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CST: 22/11/2019 11:21:50   

Paul Mueller Company Announces Its Third Quarter Earnings of 2019

27 Days ago

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
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                  
                                                 

 

PAUL MUELLER COMPANY
SUMMARIZED NOTES TO THE FINANCIAL STATEMENTS
(In thousands)

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

     
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

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

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

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

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

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

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

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

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

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

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.

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


 

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