Mueller Industries, Inc. Reports Second Quarter 2016 Earnings

MEMPHIS, Tenn., July 26, 2016 -- Mueller Industries, Inc. (NYSE: MLI) announced today net income of $27.8 million, or 49 cents per diluted share, for the second quarter of 2016.  In the second quarter of 2015, the Company reported net income of $33.7 million, or 59 cents per diluted share which included $6.7 million, or 12 cents per diluted share, in unusual gains.

Net sales for the second quarter of 2016 were $544.1 million compared with $555.6 million for the same quarter of the prior year.  Overall unit volume rose over the same period in 2015, but lower selling prices as a result of lower copper prices reduced overall net sales.  The average price of copper was $2.13 per pound in the second quarter of 2016 compared with $2.77 per pound in the second quarter of 2015.

Acquired businesses have performed well in 2016 and contributed favorably to the second quarter 2016 earnings.  The earnings benefit from acquired businesses was muted by margin compression at the U.S. copper tube, copper fittings and brass rod businesses.  These businesses were impacted by elevated premiums to secure copper cathode and by contracted discounts and availability of copper and brass scrap.

 

Financial and Related Highlights:

-

The second quarter of 2015 included a pre-tax gain on the sale of assets of $15.4 million, offset by severance charges of $3.4 million, before tax, related to the rationalization of the U.K. copper tube business.

-

The second quarter of 2016 results included a $995 thousand net loss from Tecumseh Products Co., an unconsolidated affiliate.

 

-

Cash ended the period at $283.2 million, debt to total capitalization ratio was 20.0 percent and the current ratio was 4.0 to 1.

 Regarding the outlook Greg Christopher, Mueller CEO, said, "In the U.S., construction activity continues at a steady pace in both the residential and non-residential sectors. Orders for our construction related products in North America are solid and we look forward to moving beyond production constraints related to our ongoing piping products plant modernization programs."

He adds, "Activity in the U.S. industrial sector remains soft and China continues to be challenging. These factors have impacted our respective businesses and we look forward to their eventual rebound."

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 Memphis, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, South Korea, 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.

 

CONTACT
Jeffrey A. Martin
(901)753-3226

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

For the Quarter Ended

 

 

For the Six Months Ended

 

(In thousands, except per share data)

 

July 2,

2016

 

 

June 27,

2015

 

 

July 2,

2016

 

 

June 27,

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

544,071

 

 

$

555,593

 

 

$

1,076,880

 

 

$

1,092,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

456,060

 

 

 

470,365

 

 

 

902,702

 

 

 

931,199

 

Depreciation and amortization

 

 

9,061

 

 

 

8,188

 

 

 

17,981

 

 

 

16,041

 

Selling, general, and administrative expense

 

 

34,514

 

 

 

33,420

 

 

 

70,294

 

 

 

66,251

 

Gain on sale of assets

 

 

 

 

 

(15,376

)

 

 

 

 

 

(15,376

)

Severance

 

 

 

 

 

3,442

 

 

 

 

 

 

3,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

44,436

 

 

 

55,554

 

 

 

85,903

 

 

 

91,278

 

Interest expense

 

 

(1,692

)

 

 

(2,219

)

 

 

(3,540

)

 

 

(4,295

)

Other income, net

 

 

515

 

 

 

265

 

 

 

760

 

 

 

370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

43,259

 

 

 

53,600

 

 

 

83,123

 

 

 

87,353

 

Income tax expense

 

 

(14,005

)

 

 

(19,738

)

 

 

(28,126

)

 

 

(31,151

)

Income (loss) from unconsolidated affiliates, net of tax

 

 

(995

)

 

 

 

 

 

1,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

 

28,259

 

 

 

33,862

 

 

 

56,924

 

 

 

56,202

 

Net income attributable to noncontrolling interests

 

 

(462

)

 

 

(211

)

 

 

(497

)

 

 

(573

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Mueller Industries, Inc.

 

$

27,797

 

 

$

33,651

 

 

$

56,427

 

 

$

55,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares for basic earnings per share

 

 

56,511

 

 

 

56,247

 

 

 

56,489

 

 

 

56,220

 

Effect of dilutive stock-based awards

 

 

418

 

 

 

743

 

 

 

456

 

 

 

737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares for diluted earnings per share

 

 

56,929

 

 

 

56,990

 

 

 

56,945

 

 

 

56,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.49

 

 

$

0.60

 

 

$

1.00

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.49

 

 

$

0.59

 

 

$

0.99

 

 

$

0.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.100

 

 

$

0.075

 

 

$

0.175

 

 

$

0.150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Segment Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Piping Systems Segment

 

$

388,662

 

 

$

379,750

 

 

$

757,552

 

 

$

741,232

 

Industrial Metals Segment

 

 

127,737

 

 

 

145,228

 

 

 

262,258

 

 

 

296,264

 

Climate Segment

 

 

31,359

 

 

 

31,498

 

 

 

62,065

 

 

 

57,309

 

Elimination of intersegment sales

 

 

(3,687

)

 

 

(883

)

 

 

(4,995

)

 

 

(1,970

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

544,071

 

 

$

555,593

 

 

$

1,076,880

 

 

$

1,092,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Piping Systems Segment

 

$

32,959

 

 

$

43,235

 

 

$

64,118

 

 

$

69,494

 

Industrial Metals Segment

 

 

17,124

 

 

 

20,475

 

 

 

37,036

 

 

 

39,434

 

Climate Segment

 

 

5,837

 

 

 

4,250

 

 

 

9,716

 

 

 

6,515

 

Unallocated expenses

 

 

(11,484

)

 

 

(12,406

)

 

 

(24,967

)

 

 

(24,165

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

44,436

 

 

$

55,554

 

 

$

85,903

 

 

$

91,278

 


MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands)

 

July 2,

2016

 

 

December 26, 2015

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

283,161

 

 

$

274,844

 

Accounts receivable, net

 

 

305,332

 

 

 

251,571

 

Inventories

 

 

249,954

 

 

 

239,378

 

Other current assets

 

 

27,276

 

 

 

34,608

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

865,723

 

 

 

800,401

 

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

297,939

 

 

 

280,224

 

Other assets

 

 

256,813

 

 

 

258,176

 

 

 

 

 

 

 

 

 

 

 

 

$

1,420,475

 

 

$

1,338,801

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current portion of debt

 

$

16,226

 

 

$

11,760

 

Accounts payable

 

 

105,138

 

 

 

88,051

 

Other current liabilities

 

 

96,586

 

 

 

109,618

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

217,950

 

 

 

209,429

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

213,646

 

 

 

204,250

 

Pension and postretirement liabilities

 

 

32,703

 

 

 

34,876

 

Environmental reserves

 

 

20,830

 

 

 

20,943

 

Deferred income taxes

 

 

13,644

 

 

 

7,161

 

Other noncurrent liabilities

 

 

2,930

 

 

 

2,440

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

501,703

 

 

 

479,099

 

 

 

 

 

 

 

 

 

 

Total Mueller Industries, Inc. stockholders’ equity

 

 

872,655

 

 

 

827,285

 

Noncontrolling interests

 

 

46,117

 

 

 

32,417

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

918,772

 

 

 

859,702

 

 

 

 

 

 

 

 

 

 

 

 

$

1,420,475

 

 

$

1,338,801

 

 

 

 

 

 

 

 

 

 

 


MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Six Months Ended

 

 (In thousands)

 

July 2,

2016

 

 

June 27,

2015

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Consolidated net income

 

$

56,924

 

 

$

56,202

 

Reconciliation of consolidated net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

18,162

 

 

 

16,293

 

Equity in earnings of unconsolidated affiliates

 

 

(1,927

)

 

 

 

Stock-based compensation expense

 

 

2,874

 

 

 

2,966

 

Gain on disposal of assets

 

 

(555

)

 

 

(15,392

)

Impairment charges

 

 

 

 

 

570

 

Deferred income taxes

 

 

3,548

 

 

 

(1,445

)

Income tax benefit from exercise of stock options

 

 

(186

)

 

 

(146

)

Changes in assets and liabilities, net of businesses acquired

 

 

 

 

 

 

 

 

Receivables

 

 

(52,334

)

 

 

(24,304

)

Inventories

 

 

1,176

 

 

 

(5,252

)

Other assets

 

 

17,009

 

 

 

6,963

 

Current liabilities

 

 

(1,314

)

 

 

(19,629

)

Other liabilities

 

 

(1,440

)

 

 

(415

)

Other, net

 

 

(72

)

 

 

739

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

41,865

 

 

 

17,150

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,248

)

 

 

(15,969

)

Businesses acquired, net of cash acquired

 

 

(20,533

)

 

 

(35,978

)

Net withdrawals from restricted cash balances

 

 

1,508

 

 

 

3,486

 

Proceeds from the sale of assets

 

 

1,482

 

 

 

5,518

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(27,791

)

 

 

(42,943

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayments of long-term debt

 

 

(500

)

 

 

(500

)

Dividends paid to stockholders of Mueller Industries, Inc.

 

 

(9,887

)

 

 

(8,435

)

Issuance of debt

 

 

2,000

 

 

 

 

Issuance (repayment) of debt by joint ventures, net

 

 

4,426

 

 

 

(17,750

)

Net cash received to settle stock-based awards

 

 

326

 

 

 

125

 

Income tax benefit from exercise of stock options

 

 

186

 

 

 

146

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(3,449

)

 

 

(26,414

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(2,308

)

 

 

(780

)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

8,317

 

 

 

(52,987

)

Cash and cash equivalents at the beginning of the period

 

 

274,844

 

 

 

352,134

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

$

283,161

 

 

$

299,147

 

 

 

 

 

 

 

 

 

 

 


 

 

MUELLER INDUSTRIES, INC.

Reconciliation of Net Income as Reported to Pro forma without Unusual Items

(Unaudited)

 

Earnings attributable to normal operations without the gain on sale of assets and severance is a measurement not derived in accordance with generally accepted accounting principles (GAAP).  Excluding these items 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 these items to net income as reported is as follows:

 

 

 

For the Quarter Ended June 27, 2015

 

 

 

 

 

 

 

Impact of

 

 

 

 

(In thousands, except per share data)

 

As Reported

 

 

Yorkshire Copper Tube

Severance

 

 

Gain on

Sale of Assets

 

 

Pro forma

 

Operating income

 

$

55,554

 

 

$

3,442

 

 

$

(15,376

)

 

$

43,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,219

)

 

 

 

 

 

 

 

 

(2,219

)

Other income, net

 

 

265

 

 

 

 

 

 

 

 

 

265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

53,600

 

 

 

3,442

 

 

 

(15,376

)

 

 

41,666

 

Income tax expense

 

 

(19,738

)

 

 

(697

)

 

 

5,905

 

 

 

(14,530

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

 

33,862

 

 

 

2,745

 

 

 

(9,471

)

 

 

27,136

 

Net income attributable to non-controlling interest

 

 

(211

)

 

 

 

 

 

 

 

 

(211

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Mueller Industries, Inc.

 

$

33,651

 

 

$

2,745

 

 

$

(9,471

)

 

$

26,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.59

 

 

$

0.05

 

 

$

(0.17

)

 

$

0.47