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 ~~June 26,~~September 25, 2021
			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 jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


150 Schilling Boulevard	Suite 100
Collierville	Tennessee	38017
(Address of principal executive offices)		(Zip Code)

(901) 753-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	MLI	NYSE

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of the Registrant’s common stock outstanding as of ~~July 16,~~October 15, 2021 was ~~57,153,791.~~57,366,709.

MUELLER INDUSTRIES, INC.

FORM 10-Q

For the Quarterly Period Ended ~~June 26,~~September 25, 2021

As used in this report, the terms “Company,” “Mueller,” and “Registrant” mean Mueller Industries, Inc. and its consolidated subsidiaries taken as a whole, unless the context indicates otherwise.

INDEX


		Page Number
Part I. Financial Information

	Item 1. – Financial Statements (Unaudited)

	a.) Condensed Consolidated Statements of Income	3

	b.) Condensed Consolidated Statements of Comprehensive Income	4

	c.) Condensed Consolidated Balance Sheets	5

	d.) Condensed Consolidated Statements of Cash Flows	6

	e.) Condensed Consolidated Statements of Changes in Equity	78

	f.) Notes to Condensed Consolidated Financial Statements	910

	Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations	2526

	Item 3. – Quantitative and Qualitative Disclosures About Market Risk	3436

	Item 4. – Controls and Procedures	3638

Part II. Other Information

	Item 1. – Legal Proceedings	3638

	Item 1A – Risk Factors	3638

	Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	3739

	Item 6. – Exhibits	3840

Signatures		3941

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands, except per share data)	(In thousands, except per share data)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands, except per share data)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Net sales	Net sales	$	1,012,592	$	500,168	$	1,830,740	$	1,103,087	Net sales	$	982,248	$	619,105	$	2,812,988	$	1,722,192

Cost of goods sold	Cost of goods sold	799,712		403,159		1,468,130		911,874		Cost of goods sold	744,265		500,780		2,212,395		1,412,654
Depreciation and amortization	Depreciation and amortization	11,134		11,097		22,889		22,136		Depreciation and amortization	10,868		10,752		33,757		32,888
Selling, general, and administrative expense	Selling, general, and administrative expense	43,932		33,616		89,367		76,368		Selling, general, and administrative expense	48,524		38,346		137,891		117,749
Asset impairments		0		0		0		3,035
Gain on sale of businesses										Gain on sale of businesses	(54,759)		—		(54,759)		—

Litigation settlement, net	Litigation settlement, net	0		0		0		(21,933)		Litigation settlement, net	—		—		—		(21,933)

Operating income	Operating income	157,814		52,296		250,354		111,607		Operating income	233,350		69,227		483,704		180,834

Interest expense	Interest expense	(1,866)		(4,973)		(6,335)		(10,352)		Interest expense	(1,116)		(4,885)		(7,451)		(15,237)
Redemption premium	Redemption premium	(5,674)		0		(5,674)		0		Redemption premium	—		—		(5,674)		—
Other income, net		683		2,834		1,260		3,112
Other (expense) income, net										Other (expense) income, net	(2,548)		522		(1,288)		3,634

Income before income taxes	Income before income taxes	150,957		50,157		239,605		104,367		Income before income taxes	229,686		64,864		469,291		169,231

Income tax expense	Income tax expense	(39,006)		(13,029)		(60,767)		(27,173)		Income tax expense	(60,229)		(15,450)		(120,996)		(42,623)
Loss from unconsolidated affiliates, net of foreign tax		(1,019)		(8,641)		(2,668)		(14,756)
Income (loss) from unconsolidated affiliates, net of foreign tax										Income (loss) from unconsolidated affiliates, net of foreign tax	2,799		(5,457)		131		(20,213)

Consolidated net income	Consolidated net income	110,932		28,487		176,170		62,438		Consolidated net income	172,256		43,957		348,426		106,395

Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(2,100)		(531)		(4,231)		(2,067)		Net income attributable to noncontrolling interests	(1,276)		(1,255)		(5,507)		(3,322)

Net income attributable to Mueller Industries, Inc.	Net income attributable to Mueller Industries, Inc.	$	108,832	$	27,956	$	171,939	$	60,371	Net income attributable to Mueller Industries, Inc.	$	170,980	$	42,702	$	342,919	$	103,073

Weighted average shares for basic earnings per share	Weighted average shares for basic earnings per share	55,946		55,723		55,931		55,799		Weighted average shares for basic earnings per share	56,077		55,816		55,979		55,805
Effect of dilutive stock-based awards	Effect of dilutive stock-based awards	866		471		811		527		Effect of dilutive stock-based awards	731		550		784		534

Adjusted weighted average shares for diluted earnings per share	Adjusted weighted average shares for diluted earnings per share	56,812		56,194		56,742		56,326		Adjusted weighted average shares for diluted earnings per share	56,808		56,366		56,763		56,339

Basic earnings per share	Basic earnings per share	$	1.95	$	0.50	$	3.07	$	1.08	Basic earnings per share	$	3.05	$	0.77	$	6.13	$	1.85

Diluted earnings per share	Diluted earnings per share	$	1.92	$	0.50	$	3.03	$	1.07	Diluted earnings per share	$	3.01	$	0.76	$	6.04	$	1.83

Dividends per share	Dividends per share	$	0.13	$	0.10	$	0.26	$	0.20	Dividends per share	$	0.13	$	0.10	$	0.39	$	0.30

See accompanying notes to condensed consolidated financial statements.

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Consolidated net income	Consolidated net income	$	110,932	$	28,487	$	176,170	$	62,438	Consolidated net income	$	172,256	$	43,957	$	348,426	$	106,395

Other comprehensive (loss) income, net of tax:	Other comprehensive (loss) income, net of tax:									Other comprehensive (loss) income, net of tax:
Foreign currency translation	Foreign currency translation	3,515		421		7,902		(20,834)		Foreign currency translation	(8,569)		9,320		(667)		(11,514)
Net change with respect to derivative instruments and hedging activities, net of tax of $961, $(970), $814, and $(10)		(3,337)		3,398		(2,844)		41
Net change in pension and postretirement obligation adjustments, net of tax of $1, $375, $57, and $132		74		(1,284)		(17)		(545)
Attributable to unconsolidated affiliates, net of tax of $219, $810, $(358), and $262		(753)		(2,790)		1,234		(903)
Net change with respect to derivative instruments and hedging activities, net of tax of $(610), $(43), $204, and $(53)										Net change with respect to derivative instruments and hedging activities, net of tax of $(610), $(43), $204, and $(53)	2,122		151		(722)		192
Net change in pension and postretirement obligation adjustments, net of tax of $(137), $92, $(80), and $224										Net change in pension and postretirement obligation adjustments, net of tax of $(137), $92, $(80), and $224	493		(170)		476		(715)
Attributable to unconsolidated affiliates, net of tax of $(284), $(99), $(642), and $163										Attributable to unconsolidated affiliates, net of tax of $(284), $(99), $(642), and $163	977		339		2,211		(564)

Total other comprehensive (loss) income, net	Total other comprehensive (loss) income, net	(501)		(255)		6,275		(22,241)		Total other comprehensive (loss) income, net	(4,977)		9,640		1,298		(12,601)

Consolidated comprehensive income	Consolidated comprehensive income	110,431		28,232		182,445		40,197		Consolidated comprehensive income	167,279		53,597		349,724		93,794
Comprehensive (income) loss attributable to noncontrolling interests		(1,333)		90		(3,885)		(855)
Comprehensive income attributable to noncontrolling interests										Comprehensive income attributable to noncontrolling interests	(192)		(2,207)		(4,077)		(3,062)

Comprehensive income attributable to Mueller Industries, Inc.	Comprehensive income attributable to Mueller Industries, Inc.	$	109,098	$	28,322	$	178,560	$	39,342	Comprehensive income attributable to Mueller Industries, Inc.	$	167,087	$	51,390	$	345,647	$	90,732

See accompanying notes to condensed consolidated financial statements.

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


		(Unaudited)					(Unaudited)
(In thousands, except share data)	(In thousands, except share data)	June 26, 2021		December 26, 2020		(In thousands, except share data)	September 25, 2021		December 26, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	110,681	$	119,075	Cash and cash equivalents	$	104,789	$	119,075
Accounts receivable, less allowance for doubtful accounts of $2,818 in 2021 and $1,538 in 2020		542,044		357,532
Accounts receivable, less allowance for doubtful accounts of $2,687 in 2021 and $1,538 in 2020						Accounts receivable, less allowance for doubtful accounts of $2,687 in 2021 and $1,538 in 2020	493,960		357,532
Inventories	Inventories	384,982		315,002		Inventories	405,590		315,002
Other current assets	Other current assets	44,288		33,752		Other current assets	33,604		33,752

Total current assets	Total current assets	1,081,995		825,361		Total current assets	1,037,943		825,361

Property, plant, and equipment, net	Property, plant, and equipment, net	385,246		376,572		Property, plant, and equipment, net	370,222		376,572
Operating lease right-of-use assets	Operating lease right-of-use assets	26,871		29,301		Operating lease right-of-use assets	24,147		29,301
Goodwill, net	Goodwill, net	169,364		167,764		Goodwill, net	159,988		167,764
Intangible assets, net	Intangible assets, net	76,886		77,207		Intangible assets, net	63,579		77,207
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	36,899		37,976		Investments in unconsolidated affiliates	65,000		37,976
Other assets	Other assets	12,176		14,387		Other assets	7,658		14,387

Total assets	Total assets	$	1,789,437	$	1,528,568	Total assets	$	1,728,537	$	1,528,568

Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of debt	Current portion of debt	$	6,428	$	41,283	Current portion of debt	$	1,110	$	41,283
Accounts payable	Accounts payable	190,403		147,741		Accounts payable	180,509		147,741
Accrued wages and other employee costs	Accrued wages and other employee costs	39,502		46,299		Accrued wages and other employee costs	49,932		46,299
Current portion of operating lease liabilities	Current portion of operating lease liabilities	6,546		6,259		Current portion of operating lease liabilities	6,193		6,259
Other current liabilities	Other current liabilities	119,550		98,061		Other current liabilities	142,354		98,061

Total current liabilities	Total current liabilities	362,429		339,643		Total current liabilities	380,098		339,643

Long-term debt, less current portion	Long-term debt, less current portion	350,996		286,593		Long-term debt, less current portion	121,012		286,593
Pension liabilities	Pension liabilities	11,799		13,552		Pension liabilities	10,901		13,552
Postretirement benefits other than pensions	Postretirement benefits other than pensions	13,368		13,289		Postretirement benefits other than pensions	13,231		13,289
Environmental reserves	Environmental reserves	21,020		21,256		Environmental reserves	20,902		21,256
Deferred income taxes	Deferred income taxes	16,363		16,842		Deferred income taxes	13,393		16,842
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	19,433		21,602		Noncurrent operating lease liabilities	17,399		21,602
Other noncurrent liabilities	Other noncurrent liabilities	20,113		14,731		Other noncurrent liabilities	25,369		14,731

Total liabilities	Total liabilities	815,521		727,508		Total liabilities	602,305		727,508

Equity	Equity					Equity
Mueller Industries, Inc. stockholders' equity:	Mueller Industries, Inc. stockholders' equity:					Mueller Industries, Inc. stockholders' equity:
Preferred stock - $1.00 par value; shares authorized 5,000,000; NaN outstanding		0		0
Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 57,151,341 in 2021 and 57,087,432 in 2020		802		802
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding						Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding	—		—
Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 57,367,709 in 2021 and 57,087,432 in 2020						Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 57,367,709 in 2021 and 57,087,432 in 2020	802		802
Additional paid-in capital	Additional paid-in capital	285,148		280,051		Additional paid-in capital	283,285		280,051
Retained earnings	Retained earnings	1,176,812		1,019,694		Retained earnings	1,340,337		1,019,694
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(48,262)		(54,883)		Accumulated other comprehensive loss	(52,155)		(54,883)
Treasury common stock, at cost	Treasury common stock, at cost	(468,784)		(468,919)		Treasury common stock, at cost	(464,707)		(468,919)

Total Mueller Industries, Inc. stockholders' equity	Total Mueller Industries, Inc. stockholders' equity	945,716		776,745		Total Mueller Industries, Inc. stockholders' equity	1,107,562		776,745
Noncontrolling interests	Noncontrolling interests	28,200		24,315		Noncontrolling interests	18,670		24,315

Total equity	Total equity	973,916		801,060		Total equity	1,126,232		801,060

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	—		—

Total liabilities and equity	Total liabilities and equity	$	1,789,437	$	1,528,568	Total liabilities and equity	$	1,728,537	$	1,528,568

See accompanying notes to condensed consolidated financial statements.

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Six Months Ended
(In thousands) June 26, 2021 June 27, 2020
Cash flows from operating activities
Consolidated net income $ 176,170 $ 62,438
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization 22,975 22,296
Stock-based compensation expense 4,817 4,198
Provision for doubtful accounts receivable 1,280 1,850
Loss from unconsolidated affiliates 2,668 14,756
Redemption premium 5,674 0
Gain on disposals of properties (819) (9)
Impairment charges 0 3,035
Deferred income tax expense 3,252 764
Changes in assets and liabilities, net of effects of businesses acquired:
Receivables (190,944) (11,212)
Inventories (63,949) 43,263
Other assets (5,482) 3,967
Current liabilities 50,456 (277)
Other liabilities 3,429 (5,369)
Other, net (247) 3,082
Net cash provided by operating activities 9,280 142,782
Cash flows from investing activities
Capital expenditures (17,978) (22,215)
Acquisition of businesses, net of cash acquired (13,935) (15,415)
Payment received for notes receivable 8,539 0
Proceeds from sales of assets 1,730 1
Net cash used in investing activities (21,644) (37,629)
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc. (14,546) (11,168)
Repurchase of common stock 0 (5,574)
Issuance of debt 425,000 110,015
Repayments of debt (400,497) (166,021)
Issuance (repayment) of debt by consolidated joint ventures, net 463 (471)
Net cash received to settle stock-based awards 414 696
Debt issuance costs (1,111) 0
Net cash provided by (used in) financing activities 9,723 (72,523)
Effect of exchange rate changes on cash 987 (6,160)
(Decrease) increase in cash, cash equivalents, and restricted cash (1,654) 26,470
Cash, cash equivalents, and restricted cash at the beginning of the period 127,376 98,042
Cash, cash equivalents, and restricted cash at the end of the period $ 125,722 $ 124,512


	For the Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020

Cash flows from operating activities
Consolidated net income	$	348,426	$	106,395
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization	33,932		33,127
Stock-based compensation expense	7,228		6,332
Provision for doubtful accounts receivable	1,310		953
(Income) loss from unconsolidated affiliates	(131)		20,213
Redemption premium	5,674		—
(Gain) loss on disposals of properties	(1,135)		144
Gain on sale of businesses	(54,759)		—


Impairment charges	2,568		3,035


Deferred income tax expense (benefit)	6,304		(836)
Changes in assets and liabilities, net of effects of businesses acquired and sold:
Receivables	(155,103)		(45,530)
Inventories	(96,505)		41,598
Other assets	(9,335)		9,053
Current liabilities	85,523		25,913
Other liabilities	8,335		(5,813)
Other, net	(851)		2,294

Net cash provided by operating activities	181,481		196,878

Cash flows from investing activities
Capital expenditures	(25,547)		(29,204)
Acquisition of businesses, net of cash acquired	(13,935)		(72,648)
Proceeds from sale of businesses, net of cash sold	74,250		—
Investments in unconsolidated affiliates	(1,613)		—
Payment received for (issuance of) notes receivable	8,539		(9,155)
Proceeds from sales of assets	2,124		12


Net cash provided by (used in) investing activities	43,818		(110,995)

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020

Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.	(21,846)		(16,754)
Dividends paid to noncontrolling interests	(9,722)		—
Repurchase of common stock	—		(5,574)
Payment of contingent consideration	(1,250)		(7,000)
Issuance of debt	475,000		150,027
Repayments of debt	(680,572)		(186,492)
Repayment of debt by consolidated joint ventures, net	(4,865)		(299)
Net cash received (used) to settle stock-based awards	219		(160)
Debt issuance costs	(1,111)		—

Net cash used in financing activities	(244,147)		(66,252)

Effect of exchange rate changes on cash	(377)		(3,294)

(Decrease) increase in cash, cash equivalents, and restricted cash	(19,225)		16,337
Cash, cash equivalents, and restricted cash at the beginning of the period	127,376		98,042

Cash, cash equivalents, and restricted cash at the end of the period	$	108,151	$	114,379

See accompanying notes to condensed consolidated financial statements.

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

For the Quarter Ended For the Six Months Ended
(In thousands) June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020
Common stock:
Balance at beginning of period $ 802 $ 802 $ 802 $ 802
Balance at end of period $ 802 $ 802 $ 802 $ 802
Additional paid-in capital:
Balance at beginning of period $ 282,713 $ 280,197 $ 280,051 $ 278,609
Acquisition (issuance) of shares under incentive stock option plans 12 (270) 565 (667)
Stock-based compensation expense 2,708 2,213 4,817 4,198
Issuance of restricted stock (285) (284) (285) (284)
Balance at end of period $ 285,148 $ 281,856 $ 285,148 $ 281,856
Retained earnings:
Balance at beginning of period $ 1,075,410 $ 929,810 $ 1,019,694 $ 903,070
Net income attributable to Mueller Industries, Inc. 108,832 27,956 171,939 60,371
Dividends paid or payable to stockholders of Mueller Industries, Inc. (7,430) (5,774) (14,821) (11,449)
Balance at end of period $ 1,176,812 $ 951,992 $ 1,176,812 $ 951,992
Accumulated other comprehensive loss:
Balance at beginning of period $ (48,528) $ (90,165) $ (54,883) $ (68,770)
Total other comprehensive income (loss) attributable to Mueller Industries, Inc. 266 366 6,621 (21,029)
Balance at end of period $ (48,262) $ (89,799) $ (48,262) $ (89,799)


	For the Quarter Ended				For the Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Common stock:
Balance at beginning of period	$	802	$	802	$	802	$	802

Balance at end of period	$	802	$	802	$	802	$	802

Additional paid-in capital:
Balance at beginning of period	$	285,148	$	281,856	$	280,051	$	278,609
Acquisition (issuance) of shares under incentive stock option plans	163		(229)		728		(896)
Stock-based compensation expense	2,411		2,134		7,228		6,332
Issuance of restricted stock	(4,437)		(6,098)		(4,722)		(6,382)

Balance at end of period	$	283,285	$	277,663	$	283,285	$	277,663

Retained earnings:
Balance at beginning of period	$	1,176,812	$	951,992	$	1,019,694	$	903,070
Net income attributable to Mueller Industries, Inc.	170,980		42,702		342,919		103,073
Dividends paid or payable to stockholders of Mueller Industries, Inc.	(7,455)		(5,711)		(22,276)		(17,160)



Balance at end of period	$	1,340,337	$	988,983	$	1,340,337	$	988,983

Accumulated other comprehensive loss:
Balance at beginning of period	$	(48,262)	$	(89,799)	$	(54,883)	$	(68,770)
Total other comprehensive (loss) income attributable to Mueller Industries, Inc.	(3,893)		8,688		2,728		(12,341)


Balance at end of period	$	(52,155)	$	(81,111)	$	(52,155)	$	(81,111)

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands) For the Quarter Ended For the Six Months Ended
June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020
Treasury stock:
Balance at beginning of period $ (469,251) $ (474,957) $ (468,919) $ (470,243)
Issuance (acquisition) of shares under incentive stock option plans 182 503 (124) 1,363
Repurchase of common stock 0 0 (26) (5,574)
Issuance of restricted stock 285 284 285 284
Balance at end of period $ (468,784) $ (474,170) $ (468,784) $ (474,170)
Noncontrolling interests:
Balance at beginning of period $ 26,867 $ 19,613 $ 24,315 $ 18,668
Net income attributable to noncontrolling interests 2,100 531 4,231 2,067
Foreign currency translation (767) (621) (346) (1,212)
Balance at end of period $ 28,200 $ 19,523 $ 28,200 $ 19,523


	For the Quarter Ended				For the Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Treasury stock:
Balance at beginning of period	$	(468,784)	$	(474,170)	$	(468,919)	$	(470,243)
(Acquisition) issuance of shares under incentive stock option plans	(360)		(644)		(484)		719
Repurchase of common stock	—		—		(26)		(5,574)
Issuance of restricted stock	4,437		6,098		4,722		6,382

Balance at end of period	$	(464,707)	$	(468,716)	$	(464,707)	$	(468,716)

Noncontrolling interests:
Balance at beginning of period	$	28,200	$	19,523	$	24,315	$	18,668
Dividends paid to noncontrolling interests	(9,722)		—		(9,722)		—
Net income attributable to noncontrolling interests	1,276		1,255		5,507		3,322
Foreign currency translation	(1,084)		952		(1,430)		(260)

Balance at end of period	$	18,670	$	21,730	$	18,670	$	21,730

See accompanying notes to condensed consolidated financial statements.

MUELLER INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

General

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. Results of operations for the interim periods presented are not necessarily indicative of results which may be expected for any other interim period or for the year as a whole. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K, including the annual financial statements incorporated therein.

The accompanying unaudited interim financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented herein. Certain prior year balances have been reclassified to conform to the current year presentation.

Note 1 – Recent Accounting Standards

Adopted

In October 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-10, Codification Improvements: An Amendment of the FASB Accounting Standards Codification. The ASU facilitates updates to the Accounting Standards Codification for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements. The Company adopted the ASU during the first quarter of 2021 using a retrospective approach. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The Company adopted the ASU during the first quarter of 2021 using a prospective approach. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The new guidance affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The Company adopted the ASU during the first quarter of 2021 using a prospective approach. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Issued

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): An Amendment of the FASB Accounting Standards Codification. The new guidance was issued in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR). Regulators in numerous jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU is effective in 2021 but can be applied through December 31, 2022. The updated guidance requires retrospective adoption, and early adoption is permitted. The Company does not expect the adoption of the ASU to have a material impact on its Condensed Consolidated Financial Statements.

Note 2 – Earnings per Common Share

Basic per share amounts have been computed based on the average number of common shares outstanding. Diluted per share amounts reflect the increase in average common shares outstanding that would result from the assumed exercise of outstanding stock options and vesting of restricted stock awards, computed using the treasury stock method. Approximately 530 thousand and 83 thousand stock-based awards were excluded from the computation of diluted earnings per share for the quarters ended ~~June 26,~~September 25, 2021 and ~~June 27,~~September 26, 2020, respectively, because they were antidilutive.

910

Note 3 – Acquisitions and Dispositions

Acquisitions

H&C Flex

On December 20, 2020, the Company entered into an asset purchase agreement with Hart & Cooley LLC. The transaction closed on January 29, 2021, whereby the Company purchased the Hart & Cooley flexible duct business, which included inventory, manufacturing equipment, and related assets for approximately ~~$15.4 million.~~$15.3 million. The total purchase price consisted of $14.0 million in cash paid at closing and a contingent consideration arrangement ~~currently estimated at $1.4~~of $1.3 million. The Company treated this as a business combination. The acquired business, H&C Flex, is a manufacturer and distributor of insulated HVAC flexible duct systems. It is reported within and complements the Company’s existing businesses in the Climate segment.

As of ~~June 26,~~September 25, 2021, the provisional fair value of tangible assets acquired totaled $15.3 million, consisting primarily of property, plant, and equipment of $10.8 million and inventory of $4.5 million. Of the remaining purchase price, $0.1 million was allocated to tax-deductible goodwill. During the second quarter of 2021, there was a change in the valuation that resulted in an increase in property, plant, and equipment of $2.4 million, a decrease in goodwill of $1.0 million, and the recognition of contingent consideration of $1.4 million. The purchase price allocation is provisional as of ~~June 26,~~September 25, 2021 and subject to change upon completion of the final valuation of the assets and contingent consideration during the measurement period.

Kessler Sales and Distribution, LLC

On August 3, 2020, the Company entered into an asset purchase agreement with Wieland-Kessler LLC, whereby the Company purchased the Kessler distribution business, which included inventory, manufacturing equipment, and related assets. The total purchase price was $57.2 million in cash paid at closing. The Company treated this as a business combination. The acquired business, Kessler Sales and Distribution, LLC, is a distributor of residential and commercial plumbing products. It is reported within and complements the Company’s existing businesses in the Piping Systems segment.

The ~~provisional~~ fair value of tangible assets acquired totaled $27.3 million, consisting primarily of inventory. Of the remaining purchase price, $29.9 million was allocated to tax-deductible goodwill and intangible assets. During the second quarter of 2021, there was a change in the valuation that resulted in a decrease in property, plant, and equipment and an increase in goodwill of $1.4 million. During the first quarter of 2021, there was a change in the valuation that resulted in a decrease in goodwill and an increase in intangible assets of $1.5 million. The ~~purchase price allocation is provisional~~valuation of the business has been finalized as of ~~June 26, 2021 and subject to change upon completion of the final valuation of the long-lived assets during the measurement period.~~September 25, 2021.

Shoals Tubular, Inc.

On January 17, 2020, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding stock of Shoals Tubular, Inc. (STI) for approximately $15.3 million, net of working capital adjustments. The total purchase price consisted of $15.3 million in cash at closing. STI is a manufacturer of brazed manifolds, headers, and distributor assemblies used primarily by manufacturers of residential heating and air conditioning units. The acquired business is reported within and complements the Company’s existing businesses in the Climate segment.

The fair value of the tangible assets acquired totaled $6.2 million, consisting primarily of property, plant, and equipment of $3.7 million, inventories of $1.8 million, and accounts receivable of $0.7 million. The fair value of the liabilities assumed totaled $0.2 million, consisting primarily of accounts payable. Of the remaining purchase price, $9.3 million was allocated to tax-deductible goodwill and intangible assets. The valuation of the business has been finalized. There were no material changes to the purchase price allocation from the amounts presented in the Company’s 2020 Annual Report on Form 10-K.

Dispositions

Die-Mold

On September 2, 2021, the Company entered into a contribution agreement with a limited liability company in the retail distribution business, pursuant to which the Company exchanged the outstanding common stock of Die-Mold for a 17 percent equity interest in the limited liability company. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. and was included in the Piping Systems Segment. Die-Mold reported net sales of $10.9 million and net income of $1.6 million for the first nine months of 2021 compared to net sales of $10.4 million and net income of $1.4 million in the first nine months of 2020. As a result of the transaction, the Company recognized a gain of $4.7 million based on the excess of the fair value of the consideration received (the 17 percent equity interest) over the carrying value of Die-Mold. The Company utilized a market comparable companies approach using an

EBITDA multiple to determine the fair value of the consideration received of $24.0 million, which is recognized within the Investments in unconsolidated affiliates line of the Condensed Consolidated Balance Sheet. The excess of the fair value of the deconsolidated subsidiary over its carrying value resulted in the gain.

Fabricated Tube Products and Shoals Tubular, Inc.

On July 28, 2021, the Company entered into a purchase agreement with J.W. Harris Co., Inc. and Lincoln Electric Holdings, Inc., pursuant to which the Company sold the assets of Fabricated Tube Products (FTP) and all of the outstanding stock of STI for approximately $78.2 million. These businesses manufacture and fabricate valves and assemblies, brazed manifolds, headers, and distributor assemblies used primarily by manufacturers of residential heating and air conditioning units in the U.S. and were included in the Climate segment. They reported combined net sales of $37.0 million and net income of $5.5 million in the first nine months of 2021 compared to combined net sales of $38.3 million and net income of $4.8 million in the first nine months of 2020. The carrying value of the assets disposed totaled $31.7 million, consisting primarily of accounts receivable, inventories, and long-lived assets. The carrying value of the liabilities disposed totaled $3.6 million, consisting primarily of accounts payable. As a result of the transaction, the Company recognized a pre-tax gain of $50.1 million on the sale of these businesses in the Condensed Consolidating Financial Statements.

Note 4 – Segment Information

Each of the Company’s reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:

Piping Systems

Piping Systems is composed of the following operating segments: Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, ~~Die-Mold,~~ European Operations, Trading Group, and Jungwoo-Mueller (the Company’s South Korean joint venture). The Domestic Piping Systems Group manufactures and distributes copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Outside the U.S., Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group produces a complete line of products for PEX plumbing and radiant systems in Canada and sells these products in Canada and the U.S. ~~Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S.~~ European Operations manufactures copper tube in the U.K. which is sold primarily in Europe. The Trading Group manufactures pipe nipples and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products in the U.S. and Mexico. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment’s products are sold primarily to plumbing, refrigeration, and air-conditioning wholesalers, hardware wholesalers and co-ops, building product retailers, and air-conditioning original equipment manufacturers (OEMs).

Industrial Metals

Industrial Metals is composed of the following operating segments: Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. These businesses manufacture brass rod, impact extrusions, and forgings, as well as a wide variety of end products including plumbing brass, automotive components, valves, fittings, and gas assemblies. These products are manufactured in the U.S. and sold primarily to OEMs in the U.S., many of which are in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets.

Climate

Climate is composed of the following operating segments: Refrigeration Products, ~~Fabricated Tube Products,~~ Westermeyer, Turbotec, Flex Duct, and Linesets, Inc.~~, and STI.~~ These domestic businesses manufacture ~~and fabricate valves, assemblies,~~ high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, and line sets ~~brazed manifolds, headers, and distributor assemblies~~ primarily for the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.

Summarized segment information is as follows:


		For the Quarter Ended June 26, 2021											For the Quarter Ended September 25, 2021
(In thousands)	(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total		(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	Net sales	$	711,616	$	180,040	$	131,708	$	(10,772)	$	1,012,592	Net sales	$	688,200	$	182,245	$	122,252	$	(10,449)	$	982,248

Cost of goods sold	Cost of goods sold	558,278		155,399		96,303		(10,268)		799,712		Cost of goods sold	506,703		158,822		89,175		(10,435)		744,265
Depreciation and amortization	Depreciation and amortization	5,515		1,694		2,753		1,172		11,134		Depreciation and amortization	5,547		1,661		2,484		1,176		10,868
Selling, general, and administrative expense	Selling, general, and administrative expense	23,315		2,448		7,280		10,889		43,932		Selling, general, and administrative expense	23,751		2,710		9,521		12,542		48,524
Gain on sale of businesses												Gain on sale of businesses	—		—		—		(54,759)		(54,759)

Operating income	Operating income	124,508		20,499		25,372		(12,565)		157,814		Operating income	152,199		19,052		21,072		41,027		233,350

Interest expense	Interest expense									(1,866)		Interest expense									(1,116)
Redemption premium										(5,674)
Other income, net										683

Other (expense) income, net												Other (expense) income, net									(2,548)

Income before income taxes	Income before income taxes									$	150,957	Income before income taxes									$	229,686


	For the Quarter Ended September 26, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	409,414	$	118,831	$	97,604	$	(6,744)	$	619,105

Cost of goods sold	339,904		95,717		70,450		(5,291)		500,780
Depreciation and amortization	5,362		1,774		2,547		1,069		10,752
Selling, general, and administrative expense	19,285		2,992		6,451		9,618		38,346




Operating income	44,863		18,348		18,156		(12,140)		69,227

Interest expense									(4,885)
Other income, net									522

Income before income taxes									$	64,864

1113

Segment information (continued):


		For the Quarter Ended June 27, 2020											For the Nine Months Ended September 25, 2021
(In thousands)	(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total		(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	Net sales	$	334,040	$	88,619	$	86,107	$	(8,598)	$	500,168	Net sales	$	1,947,564	$	527,137	$	364,986	$	(26,699)	$	2,812,988

Cost of goods sold	Cost of goods sold	272,271		75,274		64,540		(8,926)		403,159		Cost of goods sold	1,515,335		455,112		269,560		(27,612)		2,212,395
Depreciation and amortization	Depreciation and amortization	5,456		1,995		2,757		889		11,097		Depreciation and amortization	17,272		5,098		7,866		3,521		33,757
Selling, general, and administrative expense	Selling, general, and administrative expense	15,239		2,477		6,457		9,443		33,616		Selling, general, and administrative expense	71,152		8,529		23,781		34,429		137,891
Gain on sale of businesses												Gain on sale of businesses	—		—		—		(54,759)		(54,759)

Operating income	Operating income	41,074		8,873		12,353		(10,004)		52,296		Operating income	343,805		58,398		63,779		17,722		483,704

Interest expense	Interest expense									(4,973)		Interest expense									(7,451)
Redemption premium												Redemption premium									(5,674)
Other income, net	Other income, net									2,834		Other income, net									(1,288)

Income before income taxes	Income before income taxes									$	50,157	Income before income taxes									$	469,291

For the Six Months Ended June 26, 2021
(In thousands) Piping Systems Industrial Metals Climate Corporate and Eliminations Total
Net sales $ 1,259,364 $ 344,892 $ 242,734 $ (16,250) $ 1,830,740
Cost of goods sold 1,008,632 296,290 180,385 (17,177) 1,468,130
Depreciation and amortization 11,725 3,437 5,382 2,345 22,889
Selling, general, and administrative expense 47,401 5,819 14,260 21,887 89,367
Operating income 191,606 39,346 42,707 (23,305) 250,354
Interest expense (6,335)
Redemption premium (5,674)
Other income, net 1,260
Income before income taxes $ 239,605


	For the Nine Months Ended September 26, 2020
( In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	1,128,467	$	338,652	$	276,983	$	(21,910)	$	1,722,192

Cost of goods sold	931,339		285,788		206,083		(10,556)		1,412,654
Depreciation and amortization	16,517		5,771		7,770		2,830		32,888
Selling, general, and administrative expense	57,998		8,690		19,607		31,454		117,749

Litigation settlement, net	—		—		—		(21,933)		(21,933)


Operating income	122,613		38,403		43,523		(23,705)		180,834

Interest expense									(15,237)
Other income, net									3,634

Income before income taxes									$	169,231

1214

~~Segment information (continued):~~

For the Six Months Ended June 27, 2020
( In thousands) Piping Systems Industrial Metals Climate Corporate and Eliminations Total
Net sales $ 719,053 $ 219,821 $ 179,379 $ (15,166) $ 1,103,087
Cost of goods sold 591,435 190,071 135,633 (5,265) 911,874
Depreciation and amortization 11,155 3,997 5,223 1,761 22,136
Selling, general, and administrative expense 35,678 5,698 13,156 21,836 76,368
Asset impairments 3,035 0 0 0 3,035
Litigation settlement, net 0 0 0 (21,933) (21,933)
Operating income 77,750 20,055 25,367 (11,565) 111,607
Interest expense (10,352)
Other income, net 3,112
Income before income taxes $ 104,367

The following table presents total assets attributable to each segment:


(In thousands)	(In thousands)	June 26, 2021		December 26, 2020		(In thousands)	September 25, 2021		December 26, 2020

Segment assets:	Segment assets:					Segment assets:
Piping Systems	Piping Systems	$	1,222,336	$	977,937	Piping Systems	$	1,142,523	$	977,937
Industrial Metals	Industrial Metals	173,227		152,683		Industrial Metals	186,040		152,683
Climate	Climate	272,318		258,668		Climate	244,603		258,668
General Corporate	General Corporate	121,556		139,280		General Corporate	155,371		139,280

		$	1,789,437	$	1,528,568		$	1,728,537	$	1,528,568

The following tables represent a disaggregation of revenue from contracts with customers, along with the reportable segment for each category:


		For the Quarter Ended June 26, 2021									For the Quarter Ended September 25, 2021
(In thousands)	(In thousands)	Piping Systems		Industrial Metals		Climate		Total		(In thousands)	Piping Systems		Industrial Metals		Climate		Total

Tube and fittings	Tube and fittings	$	567,092	$	0	$	0	$	567,092	Tube and fittings	$	555,161	$	—	$	—	$	555,161
Brass rod and forgings	Brass rod and forgings	0		142,974		0		142,974		Brass rod and forgings	—		143,788		—		143,788
OEM components, tube & assemblies	OEM components, tube & assemblies	8,456		12,710		43,449		64,615		OEM components, tube & assemblies	6,943		12,076		29,627		48,646
Valves and plumbing specialties	Valves and plumbing specialties	136,068		0		0		136,068		Valves and plumbing specialties	126,096		—		—		126,096
Flex duct and other HVAC components	Flex duct and other HVAC components	0		0		88,259		88,259		Flex duct and other HVAC components	—		—		92,625		92,625
Other	Other	0		24,356		0		24,356		Other	—		26,381		—		26,381

		711,616		180,040		131,708		1,023,364			688,200		182,245		122,252		992,697

Intersegment sales	Intersegment sales							(10,772)		Intersegment sales							(10,449)

Net sales	Net sales							$	1,012,592	Net sales							$	982,248

For the Quarter Ended June 27, 2020
(In thousands) Piping Systems Industrial Metals Climate Total
Tube and fittings $ 256,016 $ 0 $ 0 $ 256,016
Brass rod and forgings 0 64,490 0 64,490
OEM components, tube & assemblies 16,812 10,427 32,931 60,170
Valves and plumbing specialties 61,212 0 0 61,212
Flex duct and other HVAC components 0 0 53,176 53,176
Other 0 13,702 0 13,702
334,040 88,619 86,107 508,766
Intersegment sales (8,598)
Net sales $ 500,168


	For the Quarter Ended September 26, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Total

Tube and fittings	$	320,619	$	—	$	—	$	320,619
Brass rod and forgings	—		89,487		—		89,487
OEM components, tube & assemblies	7,402		11,215		35,957		54,574
Valves and plumbing specialties	81,393		—		—		81,393
Flex duct and other HVAC components	—		—		61,647		61,647
Other	—		18,129		—		18,129

	409,414		118,831		97,604		625,849

Intersegment sales							(6,744)

Net sales							$	619,105

1415

Disaggregation of revenue from contracts with customers (continued):


		For the Six Months Ended June 26, 2021									For the Nine Months Ended September 25, 2021
(In thousands)	(In thousands)	Piping Systems		Industrial Metals		Climate		Total		(In thousands)	Piping Systems		Industrial Metals		Climate		Total

Tube and fittings	Tube and fittings	$	993,231	$	0	$	0	$	993,231	Tube and fittings	$	1,548,392	$	—	$	—	$	1,548,392
Brass rod and forgings	Brass rod and forgings	0		274,236		0		274,236		Brass rod and forgings	—		418,024		—		418,024
OEM components, tube & assemblies	OEM components, tube & assemblies	17,011		23,743		81,516		122,270		OEM components, tube & assemblies	23,954		35,819		111,143		170,916
Valves and plumbing specialties	Valves and plumbing specialties	249,122		0		0		249,122		Valves and plumbing specialties	375,218		—		—		375,218
Flex duct and other HVAC components	Flex duct and other HVAC components	0		0		161,218		161,218		Flex duct and other HVAC components	—		—		253,843		253,843
Other	Other	0		46,913		0		46,913		Other	—		73,294		—		73,294

		1,259,364		344,892		242,734		1,846,990			1,947,564		527,137		364,986		2,839,687

Intersegment sales	Intersegment sales							(16,250)		Intersegment sales							(26,699)

Net sales	Net sales							$	1,830,740	Net sales							$	2,812,988


		For the Six Months Ended June 27, 2020					For the Nine Months Ended September 26, 2020
(In thousands)	(In thousands)	Piping Systems	Industrial Metals	Climate	Total			(In thousands)	Piping Systems	Industrial Metals	Climate	Total

Tube and fittings	Tube and fittings	558,145	0	0	558,145			Tube and fittings	878,764	—	—	878,764
Brass rod and forgings	Brass rod and forgings	0	164,160	0	164,160			Brass rod and forgings	—	253,647	—	253,647
OEM components, tube & assemblies	OEM components, tube & assemblies	42,107	21,309	69,504	132,920			OEM components, tube & assemblies	49,509	32,524	105,461	187,494
Valves and plumbing specialties	Valves and plumbing specialties	118,801	0	0	118,801			Valves and plumbing specialties	200,194	—	—	200,194
Flex duct and other HVAC components	Flex duct and other HVAC components	0	0	109,875	109,875			Flex duct and other HVAC components	—	—	171,522	171,522
Other	Other	0	34,352	0	34,352			Other	—	52,481	—	52,481

		719,053	219,821	179,379	1,118,253				1,128,467	338,652	276,983	1,744,102

Intersegment sales	Intersegment sales				(15,166)			Intersegment sales				(21,910)

Net sales	Net sales				$	1,103,087		Net sales				$	1,722,192

Note 5 – Cash, Cash Equivalents, and Restricted Cash


(In thousands)	(In thousands)	June 26, 2021		December 26, 2020		(In thousands)	September 25, 2021		December 26, 2020

Cash & cash equivalents	Cash & cash equivalents	$	110,681	$	119,075	Cash & cash equivalents	$	104,789	$	119,075
Restricted cash included within other current assets	Restricted cash included within other current assets	14,938		8,198		Restricted cash included within other current assets	3,259		8,198
Restricted cash included within other assets	Restricted cash included within other assets	103		103		Restricted cash included within other assets	103		103

Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	125,722	$	127,376	Total cash, cash equivalents, and restricted cash	$	108,151	$	127,376

Amounts included in restricted cash relate to required deposits in brokerage accounts that facilitate the Company’s hedging activities as well as imprest funds for the Company’s self-insured workers’ compensation program.

1516

Note 6 – Inventories


(In thousands)	(In thousands)	June 26, 2021		December 26, 2020		(In thousands)	September 25, 2021		December 26, 2020

Raw materials and supplies	Raw materials and supplies	$	122,931	$	85,927	Raw materials and supplies	$	133,109	$	85,927
Work-in-process	Work-in-process	73,336		49,361		Work-in-process	66,574		49,361
Finished goods	Finished goods	197,006		186,785		Finished goods	215,007		186,785
Valuation reserves	Valuation reserves	(8,291)		(7,071)		Valuation reserves	(9,100)		(7,071)

Inventories	Inventories	$	384,982	$	315,002	Inventories	$	405,590	$	315,002

Note 7 – Financial Instruments

Derivative Instruments and Hedging Activities

The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, and interest rates. The Company uses derivative instruments such as commodity futures contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures.

All derivatives are recognized in the Condensed Consolidated Balance Sheets at their fair value. On the date the derivative contract is entered into, it is either a) designated as a hedge of a forecasted transaction or the variability of cash flow to be paid (cash flow hedge) or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure (economic hedge), as the Company does not enter into derivative contracts for trading purposes. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge are recorded in stockholders’ equity within AOCI, to the extent effective, until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of undesignated derivatives executed as economic hedges are reported in current earnings.

The Company documents all relationships between derivative instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value hedges to specific assets and liabilities in the Condensed Consolidated Balance Sheets and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable of occurring, hedge accounting is discontinued prospectively in accordance with the derecognition criteria for hedge accounting.

Commodity Futures Contracts

Copper and brass represent the largest component of the Company’s variable costs of production. The cost of these materials is subject to global market fluctuations caused by factors beyond the Company’s control. The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts. These futures contracts have been designated as cash flow hedges.

At ~~June 26,~~September 25, 2021, the Company held open futures contracts to purchase approximately ~~$83.9~~$46.9 million of copper over the next 2318 months related to fixed price sales orders. The fair value of those futures contracts was a ~~$2.8 million~~$112 thousand net ~~loss~~gain position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At ~~June 26,~~September 25, 2021, this amount was approximately ~~$1.9 million~~$142 thousand of deferred net ~~losses,~~gains, net of tax.

The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At ~~June 26,~~September 25, 2021, the Company held open futures contracts to sell approximately ~~$66.7 million~~$867 thousand of copper over the next ~~nine~~10 months related to copper inventory. The fair value of those futures contracts was a ~~$2.6 million~~$16 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).

1617

The Company presents its derivative assets and liabilities in the Condensed Consolidated Balance Sheets on a net basis by counterparty. The following table summarizes the location and fair value of the derivative instruments and disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:


		Asset Derivatives					Liability Derivatives						Asset Derivatives					Liability Derivatives
			Fair Value					Fair Value						Fair Value					Fair Value
(In thousands)	(In thousands)	Balance Sheet Location	June 26, 2021		December 26, 2020		Balance Sheet Location	June 26, 2021		December 26, 2020		(In thousands)	Balance Sheet Location	September 25, 2021		December 26, 2020		Balance Sheet Location	September 25, 2021		December 26, 2020

Commodity contracts - gains	Commodity contracts - gains	Other current assets	$	132	$	1,213	Other current liabilities	$	1,788	$	68	Commodity contracts - gains	Other current assets	$	671	$	1,213	Other current liabilities	$	27	$	68
Commodity contracts - losses	Commodity contracts - losses	Other current assets	(83)		(8)		Other current liabilities	(7,285)		(5,863)		Commodity contracts - losses	Other current assets	(559)		(8)		Other current liabilities	(43)		(5,863)

Total derivatives (1)	Total derivatives (1)		$	49	$	1,205		$	(5,497)	$	(5,795)	Total derivatives (1)		$	112	$	1,205		$	(16)	$	(5,795)

(1) Does not include the impact of cash collateral provided to counterparties.

The following tables summarize the effects of derivative instruments on the Company’s Condensed Consolidated Statements of Income:

For the Quarter Ended

For the Six Months Ended

For the Quarter Ended

For the Nine Months Ended

(In thousands)

Location

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

(In thousands)

Location

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Undesignated derivatives:

(Loss) gain on commodity contracts (nonqualifying)

Cost of goods sold

(1,893)

5,037

(10,423)

(4,439)

Gain (loss) on commodity contracts (nonqualifying)

Cost of goods sold

7,282

843

(3,141)

(3,596)

The following tables summarize amounts recognized in and reclassified from AOCI during the period:


		For the Quarter Ended June 26, 2021						For the Quarter Ended September 25, 2021
(In thousands)	(In thousands)	Loss Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax		(In thousands)	Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Commodity contracts	Commodity contracts	$	(1,475)	Cost of goods sold	$	(1,853)	Commodity contracts	$	845	Cost of goods sold	$	1,265
Other	Other	(9)		Other	0		Other	13		Other	(1)

Total	Total	$	(1,484)	Total	$	(1,853)	Total	$	858	Total	$	1,264

1718

Amounts recognized in and reclassified from AOCI (continued):


		For the Quarter Ended June 27, 2020						For the Quarter Ended September 26, 2020
(In thousands)	(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax		(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Commodity contracts	Commodity contracts	$	(1,715)	Cost of goods sold	$	5,075	Commodity contracts	$	337	Cost of goods sold	$	(180)
Other	Other	37		Other	1		Other	(6)		Other	—

Total	Total	$	(1,678)	Total	$	5,076	Total	$	331	Total	$	(180)


		For the Six Months Ended June 26, 2021						For the Nine Months Ended September 25, 2021
(In thousands)	(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	(Gain) Loss Reclassified from AOCI (Effective Portion), Net of Tax		(In thousands)	Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Commodity contracts	Commodity contracts	$	16	Cost of goods sold	$	(2,849)	Commodity contracts	$	861	Cost of goods sold	$	(1,584)
Other	Other	(12)		Other	1		Other	1		Other	—

Total	Total	$	4	Total	$	(2,848)	Total	$	862	Total	$	(1,584)


		For the Six Months Ended June 27, 2020						For the Nine Months Ended September 26, 2020
(In thousands)	(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax		(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Commodity contracts	Commodity contracts	$	(5,421)	Cost of goods sold	$	5,453	Commodity contracts	$	(5,084)	Cost of goods sold	$	5,273
Other	Other	8		Other	1		Other	2		Other	1

Total	Total	$	(5,413)	Total	$	5,454	Total	$	(5,082)	Total	$	5,274

The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral. At ~~June 26,~~September 25, 2021 and December 26, 2020, the Company had recorded restricted cash in other current assets of ~~$14.5~~$2.9 million and $7.6 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.

Long-Term Debt

The fair value of long-term debt at ~~June 26,~~September 25, 2021 approximates the carrying value on that date. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The ~~fair~~

1819

fair value of long-term debt is classified as level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

On March 31, 2021, the Company entered into a Credit Agreement to replace its prior credit agreement that would have matured on December 6, 2021. The Company's total borrowing capacity under the Credit Agreement is $500.0 million. The Credit Agreement provides for an unsecured $400.0 million revolving credit facility, which matures March 31, 2026, and a term loan facility of $100.0 million, which matures March 31, 2022. Funds borrowed under the Credit Agreement may be used by the Company for working capital purposes and other general corporate purposes. In addition, the Credit Agreement provides a sublimit of $50.0 million for the issuance of letters of credit, a sublimit of $35.0 million for loans and letters of credit made in certain foreign currencies, and a Swing Line sublimit of $25.0 million. Outstanding letters of credit and foreign currency loans reduce borrowing availability under the Credit Agreement on a dollar-for-dollar basis. Total borrowings under the Credit Agreement were ~~$350.0~~$120.0 million as of ~~June 26,~~September 25, 2021. On October 6, 2021, the Company paid the term loan facility in full with borrowings under the revolving credit facility.

During the first quarter of 2021, the Company announced the redemption of its Subordinated Debentures due 2027. The full redemption of outstanding debentures occurred on April 15, 2021 for a total of $291.4 million in principal plus accrued interest and a redemption premium of $5.7 million that was expensed during the second quarter.

Note 8 – Investments in Unconsolidated Affiliates

On September 2, 2021, the Company acquired a 17 percent noncontrolling equity interest in a limited liability company in the retail distribution business by contributing the outstanding common stock of Die-Mold in exchange for the equity method interest. The transaction was recorded as a deconsolidation of a subsidiary and the recognition of an equity method investment at fair value, as described in “Note 3 - Acquisitions and Dispositions.” This investment is recorded using the equity method of accounting. The Company records its proportionate share of the investees’ net income or loss one month in arrears as income (loss) from unconsolidated affiliates in the Condensed Consolidated Statements of Income.

Tecumseh

The Company owns a 50 percent interest in an unconsolidated affiliate that acquired Tecumseh Products Company LLC (Tecumseh). The Company also owns a 50 percent interest in a second unconsolidated affiliate that provides financing to Tecumseh. These investments are recorded using the equity method of accounting, as the Company can exercise significant influence but does not own a majority equity interest or otherwise control the respective entities. Under the equity method of accounting, these investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions.

The Company records its proportionate share of the investees’ net income or loss, net of foreign taxes, one quarter in arrears as income (loss) from unconsolidated affiliates, net of foreign tax, in the Condensed Consolidated Statements of Income and its proportionate share of the investees’ other comprehensive income (loss), net of income taxes, in the Condensed Consolidated Statements of Comprehensive Income and the Condensed Consolidated Statements of Changes in Equity. The U.S. tax effect of the Company’s proportionate share of Tecumseh’s income or loss is recorded in income tax expense in the Condensed Consolidated Statements of Income. In general, the equity investment in unconsolidated affiliates is equal to the current equity investment plus the investees’ net accumulated losses.

The following tables present summarized financial information derived from the Company’s equity method investees’ combined consolidated financial statements, which are prepared in accordance with U.S. GAAP.


(In thousands)	(In thousands)	June 26, 2021		December 26, 2020		(In thousands)	September 25, 2021		December 26, 2020

Current assets	Current assets	$	194,383	$	167,451	Current assets	$	217,520	$	167,451
Noncurrent assets	Noncurrent assets	73,976		78,241		Noncurrent assets	82,069		78,241
Current liabilities	Current liabilities	145,300		120,202		Current liabilities	167,721		120,202
Noncurrent liabilities	Noncurrent liabilities	49,770		50,020		Noncurrent liabilities	49,367		50,020

For the Quarter Ended For the Six Months Ended
(In thousands) June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020
Net sales $ 103,834 $ 103,550 $ 201,163 $ 210,548
Gross profit 15,323 11,022 25,022 24,508
Net loss (2,038) (17,282) (5,337) (29,967)


	For the Quarter Ended				For the Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Net sales	$	125,581	$	73,850	$	326,744	$	284,398
Gross profit	15,693		7,565		40,715		32,073
Net income (loss)	5,599		(10,916)		262		(40,883)

The Company’s loss from unconsolidated affiliates, net of foreign tax, for the quarter and ~~six~~nine months ended ~~June 26,~~September 25, 2021 included net ~~losses~~income of ~~$1.0~~$2.8 million and ~~$2.7~~$0.1 million, respectively, for Tecumseh.

The Company’s loss from unconsolidated affiliates, net of foreign tax, for the quarter and ~~six~~nine months ended ~~June 27,~~September 26, 2020 included net losses of ~~$8.6~~$5.5 million and ~~$15.0~~$20.4 million, respectively, for Tecumseh.

Mueller Middle East

On December 30, 2015, the Company entered into a joint venture agreement with Cayan Ventures and Bahrain Mumtalakat Holding Company to build a copper tube mill in Bahrain. The business operates and brands its products under the Mueller Industries family of brands. The Company has invested approximately $5.0 million of cash to date and is the technical and marketing lead with a 40 percent ownership in the joint venture.

Note 9 – Benefit Plans

The Company sponsors several qualified and nonqualified pension plans and other postretirement benefit plans for certain of its employees. The components of net periodic benefit cost (income) are as follows:


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Pension benefits:	Pension benefits:									Pension benefits:

Interest cost	Interest cost	$	313	$	866	$	626	$	1,724	Interest cost	$	313	$	862	$	939	$	2,586
Expected return on plan assets	Expected return on plan assets	(904)		(1,495)		(1,808)		(2,990)		Expected return on plan assets	(903)		(1,496)		(2,711)		(4,486)
Amortization of net loss	Amortization of net loss	379		528		757		988		Amortization of net loss	378		494		1,135		1,482

Net periodic benefit income	Net periodic benefit income	$	(212)	$	(101)	$	(425)	$	(278)	Net periodic benefit income	$	(212)	$	(140)	$	(637)	$	(418)

Other benefits:	Other benefits:									Other benefits:
Service cost	Service cost	$	65	$	56	$	130	$	117	Service cost	$	64	$	59	$	194	$	176
Interest cost	Interest cost	87		106		174		215		Interest cost	87		106		261		321
Amortization of prior service credit	Amortization of prior service credit	(117)		(58)		(235)		(284)		Amortization of prior service credit	(118)		(117)		(353)		(401)
Amortization of net gain	Amortization of net gain	(33)		(47)		(64)		(100)		Amortization of net gain	(32)		(50)		(96)		(150)
Curtailment gain	Curtailment gain	0		$	(2,591)	0		$	(2,591)	Curtailment gain	—		$	—	—		$	(2,591)

Net periodic benefit cost (income)	Net periodic benefit cost (income)	$	2	$	(2,534)	$	5	$	(2,643)	Net periodic benefit cost (income)	$	1	$	(2)	$	6	$	(2,645)

The components of net periodic benefit cost (income) other than the service cost component are included in other income, net in the Condensed Consolidated Statements of Income.

Note 10 – Commitments and Contingencies

The Company is involved in certain litigation as a result of claims that arose in the ordinary course of business, which management believes will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. The Company may also realize the benefit of certain legal claims and litigation in the future; these gain contingencies are not recognized in the Condensed Consolidated Financial Statements.

Environmental

Non-operating Properties

Southeast Kansas Sites

The Kansas Department of Health and Environment (KDHE) has contacted the Company regarding environmental contamination at 3 former smelter sites in Kansas (Altoona, East La Harpe, and Lanyon). The Company is not a successor to the companies that operated these smelter sites, but is exploring possible settlement with KDHE and other potentially responsible parties (PRP) in order to avoid litigation.

Altoona. Another PRP conducted a site investigation of the Altoona site under a consent decree with KDHE and submitted a removal site evaluation report recommending a remedy. The remedial design plan, which covers both on-site and certain off-site cleanup costs, was approved by the KDHE in 2016. Construction of the remedy was completed in 2018.

East La Harpe. At the East La Harpe site, the Company and 2 other PRPs conducted a site study evaluation under KDHE supervision and prepared a site cleanup plan approved by KDHE. In 2016, the corporate parent (Peabody Energy) of a third party that the Company understands may owe indemnification obligations to one of the other PRPs (Blue Tee) in connection with the East La Harpe site filed for protection under Chapter 11 of the U.S. Bankruptcy Code. KDHE has extended the deadline for the PRPs to develop a repository design plan to allow for wetlands permitting to take place. In December 2018, KDHE provided a draft agreement which contemplates the use of funds KDHE obtained from two other parties (Peabody Energy and Blue Tee) to fund part of the remediation, and removes Blue Tee from the PRPs’ agreement with KDHE. The Company is currently negotiating the terms of that draft agreement.

Lanyon. With respect to the Lanyon Site, in 2016, the Company received a general notice letter from the United States Environmental Protection Agency (EPA) asserting that the Company is a PRP, which the Company has denied. EPA issued an interim record of decision in 2017 and has been remediating properties at the site.

The Company’s reserve for its proportionate share of the remediation costs associated with these 3 Southeast Kansas sites is $5.6 million.

Shasta Area Mine Sites

Mining Remedial Recovery Company (MRRC), a wholly owned subsidiary, owns certain inactive mines in Shasta County, California. MRRC has continued a program, begun in the late 1980s, of implementing various remedial measures, including sealing mine portals with concrete plugs in portals that were discharging water. The sealing program achieved significant reductions in the metal load in discharges from these adits; however, additional reductions are required pursuant to an order issued by the California Regional Water Quality Control Board (QCB). In response to a 1996 QCB Order, MRRC completed a feasibility study in 1997 describing measures designed to mitigate the effects of acid rock drainage. In December 1998, the QCB modified the 1996 order extending MRRC’s time to comply with water quality standards. In September 2002, the QCB adopted a new order requiring MRRC to adopt Best Management Practices (BMP) to control discharges of acid mine drainage, and again extended the time to comply with water quality standards until September 2007. During that time, implementation of BMP further reduced impacts of acid rock drainage; however, full compliance has not been achieved. The QCB is presently renewing MRRC’s discharge permit and will concurrently issue a new order. It is expected that the new 10-year permit will include an order requiring continued implementation of BMP through 2030 to address residual discharges of acid rock drainage. The Company currently estimates that it will spend between approximately $13.9 million and $18.0 million for remediation at these sites over the next 30 years and has accrued a reserve at the low end of this range.

Lead Refinery Site

U.S.S. Lead Refinery, Inc. (Lead Refinery), a non-operating wholly owned subsidiary of MRRC, has conducted corrective action and interim remedial activities (collectively, Site Activities) at Lead Refinery’s East Chicago, Indiana site pursuant to the Resource Conservation and Recovery Act since December 1996. Although the Site Activities have been substantially concluded, Lead Refinery is required to perform monitoring and maintenance-related activities pursuant to a post-closure permit issued by the Indiana Department of Environmental Management effective as of March 2, 2013. Approximate costs to comply with the post-closure permit, including associated general and administrative costs, are estimated at between $1.7 million and $2.4 million over the next 16 years. The Company has recorded a reserve at the low end of this range.

On April 9, 2009, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the U.S. Environmental Protection Agency (EPA) added the Lead Refinery site and surrounding properties to the National Priorities List (NPL). On July 17, 2009, Lead Refinery received a written notice from the EPA indicating that it may be a PRP under CERCLA due to the release or threat of release of hazardous substances including lead into properties surrounding the Lead Refinery NPL site. The EPA identified 2 other PRPs in connection with that matter. In November 2012, the EPA adopted a remedy for the surrounding properties and in September 2014, the EPA announced that it had entered into a settlement with the 2 other PRPs whereby they will pay approximately $26.0 million to fund the cleanup of approximately 300 properties surrounding the Lead Refinery NPL site (zones 1 and 3 of operable unit 1) and perform certain remedial action tasks.

On November 8, 2016, the Company, its subsidiary Arava Natural Resources Company, Inc. (Arava), and Arava’s subsidiary MRRC each received general notice letters from the EPA asserting that they may be PRPs in connection with the Lead Refinery NPL site. The Company, Arava, and MRRC have denied liability for any remedial action and response costs associated with the Lead Refinery NPL site. In June 2017, the EPA requested that Lead Refinery conduct, and the Company fund, a remedial investigation and feasibility study of operable unit 2 of the Lead Refinery NPL site pursuant to a proposed administrative settlement agreement and order on consent. The Company and Lead Refinery entered into that agreement in September 2017. The Company has made a capital contribution to Lead Refinery to conduct the remedial investigation and feasibility study with respect to operable unit 2 and has provided financial assurance in the amount of $1.0 million. The remedial investigation and feasibility study remain ongoing. The EPA has also asserted its position that Mueller is a responsible party for the Lead Refinery NPL site, and accordingly is responsible for a share of remedial action and response costs at the site and in the adjacent residential area.

In January 2018, the EPA issued 2 unilateral administrative orders (UAOs) directing the Company, Lead Refinery, and 4 other PRPs to conduct soil and interior remediation of certain residences at the Lead Refinery NPL site (zones 2 and 3 of operable unit 1). The Company and Lead Refinery have reached agreement with the 4 other PRPs to implement these 2 UAOs, with the Company agreeing to pay, on an interim basis, (i) an estimated $4.5 million (subject to potential change through a future reallocation process) of the approximately $25.0 million the PRPs currently estimate it will cost to implement the UAOs, which estimate is subject to change, and (ii) $2.0 million relating to past costs incurred by other PRPs for work conducted at the site, as well as the possibility of up to $0.7 million in further payments for ongoing work by those PRPs. As of ~~June 26,~~September 25, 2021, the Company has made payments of approximately $7.6 million related to the aforementioned agreement with the other PRPs. The Company disputes that it was properly named in the UAOs, and has reserved its rights to petition the EPA for reimbursement of any costs incurred to comply with the UAOs upon the completion of the work required therein. The Company and Lead Refinery are also evaluating entry into an administrative settlement agreement and order on consent with the EPA, along with the 4 other PRPs, which would involve payment of certain past and future costs relating to operable unit 1, in exchange for certain releases and contribution protection for the Company, Lead Refinery and their respective affiliates relating to that operable unit. The Company reserved $3.3 million for this settlement in the third quarter of 2021. In October 2017 and March 2018, separate groups of private plaintiffs sued the Company, Arava, MRRC, and Lead Refinery, along with other defendants, in 2 civil tort actions relating to the site. The Company, Arava, and MRRC have been voluntarily dismissed from both litigations without prejudice, ~~but~~and Lead ~~Refinery remains a party~~Refinery’s motion to ~~each.~~dismiss one of the matters was granted without prejudice. At this juncture, the Company is unable to determine the likelihood of a material adverse outcome or the amount or range of a potential loss in excess of the current reserve with respect to any remedial action or litigation relating to the Lead Refinery NPL site, either at Lead Refinery’s former operating site (operable unit 2) or the adjacent residential area (operable unit 1), including, but not limited to, EPA oversight costs for which the EPA may attempt to seek reimbursement from the Company, and past costs for which other PRPs may attempt to seek contribution from the Company.

Bonita Peak Mining District

Following an August 2015 spill from the Gold King Mine into the Animas River near Silverton, Colorado, the EPA listed the Bonita Peak Mining District on the NPL. Said listing was finalized in September 2016. The Bonita Peak Mining District encompasses 48 mining sites within the Animas River watershed, including the Sunnyside Mine, the American Tunnel, and the

Sunbank Group. On or about July 25, 2017, Washington Mining Company (Washington Mining) (a wholly-owned subsidiary of the Company’s wholly-owned subsidiary, Arava), received a general notice letter from the EPA stating that Washington Mining may be a PRP under CERCLA in connection with the Bonita Peak Mining District site and therefore responsible for the remediation of certain portions of the site, along with related costs incurred by the EPA. Shortly thereafter, the Company received a substantively identical letter asserting that it may be a PRP at the site and similarly responsible for the cleanup of certain portions of the site. The general notice letters identify one other PRP at the site, and do not require specific action by Washington Mining or the Company at this time. At this juncture, the Company is unable to determine the likelihood of a materially adverse outcome or the amount or range of a potential loss with respect to any remedial action related to the Bonita Peak Mining District NPL site.

Operating Properties

Mueller Copper Tube Products, Inc.

In 1999, Mueller Copper Tube Products, Inc. (MCTP), a wholly owned subsidiary, commenced a cleanup and remediation of soil and groundwater at its Wynne, Arkansas plant to remove trichloroethylene, a cleaning solvent formerly used by MCTP. On August 30, 2000, MCTP received approval of its Final Comprehensive Investigation Report and Storm Water Drainage Investigation Report addressing the treatment of soils and groundwater from the Arkansas Department of Environmental Quality (ADEQ). The Company established a reserve for this project in connection with the acquisition of MCTP in 1998. Effective November 17, 2008, MCTP entered into a Settlement Agreement and Administrative Order by Consent to submit a Supplemental Investigation Work Plan (SIWP) and subsequent Final Remediation Work Plan (RWP) for the site. By letter dated January 20, 2010, ADEQ approved the SIWP as submitted, with changes acceptable to the Company. On December 16, 2011, MCTP entered into an amended Administrative Order by Consent to prepare and implement a revised RWP regarding

final remediation for the Site. The remediation system was activated in February 2014. Costs to implement the work plans, including associated general and administrative costs, are estimated to approximate $0.9 million to $1.1 million over the next five years. The Company has recorded a reserve at the low end of this range.

United States Department of Commerce Antidumping Review

On December 24, 2008, the Department of Commerce (DOC) initiated an antidumping administrative review of the antidumping duty order covering circular welded non-alloy steel pipe and tube from Mexico for the November 1, 2007 through October 31, 2008 period of review. The DOC selected Mueller Comercial as a respondent in the review. On April 19, 2010, the DOC published the final results of the review and assigned Mueller Comercial an antidumping duty rate of 48.33 percent. On May 25, 2010, the Company appealed the final results to the U.S. Court of International Trade (CIT). On December 16, 2011, the CIT issued a decision remanding the Department’s final results. While the matter was still pending, the Company and the United States reached an agreement to settle the appeal. Subject to the conditions of the agreement, the Company anticipated that certain of its subsidiaries would incur antidumping duties on subject imports made during the period of review and, as such, established a reserve for this matter. After the lapse of the statutory period of time during which U.S. Customs and Border Protection (CBP) was required, but failed, to liquidate the entries at the settled rate, the Company released the reserve. Between October 30, 2015 and November 27, 2015, CBP sent a series of invoices to Southland Pipe Nipples Co., Inc. (Southland), requesting payment of approximately $3.0 million in duties and interest in connection with 795 import entries made during the November 1, 2007 through October 31, 2008 period. On January 26, 2016 and January 27, 2016, Southland filed protests with CBP in connection with these invoices, noting that CBP’s asserted claims were not made in accordance with applicable law, including statutory provisions governing deemed liquidation. The Company believes in the merits of the legal objections raised in Southland’s protests, and CBP’s response to Southland’s protests is currently pending. Given the procedural posture and issues raised by this legal dispute, the Company cannot estimate the amount of potential duty liability, if any, that may result from CBP’s asserted claims.

Deepwater Horizon Economic and Property Damage Claim

During 2020, Mueller Copper Tube Company, a wholly owned subsidiary of the Company, collected approximately $22.1 million related to its claim under the Deepwater Horizon Economic and Property Damage Settlement Program. The collected amount represents settlement proceeds received after the payment of fees and expenses.

Guarantees

Guarantees, in the form of letters of credit, are issued by the Company generally to assure the payment of insurance deductibles, certain retiree health benefits, and debt at certain unconsolidated affiliates. The terms of the guarantees are generally one year but are renewable annually as required. These letters are primarily backed by the Company’s revolving credit facility. The

maximum payments that the Company could be required to make under its guarantees at ~~June 26,~~September 25, 2021 were $23.9 million.

Note 11 – Income Taxes

The Company’s effective tax rate for the ~~second~~third quarter of 2021 was 26 percent compared with 2624 percent for the same period last year. The primary items impacting the effective tax rate for the ~~second~~third quarter of 2021 were increases related to the provision for state income taxes, net of the federal benefit, of ~~$5.3~~$8.5 million and the effect of foreign tax rates higher than statutory tax rates and other foreign items of ~~$1.8~~$5.6 million. These items were partially offset by $2.2 million of other items.

The items impacting the effective tax rate for the ~~second~~third quarter of 2020 were ~~primarily attributable to~~ the provision for state income taxes, net of the federal benefit, of $~~1.2~~1.4 million and other items of ~~$1.3~~$0.4 million.

The Company’s effective tax rate for the first ~~half~~nine months of 2021 was 2526 percent compared with 2625 percent for the same period last year. The items impacting the effective tax rate for the first ~~half~~nine months of 2021 were primarily ~~related~~attributable to the provision for state income taxes, net of the federal benefit, of ~~$7.7~~$16.3 million and the effect of foreign tax rates higher than statutory tax rates and other foreign items of ~~$3.1~~$8.7 million. These items were partially offset by $2.5 million of other items.

The items impacting the effective tax rate for the first ~~half~~nine months of 2020 were primarily related to the provision for state income taxes, net of the federal benefit, of ~~$3.3~~$4.8 million, ~~and~~the effect of foreign tax rates higher than statutory tax rates of ~~$1.5 million.~~$1.7 million, and $0.6 million of other items.

The Company files a consolidated U.S. federal income tax return and numerous consolidated and separate-company income tax returns in many state, local, and foreign jurisdictions. The statute of limitations is open for the Company’s federal tax ~~return~~returns for 2015 and 2017 and all subsequent years. The statutes of limitations for most state returns are open for 2017 and all subsequent years, and some state and foreign returns are also open for some earlier tax years due to differing statute periods. The Internal Revenue Service ~~is auditing~~recently completed its audit of the Company’s 2015 and 2017 federal consolidated ~~returns.~~returns, which resulted in no material impact to the financial statements. While the Company believes that it is

adequately reserved for possible audit adjustments, the final resolution of these examinations cannot be determined with certainty and could result in final settlements that differ from current estimates.

Note 12 – Accumulated Other Comprehensive Income (Loss)

AOCI includes certain foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges, adjustments to pension and OPEB liabilities, and other comprehensive income attributable to unconsolidated affiliates.

The following tables provide changes in AOCI by component, net of taxes and noncontrolling interests (amounts in parentheses indicate debits to AOCI):


		For the Six Months Ended June 26, 2021											For the Nine Months Ended September 25, 2021
(In thousands)	(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Derivatives		Pension/OPEB Liability Adjustment		Attributable to Unconsol. Affiliates		Total		(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Derivatives		Pension/OPEB Liability Adjustment		Attributable to Unconsol. Affiliates		Total

Balance as of December 26, 2020	Balance as of December 26, 2020	$	(37,339)	$	984	$	(17,203)	$	(1,325)	$	(54,883)	Balance as of December 26, 2020	$	(37,339)	$	984	$	(17,203)	$	(1,325)	$	(54,883)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	8,248		4		(400)		1,234		9,086		Other comprehensive income (loss) before reclassifications	763		862		(98)		2,211		3,738
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(2,848)		383		0		(2,465)		Amounts reclassified from AOCI	—		(1,584)		574		—		(1,010)

Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	8,248		(2,844)		(17)		1,234		6,621		Net current-period other comprehensive income (loss)	763		(722)		476		2,211		2,728

Balance as of June 26, 2021		$	(29,091)	$	(1,860)	$	(17,220)	$	(91)	$	(48,262)
Balance as of September 25, 2021												Balance as of September 25, 2021	$	(36,576)	$	262	$	(16,727)	$	886	$	(52,155)

For the Six Months Ended June 27, 2020
(In thousands) Cumulative Translation Adjustment Unrealized Gain (Loss) on Derivatives Pension/OPEB Liability Adjustment Attributable to Unconsol. Affiliates Total
Balance as of December 28, 2019 $ (46,198) $ 476 $ (21,855) $ (1,193) $ (68,770)
Other comprehensive loss before reclassifications (19,622) (5,413) (1,034) (903) (26,972)
Amounts reclassified from AOCI 0 5,454 489 0 5,943
Net current-period other comprehensive (loss) income (19,622) 41 (545) (903) (21,029)
Balance as of June 27, 2020 $ (65,820) $ 517 $ (22,400) $ (2,096) $ (89,799)

2425


	For the Nine Months Ended September 26, 2020
(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Derivatives		Pension/OPEB Liability Adjustment		Attributable to Unconsol. Affiliates		Total

Balance as of December 28, 2019	$	(46,198)	$	476	$	(21,855)	$	(1,193)	$	(68,770)

Other comprehensive loss before reclassifications	(11,254)		(5,082)		(1,468)		(564)		(18,368)
Amounts reclassified from AOCI	—		5,274		753		—		6,027

Net current-period other comprehensive (loss) income	(11,254)		192		(715)		(564)		(12,341)


Balance as of September 26, 2020	$	(57,452)	$	668	$	(22,570)	$	(1,757)	$	(81,111)

Reclassification adjustments out of AOCI were as follows:


		Amount reclassified from AOCI										Amount reclassified from AOCI
		For the Quarter Ended				For the Six Months Ended						For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		Affected line item	(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		Affected line item

Unrealized (gains) losses on derivative commodity contracts		$	(2,390)	$	6,361	$	(3,689)	$	6,829	Cost of goods sold
Unrealized losses (gains) on derivative commodity contracts											Unrealized losses (gains) on derivative commodity contracts	$	1,077	$	(248)	$	(2,612)	$	6,581	Cost of goods sold

		537		(1,285)		841		(1,375)		Income tax expense (benefit)		187		68		1,028		(1,307)		Income tax expense (benefit)

		$	(1,853)	$	5,076	$	(2,848)	$	5,454	Net of tax and noncontrolling interests		$	1,264	$	(180)	$	(1,584)	$	5,274	Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	Amortization of net loss and prior service cost on employee benefit plans	$	229	$	423	$	458	$	604	Other income, net	Amortization of net loss and prior service cost on employee benefit plans	$	228	$	327	$	686	$	931	Other income, net
		(38)		(86)		(75)		(115)		Income tax benefit		(37)		(63)		(112)		(178)		Income tax benefit

		$	191	$	337	$	383	$	489	Net of tax and noncontrolling interests		$	191	$	264	$	574	$	753	Net of tax and noncontrolling interests

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General Overview

We are a leading manufacturer of copper, brass, aluminum, and plastic products. The range of products we manufacture is broad: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; ~~fabricated tubular products;~~ pressure vessels; steel nipples; and insulated flexible duct systems. We also resell brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets, and plumbing specialty products. Our operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, the Middle East, and China.

Each of our reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:

•Piping Systems: The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, ~~Die-Mold,~~ European Operations, Trading Group, and Jungwoo-Mueller (our South Korean joint venture). The Domestic Piping Systems Group manufactures and distributes copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. Heatlink Group manufactures a complete line of products for PEX plumbing and radiant systems ~~in Canada and sells these products in Canada and the U.S. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling~~ in Canada and sells these products in Canada and the U.S. European Operations manufactures copper tube in the United Kingdom, which is sold throughout Europe. The Trading Group manufactures pipe nipples and sources products for import distribution in North America. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping Systems segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs).

•Industrial Metals: The Industrial Metals segment is composed of Brass Rod & Copper Bar Products, Impacts & Micro Gauge, and Brass Value-Added Products. The segment manufactures and sells brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; and gas valves and assemblies. The segment manufactures and sells its products primarily to domestic OEMs in the industrial, transportation, construction, heating, ventilation, and air-conditioning, plumbing, refrigeration, and energy markets.

•Climate: The Climate segment is composed of Refrigeration Products, ~~Fabricated Tube Products,~~ Westermeyer, Turbotec, Flex Duct, and Linesets, Inc.~~, and Shoals Tubular, Inc. (STI).~~ The segment manufactures and sells refrigeration valves and fittings, ~~fabricated tubular products,~~ high pressure components, coaxial heat exchangers, and insulated HVAC flexible duct systems and line ~~sets, brazed manifolds, headers, and distributor assemblies.~~sets. The segment sells its products primarily to the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.

New housing starts and commercial construction are important determinants of our sales to the heating, ventilation, and air-conditioning, refrigeration, and plumbing markets because the principal end use of a significant portion of our products is in the construction of single and multi-family housing and commercial buildings. Repairs and remodeling projects are also important drivers of underlying demand for these products. In addition, our products are used in various transportation, automotive, and industrial applications.

According to the U.S. Census Bureau, the ~~June~~August 2021 seasonally adjusted annual rate of new housing starts was ~~1.64~~1.61 million, compared to the ~~June~~September 2020 rate of ~~1.27~~1.45 million. Mortgage rates remain at historically low levels, as the average 30-year fixed mortgage rate was ~~2.94~~2.92 percent for the first ~~half~~nine months of 2021 and 3.11 percent for the twelve months ended December 2020. The private non-residential construction sector includes offices, industrial, health care, and retail projects. According to the U.S. Census Bureau, the seasonally adjusted annual value of private nonresidential construction put in place was ~~$451.6~~$455.6 billion in ~~May~~August 2021 compared to the May 2020 rate of ~~$479.2~~$466.1 billion.

Profitability of certain of our product lines depends upon the “spreads” between the cost of raw material and the selling prices of our products. The open market prices for copper cathode and copper and brass scrap, for example, influence the selling price of copper tube and brass rod, two principal products manufactured by the Company. We attempt to minimize the effects on profitability from fluctuations in material costs by passing through these costs to our customers; however, margins of our businesses that account for inventory on a FIFO basis may be impacted in periods of significant fluctuations in material costs. Our earnings and cash flow are dependent upon these spreads that fluctuate based upon market conditions.

Earnings and profitability are also impacted by unit volumes that are subject to market trends, such as substitute products, imports, technologies, and market share. In our core product lines, we intensively manage our pricing structure while attempting to maximize profitability. From time-to-time, this practice results in lost sales opportunities and lower volume. For plumbing systems, plastics are the primary substitute product; these products represent an increasing share of consumption. For certain air-conditioning and refrigeration applications, aluminum-based systems are the primary substitution threat. We cannot predict the acceptance or the rate of switching that may occur. U.S. consumption of copper tube and brass rod is still predominantly supplied by U.S. manufacturers. In recent years, brass rod consumption in the U.S. has declined due to the outsourcing of many manufactured products to offshore regions.

Results of Operations

Consolidated Results

The following table compares summary operating results for the first ~~half~~nine months of 2021 and 2020:


		For the Quarter Ended				Percent Change		For the Six Months Ended				Percent Change			For the Quarter Ended				Percent Change		For the Nine Months Ended				Percent Change
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		2021 vs. 2020		June 26, 2021		June 27, 2020		2021 vs. 2020		(In thousands)	September 25, 2021		September 26, 2020		2021 vs. 2020		September 25, 2021		September 26, 2020		2021 vs. 2020

Net sales	Net sales	$	1,012,592	$	500,168	102.5	%	$	1,830,740	$	1,103,087	66.0	%	Net sales	$	982,248	$	619,105	58.7	%	$	2,812,988	$	1,722,192	63.3	%
Operating income	Operating income	157,814		52,296		201.8		250,354		111,607		124.3		Operating income	233,350		69,227		237.1		483,704		180,834		167.5
Net income	Net income	108,832		27,956		289.3		171,939		60,371		184.8		Net income	170,980		42,702		300.4		342,919		103,073		232.7

The following are components of changes in net sales compared to the prior year:


		Quarter-to- Date		Year-to- Date			Quarter-to- Date		Year-to- Date
Net selling price in core product lines	Net selling price in core product lines	55.7	%	37.9	%	Net selling price in core product lines	42.7	%	39.6	%
Unit sales volume in core product lines	Unit sales volume in core product lines	22.1		10.9		Unit sales volume in core product lines	5.5		9.0
Acquisitions	Acquisitions	14.4		10.6		Acquisitions	7.5		9.5

Dispositions						Dispositions	(1.4)		—
Other	Other	10.3		6.6		Other	4.4		5.2

		102.5	%	66.0	%		58.7	%	63.3	%

The increase in net sales during the ~~second~~third quarter of 2021 was primarily due to (i) higher net selling prices of ~~$278.4~~$264.4 million in our core product lines, primarily copper tube and brass rod, (ii) higher unit sales volume of ~~$110.6~~$34.2 million in our core product lines, (iii) incremental sales of ~~$59.7~~$33.3 million recorded by Kessler Sales and Distribution (KSD), acquired in August 2020, (iv) an increase in sales of ~~$51.3~~$26.6 million in our non-core product lines, and (v) sales of ~~$12.4~~$13.1 million recorded by H&C Flex (H&C), acquired in January 2021. These increases were partially offset by a decrease in sales of $8.5 million as a result of the dispositions of Die-Mold, FTP, and STI in the third quarter of 2021.

The increase in net sales during the first ~~half~~nine months of 2021 was primarily due to (i) higher net selling prices of ~~$417.7~~$681.7 million in our core product lines, (ii) higher unit sales volume of ~~$119.8~~$154.4 million in our core product lines, (iii) incremental sales of ~~$96.4~~$129.6 million recorded by KSD, (iv) an increase in sales of ~~$73.7~~$91.8 million in our non-core product lines, and (v) sales of ~~$20.0~~$33.1 million recorded by H&C.

Net selling prices generally fluctuate with changes in raw material costs. Changes in raw material costs are generally passed through to customers by adjustments to selling prices. The following graph shows the Comex average copper price per pound by quarter for the current and prior fiscal years:

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first ~~half~~nine months of 2021 and 2020:


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	$	799,712	$	403,159	$	1,468,130	$	911,874	Cost of goods sold	$	744,265	$	500,780	$	2,212,395	$	1,412,654
Depreciation and amortization	Depreciation and amortization	11,134		11,097		22,889		22,136		Depreciation and amortization	10,868		10,752		33,757		32,888
Selling, general, and administrative expense	Selling, general, and administrative expense	43,932		33,616		89,367		76,368		Selling, general, and administrative expense	48,524		38,346		137,891		117,749
Asset impairments		—		—		—		3,035
Gain on sale of businesses										Gain on sale of businesses	(54,759)		—		(54,759)		—

Litigation settlement, net	Litigation settlement, net	—		—		—		(21,933)		Litigation settlement, net	—		—		—		(21,933)

Operating expenses	Operating expenses	$	854,778	$	447,872	$	1,580,386	$	991,480	Operating expenses	$	748,898	$	549,878	$	2,329,284	$	1,541,358


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020			September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	79.0	%	80.6	%	80.2	%	82.7	%	Cost of goods sold	75.8	%	80.9	%	78.6	%	82.0	%
Depreciation and amortization	Depreciation and amortization	1.1		2.2		1.3		2.0		Depreciation and amortization	1.1		1.7		1.2		1.9
Selling, general, and administrative expense	Selling, general, and administrative expense	4.3		6.7		4.9		6.9		Selling, general, and administrative expense	4.9		6.2		5.0		6.9
Asset impairments		—		—		—		0.3
Gain on sale of businesses										Gain on sale of businesses	(5.6)		—		(1.9)		—

Litigation settlement, net	Litigation settlement, net	—		—		—		(2.0)		Litigation settlement, net	—		—		—		(1.3)

Operating expenses	Operating expenses	84.4	%	89.5	%	86.4	%	89.9	%	Operating expenses	76.2	%	88.8	%	82.9	%	89.5	%

Q3 2021 compared to Q2Q3 2020

Cost of goods sold increased in the ~~second~~third quarter of 2021 primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was ~~21.0~~24.2 percent compared with ~~19.4~~19.1 percent in the prior year quarter. The combination of strong demand for our products, inflationary pressures, and severe industry wide supply constraints leading to growing backlogs contributed to an environment of higher selling prices and improved margins for the majority of our businesses. Depreciation and amortization was consistent with the ~~second~~third quarter of 2020. Selling, general, and administrative expense increased in the ~~second~~third quarter of 2021 primarily as a result of (i) higher employment costs, including incentive compensation and healthcare, of ~~$5.0~~$5.3 million, (ii) asset impairment charges of $2.6 million, (iii) an increase of $1.1 million in bad debt expense, (iv) incremental expenses associated with KSD and H&C of ~~$2.8~~$0.7 million, ~~(iii)~~(v) an increase of ~~$0.8~~$0.6 million in ~~supplies~~professional fees, (vi) higher foreign currency transaction losses of $0.4 million, and ~~utilities, (iv)~~(vii) an increase of ~~$0.5~~$0.4 million in travel and entertainment ~~expense,~~expense. In addition, during the third quarter of 2021 we recognized a gain of $54.8 million on the sale of FTP, STI, and ~~(v) an increase~~the majority of ~~$0.5 million in bad debt expense.~~Die-Mold.

Interest expense decreased for the ~~second~~third quarter of 2021 primarily as a result of the redemption of our Subordinated Debentures during the ~~quarter. In addition, we recognized expense of $5.7 million for a redemption premium related to our Subordinated Debentures redeemed during the~~ second quarter of 2021. ~~Other income,~~We recognized other expenses, net, ~~decreased~~of $2.5 million in the ~~second~~third quarter of 2021 compared to other income, net, of $0.5 million the third quarter of 2020. This change was primarily due to ~~a curtailment gain related to~~higher environmental remediation costs at our ~~benefit plans recognized during~~non-operating properties in the ~~second~~third quarter of ~~2020.~~2021.

Our effective tax rate for the ~~second~~third quarter of 2021 was 26 percent compared with 2624 percent for the same period last year. The items impacting the effective tax rate were ~~primarily~~increases related to the provision for state income taxes, net of the federal benefit, of ~~$5.3~~$8.5 million and the effect of foreign tax rates higher than statutory tax rates and other foreign items of ~~$1.8~~$5.6 million. These items were partially offset by $2.2 million of other items.

For the ~~second~~third quarter of 2020, the difference between the effective tax rate and the amount computed using the U.S. federal statutory rate was primarily attributable to the provision for state income taxes, net of the federal benefit, of ~~$1.2~~$1.4 million and other items of ~~$1.3~~$0.4 million.

During the ~~second~~third quarter of 2021 and the ~~second~~third quarter of 2020, we recognized income of $2.8 million and losses of ~~$1.0 million and $8.6~~$5.5 million, respectively, on our investments in unconsolidated affiliates.

YTD 2021 compared to YTD 2020

Cost of goods sold increased in the first ~~half~~nine months of 2021 primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was ~~19.8~~21.4 percent compared with ~~17.3~~18.0 percent in the prior year. The combination of strong demand for our products, inflationary pressures, and severe industry wide supply constraints leading to growing backlogs contributed to an environment of higher selling prices and improved margins for the majority of our businesses. Depreciation and amortization increased slightly in the first ~~half~~nine months of 2021 primarily as a result of (i) depreciation of property, plant, and equipment placed into service in the prior year and (ii) depreciation and amortization of the long-lived assets of businesses acquired. Selling, general, and administrative expense increased in the first ~~half~~nine months of 2021 primarily as a result of (i) higher employment costs, including incentive compensation, of $9.8 million, (ii) incremental expenses associated with KSD and H&C of ~~$5.5~~$6.2 million, ~~(i) higher employment costs, including incentive compensation,~~(iii) an increase of ~~$4.6~~$1.7 million ~~(iii)~~in professional fees, (iv) expenses of $1.3 million associated with the write-off of vendor deposits, ~~and (iv)~~(v) an increase of ~~$1.0~~$0.9 million in supplies and ~~utilities.~~utilities, and (vi) higher foreign currency transaction losses of $0.4 million. In addition, during the first ~~half~~nine months of 2021 we recognized a gain of $54.8 million on the sale of FTP, STI, and the majority of Die-Mold. During the first nine months of 2020 we recognized a gain of $21.9 million for the settlement of our claim under the Deepwater Horizon Economic and Property Damage Settlement ~~Program and asset impairment charges of $3.0 million related to production equipment that was idled.~~Program.

Interest expense decreased for the first ~~half~~nine months of 2021 primarily as a result of the redemption of our Subordinated Debentures during the second ~~quarter.~~quarter of 2021. In addition, we recognized expense of $5.7 million for a redemption premium related to our Subordinated Debentures redeemed during the first ~~half~~nine months of 2021. ~~Other~~We recognized other expenses, net, of $1.3 million in the first nine months of 2021 compared to other income, net, ~~for~~of $3.6 million the first ~~half~~nine months of 2020. This change was primarily due to (i) higher environmental remediation costs at our non-operating properties in the first nine months of 2021 ~~decreased primarily due to~~and (ii) a curtailment gain related to our benefit plans recognized during the first ~~half~~nine months of 2020.

Our effective tax rate for the first ~~half~~nine months of 2021 was 2526 percent compared with 2625 percent for the same period last year. The items impacting the effective tax rate are primarily related to the provision for state income taxes, net of the federal benefit, of ~~$7.7~~$16.3 million and the effect of foreign tax rates higher than statutory tax rates and other foreign items of ~~$3.1~~$8.7 million. These items were partially offset by $2.5 million of other items.

For the first ~~half~~nine months of 2020, the items impacting the effective tax rate were primarily related to the provision for state income taxes, net of the federal benefit, of ~~$3.3~~$4.8 million, the effect of ~~and~~ foreign tax rates higher than statutory tax rates of ~~$1.5 million.~~$1.7 million, and $0.6 million million of other items.

During the first ~~half~~nine months of 2021 and the first ~~half~~nine months of 2020, we recognized income of $0.1 million and losses of ~~$2.7 million and $14.8~~$20.2 million, respectively, on our investments in unconsolidated affiliates.

Piping Systems Segment

The following table compares summary operating results for the first ~~half~~nine months of 2021 and 2020 for the businesses comprising our Piping Systems segment:


		For the Quarter Ended				Percent Change		For the Six Months Ended				Percent Change			For the Quarter Ended				Percent Change		For the Nine Months Ended				Percent Change
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		2021 vs. 2020		June 26, 2021		June 27, 2020		2021 vs. 2020		(In thousands)	September 25, 2021		September 26, 2020		2021 vs. 2020		September 25, 2021		September 26, 2020		2021 vs. 2020

Net sales	Net sales	$	711,616	$	334,040	113.0	%	$	1,259,364	$	719,053	75.1	%	Net sales	$	688,200	$	409,414	68.1	%	$	1,947,564	$	1,128,467	72.6	%
Operating income	Operating income	124,508		41,074		203.1		191,606		77,750		146.4		Operating income	152,199		44,863		239.3		343,805		122,613		180.4

The following are components of changes in net sales compared to the prior year:


		Quarter-to- Date		Year-to- Date			Quarter-to- Date		Year-to- Date
Net selling price in core product lines	Net selling price in core product lines	68.4	%	46.9	%	Net selling price in core product lines	52.7	%	48.9	%
Unit sales volume in core product lines	Unit sales volume in core product lines	23.8		11.9		Unit sales volume in core product lines	5.5		9.7
Acquisitions	Acquisitions	18.1		13.5		Acquisitions	8.1		11.6

Dispositions						Dispositions	(0.2)		—
Other	Other	2.7		2.8		Other	2.0		2.4

		113.0	%	75.1	%		68.1	%	72.6	%

The increase in net sales during the ~~second~~third quarter of 2021 was primarily attributable to (i) higher net selling prices in the segment’s core product lines, primarily copper tube, of ~~$225.4~~$215.2 million, (ii) incremental sales of $33.3 million recorded by KSD, and (iii) higher unit sales volume of ~~$78.4~~$22.6 million in the segment’s core product ~~lines, and (iii) sales of $59.7 million recorded by KSD.~~

lines.

Net sales during the first ~~half~~nine months of 2021 increased primarily as a result of (i) higher net selling prices in the segment’s core product lines of ~~$334.8~~$548.9 million, (ii) incremental sales of ~~$96.4~~$129.6 million recorded by KSD, and (iii) higher unit sales volume of ~~$85.0~~$108.5 million in the segment’s core product lines.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first ~~half~~nine months of 2021 and 2020:


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	$	558,278	$	272,271	$	1,008,632	$	591,435	Cost of goods sold	$	506,703	$	339,904	$	1,515,335	$	931,339
Depreciation and amortization	Depreciation and amortization	5,515		5,456		11,725		11,155		Depreciation and amortization	5,547		5,362		17,272		16,517
Selling, general, and administrative expense	Selling, general, and administrative expense	23,315		15,239		47,401		35,678		Selling, general, and administrative expense	23,751		19,285		71,152		57,998
Asset impairments		—		—		—		3,035

Operating expenses	Operating expenses	$	587,108	$	292,966	$	1,067,758	$	641,303	Operating expenses	$	536,001	$	364,551	$	1,603,759	$	1,005,854

For the Quarter Ended For the Six Months Ended
June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020
Cost of goods sold 78.5 % 81.5 % 80.1 % 82.3 %
Depreciation and amortization 0.8 1.6 0.9 1.5
Selling, general, and administrative expense 3.3 4.6 3.9 5.0
Asset impairments — — — 0.3
Operating expenses 82.6 % 87.7 % 84.9 % 89.1 %


	For the Quarter Ended				For the Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	73.6	%	83.0	%	77.8	%	82.5	%
Depreciation and amortization	0.8		1.3		0.9		1.4
Selling, general, and administrative expense	3.5		4.7		3.6		5.2




Operating expenses	77.9	%	89.0	%	82.3	%	89.1	%

The increase in cost of goods sold during the ~~second~~third quarter of 2021 was primarily due to the increase in the average cost of copper, our principal raw material. Gross margin as a percentage of sales was ~~21.5~~26.4 percent compared with ~~18.5~~17.0 percent in the prior year quarter. Depreciation and amortization was consistent with the ~~second~~third quarter of 2020. Selling, general, and administrative expense increased for the ~~second~~third quarter of 2021 primarily as a result of (i) higher employment costs, including incentive compensation and healthcare, of ~~$2.9~~$3.2 million, (ii) incremental expenses associated with KSD of ~~$2.4~~$0.3 million, and (iii) ~~the absence~~lower foreign currency gains of ~~$1.3~~$0.4 million. These increases were partially offset by lower expenses of $0.3 million ~~of government subsidies provided to certain~~associated with businesses ~~related to the COVID-19 pandemic recorded during the second quarter of 2020, and (iv) an increase in supplies and utilities of $0.5 million.~~disposed.

The increase in cost of goods sold during the first ~~half~~nine months of 2021 was primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was ~~19.9~~22.2 percent compared with ~~17.7~~17.5 percent in the prior year. Depreciation and amortization ~~was consistent with~~increased slightly in the first ~~half~~nine months of ~~2020.~~2021 primarily as a result of depreciation and amortization of the long-lived assets of businesses acquired. Selling, general, and administrative expense increased for the first ~~half~~nine months of 2021 primarily as a result of (i) higher employment costs of $5.9 million, (ii) incremental expenses associated with KSD of ~~$4.9 million, (ii) higher employment costs of $2.8~~$5.3 million, (iii) expenses of $1.3 million associated with the write-off of vendor deposits, and (iv) the absence of $1.3 million of government subsidies provided to certain businesses related to the COVID-19 pandemic recorded during the first ~~half~~nine months of ~~2020, (v) an increase in supplies and utilities of $0.6 million, and (vi) higher foreign currency transaction losses of $0.5 million.~~2020. In addition, during the first ~~half~~nine months of 2020 the segment recognized asset impairment charges of $3.0 million related to production equipment that was idled.

Industrial Metals Segment

The following table compares summary operating results for the first ~~half~~nine months of 2021 and 2020 for the businesses comprising our Industrial Metals segment:


		For the Quarter Ended				Percent Change		For the Six Months Ended				Percent Change			For the Quarter Ended				Percent Change		For the Nine Months Ended				Percent Change
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		2021 vs. 2020		June 26, 2021		June 27, 2020		2021 vs. 2020		(In thousands)	September 25, 2021		September 26, 2020		2021 vs. 2020		September 25, 2021		September 26, 2020		2021 vs. 2020

Net sales	Net sales	$	180,040	$	88,619	103.2	%	$	344,892	$	219,821	56.9	%	Net sales	$	182,245	$	118,831	53.4	%	$	527,137	$	338,652	55.7	%
Operating income	Operating income	20,499		8,873		131.0		39,346		20,055		96.2		Operating income	19,052		18,348		3.8		58,398		38,403		52.1

The following are components of changes in net sales compared to the prior year:


		Quarter-to- Date		Year-to- Date			Quarter-to- Date		Year-to- Date
Net selling price in core product lines	Net selling price in core product lines	62.3	%	39.3	%	Net selling price in core product lines	43.5	%	40.9	%
Unit sales volume in core product lines	Unit sales volume in core product lines	37.9		16.5		Unit sales volume in core product lines	10.3		14.2

Other	Other	3.0		1.1		Other	(0.4)		0.6

		103.2	%	56.9	%		53.4	%	55.7	%

The increase in net sales during the ~~second~~third quarter of 2021 was primarily due to (i) higher net selling prices of ~~$53.0~~$49.3 million in the segment’s core product lines, primarily brass rod, and (ii) higher unit sales volume of $11.7 million in the segment’s core product lines.

The increase in net sales during the first nine months of 2021 was primarily due to (i) higher net selling prices of $132.8 million in the segment’s core product lines and (ii) higher unit sales volume of ~~$32.2 million in the segment’s core product lines, primarily brass rod.~~

The increase in net sales during the first half of 2021 was primarily due to (i) higher net selling prices of $82.9 million in the segment’s core product lines and (i) higher unit sales volume of $34.9$45.9 million in the segment’s core product lines.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first ~~half~~nine months of 2021 and 2020:


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	$	155,399	$	75,274	$	296,290	$	190,071	Cost of goods sold	$	158,822	$	95,717	$	455,112	$	285,788
Depreciation and amortization	Depreciation and amortization	1,694		1,995		3,437		3,997		Depreciation and amortization	1,661		1,774		5,098		5,771
Selling, general, and administrative expense	Selling, general, and administrative expense	2,448		2,477		5,819		5,698		Selling, general, and administrative expense	2,710		2,992		8,529		8,690

Operating expenses	Operating expenses	$	159,541	$	79,746	$	305,546	$	199,766	Operating expenses	$	163,193	$	100,483	$	468,739	$	300,249


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020			September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	86.3	%	84.9	%	85.9	%	86.5	%	Cost of goods sold	87.1	%	80.5	%	86.3	%	84.4	%
Depreciation and amortization	Depreciation and amortization	0.9		2.3		1.0		1.8		Depreciation and amortization	0.9		1.5		1.0		1.7
Selling, general, and administrative expense	Selling, general, and administrative expense	1.4		2.8		1.7		2.6		Selling, general, and administrative expense	1.5		2.6		1.6		2.6

Operating expenses	Operating expenses	88.6	%	90.0	%	88.6	%	90.9	%	Operating expenses	89.5	%	84.6	%	88.9	%	88.7	%

The increase in cost of goods sold during the ~~second~~third quarter of 2021 was primarily due to the increase in the price of copper. Gross margin as a percentage of sales was ~~13.7~~12.9 percent compared with ~~15.1~~19.5 percent in the prior year quarter. Rising material

costs during the ~~second~~third quarter of 2021 had a negative impact on margins reported by most of the businesses included in this segment. Depreciation and amortization ~~decreased slightly as a result of several long-lived assets becoming fully depreciated. Selling,~~and selling, general, and administrative expense ~~was~~were consistent with the ~~second~~third quarter of 2020.

Climate Segment

The following table compares summary operating results for the first ~~half~~nine months of 2021 and 2020 for the businesses comprising our Climate segment:


		For the Quarter Ended				Percent Change		For the Six Months Ended				Percent Change			For the Quarter Ended				Percent Change		For the Nine Months Ended				Percent Change
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		2021 vs. 2020		June 26, 2021		June 27, 2020		2021 vs. 2020		(In thousands)	September 25, 2021		September 26, 2020		2021 vs. 2020		September 25, 2021		September 26, 2020		2021 vs. 2020

Net sales	Net sales	$	131,708	$	86,107	53.0	%	$	242,734	$	179,379	35.3	%	Net sales	$	122,252	$	97,604	25.3	%	$	364,986	$	276,983	31.8	%
Operating income	Operating income	25,372		12,353		105.4		42,707		25,367		68.4		Operating income	21,072		18,156		16.1		63,779		43,523		46.5

Sales for the ~~second~~third quarter of 2021 increased primarily as a result of a increase in volume and price in certain product lines, as well as sales of ~~$12.4~~$13.1 million recorded by H&C. These increases were partially offset by a decrease in sales of $7.8 million as a result of the dispositions of FTP and STI during the third quarter of 2021.

Sales for the first ~~half~~nine months of 2021 increased primarily as a result of a increase in volume and price in certain product lines, as well as sales of ~~$20.0~~$33.1 million recorded by H&C. These increases were partially offset by a decrease in sales of $3.7 million as a result of the dispositions of FTP and STI during the third quarter of 2021.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the first ~~half~~nine months of 2021 and 2020:


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
(In thousands)	(In thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020		(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	$	96,303	$	64,540	$	180,385	$	135,633	Cost of goods sold	$	89,175	$	70,450	$	269,560	$	206,083
Depreciation and amortization	Depreciation and amortization	2,753		2,757		5,382		5,223		Depreciation and amortization	2,484		2,547		7,866		7,770
Selling, general and administrative expense	Selling, general and administrative expense	7,280		6,457		14,260		13,156		Selling, general and administrative expense	9,521		6,451		23,781		19,607

Operating expenses	Operating expenses	$	106,336	$	73,754	$	200,027	$	154,012	Operating expenses	$	101,180	$	79,448	$	301,207	$	233,460


		For the Quarter Ended				For the Six Months Ended					For the Quarter Ended				For the Nine Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020			September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020

Cost of goods sold	Cost of goods sold	73.1	%	75.0	%	74.3	%	75.6	%	Cost of goods sold	72.9	%	72.2	%	73.9	%	74.4	%
Depreciation and amortization	Depreciation and amortization	2.1		3.2		2.2		2.9		Depreciation and amortization	2.0		2.6		2.2		2.8
Selling, general and administrative expense	Selling, general and administrative expense	5.5		7.5		5.9		7.3		Selling, general and administrative expense	7.9		6.6		6.4		7.1

Operating expenses	Operating expenses	80.7	%	85.7	%	82.4	%	85.9	%	Operating expenses	82.8	%	81.4	%	82.5	%	84.3	%

Cost of goods sold increased during the ~~second~~third quarter of 2021, consistent with the increase in net sales. Gross margin as a percentage of sales was ~~26.9~~27.1 percent compared with ~~25.0~~27.8 percent in the prior year quarter. Depreciation and amortization was consistent with the ~~second~~third quarter of 2020. Selling, general, and administrative ~~expenses~~expense increased primarily due to (i) asset impairment charges of $2.7 million, (ii) expenses associated with H&C of $0.3 million, and (iii) higher employment costs, including incentive compensation, of ~~$0.4 million, and (ii) expenses associated with H&C of $0.4~~$0.2 million.

Cost of goods sold increased during the first ~~half~~nine months of 2021 primarily due to factors noted above regarding the change in net sales. Gross margin as a percentage of sales was ~~25.7~~26.1 percent compared with ~~24.4~~25.6 percent in the prior year. Depreciation and amortization was consistent with the first ~~half~~nine months of 2020. Selling, general, and administrative ~~expenses~~expense increased for the first ~~half~~nine months of 2021 as a result of (i) asset impairment charges of $2.7 million, (ii) higher employment costs, including incentive compensation, of ~~$0.9~~$1.0 million, and ~~(ii)~~(iii) expenses associated with H&C of ~~$0.6~~$0.9 million.

Liquidity and Capital Resources

The following table presents selected financial information for the first ~~half~~nine months of 2021 and 2020:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2021		2020

Increase (decrease) in:	Increase (decrease) in:					Increase (decrease) in:
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	(1,654)	$	26,470	Cash, cash equivalents, and restricted cash	$	(19,225)	$	16,337
Property, plant, and equipment, net	Property, plant, and equipment, net	8,674		(343)		Property, plant, and equipment, net	(6,350)		5,608
Total debt	Total debt	29,548		(56,597)		Total debt	(205,754)		(36,598)
Working capital, net of cash and current debt	Working capital, net of cash and current debt	207,387		(44,711)		Working capital, net of cash and current debt	146,240		1,086

Net cash provided by operating activities	Net cash provided by operating activities	9,280		142,782		Net cash provided by operating activities	181,481		196,878
Net cash used in investing activities		(21,644)		(37,629)
Net cash provided by (used in) financing activities		9,723		(72,523)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	43,818		(110,995)
Net cash used in financing activities						Net cash used in financing activities	(244,147)		(66,252)

Cash Flows from Operating Activities

During the ~~six~~nine months ended ~~June 26,~~September 25, 2021, net cash provided by operating activities was primarily attributable to (i) consolidated net income of ~~$176.2~~$348.4 million, (ii) an increase in current liabilities of ~~$50.5~~$85.5 million, (iii) depreciation and amortization of ~~$23.0~~$33.9 million, (iv) stock-based compensation expense of $7.2 million, and (v) the redemption premium of $5.7 million related to our Subordinated ~~Debentures, and (v) stock-based compensation expense of $4.8 million.~~Debentures. These increases were largely offset by (i) an increase in accounts receivable of ~~$190.9~~$155.1 million, ~~and~~ (ii) an increase in inventories of ~~$63.9 million.~~$96.5 million, and the gain of $54.8 million recognized on the sale of Die-Mold, FTP, and STI. The fluctuations of accounts receivable, inventories, and current liabilities were primarily due to increased sales volume in certain businesses and higher material costs during the first ~~half~~nine months of 2021.

During the ~~six~~nine months ended ~~June 27,~~September 26, 2020, net cash provided by operating activities was primarily attributable to (i) consolidated net income of ~~$62.4~~$106.4 million, (ii) a decrease in inventories of ~~$43.3~~$41.6 million, (iii) depreciation and amortization of ~~$22.3~~$33.1 million, (iv) an increase in current liabilities of $25.9 million, (v) losses from unconsolidated affiliates of ~~$14.8~~$20.2 million, ~~(v)~~(vi) a decrease in other assets of ~~$4.0~~$9.1 million, and ~~(vi)~~(vii) stock-based compensation expense of $6.3 million, and (viii) asset impairment charges of $3.0 million. These increases were partially offset by (i) an increase in accounts receivable of ~~$11.2~~$45.5 million and (ii) a decrease in other liabilities of ~~$5.4~~$5.8 million.

Cash Flows from Investing Activities

The major components of net cash ~~used in~~provided by investing activities during the ~~six~~nine months ended ~~June 26,~~September 25, 2021 included (i) proceeds from the sale of FTP and STI, net of cash sold, of $74.3 million and (ii) payments received on notes receivable of $8.5 million. These sources were partially offset by (i) capital expenditures of ~~$18.0~~$25.5 million and (ii) $13.9 million for the purchase of H&C, net of cash acquired. ~~These uses were partially offset by (i) payments received on notes receivable of $8.5 million and (ii) proceeds from the sale of properties of $1.7 million.~~

The major components of net cash used in investing activities during the ~~six~~nine months ended ~~June 27,~~September 26, 2020 included (i) ~~capital expenditures of $22.2 million and (ii) $15.4~~$72.6 million for the purchase of KSD and STI, net of cash ~~acquired.~~acquired, (ii) capital expenditures of $29.2 million, and (iii) the issuance of notes receivable of $9.2 million.

Cash Flows from Financing Activities

For the ~~six~~nine months ended ~~June 26,~~September 25, 2021, net cash ~~provided by~~used in financing activities consisted of ~~the issuance of debt under our Credit Agreement of $425.0 million. This source was largely offset by~~ (i) ~~$290.2 million used for the redemption of the Subordinated Debentures, (ii) $110.0~~$390.0 million used to reduce the debt outstanding under our Credit Agreement, ~~and~~(ii) $290.2 million used for the redemption of the Subordinated Debentures, (iii) ~~$14.5~~$21.8 million used for the payment of regular quarterly dividends to stockholders of the ~~Company.~~Company, and (iv) $9.7 million used for the payment of dividends to noncontrolling interests. These uses were largely offset by the issuance of debt under our Credit Agreement of $475.0 million.

For the ~~six~~nine months ended ~~June 27,~~September 26, 2020, net cash used in financing activities consisted primarily of (i) ~~$165.0~~$185.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) ~~$11.2~~$16.8 million used for the payment of regular quarterly dividends

to stockholders of the Company, (iii) $7.0 million used for the payment of contingent consideration related to ATCO, and ~~(iii)~~(iv) $5.6 million used to repurchase common stock. These uses were partially offset by the issuance of debt under our Credit Agreement of ~~$110.0~~$150.0 million.

Liquidity and Outlook

We believe that cash provided by operations, funds available under the Credit Agreement, and cash on hand will be adequate to meet our liquidity needs, including working capital, capital expenditures, and debt payment obligations.

As of ~~June 26,~~September 25, 2021, we had ~~$110.7~~$104.8 million of cash on hand and ~~$126.1~~$356.1 million available to be drawn under the Credit Agreement. Our current ratio was ~~3.0~~2.7 to 1.

We have significant environmental remediation obligations which we expect to pay over future years. Cash used for environmental remediation activities was approximately ~~$0.9~~$1.2 million during the first ~~half~~nine months of 2021. We expect to spend approximately ~~$2.0~~$5.2 million ~~for~~over the ~~remainder of 2021~~next twelve months for ongoing environmental remediation activities.

The Company declared a quarterly cash dividend of 13.0 cents per common share during the first, second, and ~~second~~third quarters of 2021 and 10.0 cents per common share during the first, second, and ~~second~~third quarters of 2020. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, earnings, and other factors.

Long-Term Debt

As of ~~June 26,~~September 25, 2021, the Company’s total debt was ~~$357.4~~$122.1 million or ~~26.8~~9.8 percent of its total capitalization.

The Company’s Credit Agreement provides for an unsecured $400.0 million revolving credit facility, which matures March 31, 2026, and a term loan facility of $100.0 million, which matures March 31, 2022. Total borrowings under the Credit Agreement were ~~$350.0~~$120.0 million as of ~~June 26,~~September 25, 2021. The Credit Agreement backed approximately $23.9 million in letters of credit at the end of the ~~second~~third quarter of 2021. On October 6, 2021 the Company paid the term loan facility in full with borrowings under the revolving credit facility.

Covenants contained in the Company’s financing obligations require, among other things, the maintenance of minimum levels of tangible net worth and the satisfaction of certain minimum financial ratios. As of ~~June 26,~~September 25, 2021, the Company was in compliance with all of its debt covenants.

Share Repurchase Program

The Board of Directors has extended, ~~until~~until July ~~2021, the~~2022, the authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. We may cancel, suspend, or extend the time period for the repurchase of shares at any time. Any repurchases will be funded primarily through existing cash and cash from operations. We may hold any shares repurchased in treasury or use a portion of the repurchased shares for our stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through ~~June 26,~~September 25, 2021, the Company has repurchased approximately 6.4 million shares under this authorization.

Contractual Cash Obligations

There have been no significant changes in our contractual cash obligations reported at December 26, 2020 other than the new Credit Agreement and redemption of the Debentures during the second quarter of 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in raw material and energy costs, interest rates, and foreign currency exchange rates. To reduce such risks, we may periodically use financial instruments. Hedging transactions are authorized and executed pursuant to policies and procedures. Further, we do not buy or sell financial instruments for trading purposes.

Cost and Availability of Raw Materials and Energy

Raw materials, primarily copper and brass, represent the largest component of the Company’s variable costs of production. The cost of these materials is subject to global market fluctuations caused by factors beyond our control. Significant increases in the cost of metal, to the extent not reflected in prices for our finished products, or the lack of availability could materially and adversely affect our business, results of operations, and financial condition.

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The Company occasionally enters into future fixed-price arrangements with certain customers. We may utilize futures contracts to hedge risks associated with these forward fixed-price arrangements. We may also utilize futures contracts to manage price risk associated with inventory. Depending on the nature of the hedge, changes in the fair value of the futures contracts will either be offset against the change in fair value of the inventory through earnings or recognized as a component of accumulated other comprehensive income (AOCI) in equity and reflected in earnings upon the sale of inventory. Periodic value fluctuations of the contracts generally offset the value fluctuations of the underlying fixed-price transactions or inventory. At ~~June 26,~~September 25, 2021, we held open futures contracts to purchase approximately ~~$83.9~~$46.9 million of copper over the next 2318 months related to fixed-price sales orders and to sell approximately ~~$66.7~~$0.9 million of copper over the next ~~nine~~ten months related to copper inventory.

We may enter into futures contracts or forward fixed-price arrangements with certain vendors to manage price risk associated with natural gas purchases. The effective portion of gains and losses with respect to these positions are deferred in equity as a component of AOCI and reflected in earnings upon consumption of natural gas. Periodic value fluctuations of the futures contracts generally offset the value fluctuations of the underlying natural gas prices. As of ~~June 26,~~September 25, 2021, we held no open futures contracts to purchase natural gas.

Interest Rates

At ~~June 26,~~September 25, 2021, we had variable-rate debt outstanding of ~~$350.0~~$120.0 million. At this borrowing level, a hypothetical 10 percent increase in interest rates would have had an insignificant unfavorable impact on our pretax earnings and cash flows. The primary interest rate exposure on variable-rate debt is based on LIBOR.

Foreign Currency Exchange Rates

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than an entity’s functional currency. The Company and its subsidiaries generally enter into transactions denominated in their respective functional currencies. We may utilize certain futures or forward contracts with financial institutions to hedge foreign currency transactional exposures. Gains and losses with respect to these positions are deferred in equity as a component of AOCI and reflected in earnings upon collection of receivables or payment of commitments. At ~~June 26,~~September 25, 2021, we had open forward contracts with a financial institution to sell approximately ~~5.5~~4.2 million euros, ~~19.7~~16.5 million Swedish kronor, and ~~12.8~~12.5 million Norwegian kroner through ~~October 2021.~~January 2022.

The Company’s primary foreign currency exposure arises from foreign-denominated revenues and profits and their translation into U.S. dollars. The primary currencies to which we are exposed include the Canadian dollar, the British pound sterling, the Mexican peso, and the South Korean won. The Company generally views its investments in foreign subsidiaries with a functional currency other than the U.S. dollar as long-term. As a result, we generally do not hedge these net investments.

Cautionary Statement Regarding Forward Looking Information

This Quarterly Report contains various forward-looking statements and includes assumptions concerning the Company’s operations, future results, and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties, and may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. The forward-looking statements reflect knowledge and information available as of the date of preparation of the Quarterly Report, and the Company undertakes no obligation to update these forward-looking statements. We identify the forward-looking statements by using the words “anticipates,” “believes,” “expects,” “intends” or similar expressions in such statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important economic, political, and technological factors, among others, which could cause actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. In addition to those factors discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 26, 2020, such factors include: (i) the current and projected future business environment, including interest rates capital and consumer spending, and the impact of the COVID-19 pandemic; (ii) the domestic housing and commercial construction industry environment; (iii) availability and price fluctuations in commodities (including copper, natural gas, and other raw materials, including crude oil that indirectly affects plastic resins); (iv) competitive factors and competitor responses to the Company’s initiatives; (v) stability of government laws and regulations, including taxes; (vi) availability of financing; and (vii) continuation of the environment to make acquisitions, domestic and foreign, including regulatory requirements and market values of candidates.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure information required to be disclosed in Company reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) of the Exchange Act as of ~~June 26,~~September 25, 2021. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of ~~June 26,~~September 25, 2021 to ensure that information required to be disclosed in Company reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ending ~~June 26,~~September 25, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

General

The Company is involved in certain litigation as a result of claims that arose in the ordinary course of business. Additionally, the Company may realize the benefit of certain legal claims and litigation in the future; these gain contingencies are not recognized in the Condensed Consolidated Financial Statements. For a description of material pending legal proceedings, see “Note 10 - Commitments and Contingencies” in the Notes to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.

Item 1A. Risk Factors

The Company is exposed to risk as it operates its businesses. To provide a framework to understand the operating environment of the Company, we have provided a brief explanation of the more significant risks associated with our businesses in our 2020 Annual Report on Form 10-K. There have been no material changes in risk factors that were previously disclosed in our 2020 Annual Report on Form 10-K. Additionally, the operating results of the Company’s unconsolidated affiliates may be adversely affected by unfavorable economic and market conditions.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The Company’s Board of Directors has extended, until July ~~2021,~~2022, the authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. The Company may cancel, suspend, or extend the time period for the repurchase of shares at any time. Any repurchases will be funded primarily through existing cash and cash from operations. The Company may hold any shares repurchased in treasury or use a portion of the repurchased shares for its stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through ~~June 26,~~September 25, 2021, the Company had repurchased approximately 6.4 million shares under this authorization. Below is a summary of the Company’s stock repurchases for the period ended ~~June 26,~~September 25, 2021.

(a)
Total Number
of Shares Purchased (1)
(b)
Average Price Paid per Share (c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d)
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (2)
March 28, 2021 - April 24, 2021 — $ — — 13,575,058
April 25, 2021 - May 22, 2021 3,553 $ 45.61 — 13,575,058
May 23, 2021 - June 26, 2021 1,221 $ 43.44 — 13,575,058
Total 4,774 —


	(a) Total Number of Shares Purchased (1)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (2)


June 27, 2021 - July 24, 2021	3,507	$	39.11	—	13,575,058
July 25, 2021 - August 21, 2021	1,666	$	36.24	—	13,575,058
August 22, 2021 - September 25, 2021	1,000	$	20.37	—	13,575,058
Total	6,173			—

(1) Includes shares tendered to the Company by holders of stock-based awards in payment of the purchase price and/or withholding taxes upon exercise and/or vesting. Also includes shares resulting from restricted stock forfeitures at the average cost of treasury stock.

(2) Shares available to be purchased under the Company’s 20 million share repurchase ~~authorization~~authorization until July ~~2021.~~ 2022. The extension of the authorization was announced on October ~~21, 2020.~~20, 2021.

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Item 6. Exhibits


~~10.1~~			~~Credit Agreement, dated as of March 31, 2021, among the Company (as borrower), Bank of America, N.A. (as administrative agent), and certain lenders named therein~~ (~~Incorporated~~ ~~herein by reference to Exhibit 10.1 of the Registrant~~’~~s Current Report on Form 8-K, dated April 5, 2021)~~.

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase

101.INS			Inline XBRL Instance Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase

101.PRE			Inline XBRL Presentation Linkbase Document

101.SCH			Inline XBRL Taxonomy Extension Schema

104			Cover Page Interactive Data File (embedded within the Inline XBRL document and included in exhibit 101)

Items 3, 4, and 5 are not applicable and have been omitted.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			MUELLER INDUSTRIES, INC.


			/s/ Jeffrey A. Martin
			Jeffrey A. Martin
~~July 21,~~October 20, 2021			Chief Financial Officer and Treasurer
Date			(Principal Financial and Accounting Officer)


			/s/ Anthony J. Steinriede
~~July 21,~~October 20, 2021			Anthony J. Steinriede
Date			Vice President – Corporate Controller

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