Mueller Industries, Inc. (NYSE: MLI) announced today third quarter operating income of $46.3 million versus $33.7 million reported in the same quarter of 2018.
Net income was $29.1 million, or 52 cents per diluted share, on $608.6 million in net sales, compared with net income of $20.3 million, or 35 cents per diluted share, on $646.0 million in net sales for the same quarter of 2018.
Financial and Operating Highlights:
- Lower copper prices contributed to the decline in net sales. COMEX copper fell eight cents per pound during the quarter and was, on average, four percent lower in the third quarter of 2019 compared with the third quarter of 2018.
- Lower unit volume in both our Piping Systems and Industrial Metals segments further contributed to the reduction in net sales.
- The effective tax rate for the quarter was 19 percent, compared with 12 percent in the prior year quarter. The rates in both quarters reflect non-recurring adjustments to tax provisions on foreign earnings.
- We recorded a $1.9 million loss on our investment in Tecumseh Products Company in the third quarter of 2019, which represents a significant narrowing of the loss recorded in the second quarter of 2019.
- Cash generated from operations was $67.9 million in the third quarter, and debt repayments totaled $40.6 million. Quarter-end cash on hand was $100.3 million, debt to total capitalization was 41 percent, and the current ratio was 3.0 to 1.
Regarding the outlook, Greg Christopher, Mueller CEO said, “The combination of our acquisitions and increased benefits from recent investments in our plants provided meaningful improvements to our results. We remain optimistic that the impact of global uncertainties and recent softness in demand will be mild, but nonetheless believe we are well positioned given our strong cash flow and low leverage, and prepared to react to changing market conditions.”
He added, “With regard to Tecumseh, management is executing the necessary and difficult action plans to restructure this business.”
Mueller Industries, Inc. is an industrial manufacturer that specializes in copper and copper alloy manufacturing while also producing goods made from aluminum, steel, and plastics. It is headquartered in Collierville, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, South Korea, the Middle East, and China. Its products include tubing, fittings, valves, vessels, and related items for plumbing and HVACR related piping systems, as well as rod, forgings, extrusions, and various components for OEM applications. Products are distributed into sectors such as building construction, appliance, defense, energy, and automotive.
Statements in this release that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties. These include economic and currency conditions, continued availability of raw materials and energy, market demand, pricing, competitive and technological factors, and the availability of financing, among others, as set forth in the Company’s SEC filings. The words “outlook,” “estimate,” “project,” “intend,” “expect,” “believe,” “target,” “encourage,” “anticipate,” “appear,” and similar expressions are intended to identify forward-looking statements. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. The Company has no obligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.
MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||||
For the Quarter Ended | For the Nine Months Ended | |||||||||||||||
(In thousands, except per share data) |
September 28,
|
September 29,
|
September 28,
|
September 29,
| ||||||||||||
Net sales | $ | 608,602 | $ | 645,958 | $ | 1,886,777 | $ | 1,948,791 | ||||||||
Cost of goods sold | 510,788 | 566,956 | 1,586,129 | 1,676,446 | ||||||||||||
Depreciation and amortization | 10,823 | 10,619 | 31,856 | 29,081 | ||||||||||||
Selling, general, and administrative expense | 40,739 | 38,889 | 121,838 | 112,077 | ||||||||||||
Gain on sale of assets | — | (2,691 | ) | — | (334 | ) | ||||||||||
Insurance recovery | — | (1,486 | ) | — | (1,486 | ) | ||||||||||
Operating income | 46,252 | 33,671 | 146,954 | 133,007 | ||||||||||||
Interest expense | (6,148 | ) | (6,746 | ) | (20,135 | ) | (18,728 | ) | ||||||||
Other income, net | 533 | 411 | 823 | 1,557 | ||||||||||||
Income before income taxes | 40,637 | 27,336 | 127,642 | 115,836 | ||||||||||||
Income tax expense | (7,665 | ) | (3,373 | ) | (27,643 | ) | (23,179 | ) | ||||||||
Loss from unconsolidated affiliates, net of foreign tax | (2,528 | ) | (3,100 | ) | (23,740 | ) | (13,568 | ) | ||||||||
Consolidated net income | 30,444 | 20,863 | 76,259 | 79,089 | ||||||||||||
Net income attributable to noncontrolling interests | (1,351 | ) | (571 | ) | (3,457 | ) | (1,487 | ) | ||||||||
Net income attributable to Mueller Industries, Inc. | $ | 29,093 | $ | 20,292 | $ | 72,802 | $ | 77,602 | ||||||||
Weighted average shares for basic earnings per share | 55,832 | 56,877 | 55,771 | 56,858 | ||||||||||||
Effect of dilutive stock-based awards | 482 | 540 | 523 | 524 | ||||||||||||
Adjusted weighted average shares for diluted earnings per share | 56,314 | 57,417 | 56,294 | 57,382 | ||||||||||||
Basic earnings per share | $ | 0.52 | $ | 0.36 | $ | 1.31 | $ | 1.36 | ||||||||
Diluted earnings per share | $ | 0.52 | $ | 0.35 | $ | 1.29 | $ | 1.35 | ||||||||
Dividends per share | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||||
Summary Segment Data: | ||||||||||||||||
Net sales: | ||||||||||||||||
Piping Systems Segment | $ | 390,917 | $ | 410,525 | $ | 1,193,274 | $ | 1,294,672 | ||||||||
Industrial Metals Segment | 135,443 | 158,709 | 434,037 | 511,932 | ||||||||||||
Climate Segment | 90,938 | 81,619 | 276,853 | 156,854 | ||||||||||||
Elimination of intersegment sales | (8,696 | ) | (4,895 | ) | (17,387 | ) | (14,667 | ) | ||||||||
Net sales | $ | 608,602 | $ | 645,958 | $ | 1,886,777 | $ | 1,948,791 | ||||||||
Operating income: | ||||||||||||||||
Piping Systems Segment | $ | 36,010 | $ | 25,408 | $ | 100,155 | $ | 100,376 | ||||||||
Industrial Metals Segment | 12,599 | 15,111 | 46,697 | 53,837 | ||||||||||||
Climate Segment | 7,963 | 5,774 | 33,384 | 16,668 | ||||||||||||
Unallocated expenses | (10,320 | ) | (12,622 | ) | (33,282 | ) | (37,874 | ) | ||||||||
Operating income | $ | 46,252 | $ | 33,671 | $ | 146,954 | $ | 133,007 | ||||||||
MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||
(In thousands) |
September 28,
|
December 29,
| ||||
ASSETS | ||||||
Cash and cash equivalents | $ | 100,338 | $ | 72,616 | ||
Accounts receivable, net | 319,562 | 273,417 | ||||
Inventories | 277,567 | 329,795 | ||||
Other current assets | 33,242 | 26,790 | ||||
Total current assets | 730,709 | 702,618 | ||||
Property, plant, and equipment, net | 361,308 | 370,633 | ||||
Operating lease right-of-use assets | 25,855 | — | ||||
Other assets | 284,893 | 296,298 | ||||
$ | 1,402,765 | $ | 1,369,549 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current portion of debt | $ | 7,387 | $ | 7,101 | ||
Accounts payable | 102,084 | 103,754 | ||||
Current portion of operating lease liabilities | 3,832 | — | ||||
Other current liabilities | 133,466 | 121,946 | ||||
Total current liabilities | 246,769 | 232,801 | ||||
Long-term debt | 434,082 | 489,597 | ||||
Pension and postretirement liabilities | 27,399 | 29,055 | ||||
Environmental reserves | 19,774 | 20,009 | ||||
Deferred income taxes | 17,260 | 16,615 | ||||
Noncurrent operating lease liabilities | 22,712 | — | ||||
Other noncurrent liabilities | 10,173 | 18,212 | ||||
Total liabilities | 778,169 | 806,289 | ||||
Total Mueller Industries, Inc. stockholders’ equity | 607,648 | 548,356 | ||||
Noncontrolling interests | 16,948 | 14,904 | ||||
Total equity | 624,596 | 563,260 | ||||
$ | 1,402,765 | $ | 1,369,549 | |||
MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
For the Nine Months Ended | ||||||||
(In thousands) |
September 28,
|
September 29,
| ||||||
Cash flows from operating activities | ||||||||
Consolidated net income | $ | 76,259 | $ | 79,089 | ||||
Reconciliation of consolidated net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 32,095 | 29,320 | ||||||
Stock-based compensation expense | 6,355 | 5,953 | ||||||
Loss from unconsolidated affiliates | 23,740 | 13,568 | ||||||
Gain on disposals of properties | (24 | ) | (247 | ) | ||||
Insurance recovery | — | (1,486 | ) | |||||
Change in fair value of contingent consideration | 4,500 | — | ||||||
Deferred income tax benefit | (1,593 | ) | (1,502 | ) | ||||
Changes in assets and liabilities, net of effects of business acquired: | ||||||||
Receivables | (47,433 | ) | (42,201 | ) | ||||
Inventories | 50,985 | 48,716 | ||||||
Other assets | (7,485 | ) | 11,250 | |||||
Current liabilities | 1,687 | (7,947 | ) | |||||
Other liabilities | (7,112 | ) | (13,862 | ) | ||||
Other, net | (47 | ) | 1,864 | |||||
Net cash provided by operating activities | 131,927 | 122,515 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (20,162 | ) | (16,685 | ) | ||||
Acquisition of business, net of cash acquired | 3,465 | (167,677 | ) | |||||
Investments in unconsolidated affiliates | (11,000 | ) | (609 | ) | ||||
Proceeds from sales of properties | 385 | 18,693 | ||||||
Net cash used in investing activities | (27,312 | ) | (166,278 | ) | ||||
Cash flows from financing activities | ||||||||
Dividends paid to stockholders of Mueller Industries, Inc. | (16,738 | ) | (17,051 | ) | ||||
Repurchase of common stock | (1,763 | ) | (6,575 | ) | ||||
Payment of contingent consideration | (3,170 | ) | — | |||||
Issuance of long-term debt | 100,658 | 194,131 | ||||||
Repayments of long-term debt | (151,305 | ) | (139,518 | ) | ||||
Repayment of debt by consolidated joint ventures, net | (4,352 | ) | (2,978 | ) | ||||
Net cash used to settle stock-based awards | (1,069 | ) | (726 | ) | ||||
Dividends paid to noncontrolling interests | — | (592 | ) | |||||
Net cash (used in) provided by financing activities | (77,739 | ) | 26,691 | |||||
Effect of exchange rate changes on cash | (1,511 | ) | (442 | ) | ||||
Increase (decrease) in cash, cash equivalents, and restricted cash | 25,365 | (17,514 | ) | |||||
Cash, cash equivalents, and restricted cash at the beginning of the period | 77,138 | 126,563 | ||||||
Cash, cash equivalents, and restricted cash at the end of the period | $ | 102,503 | $ | 109,049 | ||||
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