Mueller Industries Inc 10-Q for FY2020 Q3

Mueller Industries Inc (MLI)

10-Q 2020-10-21 For: 2020-09-26

Added on April 09, 2026

About this 10-Q

Mueller Industries Inc filed this 10-Q on October 21, 2020, covering the quarter ended September 26, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 26, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $619.11M; up 1.7% from $608.6M a year earlier
Net income: $42.7M; up 46.8% from net income of $29.09M a year earlier
Diluted EPS: $0.76; up 46.2% from $0.52 a year earlier

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For the quarterly period ended			September 26, 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	36

	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 Nine Months Ended
(In thousands, except per share data)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019

Net sales	$	619,105	$	608,602	$	1,722,192	$	1,886,777

Cost of goods sold	500,780		510,788		1,412,654		1,586,129
Depreciation and amortization	10,752		10,823		32,888		31,856
Selling, general, and administrative expense	38,346		40,739		114,714		121,838
Asset impairments	—		—		3,035		—
Litigation settlement, net	—		—		(21,933)		—


Operating income	69,227		46,252		180,834		146,954

Interest expense	(4,885)		(6,148)		(15,237)		(20,135)
Other income, net	522		533		3,634		823

Income before income taxes	64,864		40,637		169,231		127,642

Income tax expense	(15,450)		(7,665)		(42,623)		(27,643)
Loss from unconsolidated affiliates, net of foreign tax	(5,457)		(2,528)		(20,213)		(23,740)

Consolidated net income	43,957		30,444		106,395		76,259

Net income attributable to noncontrolling interests	(1,255)		(1,351)		(3,322)		(3,457)

Net income attributable to Mueller Industries, Inc.	$	42,702	$	29,093	$	103,073	$	72,802

Weighted average shares for basic earnings per share	55,816		55,832		55,805		55,771
Effect of dilutive stock-based awards	550		482		534		523

Adjusted weighted average shares for diluted earnings per share	56,366		56,314		56,339		56,294

Basic earnings per share	$	0.77	$	0.52	$	1.85	$	1.31

Diluted earnings per share	$	0.76	$	0.52	$	1.83	$	1.29

Dividends per share	$	0.10	$	0.10	$	0.30	$	0.30


	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019

Consolidated net income	$	43,957	$	30,444	$	106,395	$	76,259

Other comprehensive income (loss), net of tax:
Foreign currency translation	9,320		(6,692)		(11,514)		(3,612)
Net change with respect to derivative instruments and hedging activities, net of tax of $(43), $56, $(53), and $(34)	151		(195)		192		133
Net change in pension and postretirement obligation adjustments, net of tax of $92, $(232), $224, and $(323)	(170)		777		(715)		1,207
Attributable to unconsolidated affiliates, net of tax of $(99), $(159), $163, and $(240)	339		547		(564)		828

Total other comprehensive income (loss), net	9,640		(5,563)		(12,601)		(1,444)

Consolidated comprehensive income	53,597		24,881		93,794		74,815
Comprehensive income attributable to noncontrolling interests	(2,207)		(857)		(3,062)		(2,044)

Comprehensive income attributable to Mueller Industries, Inc.	$	51,390	$	24,024	$	90,732	$	72,771


	(Unaudited)
(In thousands, except share data)	September 26, 2020		December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	113,640	$	97,944
Accounts receivable, less allowance for doubtful accounts of $1,289 in 2020 and $770 in 2019	320,035		269,943
Inventories	271,310		292,107
Other current assets	24,880		33,778

Total current assets	729,865		693,772

Property, plant, and equipment, net	368,736		363,128
Operating lease right-of-use assets	22,397		26,922
Goodwill, net	185,479		153,276
Intangible assets, net	62,474		60,082
Investments in unconsolidated affiliates	27,423		48,363
Other assets	23,638		25,397

Total assets	$	1,420,012	$	1,370,940

Liabilities
Current liabilities:
Current portion of debt	$	6,684	$	7,530
Accounts payable	108,063		85,644
Accrued wages and other employee costs	49,016		41,673
Current portion of operating lease liabilities	6,320		5,250
Other current liabilities	82,669		94,190

Total current liabilities	252,752		234,287

Long-term debt, less current portion	342,972		378,724
Pension liabilities	5,773		9,126
Postretirement benefits other than pensions	12,413		13,082
Environmental reserves	19,809		19,972
Deferred income taxes	18,066		21,094
Noncurrent operating lease liabilities	16,464		22,388
Other noncurrent liabilities	12,412		10,131

Total liabilities	680,661		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 57,080,225 in 2020 and 56,949,246 in 2019	802		802
Additional paid-in capital	277,663		278,609
Retained earnings	988,983		903,070
Accumulated other comprehensive loss	(81,111)		(68,770)
Treasury common stock, at cost	(468,716)		(470,243)

Total Mueller Industries, Inc. stockholders' equity	717,621		643,468
Noncontrolling interests	21,730		18,668

Total equity	739,351		662,136



Total liabilities and equity	$	1,420,012	$	1,370,940


	For the Quarter Ended September 26, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	409,414	$	118,831	$	97,604	$	(6,744)	$	619,105

Cost of goods sold	339,904		95,717		70,450		(5,291)		500,780
Depreciation and amortization	5,362		1,774		2,547		1,069		10,752
Selling, general, and administrative expense	19,285		2,992		6,451		9,618		38,346




Operating income	44,863		18,348		18,156		(12,140)		69,227

Interest expense									(4,885)
Other income, net									522

Income before income taxes									$	64,864


	For the Quarter Ended September 28, 2019
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	390,917	$	135,443	$	90,938	$	(8,696)	$	608,602

Cost of goods sold	330,418		117,893		70,523		(8,046)		510,788
Depreciation and amortization	5,751		1,836		2,491		745		10,823
Selling, general, and administrative expense	18,738		3,115		9,961		8,925		40,739




Operating income	36,010		12,599		7,963		(10,320)		46,252

Interest expense									(6,148)
Other income, net									533

Income before income taxes									$	40,637


	For the Nine Months Ended September 26, 2020
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	1,128,467	$	338,652	$	276,983	$	(21,910)	$	1,722,192

Cost of goods sold	931,339		285,788		206,083		(10,556)		1,412,654
Depreciation and amortization	16,517		5,771		7,770		2,830		32,888
Selling, general, and administrative expense	54,963		8,690		19,607		31,454		114,714
Asset impairments	3,035		—		—		—		3,035
Litigation settlement, net	—		—		—		(21,933)		(21,933)


Operating income	122,613		38,403		43,523		(23,705)		180,834

Interest expense									(15,237)
Other income, net									3,634

Income before income taxes									$	169,231


	For the Nine Months Ended September 28, 2019
(In thousands)	Piping Systems		Industrial Metals		Climate		Corporate and Eliminations		Total

Net sales	$	1,193,274	$	434,037	$	276,853	$	(17,387)	$	1,886,777

Cost of goods sold	1,019,546		372,542		212,201		(18,160)		1,586,129
Depreciation and amortization	16,953		5,518		6,932		2,453		31,856
Selling, general, and administrative expense	56,620		9,280		24,336		31,602		121,838




Operating income	100,155		46,697		33,384		(33,282)		146,954

Interest expense									(20,135)
Other income, net									823

Income before income taxes									$	127,642


	Asset Derivatives								Liability Derivatives
		Fair Value							Fair Value
(In thousands)	Balance Sheet Location	September 26, 2020		December 28, 2019		Balance Sheet Location	September 26, 2020		December 28, 2019

Commodity contracts - gains	Other current assets	$	791	$	1,435	Other current liabilities	$	—	$	50
Commodity contracts - losses	Other current assets	(18)		(12)		Other current liabilities	—		(159)

Total derivatives ⁽¹⁾		$	773	$	1,423		$	—	$	(109)


	For the Nine Months Ended
(In thousands)	September 26, 2020		September 28, 2019

Cash flows from operating activities
Consolidated net income	$	106,395	$	76,259
Reconciliation of consolidated net income to net cash provided by operating activities:
Depreciation and amortization	33,127		32,095
Stock-based compensation expense	6,332		6,355
Provision for doubtful accounts receivable	953		(66)
Loss from unconsolidated affiliates	20,213		23,740

Loss (gain) on disposals of properties	144		(24)

Impairment charges	3,035		—

Change in fair value of contingent consideration	—		4,500
Deferred income tax benefit	(836)		(1,593)
Changes in assets and liabilities, net of effects of business acquired:
Receivables	(45,530)		(47,367)
Inventories	41,598		50,985
Other assets	9,053		(7,485)
Current liabilities	25,913		1,687
Other liabilities	(5,813)		(7,112)
Other, net	2,294		(47)

Net cash provided by operating activities	196,878		131,927

Cash flows from investing activities
Capital expenditures	(29,204)		(20,162)
Acquisition of businesses, net of cash acquired	(72,648)		3,465

Investments in unconsolidated affiliates	—		(11,000)
Issuance of notes receivable	(9,155)		—
Proceeds from sales of assets	12		385


Net cash used in investing activities	(110,995)		(27,312)

Cash flows from financing activities


(In thousands)	September 26, 2020		December 28, 2019

Raw materials and supplies	$	78,210	$	85,769
Work-in-process	41,136		48,814
Finished goods	159,674		163,842
Valuation reserves	(7,710)		(6,318)

Inventories	$	271,310	$	292,107


	For the Quarter Ended September 26, 2020
(In thousands)	Gain (Loss) 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	$	337	Cost of goods sold	$	(180)
Other	(6)		Other	—

Total	$	331	Total	$	(180)


	For the Quarter Ended September 28, 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	$	130	Cost of goods sold	$	(332)
Other	8		Other	(1)

Total	$	138	Total	$	(333)


	For the Nine Months Ended September 26, 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	$	(5,084)	Cost of goods sold	$	5,273
Other	2		Other	1

Total	$	(5,082)	Total	$	5,274


	For the Nine Months Ended September 26, 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	(11,254)		(5,082)		(1,468)		(564)		(18,368)
Amounts reclassified from AOCI	—		5,274		753		—		6,027

Net current-period other comprehensive loss	(11,254)		192		(715)		(564)		(12,341)


Balance as of September 26, 2020	$	(57,452)	$	668	$	(22,570)	$	(1,757)	$	(81,111)


	Amount reclassified from AOCI
	For the Quarter Ended						For the Nine Months Ended
(In thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019		Affected line item

Unrealized (gains) losses on derivative commodity contracts	$	(248)	$	(394)	$	6,581	$	(764)	Cost of goods sold

	68		61		(1,307)		134		Income tax expense (benefit)

	$	(180)	$	(333)	$	5,274	$	(630)	Net of tax and noncontrolling interests

Amortization of net loss and prior service cost on employee benefit plans	$	327	$	249	$	931	$	747	Other income, net
	(63)		(42)		(178)		(127)		Income tax benefit

	$	264	$	207	$	753	$	620	Net of tax and noncontrolling interests


	For the Quarter Ended						Percent Change		For the Nine Months Ended				Percent Change
(In thousands)	September 26, 2020		September 28, 2019		2020 vs. 2019		September 26, 2020		September 28, 2019		2020 vs. 2019

Net sales	$	619,105	$	608,602	1.7	%	$	1,722,192	$	1,886,777	(8.7)	%
Operating income	69,227		46,252		49.7		180,834		146,954		23.1
Net income	42,702		29,093		46.8		103,073		72,802		41.6


	Quarter-to- Date		Year-to- Date
Net selling price in core product lines	2.5	%	(1.2)	%
Unit sales volume in core product lines	(4.9)		(8.1)
Acquisitions	4.0		1.6

Other	0.1		(1.0)

	1.7	%	(8.7)	%


(In thousands)	2020		2019

Increase (decrease) in:
Cash, cash equivalents, and restricted cash	$	16,337	$	25,365
Property, plant, and equipment, net	5,608		(9,325)
Total debt	(36,598)		(55,229)
Working capital, net of cash and current debt	1,086		(13,313)

Net cash provided by operating activities	196,878		131,927
Net cash used in investing activities	(110,995)		(27,312)
Net cash used in financing activities	(66,252)		(77,739)


	(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⁾


June 28, 2020 - July 25, 2020	6,766	$	27.46	—	13,575,070
July 26, 2020 - August 22, 2020	40,893	$	28.62	—	13,575,070
August 23, 2020 - September 26, 2020	516	$	28.95	—	13,575,070
Total	48,175			—


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
October 21, 2020			Chief Financial Officer and Treasurer
Date			(Principal Financial and Accounting Officer)


			/s/ Anthony J. Steinriede
October 21, 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: October 21, 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
October 21, 2020