&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) The company manufactures and sells copper, brass, aluminum, and plastic products through its Piping Systems, Industrial Metals, and Climate segments - The company's operations are organized into three reportable segments: **Piping Systems, Industrial Metals, and Climate**[16](index=16&type=chunk) - The Piping Systems segment manufactures and sells copper tube, fittings, and PEX plastic products for plumbing, refrigeration, and HVAC markets globally[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - The Industrial Metals segment produces brass rod, copper bar, aluminum/brass forgings, and other value-added products for OEMs[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) - The Climate segment manufactures refrigeration valves, fabricated tube products, heat exchangers, and insulated HVAC flexible duct systems for OEMs[33](index=33&type=chunk)[34](index=34&type=chunk) - As of December 28, 2019, the company employed approximately **4,964 people**, with 1,579 represented by various unions[36](index=36&type=chunk) - The company's primary raw material is **copper**, sourced through short-term supply contracts and the open market[37](index=37&type=chunk)[39](index=39&type=chunk) Environmental Reserves and Provisions | Year | Provision for Environmental Matters | Reserve at Year-End | | :--- | :--- | :--- | | 2019 | $1.7 million | $20.9 million | | 2018 | $2.0 million | $23.6 million | | 2017 | $7.5 million | Not specified | - The business experiences seasonality, with net sales typically moderating in the fourth quarter due to seasonal construction markets[43](index=43&type=chunk) [Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from raw material costs, economic dependency on construction, competition, and various operational challenges - Volatility in the costs of **raw materials and energy** could adversely impact operating margins if not passed on to customers[46](index=46&type=chunk) - The business is sensitive to economic conditions in the **housing and commercial construction industries** and changes in interest rates[48](index=48&type=chunk)[49](index=49&type=chunk) - **Competitive pressures** from imports and substitute products could negatively affect demand, margins, and profitability[51](index=51&type=chunk) - Fluctuations in **foreign currency exchange rates** could impact competitiveness and reported results[52](index=52&type=chunk) - The implementation of **Brexit** creates uncertainty and risks related to exchange rates, interest rates, and customer relationships[53](index=53&type=chunk) - Potential **strikes or work stoppages** from collective bargaining agreement renewals could disrupt operations and increase costs[56](index=56&type=chunk) - Compliance with **environmental, health, and safety laws** could require significant costs and materially affect operations[58](index=58&type=chunk) - Failure to successfully **execute and integrate acquisitions** could negatively impact financial results[59](index=59&type=chunk)[60](index=60&type=chunk) - The company is subject to **cybersecurity risks**, including data breaches and operational disruptions[61](index=61&type=chunk)[62](index=62&type=chunk) [Unresolved Staff Comments](index=10&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[63](index=63&type=chunk) [Properties](index=11&type=section&id=Item%202.%20Properties) The company owns and leases numerous manufacturing and distribution facilities across its segments in multiple countries Major Operating Facilities by Segment | Segment | Location Examples | Primary Use | Ownership | | :--- | :--- | :--- | :--- | | **Piping Systems** | Fulton, MS; Wynne, AR; Bilston, England; Yangju City, South Korea | Manufacturing & Distribution | Mostly Owned | | **Industrial Metals** | Port Huron, MI; Belding, MI; Marysville, MI | Manufacturing | Mostly Owned | | **Climate** | Plainville, GA; Fort Worth, TX; Phoenix, AZ; Guadalupe, Mexico | Manufacturing & Distribution | Mostly Owned | [Legal Proceedings](index=13&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in litigation arising in the ordinary course of business, with details provided in financial statement notes - The company is involved in litigation from claims arising in the ordinary course of business, with details in "Note 14 – Commitments and Contingencies"[69](index=69&type=chunk)[70](index=70&type=chunk) [Mine Safety Disclosures](index=13&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[71](index=71&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=14&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, it pays a quarterly dividend, and maintains an active share repurchase program - The company's common stock is listed on the New York Stock Exchange (NYSE) under the symbol **'MLI'**[74](index=74&type=chunk) - A quarterly cash dividend of **$0.10 per share** was paid during fiscal years 2018 and 2019[75](index=75&type=chunk) - The Board extended the authorization to repurchase up to **20 million shares** until August 2020, with approximately 6.2 million shares repurchased since inception[77](index=77&type=chunk) Issuer Purchases of Equity Securities (Quarter Ended Dec 28, 2019) | Period | Total Shares Purchased | Average Price Paid per Share | Max Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Oct 27 - Nov 23, 2019 | 10,109 | $32.09 | 13,822,567 | | Nov 24 - Dec 28, 2019 | 5,128 | $32.34 | 13,822,567 | | **Total** | **15,237** | | | Company Stock Performance (Total Return Index) | Year | Mueller Industries, Inc. | Dow Jones U.S. Total Return Index | Dow Jones U.S. Building Materials & Fixtures Index | | :--- | :--- | :--- | :--- | | 2014 | 100.00 | 100.00 | 100.00 | | 2015 | 82.67 | 100.63 | 114.37 | | 2016 | 119.33 | 112.96 | 135.47 | | 2017 | 132.90 | 137.24 | 159.65 | | 2018 | 89.09 | 130.42 | 126.50 | | 2019 | 122.49 | 171.04 | 185.11 | [Selected Financial Data](index=17&type=section&id=Item%206.%20Selected%20Financial%20Data) The company presents a five-year summary of key financial data, showing net sales of $2.43 billion for fiscal year 2019 Selected Financial Data (2015-2019) | (In thousands, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,430,616 | $2,507,878 | $2,266,073 | $2,055,622 | $2,100,002 | | **Operating income** | $191,403 | $172,969 | $150,807 | $154,401 | $138,704 | | **Net income** | $100,972 | $104,459 | $85,598 | $99,727 | $87,864 | | **Diluted EPS** | $1.79 | $1.82 | $1.49 | $1.74 | $1.54 | | **Cash dividends per share** | $0.40 | $0.40 | $3.40 | $0.375 | $0.30 | | **Total assets** | $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 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales decreased in 2019, but operating income grew, driven by segment performance and strong operating cash flow [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Consolidated net sales decreased 3.1% in 2019, while operating income grew 10.7% due to improved cost management Consolidated Operating Results (2017-2019) | (In thousands) | 2019 | 2018 | 2017 | % Change 2019 vs 2018 | % Change 2018 vs 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,430,616 | $2,507,878 | $2,266,073 | (3.1)% | 10.7% | | **Operating income** | $191,403 | $172,969 | $150,807 | 10.7% | 14.7% | | **Net income** | $100,972 | $104,459 | $85,598 | (3.3)% | 22.0% | Components of Net Sales Change | Component | 2019 vs. 2018 | 2018 vs. 2017 | | :--- | :--- | :--- | | Net selling price in core product lines | (3.7)% | 4.4% | | Unit sales volume in core product lines | (4.4)% | 3.6% | | Acquisitions | 4.2% | 4.7% | | Dispositions | — | (3.0)% | | Other | 0.8% | 1.0% | | **Total** | **(3.1)%** | **10.7%** | - Cost of goods sold as a percentage of net sales **decreased to 83.7% in 2019** from 85.7% in 2018, contributing to higher operating income[146](index=146&type=chunk) - The company recognized **losses of $24.6 million** on its investments in unconsolidated affiliates in 2019[158](index=158&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated strong operating cash flow in 2019, which was used for capital expenditures, debt reduction, and dividends Selected Cash Flow and Balance Sheet Changes | (In thousands) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $200,544 | $167,892 | $43,995 | | **Net cash used in investing activities** | ($40,457) | ($187,096) | ($36,280) | | **Net cash used in financing activities** | ($139,694) | ($28,269) | ($244,566) | | **Increase (decrease) in Total debt** | ($110,444) | $31,626 | $237,708 | - Key drivers of operating cash flow in 2019 included **net income ($106.2M)**, depreciation & amortization ($43.0M), and a decrease in inventories ($39.6M)[176](index=176&type=chunk) - Financing activities in 2019 were dominated by a **$205.0 million reduction in debt** and $22.3 million in dividend payments[182](index=182&type=chunk) - The company anticipates capital expenditures of approximately **$45.0 million to $50.0 million** in 2020[192](index=192&type=chunk) - Total debt was **$386.3 million** as of December 28, 2019, representing 36.8% of total capitalization[196](index=196&type=chunk) [Contractual Cash Obligations](index=43&type=section&id=Contractual%20Cash%20Obligations) The company's contractual cash obligations total approximately $1.27 billion, primarily driven by raw material purchase commitments Contractual Cash Obligations as of December 28, 2019 | (In millions) | Total | 2020 | 2021-2022 | 2023-2024 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total debt** | $386.8 | $7.5 | $91.0 | $1.4 | $286.9 | | **Operating and capital leases** | $35.7 | $6.6 | $10.0 | $5.3 | $13.8 | | **Purchase commitments** | $687.5 | $686.4 | $0.8 | $0.3 | — | | **Interest payments** | $129.5 | $20.0 | $37.0 | $34.1 | $38.4 | | **Total** | **$1,265.7** | **$742.2** | **$141.4** | **$41.1** | **$341.0** | [Market Risks](index=43&type=section&id=Market%20Risks) The company is exposed to market risks from commodity prices, interest rates, and foreign currency, which it manages through hedging - The company uses **commodity futures contracts** to hedge risks associated with forward fixed-price sales and inventory[202](index=202&type=chunk) - The company had **$97.0 million in variable-rate debt** outstanding at year-end 2019, with primary exposure to LIBOR[204](index=204&type=chunk) - The net investment in foreign subsidiaries was **$397.1 million** at year-end 2019, with a hypothetical 10% adverse change in exchange rates resulting in a potential loss of $39.7 million[206](index=206&type=chunk) [Critical Accounting Policies and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment, particularly for inventory valuation, goodwill, pensions, and environmental reserves - **Inventory Valuation:** Inventories are valued at lower-of-cost-or-market, with reserves of **$6.3 million** at year-end 2019 for obsolete items[209](index=209&type=chunk)[210](index=210&type=chunk) - **Goodwill Impairment:** Goodwill of **$153.3 million** is tested annually, with no impairment indicated in 2019 or 2018[211](index=211&type=chunk)[215](index=215&type=chunk) - **Pension and Other Postretirement Benefit Plans:** Obligations are actuarially determined using assumptions for discount rates and expected return on plan assets[216](index=216&type=chunk) - **Environmental Reserves:** Liabilities for environmental remediation are recognized when probable and reasonably estimable[218](index=218&type=chunk) - **Income Taxes:** The company estimates income tax expense and assesses the realizability of deferred tax assets[220](index=220&type=chunk)[222](index=222&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Disclosures about market risk are contained within the "Financial Review" section of the report - Quantitative and qualitative disclosures about market risk are contained under the caption "Financial Review" commencing on page F-2[85](index=85&type=chunk) [Financial Statements and Supplementary Data](index=17&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the company's audited consolidated financial statements, notes, and the independent auditor's report [Consolidated Financial Statements](index=47&type=section&id=Consolidated%20Financial%20Statements) The financial statements present the company's financial position, showing net sales of $2.43 billion and net income of $101.0 million in 2019 Key Financial Statement Data (Fiscal Year 2019) | Metric | Amount (in thousands) | | :--- | :--- | | **Income Statement:** | | | Net Sales | $2,430,616 | | Operating Income | $191,403 | | Net Income (attributable to Mueller) | $100,972 | | Diluted EPS | $1.79 | | **Balance Sheet (Year-End):** | | | Total Assets | $1,370,940 | | Total Liabilities | $708,804 | | Total Equity | $662,136 | | **Cash Flow Statement:** | | | Net Cash from Operating Activities | $200,544 | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, acquisitions, segment data, debt, and other key financial items - **Note 1:** The company adopted the new lease accounting standard (ASC 842) in 2019, recognizing **right-of-use assets of $29.5 million**[289](index=289&type=chunk) - **Note 2:** The 2018 acquisition of ATCO Rubber Products, Inc. for approximately **$158.1 million** is detailed[294](index=294&type=chunk)[296](index=296&type=chunk) - **Note 3:** Provides disaggregation of revenue, with the U.S. accounting for **$1.78 billion** of the $2.43 billion in 2019 net sales[312](index=312&type=chunk)[313](index=313&type=chunk) - **Note 12:** Details the company's debt, including **$284.5 million in 6% Subordinated Debentures** due 2027[348](index=348&type=chunk) - **Note 14:** Environmental reserves totaled **$20.9 million** at year-end 2019, with significant obligations related to specific sites[384](index=384&type=chunk)[385](index=385&type=chunk)[390](index=390&type=chunk) - **Note 19:** Provides unaudited quarterly financial data for 2019 and 2018[433](index=433&type=chunk) [Report of Independent Registered Public Accounting Firm](index=105&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued unqualified opinions on the financial statements and internal controls, identifying two Critical Audit Matters - Ernst & Young LLP expressed an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting[440](index=440&type=chunk)[441](index=441&type=chunk) - **Critical Audit Matters** highlighted were the Defined Benefit Pension Obligation and the Valuation of Goodwill for the Heatlink Group reporting unit[444](index=444&type=chunk)[446](index=446&type=chunk)[451](index=451&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=19&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[89](index=89&type=chunk) [Controls and Procedures](index=19&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2019 - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of December 28, 2019[91](index=91&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 28, 2019[93](index=93&type=chunk) - Ernst & Young LLP issued an **unqualified attestation report** on the company's internal control over financial reporting[94](index=94&type=chunk)[98](index=98&type=chunk) - There were **no material changes** in internal control over financial reporting during the fourth quarter of 2019[95](index=95&type=chunk) [Other Information](index=22&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[106](index=106&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=22&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Required information on directors, officers, and governance is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement for its 2020 Annual Meeting of Stockholders[108](index=108&type=chunk) [Executive Compensation](index=22&type=section&id=Item%2011.%20Executive%20Compensation) Required information on executive compensation is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement for its 2020 Annual Meeting of Stockholders[110](index=110&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=22&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides information on equity compensation plans, with other ownership details incorporated by reference Equity Compensation Plan Information (as of Dec 28, 2019) | Plan category | Securities to be issued upon exercise (thousands) | Weighted average exercise price | Securities remaining available for future issuance (thousands) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 939 | $25.05 | 1,900 | | **Total** | **939** | **$25.05** | **1,900** | - Other information regarding security ownership is incorporated by reference from the Company's 2020 Proxy Statement[111](index=111&type=chunk)[112](index=112&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=23&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Required information on related transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement for its 2020 Annual Meeting of Stockholders[113](index=113&type=chunk) [Principal Accountant Fees and Services](index=23&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Required information on principal accountant fees is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement for its 2020 Annual Meeting of Stockholders[114](index=114&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=24&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[117](index=117&type=chunk)[120](index=120&type=chunk) - Key exhibits include the **Restated Certificate of Incorporation**, By-laws, Indenture for 6% Subordinated Debentures, and various incentive plans[120](index=120&type=chunk)[121](index=121&type=chunk) - **Certifications from the CEO and CFO** pursuant to the Sarbanes-Oxley Act of 2002 are also filed as exhibits[122](index=122&type=chunk) [Form 10-K Summary](index=26&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no Form 10-K summary for this item - None[123](index=123&type=chunk)

Part I [Business](index=3&type=section&id=Item%201.%20Business) A leading global manufacturer of copper, brass, aluminum, and plastic products operating across three primary segments [Business Overview and Segments](index=3&type=section&id=Business%20Overview%20and%20Segments) The company manufactures diverse products for construction and industrial markets, organized into three reportable segments - Mueller Industries is a leading manufacturer of copper, brass, aluminum, and plastic products with operations across the United States, Canada, Mexico, Great Britain, South Korea, the Middle East, and China[14](index=14&type=chunk) - The company's business is structured into three reportable segments: **Piping Systems, Industrial Metals, and Climate**[15](index=15&type=chunk) - Key drivers for sales in the HVAC, refrigeration, and plumbing markets are **new housing starts, commercial construction, and remodeling projects**[17](index=17&type=chunk) [Piping Systems Segment](index=3&type=section&id=Piping%20Systems%20Segment) This segment manufactures and sells copper and plastic plumbing systems, serving wholesale, retail, and OEM customers - The Piping Systems segment produces copper tube, fittings, line sets, and PEX plumbing products across the U.S., Canada, and Europe[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - The segment has expanded through several recent acquisitions: **Jungwoo-Mueller** (South Korea, 2016), **Heatlink Group** (Canada, 2017), and **Die-Mold** (Canada, 2018)[21](index=21&type=chunk) - Key competitors include Cerro Flow Products, Cambridge-Lee Industries, NIBCO, and various foreign manufacturers, as well as producers of substitute plastic products[25](index=25&type=chunk) [Industrial Metals Segment](index=4&type=section&id=Industrial%20Metals%20Segment) This segment manufactures brass, copper, and aluminum products for various original equipment manufacturers (OEMs) - This segment produces a range of products including brass rod, copper bar, aluminum/brass forgings, and valves for OEMs in industries like HVAC, plumbing, and automotive[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - The acquisition of **Sherwood Valve Products in 2015** complemented the segment's existing brass businesses[30](index=30&type=chunk) - The primary competitor in the brass rod market is **Chase Brass and Copper Company LLC**, along with other domestic and foreign companies[31](index=31&type=chunk) [Climate Segment](index=5&type=section&id=Climate%20Segment) This segment manufactures and distributes various components for the HVAC and refrigeration markets - This segment produces refrigeration valves, fabricated tubular products, heat exchangers, and insulated HVAC flexible duct systems for OEMs in the HVAC and refrigeration markets[32](index=32&type=chunk)[33](index=33&type=chunk) - Recent acquisitions of **Turbotec (2015)** and **ATCO (2018)** have complemented the segment's existing businesses[34](index=34&type=chunk) [Labor, Materials, and Environment](index=5&type=section&id=Labor%2C%20Materials%2C%20and%20Environment) The company manages a significant unionized workforce, sources key raw materials, and maintains reserves for environmental compliance - As of December 29, 2018, the Company employed approximately **5,134 people**, with **1,883 represented by various unions**[35](index=35&type=chunk) - Primary raw materials, such as copper, are obtained through short-term supply contracts and the open market, with adequate supplies historically available[36](index=36&type=chunk)[37](index=37&type=chunk) Environmental Reserves and Provisions | Year | Provision for Environmental Matters | Reserve at Year-End | | :--- | :--- | :--- | | 2018 | $2.0 million | $23.6 million | | 2017 | $7.5 million | $28.0 million | | 2016 | $0.9 million | N/A | [Risk Factors](index=6&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from raw material costs, economic conditions, competition, and international operations - **Economic and Market Risks:** Business is sensitive to economic conditions in housing and commercial construction, interest rate changes, and competitive pressures from imports and substitute products[47](index=47&type=chunk)[50](index=50&type=chunk) - **Operational Risks:** The company is exposed to risks from volatile raw material and energy costs, potential loss of key personnel, labor disputes, and business interruptions[45](index=45&type=chunk)[46](index=46&type=chunk)[54](index=54&type=chunk) - **International Risks:** Operations are subject to foreign exchange rate fluctuations and uncertainties related to Brexit, which could affect competitiveness and financial results[51](index=51&type=chunk)[52](index=52&type=chunk) - **Legal and Regulatory Risks:** The company faces risks from litigation, regulatory proceedings, and compliance with environmental, health, and safety laws, which could result in significant costs[53](index=53&type=chunk)[56](index=56&type=chunk) - **Strategic and IT Risks:** Failure to successfully integrate acquired businesses and potential breaches of information technology systems pose risks to financial results and reputation[57](index=57&type=chunk)[60](index=60&type=chunk) [Properties](index=10&type=section&id=Item%202.%20Properties) The company owns and leases numerous operating facilities across North America, Europe, and Asia for its business segments - The company owns or leases major manufacturing and distribution facilities for its Piping Systems, Industrial Metals, and Climate segments[63](index=63&type=chunk) - Key locations include multiple sites in the U.S. (e.g., Mississippi, Michigan, Texas, Georgia), Canada (Ontario, Alberta), Mexico (Monterrey, Guadalupe), England (Bilston), and South Korea (Yangju City)[64](index=64&type=chunk)[66](index=66&type=chunk) [Legal Proceedings](index=12&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course litigation, with details on material proceedings found in the financial statement notes - The Company is involved in litigation from claims arising in the ordinary course of business[67](index=67&type=chunk) - A detailed description of material pending legal proceedings is incorporated by reference from **"Note 12 – Commitments and Contingencies"** in the Notes to Consolidated Financial Statements[68](index=68&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=13&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, with a regular dividend policy and an active share repurchase program 2018 Quarterly Stock Price and Dividends | Quarter | High Price | Low Price | Dividend per Share | | :--- | :--- | :--- | :--- | | Q4 2018 | $29.27 | $21.49 | $0.10 | | Q3 2018 | $33.89 | $27.92 | $0.10 | | Q2 2018 | $31.94 | $25.26 | $0.10 | | Q1 2018 | $37.57 | $25.50 | $0.10 | - In March 2017, the company distributed a special dividend consisting of **$3.00 in cash** and **$5.00 in principal amount of 6% Subordinated Debentures** per share[73](index=73&type=chunk) - The Board has authorized a repurchase of up to **20 million shares**, extended until August 2019; approximately **13.9 million shares** remained available for repurchase as of year-end 2018[76](index=76&type=chunk)[77](index=77&type=chunk) - The company's stock performance in 2018 **underperformed** both the Dow Jones U.S. Total Return Index and the Dow Jones U.S. Building Materials & Fixtures Index[78](index=78&type=chunk)[79](index=79&type=chunk) [Selected Financial Data](index=16&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial performance and position data Selected Financial Data (2014-2018) | (In thousands, except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,507,878 | $2,266,073 | $2,055,622 | $2,100,002 | $2,364,227 | | **Operating income** | $172,969 | $150,807 | $154,401 | $138,704 | $150,143 | | **Net income attributable to Mueller** | $104,459 | $85,598 | $99,727 | $87,864 | $101,560 | | **Diluted earnings per share** | $1.82 | $1.49 | $1.74 | $1.54 | $1.79 | | **Cash dividends per share** | $0.40 | $3.40 | $0.38 | $0.30 | $0.30 | | **Total assets** | $1,369,549 | $1,320,173 | $1,447,476 | $1,338,801 | $1,328,096 | | **Long-term debt** | $489,597 | $448,592 | $213,709 | $204,250 | $205,250 | [Management's Discussion and Analysis (MD&A)](index=16&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's 2018 net sales and operating income increased due to higher volumes, prices, and acquisition contributions [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Consolidated net sales and operating income grew in 2018, driven by higher volumes, prices, and acquisition impacts Consolidated Results Summary (2016-2018) | (In thousands) | 2018 | 2017 | 2016 | % Change 2018 vs 2017 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,507,878 | $2,266,073 | $2,055,622 | 10.7% | | **Operating income** | $172,969 | $150,807 | $154,401 | 14.7% | | **Net income** | $104,459 | $85,598 | $99,727 | 22.0% | Components of Net Sales Change (2018 vs. 2017) | Component | % Change | | :--- | :--- | | Net selling price in core product lines | 4.4% | | Unit sales volume in core product lines | 3.6% | | Acquisitions and new products | 4.7% | | Dispositions | (3.0)% | | Other | 1.0% | | **Total** | **10.7%** | - The 2018 effective tax rate was **20.6%**, lower than the U.S. statutory rate primarily due to a **$4.4 million reduction** in the calculated tax on accumulated foreign earnings under the Tax Cuts and Jobs Act[156](index=156&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated strong operating cash flow, funding acquisitions and capital expenditures while maintaining a solid liquidity position Selected Cash Flow Data (2016-2018) | (In thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $167,892 | $43,995 | $157,778 | | Net cash used in investing activities | $(187,096) | $(36,280) | $(47,726) | | Net cash used in financing activities | $(28,269) | $(244,566) | $(22,561) | - Major investing activities in 2018 included **$167.7 million** for the acquisitions of ATCO and Die-Mold and **$38.5 million** in capital expenditures[179](index=179&type=chunk) - As of December 29, 2018, the company had total debt of **$496.7 million**, representing **46.9% of total capitalization**, and was in compliance with all debt covenants[197](index=197&type=chunk) - The company anticipates capital expenditures of **$25.0 million to $30.0 million** in 2019[193](index=193&type=chunk) [Market Risks](index=41&type=section&id=Market%20Risks) The company is exposed to market risks from raw material costs, interest rates, and foreign currency fluctuations - The company uses futures contracts to hedge risks associated with forward fixed-price customer arrangements and to manage price risk for inventory; at year-end, it held contracts to purchase **$59.4 million of copper**[204](index=204&type=chunk) - Interest rate risk exists on variable-rate debt, which totaled **$202.6 million** at December 29, 2018; a hypothetical 10% increase in rates would have an insignificant impact on earnings[206](index=206&type=chunk) - The company has significant exposure to foreign currency translation risk from its operations in Canada, the U.K., Mexico, and South Korea; a hypothetical 10% adverse change in exchange rates would result in a potential loss of **$37.7 million** to the value of net investments in foreign subsidiaries[208](index=208&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies requiring significant management judgment include inventory valuation, goodwill impairment, and environmental reserves - **Inventory Valuation:** Inventories are valued at the lower-of-cost-or-market, requiring estimates for potential write-downs due to declining copper prices or obsolescence[211](index=211&type=chunk) - **Goodwill Impairment:** Goodwill of **$150.3 million** is tested for impairment annually; the 2018 test indicated that the fair value of each reporting unit exceeded its carrying value[213](index=213&type=chunk)[217](index=217&type=chunk) - **Environmental Reserves:** The company maintains a reserve for environmental remediation, which was **$23.6 million** at year-end 2018, requiring estimation of cleanup costs[218](index=218&type=chunk)[383](index=383&type=chunk) - **Income Taxes:** Management must make judgments regarding the realization of deferred tax assets and establish valuation allowances when it is more likely than not that assets will not be realized[220](index=220&type=chunk)[222](index=222&type=chunk) [Financial Statements and Supplementary Data](index=18&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements and the independent auditor's report - The financial statements and supplementary data are located in a separate section of the report, commencing on page F-1[85](index=85&type=chunk)[133](index=133&type=chunk) - The independent registered public accounting firm, **Ernst & Young LLP**, issued an unqualified opinion on the consolidated financial statements[438](index=438&type=chunk) [Controls and Procedures](index=18&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - The CEO and CFO concluded that the Company's disclosure controls and procedures were **effective** as of December 29, 2018[88](index=88&type=chunk) - Management concluded that the Company's internal control over financial reporting was **effective** as of December 29, 2018; the assessment excluded the recently acquired businesses of ATCO and Die-Mold[90](index=90&type=chunk)[92](index=92&type=chunk) - Ernst & Young LLP issued an **unqualified attestation report** on the Company's internal control over financial reporting[93](index=93&type=chunk)[98](index=98&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fourth quarter of 2018[94](index=94&type=chunk) Part III [Directors, Compensation, Ownership, and Accountant Fees](index=22&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Required information on governance, compensation, and ownership is incorporated by reference from the 2019 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the Company's **2019 Proxy Statement**[109](index=109&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) Equity Compensation Plan Information (as of Dec 29, 2018) | Plan Category | Securities to be issued upon exercise (thousands) | Weighted-average exercise price | Securities remaining for future issuance (thousands) | | :--- | :--- | :--- | :--- | | **Equity compensation plans approved by security holders** | 1,014 | $23.90 | 344 | Part IV [Exhibits, Financial Statement Schedules](index=24&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section lists the financial statements, schedules, and exhibits filed with the Form 10-K[118](index=118&type=chunk)[121](index=121&type=chunk) - Key exhibits include the Restated Certificate of Incorporation, Amended and Restated By-laws, Indenture for the 6% Subordinated Debentures, various stock incentive plans, credit agreements, and the Stock Purchase Agreement for ATCO Rubber Products, Inc[121](index=121&type=chunk)[123](index=123&type=chunk) - Certifications from the CEO and CFO pursuant to the **Sarbanes-Oxley Act of 2002** are also included as exhibits[125](index=125&type=chunk)