For Memphis, Tenn.-based Mueller Industries Inc., a few recent modifications to its executive structure would normally be seen as business as usual. But coming on the heels of potentially serious news regarding the health of CEO William O'Hagan, the moves seem to indicate that the IndustryWeek 50 Best Manufacturer for 2007 is seeking to bolster its leadership team.
On Oct. 26, the copper tube and fittings manufacturer for plumbing and refrigeration applications said O'Hagan was diagnosed with lung cancer and would undergo treatment. While O'Hagan, 65, plans to remain active as CEO, the statement also noted that his treatment regimen could require occasional absences. The announcement coincided with the naming of Gregory Christopher to the company's newly created COO position. Christopher, who has been with Mueller since 1992, most recently served as president of the company's standard products division.
The following week the company announced Scott Goldman, who has served as principal of the Goldman Group since 1987, would join Mueller's board of directors on Jan. 1, 2008. Goldman, 55, has experience working globally with Fortune 500 companies in developing, licensing, launching and operating wireless systems, products and services. Expanding the company's board of directors to eight members, Goldman's appointment supplemented the company's recent decision to extend board Chairman Harvey Karp's term to Dec. 31, 2008, with the term subject to year-to-year extensions thereafter.
In reality, every one of these events could help set the tone for Mueller Industries in the coming months, but the results of recent earnings statements will likely play an equally important role. With third-quarter earnings released on Oct. 29, the company reported a 39% drop in net income from its third-quarter 2006 numbers. High copper prices contributed to the decline, jumping an average of 6 cents per pound to $3.54 on the New York Mercantile Exchange's COMEX division, according to Karp.
At A Glance
Primary Industry: Primary Metals
Number of Employees: 4,700
2006 In Review
Revenue: $2.51 billion
Profit Margin: 5.93%
Sales Turnover: 1.98
Inventory Turnover: 9.26
Revenue Growth: 45.15%
Return On Assets: 13.48%
Return On Equity: 35.2%
Mueller's plumbing and refrigeration segment posted operating earnings of $52.3 million on net sales of $397.9 million, which compares with operating earnings of $56.9 million on net sales of $426.3 million in third-quarter 2006, according to the statement. These segments were also affected by lower selling prices and spreads in copper tube, partially offset by proceeds from a copper antitrust litigation settlement.
Mueller forecasts that the housing-market decline is nearing a bottom and that indicators of a recovery phase will be evident by mid-2008. Karp also noted that there's an upward trend in the construction industry's commercial industrial sector, which has grown by 15% over the year-earlier period.
"Many of our customers have reduced their in-house inventories of our products, in part due to the volatile copper market," Karp said in the statement. "However, this means that any improvement in our markets will result in immediate business for Mueller."
Meanwhile, Mueller is also feeling the effects on Wall Street as of late, as stock in the company fell by more than 20% since early October, trading below $30 per share for the first time since April -- and only the second time in over a year.
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