8285 Tournament Drive, Suite 150
Company Perspectives:
Excelling in the production and distribution of the finest quality copper and brass products is the foundation upon which Mueller Industries operates. Since its inception in 1917 as Mueller Metals Company and later Mueller Brass Company in Port Huron, Michigan, the company has been a leader in the development of new products and innovative manufacturing processes.
Mueller Industries, Inc. is a leading U.S.-based manufacturer of copper, brass, plastic, and aluminum products. The company's Standard Products Division, which generates about three-quarters of overall revenues, produces copper tube, holding a leading position in air-conditioning and refrigeration tubes; both copper and plastic fittings for plumbing and heating applications; and valves. The products of this division are mainly sold to wholesalers in the heating, air-conditioning, plumbing, and refrigeration markets. The Industrial Products Division, which primarily serves original equipment manufacturers, produces brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum and copper impact extrusions; refrigeration valves and fittings; fabricated tubular products; and gas valves and assemblies. The company operates 22 factories--20 in the United States and a single plant each in France and the United Kingdom. Only about 13 percent of Mueller's sales originate outside the United States.
Early History of Innovation
Mueller Industries traces its history back to 1852 when 20-year-old Hieronymous Mueller migrated to the United States. Mueller was an inventor with an interest in plumbing--particularly plumbing using copper. In 1872 he patented an improved water tapping machine. In 1877 he became the first to pour castings using brass, an alloy of copper and zinc. Mueller parlayed these inventions into manufacturing facilities, and in 1893, with $68,000 in capital, he incorporated his business in Michigan as the H. Mueller Manufacturing Company.
The firm prospered throughout the next two decades. In 1913, as Great Britain entered World War I, Mueller completed its first Canadian plant. With the United States' entrance into the war, Mueller, like many industrial companies, participated in a general increase in manufacturing. In order to produce munitions, the company began construction, in Port Huron, Michigan, of the first commercial forging facility in the United States. When that plant opened on December 17, 1917, the business was reincorporated as Mueller Metals Company.
After the war, Mueller continued to make technological advances, key to the growth of significant industries. For the nascent mechanical refrigeration industry, the company provided brass forging that did not leak refrigeration gas like the porous castings previously in use. In addition, the Port Huron plant pioneered high-strength brass forging for gears, bearings, and pumps used by manufacturers of mechanical devices.
Mueller was still directing its primary efforts at the plumbing supply business, however. In 1923 the company introduced soft copper tube for underground water supplies and, in 1924, hard copper tube for indoor water supplies. By 1927, Mueller Brass Company (the new name having been adopted in 1925) was firmly established in the plumbing business and was producing a full line of fittings and valves produced in its own foundry.
Perhaps the company's most important innovation came in 1930 when the company introduced the revolutionary Streamline solder-type fitting. Previously, fittings--which joined pieces of tube--had been the weakest sections of pipes. The new solder-joined fittings, however, were actually stronger than the tubes they connected. It was because of this development that all-copper plumbing and heating systems were established as industry standards.
After the stock market crashed in 1929, Mueller fell victim to the same types of pressures other industrial companies were experiencing. Moreover, as a company that provided supplies to industrial firms, especially in the area of housing construction, Mueller experienced sales that generally reflected the low level of economic activity in the country. This being the case, Mueller canceled dividends and tightened its belt during the first half of the 1930s.
Surprisingly, Mueller returned to profitability by the mid-1930s, reinstating dividends in 1935. Toward the end of the decade, the war in Europe and a reviving economy at home spurred production. Mueller became highly profitable, a fact borne out by generally increasing dividends, including the record $2.25 dividend the company paid in 1941.
Postwar Expansion
After the war, Mueller remained profitable, especially during the 1950s when earnings fluctuated between $2.50 and $5.50 per share, and sales averaged around $59 million. Given positive economic conditions, President and CEO F.L. Riggin decided to expand the company. In December 1951 he paid $1.25 million for Valley Metal Products Co. of Plainwell, Michigan. He bought, and later sold, Sheet Aluminum Corporation, of Jackson, Mississippi, and in March 1958, he acquired American Sinteel Corporation, a Yonkers, New York, manufacturer of powder metal parts.
Along with acquisitions, Riggin upgraded existing facilities and built new ones. In 1954 he launched an eight-year program to expand and diversify the production of fabricated goods. In this effort, he placed particular emphasis on specially engineered, copper-based alloys. In addition, Riggin opened an impact extrusion facility in Marysville, Michigan, in 1958. The plant, which shaped aluminum and copper by forcing it through a die, adapted the inherent strength and minimal weight of extrusions to specialized needs of customers who ranged from aerospace manufacturers to home appliance suppliers.
During the early 1960s, Mueller continued to do well, adding a larger proportion of defense subcontracting to its mix of customers. At this time the company was producing rods, forgings, tubes, and castings made from aluminum, copper, brass, bronze, and other alloys. Among the many semi-finished and fabricated items the company produced were powdered metal, screw machine parts, machined castings, forgings and impact extrusions, refrigeration valves and fittings, chromium- and nickel-plated fabricated items, electrotinned and hot-dipped fabricated items, and copper pipes, tubes, and fittings used in plumbing, heating, and air conditioning.
Mueller continued to grow, reporting profits of $2.35 million on sales of $80.8 million in 1963. The company also acquired the assets of the Bay Engineering Company of Bridgeport, Michigan, the following year. Management, however, did not cling to the idea of a large, independent Mueller with an indefinite future.
1965-79: The USSRAM Era
For some time, U.S. Smelting Refining and Mining (USSRAM) had been acquiring Mueller stock and by 1965 had amassed a 72 percent share of the company. That year USSRAM made an offer to acquire the remainder of Mueller through a stock swap--a proposal that was approved overwhelmingly by both companies. Technically, Mueller Brass and USSRAM merged to become a new Mueller subsidiary called Mueller Brass Corp. Upon completion of the consolidation, however, the subsidiary's name was changed to U.S. Smelting, Refining, & Mining Company and USSRAM's management took over the new company, in effect absorbing Mueller.
USSRAM was a mining company whose primary products were gold, silver, lead, and zinc. Founded in 1906, the company was relatively stable until the early 1960s when a proxy fight led to the ascension of Martin Horwitz to the offices of president and chief executive officer in 1964. Under Horwitz, USSRAM had followed an aggressive path of acquisitions and had begun to develop the Continental Copper Mine in New Mexico. In acquiring Mueller, Horwitz was looking to join copper mining and smelting with the production of copper products.
The merger proved to be profitable from the start. In 1969, after Horwitz invested $17 million in Mueller's interests and $16 million in the copper mine, USSRAM's sales reached an all-time high of $170 million, while income hit a record $12 million.
In fact, the merger provided Mueller with the capital to introduce new products, modernize old facilities, and build new plants. In 1967 the company began to offer plastic pipe and fittings. The Port Huron rod mill was modernized in 1971--doubling its copper alloys capacity. That same year construction of a Fulton, Mississippi, tube mill--including a 6,300-ton automated extrusion press--was completed. In a speech reprinted by the Wall Street Transcript, Horwitz called the Fulton plant "possibly the most efficient tube mill in the United States." He concluded that given the plant's low cost operation, it had "enabled Mueller to report profits when other mills were reporting losses and still others were closing down."
In the early 1970s, USSRAM changed its name to UV Industries, Inc. to better represent an increasingly diverse product mix that, by then, also included electrical equipment. Mueller, in the meantime, continued to expand, though not quite at the pace it did in the late 1960s. In 1973 the company purchased plants in Hartsville, Tennessee, to produce refrigerator and air conditioning components. By 1976, however, slow housing starts had led to a performance that, while acceptable, was nowhere near what it might be in a boom economy.
1980s: The Sharon Steel Era
In 1977 Victor Posner, chairman of Sharon Steel Corporation, offered to buy UV Industries. Posner was a Miami Beach businessman who had dropped out of high school and made a fortune in real estate by the time he was 30. He got involved in mergers and acquisitions and eventually used his NVF Company to gain control of Sharon, then the 12th largest steel company in the United States. One of Posner's tactics was to use subordinate debentures--bonds subordinate to other claims and backed by the general credit of the issuer--rather than a specific lien on particular assets in order to fund his activities.
This was the means of payment he proposed in the acquisition of UV Industries. UV, however, was wary of Posner and the two sides went back and forth with extensive negotiations. Finally, on November 26, 1979, it was agreed that Sharon would acquire UV for an interim note worth $517 million and the assumption of UV's liabilities. However, Sharon could not sell any UV assets until the interim note was exchanged for cash. This particular clause was important because it was widely assumed that Posner would pay for the deal by selling UV's large portfolio of investments and marketable securities. According to the Wall Street Journal, some analysts thought that cash would be hard to come by and that Posner had "erred badly in trying to swallow UV."
Under the Posner regime, Mueller remained profitable, and in 1983 the company's Canadian subsidiary in Strathroy, Ontario, began manufacturing metric fittings. Sharon, however, had difficulties. The company's debts were too high, and in 1985, Sharon defaulted on $33 million in interest payments. Bondholders could have forced the business into bankruptcy immediately; instead, they negotiated with Posner, who wanted them to swap their subordinated debentures for a package of common shares and low-interest and zero-coupon notes.
The largest bondholder was Quantum Overseas N.V., an investment fund based in Curacao that was headed by high-stakes investor George Soros. Quantum and the other holders allowed payments on the debentures to be extended more than 20 times while they tried to negotiate a settlement. In 1986 it was rumored that Sharon would sell Mueller to Quantum for $55 million, but that exchange never took place.
Finally in 1987, Quantum called in the $96.9 million in Sharon securities it held and in April of that year, Sharon filed for Chapter 11 bankruptcy. Over the next two years, Quantum officials and Sharon's other creditors worked to hammer out a plan to divide Sharon's assets and help the company emerge from bankruptcy.
During this time, Mueller was not static. The company had never filed for Chapter 11 and remained a viable enterprise. In 1990 Mueller acquired U-Brand Corporation, an Ashland, Ohio, company whose plants in Ashland and Upper Sandusky, Ohio, manufactured plastic valves, pipe couplings, steel pipe nipples, malleable iron pipe fittings, iron castings, and plastic pipe fittings for wholesalers and hardware stores. In addition, Mueller continued to innovate, bringing out--coincident with new strict EPA regulations--the SRD-1 which allowed customers in the refrigeration and climate control industries to capture and recover fluorocarbons during repair operations.
Early 1990s: Regaining Independence As Mueller Industries
The issues surrounding Sharon were finally resolved on December 28, 1990, when negotiators, headed by Raymond Wechsler, an advisor to the Quantum Fund, hammered out a plan to divide up the company. After 25 years as a subsidiary, Mueller reemerged as an independent company called Mueller Industries, Inc. The new Mueller was an industrial concern that held its traditional plumbing and flow control equipment operation as well as natural resource holdings centered around a division called Arava Natural Resources Company, Inc. This new sector of the business included the Utah Railway Company--a short-line that carried coal to Provo, Utah, for transshipment by major rail carriers--Alaskan gold mining operations, and a variety of mining interests in Canada and the West. (Sharon's steel assets were spun off into a new firm called Sharon Specialty Steel, Inc.) During 1991 Mueller moved its headquarters from Port Huron, Michigan, to Wichita, Kansas.
In its first year as an independent company, Mueller announced a loss of $43.7 million on sales of $441 million. Almost all of the 1991 loss was due to a revaluation of assets, coupled with costs related to the bankruptcy proceeding and restructuring of the business following the reorganization. Harvey L. Karp, who became chairman and CEO on October 8, 1991, moved quickly to shape up the company. He enhanced the balance sheet by selling $25 million worth of investment grade notes and negotiated for expanded borrowing capabilities that provided $40 million. In an effort to focus on the company's core manufacturing business, the sale of the malleable iron business--which had not been profitable for Mueller--was arranged in 1992. To help upgrade operations neglected for many years, Karp made a commitment to allocate more capital and undertake improvement projects. He also negotiated settlements of litigation that asserted a $16.5 million guarantee obligation for the Sharon Steel business. This settlement turned out to be very favorable when Sharon filed Chapter 9 in the fourth quarter of 1992. Finally, among other key executives, Karp recruited William D. O'Hagan, who had 32 years experience in the industry, to be Mueller's chief operating officer and president. Karp's efforts paid off handsomely--for the year ended 1992, earnings were up significantly, reaching $16.6 million on sales of $517.3 million.
After Mueller emerged from Sharon Steel's shadow, the Quantum Fund held about 46 percent of the common stock, with the remainder owned by Sharon Steel's creditors. The stock initially traded on the NASDAQ exchange, but the company gained a listing on the New York Stock Exchange in February 1991. During 1993 the Quantum Fund sold the bulk of its stake to the public through a secondary offering. Then in 1994 Mueller bought Quantum's remaining 9.6 percent stake for $25.9 million. Also in 1994, O'Hagan was promoted to president and CEO, with Karp remaining chairman.
The steadily expanding economy in the mid-1990s fueled growth in housing starts, which was the key economic indicator for Mueller given the large portion of sales that were generated from the construction industry. Both revenues and earnings advanced steadily during this period, culminating in the 1996 figures of $61.2 million in net income on net sales of $729.9 million. During 1995 the company declared a two-for-one stock split and also announced that the headquarters would be moved from Wichita to Memphis, Tennessee. The move, completed in May 1996, was taken in order to place the head office closer to Mueller's core manufacturing operations in Tennessee and Mississippi. The mid-1990s were also marked by major capital outlays in which Mueller invested about $100 million in plant improvements that increased production capacity and improved efficiency in the company's manufacturing operations.
Turning Acquisitive in the Late 1990s
During the late 1990s, as Mueller continued to enjoy annual increases in revenues and profits, the company stepped up its growth efforts by completing a string of significant acquisitions. The first came in late December 1996 when Precision Tube Company, Inc. of North Wales, Pennsylvania, was purchased for $6.6 million. Founded in 1948, Precision Tube produced copper, copper alloy, and aluminum tubing and fabricated tubular products, with its main product line being copper tubing for the baseboard heating industry. These products were produced at the company's mill in North Wales, while a second plant in Salisbury, Maryland, manufactured semirigid and flexible coaxial cables and assemblies used in the defense industry and in microwave technology. The company achieved sales of about $20 million in 1996.
In the first half of 1997, Mueller established its first significant European beachhead through the acquisition of two copper tube manufacturers. In February the company spent $21.3 million for Wednesday Tube Company, based in Bilston, West Midlands, England. Then, three months later, a French firm, Desnoyers S.A., was acquired for $13.5 million. Desnoyers operated two plants near Paris, in Laigneville and Longueville, and during 1996 produced 60 million pounds of tube, resulting in net sales of $100 million. The Laigneville mill was later shut down and its operations consolidated into those of the other two European plants.
With the company's streak of record results continuing, another two-for-one stock split was declared in early 1998. Three acquisitions were completed later in the year. In August Mueller acquired B&K Industries, Inc., an Elk Grove Village, Illinois-based importer and distributor of residential and commercial plumbing products with sales in 1997 of about $50 million. A key in this deal was that B&K distributed its products to all major distribution channels, including the retail market--hardware stores and home centers--which Mueller had not previously penetrated to any great extent. Next, Mueller bought Lincoln Brass Works, Inc., a metal fabrication firm with plants in Jacksboro and Waynesboro, Tennessee, and annual sales of $35 million. Lincoln's product line complemented Mueller's brass forging operations and included custom control valve assemblies, custom metal assemblies, gas delivery systems, and tubular products, mainly for the gas appliance market. Finally, in November 1998 Mueller completed the acquisition of Halstead Industries, Inc. for about $92 million in stock. The privately held Halstead, which was founded in Pittsburgh in 1936 and which had sales in 1997 of approximately $250 million, produced copper tubing for plumbing, air conditioning, and refrigeration applications at plants in Wynne, Arkansas, and Clinton, Tennessee. Following the acquisition, Halstead was renamed Mueller Copper Tube Products, Inc.
In addition to its series of acquisitions and its continued investment of tens of millions of dollars to modernize and update existing plants, Mueller during the late 1990s also divested a number of its natural resources operations as these businesses were increasingly viewed as noncore. At the end of 1997 the company sold off a coal mining business whose operations had been shut down earlier in the decade. Alaska Gold Company, a subsidiary that operated an open pit gold mine in Alaska, was sold to Novagold Resources, Inc. for $5.5 million in April 1999. This left Mueller with one main natural resources operation, that of Utah Railway, the short-line coal-carrying railroad. Mueller recorded its sixth straight year of revenue growth and its eighth consecutive year of earnings growth in 1999. Net sales surpassed the $1 billion mark for the first time, totaling $1.2 billion, while net income increased 31.7 percent, reaching $99.3 million.
Maintaining Profitability in the Uncertain Environment of the Early 2000s
The economic downturn that coincided with the beginning of the 21st century halted Mueller's string of record results, although the company was able to stay in the black. For 2001, sales fell 15 percent while net income declined 28 percent. To minimize the effects of the downturn, Mueller instituted a number of cost saving measures, including a wage freeze, and streamlined its sales and manufacturing operations. The company's plant in Clinton, Tennessee, was closed down, and Mueller also exited from the metric copper fittings sector, closing its Canadian plant in the process. In August 2002 the company completed the divestment of its noncore assets with the sale of Utah Railway to Genessee & Wyoming, Inc. for $55.4 million. As it surveyed the future, Mueller's outlook was clouded somewhat by the continued economic weakness and by the prospect of a larger downturn in the housing market, a sector that had remained relatively buoyant thanks to historically low interest rates.
Principal Subsidiaries: Mueller Brass Co.; Itawamba Industrial Gas Company, Inc.; Streamline Copper & Brass Ltd. (Canada); Mueller Plastics Corporation, Inc.; Mueller Brass Forging Company, Inc.; Mueller Copper Fittings Company, Inc.; Mueller Copper Tube Company, Inc.; Mueller Formed Tube Company, Inc.; Mueller Impacts Company, Inc.; Mueller Line Set Inc.; Mueller Press Company, Inc.; Mueller Refrigeration Products Company, Inc.; Lincoln Brass Works, Inc.; Precision Tube Company, Inc.; Mueller Tool and Machine, Inc.; Mueller Casting Company, Inc.; Micro Gauge, Inc.; Microgauge Machining, Inc.; Propipe Technologies, Inc.; Mueller Europe, Ltd. (U.K.); Mueller de Mexico; Mueller Europe, S.A. (France); B&K Industries, Inc.; Mueller Copper Tube Products, Inc.; Mueller Streamline FSC Ltd. (Virgin Islands); Arava Natural Resources Company, Inc.; United States Fuel Company; King Coal Company; Canco Oil & Gas Ltd. (Canada); Aegis Oil & Gas Leasing Ltd. (Canada); Bayard Mining Corporation; Washington Mining Company.
Principal Divisions: Standard Products Division; Industrial Products Division.
Principal Competitors: Wolverine Tube, Inc.; NIBCO, Inc.; Cerro Copper Products Co., Inc.; Chase Industries, Inc.; Charlotte Pipe & Foundry Company; Cambridge-Lee Industries Inc.; Amcast Industrial Corporation; Cerro Metal Products Company, Inc.; Extruded Metals Inc.
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