Mueller Industries Inc 10-Q for FY2020 Q2

Mueller Industries Inc (MLI)

10-Q 2020-07-22 For: 2020-06-27

Added on April 09, 2026

About this 10-Q

Mueller Industries Inc filed this 10-Q on July 22, 2020, covering the quarter ended June 27, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 27, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $500.17M; down 24.9% from $666.39M a year earlier
Net income: $27.96M; down 0.1% from net income of $27.99M a year earlier
Diluted EPS: $0.50; unchanged from $0.50 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


For the quarterly period ended			June 27, 2020			Commission file number			1-6770


Delaware			25-0790410
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


150 Schilling Boulevard	Suite 100
Collierville	Tennessee	38017
(Address of principal executive offices)			(Zip Code)


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	MLI	NYSE


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Page Number
Part I. Financial Information

	Item 1. – Financial Statements (Unaudited)

	a.) Condensed Consolidated Statements of Income	3

	b.) Condensed Consolidated Statements of Comprehensive Income	4

	c.) Condensed Consolidated Balance Sheets	5

	d.) Condensed Consolidated Statements of Cash Flows	6

	e.) Condensed Consolidated Statements of Changes in Equity	7

	f.) Notes to Condensed Consolidated Financial Statements	9

	Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3. – Quantitative and Qualitative Disclosures About Market Risk	34

	Item 4. – Controls and Procedures	35

Part II. Other Information

	Item 1. – Legal Proceedings	35

	Item 1A – Risk Factors	36

	Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 6. – Exhibits	38

Signatures			39


	For the Quarter Ended						For the Six Months Ended
(In thousands, except per share data)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019

Net sales	$	500,168	$	666,394	$	1,103,087	$	1,278,175

Cost of goods sold	403,159		563,948		911,874		1,075,341
Depreciation and amortization	11,097		10,478		22,136		21,033
Selling, general, and administrative expense	33,616		40,446		76,368		81,099
Asset impairments	—		—		3,035		—
Litigation settlement, net	—		—		(21,933)		—


Operating income	52,296		51,522		111,607		100,702

Interest expense	(4,973)		(7,033)		(10,352)		(13,987)
Other income, net	2,834		462		3,112		290

Income before income taxes	50,157		44,951		104,367		87,005

Income tax expense	(13,029)		(10,432)		(27,173)		(19,978)
Loss from unconsolidated affiliates, net of foreign tax	(8,641)		(5,843)		(14,756)		(21,212)

Consolidated net income	28,487		28,676		62,438		45,815

Net income attributable to noncontrolling interests	(531)		(690)		(2,067)		(2,106)

Net income attributable to Mueller Industries, Inc.	$	27,956	$	27,986	$	60,371	$	43,709

Weighted average shares for basic earnings per share	55,723		55,753		55,799		55,741
Effect of dilutive stock-based awards	471		561		527		543

Adjusted weighted average shares for diluted earnings per share	56,194		56,314		56,326		56,284

Basic earnings per share	$	0.50	$	0.50	$	1.08	$	0.78

Diluted earnings per share	$	0.50	$	0.50	$	1.07	$	0.78

Dividends per share	$	0.10	$	0.10	$	0.20	$	0.20


	For the Quarter Ended						For the Six Months Ended
(In thousands)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019

Consolidated net income	$	28,487	$	28,676	$	62,438	$	45,815

Other comprehensive (loss) income, net of tax:
Foreign currency translation	421		(2,977)		(20,834)		3,080
Net change with respect to derivative instruments and hedging activities, net of tax of $(970), $253, $(10), and $(90)	3,398		(929)		41		328
Net change in pension and postretirement obligation adjustments, net of tax of $375, $(198), $132, and $(91)	(1,284)		676		(545)		430
Attributable to unconsolidated affiliates, net of tax of $810, $(68), $262, and $(81)	(2,790)		234		(903)		281

Total other comprehensive (loss) income, net	(255)		(2,996)		(22,241)		4,119

Consolidated comprehensive income	28,232		25,680		40,197		49,934
Comprehensive loss (income) attributable to noncontrolling interests	90		433		(855)		(1,187)

Comprehensive income attributable to Mueller Industries, Inc.	$	28,322	$	26,113	$	39,342	$	48,747


	(Unaudited)
(In thousands, except share data)	June 27, 2020		December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	123,610	$	97,944
Accounts receivable, less allowance for doubtful accounts of $2,205 in 2020 and $770 in 2019	273,710		269,943
Inventories	244,414		292,107
Other current assets	28,957		33,778

Total current assets	670,691		693,772

Property, plant, and equipment, net	362,785		363,128
Operating lease right-of-use assets	17,172		26,922
Goodwill, net	153,335		153,276
Intangible assets, net	63,004		60,082
Investments in unconsolidated affiliates	32,443		48,363
Other assets	23,960		25,397

Total assets	$	1,323,390	$	1,370,940

Liabilities
Current liabilities:
Current portion of debt	$	6,543	$	7,530
Accounts payable	93,579		85,644
Accrued wages and other employee costs	40,409		41,673
Current portion of operating lease liabilities	4,623		5,250
Other current liabilities	84,110		94,190

Total current liabilities	229,264		234,287

Long-term debt, less current portion	323,114		378,724
Pension liabilities	5,819		9,126
Postretirement benefits other than pensions	12,179		13,082
Environmental reserves	19,776		19,972
Deferred income taxes	19,635		21,094
Noncurrent operating lease liabilities	13,009		22,388
Other noncurrent liabilities	10,390		10,131

Total liabilities	633,186		708,804

Equity
Mueller Industries, Inc. stockholders' equity:
Preferred stock - $1.00 par value; shares authorized 5,000,000; none outstanding	—		—
Common stock - $.01 par value; shares authorized 100,000,000; issued 80,183,004; outstanding 56,791,916 in 2020 and 56,949,246 in 2019	802		802
Additional paid-in capital	281,856		278,609
Retained earnings	951,992		903,070
Accumulated other comprehensive loss	(89,799)		(68,770)
Treasury common stock, at cost	(474,170)		(470,243)

Total Mueller Industries, Inc. stockholders' equity	670,681		643,468
Noncontrolling interests	19,523		18,668

Total equity	690,204		662,136

Commitments and contingencies	—		—

Total liabilities and equity	$	1,323,390	$	1,370,940


	For the Quarter Ended June 27, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	334,040	$	88,619	$	86,107	$	(8,598)	$	500,168

Cost of goods sold	272,271		75,274		64,540		(8,926)		403,159
Depreciation and amortization	5,456		1,995		2,757		889		11,097
Selling, general, and administrative expense	15,239		2,477		6,457		9,443		33,616




Operating income	41,074		8,873		12,353		(10,004)		52,296

Interest expense									(4,973)
Other income, net									2,834

Income before income taxes									$	50,157


	For the Quarter Ended June 29, 2019
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	425,865	$	147,719	$	96,081	$	(3,271)	$	666,394

Cost of goods sold	364,332		127,950		74,849		(3,183)		563,948
Depreciation and amortization	5,652		1,838		2,128		860		10,478
Selling, general, and administrative expense	19,985		3,020		6,069		11,372		40,446




Operating income	35,896		14,911		13,035		(12,320)		51,522

Interest expense									(7,033)
Other income, net									462

Income before income taxes									$	44,951


	For the Six Months Ended June 27, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	719,053	$	219,821	$	179,379	$	(15,166)	$	1,103,087

Cost of goods sold	591,435		190,071		135,633		(5,265)		911,874
Depreciation and amortization	11,155		3,997		5,223		1,761		22,136
Selling, general, and administrative expense	35,678		5,698		13,156		21,836		76,368
Asset impairments	3,035		—		—		—		3,035
Litigation settlement, net	—		—		—		(21,933)		(21,933)


Operating income	77,750		20,055		25,367		(11,565)		111,607

Interest expense									(10,352)
Other income, net									3,112

Income before income taxes									$	104,367


	For the Six Months Ended June 29, 2019
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	802,357	$	298,594	$	185,915	$	(8,691)	$	1,278,175

Cost of goods sold	689,128		254,649		141,678		(10,114)		1,075,341
Depreciation and amortization	11,202		3,682		4,441		1,708		21,033
Selling, general, and administrative expense	37,882		6,165		14,375		22,677		81,099




Operating income	64,145		34,098		25,421		(22,962)		100,702

Interest expense									(13,987)
Other income, net									290

Income before income taxes									$	87,005


	Asset Derivatives								Liability Derivatives
		Fair Value							Fair Value
(In thousands)	Balance Sheet Location	June 27, 2020		December 28, 2019		Balance Sheet Location	June 27, 2020		December 28, 2019

Commodity contracts - gains	Other current assets	$	1,155	$	1,435	Other current liabilities	$	15	$	50
Commodity contracts - losses	Other current assets	—		(12)		Other current liabilities	(103)		(159)

Total derivatives ⁽¹⁾		$	1,155	$	1,423		$	(88)	$	(109)


	For the Six Months Ended
(In thousands)	June 27, 2020		June 29, 2019

Cash flows from operating activities
Consolidated net income	$	62,438	$	45,815
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization	22,296		21,192
Stock-based compensation expense	4,198		4,302
Provision for doubtful accounts receivable	1,850		(100)
Loss from unconsolidated affiliates	14,756		21,212

Gain on disposals of properties	(9)		(37)

Impairment charges	3,035		—


Deferred income tax expense (benefit)	764		(67)
Changes in assets and liabilities, net of effects of business acquired:
Receivables	(11,212)		(42,045)
Inventories	43,263		30,080
Other assets	3,967		(4,617)
Current liabilities	(277)		(9,735)
Other liabilities	(5,369)		(1,485)
Other, net	3,082		(532)

Net cash provided by operating activities	142,782		63,983

Cash flows from investing activities
Capital expenditures	(22,215)		(13,034)
Acquisition of business, net of cash acquired	(15,415)		3,465

Investments in unconsolidated affiliates	—		(10,500)
Proceeds from sales of assets	1		351


Net cash used in investing activities	(37,629)		(19,718)

Cash flows from financing activities
Dividends paid to stockholders of Mueller Industries, Inc.	(11,168)		(11,151)


(In thousands)	June 27, 2020		December 28, 2019

Raw materials and supplies	$	60,815	$	85,769
Work-in-process	51,240		48,814
Finished goods	140,065		163,842
Valuation reserves	(7,706)		(6,318)

Inventories	$	244,414	$	292,107


	For the Quarter Ended						For the Six Months Ended
(In thousands)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019

Pension benefits:
Service cost	$	—	$	—	$	—	$	—
Interest cost	866		1,443		1,724		2,910
Expected return on plan assets	(1,495)		(2,077)		(2,990)		(4,153)
Amortization of net loss	528		440		988		970

Net periodic benefit income	$	(101)	$	(194)	$	(278)	$	(273)

Other benefits:
Service cost	$	56	$	63	$	117	$	127
Interest cost	106		153		215		306
Amortization of prior service credit	(58)		(225)		(284)		(451)
Amortization of net gain	(47)		(13)		(100)		(21)
Curtailment gain	(2,591)		$	—	(2,591)		$	—

Net periodic benefit income	$	(2,534)	$	(22)	$	(2,643)	$	(39)


	For the Quarter Ended June 27, 2020
(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:
Commodity contracts	$	(1,715)	Cost of goods sold	$	5,075
Other	37		Other	1

Total	$	(1,678)	Total	$	5,076


	For the Six Months Ended June 29, 2019
(In thousands)	Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax

Cash flow hedges:
Commodity contracts	$	619	Cost of goods sold	$	(297)
Other	6		Other	—

Total	$	625	Total	$	(297)


	For the Six Months Ended June 27, 2020
(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Derivatives		Pension/OPEB Liability Adjustment		Attributable to Unconsol. Affiliates		Total

Balance as of December 28, 2019	$	(46,198)	$	476	$	(21,855)	$	(1,193)	$	(68,770)

Other comprehensive loss before reclassifications	(19,622)		(5,413)		(1,034)		(903)		(26,972)
Amounts reclassified from AOCI	—		5,454		489		—		5,943

Net current-period other comprehensive loss	(19,622)		41		(545)		(903)		(21,029)


Balance as of June 27, 2020	$	(65,820)	$	517	$	(22,400)	$	(2,096)	$	(89,799)


	Amount reclassified from AOCI
	For the Quarter Ended						For the Six Months Ended
(In thousands)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019		Affected line item

Unrealized losses (gains) on derivative commodity contracts	$	6,361	$	(274)	$	6,829	$	(370)	Cost of goods sold

	(1,285)		56		(1,375)		73		Income tax (benefit) expense

	$	5,076	$	(218)	$	5,454	$	(297)	Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	$	423	$	202	$	604	$	498	Other income, net
	(86)		(32)		(115)		(85)		Income tax benefit

	$	337	$	170	$	489	$	413	Net of tax and noncontrolling interests


	For the Quarter Ended						Percent Change		For the Six Months Ended				Percent Change
(In thousands)	June 27, 2020		June 29, 2019		2020 vs. 2019		June 27, 2020		June 29, 2019		2020 vs. 2019

Net sales	$	500,168	$	666,394	(24.9)	%	$	1,103,087	$	1,278,175	(13.7)	%
Operating income	52,296		51,522		1.5		111,607		100,702		10.8
Net income	27,956		27,986		(0.1)		60,371		43,709		38.1


	Quarter-to- Date		Year-to- Date
Net selling price in core product lines	(4.3)	%	(3.0)	%
Unit sales volume in core product lines	(16.9)		(9.6)
Acquisitions	0.4		0.4

Other	(4.1)		(1.5)

	(24.9)	%	(13.7)	%


(In thousands)	2020		2019

Increase (decrease) in:
Cash, cash equivalents, and restricted cash	$	26,470	$	16,934
Property, plant, and equipment, net	(343)		(5,608)
Total debt	(56,597)		(14,531)
Working capital, net of cash and current debt	(44,711)		(14,899)

Net cash provided by operating activities	142,782		63,983
Net cash used in investing activities	(37,629)		(19,718)
Net cash used in financing activities	(72,523)		(27,449)


	(a) Total Number of Shares Purchased ⁽¹⁾	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs ⁽²⁾


March 29, 2020 - April 25, 2020	—	$	—	—	13,575,070
April 26, 2020 - May 23, 2020	1,462	$	25.09	—	13,575,070
May 24, 2020 - June 27, 2020	300	$	20.27	—	13,575,070
Total	1,762			—


31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase

101.INS			Inline XBRL Instance Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase

101.PRE			Inline XBRL Presentation Linkbase Document

101.SCH			Inline XBRL Taxonomy Extension Schema

104			Cover Page Interactive Data File (embedded within the Inline XBRL document and included in exhibit 101)


			MUELLER INDUSTRIES, INC.


			/s/ Jeffrey A. Martin
			Jeffrey A. Martin
July 22, 2020			Chief Financial Officer and Treasurer
Date			(Principal Financial and Accounting Officer)


			/s/ Anthony J. Steinriede
July 22, 2020			Anthony J. Steinriede
Date			Vice President – Corporate Controller


1.	I have reviewed this quarterly report on Form 10-Q of Mueller Industries, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: July 22, 2020
			/s/ Gregory L. Christopher
			Gregory L. Christopher
			Chief Executive Officer


(1)			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ JEFFREY A. MARTIN
Jeffrey A. Martin
Chief Financial Officer
July 22, 2020