Paul Mueller Company Announces Its Third Quarter Earnings of 2019
25 October 2019
SPRINGFIELD, Mo., Oct. 25, 2019 (GLOBE NEWSWIRE) -- Paul Mueller Company (OTC: MUEL) today announced earnings for the quarter ended September 30, 2019. PAUL MUELLER COMPANY A. The chart below depicts the net revenue on a consolidating basis for the three months ended September 30. The chart below depicts the net revenue on a consolidating basis for the nine months ended September 30. The chart below depicts the net revenue on a consolidating basis for the twelve months ended September 30. The chart below depicts the net income on a consolidating basis for the three months ended September 30. The chart below depicts the net income on a consolidating basis for the nine months ended September 30. The chart below depicts the net income on a consolidating basis for the twelve months ended September 30. 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 2018 annual report, available at Press Contact: Ken Jeffries | Paul Mueller Company | Springfield, MO 65802 | (417) 575-9346 PAUL MUELLER COMPANY
NINE-MONTH REPORT Unaudited (In thousands) CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 2019 2018 2019 2018 2019 2018 Net Sales $ 45,968 $ 46,809 $ 141,911 $ 155,592 $ 187,529 $ 198,037 Cost of Sales 33,117 34,276 103,883 116,318 137,825 146,080 Gross Profit $ 12,851 $ 12,533 $ 38,028 $ 39,274 $ 49,704 $ 51,957 Selling, General and Administrative Expense 11,205 11,098 33,701 35,172 45,666 47,015 Operating Income $ 1,646 $ 1,435 $ 4,327 $ 4,102 $ 4,038 $ 4,942 Interest Expense (213 ) (182 ) (808 ) (733 ) (995) (815 ) Other Income (Expense) 81 57 366 219 365 (1,126 ) Income before Provision (Benefit) for Income Taxes $ 1,514 $ 1,310 $ 3,885 $ 3,588 $ 3,408 $ 3,001 Provision (Benefit) for Income Taxes 374 486 861 809 524 4,864 Net Income (Loss) $ 1,140 $ 824 $ 3,024 $ 2,779 $ 2,884 $ (1,863) Earnings per Common Share –– Basic $0.95 $0.69 $2.53 $2.32 $2.41 ($1.56 ) Diluted $0.95 $0.69 $2.53 $2.32 $2.41 ($1.56 ) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Nine Months Ended September 30 2019 2018 Net Income $ 3,024 $ 2,779 Other Comprehensive Income (Loss), Net of Tax: Foreign Currency Translation Adjustment (1,216 ) (1,140 ) Comprehensive Income $ 1,808 $ 1,639 CONSOLIDATED BALANCE SHEETS September 30 December 31 2019 2018 Cash and Short-Term Investments $ 993 $ 715 Accounts Receivable 25,426 27,533 Inventories 27,224 26,678 Other Current Assets 2,889 2,066 Current Assets $ 56,532 $ 56,992 Net Property, Plant, and Equipment 46,866 50,699 Other Assets 22,901 22,497 Total Assets $ 126,299 $ 130,188 Accounts Payable $ 13,188 $ 11,177 Current Maturities and Short-Term debt 2,641 10,332 Other Current Liabilities 34,110 26,131 Current Liabilities $ 49,939 $ 47,640 Long-Term Debt 15,403 21,478 Long-Term Pension Liabilities 29,451 32,081 Other Long-Term Liabilities 2,070 1,361 Total Liabilities 96,863 102,560 Shareholders' Investment 29,436 27,628 Total Liabilities and Shareholders' Investment $ 126,299 $ 130,188 SELECTED FINANCIAL DATA September 30 December 31 2019 2018 Book Value per Common Share $24.61 $23.10 Total Shares Outstanding 1,196,187 1,196,187 Backlog $ 86,426 $ 97,354 CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT Accumulated Other Comprehensive Income (Loss) Common Stock Paid-in Surplus Retained Earnings Treasury Stock Total Balance, December 31, 2018 $ 1,508 $ 9,708 $ 61,895 $ (6,332 ) $ (39,151 ) $ 27,628 Add (Deduct): Net Income 3,024 3,024 Other Comprehensive Income, Net of Tax (1,216 ) (1,216 ) Balance, September 30, 2019 $ 1,508 $ 9,708 $ 64,919 $ (6,332 ) $ (40,367 ) $ 29,436 CONSOLIDATED STATEMENT OF CASH FLOWS Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 Operating Activities: Net Income $ 3,024 $ 2,779 Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities: Pension Contributions (Greater) Less than Expense (2,631 ) (3,625 ) Bad Debt Expense (Recovery) (210 ) (24 ) Depreciation & Amortization 4,919 4,568 (Gain) Loss on Sales of Equipment (18 ) (162 ) Change in Assets and Liabilities (Inc) Dec in Accts and Notes Receivable 2,426 (11,127 ) (Inc) Dec in Cost in Excess of Estimated Earnings and Billings (180 ) 50 (Inc) Dec in Inventories (546 ) 1,456 (Inc) Dec in Prepayments (643 ) 459 (Inc) Dec in Intangibles (118 ) - (Inc) Dec Other LT Assets (48 ) (3 ) Inc (Dec) in Accounts Payable 2,012 1,133 Inc (Dec) Other Accrued Expenses (948 ) (247 ) Inc (Dec) Advanced Billings 7,295 (2,993 ) Inc (Dec) in Billings in Excess of Costs and Estimated Earnings 1,633 (770 ) Inc (Dec) In Other Liabilities (198 ) 44 Net Cash Provided (Required) by Operating Activities $ 15,769 $ (8,462 ) Investing Activities Proceeds from Sales of Equipment 31 172 Additions to Property and Equipment (1,062 ) (4,856 ) Net Cash (Required) for Investing Activities $ (1,031 ) $ (4,684 ) Financing Activities (Repayment) Proceeds of Short-Term Borrowings, Net (7,692 ) 9,360 (Repayment) Proceeds of Long-Term Debt (5,553 ) (576 ) Treasury Stock Acquisitions - (3 ) Net Cash (Required) Provided for Financing Activities $ (13,245 ) $ 8,781 ) Effect of Exchange Rate Changes (1,215 ) (1,526 ) Net Increase (Decrease) in Cash and Cash Equivalents $ 278 $ (5,891 ) Cash and Cash Equivalents at Beginning of Year 715 6,571 Cash and Cash Equivalents at End of Quarter $ 993 $ 680
SUMMARIZED NOTES TO THE FINANCIAL STATEMENTS
(In thousands) Three Months Ended September 30 Revenue 2019 2018 Domestic $36,168 $33,197 Mueller BV $10,310 $14,107 Eliminations ($510) ($495) Net Revenue $45,968 $46,809 Nine Months Ended September 30 Revenue 2019 2018 Domestic $104,190 $105,902 Mueller BV $39,393 $50,611 Eliminations ($1,672) ($921) Net Revenue $141,911 $155,592 Twelve Months Ended September 30 Revenue 2019 2018 Domestic $135,378 $136,828 Mueller BV $54,123 $62,217 Eliminations ($1,972) ($1,008) Net Revenue $187,529 $198,037 Three Months Ended September 30 Net Income 2019 2018 Domestic $2,273 $1,574 Mueller BV ($1,085) ($740) Eliminations ($48) ($10) Net Income $1,140 $824 Nine Months Ended September 30 Net Income 2019 2018 Domestic $4,093 $3,689 Mueller BV ($997) ($931) Eliminations ($72) $21 Net Income $3,024 $2,779 Twelve Months Ended September 30 Net Income 2019 2018 Domestic $5,090 $695 Mueller BV ($2,149) ($2,680) Eliminations ($57) $122 Net Income $2,884 ($1,863) B. Backlog fell during the first nine months of 2019 to $86.4 million on September 30, 2019 from $97.4 million on December 31, 2018. This is down from the peak of $100.7 million on June 30, 2019 as we began working through the large backlog from the strong pharmaceutical market. In addition, the unusually large backlog in the Dairy Farm Equipment product line in which we entered 2019 has been reduced from the slowdown in the strong Canadian market and continued softness in the US market. Backlog in The Netherlands fell to $12.7 million on September 30, 2019 from the $13.8 million on December 31, 2018, due to weaker demand in the Dutch market. The Dutch farmer is facing uncertainty from new nitrogen-based emission limits. C. Revenue for the third quarter of 2019 was down by $0.8 million compared to the third quarter of 2018. Revenues in the US were up $3.0 million, but down $3.8 million in The Netherlands. For the nine months ending September 30th, revenue was down $13.7 million. The US revenue was down $1.7 million and Mueller BV revenue was down $11.2 million primarily from a large heat transfer order that shipped in the second quarter of 2018. D. Net income for the third quarter of 2019 was up $0.3 million compared to the third quarter of 2018. In the US, net income was up $0.7 million, driven by a strong showing from our Food and Dairy product line partially offset by the slowing Dairy Farm Equipment market. Mueller B.V. profits were down slightly for the quarter compared to 2018. E. Net income for the nine months ending September 30, 2019 was up $0.2 million over the same period in 2018. US net income was up $0.4 million, primarily from the Food and Dairy product line profit improvement and the positive effect of LIFO as described in footnote I. These improvements were partially offset by the soft Dairy Farm Equipment results and the timing of recognition of revenue and profits on large pharmaceutical orders. Mueller B.V. expense control measures are showing results as profits were only down $0.1 million on $11.2 million in less revenue. F. Tax expense of approximately $4.2 million was recognized in December 2017 due to new US federal tax legislation under the Tax Cuts and Jobs Act (TCJA). This included a $0.9 million transition tax expense estimate and $3.3 million tax expense due to the revaluation of the deferred tax asset due to a decrease in the tax rate. In certain cases, the Company recorded for 2017 a reasonable estimate of the effects of the TCJA, and accordingly such amounts are provisional. In September 2018, tax expense was increased by $0.2 million to finalize the transition tax for 2017. G. Mueller B.V. was in violation of certain financial covenants in its bank borrowing facility as of December 31, 2018. On March 4, 2019, the Company loaned Mueller B.V. $3.4 million in subordinated debt. This amount plus an additional $1.1 million of subordinated debt loaned to Mueller B.V. in November 2018 was used to pay down the variable rate note payable by $4.5 million on March 8, 2019. Mueller B.V. also agreed to reduce their capacity of the revolving credit facility from $8.0 million to $6.8 million and to complete an independent review of the business and real estate valuation acceptable to the lender. In return, the lender waived the loan covenant violations as of December 31, 2018 and future violations of these covenants through March 31, 2020. H. A total of $6.6 million has been loaned to Mueller B.V. by the Company in the trailing twelve months through March 31, 2019. This lending and the first quarter domestic loss of $1.1 million has resulted in the Company requesting an amendment to the bank borrowing facility in the US to accommodate its lending to Mueller B.V. On April 25, 2019, the lender provided an amendment excluding, from the fixed charge coverage ratio calculation, $2.0 million of the March 4th loan to Mueller B.V. described in G. above. All domestic covenants were met as of September 30, 2019. I. The pre-tax results for the three months ended September 30, 2019, were unfavorably affected by $0.8 million increase in the LIFO reserve. The pre-tax results for the nine months ended September 30, 2019, were unfavorably affected by $0.4 million increase in the LIFO reserve. The pre-tax results for the twelve months ended September 30, 2019, were unfavorably affected by $0.3 million increase in the LIFO reserve. The pre-tax results for the three months ended September 30, 2018, were unfavorably affected by $0.2 million increase in the LIFO reserve. The pre-tax results for the nine months ended September 30, 2018, were unfavorably affected by a $2.2 million increase in the LIFO reserve. The pre-tax results for the twelve months ended September 30, 2018, were unfavorably affected by a $2.4 million increase in the LIFO reserve. J. The consolidated financials are affected by the euro to dollar exchange rate when consolidating Mueller B.V., the Dutch subsidiary. The month end euro to dollar exchange rate was 1.16 for September 2018; 1.14 for December 2018; and 1.10 for September 2019.
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kjeffries@paulmueller.com | http://paulmueller.com