MUELLER INDUSTRIES INC - Quarter Report: 2016 July (Form 10-Q)

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 period ended July 2, 2016

Commission file number 1–6770

MUELLER INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	25-0790410
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

8285 Tournament Drive, Suite 150
Memphis, Tennessee	38125
(Address of principal executive offices)	(Zip Code)

(901) 753-3200

(Registrant's telephone number, including area code)

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 x No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ☐

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

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

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 25, 2016, was 57,172,780.

INDEX

MUELLER INDUSTRIES, INC.

FORM 10-Q

For the Quarterly Period Ended July 2, 2016

__________________________

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.) Notes to Condensed Consolidated Financial Statements	7

	Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3. – Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4. – Controls and Procedures	32

Part II. Other Information

	Item 1. – Legal Proceedings	33

	Item 1A. – Risk Factors	33

	Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 5. – Other Information	34

	Item 6. – Exhibits	35

Signatures		36

INDEX

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
(In thousands, except per share data)	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Net sales	$	544,071		$	555,593		$	1,076,880		$	1,092,835

Cost of goods sold		456,060			470,365			902,702			931,199
Depreciation and amortization		9,061			8,188			17,981			16,041
Selling, general, and administrative expense		34,514			33,420			70,294			66,251
Gain on sale of assets		—			(15,376	)		—			(15,376	)
Severance		—			3,442			—			3,442

Operating income		44,436			55,554			85,903			91,278

Interest expense		(1,692	)		(2,219	)		(3,540	)		(4,295	)
Other income, net		515			265			760			370

Income before income taxes		43,259			53,600			83,123			87,353

Income tax expense		(14,005	)		(19,738	)		(28,126	)		(31,151	)
(Loss) income from unconsolidated affiliates, net of tax		(995	)		—			1,927			—

Consolidated net income		28,259			33,862			56,924			56,202

Net income attributable to noncontrolling interests		(462	)		(211	)		(497	)		(573	)

Net income attributable to Mueller Industries, Inc.	$	27,797		$	33,651		$	56,427		$	55,629

Weighted average shares for basic earnings per share		56,511			56,247			56,489			56,220
Effect of dilutive stock-based awards		418			743			456			737

Adjusted weighted average shares for diluted earnings per share		56,929			56,990			56,945			56,957

Basic earnings per share	$	0.49		$	0.60		$	1.00		$	0.99

Diluted earnings per share	$	0.49		$	0.59		$	0.99		$	0.98

Dividends per share	$	0.100		$	0.075		$	0.175		$	0.150

See accompanying notes to condensed consolidated financial statements.

INDEX

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Quarter Ended								For the Six Months Ended
(In thousands)	July 2, 2016				June 27, 2015				July 2, 2016				June 27, 2015

Consolidated net income	$	28,259			$	33,862			$	56,924			$	56,202

Other comprehensive income (loss), net of tax:
Foreign currency translation		(10,186	)			7,056				(11,297	)			(1,348	)
Net change with respect to derivative instruments and hedging activities		700		⁽¹⁾		(903	)	⁽²⁾		1,294		⁽³⁾		(1,101	)	⁽⁴⁾
Net actuarial (gain) loss on pension and postretirement obligations		1,530		⁽⁵⁾		(647	)	⁽⁶⁾		2,702		⁽⁷⁾		769		⁽⁸⁾
Attributable to unconsolidated affiliates		1,438		⁽⁹⁾		—				1,438		⁽⁹⁾		—
Other, net		9				34				23				7

Total other comprehensive (loss) income		(6,509	)			5,540				(5,840	)			(1,673	)

Consolidated comprehensive income		21,750				39,402				51,084				54,529
Comprehensive loss attributable to noncontrolling interests		123				520				862				175

Comprehensive income attributable to Mueller Industries, Inc.	$	21,873			$	39,922			$	51,946			$	54,704

See accompanying notes to condensed consolidated financial statements.

_______________________________________

(1) Net of tax of $(266)

(2) Net of tax of $166

(3) Net of tax of $(487)

(4) Net of tax of $440

(5) Net of tax of $(522)

(6) Net of tax of $216

(7) Net of tax of $(920)

(8) Net of tax of $(286)

(9) Net of tax of $(812)

INDEX

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)	July 2, 2016			December 26, 2015
Assets
Current assets:
Cash and cash equivalents	$	283,161		$	274,844
Accounts receivable, less allowance for doubtful accounts of $565 in 2016 and $623 in 2015		305,332			251,571
Inventories		249,954			239,378
Other current assets		27,276			34,608

Total current assets		865,723			800,401

Property, plant, and equipment, net		297,939			280,224
Goodwill, net		128,339			120,252
Intangible assets, net		39,050			40,636
Investment in unconsolidated affiliates		70,077			65,900
Other assets		19,347			31,388

Total assets	$	1,420,475		$	1,338,801

Liabilities
Current liabilities:
Current portion of debt	$	16,226		$	11,760
Accounts payable		105,138			88,051
Accrued wages and other employee costs		31,199			35,636
Other current liabilities		65,387			73,982

Total current liabilities		217,950			209,429

Long-term debt, less current portion		213,646			204,250
Pension liabilities		15,435			17,449
Postretirement benefits other than pensions		17,268			17,427
Environmental reserves		20,830			20,943
Deferred income taxes		13,644			7,161
Other noncurrent liabilities		2,930			2,440

Total liabilities		501,703			479,099

Equity
Mueller Industries, Inc. stockholders' equity:
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding		—			—
Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 57,167,406 in 2016 and 57,158,608 in 2015		802			802
Additional paid-in capital		274,928			271,158
Retained earnings		1,110,010			1,063,543
Accumulated other comprehensive loss		(59,472	)		(54,990	)
Treasury common stock, at cost		(453,613	)		(453,228	)

Total Mueller Industries, Inc. stockholders' equity		872,655			827,285
Noncontrolling interests		46,117			32,417

Total equity		918,772			859,702

Commitments and contingencies		—			—

Total liabilities and equity	$	1,420,475		$	1,338,801


See accompanying notes to condensed consolidated financial statements.

INDEX

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
(In thousands)	July 2, 2016			June 27, 2015

Cash flows from operating activities
Consolidated net income	$	56,924		$	56,202
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization		18,162			16,293
Stock-based compensation expense		2,874			2,966
Equity in earnings of unconsolidated affiliates		(1,927	)		—
Gain on disposal of assets		(555	)		(15,392	)
Impairment charges		—			570
Deferred income taxes		3,548			(1,445	)
Income tax benefit from exercise of stock options		(186	)		(146	)
Changes in assets and liabilities, net of businesses acquired:
Receivables		(52,334	)		(24,304	)
Inventories		1,176			(5,252	)
Other assets		17,009			6,963
Current liabilities		(1,314	)		(19,629	)
Other liabilities		(1,440	)		(415	)
Other, net		(72	)		739

Net cash provided by operating activities		41,865			17,150

Cash flows from investing activities
Capital expenditures		(10,248	)		(15,969	)
Acquisition of businesses, net of cash acquired		(20,533	)		(35,978	)
Net withdrawals from restricted cash balances		1,508			3,486
Proceeds from the sale of assets		1,482			5,518

Net cash used in investing activities		(27,791	)		(42,943	)

Cash flows from financing activities
Repayments of long-term debt		(500	)		(500	)
Dividends paid to stockholders of Mueller Industries, Inc.		(9,887	)		(8,435	)
Issuance (repayment) of debt by joint ventures, net		4,426			(17,750	)
Issuance of debt		2,000			—
Net cash received to settle stock-based awards		326			125
Income tax benefit from exercise of stock options		186			146

Net cash used in financing activities		(3,449	)		(26,414	)

Effect of exchange rate changes on cash		(2,308	)		(780	)

Increase (decrease) in cash and cash equivalents		8,317			(52,987	)
Cash and cash equivalents at the beginning of the period		274,844			352,134

Cash and cash equivalents at the end of the period	$	283,161		$	299,147


See accompanying notes to condensed consolidated financial statements.

INDEX

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 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. The fiscal six months ended July 2, 2016 contained 27 weeks, while the fiscal six months ended June 27, 2015 contained 26 weeks.

Note 1 – 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 418 thousand and 24 thousand stock options were excluded from the computation of diluted earnings per share for the quarters ended July 2, 2016 and June 27, 2015, respectively, because they were antidilutive.

Note 2 – Acquisitions and Dispositions

Acquisitions

On April 26, 2016, the Company entered into an agreement providing for the purchase of a 60.0 percent equity interest in Jungwoo Metal Ind. Co., LTD (Jungwoo-Mueller) for approximately $21.8 million in cash. Jungwoo-Mueller manufactures copper-based pipe joining products and is headquartered in Seoul, South Korea and serves markets worldwide. It complements the Company's existing copper fittings businesses in the Piping Systems segment and is reported in the Company's Condensed Consolidated Financial Statements one month in arrears.

This acquisition was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The fair value of the assets acquired totaled $50.1 million, consisting primarily of property, plant, and equipment of $25.9 million, inventories of $15.8 million, accounts receivable of $5.6 million, other current assets of $1.5 million and cash of $1.3 million. The fair value of the liabilities assumed totaled $17.3 million, consisting primarily of long-term debt of $8.7 million, accounts payable of $7.3 million, pension liabilities of $0.8 million, and other current liabilities of $0.5 million. Of the remaining purchase price, $3.6 million was allocated to non-deductible goodwill. The noncontrolling interest in Jungwoo-Mueller is $14.6 million. The purchase price allocation is provisional as of July 2, 2016 and subject to change upon completion of the final valuation of the long-lived assets and noncontrolling interest during the measurement period.

During the second quarter of 2015, the Company recognized approximately $3.4 million of severance costs related to the reorganization of Yorkshire Copper Tube, acquired in 2014.

The valuations of businesses acquired during 2015 have been finalized. During the second quarter of 2016, a deferred tax liability of $4.1 million was recorded that resulted from a basis difference in the long-lived assets acquired from Great Lakes Copper Ltd. This resulted in an increase in goodwill. There were no changes to the purchase price allocations for Turbotec Products, Inc. or Sherwood Valve LLC from the amounts presented in the Company's 2015 Annual Report on Form 10-K.

INDEX

Dispositions

On June 1, 2015, the Company sold certain assets. Simultaneously, the Company entered into a lease agreement with the purchaser of the assets for their continued use for a period of approximately 22 months (Lease Period).

The total sales price was $20.2 million, of which $5.0 million was received on June 1, 2015; the Company will receive $5.0 million on December 30, 2016 and the remaining $10.2 million will be received at the end of the Lease Period. This transaction resulted in a pre-tax gain of $15.4 million in the second quarter of 2015, or 17 cents per diluted share after tax. This gain was recognized in the Plumbing & Refrigeration segment.

Note 3 –Segment Information

During the first quarter of 2016, the Company made changes to its management reporting structure as a result of a change in the way the Chief Executive Officer, who serves as the Chief Operating Decision Maker, manages and evaluates the business, makes key operating decisions, and allocates resources. Previously, the Company had two reportable segments: Plumbing & Refrigeration and OEM. During the first quarter, the Company realigned its operating segments into three reportable segments: Piping Systems, Industrial Metals, and Climate. Management has recast certain prior period amounts to conform the current period presentation. Each of the reportable segments is composed of certain operating segments that are aggregated primarily by the nature of products offered as follows:

Piping Systems

Piping Systems is composed of the following operating segments: Domestic Piping Systems Group, Canadian Operations, European Operations, Trading Group, Mueller-Xingrong (the Company's Chinese joint venture), and Jungwoo-Mueller (the Company's South Korean joint venture). The Domestic Piping Systems Group manufactures copper tube and fittings, plastic fittings, and line sets. These products are manufactured in the U.S. Outside the U.S., the Canadian Operations manufacture copper tube and line sets and sell the products primarily in the U.S. and Canada, and the European Operations manufacture copper tube, which is sold primarily in Europe. The Trading Group manufactures pipe nipples and imports and resells brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products in the U.S. and Mexico. Mueller-Xingrong manufactures engineered copper tube primarily for air-conditioning applications in China. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. The Piping System 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, construction, heating, ventilation, and air-conditioning, plumbing, and refrigeration markets.

Climate

Climate is composed of the following operating segments: Refrigeration Products, Fabricated Tube Products, Westermeyer, and Turbotec. These domestic businesses manufacture and fabricate valves and assemblies primarily for the heating, ventilation, air-conditioning, and refrigeration markets in the U.S.

INDEX

Summarized segment information is as follows:

	For the Quarter Ended July 2, 2016
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	388,662	$	127,737	$	31,359	$	(3,687	)	$	544,071

Cost of goods sold		333,356		104,874		22,448		(4,618	)		456,060
Depreciation and amortization		5,787		2,120		618		536			9,061
Selling, general, and administrative expense		16,560		3,619		2,456		11,879			34,514

Operating income		32,959		17,124		5,837		(11,484	)		44,436

Interest expense											(1,692	)
Other income, net											515

Income before taxes										$	43,259

	For the Quarter Ended June 27, 2015
(In thousands)	Piping Systems			Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	379,750		$	145,228	$	31,498	$	(883	)	$	555,593

Cost of goods sold		326,338			120,808		24,134		(915	)		470,365
Depreciation and amortization		5,335			1,643		614		596			8,188
Selling, general, and administrative expense		16,776			2,302		2,500		11,842			33,420
Gain on sale of assets		(15,376	)		—		—		—			(15,376	)
Severance		3,442			—		—		—			3,442

Operating income		43,235			20,475		4,250		(12,406	)		55,554

Interest expense												(2,219	)
Other income, net												265

Income before taxes											$	53,600

INDEX

Segment information (continued):

	For the Six Months Ended July 2, 2016
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	757,552	$	262,258	$	62,065	$	(4,995	)	$	1,076,880

Cost of goods sold		647,148		214,103		46,153		(4,702	)		902,702
Depreciation and amortization		11,436		4,255		1,217		1,073			17,981
Selling, general, and administrative expense		34,850		6,864		4,979		23,601			70,294

Operating income		64,118		37,036		9,716		(24,967	)		85,903

Interest expense											(3,540	)
Other income, net											760

Income before taxes										$	83,123

	For the Six Months Ended June 27, 2015
(In thousands)	Piping Systems			Industrial Metals		Climate		Corporate and Eliminations			Total

Net sales	$	741,232		$	296,264	$	57,309	$	(1,970	)	$	1,092,835

Cost of goods sold		639,028			248,532		45,401		(1,762	)		931,199
Depreciation and amortization		10,522			3,298		1,039		1,182			16,041
Selling, general, and administrative expense		34,122			5,000		4,354		22,775			66,251
Gain on sale of assets		(15,376	)		—		—		—			(15,376	)
Severance		3,442			—		—		—			3,442

Operating income		69,494			39,434		6,515		(24,165	)		91,278

Interest expense												(4,295	)
Other income, net												370

Income before taxes											$	87,353

(In thousands)	July 2, 2016		December 26, 2015

Segment assets:
Piping Systems	$	863,138	$	811,343
Industrial Metals		160,655		153,102
Climate		66,383		61,672
General Corporate		330,299		312,684

	$	1,420,475	$	1,338,801

INDEX

Note 4 – Inventories

(In thousands)	July 2, 2016			December 26, 2015

Raw materials and supplies	$	64,206		$	58,987
Work-in-process		36,604			25,161
Finished goods		154,593			161,410
Valuation reserves		(5,449	)		(6,180	)

Inventories	$	249,954		$	239,378

Note 5 – 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 (i) a hedge of a forecasted transaction or the variability of cash flow to be paid or received (cash flow hedge), or (ii) a hedge of the fair value of a recognized asset or liability (fair value hedge) or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure, as the Company does not enter into derivative contracts for trading purposes (economic hedge). Changes in the fair value of a derivative instrument that is qualified, designated and highly effective as a cash flow hedge are recorded in accumulated other comprehensive income (AOCI), to the extent effective, until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative instrument that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings.

The Company documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives 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 derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow or fair values of hedged items. When a derivative 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 July 2, 2016, the Company held open futures contracts to purchase approximately $22.3 million of copper over the next 18 months related to fixed price sales orders. The fair value of those futures contracts was a $1.7 million net gain position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At July 2, 2016, this amount was approximately $979 thousand of deferred net gains, net of tax.

INDEX

The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. These futures contracts have been designated as fair value hedges. At July 2, 2016, the Company held open futures contracts to sell approximately $15.5 million of copper over the next six months related to copper inventory. The fair value of those futures contracts was a $498 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).

Interest Rate Swap

On February 20, 2013, the Company entered into a two-year forward-starting interest rate swap agreement with an effective date of January 12, 2015, and an underlying notional amount of $200.0 million, pursuant to which the Company receives variable interest payments based on one-month LIBOR and pays fixed interest at a rate of 1.4 percent. Based on the Company's current variable premium pricing on its Term Loan Facility, the all-in fixed rate as of the effective date is 2.7 percent. The interest rate swap will mature on December 11, 2017, and is structured to offset the interest rate risk associated with the Company's floating-rate, LIBOR-based Term Loan Facility Agreement. The swap was designated and accounted for as a cash flow hedge from inception.

The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rate and the expected cash flows at the current market interest rate using observable benchmarks for LIBOR forward rates at the end of the period (level 2 within the fair value hierarchy). Interest payable and receivable under the swap agreement is accrued and recorded as an adjustment to interest expense. The fair value of the interest rate swap was a $2.4 million loss position at July 2, 2016, and there was $1.5 million of deferred losses, net of tax, included in AOCI that are expected to be reclassified into interest expense over the term of the hedged item.

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 our net derivative assets and liabilities into gross components on a contract-by-contract basis:

	Asset Derivatives								Liability Derivatives
		Fair Value								Fair Value
(In thousands)	Balance Sheet Location	July 2, 2016				December 26, 2015			Balance Sheet Location	July 2, 2016				December 26, 2015
Hedging instrument:
Commodity contracts - gains	Other current assets		$	1,761			$	60	Other current liabilities		$	24			$	238
Commodity contracts - losses	Other current assets			(85	)			—	Other current liabilities			(522	)			(1,864	)
Interest rate swap	Other assets			—				—	Other liabilities			(2,407	)			(1,692	)
Total derivatives ⁽¹⁾			$	1,676			$	60			$	(2,905	)		$	(3,318	)

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

The following tables summarize the effects of derivative instruments on our Condensed Consolidated Statements of Income:

		Three Months Ended								Six Months Ended
(In thousands)	Location	July 2, 2016				June 27, 2015				July 2, 2016				June 27, 2015
Fair value hedges:
(Loss) gain on commodity contracts (qualifying)	Cost of goods sold		$	(332	)		$	1,256			$	(383	)		$	1,468
Gain (loss) on hedged item - Inventory	Cost of goods sold			288				(1,403	)			350				(1,650	)

Undesignated derivatives:
Gain on commodity contracts (nonqualifying)	Cost of goods sold			1,326				1,046				1,820				1,279

INDEX

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

	Three Months Ended July 2, 2016
(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax				Classification Gains (Losses)	Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts		$	2,464		Cost of goods sold		$	(1,359	)
Interest rate swap			(115	)	Interest expense			59
Other			(349	)	Other			—
Total		$	2,000		Total		$	(1,300	)

	Three Months Ended June 27, 2015
(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax				Classification Gains (Losses)	Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts		$	(1,159	)	Cost of goods sold		$	(81	)
Interest rate swap			267		Interest expense			63
Other			7					—
Total		$	(885	)			$	(18	)

	Six Months Ended July 2, 2016
(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax				Classification Gains (Losses)	Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts		$	3,337		Cost of goods sold	$	(1,291	)
Interest rate swap			(585	)	Interest expense		128
Other			(295	)	Other		—
Total		$	2,457			$	(1,163	)

INDEX

Derivative instrument information (continued):

	Six Months Ended June 27, 2015
(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax				Classification Gains (Losses)	Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts		$	(885	)	Cost of goods sold	$	490
Interest rate swap			(765	)	Interest expense		131
Other			(72	)	Other		—
Total		$	(1,722	)		$	621

The Company enters into futures and forward contracts that closely match the terms of the underlying transactions. As a result, the ineffective portion of the open hedge contracts through July 2, 2016 was not material to the Condensed Consolidated Statements of Income.

The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with 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 July 2, 2016 and December 26, 2015, the Company had recorded restricted cash in other current assets of $1.0 million and $2.6 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.

Note 6 – Investment in Unconsolidated Affiliates

The Company owns a 50 percent interest in Tecumseh Products Holdings LLC (Joint Venture), an unconsolidated affiliate that acquired Tecumseh Products Company (Tecumseh) during the third quarter of 2015. The Company also owns 50 percent interest in a second unconsolidated affiliate that provided financing to Tecumseh in conjunction with the acquisition. These investments are accounted for 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 one quarter in arrears as income (loss) from unconsolidated affiliates, net of tax, in the Condensed Consolidated Statements of Income.

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)	March 31, 2016		September 30, 2015

Current assets	$	248,511	$	251,389
Noncurrent assets		119,900		112,156
Current liabilities		158,000		178,784
Noncurrent liabilities		70,237		63,643

	March 31, 2016
(In thousands)	For the Quarter Ended				For the Six Months Ended

Net sales		$	138,900		$	290,500
Gross profit			19,500			37,500
Net income			(1,990	)		3,854

Included in the equity method investees' net income for the six months ended March 31, 2016 is a gain of $17.1 million that resulted from the allocation of the purchase price, which was finalized during the quarter ended December 31, 2015. That gain was offset by restructuring and impairment charges of $5.3 million and net losses of $8.0 million.

INDEX

Note 7 –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 are as follows:

	For the Quarter Ended						For the Six Months Ended
(In thousands)	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Pension benefits:
Service cost	$	165		$	228		$	360		$	500
Interest cost		1,969			2,027			3,944			4,081
Expected return on plan assets		(2,466	)		(2,655	)		(4,932	)		(5,309	)
Amortization of net loss		746			656			1,520			1,370

Net periodic benefit cost	$	414		$	256		$	892		$	642

Other benefits:
Service cost	$	60		$	84		$	122		$	180
Interest cost		149			190			305			386
Amortization of prior service (credit) cost		(224	)		1			(448	)		3
Amortization of net gain		(20	)		(16	)		(18	)		(13	)

Net periodic benefit (income) cost	$	(35	)	$	259		$	(39	)	$	556

Note 8 – 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. It 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.

Guarantees

Guarantees, in the form of letters of credit, are issued by the Company generally to assure the payment of insurance deductibles and certain retiree health benefits. The terms of 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 July 2, 2016 were $7.0 million.

INDEX

Note 9 – Income Taxes

The Company's effective tax rate for the second quarter of 2016 was 32 percent compared with 37 percent for the same period last year. The items impacting the effective tax rate for the second quarter of 2016 were primarily attributable to reductions for the U.S. production activities deduction of $1.0 million, and the effect of foreign tax rates lower than statutory tax rates of $1.4 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $0.8 million and miscellaneous items totaling $0.5 million.

For the second quarter of 2015, the difference between the effective tax rate and the amount computed using the U.S. federal statutory tax rate was primarily attributable to increases for state income taxes, net of the federal benefit, of $1.4 million and miscellaneous items totaling $0.6 million. These items were partially offset by reductions for the U.S. production activities deduction of $1.2 million.

The Company's effective tax rate for the first half of 2016 was 34 percent compared with 36 percent for the same period last year. The items impacting the effective tax rate for the first half of 2016 were primarily attributable to reductions for the U.S. production activities deduction of $1.9 million and the effect of foreign tax rates lower than statutory tax rates of $2.5 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $1.7 million, and miscellaneous items totaling $1.7 million.

For the first half of 2015, the difference between the effective tax rate and what would be computed using the U.S. federal statutory tax rate was attributable to increases for state income taxes, net of the federal benefit, of $2.2 million and miscellaneous other items totaling $1.0 million. These items were partially offset by reductions for the U.S. production activities deduction of $2.2 million and the effect of foreign income taxes lower than statutory tax rates and other foreign adjustments of $0.4 million.

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 and most state income tax returns for 2012 and all subsequent years and is open for certain state and foreign returns for earlier tax years due to ongoing audits and differing statute periods. The Internal Revenue Service is currently auditing the Company's 2013 federal tax return. While the Company believes that it is adequately reserved for possible future 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 10 – Accumulated Other Comprehensive Income

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

INDEX

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

	For the Six Months Ended July 2, 2016
(In thousands)	Cumulative Translation Adjustment			Unrealized (Losses)/Gains on Derivatives			Minimum Pension/OPEB Liability Adjustment			Other		Total

Balance at December 26, 2015	$	(24,773	)	$	(2,009	)	$	(28,429	)	$	221	$	(54,990	)

Other comprehensive income (loss) before reclassifications		(9,939	)		2,457			1,910			1,461		(4,111	)
Amounts reclassified from AOCI		—			(1,163	)		792			—		(371	)

Net current-period other comprehensive income		(9,939	)		1,294			2,702			1,461		(4,482	)

Balance at July 2, 2016	$	(34,712	)	$	(715	)	$	(25,727	)	$	1,682	$	(59,472	)

	For the Six Months Ended June 27, 2015
(In thousands)	Cumulative Translation Adjustment			Unrealized (Losses)/Gains on Derivatives			Minimum Pension/OPEB Liability Adjustment			Other		Total

Balance at December 27, 2014	$	(7,076	)	$	(953	)	$	(35,164	)	$	270	$	(42,923	)

Other comprehensive income (loss) before reclassifications		(947	)		(1,722	)		(229	)		7		(2,891	)
Amounts reclassified from AOCI		—			621			998			—		1,619

Net current-period other comprehensive income		(947	)		(1,101	)		769			7		(1,272	)

Balance at June 27, 2015	$	(8,023	)	$	(2,054	)	$	(34,395	)	$	277	$	(44,195	)

INDEX

Reclassification adjustments out of AOCI were as follows:

	Amount reclassified from AOCI
	For the Three Months Ended
(In thousands)	July 2, 2016			June 27, 2015			Affected line item

Unrealized losses/(gains) on derivatives:
Commodity contracts	$	(2,108	)	$	(111	)	Cost of goods sold
Interest rate swap		92			98		Interest expense
		716			(5	)	Income tax expense
		(1,300	)		(18	)	Net of tax
		—			—		Noncontrolling interests

	$	(1,300	)	$	(18	)	Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	$	502		$	641		Selling, general, and administrative expense
		(122	)		(164	)	Income tax expense
		380			477		Net of tax
		—			—		Noncontrolling interests

	$	380		$	477		Net of tax and noncontrolling interests

	Amount reclassified from AOCI
	For the Six Months Ended
(In thousands)	July 2, 2016			June 27, 2015			Affected line item

Unrealized losses/(gains) on derivatives:
Commodity contracts	$	(1,871	)	$	651		Cost of goods sold
Interest rate swap		200			204		Interest expense
		508			(234	)	Income tax expense
		(1,163	)		621		Net of tax
		—			—		Noncontrolling interests

	$	(1,163	)	$	621		Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	$	1,054		$	1,360		Selling, general, and administrative expense
		(262	)		(362	)	Income tax expense
		792			998		Net of tax
		—			—		Noncontrolling interests

	$	792		$	998		Net of tax and noncontrolling interests

INDEX

Note 11 – Noncontrolling Interests

(In thousands)	Noncontrolling Interests

Balance at December 26, 2015	$	32,417
Purchase of Jungwoo-Mueller		14,562
Net income attributable to noncontrolling interests		497
Other comprehensive loss attributable to noncontrolling interests, net of tax:
Foreign currency translation		(1,359	)

Balance at July 2, 2016	$	46,117

Note 12 – Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU (Accounting Standards Update) No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting (ASU 2016-09). The ASU requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It will also allow a company to make a policy election to account for forfeitures as they occur. The guidance is effective for public business entities in interim and fiscal periods beginning after December 15, 2016. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company is in the process of evaluating the impact of ASU 2016-09 on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a financing or operating lease. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The ASU will be effective for interim and fiscal periods beginning after December 15, 2018. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. The Company is still evaluating the effects that the provision of ASU 2016-02 will have on its Condensed Consolidated Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issue Costs (ASU 2015-03). The ASU simplifies the presentation of debt issuance costs by requiring debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as a separate asset. In circumstances in which there is not an associated debt liability amount recorded in the financial statements when the debt issuance costs are incurred, they will be reported on the balance sheet as an asset until the debt liability is recorded. The guidance is effective for public business entities in interim and fiscal periods beginning after December 15, 2015. Retrospective application is required. The Company adopted ASU 2015-03 effective December 27, 2015. The adoption of the ASU did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The ASU will supersede virtually all existing revenue recognition guidance under U.S. GAAP and will be effective for annual reporting periods beginning after December 15, 2017. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and the amount of revenue recognized reflects the consideration that a company expects to receive for the goods and services provided. The new guidance establishes a five-step approach for the recognition of revenue. The Company is in the process of evaluating the impact of ASU 2014-09 on its Condensed Consolidated Financial Statements.

INDEX

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 these products is broad: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products; and steel nipples. We also resell imported brass and plastic plumbing valves, 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 and China.

During the first quarter of 2016, the Company made changes to its management reporting structure as a result of a change in the way the Chief Executive Officer, who serves as the Chief Operating Decision Maker, manages and evaluates the business, makes key operating decisions, and allocates resources. Previously, the Company had two reportable segments: Plumbing & Refrigeration and OEM. During the first quarter, the Company realigned its operating segments into three reportable segments: Piping Systems, Industrial Metals, and Climate. Management has recast certain prior period amounts to conform to the current period presentation. 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, Canadian Operations, European Operations, Trading Group, Mueller-Xingrong (our Chinese joint venture), and Jungwoo-Mueller (our South Korean joint venture). The Domestic Piping Systems Group manufactures and sells copper tube, copper and plastic fittings, line sets, and valves in North America. The Canadian Operations manufacture copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. 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. Mueller-Xingrong manufactures engineered copper tube primarily for air-conditioning applications; these products are sold primarily to OEMs located in China. 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 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, construction, heating, ventilation, and air-conditioning, plumbing, and refrigeration markets.

Climate: The Climate segment is composed of Refrigeration Products, Fabricated Tube Products, Westermeyer, and Turbotec. The segment manufactures and sells refrigeration valves and fittings and fabricated tubular products. 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 the Company's 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.

Residential construction activity has shown improvement in recent years, but remains at levels below long-term historical averages. Continued improvement is expected, but may be tempered by continuing low labor participation rates, the pace of household formations, and tighter lending standards. Per the U.S. Census Bureau, the June 2016 seasonally adjusted annual rate of new housing starts was 1.2 million, which was consistent with the June 2015 rate. Mortgage rates remain at historically low levels, as the average 30-year fixed mortgage rate was 3.67 percent for the first six months of 2016 and 3.85 percent for the twelve months ended December 2015.

INDEX

The private non-residential construction sector, which includes offices, industrial, health care and retail projects, has shown improvement since 2014. Per the U.S. Census Bureau, the actual (not seasonally adjusted) value of private nonresidential construction put in place was $389.9 billion in 2015 compared to $359.7 billion in 2014. The seasonally adjusted annual value of private non-residential construction put in place was $407.4 billion in May 2016 compared to the December 2015 rate of $393.9 billion and the May 2015 rate of $392.0 billion. We expect that most of these conditions will continue to improve.

Profitability of certain of the Company's product lines depends upon the "spreads" between the cost of raw material and the selling prices of its products. The open market prices for copper cathode and scrap, for example, influence the selling price of copper tube, a principal product manufactured by the Company. We attempt to minimize the effects on profitability from fluctuations in material costs by passing through these costs to our customers. Our earnings and cash flow are dependent upon these spreads that fluctuate based upon market conditions.

Earnings and profitability are also impacted by unit volumes that are subject to market trends, such as substitute products, imports, technologies, and market share. In our core product lines, we intensively manage our pricing structure while attempting to maximize our 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. U.S. consumption of copper tube is still predominantly supplied by U.S. manufacturers. 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. 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 2016 and 2015:

	Three Months Ended						Percent Change				Six Months Ended						Percent Change
(In thousands)	July 2, 2016			June 27, 2015			2016 vs. 2015				July 2, 2016			June 27, 2015			2016 vs. 2015

Net sales		$	544,071		$	555,593		(2.1	)	%		$	1,076.880		$	1,092,835		(1.5	)%
Operating income			44,436			55,554		(20.0	)				85,903			91,278		(5.9	)
Net income			27,797			33,651		(17.4	)				56,427			55,629		1.4

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

	Quarter-to-Date			Year-to-Date
	2016 vs. 2015			2016 vs. 2015
Net selling price in core product lines		(12.8	)%		(13.4	)%
Unit sales volume in core product lines		(2.0	)		(1.6	)
Acquisitions		14.0			13.9
Other		(1.3	)		(0.4	)

		(2.1	)%		(1.5	)%

The decrease in net sales during the second quarter of 2016 was primarily due to (i) lower net selling prices of $71.4 million in our core product lines, primarily copper tube and brass rod, (ii) lower unit sales volume of $11.4 million, primarily in the Industrial Metals segment and at Mueller-Xingrong, and (iii) a decrease in net sales of $6.7 million in our non-core product lines. These decreases were offset by (i) $63.8 million of sales recorded by Great Lakes Copper Ltd. (Great Lakes), acquired in July 2015, (ii) $10.8 million of sales recorded by Sherwood Valve LLC (Sherwood), acquired in June 2015, and (iii) $3.2 million of sales recorded by Jungwoo Metal Ind. Co., LTD (Jungwoo-Mueller), acquired in April 2016.

INDEX

The decrease in net sales during the first half of 2016 was primarily due to (i) lower net selling prices of $146.5 million in our core product lines, (ii) lower unit sales volume of $17.3 million, primarily in the Industrial Metals segment and at Mueller-Xingrong, and (iii) a decrease in net sales of $4.8 million in our non-core product lines. These decreases were offset by (i) $121.2 million of sales recorded by Great Lakes, (ii) $23.1 million of sales recorded by Sherwood, (iii) $4.5 million of incremental sales recorded by Turbotec Products, Inc. (Turbotec), acquired in March 2015, and (iv) $3.2 million of sales recorded by Jungwoo-Mueller.

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 2016 and 2015:

	Three Months Ended					Six Months Ended
(In thousands)	July 2, 2016		June 27, 2015			July 2, 2016		June 27, 2015

Cost of goods sold	$	456,060	$	470,365		$	902,702	$	931,199
Depreciation and amortization		9,061		8,188			17,981		16,041
Selling, general and administrative expense		34,514		33,420			70,294		66,251
Gain on sale of assets		—		(15,376	)		—		(15,376	)
Severance		—		3,442			—		3,442

Operating expenses	$	499,635	$	500,039		$	990,977	$	1,001,557

INDEX

	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		83.8	%		84.7	%		83.8	%		85.2	%
Depreciation and amortization		1.7			1.5			1.7			1.5
Selling, general and administrative expense		6.3			6.0			6.5			6.0
Gain on sale of assets		—			(2.8	)		—			(1.4	)
Severance		—			0.6			—			0.3

Operating expenses		91.8	%		90.0	%		92.0	%		91.6	%

Q2 2016 compared to Q2 2015

The decrease in cost of goods sold was primarily due to the decrease in the average cost of copper, our principal raw material, partially offset by the increase in volume related to businesses acquired. Depreciation and amortization increased in the second quarter of 2016 primarily as a result of depreciation and amortization of long-lived assets of businesses acquired.Selling, general, and administrative expenses increased slightly for the second quarter of 2016 primarily as a result of incremental expenses of $2.6 million associated with businesses acquired during 2015 and 2016. This was offset by a reduction in employee compensation expenses, including incentive compensation, of $0.4 million. In addition, there were $1.0 million of equipment relocation costs and fixed asset impairment charges related to the rationalization of Yorkshire Copper Tube (Yorkshire) recorded in the second quarter of 2015.

During the second quarter of 2015, our operating results were positively impacted by a net gain of $15.4 million recorded on the sale of certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.

Interest expense decreased slightly in the second quarter of 2016 primarily as a result of decreased borrowing costs at Mueller-Xingrong. Other income, net, for the first quarter of 2016 was consistent with the first quarter of 2015.

Our effective tax rate for the second quarter of 2016 was 32 percent compared with 37 percent for the same period last year. The items impacting the effective tax rate for the second quarter of 2016 were primarily attributable to reductions for the U.S. production activities deduction of $1.0 million and the effect of foreign tax rates lower than statutory tax rates of $1.4 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $0.8 million and miscellaneous items totaling $0.5 million.

We own a 50 percent interest in Tecumseh Products Holdings LLC, an unconsolidated affiliate that acquired Tecumseh Products Company (Tecumseh) during the third quarter of 2015. We also own a 50 percent interest in a second unconsolidated affiliate that provided financing to Tecumseh in conjunction with the acquisition. We account for these investments using the equity method of accounting. For the second quarter of 2016, we recognized a loss of $1.0 million on these investments.

2016 YTD compared to 2015 YTD

The decrease in cost of goods sold was primarily due to the decrease in the average cost of copper, partially offset by the increase in volume related to businesses acquired. Depreciation and amortization increased slightly in the first half of 2016 primarily as a result of depreciation and amortization of long-lived assets of businesses acquired.Selling, general, and administrative expenses increased for the first half of 2016 primarily as a result of incremental expenses of $6.2 million associated with businesses acquired during 2015 and 2016. In addition, there was $1.3 million of equipment relocation costs and fixed asset impairment charges related to the rationalization of Yorkshire recorded in the first half of 2015.

INDEX

During the first half of 2015, our operating results were positively impacted by a net gain of $15.4 million recorded on the sale of certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.

Interest expense decreased in the first half of 2016 primarily as a result of decreased borrowing costs at Mueller-Xingrong. Other income, net, for the first half of 2016 was consistent with the second quarter of 2015.

Our effective tax rate for the first half of 2016 was 34 percent compared with 36 percent for the same period last year. The items impacting the effective tax rate for the first half of 2016 were primarily attributable to reductions for the U.S. production activities deduction of $1.9 million and the effect of foreign tax rates lower than statutory tax rates of $2.5 million. These items were partially offset by the provision for state income taxes, net of the federal benefit, of $1.7 million, and miscellaneous items totaling $1.7 million.

For the first half of 2015, the difference between the effective tax rate and the amount computed using the U.S. federal statutory tax rate was attributable to increases for state income taxes, net of the federal benefit, of $2.2 million and miscellaneous other items totaling $1.0 million. These items were partially offset by reductions for the U.S. production activities deduction of $2.2 million and the effect of foreign income taxes lower than statutory tax rates and other foreign adjustments of $0.4 million.

During the first half of 2016, we recognized $1.9 million of income on our investment in unconsolidated affiliates. This included the gain that resulted from the allocation of the purchase price recorded by our equity method investees, which was offset by restructuring and impairment charges and operating losses.

Piping Systems Segment

The following table compares summary operating results for 2016 and 2015 for the businesses comprising our Piping Systems segment:

	Three Months Ended						Percent Change			Six Months Ended						Percent Change
(In thousands)	July 2, 2016			June 27, 2015			2016 vs. 2015			July 2, 2016			June 27, 2015			2016 vs. 2015

Net sales		$	388,662		$	379,750		2.3	%		$	757,552		$	741,232		2.2	%
Operating income			32,959			43,235		(23.8	)			64,118			69,494		(7.7	)

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

	Quarter-to-Date		Year-to-Date
	2016 vs. 2015		2016 vs. 2015
Net selling price in core product lines	(13.4	)%	(14.0	)%
Unit sales volume in core product lines	(0.7	)	0.1
Acquisitions	17.7		16.8
Other	(1.3	)	(0.7	)

	2.3	%	2.2	%

The increase in net sales during the second quarter of 2016 was primarily attributable to (i) $63.8 million of sales recorded by Great Lakes and (ii) $3.2 million of sales recorded by Jungwoo-Mueller. These increases were offset by (i) lower net selling prices of $51.0 million in the segment's core product lines, primarily copper tube, (ii) a decrease in net sales of $5.1 million in the segment's non-core product lines, and (iii) lower unit sales volume of $2.5 million in the segment's core product lines, primarily Mueller-Xingrong.

INDEX

The increase in net sales during the first half of 2016 was primarily due to (i) $121.2 million of sales recorded by Great Lakes and (ii) $3.2 million of sales recorded by Jungwoo-Mueller. These increases were offset by (i) lower net selling prices of $104.0 million in the segment's core product lines and (ii) a decrease in net sales of $4.8 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 2016 and 2015:

	Three Months Ended					Six Months Ended
(In thousands)	July 2, 2016		June 27, 2015			July 2, 2016		June 27, 2015

Cost of goods sold	$	333,356	$	326,338		$	647,148	$	639,028
Depreciation and amortization		5,787		5,335			11,436		10,522
Selling, general and administrative expense		16,560		16,776			34,850		34,122
Gain on sale of assets		—		(15,376	)		—		(15,376	)
Severance		—		3,442			—		3,442

Operating expenses	$	355,703	$	336,515		$	693,434	$	671,738

	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		85.8	%		85.9	%		85.4	%		86.2	%
Depreciation and amortization		1.5			1.4			1.5			1.4
Selling, general and administrative expense		4.2			4.4			4.6			4.6
Gain on sale of assets		—			(4.0	)		—			(2.1	)
Severance		—			0.9			—			0.5

Operating expenses		91.5	%		88.6	%		91.5	%		90.6	%

The increase in cost of goods sold during the second quarter of 2016 was primarily due to the increase in volume related to Great Lakes and Jungwoo-Mueller, partially offset by the decrease in the average cost of copper. Depreciation and amortization increased slightly as a result of depreciation and amortization of the long-lived assets acquired at Great Lakes.Selling, general, and administrative expenses increased slightly for the second quarter of 2016, primarily as a result of incremental expenses associated with Great Lakes and Jungwoo-Mueller of $2.3 million. This was offset by a reduction in (i) sales commissions of $0.7 million, (ii) environmental remediation costs of $0.4 million, and (iii) employee compensation expenses, including incentive compensation, of $0.5 million. Lastly, there was $1.0 million of equipment relocation costs and fixed asset impairment charges related to the rationalization of Yorkshire recorded in the second quarter of 2015.

During the second quarter of 2015, the segment's operating results were positively impacted by a net gain of $15.4 million recorded on the sale of certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.

INDEX

The increase in cost of goods sold during the first half of 2016 was primarily due to the increase in volume related to Great Lakes and Jungwoo-Mueller, partially offset by the decrease in the average cost of copper. Depreciation and amortization increased as a result of depreciation and amortization of the long-lived assets acquired at Great Lakes.Selling, general, and administrative expenses increased slightly for the first half of 2016, primarily due to incremental expenses associated with Great Lakes and Jungwoo-Mueller of $4.0 million. This was offset by a reduction in (i) sales commissions of $1.4 million and (ii) environmental remediation costs of $0.4 million. Lastly, there was $1.3 million of equipment relocation costs and fixed asset impairment charges related to the rationalization of Yorkshire recorded in the first half of 2015.

During the first half of 2015, the segment's operating results were positively impacted by a net gain of $15.4 million recorded on the sale of certain assets. This was offset by $3.4 million of severance charges related to the rationalization of Yorkshire.

Industrial Metals Segment

The following table compares summary operating results for 2016 and 2015 for the businesses comprising our Industrial Metals segment:

	Three Months Ended						Percent Change			Six Months Ended						Percent Change
(In thousands)	July 2, 2016			June 27, 2015			2016 vs. 2015			July 2, 2016			June 27, 2015			2016 vs. 2015

Net sales		$	127,737		$	145,228		(12.0	)%		$	262,258		$	296,264		(11.5	)%
Operating income			17,124			20,475		(16.4	)			37,036			39,434		(6.1	)

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

	Quarter-to-Date		Year-to-Date
	2016 vs. 2015		2016 vs. 2015
Net selling price in core product lines	(14.2	)%	(14.3	)%
Unit sales volume in core product lines	(6.1	)	(6.1	)
Acquisitions	7.5		7.8
Other	0.8		1.1

	(12.0	)%	(11.5	)%

The decrease in net sales during the second quarter of 2016 was primarily due to (i) lower net selling prices of $20.4 million in the segment's core product lines, primarily brass rod, and (ii) lower unit sales volume of $8.8 million in the segment's core product lines. These decreases were offset by $10.8 million of sales recorded by Sherwood.

The decrease in net sales during the first half of 2016 was primarily due to (i) lower unit sales volume of $42.5 million in the segment's core product lines, and (ii) lower net selling prices of $18.0 million in the segment's core product lines. These decreases were offset by $23.1 million of sales recorded by Sherwood.

INDEX

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2016 and 2015:

	Three Months Ended						Six Months Ended
(In thousands)	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		$	104,874		$	120,808		$	214,103		$	248,532
Depreciation and amortization			2,120			1,643			4,255			3,298
Selling, general and administrative expense			3,619			2,302			6,864			5,000

Operating expenses		$	110,613		$	124,753		$	225,222		$	256,830

	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		82.1	%		83.2	%		81.6	%	83.9	%
Depreciation and amortization		1.7			1.1			1.6		1.1
Selling, general and administrative expense		2.8			1.6			2.7		1.7

Operating expenses		86.6	%		85.9	%		85.9	%	86.7	%

The decrease in cost of goods sold during the second quarter of 2016 was primarily due to the decrease in the average cost of copper. Depreciation and amortization increased slightly as a result of the long-lived assets acquired at Sherwood and recent capital expenditures. Selling, general, and administrative expenses increased primarily due to incremental expenses associated with Sherwood of $1.5 million.

The decrease in cost of goods sold during the first half of 2016 was primarily due to the decrease in the average cost of copper. Depreciation and amortization increased as a result of the long-lived assets acquired at Sherwood and recent capital expenditures.Selling, general, and administrative expenses increased primarily due to incremental expenses associated with Sherwood of $2.1 million, offset by a decrease in net periodic pension costs of $0.3 million.

Climate Segment

The following table compares summary operating results for 2016 and 2015 for the businesses comprising our Climate segment:

	Three Months Ended						Percent Change			Six Months Ended						Percent Change
(In thousands)	July 2, 2016			June 27, 2015			2016 vs. 2015			July 2, 2016			June 27, 2015			2016 vs. 2015

Net sales		$	31,359		$	31,498		(0.4	)%		$	62,065		$	57,309		8.3	%
Operating income			5,837			4,250		37.3				9,716			6,515		49.1

Sales for the second quarter of 2016 were consistent with sales recorded in the second quarter of 2015. The increase in sales for the first half of 2016 was primarily due to incremental sales recorded by Turbotec of $4.5 million.

INDEX

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for 2016 and 2015:

	Three Months Ended						Six Months Ended
(In thousands)	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		$	22,448		$	24,134		$	46,153		$	45,401
Depreciation and amortization			618			614			1,217			1,039
Selling, general and administrative expense			2,456			2,500			4,979			4,354

Operating expenses		$	25,522		$	27,248		$	52,349		$	50,794

	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015

Cost of goods sold		71.6	%		76.6	%		74.4	%	79.2	%
Depreciation and amortization		2.0			1.9			2.0		1.8
Selling, general and administrative expense		7.8			8.0			7.9		7.6

Operating expenses		81.4	%		86.5	%		84.3	%	88.6	%

The decrease in cost of goods sold during the second quarter of 2016 was primarily due to the decrease in the average cost of copper and product mix within the segment. Depreciation and amortization and selling, general, and administrative expenses for the second quarter of 2016 were consistent with the expense recorded for the second quarter of 2015.

The increase in cost of goods sold during the first half of 2016 was related to the increase in volume with the acquisition of Turbotec, partially offset by the decrease in the average cost of copper and product mix within the segment. Depreciation and amortization increased as a result of the depreciation and amortization of the long-lived assets acquired at Turbotec.Selling, general, and administrative expenses increased slightly primarily due to incremental expenses associated with Turbotec of $0.6 million.

INDEX

Liquidity and Capital Resources

The following table presents selected financial information for the first half of 2016 and 2015:

(In thousands)	2016			2015

Increase (decrease) in:
Cash and cash equivalents	$	8,317		$	(52,987	)
Property, plant, and equipment, net		17,715			15,239
Total debt		13,862			(18,680	)
Working capital, net of cash and current debt		52,950			52,934

Cash provided by operating activities		41,865			17,150
Cash used in investing activities		(27,791	)		(42,943	)
Cash used in financing activities		(3,449	)		(26,414	)

Cash Provided by Operating Activities

During the six months ended July 2, 2016, cash provided by operating activities was primarily attributable to consolidated net income of $56.9 million, depreciation and amortization of $18.2 million, and decreased other assets of $17.0 million. These increases were offset by increased receivables of $52.3 million. The fluctuations are primarily due to increased sales volume in certain businesses and additional working capital needs in the first half of 2016.

During the six months ended June 27, 2015, cash provided by operating activities was primarily attributable to consolidated net income of $56.2 million and depreciation and amortization of $16.3 million. These cash increases were partially offset by increased receivables of $24.3 million, decreased current liabilities of $19.6 million, and the $15.4 million gain on the sale of certain assets. These fluctuations are primarily due to a net increase in working capital needs.

Cash Used in Investing Activities

The major components of net cash used in investing activities in the first six months of 2016 included $20.5 million for the purchase of a 60.0 percent equity interest in Jungwoo-Mueller, net of cash acquired, and capital expenditures of $10.2 million , offset by $1.5 million in proceeds from the sale of properties and net withdrawals from restricted cash balances of $1.5 million.

The major components of net cash used in investing activities in the first six months of 2015 included $36.0 million for the acquisition of Turbotec and Sherwood and capital expenditures of $16.0 million. These cash decreases were offset by $5.5 million in proceeds from the sale of certain assets and net withdrawals from restricted cash of $3.5 million.

Cash Used in Financing Activities

For the first half of 2016, net cash used in financing activities consisted primarily of $9.9 million used for the payment of regular quarterly dividends to stockholders of the Company. This was partially offset by the issuance of debt of $6.4 million.

For the first half of 2015, net cash used in financing activities consisted primarily of $17.8 million used for the repayment of debt by Mueller-Xingrong and $8.4 million used for payment of regular quarterly dividends to stockholders of the Company.

Liquidity and Outlook

Management believes 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 4.0 to 1 as of July 2, 2016.

INDEX

We have significant environmental remediation obligations which we expect to pay over future years. Cash used for environmental remediation activities was approximately $0.3 million during the first six months of 2016. We expect to spend approximately $0.4 million for the remainder of 2016 for ongoing environmental remediation activities.

The Company declared and paid a quarterly cash dividend of 7.5 cents and 10.0 cents per common share in the first and second quarters of 2016, respectively, and 7.5 cents per common share in the first and second quarters of 2015. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, earnings, and other factors.

On April 26, 2016, the Company entered into an agreement providing for the purchase of a 60.0 percent equity interest in Jungwoo-Mueller for KRW 25 billion, or approximately $21.8 million.

Long-Term Debt

The Company's credit agreement provides for an unsecured $200.0 million revolving credit facility (the Revolving Credit Facility) and a $200.0 million Term Loan Facility, both of which mature on December 11, 2017. The Revolving Credit Facility backed approximately $7.0 million in letters of credit at the end of the second quarter of 2016.

On March 23, 2016, Mueller-Xingrong entered into a new secured revolving credit arrangement with a total borrowing capacity of RMB 150 million (or approximately $24.1 million). In addition, Mueller-Xingrong occasionally finances working capital through various accounts receivable and bank draft discount arrangements. Borrowings are secured by the real property and equipment and bank draft receivables of Mueller-Xingrong and bear interest at the latest base-lending rate published by the People's Bank of China, which was 4.35 percent as of July 2, 2016. Total borrowings at Mueller-Xingrong were $10.6 million as of July 2, 2016.

Jungwoo-Mueller has several secured revolving credit arrangements with a total borrowing capacity of KRW 35.7 billion (or approximately $30.0 million). Borrowings are secured by the real property and equipment of Jungwoo-Mueller and bear interest at 3.28 percent as of July 2, 2016. Total borrowings at Jungwoo-Mueller were $12.5 million as of July 2, 2016.

As of July 2, 2016, the Company's total debt was $229.9 million or 20.0 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 July 2, 2016, the Company was in compliance with all of its debt covenants.

Share Repurchase Program

The Company's Board of Directors has extended, until October 2016, its authorization to repurchase up to 20 million shares of the Company's common stock through open market transactions or through privately negotiated transactions. The Company has no obligation to repurchase any shares and 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 employee benefit plans, as well as for other corporate purposes. From its initial authorization in 1999 through July 2, 2016, the Company had repurchased approximately 4.7 million shares under this authorization.

Contractual Cash Obligations

There have been no significant changes in the Company's contractual cash obligations reported at December 26, 2015.

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, the Company may periodically use financial instruments. Hedging transactions are authorized and executed pursuant to policies and procedures. Further, the Company does not buy or sell financial instruments for trading purposes.

INDEX

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 fixed-price arrangements. The Company 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) 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 quarter-end, we held open futures contracts to purchase approximately $22.3 million of copper over the next 18 months related to fixed-price sales orders and to sell approximately $15.5 million of copper over the next six 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 contracts generally offset the value fluctuations of the underlying natural gas prices. There were no open futures contracts to purchase natural gas at July 2, 2016.

Interest Rates

At July 2, 2016, the Company had variable-rate debt outstanding of $229.9 million. At these borrowing levels, a hypothetical 10 percent increase in interest rates would have had an insignificant unfavorable impact on the Company's pretax earnings and cash flows. The primary interest rate exposures on floating-rate debt are based on LIBOR and the base-lending rate published by the People's Bank of China. There was no fixed rate debt outstanding as of July 2, 2016.

Included in the variable-rate debt outstanding is the Company's $200.0 million Term Loan Facility which bears interest based on LIBOR. We have reduced our exposure to increases in LIBOR by entering into interest rate swap contracts. These contracts have been designated as cash flow hedges. The fair value of these contracts has been recorded in the Condensed Consolidated Balance Sheets, and the related gains and losses on the contracts are deferred in stockholders' equity as a component of AOCI. Deferred gains or losses on the contracts will be recognized in interest expense in the period in which the related interest payment being hedged is expensed.

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 July 2, 2016, the Company had open futures contracts with a financial institution to sell approximately 2.7 million euros, 12.3 million Swedish kronor, 9.0 million Norwegian kroner, and 7.7 million U.S. dollars through February 2017. It also held open futures contracts to buy approximately 1.8 million euros through November 2016.

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 euro, the Mexican peso, the South Korean won, and the Chinese renminbi. 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.

INDEX

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 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.

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 July 2, 2016. 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 July 2, 2016 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 July 2, 2016, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

INDEX

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.

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 2015 Annual Report on Form 10-K. There have been no material changes in risk factors that were previously disclosed in our 2015 Annual Report on Form 10-K, except as set forth below.

The vote by the United Kingdom (U.K.) to leave the European Union (EU) could adversely affect us.

The recent U.K. referendum on its membership in the EU resulted in a majority of U.K. voters voting to exit the EU ("Brexit"). As a result, we face risks associated with the potential uncertainty and consequences that may follow Brexit, including with respect to volatility in exchange rates and interest rates and disruptions affecting our relationships with our existing and future customers, suppliers and employees. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations and financial condition.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

(a)

(b)

(c)

(d)

Total Number

of Shares Purchased

Average Price

Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs

15,287,060

⁽¹⁾

April 3 – April 30, 2016

962

⁽²⁾

19.71

—

May 1 – May 28, 2016

1,062

⁽²⁾

30.51

—

May 29 – July 2, 2016

38,983

⁽²⁾

31.23

—

(1) Shares available to be purchased under the Company's 20 million share repurchase authorization until October 2016. The extension of the authorization was announced on October 21, 2015.

(2) 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.

INDEX

Item 5.

Other Information

Change in Control Agreements

On July 26, 2016, the Company and each of Jeffrey A. Martin, Nicholas W. Moss, Steffen Sigloch, Mark Millerchip, Daniel R. Corbin and Brian K. Barksdale entered into a Change in Control Agreement (the "Change in Control Agreement"). Pursuant to the Change in Control Agreement, if, upon or within two years following a Change in Control, an executive's employment is terminated by the Company without Cause (other than on account of death or Disability), or by the executive for Good Reason, the executive shall be entitled to: (i) an amount equal to two times the executive's base salary (as in effect immediately prior to the Change in Control or, if greater, the date of such termination); and (ii) an amount equal to two times the average annual bonus paid to the executive (including, for this purpose only, any amounts deferred) in respect of the three calendar years immediately preceding the calendar year in which the Change in Control occurs (or the three calendar years immediately preceding the calendar year of such termination, if greater). The Change in Control Agreement also provides that for two years following termination under the circumstances described above, the executive will receive (subject to the executive's election of COBRA continuation coverage under the Company's group health plan) continued coverage under the Company's group health plan at the Company's cost (or at the direction of the Company, reimbursement for COBRA premiums) for two years following such termination. The provision of any payments and/or benefits under the Change in Control Agreement is subject to the executive's execution and delivery to the Company of a general release of claims in a form reasonably acceptable to the Company that becomes effective within sixty (60) days of such termination.

The foregoing description of the Change in Control Agreement is a summary and is qualified in its entirety by reference to the Change in Control Agreements, which are filed as Exhibits 10.3 through 10.8 to this Quarterly Report on Form 10-Q and are incorporated herein by reference. Capitalized terms as used in the foregoing description have the same meaning as set forth in the Change in Control Agreement.

Amendment to Employment Agreement of Chief Executive Officer

On July 26, 2016, the Company and Gregory L. Christopher, its Chief Executive Officer, executed an amendment to Mr. Christopher's employment agreement (the "Amendment"). The Amendment changes the manner in which the Bonus component of Mr. Christopher's severance is calculated. Pursuant to the Amendment, the Bonus component of Mr. Christopher's severance will be an amount equal to the greater of (x) the target Bonus for the year in which Mr. Christopher's termination of employment occurs and (y) the target Bonus for the year immediately preceding the year in which Mr. Christopher's termination of employment occurs, in each case, as established by the Company for such year. Consistent with the existing terms of Mr. Christopher's employment agreement, Mr. Christopher will be entitled to receive the Bonus component of his severance in the event his employment is terminated by the Company without Cause, or by him for Good Reason, as if his employment had continued for the remainder of the then-current employment term. Pursuant to the Amendment, under such circumstances, Mr. Christopher would also be entitled to receive payment of the Bonus that would otherwise have been earned in respect of the year in which such termination occurred, pro-rated to reflect the number of days he was employed during such year of termination. Consistent with the existing terms of Mr. Christopher's employment agreement, Mr. Christopher will also be entitled to receive the Bonus component of his severance, multiplied by the number of full and partial years remaining in the then-current employment term, in a lump sum in the event of his resignation following a Change in Control.

The foregoing description of the Amendment is a summary and is qualified in its entirety by reference to the Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference. Capitalized terms as used in the foregoing description have the same meaning as set forth in Mr. Christopher's employment agreement previously filed with the SEC.

INDEX

Item 6.

Exhibits

	10.1	Amendment No. 3 to Credit Agreement among the Registrant (as borrower), Bank of America N.A. (as agent), and certain lenders named therein, dated July 26, 2016

	10.2	Amendment No. 2 to Amended and Restated Employment Agreement by and between the Registrant and Gregory L. Christopher, dated July 26, 2016

	10.3	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Brian K. Barksdale

	10.4	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Daniel R. Corbin

	10.5	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Jeffrey A. Martin

	10.6	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Mark Millerchip

	10.7	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Nicholas W. Moss

	10.8	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Steffen Sigloch

	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	XBRL Taxonomy Extension Calculation Linkbase

	101.DEF	XBRL Taxonomy Extension Definition Linkbase

	101.INS	XBRL Instance Document

	101.LAB	XBRL Taxonomy Extension Label Linkbase

	101.PRE	XBRL Presentation Linkbase Document

	101.SCH	XBRL Taxonomy Extension Schema

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

INDEX

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 28, 2016	Chief Financial Officer and Treasurer
Date	(Principal Financial and Accounting Officer)


	/s/Anthony J. Steinriede
July 28, 2016	Anthony J. Steinriede
Date	Vice President – Corporate Controller

INDEX

EXHIBIT INDEX

Exhibits	Description

10.1	Amendment No. 3 to Credit Agreement among the Registrant (as borrower), Bank of America N.A. (as agent), and certain lenders named therein, dated July 26, 2016

10.2	Amendment No. 2 to Amended and Restated Employment Agreement by and between the Registrant and Gregory L. Christopher, dated July 26, 2016

10.3	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Brian K. Barksdale

10.4	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Daniel R. Corbin

10.5	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Jeffrey A. Martin

10.6	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Mark Millerchip

10.7	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Nicholas W. Moss

10.8	Change in Control Agreement, effective July 26, 2016 by and between the Registrant and Steffen Sigloch

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	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.INS	XBRL Instance Document

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Presentation Linkbase Document

101.SCH	XBRL Taxonomy Extension Schema