Mueller Industries, Inc. Reports Fiscal 2023 Fourth Quarter and Full Year Results

Rhea-AI Summary

Mueller Industries, Inc. (NYSE: MLI) reported a decline in net income, earnings before taxes, net sales, and diluted EPS for the fourth quarter and full year of 2023 compared to the previous year. The company experienced reduced demand in most segments and markets, particularly those products used in new residential construction. Despite this, the CEO remains optimistic about the business outlook due to structural changes and strong cash flows.

Positive

• The company generated $174.3 million of cash from operations in the fourth quarter, and $672.8 million for the year.
• Year-end cash and short-term investments totaled $1.3 billion, and the current ratio is 6.4 to 1.
• The CEO highlighted that the structural changes made to improve gross margins are showing durability and the manufacturing platform is well balanced for both current and higher levels of demand when conditions improve.
• The CEO emphasized that there continues to be pent up demand for residential housing and needed investment in U.S. infrastructure, and the company is well positioned for long-term growth and to deliver superior returns to shareholders.

Negative

• Net income, earnings before taxes, net sales, and diluted EPS all experienced significant declines compared to the previous year.
• The company recorded a reserve of $11.6 million related to a pending legal matter at an unconsolidated affiliate, Tecumseh Products Company.
• The company has yet to recognize any insurance recovery for the significant losses incurred as a result of a tornado that destroyed its copper fittings operations in Covington, Tennessee.

Insights

Financial Analyst

Reviewing Mueller Industries' reported financials reveals several key indicators of the company's performance. The downward trend in net income, earnings before taxes, net sales and diluted EPS suggests a contraction in profitability and revenue, which is significant given the context of a historically profitable fourth quarter in the prior year. This contraction is largely attributed to decreased demand, particularly in new residential construction, which is a critical sector for Mueller's product offerings.

The cash flow generation remains robust, indicating effective cash management and operational efficiency. The substantial cash and short-term investments position at year-end provides Mueller with strategic flexibility to invest in growth opportunities or weather economic downturns. The company's current ratio, an indicator of liquidity, is exceptionally high at 6.4 to 1, which far exceeds the typical industrial sector benchmark of 1.5 to 2. It suggests a very strong short-term financial stability, though it could also prompt questions regarding the efficiency of asset utilization.

Investors should consider the impact of the legal reserve for the Tecumseh Products Company matter and the lack of insurance recovery for the tornado damages, as these factors could influence future financials. The company's anticipation of recognizing insurance recovery in the latter half of 2024 offers a potential future financial uplift.

Market Research Analyst

From a market perspective, Mueller Industries' performance reflects broader economic trends, such as the cooling of the housing market due to rising interest rates and inflation. The company's emphasis on structural changes to improve gross margins and a balanced manufacturing platform suggests a strategic adaptation to current market conditions. The mention of pent-up demand for residential housing and U.S. infrastructure investment indicates Mueller is aligning with anticipated market recovery areas.

Investors and stakeholders should note the company's positive outlook on the expected easing of interest rates and inflation, which could rekindle building construction activity. This outlook, combined with a strong cash flow and cash balance, positions Mueller to potentially capitalize on market upturns. However, the timing and extent of market recovery remain uncertain and thus require monitoring.

Economist

An economist's view would highlight the influence of macroeconomic factors on Mueller Industries' results. The decline in demand is symptomatic of the broader economic slowdown, particularly in interest rate-sensitive sectors like housing. The company's performance must be contextualized within the current economic landscape of rising interest rates, which typically dampen borrowing and investment in construction.

The CEO’s comments on the positive business outlook and the potential for pent-up demand suggest an anticipation of economic recovery. The strategic focus on ensuring operational capitalization and pursuing growth through acquisitions indicates a proactive approach to leveraging economic cycles. The company's financial health, evidenced by strong cash flows, positions it well to navigate through and benefit from these cycles.

Long-term implications for stakeholders include the potential for growth as economic conditions stabilize. However, the short-term outlook may be tempered by ongoing economic pressures and the delayed realization of insurance recoveries, which could affect the company's financial performance.

COLLIERVILLE, Tenn.--(BUSINESS WIRE)-- Mueller Industries, Inc. (NYSE: MLI) today reported 2023 fourth quarter and full year results.

For the Fourth Quarter 2023 versus Fourth Quarter 2022:

• Net income:		$119.2 million vs $138.9 million, down 14.2%.
• Earnings before taxes:		$177.9 million vs $185.9 million, down 4.3%.
• Net sales:		$732.4 million vs $877.6 million, down 16.5%.
• Diluted EPS:		$1.05 vs $1.23, down 14.6%.

For the Full Year 2023 versus the Full Year 2022:

• Net income:		$602.9 million vs $658.3 million, down 8.4%.
• Earnings before taxes:		$845.2 million vs $876.0 million, down 3.5%.
• Net sales:		$3.4 billion vs $4.0 billion, down 14.1%.
• Diluted EPS:		$5.30 vs $5.82, down 8.9%.

Fourth Quarter*/Year-End Financial and Operating Commentary:

• The net sales decline of $145.2 million in the fourth quarter was primarily attributable to lower demand in most segments and markets, particularly those products that are predominantly used in new residential construction. Fluctuations in COMEX copper prices had a nominal impact on the change in net sales.
• The Company generated $174.3 million of cash from operations in the fourth quarter, and $672.8 million for the year.
• Year-end cash and short-term investments totaled $1.3 billion, and our current ratio is 6.4 to 1.
• During the quarter, we recorded a reserve of $11.6 million related to a pending legal matter at unconsolidated affiliate, Tecumseh Products Company, which is currently under appeal.
• We have yet to recognize any insurance recovery for the significant losses we have incurred as a result of the tornado that destroyed our copper fittings operations in Covington, Tennessee. We anticipate doing so sometime during the latter half of 2024, once the business is back and operational.

* For context, the Company’s current fourth quarter includes 13 weeks of results, as compared to the 14 weeks reported for the fourth quarter of 2022, the business’ most profitable fourth quarter on record.

Regarding the quarter performance and outlook, Greg Christopher, Mueller’s CEO said, “Our team performed exceptionally well on all fronts and delivered another quarter of excellent earnings and cash generation, despite reduced demand. Importantly, the structural changes we have made to improve gross margins are showing durability, and our manufacturing platform is well balanced for both current demand levels, as well as higher levels of demand when conditions improve.

Our business outlook is positive. There continues to be pent up demand for residential housing and needed investment in U.S. infrastructure. As rising interest rates and inflation begin to recede, demand will return as building construction activity is reignited.

Our strong cash flows and tremendous cash balance provide us the resources to execute on our strategic plans. Our top priorities are ensuring our operations are well capitalized to remain a low-cost producer, and pursuing acquisitions that strengthen our core and create greater growth avenues.

We are well positioned for long-term growth and to deliver superior returns to our shareholders.”

Mueller Industries, Inc. (NYSE: MLI) is an industrial corporation whose holdings manufacture vital goods for important markets such as air, water, oil and gas distribution; climate comfort; food preservation; energy transmission; medical; aerospace and automotive. It includes a network of companies and brands throughout North America, Europe, Asia, and the Middle East.

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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								For the Year Ended
(In thousands, except per share data)	December 30, 2023				December 31, 2022				December 30, 2023				December 31, 2022
Net sales	$	732,377			$	877,581			$	3,420,345			$	3,982,455
Cost of goods sold		536,383				620,800				2,433,511				2,864,862
Depreciation and amortization		9,250				10,738				39,954				43,731
Selling, general, and administrative expense		51,184				55,630				208,172				196,713
Gain on sale of businesses		—				—				(4,137	)			—
Impairment charges		324				—				6,258				—
Gain on insurance settlement		—				—				(19,466	)			—
Operating income		135,236				190,413				756,053				877,149
Interest expense		(713	)			(144	)			(1,221	)			(810	)
Interest income		13,642				4,838				38,208				6,457
Realized and unrealized gains on short-term investments		21,503				—				41,865				2,918
Gain on extinguishment of NMTC liability		7,534				—				7,534				—
Environmental income (expense)		202				349				(825	)			(1,298	)
Pension plan termination expense		—				(13,100	)			—				(13,100	)
Other income, net		471				3,592				3,618				4,715
Income before income taxes		177,875				185,948				845,232				876,031
Income tax expense		(46,440	)			(49,798	)			(220,762	)			(223,322	)
(Loss) income from unconsolidated affiliates, net of foreign tax		(12,139	)			4,085				(14,821	)			10,111
Consolidated net income		119,296				140,235				609,649				662,820
Net income attributable to noncontrolling interests		(58	)			(1,329	)			(6,752	)			(4,504	)
Net income attributable to Mueller Industries, Inc.	$	119,238			$	138,906			$	602,897			$	658,316
Weighted average shares for basic earnings per share		111,556				111,284				111,420				111,558
Effect of dilutive stock-based awards		2,425				1,434				2,242				1,552
Adjusted weighted average shares for diluted earnings per share		113,981				112,718				113,662				113,110
Basic earnings per share	$	1.07			$	1.25			$	5.41			$	5.90
Diluted earnings per share	$	1.05			$	1.23			$	5.30			$	5.82
Dividends per share	$	0.150			$	0.125			$	0.600			$	0.500

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME, CONTINUED (Unaudited)
	For the Quarter Ended								For the Year Ended
(In thousands)	December 30, 2023				December 31, 2022				December 30, 2023				December 31, 2022
Summary Segment Data:
Net sales:
Piping Systems Segment	$	513,938			$	567,039			$	2,382,573			$	2,730,084
Industrial Metals Segment		125,363				146,322				577,875				644,689
Climate Segment		103,933				170,551				500,790				650,307
Elimination of intersegment sales		(10,857	)			(6,331	)			(40,893	)			(42,625	)
Net sales	$	732,377			$	877,581			$	3,420,345			$	3,982,455
Operating income:
Piping Systems Segment	$	113,634			$	131,056			$	569,239			$	671,062
Industrial Metals Segment		14,972				22,960				76,379				82,464
Climate Segment		25,963				53,158				171,864				188,067
Unallocated expenses		(19,333	)			(16,761	)			(61,429	)			(64,444	)
Operating income	$	135,236			$	190,413			$	756,053			$	877,149

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)	December 30, 2023				December 31, 2022
ASSETS
Cash and cash equivalents	$	1,170,893			$	461,018
Short-term investments		98,146				217,863
Accounts receivable, net		351,561				380,352
Inventories		380,248				448,919
Other current assets		39,173				26,501
Total current assets		2,040,021				1,534,653
Property, plant, and equipment, net		385,165				379,950
Operating lease right-of-use assets		35,170				22,892
Other assets		298,945				304,904
	$	2,759,301			$	2,242,399
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of debt	$	796			$	811
Accounts payable		120,485				128,000
Current portion of operating lease liabilities		7,893				4,942
Other current liabilities		187,964				214,542
Total current liabilities		317,138				348,295
Long-term debt		185				1,218
Pension and postretirement liabilities		12,062				13,055
Environmental reserves		15,030				16,380
Deferred income taxes		19,134				16,258
Noncurrent operating lease liabilities		26,683				16,880
Other noncurrent liabilities		10,353				16,349
Total liabilities		400,585				428,435
Total Mueller Industries, Inc. stockholders’ equity		2,337,445				1,790,914
Noncontrolling interests		21,271				23,050
Total equity		2,358,716				1,813,964
	$	2,759,301			$	2,242,399

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	For the Year Ended
(In thousands)	December 30, 2023				December 31, 2022
Cash flows from operating activities
Consolidated net income	$	609,649			$	662,820
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization		40,824				44,088
Stock-based compensation expense		23,131				17,801
Provision for doubtful accounts receivable		(84	)			323
Loss (income) from unconsolidated affiliates		14,821				(10,111	)
Gain on sale of businesses		(4,137	)			—
Unrealized gain on short-term investments		(24,765	)			—
Gain on disposals of assets		(1	)			(6,373	)
Insurance proceeds - noncapital related		9,854				1,646
Gain on sale of securities		(17,100	)			—
Gain on insurance settlement		(19,466	)			—
Impairment charges		6,258				—
Gain on extinguishment of NMTC liability		(7,534	)			—
Deferred income tax expense (benefit)		4,790				(3,880	)
Changes in assets and liabilities, net of effects of businesses acquired and sold:
Receivables		30,915				82,713
Inventories		67,903				(24,189	)
Other assets		(20,700	)			(8,971	)
Current liabilities		(40,606	)			(26,633	)
Other liabilities		(3,497	)			(7,564	)
Other, net		2,511				2,273
Net cash provided by operating activities		672,766				723,943
Cash flows from investing activities
Proceeds from sale of assets, net of cash transferred		279				7,850
Purchase of short-term investments		(106,231	)			(217,863	)
Proceeds from the sale of securities		55,454				—
Proceeds from the maturity of short-term investments		217,863				—
Capital expenditures		(54,025	)			(37,639	)
Insurance proceeds - capital related		24,646				3,354
Dividends from unconsolidated affiliates		1,093				2,295
Investments in unconsolidated affiliates		(3,999	)			—
Net cash provided by (used in) investing activities		135,080				(242,003	)

MUELLER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED (Unaudited)
	For the Year Ended
(In thousands)	December 30, 2023				December 31, 2022
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.		(66,868	)			(55,787	)
Dividends paid to noncontrolling interests		(9,312	)			(7,248	)
Repayments of long-term debt		(241	)			(204	)
(Repayment) issuance of debt by consolidated joint ventures, net		(30	)			67
Repurchase of common stock		(19,303	)			(38,054	)
Net cash (used) received to settle stock-based awards		(8,755	)			(1,429	)
Net cash used in financing activities		(104,509	)			(102,655	)
Effect of exchange rate changes on cash		5,590				(4,365	)
Increase in cash, cash equivalents, and restricted cash		708,927				374,920
Cash, cash equivalents, and restricted cash at the beginning of the year		465,296				90,376
Cash, cash equivalents, and restricted cash at the end of the year	$	1,174,223			$	465,296

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205683564/en/

Jeffrey A. Martin

(901) 753-3226

Source: Mueller Industries, Inc.

FAQ

What is Mueller Industries, Inc.'s ticker symbol?

Mueller Industries, Inc.'s ticker symbol is MLI and it is listed on the NYSE.

What were Mueller Industries, Inc.'s net sales for the fourth quarter of 2023?

Mueller Industries, Inc.'s net sales for the fourth quarter of 2023 were $732.4 million.

What was the percentage change in Mueller Industries, Inc.'s net income for the full year of 2023 compared to 2022?

Mueller Industries, Inc.'s net income for the full year of 2023 decreased by 8.4% compared to 2022.

What did the CEO of Mueller Industries, Inc. say about the business outlook?

The CEO of Mueller Industries, Inc. remains optimistic about the business outlook, highlighting pent up demand for residential housing and U.S. infrastructure investment, as well as the company's strong cash flows.

Where does Mueller Industries, Inc. operate?

Mueller Industries, Inc. operates throughout North America, Europe, Asia, and the Middle East.