MLI 10-K & 10-Q changes, risk factors and insider trading

Both the costs of raw materials used in our manufactured products (copper, brass, zinc, and aluminum) and energy costs (electricity, natural gas and fuel) have been volatile during the last several years, which has resulted in changes in production and distribution costs. For example, recent and pending climate change regulation and initiatives on the state, regional, federal, and international levels that have focused on reducing greenhouse gas (GHG) emissions from the energy and utility sectors may affect energy availability and costs in the near future. Tariffs impact the total cost of our products and the components and raw materials that go into manufacturing them. The new, substantial tariff increases on imports in the United States from Canada and Mexico (in addition to China) announced on February 1, 2025, should they be implemented and sustained for an extended period of time, could adversely impact the gross margin the Company earns on its products. While we typically attempt to pass costs through to our customers or to modify or adapt our activities to mitigate the impact of increases, we may not be able to do so successfully. The Company is prepared to proactively work with its supply chain to mitigate the cost impact and pass increases in costs to its customers, to the extent possible, when they occur, but failure to fully pass increases to our customers or to modify or adapt our activities to mitigate the impact could have a material adverse impact on our operating margins. Additionally, if we are for any reason unable to obtain raw materials or energy, our ability to manufacture our products would be impacted, which could have a material adverse impact on our operating margins.

We conduct our business through subsidiaries in several different countries and export our products to many countries. Fluctuations in currency exchange rates could have a significant impact on the competitiveness of our products as well as the reported results of our operations, which are presented in U.S. dollars. A portion of our products are manufactured in or acquired from suppliers located in lower cost regions. Cross border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange fluctuations. TheWhile the U.S. dollar has weakened in recent months, any future strengthening of the U.S. dollar could expose our U.S. based businesses to competitive threats from lower cost producers in other countries such as China. Lastly, our sales are translated into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects when the results of foreign operations are translated into U.S. dollars. Accordingly, significant changes in exchange rates, particularly the British pound sterling, Mexican peso, Canadian dollar, and the South Korean won, could have an adverse impact on our results of operations or financial position.

•Piping Systems: The Piping Systems segment is composed of Domestic Piping Systems Group, Great Lakes Copper, European Operations, Trading Group, Jungwoo-Mueller (our South Korean joint venture), and Mueller Middle East (our Bahraini joint venture). The Domestic Piping Systems Group manufactures and distributes copper tube, fittings, and line sets. These products are manufactured in the U.S., sold in the U.S., and exported to markets worldwide. Great Lakes Copper manufactures copper tube and line sets in Canada and sells the products primarily in the U.S. and Canada. European Operations manufactures copper tube in the United Kingdom, which is sold throughout Europe. The Trading Group manufactures pipe nipples and sources products for import distribution in North America. Jungwoo-Mueller manufactures copper-based joining products that are sold worldwide. Mueller Middle East manufactures copper tube and serves markets in the Middle East and Northern Africa. The Piping Systems segment sells products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs).

According to the U.S. Census Bureau, the JanuaryJune 2026 seasonally adjusted annual rate of new housing starts was 1.491.43 million, compared to the MarchJune 2025 rate of 1.361.38 million. The average 30-year fixed mortgage rate was 6.116.28 percent for the first quarterhalf of 2026 and 6.60 percent for the year ended December 2025. The private non-residential construction sector includes offices, industrial, health care, and retail projects. According to the U.S. Census Bureau, the seasonally adjusted annual value of private nonresidential construction put in place was $728.2$738.7 billion in JanuaryMay 2026 compared to the JanuaryMay 2025 rate of $751.1$791.0 billion.

The following table compares summary operating results for the second quarter and first quartershalf of 2026 and 2025:

The increase in net sales during the firstsecond quarter of 2026 was primarily due to (i) higher net selling prices of $219.1$184.6 million in our core product lines, primarily copper tube, brass rod, and high-quality wire and cable, related to the rise in raw material costs, and(ii) sales of $62.5 million recorded by Bison, acquired on March 30, 2026, (iiiii) an increase in sales of $16.8$36.0 million in our non-core product lines.lines, These increases were partially offset byand (iiv) lowerhigher unit sales volume of $33.4$17.4 million in our core product lines, primarily copperbrass tube,rod and (ii)high-quality wire and cable. These increases were partially offset by a decrease in sales of $9.7$10.7 million as a result of the sale of Sherwood during the first quarter of 2026.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the second quarter and first quartershalf of 2026 and 2025:

Cost of goods sold increased in the firstsecond quarter of 2026 primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was 30.027.7 percent compared with 27.231.0 percent in the prior year quarter. Depreciation and amortization was consistent with the firstsecond quarter of 2025. Selling, general, and administrative expense increased slightly in the firstsecond quarter of 2026 primarily as a result of (i) higher employment costs, including incentive compensation, of $6.8$1.6 million andmillion, (ii) higher legal and professional fees of $3.5$1.5 million.million, and (iii) incremental expenses of $1.4 million associated with Bison. These increases were partiallylargely offset by (i) lower product-related costs of $4.7$1.4 million, (ii) lower taxesforeign andcurrency insurancetransaction losses of $0.5$1.2 million, (iii) the absence of $0.5 million of expenses associated with Sherwood, and (iv) higherlower foreigntaxes currencyand transaction gainsinsurance of $0.4 million. In addition, during the firstsecond quarter of 2026,2025, we recognized a gain of $41.4$36.3 million onfor the saleexcess of ourinsurance Sherwoodproceeds businessreceived as well as fixed asset impairment charges on idled equipment of $2.7 million. Duringover the first quarter of 2026 we recognized net losses onincurred related to the disposalMarch of2023 assetstornado ofat $1.5our million,Covington, comparedTennessee tomanufacturing net gains on the disposal of assets of $14.5 million recognized during the first quarter of 2025.operation.

Interest income was higher in the firstsecond quarter of 2026 primarily as a result of higher interest rates. During the firstsecond quarterquarters of 2026,2026 and 2025, we recognized unrealized lossesgains on short-term investments of $2.0$6.5 million comparedand to$13.2 unrealizedmillion, lossesrespectively. ofOther $5.0expense, millionnet, inwas consistent with the firstsecond quarter of 2025. We recognized other expense, net, of $1.2 million in the first quarter of 2026 compared to other income, net, of $0.1 million in the first quarter of 2025. This change was primarily due to higher environmental remediation expense for our non-operating properties in 2026.

Our effective tax rate for the firstsecond quarter of 2026 was 25 percent compared with 24 percent for the same period last year. The primary items impacting the effective tax rate were (i) increases related to the provision for state income taxes, net of the federal benefit, of $10.7$10.9 million and (ii) the effect of foreign tax rates higher than statutory tax rates and other foreign adjustments of $2.2 million. This was partially offset by decreases to other items of $0.7$3.5 million.

For the firstsecond quarter of 2025, the difference between the effective tax rate and the amount computed using the U.S. federal statutory rate was primarily attributable to (i) increases related to the provision for state income taxes, net of the federal benefit, of $6.8 million and (ii) the effect of foreign tax rates higher than statutory tax rates and other foreign adjustments of $2.1$10.1 million. These were partially offset by other adjustments of $1.9 million.

During the firstsecond quarters of 2026 and 2025, we recognized net income of $0.1$6.9 million and net losses of $0.5$2.9 million, respectively, on our investments in unconsolidated affiliates.

The following table compares summary operating results for the second quarter and first quartershalf of 2026 and 2025 for the businesses comprising our Piping Systems segment:

The increase in net sales during the firstsecond quarter of 2026 was primarily attributable to (i) higher net selling prices in the segment’s core product lines, primarily copper tube, of $162.6$125.7 million, (ii) sales of $62.5 million recorded by Bison, and (iiiii) an increase in sales of $15.4$28.1 million in the segment’s non-core product lines. These increases were partially offset by lower unit sales volume of $54.8$15.9 million in the segment’s 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 the second quarter and first quartershalf of 2026 and 2025:

The increase in cost of goods sold during the first half of 2026 was primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was 31.9 percent compared with 31.4 percent in the prior year. Depreciation and amortization wasincreased consistentslightly in the first half of 2026 as a result of incremental expenses associated with the first quarteracquisition of 2025.Bison. Selling, general, and administrative expense decreased for the first quarterhalf of 2026 primarily as a result of (i) lower product-related costs of $4.7$6.1 million, (ii) lower foreign currency transaction losses of $2.5 million, (iii) lower sales and marketing costs of $0.8 million, and (iv) lower repairs and maintenance of $0.7 million. These decreases were partially offset by (i) higher employment costs, including incentive compensation, of $2.9$4.4 million, (ii) incremental expenses of $1.4 million associated with Bison, and (iii) higher professional fees of $0.7 million. In addition, during the first quarterhalf of 2026 the segment recognized fixed asset impairment charges on idled equipment of $2.7 million and net losses on the disposal of assets of $1.5$1.6 million. During the first quarterhalf of 20252025, the segment recognized net gains on the disposal of assets of $14.5$15.8 million.million and a gain of $36.3 million for the excess of insurance proceeds received over the losses incurred related to the March 2023 tornado at our Covington, Tennessee manufacturing operation.

The following table compares summary operating results for the second quarter and first quartershalf of 2026 and 2025 for the businesses comprising our Industrial Metals segment:

The increase in net sales during the firstsecond quarter of 2026 was primarily due to (i) higher net selling prices of $56.5$58.9 million in the segment’s core product lines, primarily brass rod and high-quality wire and cable, and (ii) higher unit sales volume of $21.5$33.3 million in the segment’s core product lines. These increases were slightly offset by a decrease in sales of $9.7$10.7 million as a result of the sale of Sherwood during the first quarter of 2026.Sherwood.

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the second quarter and first quartershalf of 2026 and 2025:

The change in cost of goods sold during the firstsecond quarter of 2026 was primarily due to the factors noted above regarding the change in net sales. Gross margin as a percentage of sales was 18.415.9 percent compared with 17.616.6 percent in the prior year quarter. Depreciation and amortization was consistent with the firstsecond quarter of 2025. Selling, general, and administrative expense increaseddecreased slightly during the firstsecond quarter of 2026 primarily due to (i) higher legal and professional fees of $0.6 million and (ii) higher employment costs of $0.4 million. These increases were partially offset by the absence of $0.5 million of expenses associated with Sherwood.Sherwood and (ii) lower professional fees of $0.2 million. These decreases were partially offset by higher employment costs of $0.5 million.

The following table compares summary operating results for the second quarter and first quartershalf of 2026 and 2025 for the businesses comprising our Climate segment:

The following tables compare cost of goods sold and operating expenses as dollar amounts and as a percent of net sales for the second quarter and first quartershalf of 2026 and 2025:

Cost of goods sold increased during the firstsecond quarter of 2026 primarily due to the rise in raw material costs. Gross margin as a percentage of sales was 33.935.7 percent compared with 36.238.6 percent in the prior year quarter. Depreciation and amortization and selling, general, and administrative expense were consistent with the firstsecond quarter of 2025. During the second quarter of 2025, the segment recorded a loss on the disposal of assets of $1.0 million.

The following table presents selected financial information for the first quartershalf of 2026 and 2025:

During the quartersix months ended MarchJune 28,27, 2026, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $241.4$491.7 million and (ii) an increase in current liabilities of $88.9$167.9 million. There were also increases due to non-cash adjustments primarily consisting of (i) depreciation and amortization of $16.7$34.0 million and (ii) stock-based compensation expense of $7.3$15.8 million. These increases were partially offset by (i) an increase in accounts receivable of $200.2$292.2 million, (ii) an increase in inventories of $43.9$89.2 million, and (iii) a gain of $41.4 million related to the sale of the Sherwood business.

During the quartersix months ended MarchJune 29,28, 2025, net cash provided by operating activities was primarily attributable to (i) consolidated net income of $159.3$407.8 million, (ii) an increase in current liabilities of $57.7$72.3 million, and (iii) dividendsnon-capital fromrelated unconsolidatedinsurance affiliatesproceeds of $2.8$12.3 million.million for the March 2023 tornado in Covington, Tennessee. There were also increases due to non-cash adjustments primarily consisting of (i) depreciation and amortization of $17.1$35.0 million,million and (ii) stock-based compensation expense of $6.2 million, and (iii) unrealized losses on short-term investments of $5.0$13.9 million. These increases were partially offset by (i) an increase in accounts receivable of $101.5$134.5 million, (ii) the gain of $36.3 million related to insurance proceeds for the March 2023 tornado in Covington, Tennessee, (iii) an increase in inventories of $18.5$41.2 million, and (iiiiv) net gains on the disposal of assets of $14.5$14.8 million, and (v) unrealized gains on short-term investments of $8.2 million.

The major components of net cash used in investing activities during the quartersix months ended MarchJune 29,27, 20252026 included (i) $138.3 million for the purchase of short-term investments of $26.6 millionBison and (ii) capital expenditures of $16.6$38.8 million. These uses were partially offset by proceeds from the sale of propertiesthe Sherwood business, net of $19.7cash sold, of $57.0 million.

For the quartersix months ended MarchJune 28,27, 2026, net cash used in financing activities consisted primarily of (i) $75.0$76.4 million used to repurchase common stock of the Company, (ii) $38.0$76.1 million used for the payment of regular quarterly dividends to stockholders of the Company, and (iii) $4.8$5.0 million used for the payment of dividends to noncontrolling interests.

For the quartersix months ended MarchJune 29,28, 2025, net cash used in financing activities consisted primarily of (i) $243.6 million used to repurchase common stock of the Company, (ii) $27.3$54.4 million used for the payment of regular quarterly dividends to stockholders of the Company, (iii) $12.2 million used for the payment of dividends to noncontrolling interests, and (iv) $4.5$4.2 million net cash used to settle stock-based awards.

As of MarchJune 28,27, 2026, we had $1.4 billion of cash on hand and $372.5$72.5 million available to be drawn under the Credit Agreement. The Credit Agreement matured on March 31, 2026 and the Company entered into a new credit agreement on March 27, 2026. Under the terms of the new credit agreement, there was $72.5 million available to be drawn. Our current ratio was 5.44.8 to 1.

We have significant environmental remediation obligations which we expect to pay over future years. Cash used for environmental remediation activities was approximately $1.2$1.8 million during the first quarterhalf of 2026. We expect to spend approximately $3.6$3.4 million over the next twelve months for ongoing environmental remediation activities.

The Company declared a quarterly cash dividend of 35.0 cents and 25.017.5 cents per common share during the first and second quarters of 2026 and 12.5 cents per common share during the first and second quarters of 2025, respectively. Payment of dividends in the future is dependent upon our financial condition, cash flows, capital requirements, earnings, and other factors.

The Company’s Credit Agreement provides for an unsecured $400.0$100.0 million revolving credit facility, which matures March 31,27, 2026.2031. There were no borrowings outstanding under the Credit Agreement as of MarchJune 28,27, 2026. The Credit Agreement backed approximately $27.5 million in letters of credit at the end of the firstsecond quarter of 2026.

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 MarchJune 28,27, 2026, the Company was in compliance with all of its debt covenants.

The Board of Directors has extended, until July 2026, the authorization to repurchase up to 4080 million shares of the Company’s common stock through open market transactions or through privately negotiated transactions. We may cancel, suspend, or extend the time period for the repurchase of shares at any time. Any repurchases will be funded primarily through existing cash and cash from operations. We may hold any shares repurchased in treasury or use a portion of the repurchased shares for our stock-based compensation plans, as well as for other corporate purposes. From its initial authorization in 1999 through MarchJune 28,27, 2026, the Company has repurchased approximately 19.639.2 million shares under this authorization. See Part II., Item 2. below for information about the Company’s share repurchases during the quarter ended MarchJune 28,27, 2026.