Mueller Industries, Inc. Reports Third Quarter 2018 Earnings

MEMPHIS, Tenn.--(BUSINESS WIRE)-- Mueller Industries, Inc. (NYSE: MLI) announced today third quarter operating income of $33.7 million, compared with $37.5 million in the same quarter of 2017.

Net income for the period was $20.3 million, or 35 cents per diluted share, on $646.0 million in net sales, compared with net income of $22.3 million, or 39 cents per diluted share, on $550.4 million in net sales for the same quarter of 2017.

Higher unit sales volume in our core metal businesses, as well as contributions from acquisitions, led to the higher net sales reported.

Financial and Operating Highlights for the third quarter of 2018 include:

  • The average price of copper declined 36 cents per pound during the third quarter of 2018, resulting in a meaningful negative impact on margins. In contrast, the average price of copper rose 31 cents per pound during the third quarter of 2017, which benefited margins during that period.
  • We recognized $2.3 million of nonrecurring charges in the third quarter of 2018 related to purchase accounting adjustments for recently acquired businesses.
  • We posted $2.7 million of gains in the third quarter of 2018 from the sale of properties.
  • We recorded a $3.1 million loss on the Company’s equity investments in unconsolidated affiliates.
  • The effective tax rate for the quarter of 12.3 percent reflects an adjustment to true-up the transition tax on foreign earnings under the 2017 tax act. The annual effective tax rate for 2018 is expected to be approximately 22 percent.
  • During the quarter, the Company generated $86.3 million in cash from operations and ended the quarter with a current ratio of 3.1 to 1.

Regarding the outlook, Greg Christopher, Mueller CEO said, “Our businesses’ performance was good in the third quarter, although reported earnings were impacted by movements in copper prices. On a LIFO basis, our businesses outperformed 2017 by most metrics, and cash generated from operations was solid. Volume in our mill businesses was strong, led by the recovery of market share in our U.S. copper tube businesses as we benefit from the completion of our modernization investments. As we continue to operate the new equipment more effectively, we expect to recognize the secondary rationalization benefits and achieve our targeted cost improvements.

The economic outlook for most of our markets and businesses remains solid.”

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, 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 29, 2018     September 30, 2017 September 29, 2018     September 30, 2017
 
Net sales $ 645,958 $ 550,363 $ 1,948,791 $ 1,742,549
 
Cost of goods sold 566,956 471,262 1,676,446 1,484,000
Depreciation and amortization 10,619 8,266 29,081 25,216
Selling, general, and administrative expense 38,889 33,214 112,077 104,676
Asset impairments 411
(Gain) loss on sale of assets (2,691 ) 140 (334 ) (1,491 )
Insurance recovery (1,486 )   (1,486 )  
 
Operating income 33,671 37,481 133,007 129,737
 
Interest expense (6,746 ) (5,237 ) (18,728 ) (14,210 )
Other income (expense), net 411   (380 ) 1,557   556  
 
Income before income taxes 27,336 31,864 115,836 116,083
 
Income tax expense (3,373 ) (8,716 ) (23,179 ) (33,295 )
Loss from unconsolidated affiliates, net of foreign tax (3,100 ) (394 ) (13,568 ) (1,746 )
 
Consolidated net income 20,863 22,754 79,089 81,042
 
Net income attributable to noncontrolling interests (571 ) (496 ) (1,487 ) (1,164 )
 
Net income attributable to Mueller Industries, Inc. $ 20,292   $ 22,258   $ 77,602   $ 79,878  
 
Weighted average shares for basic earnings per share 56,877 56,987 56,858 56,891
Effect of dilutive stock-based awards 540   456   524   542  
 
Adjusted weighted average shares for diluted earnings per share 57,417   57,443   57,382   57,433  
 
Basic earnings per share $ 0.36   $ 0.39   $ 1.36   $ 1.40  
 
Diluted earnings per share $ 0.35   $ 0.39   $ 1.35   $ 1.39  
 
Dividends per share $ 0.10   $ 0.10   $ 0.30   $ 8.30  
 
Summary Segment Data:
 
Net sales:
Piping Systems Segment $ 410,525 $ 384,078 $ 1,294,672 $ 1,205,697
Industrial Metals Segment 158,709 147,578 511,932 451,919
Climate Segment 81,619 32,488 156,854 103,403
Elimination of intersegment sales (4,895 ) (13,781 ) (14,667 ) (18,470 )
 
Net sales $ 645,958   $ 550,363   $ 1,948,791   $ 1,742,549  
 
Operating income:
Piping Systems Segment $ 25,408 $ 20,941 $ 100,376 $ 86,323
Industrial Metals Segment 15,111 22,698 53,837 59,434
Climate Segment 5,774 5,429 16,668 17,155
Unallocated expenses (12,622 ) (11,587 ) (37,874 ) (33,175 )
 
Operating income $ 33,671   $ 37,481   $ 133,007   $ 129,737  
       

 

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
(In thousands)

September 29, 2018

December 30, 2017
ASSETS
Cash and cash equivalents $ 104,735 $ 120,269
Accounts receivable, net 308,231 244,795
Inventories 313,396 327,901
Other current assets 34,842 46,150
 
Total current assets 761,204 739,115
 
Property, plant, and equipment, net 360,655 304,321
Other assets 299,884 276,737
 
$ 1,421,743 $ 1,320,173
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of debt $ 9,254 $ 16,480
Accounts payable 121,412 102,503
Other current liabilities 113,617 123,269
 
Total current liabilities 244,283 242,252
 
Long-term debt 510,032 448,592
Pension and postretirement liabilities 26,844 28,713
Environmental reserves 21,339 23,699
Deferred income taxes 17,299 19,403
Other noncurrent liabilities 18,538 21,486
 
Total liabilities 838,335 784,145
 
Total Mueller Industries, Inc. stockholders’ equity 568,986 522,111
Noncontrolling interests 14,422 13,917
 
Total equity 583,408 536,028
 
$ 1,421,743 $ 1,320,173
   

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
For the Nine Months Ended
(In thousands) September 29, 2018     September 30, 2017
 
Cash flows from operating activities
Consolidated net income $ 79,089 $ 81,042
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization 29,320 25,439
Stock-based compensation expense 5,953 5,555
Loss from unconsolidated affiliates 13,568 1,746
Gain on sale of business (1,491 )
Gain on disposals of properties (247 ) (26 )
Gain on sales of securities (611 )
Impairment charge 411
Insurance recovery (1,486 )
Deferred income taxes (1,502 ) 624
Changes in assets and liabilities, net of effects of businesses acquired and sold:
Receivables (42,201 ) (33,359 )
Inventories 48,716 (40,920 )
Other assets 11,250 (3,372 )
Current liabilities (7,947 ) 20,967
Other liabilities (13,862 ) (1,498 )
Other, net 1,864   (965 )
 
Net cash provided by operating activities 122,515   53,542  
 
Cash flows from investing activities
Capital expenditures (16,685 ) (17,297 )
Acquisition of businesses, net of cash acquired (167,677 ) (18,396 )
Proceeds from sale of business, net of cash sold 17,483
Investments in unconsolidated affiliates (609 ) (3,317 )
Proceeds from sales of properties 18,693 11,732
Proceeds from sales of securities   1,787  
 
Net cash used in investing activities (166,278 ) (8,008 )
 
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc. (17,051 ) (191,241 )
Repurchase of common stock (6,575 )
Issuance of long-term debt 194,131
Repayments of long-term debt (139,518 ) (100,917 )
Repayment of debt by consolidated joint ventures, net (2,978 ) (3,451 )
Net cash used to settle stock-based awards (726 ) (1,644 )
Dividends paid to noncontrolling interests (592 ) (2,909 )
 
Net cash provided by (used in) financing activities 26,691   (300,162 )
 
Effect of exchange rate changes on cash (442 ) 4,466  
 
Decrease in cash, cash equivalents, and restricted cash (17,514 ) (250,162 )
Cash, cash equivalents, and restricted cash at the beginning of the period 126,563   360,469  
 
Cash, cash equivalents, and restricted cash at the end of the period $ 109,049   $ 110,307  

Mueller Industries, Inc.
Jeffrey A. Martin, 901-753-3226

Source: Mueller Industries, Inc.