Mueller Industries, Inc.

Mueller Industries, Inc.

2959 N. Rock Road
Wichita, Kansas 67226
U.S.A.
(316) 636-6300
Fax: (316) 636-6390

Public Company
Incorporated: 1893 as H. Mueller Manufacturing Company
Employees: 2,055
Sales: $517.30 million
Stock Exchanges: New York
SICs: 3351 Copper Rolling & Drawing; 3363 Aluminum Die-Casting; 3088 Plastic Plumbing Fixtures; 3491 Valve & Pipe Fittings; 3498 Fabricated Pipe & Fittings; 3469 Metal Stampings, Nee

Headquartered in Wichita, Kansas, Mueller Industries, Inc. is a leading manufacturer of brass, bronze, copper, plastic, and aluminum products in the United States. The company operates eight factories and owns a short-line railroad in Utah. Mueller also holds various natural resource properties in the United States and Canada.

Mueller Industries traces its history back to 1852 when 20-year-old Hieronymous Mueller migrated to the United States. Mueller was an inventor with an interest in plumbing—particularly plumbing using copper. In 1872 he patented an improved water tapping machine. In 1877 he became the first to pour castings using brass, an alloy of copper and zinc. Mueller parlayed these inventions into manufacturing facilities, and in 1893, with $68,000 in capital, he incorporated his business in Michigan as the H. Mueller Manufacturing Company.

The firm prospered throughout the next two decades. In 1913, as Great Britain entered World War I, Mueller completed its first Canadian plant. With the United States’s entrance into the war, Mueller, like many industrial companies, participated in a general increase in manufacturing. In order to produce munitions, the company began construction, in Port Huron, Michigan, of the first commercial forging facility in the United States. When that plant opened on December 17th, 1917, the business was reincorporated as Mueller Metals Company.

After the war, Mueller continued to make technological advances, key to the growth of significant industries. For the nascent mechanical refrigeration industry, the company provided brass forging which did not leak refrigeration gas like the porous castings previously in use. In addition, the Port Huron plant pioneered high-strength brass forging for gears, bearings, and pumps used by manufacturers of mechanical devices.

Mueller was still directing its primary efforts at the plumbing supply business, however. In 1923 the company introduced soft copper tube for underground water supplies and, in 1924, hard copper tube for indoor water supplies. By 1927, Mueller was firmly established in the plumbing business and was producing a full line of fittings and valves produced in its own foundry.

Perhaps Mueller Brass’s—having changed its name in 1925—most important innovation came in 1930 when the company introduced the revolutionary Streamline solder-type fitting. Previously, fittings—which joined pieces of tube—had been the weakest sections of pipes. However, the new solder-joined fittings were actually stronger than the tubes they connected. It was due to this development that all-copper plumbing and heating systems were established as industry standards.

After the stock market crashed in 1929, Mueller fell victim to the same types of pressures other industrial companies were experiencing. Moreover, as a company that provided supplies to industrial firms, especially in the area of housing construction, Mueller experienced sales that generally reflected the low level of economic activity in the country. This being the case, Mueller canceled dividends and tightened its belt during the first half of the 1930s.

Surprisingly, Mueller returned to profitability by the mid-1930s, reinstating dividends in 1935. Toward the end of the decade, the war in Europe and a reviving economy at home spurred production. Mueller became highly profitable, a fact borne out by generally increasing dividends, including the record $2.25 dividend the company paid in 1941.

After the war, Mueller remained profitable, especially during the 1950s when earnings fluctuated between $2.50 and $5.50 per share, and sales averaged around $59 million. Given positive economic conditions, president and chief executive officer F. L. Riggin decided to expand the company. In December of 1951 he paid $1.25 million for Valley Metal Products Co. of Plainwell, Michigan. He bought, and later sold, Sheet Aluminum Corporation, of Jackson, Mississippi, and in March of 1958, he acquired American Sinteel Corporation, a Yonkers, New York, manufacturer of powder metal parts.

Along with acquisitions, Riggin upgraded existing facilities and built new ones. In 1954 he launched an eight-year program to expand and diversify the production of fabricated goods. In this effort, he placed particular emphasis on specially-engineered, copper-based alloys. In addition, Riggin opened an impact extrusion facility in Marysville, Michigan, in 1958. The plant, which shaped aluminum and copper by forcing it through a die, adapted the inherent strength and minimal weight of extrusions to specialized needs of customers who ranged from aerospace manufacturers to home appliance suppliers.

During the early 1960s, Mueller continued to do well, adding a larger proportion of defense subcontracting to its mix of customers. At this time the company was producing rods, forgings, tubes, and castings made from aluminum, copper, brass, bronze, and other alloys. Among the many semi-finished and fabricated items the company produced were powdered metal, screw machine parts, machined castings, forgings and impact extrusions, refrigeration valves and fittings, chromium- and nickel-plated fabricated items, electrotinned and hot dipped fabricated items, and copper pipes, tubes, and fittings used in plumbing, heating, and air conditioning.

Mueller continued to grow, reporting profits of $2.35 million on sales of $80.8 million in 1963. The company also acquired the assets of the Bay Engineering Company of Bridgeport, Michigan, the following year. Management, however, did not cling to the idea of a large, independent Mueller with an indefinite future.

For some time, U.S. Smelting Refining and Mining (USSRAM) had been acquiring Mueller stock and by 1965 had amassed a 72 percent share of the company. That year USSRAM made an offer to acquire the remainder of Mueller through a stock swap—a proposal which was approved overwhelmingly by both companies. Technically, Mueller Brass and USSRAM merged to become a new Mueller subsidiary called Mueller Brass Corp. Upon completion of the consolidation, however, the subsidiary’s name was changed to U.S. Smelting, Refining, & Mining Company and USSRAM’s management took over the new company, in effect absorbing Mueller.

USSRAM was a mining company whose primary products were gold, silver, lead, and zinc. Founded in 1906, the company was relatively stable until the early 1960s when a proxy fight led to the ascension of Martin Horwitz to the offices of president and chief executive officer in 1964. Under Horwitz, USSRAM had followed an aggressive path of acquisitions and had begun to develop the Continental Copper Mine in New Mexico. In acquiring Mueller, Horwitz was looking to join copper mining and smelting with the production of copper products.

The merger proved to be profitable from the start. In 1969, after Horwitz invested $17 million in Mueller’s interests and $16 million in the copper mine, USSRAM’s sales reached an all time high of $170 million, while income hit a record $12 million.

In fact, the merger provided Mueller with the capital to introduce new products, modernize old facilities, and build new plants. In 1967 the company began to offer plastic pipe and fittings. The Port Huron rod mill was modernized in 1971—doubling its copper alloys capacity. That same year construction of a Fulton, Mississippi, tube mill—including a 6,300 ton automated extrusion press—was completed. In a speech reprinted by the Wall Street Transcript, Horwitz called the Fulton plant “possibly the most efficient tube mill in the United States.” He concluded that given the plant’s low cost operation, it had “enabled Mueller to report profits when other mills were reporting losses and still others were closing down.”

In the early 1970s, USSRAM changed its name to UV Industries, Inc. to better represent an increasingly diverse product mix that, by then, also included electrical equipment. Mueller, in the meantime, continued to expand, though not quite at the pace it did in the late 1960s. In 1973 the company purchased plants in Hartsville, Tennessee, to produce refrigerator and air conditioning components. By 1976, however, slow housing starts had led to a performance that, while acceptable, was nowhere near what it might be in a boom economy.

In 1977 Victor Posner, chairman of Sharon Steel Corp., offered to buy UV Industries. Posner was a Miami Beach businessman who had dropped out of high school and made a fortune in real estate by the time he was 30. He got involved in mergers and acquisitions and eventually used his NVF Company to gain control of Sharon, then the 12th largest steel company in the United States. One of Posner’s tactics was to use subordinate debentures—bonds subordinate to other claims and backed by the general credit of the issuer—rather than a specific lien on particular assets in order to fund his activities.

This was the means of payment he proposed in the acquisition of UV Industries. UV, however, was wary of Posner and the two sides went back and forth with extensive negotiations. Finally, on November 26, 1979, it was agreed that Sharon would acquire UV for an interim note worth $517 million and the assumption of UV’s liabilities. However, they also agreed that Sharon could not sell any UV assets until the interim note was exchanged for cash. This particular clause was important because it was widely assumed that Posner would pay for the deal by selling UV’s large portfolio of investments and marketable securities. According to the Wall Street Journal, some analysts thought that cash would be hard to come by and that Posner had “erred badly in trying to swallow UV.”

Under the Posner regime, Mueller remained profitable, and in 1983 the company’s Canadian subsidiary in Strathroy, Ontario, began manufacturing metric fittings. Sharon, however, had difficulties. The company’s debts were too high, and in 1985, Sharon defaulted on $33 million in interest payments. Bondholders could have forced the business into bankruptcy immediately; instead, they negotiated with Posner, who wanted them to swap their subordinated debentures for a package of common shares and low-interest and zero-coupon notes.

The largest bondholder was Quantum Overseas N.V., an investment fund based in Curacao. Quantum and the other holders allowed payments on the debentures to be extended more than 20 times while they tried to negotiate a settlement. In 1986 it was rumored that Sharon would sell Mueller to Quantum for $55 million, but that exchange never took place.

Finally in 1987, Quantum called in the $96.9 million in Sharon securities it held and in April of that year, Sharon filed for Chapter 11 bankruptcy. Over the next two years, Quantum officials and Sharon’s other creditors worked to hammer out a plan to divide Sharon’s assets and help the company emerge from bankruptcy.

During this time, Mueller was not static. The company had never filed for Chapter 11 and remained a viable enterprise. In 1990 Mueller acquired U-Brand Corporation, an Ashland, Ohio, company whose plants in Ashland and Upper Sandusky, Ohio, manufactured plastic valves, pipe couplings, steel pipe nipples, malleable iron pipe fittings, iron castings, and plastic pipe fittings for wholesalers and hardware stores. In addition, Mueller continued to innovate, bringing out—coincident with new strict EPA regulations—the SRD-1 (tm) which allowed customers in the refrigeration and climate control industries to capture and recover fluorocarbons during repair operations.

The issues surrounding Sharon were finally resolved on December 28, 1990, when negotiators, headed by Raymond Wechsler, an advisor to the Quantum Fund, hammered out a plan to divide up the company. After 25 years as a subsidiary, Mueller reemerged as an independent company called Mueller Industries, Inc. The new Mueller was an industrial concern which held its traditional plumbing and flow control equipment operation as well as natural resource holdings. This new sector of the business included the Utah Railway Co.—a short-line that carried coal to Provo, Utah, for transshipment by major rail carriers—Alaskan gold mining operations, and a variety of mining interests in Canada and the West.

In its first year as an independent company, Mueller announced a loss of $43.7 million on sales of $441 million. Almost all of the 1991 loss was due to a revaluation of assets, coupled with costs related to the bankruptcy proceeding and restructuring of the business following the reorganization. Harvey L. Karp, who became chairman and CEO on October 8, 1991, moved quickly to shape up the company. He enhanced the balance sheet by selling $25 million worth of investment grade notes and negotiated for expanded borrowing capabilities that provided $40 million. In an effort to focus on the company’s core manufacturing business, the sale of the malleable iron business—which had not been profitable for Mueller—was arranged in 1992. To help upgrade operations neglected for many years, Karp made a commitment to allocate more capital and undertake improvement projects. He also negotiated settlements of litigation which asserted a $16.5 million guarantee obligation for the Sharon Steel business. This settlement turned out to be very favorable when Sharon filed Chapter 9 in the fourth quarter of 1992. Finally, among other key executives, Karp recruited William D. O’Hagan, who had 32 years experience in the industry, to be Mueller’s chief operating officer and president.

Karp’s efforts paid off handsomely—for the year ended 1992, earnings were up significantly, reaching $16.6 million on sales of $517.3 million. As Karp stated in PR Newswire, “We are optimistic that housing starts, the principal leading indicator of our business will increase in 1993. If they do, we are ready to take advantage of the market opportunities.”

Principal Subsidiaries

Alaska Gold Company (85%); Mueller Brass Co.; Itawamba Industrial Gas Co., Inc.; Streamline Copper & Brass, Ltd.; U-Brand Corp.; Arava Natural Resources Co., Inc.; U.S. Fuel Co.; King Coal Co.; Utah Railway Co.; Washington Mining Co.; Canco Oil & Gas Ltd.; Aegis Oil & Gas Ltd.; Bayard Mining Corp.; Mining Remedial Recovery Co.; USS Lead Refinery, Inc.; Carpentertown Coal & Coke Co.; Amwest Exploration Co.; USSRAM Exploration Co.; Richmond Eureka Mining Co. (81%); Ruby Hill Mining Co. (75%); White Knob Mining; Kennet Co., Ltd.

Further Reading

“Mueller Brass Co. Lowers Copper Water Tube Price,” Wall Street Journal April 15, 1963; “Mueller Brass Expects Record Fiscal ‘63 Sales Above $75 Million Mark,” Wall Street Journal, September 30, 1963; “Mueller Tube Mill Nears Completion,” American Metal Market, June 25, 1970; Mari, Albert, “Chase, Mueller Reduce Their Brass Rod Prices Initiating New Decline,” American Metal Market, September 30, 1976; “UV Industries, Inc.,” Wall Street Transcript, December 13, 1976; Harrigan, Suhan, “Victor Posner Faces Hair-Raising Month as Exchange for UV Note Is Postponed,” Wall Street Journal, July 21, 1980; “Sharon Steel Is in Talks to Sell Its Mueller Unit,” Wall Street Journal, December 2, 1986; “Plan for Sharon Steel to Leave Chapter 11 Is Set by Co-Sponsors,” Wall Street Journal, October, 26, 1989; Norman, James R., “Pulling Sharon Steel off the Scrap Heap,” Forbes, August 20, 1990; Mueller Industries, Inc. 1991 Annual Report, Wichita, KS, Mueller Industries, Inc., 1992; “Mueller Industries Announces Higher Third Quarter Earnings on 34 Percent Increase in Sales,” PR Newswire, October 21, 1992.

—Jordan Wankoff