Mueller Industries, Inc. Reports Third Quarter 2020 Earnings

Rhea-AI Summary

Mueller Industries, Inc. (NYSE: MLI) reported a strong Q3 with operating income of $69.2 million, up from $46.3 million in the previous year. Net income rose to $42.7 million or 76 cents per diluted share, compared to $29.1 million or 52 cents in Q3 2019. Net sales reached $619.1 million, slightly higher than $608.6 million last year, primarily due to increased selling prices influenced by higher copper costs and contributions from acquisitions. The company incurred a $5.5 million loss on investment in Tecumseh Products. Cash generated from operations totaled $196.9 million year-to-date, with $113.6 million cash on hand.

Positive

• Operating income increased by $22.9 million year-over-year.
• Net income rose to $42.7 million, reflecting strong performance.
• Net sales improved to $619.1 million despite challenges.
• Generated $54.1 million in cash from operations in Q3.

Negative

• Lower volumes in core businesses post-COVID-19 impacts.
• Incurred a $5.5 million loss on investment in Tecumseh Products.

COLLIERVILLE, Tenn.--(BUSINESS WIRE)--Mueller Industries, Inc. (NYSE: MLI) announced third quarter operating income of $69.2 million, compared with $46.3 million for the prior year period.

Net income for the period was $42.7 million, or 76 cents per diluted share, compared to net income of $29.1 million, or 52 cents per diluted share in 2019. Net sales were $619.1 million, compared with $608.6 million in the third quarter of 2019.

Third Quarter Financial and Operating Highlights:

• COMEX copper averaged $2.94 per pound, 12 percent higher than the prior year period.
• The $10.5 million increase in quarter-over-quarter sales was due to $15.2 million from higher selling prices associated with the rise in copper and $24.2 million of sales from recently acquired businesses. These increases were largely offset by lower volumes, particularly in our core businesses, which have not fully recovered from the impacts of the COVID-19 pandemic.
• We recorded a $5.5 million loss on our investment in Tecumseh Products Company, compared to the $1.9 million loss recorded during the prior year period. Included in the $5.5 million loss was $1.2 million of pre-tax restructuring charges and $0.8 million in foreign currency losses.
• The effective tax rate for the quarter was 24 percent, a more normal rate, compared with 19 percent in the prior year period.
• We generated an additional $54.1 million in cash from operations for the quarter, totaling $196.9 million year-to-date. At the end of the quarter cash on hand was $113.6 million, with only $55.0 million drawn on our credit facility.
• During the quarter, we funded the purchase of certain assets of Wieland-Kessler, LLC for $57.2 million.
• Our current ratio remains at 2.9 to 1 and our debt to total capitalization remains low at 32 percent.

Regarding the outlook, CEO Greg Christopher said, "Amidst the unprecedented challenges posed by the COVID-19 pandemic, to have achieved these results is certainly gratifying.

"The US economy appears to be rebounding, but it is not yet back to the strong pre-pandemic levels. Acquisitions and capital investments in our manufacturing operations are paying off, and should continue to support strong cash generation and our strategic growth initiatives as global economies reopen and regain their strength."

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										For the Nine Months Ended
(In thousands, except per share data)		September 26, 2020					September 28, 2019					September 26, 2020					September 28, 2019
Net sales		$	619,105				$	608,602				$	1,722,192				$	1,886,777
Cost of goods sold		500,780					510,788					1,412,654					1,586,129
Depreciation and amortization		10,752					10,823					32,888					31,856
Selling, general, and administrative expense		38,346					40,739					114,714					121,838
Asset impairments		—					—					3,035					—
Litigation settlement, net		—					—					(21,933		)			—
Operating income		69,227					46,252					180,834					146,954
Interest expense		(4,885		)			(6,148		)			(15,237		)			(20,135		)
Other income, net		522					533					3,634					823
Income before income taxes		64,864					40,637					169,231					127,642
Income tax expense		(15,450		)			(7,665		)			(42,623		)			(27,643		)
Loss from unconsolidated affiliates, net of foreign tax		(5,457		)			(2,528		)			(20,213		)			(23,740		)
Consolidated net income		43,957					30,444					106,395					76,259
Net income attributable to noncontrolling interests		(1,255		)			(1,351		)			(3,322		)			(3,457		)
Net income attributable to Mueller Industries, Inc.		$	42,702				$	29,093				$	103,073				$	72,802
Weighted average shares for basic earnings per share		55,816					55,832					55,805					55,771
Effect of dilutive stock-based awards		550					482					534					523
Adjusted weighted average shares for diluted earnings per share		56,366					56,314					56,339					56,294
Basic earnings per share		$	0.77				$	0.52				$	1.85				$	1.31
Diluted earnings per share		$	0.76				$	0.52				$	1.83				$	1.29
Dividends per share		$	0.10				$	0.10				$	0.30				$	0.30
Summary Segment Data:
Net sales:
Piping Systems Segment		$	409,414				$	390,917				$	1,128,467				$	1,193,274
Industrial Metals Segment		118,831					135,443					338,652					434,037
Climate Segment		97,604					90,938					276,983					276,853
Elimination of intersegment sales		(6,744		)			(8,696		)			(21,910		)			(17,387		)
Net sales		$	619,105				$	608,602				$	1,722,192				$	1,886,777
Operating income:
Piping Systems Segment		$	44,863				$	36,010				$	122,613				$	100,155
Industrial Metals Segment		18,348					12,599					38,403					46,697
Climate Segment		18,156					7,963					43,523					33,384
Unallocated expenses		(12,140		)			(10,320		)			(23,705		)			(33,282		)
Operating income		$	69,227				$	46,252				$	180,834				$	146,954

MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)
(In thousands)		September 26, 2020			December 28, 2019
ASSETS
Cash and cash equivalents		$	113,640		$	97,944
Accounts receivable, net		320,035			269,943
Inventories		271,310			292,107
Other current assets		24,880			33,778
Total current assets		729,865			693,772
Property, plant, and equipment, net		368,736			363,128
Operating lease right-of-use assets		22,397			26,922
Other assets		299,014			287,118
		$	1,420,012		$	1,370,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of debt		$	6,684		$	7,530
Accounts payable		108,063			85,644
Current portion of operating lease liabilities		6,320			5,250
Other current liabilities		131,685			135,863
Total current liabilities		252,752			234,287
Long-term debt		342,972			378,724
Pension and postretirement liabilities		18,186			22,208
Environmental reserves		19,809			19,972
Deferred income taxes		18,066			21,094
Noncurrent operating lease liabilities		16,464			22,388
Other noncurrent liabilities		12,412			10,131
Total liabilities		680,661			708,804
Total Mueller Industries, Inc. stockholders’ equity		717,621			643,468
Noncontrolling interests		21,730			18,668
Total equity		739,351			662,136
		$	1,420,012		$	1,370,940

MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		For the Nine Months Ended
(In thousands)		September 26, 2020					September 28, 2019
Cash flows from operating activities
Consolidated net income		$	106,395				$	76,259
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization		33,127					32,095
Stock-based compensation expense		6,332					6,355
Provision for doubtful accounts receivable		953					(66		)
Loss from unconsolidated affiliates		20,213					23,740
Loss (gain) on disposals of properties		144					(24		)
Impairment charges		3,035					—
Change in fair value of contingent consideration		—					4,500
Deferred income tax benefit		(836		)			(1,593		)
Changes in assets and liabilities, net of effects of business acquired:
Receivables		(45,530		)			(47,367		)
Inventories		41,598					50,985
Other assets		9,053					(7,485		)
Current liabilities		25,913					1,687
Other liabilities		(5,813		)			(7,112		)
Other, net		2,294					(47		)
Net cash provided by operating activities		196,878					131,927
Cash flows from investing activities
Capital expenditures		(29,204		)			(20,162		)
Acquisition of businesses, net of cash acquired		(72,648		)			3,465
Investments in unconsolidated affiliates		—					(11,000		)
Issuance of notes receivable		(9,155		)			—
Proceeds from sales of properties		12					385
Net cash used in investing activities		(110,995		)			(27,312		)
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.		(16,754		)			(16,738		)
Repurchase of common stock		(5,574		)			(1,763		)
Payment of contingent consideration		(7,000		)			(3,170		)
Issuance of long-term debt		150,027					100,658
Repayments of long-term debt		(186,492		)			(151,305		)
Repayment of debt by consolidated joint ventures, net		(299		)			(4,352		)
Net cash used to settle stock-based awards		(160		)			(1,069		)
Net cash used in financing activities		(66,252		)			(77,739		)
Effect of exchange rate changes on cash		(3,294		)			(1,511		)
Increase in cash, cash equivalents, and restricted cash		16,337					25,365
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		$	114,379				$	102,503