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Paul Mueller Company Announces Its First Quarter Earnings of 2017

SPRINGFIELD, Mo., April 28, 2017 (GLOBE NEWSWIRE) -- Paul Mueller Company (OTC:MUEL) today announced earnings for the quarter ended March 31, 2017.

 
PAUL MUELLER COMPANY
THREE-MONTH REPORT
Unaudited
                                     
  CONSOLIDATED STATEMENTS OF INCOME  
                                     
  (In thousands)         Three Months Ended   Twelve Months Ended        
              March 31   March 31        
                2017       2016       2017       2016            
                                                     
  Net Sales         $   37,611     $   41,161     $   164,471     $   175,113            
  Cost of Sales          27,017         28,845         121,463         122,766            
  Gross Profit     $   10,594     $   12,316     $   43,008     $   52,347            
  Selling, General and Administrative Expense       10,483         10,865         47,506         40,085            
  Operating Income (Loss)    $   111     $   1,451     $   (4,498 )   $   12,262            
  Interest Expense          (50 )       (36 )       (308 )       (277 )          
  Other Income (Expense)        (90 )       (48 )       167         (262 )          
  Income (Loss) before Provision (Benefit) for Income Taxes   $   (29 )   $   1,367     $   (4,639 )   $   11,723            
  Provision (Benefit) for Income Taxes        114         456         (1,304 )       3,814            
  Net Income (Loss)     $   (143 )   $   911     $   (3,335 )   $   7,909            
                                     
  Earnings (Loss) per Common Share  –– Basic   ($ 0.12 )   $ 0.74     ($ 2.78 )   $ 6.40            
          Diluted   ($ 0.12 )   $ 0.74     ($ 2.78 )   $ 6.40            
                                     
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
                                     
                      Three Months Ended          
                      March 31          
                        2017       2016            
                                     
        Net Income (Loss)           $   (143 )   $   911            
        Other Comprehensive Income, Net of Tax:                      
        Foreign Currency Translation Adjustment           556         1,315            
        Amortization of De-Designated Hedges           3         4            
                                     
        Comprehensive Income        $   416     $   2,230            
                                     
  CONSOLIDATED BALANCE SHEETS  
                                     
                      March 31   December 31          
                        2017       2016            
                                     
        Accounts Receivable        $   19,904     $   18,083            
        Inventories                 25,474         24,126            
        Other Current Assets            3,831         2,514            
        Current Assets   $   49,209     $   44,723            
                                     
        Net Property, Plant, and Equipment       33,352         33,545            
        Other Assets       28,432         26,397            
        Total Assets   $   110,993     $   104,665            
                                     
        Accounts Payable           $   9,449     $   8,165            
        Current Maturities and Short-Term debt            6,496         8,243            
        Other Current Liabilities               25,510         20,777            
        Current Liabilities   $   41,455     $   37,185            
                                     
        Long-Term Debt       4,489         4,558            
        Long-Term Pension Liabilities               31,656         31,628            
        Other Long-Term Liabilities       2,613         828            
        Total Liabilities           $   80,213     $   74,199            
        Shareholders' Investment       30,780         30,466            
        Total Liabilities and Shareholders' Investment   $   110,993     $   104,665            
                                     
   
  SELECTED FINANCIAL DATA  
                                     
                          March 31   December 31      
                            2017       2016        
          Book Value per Common Share    $ 25.73     $ 25.39        
          Total Shares Outstanding        1,196,261         1,200,021        
          Backlog    $   77,683     $   44,241        
                                     
   CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT   
               Common Stock    Paid-in Surplus   Retained Earnings   Treasury Stock              
                        Accumulated
Other
Comprehensive
Income (Loss)
    Total  
  Balance, December 31, 2016     $   1,508     $   9,708     $   61,582     $   (6,227 )   $   (36,105 )   $   30,466    
  Add (Deduct):                                
    Net Income (Loss)                 (143 )               (143 )  
    Other Comprehensive Income, Net of Tax                       559         559    
    Treasury Stock Acquisition                      (102 )           (102 )  
  Balance,  March 31, 2017     $   1,508     $   9,708     $   61,439     $   (6,329 )   $   (35,546 )   $   30,780    
                                     
                                     
   CONSOLIDATED STATEMENT OF CASH FLOWS  
                     
                          Three Months Ended March 31, 2017   Three Months Ended March 31, 2016      
        Operating Activities:                  
                           
        Net Income (Loss)       $   (143 )   $   911        
                           
        Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities:              
        Pension Contributions (Greater) Less than Expense           27         58        
        Bad Debt Expense (Recovery)           -         12        
        Depreciation & Amortization           1,432         1,429        
        (Gain) Loss on Sales of Equipment           (12 )       (7 )      
        Other           (20 )       (20 )      
        Change in Assets and Liabilities                  
        (Inc) Dec in Accts and Notes Receivable           (2,115 )       (576 )      
        (Inc) Dec in Cost in Excess of Estimated Earnings and Billings           (597 )       (15 )      
        (Inc) Dec in Inventories           (1,104 )       (806 )      
        (Inc) Dec in Prepayments           (566 )       565        
        (Inc) Dec Deferred Tax Asset                   -         (483 )      
        Inc (Dec) in Accounts Payable           1,084         891        
        Inc (Dec) Other Accrued Expenses           2,067         (121 )      
        Inc (Dec) Advanced Billings           1,425         918        
        Inc (Dec) in Billings in Excess of Costs and Estimated Earnings           1,483         757        
        Inc (Dec) In Other Liabilities           17         3        
        Net Cash Provided by Operating Activities       $   2,978     $   3,516        
                           
        Investing Activities                  
        Proceeds from Sales of Equipment           80         21        
        Additions to Property and Equipment           (857 )       (1,315 )      
        Net Cash (Required) for Investing Activities       $   (777 )   $   (1,294 )      
                           
        Financing Activities                  
        (Repayment) of Short-Term Borrowings, Net           (1,828 )       (2,228 )      
        (Repayment) of Long-Term Debt           (101 )       (110 )      
        Treasury Stock Acquisitions           (102 )       (107 )      
        Net Cash (Required) for Financing Activities       $   (2,031 )   $   (2,445 )      
                           
        Effect of Exchange Rate Changes            (31 )       (115 )      
                           
        Net Increase (Decrease) in Cash and Cash Equivalents       $   139     $   (338 )      
                           
        Cash and Cash Equivalents at Beginning of Year           357         545        
                           
        Cash and Cash Equivalents at End of Quarter       $   496     $   207        
           

 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 March 31.

Three Months Ended March 31  
Revenue   2017     2016    
Domestic $   27,419   $   26,857    
Mueller BV $   10,253   $   14,568    
Eliminations $   (61 ) $   (264 )  
Net Revenue $   37,611   $   41,161    
       

The chart below depicts the net revenue on a consolidating basis for the twelve months ended March 31.

Twelve Months Ended March 31
Revenue   2017     2016  
Domestic $   111,591   $   114,267  
Mueller BV $   53,786   $   62,642  
Eliminations $   (906 ) $   (1,796 )
Net Revenue $   164,471   $   175,113  
             

The chart below depicts the net income on a consolidating basis for the three months ended March 31.

Three Months Ended March 31
Net Income   2017     2016
Domestic $   528   $   649
Mueller BV $   (727 ) $   230
Eliminations $   56   $   32
Net Income $   (143 ) $   911
           

The chart below depicts the net income on a consolidating basis for the twelve months ended March 31.

Twelve Months Ended March 31
Net Income   2017     2016
Domestic $   (4,076 ) $   4,765
Mueller BV $   598   $   3,109
Eliminations $   143   $   35
Net Income $   (3,335 ) $   7,909
           

B. Our trailing twelve month results were negatively affected by two events which we described in previous communications including our 2015 and 2016 annual reports.

First, we began significant roof repairs on our Springfield, Missouri facilities.  The pre-tax results for the twelve months ended March 31, 2017 were reduced by roof repair expense of $1,661,000. 

Second, we completed the lump sum pension payments to participants who elected to take the settlement.  These payments, paid from the assets of the plans, were available for participants who were no longer employed by the company as of May 6, 2016, but who had not yet begun receiving their benefit.  The eligible participants represented about a quarter of the obligations of the plans and just over 50% of those eligible elected the settlement.  The payments, totaling $13.8 million to 218 participants, were made on or about September 26, 2016.  As of March 31, 2017, this settlement had a negative noncash effect on the pre-tax earnings of the Company of $6.72 million for the trailing twelve months caused by pension deficits, previously recorded in accumulated other comprehensive income, moving through net income. 

C. The pre-tax results for the twelve months ended March 31, 2017, were unfavorably affected by a $500,000 increase in the LIFO reserve. The pre-tax results for the twelve months ended March 31, 2016, were favorably affected by a $1,050,000 decrease in the LIFO reserve.

D. On March 18, 2016, the Company announced a repurchase program of up to $3 million of the Company’s common stock. The stock repurchases may be made from time to time in the open market, in compliance with a Rule 10b5-1 share repurchase plan adopted by the Company, or in privately negotiated transactions in compliance with applicable state and federal securities laws. The timing and amounts of any repurchases will be based on market conditions and other factors including price, regulatory requirements, and capital availability. The program does not require the repurchase of any minimum number of shares and may be suspended, modified, or discontinued at any time, without prior notice.  As of March 31, 2017, the Company has repurchased 3,760 shares at a total cost of $102,000 for the quarter and 37,416 shares at a total cost of $1,108,000 for the trailing twelve months.  As of March 31, 2016, the Company has repurchased 3,543 shares at a total cost of $107,000.

E. On March 17, 2017, the Company announced plans to build a new facility in Groenlo, a town in the east-central portion of The Netherlands. The new facility will be located 10 kilometers (approximately 6 miles) from one of Paul Mueller Company’s current Dutch manufacturing facilities in Lichtenvoorde.

The new facility will consolidate four locations the Company currently operates in The Netherlands, including the Lichtenvoorde location. The €20 million ($21 million) project is expected to have a positive return based on reducing the costs of operating four separate facilities, the rent paid on three of the facilities, and the sale of the primary manufacturing location in Lichtenvoorde. It will also combine the companies acquired in 2008 into one location creating a stronger culture and improving collaboration and efficiencies.
                
Pending final approval of construction plans and loan documents, construction should start in the summer of 2017 with a completion date projected to be in the summer of 2018.

F. During 2016, Mueller B.V. acquired the remaining 51% of DEG Engineering GmbH, a German engineering company, for $263,000 in cash, the forgiveness of a $2,152,000 payable owed to Mueller B.V. from DEG Engineering GmbH, and $96,000 in other considerations. The DEG Engineering GmbH acquisition included brand assets and patents useful in growing Mueller B.V. industrial and heat transfer business segments in international markets.

G. The Company was in violation of the fixed charge coverage covenant on its domestic bank borrowing facility at December 31, 2016. Subsequent to year end a waiver was obtained from the lender for the covenant violation as of December 31, 2016.  On March 29, 2017, the company obtained an amendment to the domestic bank borrowing facility to modify the fixed charge coverage covenant and was in compliance at March 31, 2017.

H. The consolidated financials are affected by the euro to dollar exchange rate when consolidating Mueller B.V., the Dutch subsidiary.  The monthly average euro to dollar exchange rate was 1.11 for March, 2016; 1.05 for December, 2016 and 1.07 for March, 2017, respectively.

(2) Summary of Accounting Policies:

Principles of Consolidation and Lines of Business–The financial statements include the accounts of Paul Mueller Company and its wholly owned subsidiaries: Mueller Transportation, Inc.; Mueller Field Operations, Inc.; and Mueller B.V. and its subsidiaries (collectively “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. The Company provides manufactured equipment and components for the food, dairy, beverage, transportation, chemical, pharmaceutical, and other industries, as well as the dairy farm market. The Company also provides field fabrication, service and repair, and construction services in these industries.

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 on page 30 of the Company’s 2016 Annual Report, 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.

For all other relevant accounting policies and management discussion and analysis,
please see the 2016 annual report, which is available at
www.paulmueller.com.

Press Contact: Jay Holden | Paul Mueller Company | Springfield, MO 65802 | (417) 575-9422
jholden@paulmueller.com | http://paulmueller.com

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