Mueller Industries, Inc. Reports First Quarter 2020 Earnings

Mueller Industries, Inc. (NYSE: MLI) announces first quarter 2020 earnings results. Operating income for the first quarter was $59.3 million versus $49.2 million for the prior year period.

Net income for the first quarter was $32.4 million, or 57 cents per diluted share, on $602.9 million in net sales, versus prior year net income of $15.7 million, or 28 cents per diluted share, on $611.8 million in net sales.

Period Financial and Operating Highlights:

• Average COMEX copper traded 9 percent lower in the first quarter of 2020 versus the prior year period. During the quarter, COMEX copper declined 64 cents per pound, or 22 percent, with 40 cents of that decline occurring in March.
• The 1.4 percent decline in net sales was attributable to the lower copper prices and lower sales volumes in our Industrial Metals segment; partially offset by higher sales volumes in our Piping Systems and Climate segments.
• Unusual impacts during the quarter included the following:
  • A $21.9 million gain from our claim under the Deepwater Horizon Economic and Property Damage Settlement Program;
  • A $3.0 million impairment charge on certain idled manufacturing equipment during the quarter; and
  • Mark-to-market losses on open hedge positions, which reduced earnings $9.6 million.
• We recorded a $6.3 million loss on our investment in Tecumseh Products Company in the quarter, compared to a $14.6 million loss in the prior year period.
• The effective tax rate for the quarter was 26 percent, compared with 23 percent in 2019.
• At quarter-end, cash on hand was $154.3 million. Debt to total capitalization was 42 percent, and the current ratio was 3.4 to 1.

Regarding the state of the Company and outlook, Greg Christopher, Mueller CEO said:

“The COVID-19 pandemic has had widespread effects around the world, and our Company is no exception. Our efforts to mitigate the health and safety risk to our employees and facilities began in February, and we have continually adapted our approach as guided by the public health experts. Amidst this turbulence, 67 of our 68 locations across three continents have remained open to support the critical infrastructure industries we serve, and we have had just one temporary closure due to a confirmed case of COVID-19. Our employees have truly stepped up to the plate by adopting the precautionary measures designed to protect them and their families while our Company does its part during this crisis.

Our primary market, the construction industry, while generally deemed essential, has seen reduced activity due largely to government orders and public health risk mitigation measures. We have, however, seen above normal demand levels in other segments for more niche products used for oxygen service in hospitals, the delivery of medical gases and medical equipment components.

These are tough times, but our balance sheet and liquidity position are solid. We have an established record of prudent financial management, and we began to prepare for a potential correction in the economy during the fourth quarter of 2019. We have further bolstered our position by implementing even more cash conservation measures, including the deferral of non-essential capital expenditures. Our committed credit facility provides for additional liquidity if needed to support our operations and seize potential opportunities, as we are well within our covenants.

2020 was off to a strong start, with softening in demand related to the virus hitting us during the latter half of March. Although the impact on the first quarter was mild, we currently anticipate that April and May could be off 30 percent - 40 percent, with any reversal depending upon the timing and progress of the reopening of the economy. We will continue to adapt as required. As a result, we do not intend to suspend or reduce our second quarter dividend.

Like all others, we look forward to the conclusion of this public health crisis, but in the meantime, are working actively as ever to capitalize on a number of opportunities we see on the horizon.”

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.

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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
(In thousands, except per share data)		March 28, 2020				March 30, 2019
Net sales		$	602,919			$	611,781
Cost of goods sold		508,715				511,393
Depreciation and amortization		11,039				10,555
Selling, general, and administrative expense		42,752				40,653
Asset impairments		3,035					—
Litigation settlement, net		(21,933		)			—
Operating income		59,311				49,180
Interest expense		(5,379		)		(6,954		)
Other income (expense), net		278				(172		)
Income before income taxes		54,210				42,054
Income tax expense		(14,144		)		(9,546		)
Loss from unconsolidated affiliates, net of foreign tax		(6,115		)		(15,369		)
Consolidated net income		33,951				17,139
Net income attributable to noncontrolling interests		(1,536		)		(1,416		)
Net income attributable to Mueller Industries, Inc.		$	32,415			$	15,723
Weighted average shares for basic earnings per share		55,875				55,728
Effect of dilutive stock-based awards		583				526
Adjusted weighted average shares for diluted earnings per share		56,458				56,254
Basic earnings per share		$	0.58			$	0.28
Diluted earnings per share		$	0.57			$	0.28
Dividends per share		$	0.10			$	0.10
Summary Segment Data:
Net sales:
Piping Systems Segment		$	385,013			$	376,492
Industrial Metals Segment		131,202				150,875
Climate Segment		93,272				89,834
Elimination of intersegment sales		(6,568		)		(5,420		)
Net sales		$	602,919			$	611,781
Operating income:
Piping Systems Segment		$	36,676			$	28,249
Industrial Metals Segment		11,182				19,187
Climate Segment		13,014				12,386
Unallocated expenses		(1,561		)		(10,642		)
Operating income		$	59,311			$	49,180

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)
(In thousands)		March 28, 2020			December 28, 2019
ASSETS
Cash and cash equivalents		$	154,283		$	97,944
Accounts receivable, net		308,836			269,943
Inventories		270,119			292,107
Other current assets		40,888			33,778
Total current assets		774,126			693,772
Property, plant, and equipment, net		366,828			363,128
Operating lease right-of-use assets		18,632			26,922
Other assets		286,353			287,118
		$	1,445,939		$	1,370,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of debt		$	7,591		$	7,530
Accounts payable		94,251			85,644
Current portion of operating lease liabilities		5,047			5,250
Other current liabilities		123,010			135,863
Total current liabilities		229,899			234,287
Long-term debt		468,234			378,724
Pension and postretirement liabilities		19,193			22,208
Environmental reserves		19,875			19,972
Deferred income taxes		19,513			21,094
Noncurrent operating lease liabilities		14,124			22,388
Other noncurrent liabilities		9,801			10,131
Total liabilities		780,639			708,804
Total Mueller Industries, Inc. stockholders’ equity		645,687			643,468
Noncontrolling interests		19,613			18,668
Total equity		665,300			662,136
		$	1,445,939		$	1,370,940

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		For the Quarter Ended
(In thousands)		March 28, 2020				March 30, 2019
Cash flows from operating activities
Consolidated net income		$	33,951			$	17,139
Reconciliation of consolidated net income to net cash provided by (used in) operating activities:
Depreciation and amortization		11,119				10,635
Stock-based compensation expense		1,985				2,007
Provision for doubtful accounts receivable		1,100				(38		)
Loss from unconsolidated affiliates		6,115				15,369
Loss on disposals of properties		32				37
Impairment charges		3,035				—
Deferred income tax expense (benefit)		213				(225		)
Changes in assets and liabilities, net of effects of business acquired:
Receivables		(46,291		)		(34,029		)
Inventories		17,450				(13,335		)
Other assets		8,010				(7,530		)
Current liabilities		(10,821		)		(15,885		)
Other liabilities		(1,643		)		741
Other, net		3,796				441
Net cash provided by (used in) operating activities		28,051				(24,673		)
Cash flows from investing activities
Capital expenditures		(17,094		)		(6,834		)
Acquisition of business, net of cash acquired		(15,407		)		—
Investments in unconsolidated affiliates		—				(8,000		)
Proceeds from sales of properties		—				4
Net cash used in investing activities		(32,501		)		(14,830		)
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.		—				(5,574		)
Repurchase of common stock		(5,574		)		(1,763		)
Issuance of long-term debt		110,000				100,557
Repayments of long-term debt		(20,572		)		(30,472		)
Issuance (repayment) of debt by consolidated joint ventures, net		189				(2,121		)
Net cash received (used) to settle stock-based awards		464				(175		)
Net cash provided by financing activities		84,507				60,452
Effect of exchange rate changes on cash		(6,135		)		919
Increase in cash, cash equivalents, and restricted cash		73,922				21,868
Cash, cash equivalents, and restricted cash at the beginning of the period		98,042				77,138
Cash, cash equivalents, and restricted cash at the end of the period		$	171,964			$	99,006

 

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