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
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.

The chart below depicts the net revenue on a consolidating basis for the six months ended June 30.

The chart below depicts the net revenue on a consolidating basis for the twelve months ended June 30.

The chart below depicts the net income (loss) on a consolidating basis for the three months ended June 30.

The chart below depicts the net income (loss) on a consolidating basis for the six months ended June 30.

The chart below depicts the net loss on a consolidating basis for the twelve months ended June 30.

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.com | https://paulmueller.com