MUEL - Paul Mueller Company Announces Its Second Quarter Earnings of 2019

July, 26 2019 06:07 PM Mueller Paul Co

SPRINGFIELD, Mo., July 26, 2019 (GLOBE NEWSWIRE) -- Paul Mueller Company (OTC: MUEL) today announced earnings for the quarter ended June 30, 2019.

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




2019



2018



2019



2018



2019



2018















Net Sales

$
54,061


$
62,705


$
95,943


$
108,783


$
188,370


$
199,499

Cost of Sales


38,940



48,240



70,766



82,042



138,984



146,078

Gross Profit

$
15,121


$
14,465


$
25,177


$
26,741


$
49,386


$
53,421

Selling, General and Administrative Expense


10,997



12,409



22,496



24,074



45,559



46,738

Operating Income (Loss)

$
4,124


$
2,056


$
2,681


$
2,667


$
3,827


$
6,683

Interest Expense


(187
)


(205
)


(595
)


(551
)


(964
)


(770
)
Other Income (Expense)


8



(129
)


285



162



341



(1,245
)
Income (Loss) before Provision (Benefit) for Income Taxes
$
3,945


$
1,722


$
2,371


$
2,278


$
3,204


$
4,668

Provision (Benefit) for Income Taxes


981



149



487



323



636



5,549

Net Income (Loss)

$
2,964


$
1,573


$
1,884


$
1,955


$
2,568


$
(881
)














Earnings per Common Share ––
Basic

$
2.48


$
1.31


$
1.58


$
1.63


$
2.15


$
(0.74
)

Diluted

$
2.48


$
1.31


$
1.58


$
1.63


$
2.15


$
(0.74
)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME







Six Months Ended


June 30



2019



2018






Net Income

$
1,884


$
1,955

Other Comprehensive Income, Net of Tax:




Foreign Currency Translation Adjustment


12



(814
)
Change in Pension Liability


-



-

Amortization of De-Designated Hedges


-



-

Comprehensive Income

$
1,896


$
1,141

CONSOLIDATED BALANCE SHEETS







June 30

December 31



2019



2018






Cash and Short-Term Investments

$
897


$
715

Accounts Receivable


34,867



27,533

Inventories


25,238



26,678

Other Current Assets


2,096



2,066

Current Assets

$
63,098


$
56,992






Net Property, Plant, and Equipment


49,198



50,699

Other Assets


23,457



22,497

Total Assets

$
135,753


$
130,188






Accounts Payable

$
13,732


$
11,177

Current Maturities and Short-Term Debt


9,277



10,332

Other Current Liabilities


33,989



26,131

Current Liabilities

$
56,998


$
47,640






Long-Term Debt


16,223



21,478

Long-Term Pension Liabilities


30,841



32,081

Other Long-Term Liabilities


2,167



1,361

Total Liabilities

$
106,229


$
102,560

Shareholders' Investment


29,524



27,628

Total Liabilities and Shareholders' Investment

$
135,753


$
130,188

SELECTED FINANCIAL DATA







June 30

December 31



2019



2018

Book Value per Common Share

$
24.68


$
23.10

Total Shares Outstanding


1,196,187



1,196,187

Backlog

$
100,693


$
97,354

CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT


Common Stock

Paid-in Surplus

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Income (Loss)

Total
Balance, December 31, 2018

$
1,508


$
9,708


$
61,895


$
(6,332
)

$
(39,151
)

$
27,628

Add (Deduct):












Net Income






1,884







1,884

Other Comprehensive Income, Net of Tax










12



12

Treasury Stock Acquisition












-

Balance, June 30, 2019

$
1,508


$
9,708


$
63,779


$
(6,332
)

$
(39,139
)

$
29,524

CONSOLIDATED STATEMENT OF CASH FLOWS


Six Months Ended June 30, 2019

Six Months Ended June 30,2018
Operating Activities:









Net Income

$
1,884


$
1,955






Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities:




Pension Contributions (Greater) Less than Expense


(1,241
)


(3,841
)
Bad Debt Expense (Recovery)


(242
)


(20
)
Depreciation & Amortization


3,275



2,928

(Gain) Loss on Sales of Equipment


(17
)


(156
)
Change in Assets and Liabilities




(Inc) Dec in Accts and Notes Receivable


(7,053
)


(10,503
)
(Inc) Dec in Cost in Excess of Estimated Earnings and Billings


251



(54
)
(Inc) Dec in Inventories


1,440



(422
)
(Inc) Dec in Prepayments


(280
)


(1,814
)
(Inc) Dec Other Assets


(78
)


(3
)
Inc (Dec) in Accounts Payable


2,555



6,220

Inc (Dec) Other Accrued Expenses


(2,478
)


(1,363
)
Inc (Dec) Advanced Billings


3,965



(4,687
)
Inc (Dec) in Billings in Excess of Costs and Estimated Earnings


6,371



(648
)
Inc (Dec) in Other Long-Term Liabilities


(135
)


(190
)
Net Cash Provided (Required) by Operating Activities

$
8,217


$
(12,598
)





Investing Activities




Proceeds from Sales of Equipment


31



161

Additions to Property and Equipment


(1,768
)


(3,840
)
Net Cash (Required) for Investing Activities

$
(1,737
)

$
(3,679
)





Financing Activities




(Repayment) Proceeds of Short-Term Borrowings, Net


(1,055
)


9,869

(Repayment) Proceeds of Long-Term Debt


(5,210
)


1,768

Treasury Stock Acquisitions


-



(2
)
Net Cash (Required) Provided for Financing Activities

$
(6,265
)

$
11,635






Effect of Exchange Rate Changes


(33
)


(1,141
)





Net Increase (Decrease) in Cash and Cash Equivalents

$
182


$
(5,783
)





Cash and Cash Equivalents at Beginning of Year


715



6,571






Cash and Cash Equivalents at End of Quarter

$
897


$
788

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

2019


2018

Domestic
$
40,110

$
40,073

Mueller BV
$
14,419

$
22,896

Eliminations
$
(468
)
$
(264
)
Net Revenue
$
54,061

$
62,705

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

Six Months Ended June 30
Revenue

2019


2018

Domestic
$
68,022

$
72,705

Mueller BV
$
29,082

$
36,504

Eliminations
$
(1,161
)
$
(426
)
Net Revenue
$
95,943

$
108,783

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

Twelve Months Ended June 30
Revenue

2019


2018

Domestic
$
132,407

$
138,528

Mueller BV
$
57,919

$
61,651

Eliminations
$
(1,956
)
$
(680
)
Net Revenue
$
188,370

$
199,499

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

Three Months Ended June 30
Net Income

2019


2018

Domestic
$
2,878

$
1,261

Mueller BV
$
83

$
309

Eliminations
$
3

$
3

Net Income
$
2,964

$
1,573

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

Six Months Ended June 30
Net Income

2019


2018

Domestic
$
1,822

$
2,115

Mueller BV
$
88

$
(191
)
Eliminations
$
(26
)
$
31

Net Income
$
1,884

$
1,955

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

Twelve Months Ended June 30
Net Income

2019


2018

Domestic
$
4,393

$
1,121

Mueller BV
$
(1,804
)
$
(2,131
)
Eliminations
$
(21
)
$
129

Net Income
$
2,568

$
(881
)

B. Backlog rose during the first half of 2019 to $100.7 million on June 30, 2019 from $97.4 million on December 31, 2018. The increase was additional orders in the strong pharmaceutical market offset by the reduction in backlog in the Dairy Farm Equipment product line in the United States which has worked through the unusually large backlog of equipment sold into Canada. Backlog in The Netherlands fell to $10.8 million on March 31, 2019 from the $13.8 million on December 31, 2018, due to weaker demand in the Dutch market.

C. Revenue for the second quarter of 2019 was down by $8.6 million compared to the second quarter of 2018. Revenues were flat in the US and the drop was related primarily to a large heat transfer order that Mueller B.V. shipped in the second quarter of last year.

D. Net income for the second quarter of 2019 was up $1.4 million compared to the second quarter of 2018. In the US, Net Income was up $1.6 million, primarily from the $1.3 million (net of tax) positive change in the effect of LIFO explained in footnote H. Mueller B.V. profits were down slightly for the quarter compared to 2018. However, their expense control measures are beginning to work as profits were only down $0.2 million on $8.5 million in less revenue.

E. Tax expense of approximately $4.2 million was recognized in December 2017 due to new United States 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.

F. 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. The independent business review was finished and reviewed with the bank. Management and the bank are currently discussing a path forward.

G. 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 United States 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 million of the March 4th loan to Mueller B.V. described in F. above. All covenants were met as of June 30, 2019.

H. The pre-tax results for the three months ended June 30, 2019, were favorably affected by a $0.4 million decrease in the LIFO reserve. The pre-tax results for the six months ended June 30, 2019, were unfavorably affected by a $0.4 million increase in the LIFO reserve. The pre-tax results for the twelve months ended June 30, 2019, were unfavorably affected by a $0.5 increase in the LIFO reserve. The pre-tax results for the three months ended June 30, 2018, were unfavorably affected by a $1.4 million increase in the LIFO reserve. The pre-tax results for the six months ended June 30, 2018, were unfavorably affected by a $1.9 million increase in the LIFO reserve. The pre-tax results for the twelve months ended June 30, 2018, were unfavorably affected by a $2.2 million increase in the LIFO reserve.

I. 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 1.17 for June, 2018; 1.14 for December, 2018; and 1.14 for June, 2019, respectively.

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
www.paulmueller.com.

Press Contact: Ken Jeffries | Paul Mueller Company | Springfield, MO 65802 | (417) 575-9346
kjeffries@paulmueller.com | http://paulmueller.com

Company Name:	Mueller Paul Co
Stock Symbol:	MUEL
Market:	OTC
Website:	www.paulmueller.com

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