MUELLER INDUSTRIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 4, 2020

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Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2019 Earnings

Collierville, Tenn., February 4, 2020 -- Mueller Industries, Inc. (NYSE: MLI) announced today operating income for the fourth quarter of $44.4 million, compared with $40.0 million in the same quarter of 2018. Net income for the quarter was $28.2 million, or 50 cents per diluted share, on net sales of $543.8 million, compared with net income of $26.9 million, or 47 cents per diluted share, on net sales of $559.1 million in the fourth quarter of 2018.
On a full year basis, the Company reported operating income of $191.4 million, compared with $173.0 million in fiscal year 2018. Net income for the year was $101.0 million, or $1.79 per diluted share, on net sales of $2.4 billion, compared with net income of $104.5 million, or $1.82 per diluted share, on net sales of $2.5 billion in 2018.

Financial and Operating Highlights:
Fourth Quarter:
•
The average price of copper was 2.4 percent lower compared with the prior year period, which impacted net sales for both our Piping Systems and Industrial Metals segments.
•
Net sales declined 2.7 percent compared with the prior year period as a result of both lower copper prices and lower shipments in our Industrial Metals segment. Declines were partially offset by higher sales volume in our Piping Systems and Climate businesses.
•
We recorded a $191,000 loss on our investment in Tecumseh compared to $1.4 million of income in the prior year.
Full Year:
•
The average price of copper was 7.2 percent lower as compared with the prior year, averaging $2.72 per pound.
•
Net sales declined 3.1 percent as compared with the prior year primarily as a result of both lower copper prices and lower shipments in our Industrial Metals segment. Declines were offset by sales from ATCO, a business acquired in the third quarter of 2018.
•
We recorded a $22.0 million loss on our investment in Tecumseh compared with a $10.0 million loss in the prior year. On an adjusted basis, excluding Tecumseh, 2019 diluted earnings per share would have been $2.19, compared with $1.95 in 2018, a 12.3 percent increase.
•
We generated $200.5 million in cash from operations.
•
We repaid $110.4 million of debt, and ended the year with a debt to total capitalization ratio of 37 percent.
•
Our current ratio is 3.0 to 1, and return on equity for the year was 16 percent.



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Regarding the business, Greg Christopher, Mueller CEO, said, “Our diverse portfolio of businesses proved to be a strength as we delivered another year of double digit operating income growth. Our businesses continue to execute their operational plans and remain focused on the long term. Prudent capital deployment and laser focused execution are core operating principles and drivers of our strong cash generation.”
He added, “Our outlook for 2020 remains positive despite softening of the industrial markets, which we experienced during the fourth quarter. Cost mitigation initiatives we undertook in the second half of 2019, combined with improved performance in our Piping Systems and Climate businesses support our expectations. Our Piping Systems and Climate businesses benefit from building construction, one of the principal market sectors in which we operate. The fundamentals of the construction sector remain solid, and the economies we operate in are healthy or improving.”
Lastly, he continued, “Tecumseh’s operating results improved in the second half of the year. We expect earnings to be bumpy as management continues to aggressively execute its restructuring plan.”


Mueller Industries, Inc. is an industrial manufacturer that specializes in copper and copper alloy manufacturing while also producing goods made from aluminum, steel, and plastics. It is headquartered in Collierville, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, South Korea, the Middle East, and China. Its products include tubing, fittings, valves, vessels, and related items for plumbing and HVACR related piping systems, as well as rod, forgings, extrusions, and various components for OEM applications. Products are distributed into sectors such as building construction, appliance, defense, energy, and automotive.

*********************

Statements in this release that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties. These include economic and currency conditions, continued availability of raw materials and energy, market demand, pricing, competitive and technological factors, and the availability of financing, among others, as set forth in the Company’s SEC filings. The words “outlook,” “estimate,” “project,” “intend,” “expect,” “believe,” “target,” “encourage,” “anticipate,” “appear,” and similar expressions are intended to identify forward-looking statements. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. The Company has no obligation to publicly update or revise any forward-looking statements to reflect events after the date of this report.

CONTACT
Jeffrey A. Martin
(901) 753-3226

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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Quarter Ended
 
For the Year Ended
(In thousands, except per share data)
December 28, 2019
 
December 29, 2018
 
December 28, 2019
 
December 29, 2018
 
 
 
 
 
 
 
 
Net sales
$
543,839

 
$
559,087

 
$
2,430,616

 
$
2,507,878

 
 
 
 
 
 
 
 
Cost of goods sold
449,481

 
473,954

 
2,035,610

 
2,150,400

Depreciation and amortization
10,837

 
10,474

 
42,693

 
39,555

Selling, general, and administrative expense
39,557

 
36,892

 
161,395

 
148,635

Insurance recovery
(485
)
 
(2,195
)
 
(485
)
 
(3,681
)
 
 
 
 
 
 
 
 
Operating income
44,449

 
39,962

 
191,403

 
172,969

 
 
 
 
 
 
 
 
Interest expense
(5,548
)
 
(6,471
)
 
(25,683
)
 
(25,199
)
Environmental expense
(440
)
 
(623
)
 
(1,321
)
 
(1,320
)
Other income, net
(20
)
 
1,713

 
1,684

 
3,967

 
 
 
 
 
 
 
 
Income before income taxes
38,441

 
34,581

 
166,083

 
150,417

 
 
 
 
 
 
 
 
Income tax expense
(7,614
)
 
(7,773
)
 
(35,257
)
 
(30,952
)
(Loss) income from unconsolidated affiliates, net of foreign tax
(854
)
 
923

 
(24,594
)
 
(12,645
)
 
 
 
 
 
 
 
 
Consolidated net income
29,973

 
27,731

 
106,232

 
106,820

 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
(1,803
)
 
(874
)
 
(5,260
)
 
(2,361
)
 
 
 
 
 
 
 
 
Net income attributable to Mueller Industries, Inc.
$
28,170

 
$
26,857

 
$
100,972

 
$
104,459

 
 
 
 
 
 
 
 
Weighted average shares for basic earnings per share
55,869

 
56,555

 
55,798

 
56,782

Effect of dilutive stock-based awards
611

 
377

 
545

 
487

 
 
 
 
 
 
 
 
Adjusted weighted average shares for diluted earnings per share
56,480

 
56,932

 
56,343

 
57,269

 
 
 
 
 
 
 
 
Basic earnings per share
$
0.50

 
$
0.47

 
$
1.81

 
$
1.84

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.50

 
$
0.47

 
$
1.79

 
$
1.82

 
 
 
 
 
 
 
 
Dividends per share
$
0.10

 
$
0.10

 
$
0.40

 
$
0.40

 
 
 
 
 
 
 
 
Summary Segment Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
    Piping Systems Segment
$
349,182

 
$
350,961

 
$
1,542,456

 
$
1,645,633

    Industrial Metals Segment
120,336

 
139,129

 
554,373

 
651,061

    Climate Segment
79,362

 
72,215

 
356,215

 
229,069

    Elimination of intersegment sales
(5,041
)
 
(3,218
)
 
(22,428
)
 
(17,885
)
 
 
 
 
 
 
 
 
Net sales
$
543,839

 
$
559,087

 
$
2,430,616

 
$
2,507,878

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
    Piping Systems Segment
$
31,724

 
$
22,453

 
$
131,879

 
$
122,829

    Industrial Metals Segment
15,026

 
21,770

 
61,724

 
75,607

    Climate Segment
9,343

 
7,450

 
42,727

 
24,118

    Unallocated expenses
(11,644
)
 
(11,711
)
 
(44,927
)
 
(49,585
)
 
 
 
 
 
 
 
 
Operating income
$
44,449

 
$
39,962

 
$
191,403

 
$
172,969


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MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands)
December 28, 2019
 
December 29, 2018
ASSETS
 
 
 
Cash and cash equivalents
$
97,944

 
$
72,616

Accounts receivable, net
269,943

 
273,417

Inventories
292,107

 
329,795

Other current assets
33,778

 
26,790

 
 
 
 
    Total current assets
693,772

 
702,618

 
 
 
 
Property, plant, and equipment, net
363,128

 
370,633

Operating lease right-of-use assets
26,922

 
—

Other assets
287,118

 
296,298

 
 
 
 
 
$
1,370,940

 
$
1,369,549

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current portion of debt
$
7,530

 
$
7,101

Accounts payable
85,644

 
103,754

Current portion of operating lease liabilities
5,250

 
—

Other current liabilities
135,863

 
121,946

 
 
 
 
    Total current liabilities
234,287

 
232,801

 
 
 
 
Long-term debt
378,724

 
489,597

Pension and postretirement liabilities
22,208

 
29,055

Environmental reserves
19,972

 
20,009

Deferred income taxes
21,094

 
16,615

Noncurrent operating lease liabilities
22,388

 
—

Other noncurrent liabilities
10,131

 
18,212

 
 
 
 
    Total liabilities
708,804

 
806,289

 
 
 
 
Total Mueller Industries, Inc. stockholders’ equity
643,468

 
548,356

Noncontrolling interests
18,668

 
14,904

 
 
 
 
    Total equity
662,136

 
563,260

 
 
 
 
 
$
1,370,940

 
$
1,369,549











4


MUELLER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
For the Year Ended
 (In thousands)
December 28, 2019
 
December 29, 2018
 
 
 
 
Cash flows from operating activities
 
 
 
Consolidated net income
$
106,232

 
$
106,820

Reconciliation of consolidated net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
43,011

 
39,873

Stock-based compensation expense
8,744

 
8,035

Loss from unconsolidated affiliates
24,594

 
12,645

Gain on disposals of assets
(963
)
 
(253
)
Insurance proceeds - noncapital related
485

 
2,306

Change in the fair value of contingent consideration
3,625

 
—

Insurance recovery
(485
)
 
(3,681
)
Deferred income tax (benefit) expense
(428
)
 
170

Provision for doubtful accounts receivable
(80
)
 
—

Changes in assets and liabilities, net of effects of businesses acquired and sold:
 
 
 
Receivables
6,585

 
(11,342
)
Inventories
39,561

 
27,512

Other assets
(15,639
)
 
14,353

Current liabilities
(7,076
)
 
(15,680
)
Other liabilities
(7,944
)
 
(14,769
)
Other, net
322

 
1,903

 
 
 
 
Net cash provided by operating activities
200,544

 
167,892

 
 
 
 
Cash flows from investing activities
 
 
 
Proceeds from sale of assets, net of cash transferred
3,240

 
18,703

Acquisition of businesses, net of cash acquired
3,465

 
(167,677
)
Capital expenditures
(31,162
)
 
(38,481
)
Insurance proceeds - capital related
—

 
1,968

Investment in unconsolidated affiliates
(16,000
)
 
(1,609
)
 
 
 
 
Net cash used in investing activities
(40,457
)
 
(187,096
)
 
 
 
 
Cash flows from financing activities
 
 
 
Dividends paid to stockholders of Mueller Industries, Inc.
(22,325
)
 
(22,705
)
Dividends paid to noncontrolling interests
(846
)
 
(592
)
Issuance of long-term debt
100,658

 
204,233

Repayments of long-term debt
(206,718
)
 
(172,002
)
Repayment of debt by consolidated joint ventures, net
(4,305
)
 
(2,915
)
Repurchase of common stock
(1,763
)
 
(33,562
)
Payment of contingent consideration
(3,170
)
 
—

Net cash used to settle stock-based awards
(1,225
)
 
(726
)
 
 
 
 
Net cash used in financing activities
(139,694
)
 
(28,269
)
 
 
 
 
Effect of exchange rate changes on cash
511

 
(1,952
)
 
 
 
 
Increase (decrease) in cash, cash equivalents, and restricted cash
20,904

 
(49,425
)
Cash, cash equivalents, and restricted cash at the beginning of the year
77,138

 
126,563

 
 
 
 
Cash, cash equivalents, and restricted cash at the end of the year
$
98,042

 
$
77,138



5


MUELLER INDUSTRIES, INC.
Reconciliation of Net Income as Reported to Non-GAAP Financial Measures Without Loss from the Unconsolidated Affiliate Tecumseh Products
(Unaudited)

Earnings attributable to normal operations without the loss from Tecumseh Products (Tecumseh) is a measurement not derived in accordance with generally accepted accounting principles (GAAP). Excluding the loss is useful as it measures the operating results that are the outcome of daily operating decisions made in the normal course of business. Reconciliation of earnings attributable to normal operations without the loss from Tecumseh to net income as reported is as follows:

(In thousands, except per share data)
 
For the Year Ended December 28, 2019
 
 
As Reported (GAAP)
 
Loss from Tecumseh
 
As Adjusted (Non-GAAP)
 
 
 
 
 
 
 
Income before income taxes
 
$
166,083

 
$
—

 
$
166,083

 
 
 
 
 
 
 
Income tax expense
 
(35,257
)
 
538

 
(34,719
)
Loss from unconsolidated affiliates, net of foreign tax
 
(24,594
)
 
22,026

 
(2,568
)
 
 
 
 
 
 
 
Consolidated net income
 
106,232

 
22,564

 
128,796

 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
(5,260
)
 
 
 
(5,260
)
 
 
 
 
 
 
 
Net income attributable to Mueller Industries, Inc.
 
$
100,972

 
$
22,564

 
$
123,536

 
 
 
 
 
 
 
Diluted earnings per share
 
$
1.79

 
$
0.40

 
$
2.19

 
 
 
 
 
 
 
(In thousands, except per share data)
 
For the Quarter Ended December 29, 2018
 
 
As Reported (GAAP)
 
Loss from Tecumseh
 
As Adjusted (Non-GAAP)
 
 
 
 
 
 
 
Income before income taxes
 
$
150,417

 
$
—

 
$
150,417

 
 
 
 
 
 
 
Income tax expense
 
(30,952
)
 
(2,775
)
 
(33,727
)
Loss from unconsolidated affiliates, net of foreign tax
 
(12,645
)
 
10,025

 
(2,620
)
 
 
 
 
 
 
 
Consolidated net income
 
106,820

 
7,250

 
114,070

 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
(2,361
)
 
 
 
(2,361
)
 
 
 
 
 
 
 
Net income attributable to Mueller Industries, Inc.
 
$
104,459

 
$
7,250

 
$
111,709

 
 
 
 
 
 
 
Diluted earnings per share
 
$
1.82

 
$
0.13

 
$
1.95



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