Paul Mueller Company Announces Its Second Quarter Earnings of 2022

Rhea-AI Summary

Paul Mueller Company (OTC: MUEL) reported decreased earnings for the quarter ending June 30, 2022, with net sales at $45,977, down from $49,278 in 2021. The company recorded a net loss of $(149) compared to a profit of $4,780 last year. Gross profit also declined from $15,369 to $10,435. A significant increase in the LIFO reserve reduced pre-tax earnings by $3.5 million. Despite challenges, including production delays due to component shortages, backlog increased to $141.7 million, driven by strong orders in the pharmaceutical sector. The company aims for better margins in the second half of 2022.

Positive

• Backlog increased to $141.7 million compared to $78.4 million at December 31, 2021.
• Orders entered for the first six months of 2022 were $148.4 million, up from $98.9 million in 2021.
• Heat Transfer and Components groups increased pre-tax earnings by $3.3 million year-over-year.

Negative

• Net income decreased to $(149) for Q2 2022, down from $4,780 in Q2 2021.
• LIFO reserve increased, negatively impacting pre-tax earnings by $3.5 million YTD.
• Revenue decreased year-over-year in US operations, primarily due to the sale of MFO and lower pharmaceutical revenue.

SPRINGFIELD, Mo., July 29, 2022 (GLOBE NEWSWIRE) -- Paul Mueller Company (OTC: MUEL) today announced earnings for the quarter ended June 30, 2022.

PAUL MUELLER COMPANY
SIX-MONTH REPORT
Unaudited
(In thousands)
CONSOLIDATED STATEMENTS OF INCOME
			Three Months Ended						Six Months Ended						Twelve Months Ended
			June 30						June 30						June 30
			2022			2021			2022			2021			2022			2021
Net Sales			$	45,977		$	49,278		$	86,752		$	94,557		$	176,808		$	200,290
Cost of Sales			35,542			33,909			67,403			65,747			137,823			139,159
Gross Profit			$	10,435		$	15,369		$	19,349		$	28,810		$	38,985		$	61,131
Selling, General and Administrative Expense			10,397			11,553			20,637			22,861			41,660			45,027
Goodwill Impairment Expense			-			-			-			-			-			15,397
Operating Income (Loss)			$	38		$	3,816		$	(1,288)		$	5,949		$	(2,675)		$	707
Interest Expense			(117)			(91)			(505)			(542)			(705)			(825)
PPP Loan Forgiveness			-			-			-			-			1,884			-
Other Income (Expense)			(126)			2,004			138			2,042			940			2,808
Income (Loss) before Provision (Benefit) for Income Taxes			$	(205)		$	5,729		$	(1,655)		$	7,449		$	(556)		$	2,690
Provision (Benefit) for Income Taxes			(56)			949			(384)			1,368			(205)			3,889
Net Income (Loss)			$	(149)		$	4,780		$	(1,271)		$	6,081		$	(351)		$	(1,199)
Earnings (Loss) per Common Share ––	Basic		$	(0.14)		$	4.38		$	(1.17)		$	5.56		$	(0.32)		$	(1.05)
	Diluted		$	(0.14)		$	4.38		$	(1.17)		$	5.56		$	(0.32)		$	(1.05)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		Six Months Ended
		June 30
		2022			2021
Net Income (Loss)		$	(1,271)		$	6,081
Other Comprehensive Income, Net of Tax:
Foreign Currency Translation Adjustment		(2,292)			(847)
Comprehensive Income (Loss)		$	(3,563)		$	5,234

 

CONSOLIDATED BALANCE SHEETS
		June 30			December 31
		2022			2021
Cash and Short-Term Investments		$	16,090		$	11,281
Accounts Receivable		21,446			25,774
Inventories (FIFO)		56,534			43,309
LIFO Reserve		(20,402)			(16,855)
Inventories (LIFO)		36,132			26,454
Current Net Investments in Sales-Type Leases		21			23
Other Current Assets		3,214			1,814
Current Assets		$	76,903		$	65,346
Net Property, Plant, and Equipment		39,321			41,250
Right of Use Assets		2,208			2,526
Other Assets		7,414			7,003
Long-Term Net Investments in Sales-Type Leases		191			164
Total Assets		$	126,037		$	116,289
Accounts Payable		$	14,029		$	14,470
Current Maturities and Short-Term Debt		1,240			1,330
Current Lease Liabilities		420			483
Advance Billings		34,039			18,595
Other Current Liabilities		10,502			9,096
Current Liabilities		$ 60,230			$ 43,974
Long-Term Debt		12,762			14,241
Long-Term Pension Liabilities		16,585			18,036
Other Long-Term Liabilities		2,328			1,848
Lease Liabilities		766			897
Total Liabilities		$	92,671		$	78,996
Shareholders' Investment		33,366			37,293
Total Liabilities and Shareholders' Investment		$	126,037		$	116,289

SELECTED FINANCIAL DATA
		June 30			December 31
		2022			2021
Book Value per Common Share		$	30.73		$	34.32
Total Shares Outstanding		1,085,711			1,086,661
Backlog		$	141,719		$	78,357

CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
														Accumulated Other
		Common						Retained						Comprehensive
		Stock			Paid-in Surplus			Earnings			Treasury Stock			Income (Loss)			Total
Balance, December 31, 2021		$	1,508		$	9,708		$	72,764		$	(10,749)		$	(35,938)		$	37,293
Add (Deduct):
Net Income (Loss)								(1,271)									(1,271)
Other Comprehensive Income (Loss), Net of Tax														(2,292)			(2,292)
Dividends, $.15 per Common Share								(326)									(326)
Treasury Stock Acquisition											(38)						(38)
Balance, June 30, 2022		$	1,508		$	9,708		$	71,167		$	(10,787)		$	(38,230)		$	33,366

 

CONSOLIDATED STATEMENT OF CASH FLOWS
		Six Months Ended June 30, 2022			Six Months Ended June 30,2021
Operating Activities:
Net Income (Loss)		$	(1,271)		$	6,081
Adjustment to Reconcile Net Income to Net Cash Provided (Required) by Operating Activities:
Pension Contributions (Greater) Less than Expense		(1,451)			(1,921)
Bad Debt Expense (Recovery)		15			(44)
Depreciation & Amortization		3,028			3,277
(Gain) Loss on Sales of Equipment		(3)			(18)
PPP Loan Forgiveness		-			(1,884)
Change in Assets and Liabilities
Dec (Inc) in Accts and Notes Receivable		4,313			(4,618)
(Inc) in Cost in Excess of Estimated Earnings and Billings		-			(824)
(Inc) in Inventories		(8,925)			(5,947)
(Inc) Dec in Prepayments		(1,400)			14
(Inc) in Net Investment in Sales-type leases		(25)			(37)
Dec in Other Assets		251			611
(Dec) Inc in Accounts Payable		(441)			757
(Dec) in Accrued Income Tax		(1)			-
Inc (Dec) in Other Accrued Expenses		1,689			(4,061)
Inc in Advanced Billings		15,444			7,944
(Dec) in Billings in Excess of Costs and Estimated Earnings		(281)			(1,982)
Inc in Lease Liability for Operating		238			51
Inc in Lease Liability for Financing		-			43
Principal payments of Lease Liability for Operating		(218)			(137)
(Dec) Inc in Other Long-Term Liabilities		(108)			(47)
Net Cash Provided (Required) by Operating Activities		$	10,854		$	(2,742)
Investing Activities
Proceeds from Sales of Equipment		3			24
Additions to Property, Plant, and Equipment		(3,828)			(2,188)
Net Cash (Required) for Investing Activities		$	(3,825)		$	(2,164)
Financing Activities
Principal payments of Lease Liability for Financing		(106)			(136)
(Repayment) Proceeds of Short-Term Borrowings, Net		-			(610)
(Repayment) Proceeds of Long-Term Debt		(760)			(843)
Dividends Paid		(326)			-
Treasury Stock Acquisitions		(38)			(4,194)
Net Cash (Required) for Financing Activities		$	(1,230)		$	(5,783)
Effect of Exchange Rate Changes		(990)			(653)
Net Increase (Decrease) in Cash and Cash Equivalents		$	4,809		$	(11,342)
Cash and Cash Equivalents at Beginning of Year		11,281			22,943
Cash and Cash Equivalents at End of Quarter		$	16,090		$	11,601

PAUL MUELLER COMPANY
SUMMARIZED NOTES TO THE FINANCIAL STATEMENTS

(1) Results of Operations: (In thousands)

A. The chart below depicts the net revenue on a consolidating basis for the three months ended June 30.

Three Months Ended June 30
Revenue		2022			2021
Domestic	$	34,315		$	37,494
Mueller BV	$	12,058		$	12,194
Eliminations	$	(396	)	$	(410	)
Net Revenue	$	45,977		$	49,278

The chart below depicts the net revenue on a consolidating basis for the six months ended June 30.

Six Months Ended June 30
Revenue		2022			2021
Domestic	$	62,431		$	70,991
Mueller BV	$	25,038		$	24,221
Eliminations	$	(717	)	$	(655	)
Net Revenue	$	86,752		$	94,557

The chart below depicts the net revenue on a consolidating basis for the twelve months ended June 30.

Twelve Months Ended June 30
Revenue		2022			2021
Domestic	$	128,519		$	154,353
Mueller BV	$	49,637		$	47,045
Eliminations	$	(1,348	)	$	(1,108	)
Net Revenue	$	176,808		$	200,290

The chart below depicts the net income (loss) on a consolidating basis for the three months ended June 30.

Three Months Ended June 30
Net Income		2022			2021
Domestic	$	237		$	4,766
Mueller BV	$	(386	)	$	11
Eliminations	$	0		$	3
Net Income (Loss)	$	(149	)	$	4,780

The chart below depicts the net income (loss) on a consolidating basis for the six months ended June 30.

Six Months Ended June 30
Net Income		2022			2021
Domestic	$	(650	)	$	6,448
Mueller BV	$	(622	)	$	(383	)
Eliminations	$	1		$	16
Net Income (Loss)	$	(1,271	)	$	6,081

The chart below depicts the net loss on a consolidating basis for the twelve months ended June 30.

Twelve Months Ended June 30
Net Income		2022			2021
Domestic	$	230		$	14,180
Mueller BV	$	(604	)	$	(15,403	)
Eliminations	$	23		$	24
Net Loss	$	(351	)	$	(1,199	)

B.   Key headlines for the quarter,

• Backlog increased during the quarter to $141.7 million.
  
  
• Cash has increased $4.8 million in the first six months. Advanced deposits from customers grew $15.4 million in line with the increased backlog. Inventories increased ($8.9 million) to support the backlog as did capital expenditures ($3.8 million).      
  
  
• Revenue and profits for the first half of the year were lower than expected as the Company worked through the older backlog that was not adequately priced for the current inflation. Production has been slowed by the shortage or delay of key components.
  
  
• The Company’s results have been negatively affected by an increase in the LIFO reserve. Pre-tax earnings were reduced by $3.5 million year-to-date and $6.4 million for trailing twelve months. This increase in the reserve is due to inflation, and an increase in inventory to produce the larger backlog.     
  
  
• The Company has aggressively marketed referral and bonus programs to attract new workers with some success as new workers are needed for the large backlog.
  
  
• Farmer unrest which started in the Netherlands and has spread to other parts of the EU poses a challenge for Mueller BV.
  

C. The following comparisons exclude Mueller Field Operations (MFO) which was sold on December 31, 2021. June 30, 2022 backlog is $141.7 million compared to $78.4 million at December 31, 2021 and $76.1 million at June 30, 2021. Most business unit backlogs are higher led by the pharmaceutical groups. Orders entered for the first six months of 2022 were $148.4 million compared to $98.9 for the first six months of 2021. Most of these orders have been priced to account for inflation which should allow for better margins in the second half of 2022.

On July 5, 2022, the Dutch government passed new emission standards that require a 50% reduction in emission of pollutants by 2030. This includes nitrogen oxide and ammonia produced by cow waste. Farmers in the Netherlands are protesting across the country as they feel these new standards will force many farmers to reduce their herds and put many out of business. Approximately 40,000 farmers gathered in protest with many driving their tractors to block food distribution centers and to block or slow traffic. Farmers in other EU countries had similar protests in support of their Dutch counterparts.

The current backlog, sales pipeline, and farms already granted permits before these rules were considered may minimize the impact to the Company for the remainder of the year. However, the current uncertainty may cause farmers to delay capital expenditures on new milk storage equipment until the path forward is decided regarding the new regulations.

D. Revenue is down from last year at three months, six months and twelve months primarily in the US operations. The reduction in revenue is due primarily to the sale of MFO and lower pharmaceutical revenue since the end, in early 2021, of the last significant pharmaceutical project. There is another large pharmaceutical project in the backlog that should increase revenue in the second half of 2022 into 2023. In the Netherlands, revenue strengthened slightly but was diminished on the consolidated statements by the strengthening dollar.

E. Similar to revenue, net income is down at three months, six months and twelve months. In the US, the unfavorable variance is primarily from lower earnings from the pharmaceutical groups and a negative effect from the increase in the LIFO reserve. The prior period results also included the $1.9 million pre-tax profit from the PPP loan forgiveness. On a positive note, the Heat Transfer and the Components groups have collectively grown pre-tax earnings by $3.3 million for the trailing twelve months.

In the Netherlands, margins are slightly down. The results for the period ending June 30, 2021 were negatively affected by $15.4 million due to the impairment of goodwill related to the 2008 acquisition of the Dutch subsidiaries.

F.  The pre-tax results for the three months ended June 30, 2022, were unfavorably affected by a $1.5 million increase in the LIFO reserve. The pre-tax results for the six months ended June 30, 2022, were unfavorably affected by a $3.5 million increase in the LIFO reserve. The pre-tax results for the twelve months ended June 30, 2022, were unfavorably affected by a $6.4 million increase in the LIFO reserve. The pre-tax results for the three months ended June 30, 2021, were unfavorably affected by a $0.3 million increase in the LIFO reserve. The pre-tax results for the six months ended June 30, 2021, were unfavorably impacted by a $1.1 million increase in the LIFO reserve. The pre-tax results for the twelve months ended June 30, 2021, were unfavorably affected by a $0.9 million increase in the LIFO reserve.

G. The consolidated financials are affected by the euro to the dollar exchange rate when consolidating Mueller B.V., the Dutch subsidiary. The month-end euro to dollar exchange rate was 1.19 for June 2021, 1.13 for December 2021, and 1.04 for June 2022.

This press release contains forward-looking statements that provide current expectations of future events based on certain assumptions. All statements regarding future performance growth, conditions, or developments are forward-looking statements. Actual future results may differ materially from those described in the forward-looking statements due to a variety of factors, including, but not limited to, the factors described in the Company’s Annual Report under “Safe Harbor for Forward-Looking Statements,” which is available at paulmueller.com. The Company expressly disclaims any obligation or undertaking to update these forward-looking statements to reflect any future events or circumstances.

The accounting policies related to this report and additional management discussion and analysis are provided in the 2021 annual report, available at
www.paulmueller.com.

Press Contact: Ken Jeffries | Paul Mueller Company | Springfield, MO 65802 | (417) 575-9346

kjeffries@paulmueller.com | https://paulmueller.com

FAQ

What were Paul Mueller Company's earnings for Q2 2022?

Paul Mueller Company reported a net loss of $(149) for the quarter ending June 30, 2022.

How did the backlog change for Paul Mueller Company in 2022?

As of June 30, 2022, the backlog increased to $141.7 million from $78.4 million at December 31, 2021.

What factors impacted Paul Mueller Company's revenue in 2022?

Revenue was negatively impacted by the sale of MFO and lower pharmaceutical revenue since early 2021.

How did the LIFO reserve affect Paul Mueller Company's financials?

The LIFO reserve increase negatively impacted pre-tax earnings by $3.5 million year-to-date.

What is the future outlook for Paul Mueller Company after the Q2 2022 report?

The company anticipates better margins in the second half of 2022 due to strong order pricing.