Paul Mueller : OTC Q2 2022 Disclosure

For Immediate Release	Press Contact: Ken Jeffries | Paul Mueller Company | Springfield, MO 65802 | [phone]
Paul Mueller Company Announces Its Second Quarter Earnings of 2022	[e-mail]| https://paulmueller.com

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

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SELECTED FINANCIAL DATA

													June 30		December 31
Book Value per Common Share								2022			2021
							$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
Balance, December 31, 2021		Stock	Paid-in Surplus			Earnings		Treasury Stock		Income (Loss)			Total
	$	1,508			$	9,708		$	72,764		$	(10,749)		$	(35,938)		$	37,293
Add (Deduct):										(1,271)									(1,271)
Net Income (Loss)
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			Six Months
													Ended			Ended
Operating Activities:											June 30, 2022		June 30,2021
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

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PAUL MUELLER COMPANY

SUMMARIZED NOTES TO THE FINANCIAL STATEMENTS

1. Results of Operations: (In thousands)
2. 1. 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

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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)

1. Key headlines for the quarter,
2. • 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).

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1. • 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.
2. 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.
3. 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.

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