Mueller Industries, Inc. (NYSE: MLI) announced today operating income for the fourth quarter of $44.4 million, compared with $40.0 million in the same quarter of 2018. Net income for the quarter was $28.2 million, or 50 cents per diluted share, on net sales of $543.8 million, compared with net income of $26.9 million, or 47 cents per diluted share, on net sales of $559.1 million in the fourth quarter of 2018.
On a full year basis, the Company reported operating income of $191.4 million, compared with $173.0 million in fiscal year 2018. Net income for the year was $101.0 million, or $1.79 per diluted share, on net sales of $2.4 billion, compared with net income of $104.5 million, or $1.82 per diluted share, on net sales of $2.5 billion in 2018.
Financial and Operating Highlights:
Fourth Quarter:
- The average price of copper was 2.4 percent lower compared with the prior year period, which impacted net sales for both our Piping Systems and Industrial Metals segments.
- Net sales declined 2.7 percent compared with the prior year period as a result of both lower copper prices and lower shipments in our Industrial Metals segment. Declines were partially offset by higher sales volume in our Piping Systems and Climate businesses.
- We recorded a $191,000 loss on our investment in Tecumseh compared to $1.4 million of income in the prior year.
Full Year:
- The average price of copper was 7.2 percent lower as compared with the prior year, averaging $2.72 per pound.
- Net sales declined 3.1 percent as compared with the prior year primarily as a result of both lower copper prices and lower shipments in our Industrial Metals segment. Declines were offset by sales from ATCO, a business acquired in the third quarter of 2018.
- We recorded a $22.0 million loss on our investment in Tecumseh compared with a $10.0 million loss in the prior year. On an adjusted basis, excluding Tecumseh, 2019 diluted earnings per share would have been $2.19, compared with $1.95 in 2018, a 12.3 percent increase.
- We generated $200.5 million in cash from operations.
- We repaid $110.4 million of debt, and ended the year with a debt to total capitalization ratio of 37 percent.
- Our current ratio is 3.0 to 1, and return on equity for the year was 16 percent.
Regarding the business, Greg Christopher, Mueller CEO, said, “Our diverse portfolio of businesses proved to be a strength as we delivered another year of double digit operating income growth. Our businesses continue to execute their operational plans and remain focused on the long term. Prudent capital deployment and laser focused execution are core operating principles and drivers of our strong cash generation.”
He added, “Our outlook for 2020 remains positive despite softening of the industrial markets, which we experienced during the fourth quarter. Cost mitigation initiatives we undertook in the second half of 2019, combined with improved performance in our Piping Systems and Climate businesses support our expectations. Our Piping Systems and Climate businesses benefit from building construction, one of the principal market sectors in which we operate. The fundamentals of the construction sector remain solid, and the economies we operate in are healthy or improving.”
Lastly, he continued, “Tecumseh’s operating results improved in the second half of the year. We expect earnings to be bumpy as management continues to aggressively execute its restructuring plan.”
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 Year Ended | ||||||||||||||
(In thousands, except per share data) |
December 28,
|
December 29,
|
December 28,
|
December 29,
| |||||||||||
Net sales | $ | 543,839 | $ | 559,087 | $ | 2,430,616 | $ | 2,507,878 | |||||||
Cost of goods sold | 449,481 | 473,954 | 2,035,610 | 2,150,400 | |||||||||||
Depreciation and amortization | 10,837 | 10,474 | 42,693 | 39,555 | |||||||||||
Selling, general, and administrative expense | 39,557 | 36,892 | 161,395 | 148,635 | |||||||||||
Insurance recovery | (485 | ) | (2,195 | ) | (485 | ) | (3,681 | ) | |||||||
Operating income | 44,449 | 39,962 | 191,403 | 172,969 | |||||||||||
Interest expense | (5,548 | ) | (6,471 | ) | (25,683 | ) | (25,199 | ) | |||||||
Environmental expense | (440 | ) | (623 | ) | (1,321 | ) | (1,320 | ) | |||||||
Other income, net | (20 | ) | 1,713 | 1,684 | 3,967 | ||||||||||
Income before income taxes | 38,441 | 34,581 | 166,083 | 150,417 | |||||||||||
Income tax expense | (7,614 | ) | (7,773 | ) | (35,257 | ) | (30,952 | ) | |||||||
(Loss) income from unconsolidated affiliates, net of foreign tax | (854 | ) | 923 | (24,594 | ) | (12,645 | ) | ||||||||
Consolidated net income | 29,973 | 27,731 | 106,232 | 106,820 | |||||||||||
Net income attributable to noncontrolling interests | (1,803 | ) | (874 | ) | (5,260 | ) | (2,361 | ) | |||||||
Net income attributable to Mueller Industries, Inc. | $ | 28,170 | $ | 26,857 | $ | 100,972 | $ | 104,459 | |||||||
Weighted average shares for basic earnings per share | 55,869 | 56,555 | 55,798 | 56,782 | |||||||||||
Effect of dilutive stock-based awards | 611 | 377 | 545 | 487 | |||||||||||
Adjusted weighted average shares for diluted earnings per share | 56,480 | 56,932 | 56,343 | 57,269 | |||||||||||
Basic earnings per share | $ | 0.50 | $ | 0.47 | $ | 1.81 | $ | 1.84 | |||||||
Diluted earnings per share | $ | 0.50 | $ | 0.47 | $ | 1.79 | $ | 1.82 | |||||||
Dividends per share | $ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.40 | |||||||
Summary Segment Data: | |||||||||||||||
Net sales: | |||||||||||||||
Piping Systems Segment | $ | 349,182 | $ | 350,961 | $ | 1,542,456 | $ | 1,645,633 | |||||||
Industrial Metals Segment | 120,336 | 139,129 | 554,373 | 651,061 | |||||||||||
Climate Segment | 79,362 | 72,215 | 356,215 | 229,069 | |||||||||||
Elimination of intersegment sales | (5,041 | ) | (3,218 | ) | (22,428 | ) | (17,885 | ) | |||||||
Net sales | $ | 543,839 | $ | 559,087 | $ | 2,430,616 | $ | 2,507,878 | |||||||
Operating income: | |||||||||||||||
Piping Systems Segment | $ | 31,724 | $ | 22,453 | $ | 131,879 | $ | 122,829 | |||||||
Industrial Metals Segment | 15,026 | 21,770 | 61,724 | 75,607 | |||||||||||
Climate Segment | 9,343 | 7,450 | 42,727 | 24,118 | |||||||||||
Unallocated expenses | (11,644 | ) | (11,711 | ) | (44,927 | ) | (49,585 | ) | |||||||
Operating income | $ | 44,449 | $ | 39,962 | $ | 191,403 | $ | 172,969 | |||||||
MUELLER INDUSTRIES, INC. | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(Unaudited) | |||||
(In thousands) |
December 28,
|
December 29,
| |||
ASSETS | |||||
Cash and cash equivalents | $ | 97,944 | $ | 72,616 | |
Accounts receivable, net | 269,943 | 273,417 | |||
Inventories | 292,107 | 329,795 | |||
Other current assets | 33,778 | 26,790 | |||
Total current assets | 693,772 | 702,618 | |||
Property, plant, and equipment, net | 363,128 | 370,633 | |||
Operating lease right-of-use assets | 26,922 | — | |||
Other assets | 287,118 | 296,298 | |||
$ | 1,370,940 | $ | 1,369,549 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
Current portion of debt | $ | 7,530 | $ | 7,101 | |
Accounts payable | 85,644 | 103,754 | |||
Current portion of operating lease liabilities | 5,250 | — | |||
Other current liabilities | 135,863 | 121,946 | |||
Total current liabilities | 234,287 | 232,801 | |||
Long-term debt | 378,724 | 489,597 | |||
Pension and postretirement liabilities | 22,208 | 29,055 | |||
Environmental reserves | 19,972 | 20,009 | |||
Deferred income taxes | 21,094 | 16,615 | |||
Noncurrent operating lease liabilities | 22,388 | — | |||
Other noncurrent liabilities | 10,131 | 18,212 | |||
Total liabilities | 708,804 | 806,289 | |||
Total Mueller Industries, Inc. stockholders’ equity | 643,468 | 548,356 | |||
Noncontrolling interests | 18,668 | 14,904 | |||
Total equity | 662,136 | 563,260 | |||
$ | 1,370,940 | $ | 1,369,549 | ||
MUELLER INDUSTRIES, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||
For the Year Ended | |||||||
(In thousands) |
December
|
December
| |||||
Cash flows from operating activities | |||||||
Consolidated net income | $ | 106,232 | $ | 106,820 | |||
Reconciliation of consolidated net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 43,011 | 39,873 | |||||
Stock-based compensation expense | 8,744 | 8,035 | |||||
Loss from unconsolidated affiliates | 24,594 | 12,645 | |||||
Gain on disposals of assets | (963 | ) | (253 | ) | |||
Insurance proceeds - noncapital related | 485 | 2,306 | |||||
Change in the fair value of contingent consideration | 3,625 | — | |||||
Insurance recovery | (485 | ) | (3,681 | ) | |||
Deferred income tax (benefit) expense | (428 | ) | 170 | ||||
Provision for doubtful accounts receivable | (80 | ) | — | ||||
Changes in assets and liabilities, net of effects of businesses acquired and sold: | |||||||
Receivables | 6,585 | (11,342 | ) | ||||
Inventories | 39,561 | 27,512 | |||||
Other assets | (15,639 | ) | 14,353 | ||||
Current liabilities | (7,076 | ) | (15,680 | ) | |||
Other liabilities | (7,944 | ) | (14,769 | ) | |||
Other, net | 322 | 1,903 | |||||
Net cash provided by operating activities | 200,544 | 167,892 | |||||
Cash flows from investing activities | |||||||
Proceeds from sale of assets, net of cash transferred | 3,240 | 18,703 | |||||
Acquisition of businesses, net of cash acquired | 3,465 | (167,677 | ) | ||||
Capital expenditures | (31,162 | ) | (38,481 | ) | |||
Insurance proceeds - capital related | — | 1,968 | |||||
Investment in unconsolidated affiliates | (16,000 | ) | (1,609 | ) | |||
Net cash used in investing activities | (40,457 | ) | (187,096 | ) | |||
Cash flows from financing activities | |||||||
Dividends paid to stockholders of Mueller Industries, Inc. | (22,325 | ) | (22,705 | ) | |||
Dividends paid to noncontrolling interests | (846 | ) | (592 | ) | |||
Issuance of long-term debt | 100,658 | 204,233 | |||||
Repayments of long-term debt | (206,718 | ) | (172,002 | ) | |||
Repayment of debt by consolidated joint ventures, net | (4,305 | ) | (2,915 | ) | |||
Repurchase of common stock | (1,763 | ) | (33,562 | ) | |||
Payment of contingent consideration | (3,170 | ) | — | ||||
Net cash used to settle stock-based awards | (1,225 | ) | (726 | ) | |||
Net cash used in financing activities | (139,694 | ) | (28,269 | ) | |||
Effect of exchange rate changes on cash | 511 | (1,952 | ) | ||||
Increase (decrease) in cash, cash equivalents, and restricted cash | 20,904 | (49,425 | ) | ||||
Cash, cash equivalents, and restricted cash at the beginning of the year | 77,138 | 126,563 | |||||
Cash, cash equivalents, and restricted cash at the end of the year | $ | 98,042 | $ | 77,138 | |||
MUELLER INDUSTRIES, INC.
Reconciliation of Net Income as Reported to Non-GAAP Financial Measures Without Loss from the Unconsolidated Affiliate Tecumseh Products
(Unaudited)
Earnings attributable to normal operations without the loss from Tecumseh Products (Tecumseh) is a measurement not derived in accordance with generally accepted accounting principles (GAAP). Excluding the loss is useful as it measures the operating results that are the outcome of daily operating decisions made in the normal course of business. Reconciliation of earnings attributable to normal operations without the loss from Tecumseh to net income as reported is as follows:
(In thousands, except per share data) | For the Year Ended December 28, 2019 | |||||||||||
As Reported
|
Loss from
|
As Adjusted
| ||||||||||
Income before income taxes | $ | 166,083 | $— | $ | 166,083 | |||||||
Income tax expense | (35,257 | ) | 538 | (34,719 | ) | |||||||
Loss from unconsolidated affiliates, net of foreign tax | (24,594 | ) | 22,026 | (2,568 | ) | |||||||
Consolidated net income | 106,232 | 22,564 | 128,796 | |||||||||
Net income attributable to noncontrolling interests | (5,260 | ) | (5,260 | ) | ||||||||
Net income attributable to Mueller Industries, Inc. | $ | 100,972 | $ | 22,564 | $ | 123,536 | ||||||
Diluted earnings per share | $ | 1.79 | $ | 0.40 | $ | 2.19 | ||||||
(In thousands, except per share data) | For the Quarter Ended December 29, 2018 | |||||||||||
As Reported
|
Loss from
|
As Adjusted
| ||||||||||
Income before income taxes | $ | 150,417 | $— | $ | 150,417 | |||||||
Income tax expense | (30,952 | ) | (2,775 | ) | (33,727 | ) | ||||||
Loss from unconsolidated affiliates, net of foreign tax | (12,645 | ) | 10,025 | (2,620 | ) | |||||||
Consolidated net income | 106,820 | 7,250 | 114,070 | |||||||||
Net income attributable to noncontrolling interests | (2,361 | ) | (2,361 | ) | ||||||||
Net income attributable to Mueller Industries, Inc. | $ | 104,459 | $ | 7,250 | $ | 111,709 | ||||||
Diluted earnings per share | $ | 1.82 | $ | 0.13 | $ | 1.95 | ||||||
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