Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2019 Earnings

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, 2019				December 29, 2018				December 28, 2019				December 29, 2018
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, 2019			December 29, 2018
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 28, 2019				December 29, 2018
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 (GAAP)				Loss from Tecumseh				As Adjusted (Non-GAAP)
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 (GAAP)				Loss from Tecumseh				As Adjusted (Non-GAAP)
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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