Paul Mueller Company Announces Its Second Quarter Earnings of 2022


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 Months
Ended
June 30, 2022
 Six Months
Ended
June 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 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 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

kjeffries@paulmueller.comhttps://paulmueller.com