Mueller Industries, Inc. Reports Fourth Quarter and Fiscal 2017 Earnings

MEMPHIS, Tenn.--()--Mueller Industries, Inc. (NYSE: MLI) announced today operating income of $22.0 million for the fourth quarter of 2017, compared with $29.3 million in the same quarter of 2016. Net income for the quarter was $5.7 million, or 10 cents per diluted share, on net sales of $523.5 million, compared with net income of $17.3 million, or 30 cents per diluted share, on net sales of $472.2 million in the fourth quarter of 2016.

On a full year basis, the Company reported operating income of $152.0 million, compared with $152.7 million in fiscal year 2016. Net income for the year was $85.6 million, or $1.49 per diluted share, on net sales of $2.3 billion, compared with net income of $99.7 million, or $1.74 per diluted share, on net sales of $2.1 billion in fiscal year 2016.

Financial and Operating Highlights:

  • During the fourth quarter of 2017, copper prices rose 4 percent and averaged $3.10 per pound. During the fourth quarter of 2016, copper prices rose 20 percent and averaged $2.39 per pound.
  • The effect of changes in copper prices during the quarter on inventory valuations and hedging positions compared with the prior year quarter, along with physical inventory adjustments, resulted in a $12.0 million negative swing in operating income in the fourth quarter of 2017 compared with the fourth quarter of 2016. Both the Piping Systems and Industrial Metals segments were impacted.
  • A casting outage in our brass rod mill impaired our ability to melt scrap returns in the fourth quarter of 2017 causing an excess build of $38.9 million in inventory. The line is now operating, and inventory levels are expected to normalize in 2018.
  • A $6.5 million pre-tax environmental charge was recorded in the quarter related to ongoing remediation activities at U.S.S. Lead, a non-operating property.
  • Interest expense for the quarter was $5.3 million, compared with $2.0 million in the same quarter of 2016. The increase was primarily due to interest on the Company’s 6% Subordinated Debentures.
  • The effective tax rate for the quarter of 42 percent reflects the net impact of the 2017 Tax Cuts and Jobs Act.

Regarding the business, Greg Christopher, Mueller CEO, said, “Our fourth quarter earnings were adversely affected by inventory impacts and, to a lesser but still important degree, the ongoing challenges in our U.S. copper tube business as previously reported. The modernization of our Fulton, Mississippi copper tube mill, combined with the costs associated with the startup of our new Cedar City, Utah mill, hampered our fourth quarter results. On a full year basis, cost overruns, start-up costs, throughput constraints, quality and yield challenges, along with an associated decline in market share, impacted our copper tube earnings by over $25.0 million.”

In conclusion, he added “The international markets we serve remained stable and better than anticipated in 2017, and demand in the U.S. markets continued to remain positive. We anticipate these conditions will continue in 2018. We will be aggressive in regaining our market share positions and avoiding the same operational issues experienced in 2017, as we remain steadfast in our commitment to grow.”

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 Memphis, Tennessee and comprises a network of operations in the United States, Canada, Mexico, Great Britain, South Korea, 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.

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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.

       

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
For the Quarter Ended

For the Year Ended

(In thousands, except per share data)

December 30,
2017

     

December 31,
2016

 

December 30,
2017

     

December 31,
2016

 
 
Net sales $ 523,524 $ 472,158 $ 2,266,073 $ 2,055,622
 
Cost of goods sold 456,617 396,129 1,940,617 1,723,499
Depreciation and amortization 8,728 8,136 33,944 35,133
Selling, general, and administrative expense 35,136 34,792 139,580 137,499
Gain on sale of assets (1,491 )
Impairment charges 1,055   3,778   1,466   6,778  
 
Operating income 21,988 29,323 151,957 152,713
 
Interest expense (5,292 ) (2,017 ) (19,502 ) (7,387 )
Environmental expense (6,221 ) (668 ) (7,284 ) (1,279 )
Other income, net 414   492   1,801   1,983  
 
Income before income taxes 10,889 27,130 126,972 146,030
 
Income tax expense (4,589 ) (9,174 ) (37,884 ) (48,137 )
(Loss) income from unconsolidated affiliates, net of tax (331 ) (1,188 ) (2,077 ) 1,861  
 
Consolidated net income 5,969 16,768 87,011 99,754
 
Net (income) loss attributable to noncontrolling interests (249 ) 554   (1,413 ) (27 )
 
Net income attributable to Mueller Industries, Inc. $ 5,720   $ 17,322   $ 85,598   $ 99,727  
 
Weighted average shares for basic earnings per share 57,026 56,680 56,925 56,572
Effect of dilutive stock-based awards 612   620   559   597  
 
Adjusted weighted average shares for diluted earnings per share 57,638   57,300   57,484   57,169  
 
Basic earnings per share $ 0.10   $ 0.31   $ 1.50   $ 1.76  
 
Diluted earnings per share $ 0.10   $ 0.30   $ 1.49   $ 1.74  
 
Dividends per share $ 0.100   $ 0.100   $ 8.400   $ 0.375  
 
Summary Segment Data:
 
Net sales:
Piping Systems Segment $ 359,253 $ 320,480 $ 1,564,950 $ 1,429,589
Industrial Metals Segment 150,212 127,452 602,131 521,060
Climate Segment 28,045 27,690 131,448 119,758
Elimination of intersegment sales (13,986 ) (3,464 ) (32,456 ) (14,785 )
 
Net sales $ 523,524   $ 472,158   $ 2,266,073   $ 2,055,622  
 
Operating income:
Piping Systems Segment $ 13,886 $ 15,630 $ 99,558 $ 103,886
Industrial Metals Segment 15,277 22,383 75,752 78,168
Climate Segment 3,170 3,193 20,325 17,733
Unallocated expenses (10,345 ) (11,883 ) (43,678 ) (47,074 )
 
Operating income $ 21,988   $ 29,323   $ 151,957   $ 152,713  
 
       

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
(In thousands)

December 30,
2017

December 31,
2016

ASSETS
Cash and cash equivalents $ 120,269 $ 351,317
Accounts receivable, net 244,795 256,291
Inventories 327,901 242,013
Other current assets 46,150   44,702
 
Total current assets 739,115 894,323
 
Property, plant, and equipment, net 304,321 295,231
Other assets 276,737   257,922
 
$ 1,320,173   $ 1,447,476
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of debt $ 16,480 $ 13,655
Accounts payable 102,503 103,175
Other current liabilities 123,269   102,162
 
Total current liabilities 242,252 218,992
 
Long-term debt 448,592 213,709
Pension and postretirement liabilities 28,713 31,273
Environmental reserves 23,699 21,208
Deferred income taxes 19,403 19,573
Other noncurrent liabilities 21,486   6,284
 
Total liabilities 784,145   511,039
 
Total Mueller Industries, Inc. stockholders’ equity 522,111 898,684
Noncontrolling interests 13,917   37,753
 
Total equity 536,028   936,437
 
$ 1,320,173   $ 1,447,476
 
   

MUELLER INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
For the Year Ended
(In thousands)

December 30,
2017

   

December 31,
2016

 
Cash flows from operating activities
Consolidated net income $ 87,011 $ 99,754
 
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization 34,247 35,702
Stock-based compensation expense 7,450 6,387
Loss (income) from unconsolidated affiliates 2,077 (1,861 )
Gain on disposal of assets (2,115 ) (651 )
Insurance proceeds - noncapital related 500
Impairment charges 1,466 6,778
Deferred income taxes (3,160 ) 6,998
Changes in assets and liabilities, net of businesses acquired and sold:
Receivables (1,779 ) (16,552 )
Inventories (86,286 ) 6,662
Other assets (5,325 ) 5,808
Current liabilities 10,678 5,646
Other liabilities 64 1,518
Other, net (833 ) 1,588  
 
Net cash provided by operating activities 43,995   157,777  
 
Cash flows from investing activities
Proceeds from sale of assets, net of cash transferred 31,564 10,304
Acquisition of businesses, net of cash acquired (18,396 ) (20,533 )
Capital expenditures (46,131 ) (37,497 )
Investment in unconsolidated affiliates (3,317 )
Net withdrawals from (deposits to) restricted cash balances 2,858   (5,331 )
 
Net cash used in investing activities (33,422 ) (53,057 )
 
Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc. (196,944 ) (21,224 )
Dividends paid to noncontrolling interests (2,909 ) (3,765 )
Issuance of long-term debt 71,475 3,500
Repayments of long-term debt (111,224 ) (1,074 )
(Repayment) issuance of debt by consolidated joint ventures, net (3,369 ) 2,265
Net cash used to settle stock-based awards (1,595 ) (1,306 )
Debt issuance costs   (957 )
 
Net cash used in financing activities (244,566 ) (22,561 )
 
Effect of exchange rate changes on cash 2,945   (5,686 )
 
(Decrease) increase in cash and cash equivalents (231,048 ) 76,473
Cash and cash equivalents at the beginning of the year 351,317   274,844  
 
Cash and cash equivalents at the end of the year $ 120,269   $ 351,317  
 

Contacts

Mueller Industries, Inc.
Jeffrey A. Martin, 901-753-3226

Contacts

Mueller Industries, Inc.
Jeffrey A. Martin, 901-753-3226