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Mueller Industries, Inc. Reports Third Quarter 2018 Earnings

MEMPHIS, Tenn., October 23, 2018 -- 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.”






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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.

CONTACT
Jeffrey A. Martin
(901) 753-3226


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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


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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













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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



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