MUELLER INDUSTRIES INC (MLI) FY 2022 MD&A

FINANCIAL REVIEW

The Financial Review section of our Annual Report on Form 10-K consists of the following: Management’s Discussion and Analysis of Results of Operations and Financial Condition (MD&A), the Consolidated Financial Statements, and Other Financial Information, all of which include information about our significant accounting policies, practices, and the transactions that impact our financial results.  The following MD&A describes the principal factors affecting the results of operations, liquidity and capital resources, contractual cash obligations, and the critical accounting estimates of the Company.  The discussion in the Financial Review section should be read in conjunction with the other sections of this Annual Report, particularly “Item 1: Business” and our other detailed discussion of risk factors included in this MD&A.

OVERVIEW

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

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

•Piping Systems:  The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper, Heatlink Group, European Operations, Trading Group, Jungwoo-Mueller (our South Korean joint venture), and Mueller Middle East (our Bahraini 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. European Operations manufacture copper tube in the United Kingdom, which is sold throughout Europe.  The Trading Group manufactures pipe nipples and sources products for import distribution in North America.  Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide.  Mueller Middle East manufactures copper tube and serves markets in the Middle East and Northern Africa. 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, Impacts & Micro Gauge, Brass Value-Added Products, and Precision Tube.  The segment manufactures and sells brass rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; gas valves and assemblies; and specialty copper, copper alloy, and aluminum tube.  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, Westermeyer, Turbotec, Flex Duct (ATCO and H&C Flex), and Linesets, Inc.  The segment manufactures and sells refrigeration valves and fittings, high pressure components, coaxial heat exchangers, insulated HVAC flexible duct systems, and line 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, actual housing starts in the U.S. were 1.55 million in 2022, which compares to 1.60 million in 2021 and 1.38 million in 2020.  The average 30-year fixed mortgage rate was approximately 5.34 percent in 2022 and 2.96 percent in 2021.  The private nonresidential construction sector, includes offices, industrial, health care, and retail projects.  According to the U.S. Census Bureau, the value of private nonresidential construction put in place was $530.1 billion in 2022, $485.8 billion in 2021, and $479.0 billion in 2020.

F-2

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.  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 2022, 2021, and 2020:

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

The increase in net sales in 2022 was primarily due to (i) higher net selling prices of $228.5 million in our core product lines, primarily copper tube, (ii) an increase in sales of $217.0 million in our other product lines, (iii) incremental sales of $38.6 million recorded by Mueller Middle East, acquired in December 2021, and (iv) incremental sales of $33.3 million recorded by H&C Flex, acquired in January 2021. These increases were slightly offset by (i) lower unit sales volume of $222.0 million in our core product lines, primarily non-U.S. copper tube and brass rod, and (ii) a decrease in sales of $82.7 million as a result of the dispositions of Die-Mold, Copper Bar, FTP, and STI during 2021.

The increase in net sales in 2021 was primarily due to (i) higher net selling prices of $886.5 million in our core product lines, primarily copper tube and brass rod, (ii) higher unit sales volume of $154.4 million in our core product lines, (iii) incremental sales of $152.7 million recorded by Kessler, acquired in August 2020, (iv) an increase in sales of $140.6 million in our non-core product lines, (v) sales of $48.9 million recorded by H&C Flex, and (vi) sales of $4.6 million recorded by Mueller Middle East. These increases were slightly offset by a decrease in sales of $16.5 million as a result of the dispositions of Die-Mold, FTP, and STI during 2021.

F-3

Net selling prices generally fluctuate with changes in raw material costs.  Changes in raw material costs are generally passed through to customers by adjustments to selling prices.  The following graph shows the Comex average copper price per pound by quarter for the most recent three-year period:

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2022, 2021, and 2020:

F-4

The decrease in cost of goods sold in 2022 was primarily due to a decrease in the average cost of copper and lower sales volume in certain core product lines. Gross margin as a percentage of sales was 28.1 percent compared with 22.0 percent in the prior year. The combination of strong demand for our products, inflationary pressures, and industry wide supply constraints contributed to an environment of higher selling prices and improved margins for the majority of our businesses. The increase in cost of goods sold in 2021 was primarily due to the increase in the average cost of copper, an increase in sales volume across all product lines, and an increase in sales volume resulting from the acquisitions of Kessler, H&C Flex, and Mueller Middle East.

Depreciation and amortization decreased slightly in 2022 as a result of long-lived assets of businesses sold and increased slightly in 2021 as a result of long-lived assets of businesses acquired.

Selling, general, and administrative expenses increased in 2022 primarily due to (i) an increase in employment costs, including incentive compensation, of $13.3 million, (ii) incremental expenses of $3.2 million associated with H&C Flex and Mueller Middle East, (iii) the absence of fees of $2.6 million received as a settlement of preexisting relationships recognized in the prior year, and (iv) higher travel and entertainment expense of $1.2 million. These increases were partially offset by the absence of expenses associated with FTP, STI, and Die-Mold of $2.9 million. The increase in selling, general, and administrative expenses in 2021 was primarily due to (i) an increase in employment costs, including incentive compensation, of $11.4 million, (ii) an increase in agent commissions of $8.7 million, (iii) incremental expenses of $6.1 million associated with Kessler and H&C Flex, (iv) an increase of $1.4 million in professional fees, and (v) expenses of $1.3 million associated with the write-off of vendor deposits. These increases were partially offset by (i) fees of $2.6 million received as a settlement of preexisting relationships and (ii) the absence of expenses associated with FTP, STI, and Die-Mold of $1.8 million.

During 2022, we recognized gains of $6.4 million on the sale of assets within Corporate and Eliminations.

During 2021, we recognized gains of $46.6 million on the sale of the FTP and STI businesses, $4.7 million on the disposition of the Die-Mold business, and $6.5 million on the sale of the Copper Bar business, as well as asset impairment charges of $2.8 million related to goodwill and fixed assets. The gain on the sale of FTP and STI and the deconsolidation of Die-Mold were reported within Corporate and Eliminations and the gain on the sale of Copper Bar was recorded in the Industrial Metals segment. Prior to the dispositions, the results of FTP and STI were included within the Climate segment, the results of Die-Mold were included within the Piping Systems segment, and the results of Copper Bar were included within the Industrial Metals segment.

During 2020, we recognized a gain of $22.1 million for the settlement of our claim under the Deepwater Horizon Economic and Property Damage Settlement Program and asset impairment charges of $3.8 million related to production equipment that was idled.

Interest expense decreased in 2022 primarily as a result of the redemption of our Subordinated Debentures during the second quarter of 2021 and there being no borrowings outstanding under the Credit Agreement during 2022. The decrease in 2021 was primarily a result of the redemption of our Subordinated Debentures during the second quarter of 2021.

During 2021, we recognized expense of $5.7 million for a redemption premium related to our Subordinated Debentures redeemed.

Environmental expense for our non-operating properties was lower in 2022 and 2021 than in 2020 primarily as a result of lower remediation costs.

During 2022, we recognized a $13.1 million expense related to the complete withdrawal from a multiemployer pension plan. During 2020, we recognized a $17.8 million expense to terminate our U.S. defined benefit pension plan, which consisted of an $11.6 million non-cash charge and $6.2 million in federal excise tax on surplus assets returned to the Company.

Other income, net, was higher in 2022 primarily as a result of (i) higher interest income on short-term investments, (ii) a gain on the sale of securities, and (iii) a curtailment gain related to our other postemployment benefit plans. It was lower in 2021 primarily as a result of lower net periodic benefit income from our benefit plans.

Income tax expense was $223.3 million in 2022, representing an effective tax rate of 25.5 percent.  This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes, net of the federal benefit, of $32.2 million, (ii) the effect of foreign statutory rates different from the U.S. federal rate and other foreign adjustments of $7.4 million, and (iii) the impact of investments in unconsolidated affiliates of $0.2 million. These increases were partially offset by other adjustments of $0.5 million.

F-5

Income tax expense was $165.9 million in 2021, representing an effective tax rate of 25.9 percent.  This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes, net of the federal benefit, of $21.1 million and (ii) the effect of foreign statutory rates different from the U.S. federal rate and other foreign adjustments of $11.2 million. These increases were partially offset by (i) the impact of investments in unconsolidated affiliates of $0.7 million and (ii) other adjustments of $0.4 million.

Income tax expense was $55.3 million in 2020, representing an effective tax rate of 26.4 percent.  This rate was higher than what would be computed using the U.S. statutory federal rate primarily due to (i) the provision for state and local income taxes, net of the federal benefit, of $5.9 million, (ii) the effect of foreign statutory rates different from the U.S. federal rate of $2.8 million, and (iii) other adjustments of $3.0 million. These increases were partially offset by the impact of investments in unconsolidated affiliates of $0.4 million.

During 2022, we recognized income of $10.1 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $0.2 million in 2021. The income on these investments for 2022 included net gains of $5.2 million for Tecumseh and net gains of $4.9 million for the retail distribution business.

During 2021, we recognized losses of $0.2 million on our investments in unconsolidated affiliates, net of foreign tax, compared to losses of $10.2 million in 2020. The loss on these investments for 2021 included net losses of $1.7 million for Tecumseh, partially offset by net gains of $0.8 million for the retail distribution business and a gain on fair value recognition related to our investment in Mueller Middle East of $0.7 million.

During 2020, we recognized losses of $10.2 million on our investments in unconsolidated affiliates, net of foreign tax. The loss of these investments for 2020 included net losses of $10.4 million for Tecumseh and net gains of $0.2 million for Mueller Middle East.

Piping Systems Segment

The following table compares summary operating results for 2022, 2021, and 2020 for the businesses comprising our Piping Systems segment:

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

The increase in net sales in 2022 was primarily attributable to (i) higher net selling prices of $219.6 million in the segment’s core product lines, primarily copper tube, (ii) an increase in sales of $61.1 million in the segment’s other product lines, and (iii) incremental sales of $38.6 million recorded by Mueller Middle East. These increases were partially offset by (i) lower unit sales volume of $172.3 million in the segment’s core product lines, primarily non-U.S. copper tube, and (ii) a decrease in sales of $10.9 million as a result of the disposition of Die-Mold.

F-6

The increase in net sales in 2021 was primarily attributable to (i) higher net selling prices of $719.0 million in the segment’s core product lines, primarily copper tube, (ii) incremental sales of $152.7 million recorded by Kessler, (iii) higher unit sales volume of $107.6 million in the segment’s core product lines, (iv) an increase in sales of $44.6 million in the segment’s non-core product lines and (v) sales of $4.6 million recorded by Mueller Middle East. These increases were slightly offset by a decrease in sales of $2.6 million as a result of the disposition of Die-Mold.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2022, 2021, and 2020:

Gross margin as a percentage of sales was 28.8 percent compared with 23.2 percent in the prior year. The increase in gross margin percent reflects effective price management in response to significant inflation in wages, consumable, freight, and distribution costs, as well as fluctuating material costs. The decrease in cost of goods sold in 2022 was primarily due to a decrease in the average cost of copper and lower sales volume in certain core product lines. The increase in cost of goods sold in 2021 was primarily due to the increase in the cost of copper, an increase in sales volume in the segment’s core product lines, and an increase in sales volume resulting from the acquisitions of Kessler and Mueller Middle East.

Depreciation and amortization decreased slightly in 2022 and 2021, compared to 2020, as a result of long-lived assets of businesses sold, partially offset by depreciation and amortization of the long-lived assets of Mueller Middle East.

Selling, general, and administrative expense for 2022 was consistent with 2021. The increase in 2021 was primarily due to (i) higher employment costs, including incentive compensation, of $6.1 million, (ii) incremental expenses of $4.3 million associated with Kessler, (iii) an increase in agent commissions of $2.0 million, (iv) expenses of $1.3 million associated with the write-off of vendor deposits, and (v) the absence of $1.3 million of government subsidies provided to certain businesses related to the COVID-19 pandemic recorded in 2020.

During 2020, we recognized asset impairment charges of $3.8 million related to production equipment that was idled.

Industrial Metals Segment

The following table compares summary operating results for 2022, 2021, and 2020 for the businesses comprising our Industrial Metals segment:

F-7

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

The decrease in net sales in 2022 was primarily due to (i) lower unit sales volume of $49.2 million in the segment’s core product lines, primarily brass rod, (ii) a decrease in sales of $36.2 million as a result of the disposition of Copper Bar, and (iii) lower sales of $4.4 million in the segment’s non-core product lines. These decreases were slightly offset by higher net selling prices of $8.9 million in the segment’s core product lines.

The increase in net sales in 2021 was primarily due to (i) higher net selling prices of $167.5 million in the segment’s core product lines, primarily brass rod, (ii) higher unit sales volume of $46.8 million in the segment’s core product lines, and (iii) higher sales of $8.4 million in the segment’s non-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 2022, 2021, and 2020:

Gross margin as a percentage of sales was 15.8 percent compared with 13.9 percent in the prior year. The decrease in cost of goods sold in 2022 was primarily due to the decrease in the average cost of brass scrap and lower sales volume in the segment’s core product lines and the disposition of Copper Bar. The increase in cost of goods sold in 2021 was primarily due to the increase in selling prices and sales volume in the segment’s core product lines.

F-8

Depreciation and amortization increased slightly in 2022 as a result of long-lived assets placed into service. Depreciation and amortization decreased slightly in 2021 as a result of several long-lived assets becoming fully depreciated.

Selling, general, and administrative expense in 2022 was consistent with 2021 and 2020.

During 2021, we recognized a gain of $6.5 million on the sale of the Copper Bar business.

Climate Segment

The following table compares summary operating results for 2022, 2021, and 2020 for the businesses comprising our Climate segment:

Net sales for 2022 increased primarily as a result of an increase in volume and price in certain product lines, as well as incremental sales of $33.3 million recorded by H&C Flex. These increases were partially offset by a decrease in sales of $35.6 million as a result of the dispositions of FTP and STI in 2021.  Net sales for 2021 increased primarily as a result of an increase in volume and price in certain product lines, as well as sales of $48.9 million recorded by H&C Flex. These increases were partially offset by a decrease in sales of $13.8 million as a result of the dispositions of FTP and STI in 2021.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2022, 2021, and 2020:

Cost of goods sold increased in 2022, consistent with the increase in net sales. Gross margin as a percentage of sales was 35.9 percent compared with 25.9 percent in the prior year. The increase in gross margin percent reflects effective price management in response to significant inflation in wages, consumable, freight, and distribution costs, as well as fluctuations in material costs. Cost of goods sold increased in 2021, consistent with the increase in net sales. Depreciation and amortization decreased in 2022 as a result of long-lived assets of businesses sold. Depreciation and amortization in 2021 was consistent with 2020. Selling, general, and administrative expenses increased in 2022 as a result of (i) higher agent commissions of $4.6 million, (ii) incremental expenses associated with H&C Flex of $2.1 million, and (iii) higher employment costs, including incentive compensation, of $1.8 million. These were partially offset by the absence of expenses associated with FTP and STI of $2.4 million. Selling, general, and administrative expenses increased in 2021 as a result of (i) higher employment costs of $2.7

F-9

million and (ii) expenses associated with H&C Flex of $1.8 million. These were partially offset by the absence of expenses associated with FTP and STI of $1.4 million.

During 2021, the segment recognized impairment charges on goodwill and long-lived assets of $2.8 million.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents selected financial information for 2022, 2021, and 2020:

Cash Provided by Operating Activities

During 2022, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $662.8 million, (ii) a decrease in accounts receivable of $82.7 million, (iii) depreciation and amortization of $44.1 million, and (iv) stock-based compensation expense of $17.8 million. These cash increases were partially offset by (i) a decrease in current liabilities of $26.6 million, (ii) an increase in inventories of $24.2 million, (iii) an increase in other assets of $9.0 million, and (iv) income from unconsolidated affiliates of $10.1 million.

During 2021, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $475.1 million, (ii) an increase in current liabilities of $73.8 million, (iii) depreciation and amortization of $45.7 million, and (iv) stock-based compensation expense of $9.8 million. These cash increases were partially offset by (i) an increase in accounts receivable of $124.7 million, (ii) an increase in inventories of $119.5 million, and (iii) gains of $57.8 million recorded on the sales of the FTP, STI, Die-Mold, and Copper Bar businesses. The fluctuations of accounts receivable, inventories, and current liabilities were primarily due to increased sales volume in certain businesses and higher material costs during 2021.

During 2020, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $143.6 million, (ii) an increase in current liabilities of $74.1 million, (iii) depreciation and amortization of $45.2 million, (iv) a decrease in other assets of $20.6 million, (v) a non-cash charge related to the termination of the U.S. pension plan of $11.6 million, (vi) losses from unconsolidated affiliates of $10.2 million, (vii) stock-based compensation expense of $8.6 million, and (viii) a decrease in inventories of $5.2 million. These cash increases were partially offset by an increase in accounts receivable of $76.4 million.

Cash (Used in) Provided by Investing Activities

The major components of net cash used in investing activities in 2022 included (i) the purchase of short-term investments of $217.9 million and (ii) capital expenditures of $37.6 million. These uses were partially offset by (i) proceeds from the sale of properties of $7.9 million, (ii) insurance proceeds for property and equipment of $3.4 million, and (iii) dividends received from unconsolidated affiliates of $2.3 million.

The major components of net cash provided by investing activities in 2021 included (i) proceeds of $81.9 million from the sale of the FTP, STI, and Copper Bar businesses, net of cash sold, and (ii) payments received on notes receivable of $8.5 million. These sources were partially offset by (i) capital expenditures of $31.8 million and (ii) $30.2 million for the purchases of H&C Flex and Mueller Middle East, net of cash acquired.

F-10

The major components of net cash used in investing activities in 2020 included (i) $72.6 million for the purchases of Kessler and STI, net of cash acquired, (ii) capital expenditures of $43.9 million, and (iii) the issuance of notes receivable of $9.3 million.

Cash Used in Financing Activities

For 2022, net cash used in financing activities consisted primarily of (i) $55.8 million used for the payment of regular quarterly dividends to stockholders of the Company, (ii) $38.1 million used for the repurchase of common stock, and (iii) $7.2 million used for the payment of dividends to noncontrolling interests.

For 2021, net cash used in financing activities consisted primarily of (i) $630.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $290.2 million used for the redemption of the Subordinated Debentures, (iii) $29.1 million used for the payment of regular quarterly dividends to stockholders of the Company, (iv) $9.7 million used for the payment of dividends to noncontrolling interests, (v) $5.1 million used for repayment of debt by Jungwoo-Mueller, and (vi) $4.9 million used to repurchase common stock. These uses of cash were partially offset by the issuance of debt under our Credit Agreement of $595.0 million.

For 2020, net cash used in financing activities consisted primarily of (i) $245.0 million used to reduce the debt outstanding under our Credit Agreement, (ii) $22.3 million used for the payment of regular quarterly dividends to stockholders of the Company, (iii) $7.0 million used for the payment of contingent consideration related to ATCO, and (iv) $5.6 million used to repurchase common stock. These uses of cash were partially offset by the issuance of debt under our Credit Agreement of $190.0 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.  Our current ratio was 4.4 to 1 as of December 31, 2022.

As of December 31, 2022, $82.0 million of our cash and cash equivalents were held by foreign subsidiaries.  The undistributed earnings of most of the foreign subsidiaries are considered to be permanently reinvested.  These earnings could be remitted to the U.S. with a minimal tax cost.  Accordingly, no additional income tax liability has been accrued with respect to these earnings or on any additional outside basis differences that may exist with respect to these entities.

We believe that cash held domestically, funds available through the Credit Agreement, and cash generated from U.S. based operations will be adequate to meet the future needs of our U.S. based operations.

Fluctuations in the cost of copper and other raw materials affect the Company’s liquidity.  Changes in material costs directly impact components of working capital, primarily inventories, accounts receivable, and accounts payable.  The price of copper has fluctuated significantly and averaged approximately $4.01 in 2022, $4.24 in 2021, and $2.80 in 2020.

We have significant environmental remediation obligations which we expect to pay over future years.  Approximately $8.3 million was spent during 2022 for environmental matters.  As of December 31, 2022, we expect to spend $4.0 million in 2023, $2.0 million in 2024, $0.8 million in 2025, $0.7 million in 2026, $0.7 million in 2027, and $12.3 million thereafter for ongoing projects.

Cash used to fund pension and other postretirement benefit obligations was $0.5 million in 2022 and $0.6 million in 2021.  We anticipate making contributions of approximately $1.1 million to these plans in 2023.

The Company declared and paid a quarterly cash dividend of 10.0 cents per common share during each quarter of 2020, 13.0 cents per common share during each quarter of 2021, and 25.0 cents per common share during each quarter of 2022.  Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, and other factors.

Capital Expenditures

During 2022 our capital expenditures were $37.6 million.  We anticipate investing approximately $35.0 million to $40.0 million for capital expenditures in 2023.

F-11

Long-Term Debt

The Company’s Credit Agreement provides for an unsecured $400.0 million revolving credit facility, which matures on March 31, 2026.  Funds borrowed under the Credit Agreement may be used for working capital purposes and other general corporate purposes.  In addition, the Credit Agreement provides a sublimit of $50.0 million for the issuance of letters of credit, a sublimit of $35.0 million for loans and letters of credit made in certain foreign currencies, and a swing line loan sublimit of $25.0 million.  Outstanding letters of credit and foreign currency loans reduce borrowing availability under the Credit Agreement.  There were no borrowings outstanding under the Credit Agreement at December 31, 2022.

Jungwoo-Mueller has several secured revolving credit arrangements with a total borrowing capacity of KRW 20.0 billion (or approximately $15.0 million).  Borrowings are secured by the real property and equipment of Jungwoo-Mueller.  There were no borrowings outstanding at Jungwoo-Mueller as of December 31, 2022.

As of December 31, 2022, the Company’s total debt was $2.0 million or 0.1 percent of its total capitalization.

Covenants contained in the Company’s financing obligations require, among other things, the maintenance of minimum levels of tangible net worth and the satisfaction of certain minimum financial ratios.  As of December 31, 2022, we were in compliance with all of our debt covenants.

Share Repurchase Program

The Company’s Board of Directors has extended, until July 2023, its authorization to repurchase up to 20 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. We may cancel, suspend, or extend the time period for the repurchase of shares at any time.  Any repurchases will be funded primarily through existing cash and cash from operations.  The Company may hold any shares repurchased in treasury or use a portion of the repurchased shares for stock-based compensation plans, as well as for other corporate purposes.  From its initial authorization in 1999 through December 31, 2022, the Company had repurchased approximately 7.2 million shares under this authorization.

CONTRACTUAL CASH OBLIGATIONS

The following table presents payments due by the Company under contractual obligations with minimum firm commitments as of December 31, 2022:

(1)This includes contractual supply commitments totaling $916.1 million at year-end prices; these contracts contain variable pricing based on Comex and the London Metals Exchange quoted prices. These commitments are for purchases of raw materials, primarily copper cathode and brass scrap, that are expected to be consumed in the ordinary course of business.

The above obligations will be satisfied with existing cash, funds available under the Credit Agreement, and cash generated by operations.  The Company has no off-balance sheet financing arrangements.

F-12

MARKET RISKS

The Company is exposed to market risks from changes in raw material and energy costs, interest rates, and foreign currency exchange rates.  To reduce such risks, we may periodically use financial instruments.  Hedging transactions are authorized and executed pursuant to policies and procedures.  Further, we do not buy or sell financial instruments for trading purposes.  A discussion of the Company’s accounting for derivative instruments and hedging activities is included in “Note 1 - Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Cost and Availability of Raw Materials and Energy

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

The Company occasionally enters into forward fixed-price arrangements with certain customers.  We may utilize futures contracts to hedge risks associated with these forward fixed-price arrangements.  We may also utilize futures contracts to manage price risk associated with inventory.  Depending on the nature of the hedge, changes in the fair value of the futures contracts will either be offset against the change in fair value of the inventory through earnings or recognized as a component of accumulated other comprehensive income (AOCI) in equity and reflected in earnings upon the sale of inventory.  Periodic value fluctuations of the contracts generally offset the value fluctuations of the underlying fixed-price transactions or inventory.  At December 31, 2022, we held open futures contracts to purchase approximately $91.8 million of copper over the next nine months related to fixed-price sales orders and to sell approximately $10.7 million of copper over the next five months related to copper inventory.

We may enter into futures contracts or forward fixed-price arrangements with certain vendors to manage price risk associated with natural gas purchases.  The effective portion of gains and losses with respect to positions are deferred in equity as a component of AOCI and reflected in earnings upon consumption of natural gas.  Periodic value fluctuations of the futures contracts generally offset the value fluctuations of the underlying natural gas prices.  There were no open futures contracts to purchase natural gas at December 31, 2022.

Interest Rates

The Company had no variable-rate debt outstanding at December 31, 2022 and December 25, 2021.  At this borrowing level, a hypothetical 10 percent increase in interest rates would have had an insignificant unfavorable impact on our pre-tax earnings and cash flows.  The primary interest rate exposure on variable-rate debt is based on the Secured Overnight Financing Rate (SOFR).

Foreign Currency Exchange Rates

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than an entity’s functional currency.  The Company and its subsidiaries generally enter into transactions denominated in their respective functional currencies.  We may utilize certain futures or forward contracts with financial institutions to hedge foreign currency transactional exposures.  Gains and losses with respect to these positions are deferred in equity as a component of AOCI and reflected in earnings upon collection of receivables or payment of commitments.  At December 31, 2022, we had open forward contracts with a financial institution to sell approximately 4.6 million euros, 36.4 million Swedish kronor, and 12.6 million Norwegian kroner through April 2023.

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, the South Korean won, and the Bahraini dinar.  The Company generally views its investments in foreign subsidiaries with a functional currency other than the U.S. dollar as long-term.  As a result, we generally do not hedge these net investments.  The net investment in foreign subsidiaries translated into U.S. dollars using the year-end exchange rates was $338.6 million at December 31, 2022 and $362.1 million at December 25, 2021.  The potential loss in value of the Company’s net investment in foreign subsidiaries resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates at December 31, 2022 and December 25, 2021 amounted to $33.9 million and $36.2 million, respectively.  This change would be reflected in the foreign currency translation component of AOCI in the equity section of our Consolidated Balance Sheets until the foreign subsidiaries are sold or otherwise disposed.

F-13

We have significant investments in foreign operations whose functional currency is the British pound sterling, the Mexican peso, the Canadian dollar, the South Korean won, and the Bahraini dinar.  In 2022, the value of the British pound decreased approximately eleven percent, the Mexican peso increased approximately six percent, the Canadian dollar decreased approximately six percent, the South Korean won decreased approximately seven percent, and the Bahraini dinar remained consistent, relative to the U.S. dollar.  The resulting net foreign currency translation losses were included in calculating net other comprehensive loss for the year ended December 31, 2022 and were recorded as a component of AOCI.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s accounting policies are more fully described in “Note 1 - Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.  As disclosed in Note 1, the preparation of financial statements in conformity with general accepted accounting principles in the United States requires management to make estimates and assumptions about future events that affect amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates.  Management believes the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.

Inventory Valuation Reserves

Our inventories are valued at the lower-of-cost-or-market.  The market price of copper cathode and scrap are subject to volatility.  During periods when open market prices decline below net realizable value, the Company may need to provide an allowance to reduce the carrying value of its inventory.  In addition, certain items in inventory may be considered excess or obsolete and, as such, we may establish an allowance to reduce the carrying value of those items to their net realizable value.  Changes in these estimates related to the value of inventory, if any, may result in a materially adverse impact on our reported financial position or results of operations.  The Company recognizes the impact of any changes in estimates, assumptions, and judgments in income in the period in which they are determined.

As of December 31, 2022 and December 25, 2021, our inventory valuation reserves were $14.3 million and $10.1 million, respectively.  The expense recognized in each of these periods was immaterial to our Consolidated Financial Statements.

Impairment of Goodwill

As of December 31, 2022, we had $157.6 million of recorded goodwill from our business acquisitions, representing the excess of the purchase price over the fair value of the net assets we have acquired.

Goodwill is subject to impairment testing, which is performed annually as of the first day of the fourth quarter unless circumstances indicate the need to accelerate the timing of the tests.  These circumstances include a significant change in the business climate, operating performance indicators, competition, or sale or disposition of a significant portion of one of our businesses.  In our evaluation of goodwill impairment, we perform a qualitative assessment at the reporting unit level that requires management judgment and the use of estimates to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If the qualitative assessment is not conclusive, management compares the fair value of a reporting unit with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

We identify reporting units by evaluating components of our operating segments and combining those components with similar economic characteristics.  Reporting units with significant recorded goodwill include Domestic Piping Systems, B&K LLC, Great Lakes, Heatlink Group, European Operations, Jungwoo-Mueller, Mueller Middle East, Westermeyer, and Flex Duct.

The fair value of each reporting unit is estimated using a combination of the income and market approaches, incorporating market participant considerations and management’s assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Estimates used by management can significantly affect the outcome of the impairment test.  Changes in forecasted operating results and other assumptions could materially affect these estimates.

We evaluated each reporting unit during the fourth quarters of 2022 and 2021, as applicable. With the exception of the Turbotec reporting unit, the estimated fair value of each of these reporting units exceeded its carrying values in 2022 and 2021, and we do not believe that any of these reporting units were at risk of impairment as of December 31, 2022. During the third quarter of 2021, the Company recognized an impairment charge of $2.1 million related to Turbotec, reported within the Climate segment.

F-14

Pension Benefit Plans

We sponsor several qualified and nonqualified pension benefit plans in certain foreign locations.  We recognize the overfunded or underfunded status of the plans as an asset or liability in the Consolidated Balance Sheets with changes in the funded status recorded through comprehensive income in the year in which those changes occur.  The obligations for these plans are actuarially determined and affected by assumptions, including discount rates, expected long-term return on plan assets for defined benefit pension plans, and certain employee-related factors, such as retirement age and mortality.  We evaluate the assumptions periodically and makes adjustments as necessary.

The expected return on plan assets is determined using the market value of plan assets.  Differences between assumed and actual returns are amortized to the market value of assets on a straight-line basis over the average remaining service period of the plan participants using the corridor approach.  The corridor approach defers all actuarial gains and losses resulting from variances between actual results and actuarial assumptions.  These unrecognized gains and losses are amortized when the net gains and losses exceed 10 percent of the greater of the market value of the plan assets or the projected benefit obligation.  The amount in excess of the corridor is amortized over the average remaining service period of the plan participants.  For 2022, the average remaining service period for the pension plans was 11.5 years.

We determine the discount rate (which is required to be the rate at which the projected benefit obligation could be effectively settled as of the measurement date) with the assistance of actuaries, who calculate the yield available on high quality corporate bonds of a term that reflects the maturity and duration of expected benefit payments.

Environmental Reserves

We recognize an environmental reserve when it is probable that a loss is likely to occur and the amount of the loss is reasonably estimable.  We estimate the duration and extent of our remediation obligations based upon reports of outside consultants, internal and third party estimates and analyses of cleanup costs and ongoing monitoring costs, communications with regulatory agencies, and changes in environmental law.  If we were to determine that our estimates of the duration or extent of our environmental obligations were no longer accurate, we would adjust our environmental reserve accordingly in the period that such determination is made.  Estimated future expenditures for environmental remediation are not discounted to their present value.

Environmental expenses that relate to ongoing operations are included as a component of cost of goods sold.  Environmental expenses related to non-operating properties are presented below operating income in the Consolidated Statements of Income.

Income Taxes

We estimate total income tax expense based on domestic and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting, and available credits and incentives.

Deferred income tax assets and liabilities are recognized for the future tax effects of temporary differences between the treatment of certain items for financial statement and tax purposes using tax rates in effect for the years in which the differences are expected to reverse.  Realization of certain components of deferred tax assets is dependent upon the occurrence of future events.

Valuation allowances are recorded when, in the opinion of management, it is more likely than not that all or a portion of the deferred tax assets will not be realized.  These valuation allowances can be impacted by changes in tax laws, changes to statutory tax rates, and future taxable income levels, and are based on our judgment, estimates, and assumptions.  In the event we were to determine that we would not be able to realize all or a portion of the net deferred tax assets in the future, we would increase the valuation allowance through a charge to income tax expense in the period that such determination is made.  Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future, in excess of the net carrying amounts, we would decrease the recorded valuation allowance through a decrease to income tax expense in the period that such determination is made.

We record liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due.  These unrecognized tax benefits are retained until the associated uncertainty is resolved.  Tax benefits for uncertain tax positions that are recognized in the Consolidated Financial Statements are measured as the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement.  To the extent we prevail in matters for which a liability for an uncertain tax position is established or are required to pay amounts in excess of the liability, our effective tax rate in a given period may be materially affected.

F-15

New Accounting Pronouncements

See “Note 1 – Summary of Significant Accounting Policies” in our Consolidated Financial Statements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

F-16

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

See accompanying notes to consolidated financial statements.

F-17

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

See accompanying notes to consolidated financial statements.

F-18

MUELLER INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2022 and December 25, 2021

See accompanying notes to consolidated financial statements.

F-19

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

See accompanying notes to consolidated financial statements.

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

F-20

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

F-21

MUELLER INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(continued)

Years Ended December 31, 2022, December 25, 2021, and December 26, 2020

See accompanying notes to consolidated financial statements.

F-22