Paul Mueller Company Announces Its Second Quarter Earnings of 2022

Jul 29th, 2022 16:15 EST

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 MonthsEndedJune 30, 2022   Six MonthsEndedJune 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 COMPANYSUMMARIZED 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

[email protected]https://paulmueller.com

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