<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. (Fee required.)
For the fiscal year ended: December 31, 1995.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. (No fee required.)
For the transition period from: _______________ to _______________.
Commission File Number: 0-4791
PAUL MUELLER COMPANY
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri
- ------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
44-0520907
- ------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
1600 West Phelps, Springfield, Missouri 65802
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(417) 831-3000
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(Registrant's telephone number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
- ------------------------- -------------------------------------------
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $1 per share
- ------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be con-
tained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K: [X]
State the aggregate market value of the voting stock held by nonaffili-
ates of the Registrant: The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid
and asked prices of such stock as of a specified date within 60 days
prior to the date of filing. Aggregate market value on March 1, 1996,
based on the last reported closing price: $ 23,803,450
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 15, 1996:
Common stock, $1 par value, outstanding: 1,168,021 shares
Portions of the Proxy Statement for the annual meeting of shareholders
to be held May 6, 1996, are incorporated by reference into Part III.
1
<PAGE> 2
PART I
ITEM 1. - DESCRIPTION OF BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
The Registrant was incorporated under the laws of Missouri in
1946 as the successor to a business begun in 1940 to perform
general sheet metal work, primarily for the building industry.
In the mid-1940's, the Registrant expanded its operations to
include the manufacture of poultry processing equipment and
stainless steel cheese-making vats for dairy plants. The
Registrant in 1955 began manufacturing stainless steel milk
coolers for dairy farms and in 1960 began manufacturing stain-
less steel storage tanks and discontinued its sheet metal
operations. The Registrant purchased a water purification
product line in January 1987. Today, the Registrant is one
of the world's largest manufacturers of milk coolers for dairy
farms. The Registrant is also one of the nation's leading
manufacturers of standard and custom-made stainless steel pro-
cessing equipment for the food and dairy, beverage, chemical
and pharmaceutical, and other industries.
The Registrant entered into a license agreement in January
1992 under which it acquired the right to manufacture and
market water distillation equipment. The agreement provides
that sales can be made on an exclusive basis to the water
bottling industry and for industrial process water applica-
tions; pharmaceutical, laboratory and medical applications;
and for milk concentration. The license is exclusive for five
years, but may become nonexclusive after three years if a
specified level of sales is not achieved. The Registrant
began selling equipment during 1992.
The Registrant entered into license agreements in February
1994 under which they acquired the rights to manufacture and
market evaporator assembly systems. The agreements provide
the Registrant an exclusive license to manufacture and to sell
or to sublicense its rights for the following applications:
milk cooling on dairy farms; HVAC; gas turbine; process
cooling of food and chemicals; and concentration of milk,
fruit juices and acid solutions. The exclusive licenses are
restricted to specific territories defined by application.
The licenses are exclusive until expiration of the patents,
but may become nonexclusive if royalties fail to equal speci-
fied minimum levels for any calendar year. The Registrant
began manufacturing and marketing in 1995.
The Registrant has a license agreement with a Dutch company,
which was extended during 1994 for five years, for the pro-
duction and sale of Mueller Dairy Farm Equipment in Europe,
which provides royalties for the Registrant.
2
<PAGE> 3
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
<TABLE>
EARNINGS DATA BY INDUSTRY SEGMENT
<CAPTION>
Dairy Farm Processing
Equipment Equipment Consolidated
----------- ----------- -----------
1995
-------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated
customers.................. $17,954,458 $60,421,178 $78,375,636
=========== =========== ===========
Operating profit............. $ 2,545,379 $ 819,115 $ 3,364,494
=========== ===========
General corporate expenses... (1,815,617)
Other income................. 1,065,776
-----------
Income from operations
before income tax.......... $ 2,614,653
===========
Identifiable assets at
December 31................ $10,576,803 $24,430,407 $35,007,210
=========== ===========
Corporate assets............. 19,671,694
-----------
Total assets at December 31.. $54,678,904
===========
Additions to property,
plant and equipment........ $ 719,071 $ 1,017,864
=========== ===========
Depreciation expense......... $ 751,451 $ 1,143,519
=========== ===========
<CAPTION>
1994
-------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated
customers.................. $22,897,565 $56,577,789 $79,475,354
=========== =========== ===========
Operating profit............. $ 4,276,870 $ 1,601,392 $ 5,878,262
=========== ===========
General corporate expenses... (1,616,725)
Other income................. 829,429
-----------
Income from operations
before income tax.......... $ 5,090,966
===========
Identifiable assets at
December 31................ $10,777,972 $24,431,405 $35,209,377
=========== ===========
Corporate assets............. 19,040,859
-----------
Total assets at December 31.. $54,250,236
===========
Additions to property,
plant and equipment........ $ 810,454 $ 934,853
=========== ===========
Depreciation expense......... $ 828,333 $ 1,276,872
=========== ===========
<CAPTION>
1993
-------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated
customers.................. $21,057,295 $52,699,364 $73,756,659
=========== =========== ===========
Operating profit (loss)...... $ 4,132,061 $ (650,039) $ 3,482,022
=========== ===========
General corporate expenses... (1,202,716)
Other income................. 575,350
-----------
Income from operations
before income tax.......... $ 2,854,656
===========
Identifiable assets at
December 31................ $10,215,876 $23,642,803 $33,858,679
=========== ===========
Corporate assets............. 19,088,616
-----------
Total assets at December 31.. $52,947,295
===========
Additions to property,
plant and equipment........ $ 531,088 $ 1,115,358
=========== ===========
Depreciation expense......... $ 770,629 $ 1,279,658
=========== ===========
</TABLE>
C. NARRATIVE DESCRIPTION OF BUSINESS
The Registrant's industry segments include Dairy Farm Equip-
ment and Processing Equipment.
The Dairy Farm Equipment segment includes sales of milk
coolers, pre-coolers, automatic washing systems and heat
recovery equipment to the dairy farm industry. The Dairy
Farm Equipment segment includes sales to domestic and export
markets.
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The Processing Equipment segment includes: (1) food, dairy,
meat and poultry processing equipment; (2) beer, wine and
beverage equipment; (3) chemical and pharmaceutical equipment;
(4) industrial heat transfer equipment; (5) thermal energy
storage equipment; and (6) water distilling/pure steam equip-
ment.
The food, dairy, meat and poultry processing equipment mar-
kets include stainless steel storage and mixing tanks, food
processors, cookers and coolers, and a variety of other
custom-fabricated tanks.
The beer, wine and beverage equipment markets include stain-
less steel storage and fermentation tanks, brewhouse equipment
and other special equipment for breweries, wineries, distil-
leries and soft drink bottlers.
The chemical, pharmaceutical and industrial equipment markets
include stainless steel and other alloy pressure vessels and
tanks, tank components, water purification products, systems
and applications for a variety of heat transfer products, and
thermal energy storage equipment.
The Processing Equipment segment includes sales to the domes-
tic and export markets.
Information as to classes of products:
<TABLE>
SALES DATA BY PRODUCT CATEGORY
(In Thousands of Dollars)
<CAPTION>
1995 1994 1993
------------- ------------- -------------
% of % of % of
Total Total Total
Sales Sales Sales Sales Sales Sales
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
DAIRY FARM EQUIPMENT.... $17,955 23% $22,897 29% $21,057 29%
PROCESSING EQUIPMENT
Food and Beverage
Equipment.......... $24,972 32% $22,035 28% $18,768 25%
Chemical, Pharmaceuti-
cal and Industrial
Equipment.......... 35,449 45% 34,543 43% 33,932 46%
------- ---- ------- ---- ------- ----
$60,421 77% $56,578 71% $52,700 71%
------- ---- ------- ---- ------- ----
TOTAL.............. $78,376 100% $79,475 100% $73,757 100%
======= ==== ======= ==== ======= ====
</TABLE>
Raw materials used in the fabrication of Registrant's products
are readily available from sources in the United States. The
Registrant purchases a component exclusively from a German
vendor under a sales and supply agreement for its plate heat
exchanger product line.
Patents held by the Registrant generally are not considered
significant to the successful conduct of each segment's busi-
ness. Trademarks are registered for the Registrant's name and
for the products sold in the Dairy Farm Equipment segment in
the key markets served by the Registrant. These trademarks
are considered significant to the successful conduct of the
Dairy Farm Equipment segment business. Key license agreements
that are maintained by the Registrant have been discussed in
Section A above.
In general, the seasonality of the Registrant's business seg-
ments is not material.
The Registrant carries a significant inventory of standard
sizes of stainless steel coil and plate used in the manufac-
ture of its products. For some Processing Equipment orders,
4
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stainless steel is specifically ordered for the project. The
Registrant provides extended payment terms primarily on export
shipments with payment secured generally by a letter of credit
and to qualifying domestic Dairy Farm Equipment distributors.
The Registrant requires down payments or progress payments
on significant Processing Equipment orders.
Sales of the Registrant's products are distributed among
several customers, and sales to any one customer are not
significant to total consolidated sales. Sales to any one
customer did not exceed 10% of the Registrant's consolidated
sales during 1995.
The backlog of sales was approximately $29,300,000 at
February 29, 1996, compared to approximately $22,700,000 at
February 28, 1995. It is anticipated that substantially all
of the February 29, 1996, backlog will be shipped in the
current fiscal year.
In the Processing Equipment segment, there are several com-
petitors, most of which are smaller than the Registrant. In
the Dairy Farm Equipment segment, there are relatively few
competitors, and the Registrant is one of the largest manu-
facturers of farm milk coolers in the world.
During 1995, stainless steel prices rose significantly com-
pared to the prior year. It appears, however, that increases
in 1996 should be more moderate. Price increases have been
announced by the major steel suppliers, but they are not
effective until May 1996. European steel producers may pro-
vide more competition in 1996, which will tend to stabilize
prices. Also, there appears to be more stability in the
market prices of molybdenum, nickel and chromium, which has
been reflected in lower steel surcharges in recent months.
The Registrant's products are priced to cover anticipated
material prices. The principal methods of competition are
price, quality, delivery and service.
The Registrant spent $597,600 in 1995, $764,400 in 1994 and
$875,800 in 1993 on research activities relating to the
development of new products or services and the improvement
of existing products or services. Eleven full-time adminis-
trative employees are engaged in this activity.
It is not anticipated that compliance with Federal, State and
local provisions, which have been enacted or adopted regu-
lating the discharge of materials into the environment or
otherwise relating to the protection of the environment, will
have a material effect upon the capital expenditures, earnings
or competitive position of the Registrant and its subsidiary.
The number of employees at December 31, 1995, was 881.
As previously reported, the labor contract with the Sheet
Metal Workers Union (which covers a portion of the employees
at the Springfield, Missouri, plant) expired on June 11, 1994.
Negotiations with union representatives continued until an
impasse was reached, and the Registrant implemented specific
provisions of its final offer effective September 19, 1994.
In November 1994, the Regional Director of the National Labor
Relations Board (NLRB) also concluded that a lawful impasse
had been reached in negotiations prior to the Registrant's
implementation of its offer.
However, on December 22, 1994, the Regional Director of the
NLRB issued an unfair labor practice complaint against the
Registrant for refusing to supply information to union repre-
sentatives about the personal health insurance claims of
individual employees and their dependents and reversed his
previous decision regarding the implementation of changes in
wages and benefits. A hearing on the unfair labor practice
issues has been scheduled for April 10, 1996, and will be
5
<PAGE> 6
conducted by an administrative law judge of the NLRB. A final
determination on the charges may take up to two years, but
management believes, based on an evaluation by counsel, that
it will be successful in refuting these allegations of unfair
labor practices.
The Registrant currently employs nearly 900 people, of which
approximately 400 at the Springfield, Missouri, facility are
represented by the Sheet Metal Workers Union. The Inter-
national Union called a strike beginning on July 25, 1995, and
18 employees went out. During the month of August, an average
of 35 employees were on strike, and during the month of
September, the average number striking was about 60 employees.
At the beginning of the fourth quarter, the maximum number
striking was approximately 185 employees. Subsequently, some
employees have returned, and there are currently about 150
employees on strike. No action has been taken by the Union to
prevent nonstriking employees from working.
The Registrant continued production with the remaining work
force and supervisory, technical, administrative and service
personnel. With the reduction in the work force, the level
of production declined and efficiency was hampered due to the
relocation of work and the reassignment of personnel to the
plant to continue operations. The Registrant has extended
a revised final offer which remains open for the Union's
acceptance. No further negotiations are scheduled, and the
Registrant is hiring plant employees.
The Registrant has facilities located in Springfield,
Missouri, and Osceola, Iowa. There are approximately 800
employees assigned to the Springfield facility. There are
an additional 100 employees at the Osceola facility, none of
which are represented by a labor union.
D. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Information about the amounts of export sales is covered in
Note 5 of the Notes to Consolidated Financial Statements found
in Part II, Item 8, and is incorporated herein by reference.
Export sales were about 47% Dairy Farm Equipment and 53% Pro-
cessing Equipment during 1995.
ITEM 2. - PROPERTIES
The Registrant's primary domestic manufacturing facilities are
located in Springfield, Missouri, and occupy approximately 720,000
square feet on 50 acres of land. These facilities are owned by
the Registrant, as is all of the equipment it uses. The original
section of the present Springfield plant was built in 1950 and
consisted of 23,720 square feet. Since then, the Registrant has
added to this facility many times in the course of a continuing
program for enlarging and modernizing its facilities and increasing
its capabilities. The last addition of approximately 14,100 square
feet were made in 1981. In February 1987, the Registrant acquired
an additional manufacturing facility in Osceola, Iowa, which con-
tains approximately 216,000 square feet.
ITEM 3. - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business or matters
for which insurance coverage is adequate, which involves the Regis-
trant, nor is any director, officer or any management security
holder involved in any litigation that could adversely affect the
Registrant.
6
<PAGE> 7
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Registrant did not submit any matter to a vote of security holders,
through a solicitation of proxies or otherwise, during the fourth
quarter of 1995.
ITEM 10. (from PART III) - EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Position(s) with Registrant
------------------- --- -----------------------------------------
<S> <C> <C>
Paul Mueller<F1> 80 Chairman of the Board and Director
Daniel C. Manna<F1> 49 President and Director
Donald E. Golik<F1> 52 Senior Vice President and Chief Financial
Officer, Secretary and Director
<FN>
<F1> Individual has been employed by the Registrant through the past
five years.
</FN>
</TABLE>
Each of the above officers was elected to serve until the next
annual meeting of the Board of Directors, which will be held on
May 6, 1996, and until his successor shall have been duly elected
and qualified or until his earlier resignation or removal.
7
<PAGE> 8
PART II
ITEM 5. - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Registrant's common stock is traded on the NASDAQ National
Market tier of The NASDAQ Stock Market(SM) under the symbol MUEL.
As of December 31, 1995, there were approximately 360 shareholders
of record and approximately 660 beneficial shareholders.
Market high and low prices and quarterly cash dividends in 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 Quarter Ended 1994 Quarter Ended
------------------------------ ------------------------------
Mar 31 Jne 30 Spt 30 Dec 31 Mar 31 Jne 30 Spt 30 Dec 31
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET PRICE
OF STOCK
High....... 31-3/4 33-1/2 37-3/4 34-1/4 35 35-1/4 33 33-3/4
Low........ 27 29 29-1/2 30 7/8 33 31 29-1/4 28-1/2
CASH
DIVIDENDS
Declared
per share.. $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50
</TABLE>
ITEM 6. - SELECTED FINANCIAL DATA
<TABLE>
SELECTED FINANCIAL DATA - FIVE-YEAR SUMMARY
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales.... $78,375,636 $79,475,354 $73,756,659 $74,620,088 $75,065,172
Net income... $ 1,954,653 $ 3,510,966 $ 2,217,656 $ 2,916,604 $ 3,310,943
Earnings per
common share. $ 1.67 $ 3.01 $ 1.90 $ 2.50 $ 2.83
Weighted aver-
age common
shares out-
standing..... 1,168,021 1,168,021 1,168,021 1,168,021 1,168,021
Dividends
declared per
common share. $2.00 $2.00 $2.00 $2.00 $2.00
Total assets. $54,678,904 $54,250,236 $52,947,295 $53,005,481 $51,479,877
Long-term
debt......... $ 161,434 $ 3,153,747 $ 3,153,747 $ 3,153,747 $ 3,153,747
</TABLE>
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
The primary factors affecting 1995 results were a lower level of
Dairy Farm Equipment sales, a strike that commenced during the
third quarter, and a significant LIFO provision.
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SALES -- Comparative consolidated sales for the past three years
were as follows:
<TABLE>
<CAPTION>
Sales
------------------------------
(in thousands of dollars)
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Dairy Farm Equipment.... $ 17,955 $ 22,897 $ 21,057
Processing Equipment.... 60,421 56,578 52,700
-------- -------- --------
$ 78,376 $ 79,475 $ 73,757
======== ======== ========
</TABLE>
Sales of Dairy Farm Equipment decreased by $4,942,000 during 1995
compared to 1994. Approximately 80% of the decline was attribu-
table to domestic operations, with the balance reflecting lower
export sales. Domestically, the combination of lower milk prices,
poor weather conditions (beginning with wet, rainy conditions in
the western states followed by hot, dry conditions in the midwest
and upper midwest), high feed prices, and low beef prices all
combined to adversely affect the profitability of dairy farmers.
These conditions, coupled with only a slight increase in milk
production during 1995, contributed to reduced demand for milk
cooling and storage capacity. With respect to export operations,
the unsettled economic conditions in Mexico and Argentina hampered
our ability to export to these key markets. Although we were able
to increase sales to other export markets, they were not sufficient
to offset the significant declines we experienced in Mexico and
Argentina.
During 1994, sales of Dairy Farm Equipment improved by $1,840,000,
and the higher level of sales was virtually all related to a 34%
increase in unit sales of milk coolers to the export market. Sales
were particularly strong in North America, South America and the
Far East during 1994. Domestically, the dairy farm economy was
generally favorable during 1994, and sales of Dairy Farm Equipment
were at a level comparable to 1993. The average milk price paid to
farmers was approximately the same as in 1993, and feed prices were
at reasonable levels.
For 1996, milk production is expected to be relatively stable
compared to 1995, and the average milk price is expected to be
somewhat higher than last year. However, the current high level
of feed prices is significantly increasing the operating costs of
dairy farmers, and the market is expected to remain relatively soft
until there is some indication that feed prices will revert to more
reasonable levels. Economic conditions in the international mar-
kets are expected to be relatively stable in 1996 compared to 1995.
In 1996, we expect continued growth in the United Kingdom market
for dairy farm equipment and some recovery in the Mexican and
Argentine economies.
In the domestic Dairy Farm Equipment market, farm consolidation
continues to shift to fewer farm operations, but with larger milk
cooling and storage capacity requirements. The Registrant is well
positioned to meet the cooling and storage requirements of the mar-
ketplace, and any impact on revenues and profitability will depend
upon the rate at which farm consolidation occurs.
During 1995, sales of Processing Equipment improved by $3,843,000
compared to 1994 levels. Favorable economic conditions, particu-
larly strong capital expenditures, led to an increase in order
entry and sales during 1995 for our more traditional custom-
fabricated products, such as Food Processing Equipment, Component
Products and Temp-Plate Heat Transfer Surface. The balance of the
increase occurred in Commercial Refrigeration and was primarily
for Thermal Energy Storage Equipment. The overall improvement
in Processing Equipment order entry during 1995 was about 21%.
In spite of the increase in order entry, shipments of custom-
fabricated products during 1995 were hampered by the strike by the
Sheet Metal Workers Union, which began during the third quarter.
Additionally, export sales of Processing Equipment were approxi-
mately 10% lower during 1995 compared to 1994.
9
<PAGE> 10
Sales of Processing Equipment improved by about 7% during 1994
compared to 1993 levels. Although the backlog of Processing
Equipment at the beginning of 1994 was at about the same level
as the beginning of 1993, the expansion of the overall domestic
economy, particularly improved capital expenditures, led to an
increase in order entry and shipments during 1994 for products such
as Food Processing Equipment and Component Products. Additionally,
export sales of Processing Equipment were about $1,400,000 higher
during 1994 compared to 1993.
Indications to date are that 1996 market conditions for Processing
Equipment are comparable to those experienced during 1995. Al-
though the outlook is for capital expenditures to continue to rise
during 1996, the rate of increase is expected to be less than that
experienced during 1995. With a beginning backlog of Processing
Equipment that is $6,000,000 higher than it was at the start of
1995, our level of sales in 1996 will depend on how quickly a nor-
mal capacity level can be regained for custom-fabricated Processing
Equipment. Also during 1996, our level of order entry and sales
will depend on a favorable capital expenditure environment and our
ability to remain competitive with respect to delivery lead times.
Although stainless steel prices rose significantly during 1995,
it appears that the increases during 1996 should be more moderate.
Price increases have been announced by the major steel suppliers,
but they are not effective until May 1996. Also, there appears
to be more stability in the market prices of molybdenum, nickel
and chromium, which has been reflected in lower steel surcharges
in recent months.
As previously reported, the labor contract with the Sheet Metal
Workers Union (which covers a portion of the employees at the
Springfield, Missouri, plant) expired on June 11, 1994. Negotia-
tions with union representatives continued until an impasse was
reached, and the Registrant implemented specific provisions of its
final offer effective September 19, 1994. In November 1994, the
Regional Director of the National Labor Relations Board (NLRB) also
concluded that a lawful impasse had been reached in negotiations
prior to the Registrant's implementation of its offer.
However, on December 22, 1994, the Regional Director of the NLRB
issued an unfair labor practice complaint against the Registrant
for refusing to supply information to union representatives about
the personal health insurance claims of individual employees and
their dependents and reversed his previous decision regarding the
implementation of changes in wages and benefits. A hearing on the
unfair labor practice issues has been scheduled for April 10, 1996,
and will be conducted by an administrative law judge of the NLRB.
A final determination on the charges may take up to two years, but
management believes, based on an evaluation by counsel, that it
will be successful in refuting these allegations of unfair labor
practices.
The Registrant currently employs nearly 900 people, of which
approximately 400 at the Springfield, Missouri, facility are repre-
sented by the Sheet Metal Workers Union. The International Union
called a strike beginning on July 25, 1995, and 18 employees went
out. During the month of August, an average of 35 employees were
on strike, and during the month of September, the average number
striking was about 60 employees. At the beginning of the fourth
quarter, the maximum number striking was approximately 185 em-
ployees. Subsequently, some employees have returned, and there
are currently about 150 employees on strike. No action has been
taken by the Union to prevent nonstriking employees from working.
The Registrant continued production with the remaining work force
and supervisory, technical, administrative and service personnel.
With the reduction in the work force, the level of production de-
clined and efficiency was hampered due to the relocation of work
and the reassignment of personnel to the plant to continue opera-
tions. The Registrant has extended a revised final offer which
remains open for the Union's acceptance. No further negotiations
are scheduled, and the Registrant is hiring plant employees.
10
<PAGE> 11
The Registrant has facilities located in Springfield, Missouri, and
Osceola, Iowa. There are approximately 800 employees assigned to
the Springfield facility. There are an additional 100 employees
at the Osceola facility, none of which are represented by a labor
union.
Total Registrant sales backlog was $25,700,000 at December 31,
1995, versus $19,500,000 and $21,200,000 at the end of 1994
and 1993, respectively. The Processing Equipment backlog was
$22,200,000, $16,200,000 and $18,000,000 at the end of 1995, 1994
and 1993, respectively, with the remaining balance in each year
attributable to Dairy Farm Equipment. Substantially all of the
December 31, 1995, backlog will be shipped during the current year.
OPERATING INCOME -- Operating income for 1995 was $1,549,000 com-
pared to $4,262,000 for 1994. The major factors contributing to
the decrease in operating income, in comparing 1995 to 1994, were
the decline in sales, the effects of the strike, and the large
LIFO provision. In addition to the sales decrease, gross mar-
gins declined due to the lower proportion of Dairy Farm Equipment
sales, which have high margins. Also, the strike adversely im-
pacted efficiency, particularly on custom-fabricated Processing
Equipment, and contributed to higher indirect manufacturing costs.
During 1995, the considerable increase in stainless steel prices
required a significant LIFO provision, which had the effect of
reducing operating income by approximately $1,789,000. In compari-
son, the LIFO adjustment was favorable during 1994, which had the
effect of increasing operating income by about $306,000. The de-
cline in selling, general and administrative expenses related to
lower costs for warranty and service, manufacturers' representa-
tive's commissions, insurance, and product development.
Operating income for 1994 was $4,262,000 compared to $2,279,000 for
1993. The major factor contributing to the increase in operating
income, when comparing 1994 to 1993, was the increase in sales of
approximately $5,719,000. The gross profit rate also improved to
25.8% for 1994 compared to 24.3% for 1993. In addition to the
sales increase, the improvement was the result of an increase
in gross margins, as pricing was better for custom-fabricated
Processing Equipment. The gross profit rate was also favorably
affected by a decrease in manufacturing burden. The higher
selling, general and administrative expenses were primarily in
the sales area, with higher costs incurred for sales promotional
materials, advertising, and manufacturers' representative's com-
missions.
The profitability of Processing Equipment is much lower than for
Dairy Farm Equipment, as a substantial number of Processing Equip-
ment projects are engineered-to-order. These projects require
much greater support from the Sales, Engineering and Manufacturing
Departments and a higher degree of skill to fabricate. Also,
the risks of manufacturing are greater because the products are
custom-designed and built and, in general, the chances of misin-
terpretation, errors and mistakes are much greater than with a
standard product. Many of the projects are bid among several
possible suppliers, which tends to make pricing very competitive.
In addition, there is a risk of adverse material price variances on
some projects in periods of rising prices due to relatively long
lead times between quotation and completion. In 1996, the profit-
ability of Processing Equipment will be adversely affected by the
inefficiencies that are a direct result of the ongoing strike.
Dairy Farm Equipment, in contrast, is a standard product, and
engineering designs have been well defined and manufacturing
methods have been refined for efficiency. The proprietary nature
of the product also permits more attractive pricing. There are
relatively few competitors, and the Registrant is the largest
domestic manufacturer of dairy farm milk coolers.
Inflation is a factor that affects the cost of operations, and the
Registrant seeks ways to minimize the effect on operating results.
To the extent permitted by competitive conditions, higher material
prices, labor costs and operating costs are passed on to the cus-
tomer by increasing prices. The Registrant uses the LIFO method
of accounting for inventories, and under this method, the cost of
11
<PAGE> 12
products sold, as reported in the financial statements, approxi-
mates the current replacement cost. Additionally, the Registrant
uses accelerated depreciation methods in charging depreciation ex-
pense to current operations, which to a certain extent offsets the
effect of the increased cost of replacement productive capacity.
OTHER INCOME (EXPENSE) -- Interest income increased during 1995
compared to 1994, as the average interest rate was higher in spite
of the fact that the average level of investable funds was lower.
Interest income increased during 1994, as the average level of
investable funds and the average interest rate were both higher
during 1994 compared to 1993. Interest expense amounts in 1995,
1994 and 1993 are consistent with the interest rate levels during
those years. Other income for 1995 and 1994 were both higher
than the previous year due to increased royalty income, improved
trucking operation results, and higher miscellaneous income.
PROVISION FOR INCOME TAXES -- The effective tax rates were 25.2%,
31% and 22.3% in 1995, 1994 and 1993, respectively. The effective
tax rates for 1995, 1994 and 1993 were below the statutory rate
(34%) primarily as a result of tax-exempt interest, tax credits,
and the lower effective tax rate for the foreign sales corporation.
FINANCIAL CONDITION
LIQUIDITY - CAPITAL RESOURCES -- Working capital was $23,508,000 at
December 31, 1995, down from $27,024,000 at December 31, 1994. The
current ratio, a measure of liquidity, was 2.48 at December 31,
1995, versus 3.28 at December 31, 1994. The reduction in working
capital and the lower current ratio is primarily related to the
reclassification of a $3,000,000 bond issue due December 1, 1996,
to current liability status. Advance billings were $6,139,000 and
$3,248,000 at December 31, 1995 and 1994, respectively. The in-
crease is related to the larger Processing Equipment backlog at
December 31, 1995, compared to December 31, 1994.
Net cash provided by operations was $5,160,000 in 1995, $3,615,000
in 1994 and $5,783,000 in 1993. The 1995 cash flow was primarily
attributable to net income, depreciation and amortization expense,
a decrease in accounts and notes receivable, and an increase in
advance billings. The 1994 cash flow was primarily attributable to
net income and to depreciation and amortization expense. In 1993,
the cash flow was primarily attributable to net income, deprecia-
tion and amortization expense, and a decrease in accounts and notes
receivable.
Capital expenditures for the most recent three years were
$2,284,000 in 1995, $1,635,000 in 1994, and $2,108,000 in 1993.
The level of planned capital expenditures for 1996 is $2,800,000,
none of which has been committed as of December 31, 1995. Antici-
pated expenditures are primarily for replacement plant equipment
to maintain quality and to improve efficiency. Management has the
discretion of lowering the level of expenditures if operating re-
sults deviate from budgeted performance.
The Registrant does not have a bank borrowing facility, and manage-
ment expects that cash flows provided by operations and the strong
cash and investment position will continue to be sufficient to
satisfy the Registrant's working capital requirements, normal
capital expenditure needs, and anticipated dividends. A policy of
requiring down payments and progress payments on large Processing
Equipment orders has had a favorable effect on cash flows. Manage-
ment expects internally generated funds to be sufficient to finance
operations, and this is consistent with historical performance.
As previously reported, an additional domestic manufacturing
facility was purchased in February 1987, and as part of the trans-
action, a $3,000,000 Floating Rate Weekly Demand Industrial
Development Revenue Bond issue was assumed, with the total amount
due on December 1, 1996.
12
<PAGE> 13
In October 1994, Statement of Financial Accounting Standards (SFAS)
No. 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments," was issued. The statement
was effective for the Registrant's 1995 fiscal year, and it did not
to have a significant effect on the disclosures to these consoli-
dated financial statements.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," was issued in March
1995, effective for the Registrant's 1996 fiscal year. The adop-
tion of SFAS No. 121 is not expected to have a material effect on
the Registrant's financial position or results of operations.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Com-
pensation," was issued. The statement is effective for the
Registrant's 1996 fiscal year, and the adoption of SFAS No. 123
is not expected to have a material effect on the Registrant's
financial position or results of operations.
13
<PAGE> 14
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash (Note 1)..................................... $ 2,491,167 $ 1,874,265
Available-for-sale investments, at market (Note 1) 12,063,140 12,211,320
Accounts and notes receivable, less reserve of
$531,601 in 1995 and $679,018 in 1994 for
doubtful accounts (Note 1).................... 13,033,660 14,839,477
Inventories (Note 1) -
Raw materials and components.................... $ 6,891,452 $ 6,035,473
Work-in-process................................. 2,065,719 1,875,197
Finished goods.................................. 2,240,684 1,468,812
----------- -----------
$11,197,855 $ 9,379,482
Prepayments....................................... 617,445 592,778
----------- -----------
Total Current Assets...................... $39,403,267 $38,897,322
Other Assets (Notes 2 and 3)........................ 3,845,380 3,837,085
Property, Plant and Equipment - at cost
(Notes 1 and 4) -
Land and land improvements........................ $ 2,600,374 $ 2,587,213
Buildings......................................... 10,260,250 10,093,029
Shop equipment.................................... 22,979,146 22,841,574
Transportation, office & other equipment.......... 9,067,799 9,077,123
Construction-in-progress.......................... 405,061 186,621
----------- -----------
$45,312,630 $44,785,560
Less - Accumulated depreciation................... 33,882,373 33,269,731
----------- -----------
$11,430,257 $11,515,829
----------- -----------
$54,678,904 $54,250,236
=========== ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Current maturities of long-term debt (Note 4)..... $ 3,000,000 $ -
Accounts payable.................................. 1,960,823 2,286,277
Accrued expenses -
Income taxes (Note 3)........................... 333,599 775,558
Payrolls........................................ 1,814,523 2,167,505
Vacations....................................... 1,574,353 1,598,539
Other........................................... 1,073,379 1,797,265
Advance billings.................................. 6,138,892 3,248,309
----------- -----------
Total Current Liabilities................. $15,895,569 $11,873,453
Other Long-Term Liabilities (Notes 2 and 4)......... 1,218,591 4,430,650
Contingencies (Note 6)..............................
Shareholders' Investment:
Common stock, par value $1 per share--Authorized
20,000,000 shares--Issued 1,342,325 shares.... $ 1,342,325 $ 1,342,325
Preferred stock, par value $1 per share--
Authorized 1,000,000 shares--No shares issued. - -
Paid-in surplus................................... 4,306,728 4,306,728
Retained earnings................................. 34,469,724 34,851,113
----------- -----------
$40,118,777 $40,500,166
Less - Treasury stock, 174,304 shares, at cost.... 2,554,033 2,554,033
----------- -----------
$37,564,744 $37,946,133
----------- -----------
$54,678,904 $54,250,236
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
14
<PAGE> 15
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales.............................. $78,375,636 $79,475,354 $73,756,659
Cost of Sales (Note 1)................. 61,012,139 58,959,913 55,834,708
----------- ----------- -----------
Gross profit......................... $17,363,497 $20,515,441 $17,921,951
Selling, General & Administrative
Expenses (Note 1).................. 15,814,620 16,253,904 15,642,645
----------- ----------- -----------
Operating income..................... $ 1,548,877 $ 4,261,537 $ 2,279,306
Other Income (Expense):
Interest income...................... $ 581,456 $ 468,816 $ 359,247
Interest expense..................... (129,608) (98,861) (85,993)
Other, net........................... 613,928 459,474 302,096
----------- ----------- -----------
$ 1,065,776 $ 829,429 $ 575,350
----------- ----------- -----------
Income before provision
for income taxes............... $ 2,614,653 $ 5,090,966 $ 2,854,656
Provision for Income Taxes (Note 3).... 660,000 1,580,000 637,000
----------- ----------- -----------
Net Income............................. $ 1,954,653 $ 3,510,966 $ 2,217,656
=========== =========== ===========
Earnings per Common Share (Note 1)..... $ 1.67 $ 3.01 $ 1.90
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Common Stock Treasury Stock
-------------------- Paid-in Retained ---------------------
Shares Amount Surplus Earnings Shares Amount
--------- --------- --------- ---------- -------- ----------
$'s $'s $'s $'s
<S> <C> <C> <C> <C> <C> <C>
Balance
12-31-92 1,342,325 1,342,325 4,306,728 33,794,575 (174,304) (2,554,033)
Add
(Deduct):
Net income - - - 2,217,656 - -
Dividends,
$2 per com-
mon share - - - (2,336,042) - -
--------- --------- --------- ---------- -------- ----------
Balance,
12-31-93 1,342,325 1,342,325 4,306,728 33,676,189 (174,304) (2,554,033)
Add
(Deduct):
Net income - - - 3,510,966 - -
Dividends,
$2 per com-
mon share - - - (2,336,042) - -
--------- --------- --------- ---------- -------- ----------
Balance,
12-31-94 1,342,325 1,342,325 4,306,728 34,851,113 (174,304) (2,554,033)
Add
(Deduct):
Net income - - - 1,954,653 - -
Dividends,
$2 per com-
mon share - - - (2,336,042) - -
--------- --------- --------- ---------- -------- ----------
Balance,
12-31-95 1,342,325 1,342,325 4,306,728 34,469,724 (174,304) (2,554,033)
========= ========= ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE> 16
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.......................... $ 1,954,653 $ 3,510,966 $ 2,217,656
Adjustments to reconcile net income
to net cash provided by
operating activities:
Bad debt expense.................. 114,432 150,688 139,230
Depreciation and amortization..... 2,507,260 2,739,943 2,809,168
(Gain) on sales of equipment...... (7,711) (62,354) (7,874)
Changes in assets and liabilities-
Decrease (increase) in
interest receivable......... 83,180 58,629 (145,309)
Decrease (increase) in accounts
and notes receivable........ 1,691,385 (1,525,390) 1,552,595
(Increase) in inventories....... (1,818,373) (511,433) (114,362)
(Increase) in prepayments....... (24,667) (151,324) (3,488)
(Increase) in other assets...... (150,295) (635,065) (724,992)
(Decrease) in accounts payable.. (325,454) (300,056) (652,890)
(Decrease) increase in
accrued expenses............ (1,543,014) 981,893 (88,694)
Increase (decrease) in
advance billings............ 2,890,583 (696,828) 309,863
(Decrease) increase in other
long-term liabilities....... (212,059) 55,142 491,921
----------- ----------- -----------
Net Cash Provided by
Operating Activities...... $ 5,159,920 $ 3,614,811 $ 5,782,824
Cash Flows (Requirements) from
Investing Activities:
Proceeds from maturities
of investments.................. $20,235,000 $18,665,226 $ 5,575,000
Purchases of investments............ (20,170,000) (19,686,944) (7,628,725)
Proceeds from sales of equipment.... 12,376 97,564 56,801
Additions to property, plant
and equipment................... (2,284,352) (1,634,742) (2,107,877)
----------- ----------- -----------
Net Cash (Required) by
Investing Activities........ $(2,206,976) $(2,558,896) $(4,104,801)
Cash Flows (Requirements) from
Financing Activities:
Dividends paid...................... $(2,336,042) $(2,336,042) $(2,336,042)
----------- ----------- -----------
Net Cash (Required) by
Financing Activities...... $(2,336,042) $(2,336,042) $(2,336,042)
----------- ----------- -----------
Net Increase (Decrease) in Cash....... $ 616,902 $(1,280,127) $ (658,019)
Cash at Beginning of Period........... 1,874,265 3,154,392 3,812,411
----------- ----------- -----------
Cash at End of Period................. $ 2,491,167 $ 1,874,265 $ 3,154,392
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) SUMMARY OF ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION -- Paul Mueller Company specializes in
the manufacture of high-quality stainless steel tanks and industrial
processing equipment. The Registrant serves the food, beverage,
chemical, pharmaceutical and other process industries and the dairy
farm market. The financial statements include the accounts of the
Registrant and its wholly owned subsidiary, Mueller International
Sales Corporation, a foreign sales corporation (FSC) (Companies).
All significant intercompany accounts and transactions have been
eliminated in consolidation.
The preparation of financial statements, in conformity with gener-
ally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabil-
ities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION AND RETAINAGES -- Revenue from sales of manufac-
tured products is recognized upon passage of title to the customer,
which generally coincides with shipment. Contracts with some cus-
tomers provide for a portion of the sales amount to be retained
by the customer for a period of time after completion of the con-
tract. Retainages included in accounts receivable were $69,900 at
December 31, 1995, and $489,600 at December 31, 1994.
INVENTORIES -- The Registrant's inventories are recorded at the
lower of cost, last-in, first-out (LIFO), or market. Cost includes
material, labor and manufacturing burden required in the production
of the Registrant's products.
Under the first-in, first-out (FIFO) method of accounting, which
approximates current cost, Registrant inventories would have been
$8,978,736, $6,957,191, and $7,177,425 higher than those reported at
December 31, 1995, 1994 and 1993, respectively.
RESEARCH AND DEVELOPMENT -- Research and development costs are
charged to expense as incurred and were $597,600 in 1995, $764,400
in 1994 and $875,800 in 1993.
DEPRECIATION POLICIES -- The Registrant provides for depreciation
expense using principally the double-declining balance method for
new items and the straight-line method for used items. The economic
useful lives for the more significant items within each property
classification are as follows:
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Land improvements........................... 10 - 20
Buildings................................... 40
Shop equipment.............................. 5 - 10
Transportation, office and other equipment.. 3 - 10
</TABLE>
Maintenance and repairs are charged to expense as incurred. The
cost and accumulated depreciation of assets retired are removed from
the accounts and any resulting gains or losses are reflected in net
income currently.
17
<PAGE> 18
EARNINGS PER COMMON SHARE -- The net income per share of common
stock has been computed on the basis of weighted average shares
outstanding (1,168,021 shares in 1995, 1994 and 1993).
INVESTMENTS -- Effective January 1, 1994, the Registrant adopted the
provisions of Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." The adoption of SFAS No. 115 did not have a material
effect on the Registrant's financial position or results of opera-
tions. The Registrant classifies its investments in tax-exempt
bonds and tax-exempt variable rate preferred stocks as available-
for-sale and records them at market value. These securities are a
part of the Registrant's asset/liability management program and may
be sold in response to capital or liquidity needs. Investments in
debt securities generally have maturities from three to twelve
months. Available-for-sale investments on the accompanying conso-
lidated balance sheets at December 31, 1995 and 1994, include:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tax-exempt bonds......................... $ 5,981,823 $ 9,575,442
Tax-exempt preferred stocks.............. 6,000,000 2,500,000
Accrued interest......................... 81,317 135,878
----------- -----------
$12,063,140 $12,211,320
=========== ===========
</TABLE>
Unrealized holding gains and losses were not material as of
December 31, 1995 or 1994. There were no realized gains or losses
during 1995 or 1994.
STATEMENTS OF CASH FLOWS -- For purposes of the statements of cash
flows, the Registrant considers all short-term highly liquid invest-
ments in money market funds to be cash equivalents.
Interest and income tax payments for each of the three years during
the period ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest payments........... $ 129,300 $ 98,900 $ 86,000
=========== =========== ===========
Income tax payments......... $ 1,275,200 $ 1,493,000 $ 1,331,300
=========== =========== ===========
</TABLE>
(2) RETIREMENT PLANS:
The Registrant has a Profit Sharing and Retirement Savings Plan
[401(k) plan] in which substantially all employees are eligible to
participate. The plan provides for a match of employees' contri-
butions up to a specified limit. The plan also has a profit-sharing
feature whereby an additional match is made if the Registrant's net
income reaches predetermined levels established annually by the
Board of Directors. The funds of the plan are deposited with an
insurance company and are invested at the employee's option in one
or more investment funds. The Registrant's contributions to the
plan were $289,800 for 1995, $404,500 for 1994 and $278,900 for
1993.
The Registrant has pension plans covering substantially all
employees. Benefits under the plans are based either on final
average pay or a flat benefit formula.
Total pension expense under the plans was $98,700 in 1995, $7,900
in 1994 and $195,200 in 1993. Management's policy is to fund
pension expense that is currently deductible for tax purposes.
18
<PAGE> 19
The following table sets forth the funded status of the plans at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Funded Status
-------------------------------------------------------------------------
December 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation, including vested benefits of
$18,176,800 and $14,176,900 at December 31,
1995 and 1994, respectively................... $20,215,400 $16,184,300
=========== ===========
Plans' assets at fair value, primarily listed
stocks and insurance company investment funds. $26,115,400 $21,724,900
Actuarial present value of projected benefit
obligation for services rendered to date...... 22,819,500 18,441,600
----------- -----------
Assets in excess of projected benefit obligation $ 3,295,900 $ 3,283,300
Unrecognized net (gain)......................... (2,123,600) (2,076,300)
Unrecognized net (asset)........................ (1,862,000) (2,212,500)
Unrecognized prior service cost................. 1,517,300 1,652,700
----------- -----------
Prepaid pension asset........................... $ 827,600 $ 647,200
=========== ===========
</TABLE>
Prepaid pension assets of $2,326,000 and $2,203,200 at December 31,
1995 and 1994, respectively, are included in other assets on the
accompanying consolidated balance sheets. Pension liabilities of
$1,498,400 and $1,556,000 at December 31, 1995 and 1994, respec-
tively, are included in current and other long-term liabilities on
the accompanying consolidated balance sheets.
Net pension expense for the Registrant's plans includes the fol-
lowing components:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost - benefit
earned during year........ $ 662,700 $ 794,900 $ 835,500
Interest cost on projected
benefit obligation........ 1,493,700 1,316,700 1,304,700
Actual return on assets..... (4,654,500) (340,100) (1,780,500)
Amortization of
unrecognized net assets... (231,200) (299,000) (299,000)
Deferred asset gain (loss).. 2,828,000 (1,464,600) 134,500
----------- ----------- -----------
Net pension expense......... $ 98,700 $ 7,900 $ 195,200
=========== =========== ===========
</TABLE>
The weighted average expected long-term rates of return on plan
assets used in the determination of annual pension expense for 1995,
1994 and 1993 were 8.5%, 8.5% and 8.75%, respectively. The weighted
average assumed discount rates used to measure the projected benefit
obligation were 7.25% at December 31, 1995, and 8% at December 31,
1994. The assumed rate of compensation increase used to measure the
projected benefit obligation was 4.5% at December 31, 1995 and 1994,
for the applicable plan.
Effective January 1, 1994, the Registrant adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
The adoption of SFAS No. 112 did not have a material effect on the
Registrant's financial position or results of operations.
(3) INCOME TAXES:
Effective January 1, 1993, the Registrant adopted the provisions of
SFAS No. 109, "Accounting for Income Taxes." The adoption of SFAS
No. 109 did not have a material effect on the Registrant's financial
position or results of operations.
19
<PAGE> 20
The provision for taxes on income from operations includes:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current tax expense............ $ 780,200 $1,667,900 $ 985,700
Deferred, net.................. (120,200) (87,900) (348,700)
---------- ---------- ----------
$ 660,000 $1,580,000 $ 637,000
========== ========== ==========
</TABLE>
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recog-
nized, if appropriate. Net deferred tax assets of $935,600 and
$815,400 at December 31, 1995 and 1994, respectively, are included
in other assets on the accompanying consolidated balance sheets.
The income tax effect of temporary differences comprising the
deferred tax assets and deferred tax liabilities in the accompanying
consolidated balance sheets is a result of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Insurance.............................. $ 155,000 $ 207,700
Vacation............................... 532,600 533,600
Warranty............................... 83,500 153,800
Doubtful accounts...................... 196,700 251,200
Healthcare benefits.................... 156,000 182,300
AMT carry-forward credit............... 384,500 -
Other.................................. 214,700 129,100
---------- ----------
$1,723,000 $1,457,700
========== ==========
Deferred Tax Liabilities:
Depreciation........................... $ 291,000 $ 272,700
Pensions............................... 469,500 342,700
Other.................................. 26,900 26,900
---------- ----------
$ 787,400 $ 642,300
========== ==========
</TABLE>
A reconciliation between the statutory federal income tax rate (34%)
and the effective rate of income tax expense for each of the three
years during the period ended December 31, 1995, follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ---------------- ----------------
Amount % Amount % Amount %
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Statutory federal
income tax......... $ 889,000 34.0 $1,730,900 34.0 $ 970,600 34.0
Increase (decrease)
in taxes resulting
from:
State tax, net of
federal benefit.. 23,400 0.9 81,400 1.6 31,000 1.1
Tax-exempt
interest......... (147,800) (5.7) (117,900) (2.3) (96,000) (3.4)
Tax credits....... (29,100) (1.1) (69,900) (1.4) (163,000) (5.7)
FSC exempt income. (105,400) (4.0) (128,200) (2.5) (86,500) (3.0)
Other, net...... 29,900 1.1 83,700 1.6 (19,100) (0.7)
---------- ---- ---------- ---- ---------- ----
$ 660,000 25.2 $1,580,000 31.0 $ 637,000 22.3
========== ==== ========== ==== ========== ====
</TABLE>
(4) DEBT:
The accompanying consolidated balance sheets include a $3,000,000
Floating Rate Weekly Demand Industrial Development Revenue Bond
issue due December 1, 1996. The bonds are secured by a letter of
credit in the amount of the outstanding bonds and by a mortgage
on the facility, which has a cost of $1,820,000. The average
interest rate on the bonds was 4.06% and 3.03% during 1995 and
1994, respectively, and was 4.45% at December 31, 1995, and 4.40%
20
<PAGE> 21
at December 31, 1994. The Registrant has the option to redeem the
bonds, in whole or in part, and the option to fix the interest rate
during the term of the issue. The carrying value of the bonds
approximates fair value due to the proximity of the maturity date.
(5) OPERATIONS BY INDUSTRY AND EXPORT SALES:
A description of the various industries in which the Companies
operate and a summary of operations by industry are included on
pages 3 and 4 of this Form 10-K. The information included therein
is incorporated as an integral part of these consolidated financial
statements.
The Registrant's export sales were $13,385,800 in 1995, $15,105,900
in 1994 and $11,785,500 in 1993.
Export sales during 1995, 1994 and 1993, respectively, were made
to the following geographic areas: North America - $4,275,800,
$5,940,800 and $4,205,000; Asia and the Far East - $5,395,200,
$5,176,300 and $4,733,800; and other areas - $3,714,800, $3,988,800
and $2,846,700.
During 1995, 1994 and 1993, sales to any one customer were not in
excess of 10% of consolidated sales.
(6) CONTINGENCIES:
The Registrant employs nearly 900 people, of which approximately 400
are represented by the Sheet Metal Workers Union. The International
Union called a strike beginning July 25, 1995, and currently about
150 employees are participating.
The Registrant is self-insured for healthcare, workers' compensa-
tion, general liability and products liability claims, subject to
specific retention levels.
<TABLE>
FINANCIAL HIGHLIGHTS BY QUARTER (UNAUDITED)
(In Thousands, Except Per Share Data)
<CAPTION>
Quarter Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
--------------- --------------- --------------- ---------------
1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- ------- ------- -------
<F2> <F3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..... $15,764 $16,241 $22,216 $19,836 $21,186 $20,610 $19,210 $22,788
Gross
profit<F1>.. $ 4,578 $ 3,974 $ 5,243 $ 4,638 $ 4,304 $ 5,107 $ 3,238 $ 6,796
Net income.... $ 466 $ 231 $ 1,027 $ 589 $ 419 $ 934 $ 43 $ 1,757
Earnings per
common share. $0.40 $0.20 $0.88 $0.50 $0.36 $0.80 $0.03 $1.51
<FN>
<F1> Because the inventory determination under the LIFO method can only
be made at the end of each fiscal year based on the inventory levels
and costs at that point, interim LIFO determinations must be based
on management's estimate of expected year-end inventory levels and
costs.
<F2> Results from operations for the fourth quarter of 1995 were
adversely affected by a LIFO adjustment. The adjustment decreased
net income by $234,400, or $0.20 per share.
<F3> Results from operations for the fourth quarter of 1994 were favor-
ably affected by a LIFO adjustment. The adjustment increased net
income by $794,400, or $0.68 per share.
</FN>
</TABLE>
21
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Paul Mueller Company:
We have audited the accompanying consolidated balance sheets of
PAUL MUELLER COMPANY (a Missouri corporation) AND SUBSIDIARY as of
December 31, 1995 and 1994, and the related consolidated statements of
income, shareholders' investment and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements
are the responsibility of the Registrant's management. Our responsi-
bility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Paul Mueller
Company and Subsidiary as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule II is the respon-
sibility of the Registrant's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 15, 1996
ITEM 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting principles or finan-
cial statement disclosure with the independent public accountants.
22
<PAGE> 23
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to Directors of the Registrant required by Item 10
is included on pages 3 and 4 of the Registrant's Proxy Statement
for the annual meeting of shareholders to be held May 6, 1996, and
is incorporated herein by reference. The information concerning
executive officers is set forth on page 7 of Part I hereof.
ITEM 11. - MANAGEMENT REMUNERATION AND TRANSACTIONS
Information as to management remuneration and transactions required
by Item 11 is included on pages 4 and 5 of the Registrant's Proxy
Statement for the annual meeting of shareholders to be held May 6,
1996, and is incorporated herein by reference.
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information as to security ownership of certain beneficial owners
and management required by Item 12 is included on pages 2 and 3 of
the Registrant's Proxy Statement for the annual meeting of share-
holders to be held May 6, 1996, and is incorporated herein by
reference.
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to certain relationships and related transactions
required by Item 13 is included on page 4 of the Registrant's Proxy
Statement for the annual meeting of shareholders to be held May 6,
1996, and is incorporated herein by reference.
23
<PAGE> 24
PART IV
ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. The financial statements and schedules, required under Part II-
Item 8, are as follows:
1. The consolidated financial statements of the Registrant and
its subsidiary, for the year ended December 31, 1995:
- Consolidated Balance Sheets..............December 31, 1995
and 1994
- Consolidated Statements of Income........For years ended
December 31, 1995,
1994 and 1993
- Consolidated Statements of
Shareholders' Investment.................For years ended
December 31, 1995,
1994 and 1993
- Consolidated Statements of Cash Flows....For years ended
December 31, 1995,
1994 and 1993
- Notes to Consolidated Financial
Statements...............................December 31, 1995,
1994 and 1993
- Financial Highlights by Quarter..........For years ended
December 31, 1995
and 1994
- Report of Independent Public Accountants
2. Additional financial statement schedules included herein:
- Schedule II - Valuation and Qualifying Accounts....Page 26
- All other schedules are not submitted because they are
not applicable or not required, or because the required
information is included in the financial statements or
notes thereto.
3. The exhibits set forth in the Exhibit Index found on pages 27
through 29.
B. No reports on Form 8-K were filed by the Registrant during the
last quarter of 1995.
24
<PAGE> 25
SIGNATURES -
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PAUL MUELLER COMPANY
DATE March 15, 1996 BY /S/ DANIEL C. MANNA
-------------- -------------------------------------
Daniel C. Manna
President
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
DATE March 15, 1996 BY /S/ DANIEL C. MANNA
-------------- -------------------------------------
Daniel C. Manna
President
(Chief Executive Officer)
DATE March 15, 1996 BY /S/ PAUL MUELLER
-------------- -------------------------------------
Paul Mueller
Chairman of the Board
and Director
DATE March 15, 1996 BY /S/ DONALD E. GOLIK
-------------- -------------------------------------
Donald E. Golik
Senior Vice President, Chief Financial
Officer and Secretary and Director
DATE March 15, 1996 BY /S/ ROBERT A. BECKER
-------------- -------------------------------------
Robert A. Becker
Director
DATE March 15, 1996 BY /S/ JACK S. CURTIS
-------------- -------------------------------------
Jack S. Curtis
Director
DATE March 15, 1996 BY /S/ WILLIAM B. JOHNSON
-------------- -------------------------------------
William B. Johnson
Director
DATE March 15, 1996 BY /S/ CHARLES M. RUPRECHT
-------------- -------------------------------------
Charles M. Ruprecht
Director
DATE March 15, 1996 BY /S/ WAYNE WELLS
-------------- -------------------------------------
Wayne Wells
Director
25
<PAGE> 26
SCHEDULE II
<TABLE>
PAUL MUELLER COMPANY AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
Balance at Charged to Charged Balance
Beginning Costs and to Other at End of
of Period Expenses Accounts Deductions Period
-------- -------- -------- -------- --------
RESERVE FOR
DOUBTFUL ACCOUNTS
<S> <C> <C> <C> <C> <C>
December 31, 1995... $679,018 $ 20,465 $ - $167,882<F1> $531,601
December 31, 1994... $595,925 $142,991 $ - $ 59,898<F1> $679,018
December 31, 1993... $498,649 $230,188 $ - $132,912<F1> $595,925
<FN>
<F1> Accounts written off during the year.
</FN>
</TABLE>
26
<PAGE> 27
<TABLE>
EXHIBIT INDEX
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
(3) ARTICLES OF INCORPORATION AND BY-LAWS - The Restated Arti-
cles of Incorporation of the Registrant filed with the
Secretary of State on May 20, 1991, and the Restated
By-Laws of the Registrant dated May 6, 1991, attached
as Exhibit (3), page 19, of the Registrant's Form 10-K for
the year ended December 31, 1991, are incorporated herein
by reference.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS -
(a) A specimen stock certificate (unlimited denomination)
representing shares of the common stock, par value $1
per share, attached as Exhibit (4), page 69, of the
Registrant's Form 10-K for the year ended December 31,
1981, is incorporated herein by reference.
(b) Shareholder Rights Plan, dated January 29, 1991, between
Paul Mueller Company and United Missouri Bank of Kansas
City, N.A., is incorporated by reference to Form 8-A
under the Securities Exchange Act of 1934, dated
January 31, 1991, and filed with the Securities and
Exchange Commission on February 1, 1991.
(10) MATERIAL CONTRACTS -
(a) The following Material Contracts, attached as Exhibit
(10) of the Registrant's Form 10-Q for the quarter
ended September 30, 1995, are incorporated herein by
reference:
<C> CAPTION
Description Page No.
--------------------------------------------- --------
<S> <C>
1. Paul Mueller Company Tax Savings Plan and
Trust, effective January 1, 1996, and
adopted by the Board of Directors on
August 2, 1995............................ 11
2. Paul Mueller Company Dependent Care Assis-
tant Plan, effective January 1, 1996, and
adopted by the Board of Directors on
August 2, 1995............................ 22
<S> <C> <C>
(b) Paul Mueller Company Salaried and Clerical Employees
Retirement Plan, as amended and restated effective
January 1, 1989, and adopted by the Board of Directors
of the Registrant on May 7, 1990, was attached as Exhi-
bit (10), page 179, of the Registrant's Form 10-K for
the year ended December 31, 1990, and is incorporated
herein by reference. Amendment Number One, effective
October 29, 1991, was adopted by the Board of Directors
on October 29, 1991, and Amendment Number Two, effective
June 1, 1992, was adopted by the Board of Directors on
May 4, 1992, and both were attached as Exhibit (10),
page 18, of the Registrant's Form 10-K for the year
ended December 31, 1992, and both are incorporated here-
in by reference. Amendment Number Three was adopted by
the Board of Directors on July 26, 1994, and Amendment
Number Four, effective January 1, 1994, was adopted by
unanimous consent of the Executive Committee of the
Board of Directors on December 5, 1994, and both were
27
<PAGE> 28
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
attached as Exhibit (10), page 59, of the Registrant's
Form 10-K for the year ended December 31, 1994, and both
are incorporated herein by reference. Amendment Number
Five to the Paul Mueller Company Salaried and Clerical
Employees Retirement Plan, adopted by the Board of
Directors on October 31, 1995, was attached as Exhibit
(10), page 26, of the Registrant's Form 10-Q for the
quarter ended September 30, 1995, and is incorporated
herein by reference.
(c) Paul Mueller Company Employee Benefit Plan, amended and
restated as of March 22, 1995, and adopted by the Trus-
tees on April 14, 1995, was attached as Exhibit (10),
page 10, of the Registrant's Form 10-Q for the quarter
ended March 31, 1995, and is incorporated herein by
reference. The First Amendment, adopted by the Trustees
on October 12, 1995, was attached as Exhibit (10), page
25, of the Registrant's Form 10-Q for the quarter ended
September 30, 1995, and is incorporated herein by
reference.
(d) The following Material Contracts, attached as Exhibit
(10) of the Registrant's Form 10-K for the year ended
December 31, 1994, are incorporated herein by reference:
<C> CAPTION
Description Page No.
--------------------------------------------- --------
<S> <C>
1. Paul Mueller Company Profit Sharing and
Retirement Savings Plan, as restated effec-
tive January 1, 1993, and adopted by the
Trustees on June 22, 1994................. 15
2. Paul Mueller Company Contract Employees
Retirement Plan, restated effective
January 1, 1992, and adopted November 17,
1992, was attached as Exhibit (10), page
22, of the Registrant's Form 10-K for
the year ended December 31, 1992, and is
incorporated herein by reference. Amend-
ment Number One, effective September 19,
1994, was executed October 20, 1994, and
Amendment Number Two, effective January 1,
1993, was executed December 2, 1994....... 67
<S> <C> <C>
(e) Sales and Supply Agreement between Registrant and GEA
Ahlborn GmbH dated October 1, 1993, attached as Exhibit
(10), page 103, of the Registrant's Form 10-K for the
year ended December 31, 1993, is incorporated herein by
reference (portions of this Agreement have been omitted
as confidential information and have been filed separ-
ately with the Securities and Exchange Commission).
(f) Exclusive License Agreement between Registrant and
Superstill Technology, Inc. dated January 9, 1992,
Addendum No. 1 dated January 28, 1992, and Addendum
No. 2 dated June 15, 1992, were attached as Exhibit (10),
page 120, of the Registrant's Form 10-K for the year
ended December 31, 1993, and are incorporated herein
by reference (portions of this Agreement and Addendums
have been omitted as confidential information and have
been filed separately with the Securities and Exchange
Commission).
28
<PAGE> 29
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
(g) Agreement between Registrant and Sheet Metal Workers'
International Association Local No. 208 dated June 12,
1991, attached as Exhibit (10), page 59, of the
Registrant's Form 10-K for the year ended December 31,
1991, is incorporated herein by reference.
(h) Agreement and Declaration of Trust for the Paul Mueller
Company Employee Benefit Plan dated May 2, 1988, attached
as Exhibit (10), page 107, of the Registrant's Form 10-K
for the year ended December 31, 1988, is incorporated
herein by reference.
(i) Paul Mueller Company Salaried and Clerical Employees
Retirement Trust, as amended August 11, 1981, was attached
as Exhibit (10), page 318, of the Registrant's Form 10-K
for the year ended December 31, 1981, and is incorporated
herein by reference. The First Amendment to the trust,
adopted by the Board of Directors on May 1, 1983, was
attached as Exhibit (10), page 160, of the Registrant's
Form 10-K for the year ended December 31, 1983, and is
incorporated herein by reference.
(j) Executive Compensation Plans and Arrangements:
<S> <C> <C>
i. Paul Mueller Company Supplemental Executive Retire-
ment Plan, effective January 1, 1996, adopted by the
Board of Directors on February 8, 1996............. 30
ii. Termination Agreement with Philip K. Daniels, Vice
President - Sales and Marketing, dated November 11,
1995............................................... 34
iii. Severance Agreement with Philip K. Daniels, Vice
President - Sales and Marketing, attached as Exhibit
(10), page 13, of the Registrant's Form 10-Q for the
quarter ended June 30, 1994, is incorporated herein
by reference.
iv. Agreement Not to Compete for Philip K. Daniels, Vice
President - Sales and Marketing, attached as Exhibit
(10), page 14, of the Registrant's Form 10-Q for the
quarter ended June 30, 1994, is incorporated herein
by reference.
v. Executive Short-Term Incentive Plan, adopted
January 31, 1995, attached as Exhibit (10), page 71,
of the Registrant's Form 10-K for the year ended
December 31, 1994, is incorporated herein by
reference.
<S> <C> <C>
(21) SUBSIDIARIES OF THE REGISTRANT............................. 36
(27) FINANCIAL DATA SCHEDULE AS OF DECEMBER 31, 1995............ 37
</TABLE>
29
<PAGE> 1
PAUL MUELLER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Paul Mueller Company (the "Company") hereby establishes a nonqua-
lified deferred compensation plan (the "Plan") for certain of its
employees, under the terms set forth below:
1. NAME OF PLAN. This Plan shall be known as the "Paul Mueller
Company Supplemental Executive Retirement Plan."
2. EFFECTIVE DATE. This Plan shall be effective as of January 1,
1996.
3. DEFINITIONS. Each of the following terms shall have the
meaning given below:
(a) "Committee" means the Compensation and Benefits Committee
of the Company's Board of Directors.
(b) "Participant" means an employee of the Company designated
by the Committee to participate in this Plan.
(c) "Retirement Plan" means the Paul Mueller Company Salaried
and Clerical Employees Retirement Plan, as adopted by the Company,
and as it may be amended from time to time.
(d) "Retirement Plan Benefit" means the amount of benefit
payable from the Retirement Plan to a Participant in the form of
a single life annuity.
(e) "Supplemental Retirement Benefit" means a benefit payable
under the terms of this Plan.
(f) Each of the following terms shall have the meaning set
forth in the Retirement Plan:
(i) "Actuarial Equivalent";
(ii) "Beneficiary";
(iii) "Deferred Retirement Date";
(iv) "Early Retirement Date";
(v) "Normal Retirement Date"; and
(vi) "Spouse."
4. CALCULATION OF SUPPLEMENTAL RETIREMENT BENEFIT. A Partici-
pant's Supplemental Retirement Benefit shall be equal to the difference
between:
30
<PAGE> 2
(a) The Participant's Retirement Plan Benefit, disregarding any
limitation on annual compensation imposed by Section 401(a)(17) of
the Internal Revenue Code; and
(b) The Participant's Retirement Plan Benefit, giving effect to
any such limitation on annual compensation.
5. VESTING. A Participant shall vest in his or her Supplemental
Retirement Benefit at the same time and in the same manner as under the
Retirement Plan.
6. FORM OF PAYMENT. Except as provided in the remainder of this
Section 6, a Participant's Supplemental Retirement Benefit shall be paid
at the same time and in the same form of payment as elected by the Par-
ticipant with respect to benefits payable to the Participant under the
Retirement Plan. Any Supplemental Retirement Benefit payable other than
as a single life annuity for the Participant's lifetime shall be the
Actuarial Equivalent of such a single life annuity. Notwithstanding the
preceding provisions of this Section:
(a) Under no circumstances may a Participant elect to receive
his or her Supplemental Retirement Benefit under either the "Social
Security Equalization Form" or the "Cash Option," as described in
Sections 7.03 and 7.04 of the Retirement Plan, respectively (any
such election under the Retirement Plan being deemed to be an elec-
tion to receive the Participant's Supplemental Retirement Benefit in
the form of a single life annuity); and
(b) In lieu of the Retirement Plan's $3,500 threshold for in-
voluntary lump-sum distributions, a Participant shall receive a
lump-sum distribution of his or her Supplemental Retirement Benefit
if, and only if, the monthly amount of such Supplemental Retirement
Benefit, when expressed as a single life annuity for the Partici-
pant's lifetime, is less than $500 per month.
7. DEATH BENEFIT. If a vested Participant dies prior to beginning
to receive a Supplemental Retirement Benefit, the Participant's Spouse
shall receive a death benefit under this Plan. This benefit shall be
equal to the difference between:
(a) Fifty percent of the amount determined under Subsection
4(a) of this Plan; and
(b) The amount of any Automatic Death Benefit the Spouse is
entitled to receive under the Retirement Plan.
Any death benefit under this Plan shall be paid at the same time and in
the same form of payment as under the Retirement Plan.
8. PARTICIPANTS' RIGHTS UNSECURED. The right of a Participant or
Beneficiary to receive a distribution under this Plan shall be an unse-
cured claim against the general assets of the Company. Neither the
Participant nor his or her Beneficiary shall have any right as against
any specific assets of the Company, but shall instead have the status
of a general unsecured creditor of the Company. This Plan constitutes
a mere promise by the Company to make benefit payments in the future.
31
<PAGE> 3
Benefits under this Plan may not be in any way encumbered or assigned
by a Participant or Beneficiary.
9. PAYMENTS TO INCOMPETENT PERSONS. Every person receiving or
claiming a benefit under this Plan shall be presumed to be mentally com-
petent and of age until the Committee receives reliable, written notice
that such person is incompetent or a minor. Payments otherwise due a
minor shall be paid to any custodial parent of such minor. Payments
otherwise due any other incompetent person shall be paid to the guar-
dian, conservator, or other legal representative of such person. In the
event that the Committee is unable to locate a parent, guardian, conser-
vator, or other legal representative of an incompetent person who is
otherwise entitled to payment under the Plan, such payment shall be made
to the individual determined by the Committee to have assumed financial
responsibility for the care of such person. Before the initial payment
is made to an individual designated in this Section, the minor or other
legally incompetent person shall be notified of the Committee's intent
to make such payment to that other individual. Any payment of a benefit
in accordance with the provisions of this Section shall be in complete
discharge of any liability to make such payment.
10. AMENDMENTS TO THE PLAN. The Board of Directors of the Company
may amend this Plan at any time, without the consent of the Participants
or their Beneficiaries; provided, however, that no amendment shall
divest any Participant or Beneficiary of any Supplemental Retirement
Benefit already earned under the provisions of this Plan.
11. TERMINATION OF THE PLAN. The Board of Directors of the Company
may terminate this Plan at any time. No additional benefits shall be
credited following termination of the Plan. Upon termination of the
Plan, Participants' benefits shall be distributed in accordance with the
other provisions of the Plan.
12. EXPENSES. All costs of administering this Plan shall be paid
by the Company.
13. NOTICES. Any notice or election required or permitted to be
given to the Committee hereunder shall be in writing, in the form pre-
scribed by the Committee, and shall be deemed to be given:
(a) On the date it is personally delivered to the Committee (or
its designee); or
(b) Three business days after it is sent by registered or cer-
tified mail, addressed to the Committee (or its designee) at the
Company's address.
14. PLAN ADMINISTRATOR. The Committee shall be the "plan adminis-
trator" for this Plan. As such, the Committee shall have the power
to interpret the Plan and to determine all questions that arise under
it. Such power includes, for example, the administrative discretion
necessary to determine whether an individual meets the Plan's written
eligibility requirements, and to interpret any other term contained in
this document. The decision of the Committee on all matters within the
scope of its authority shall be final and binding on all parties.
32
<PAGE> 4
15. GOVERNING LAW. This Plan is established in the State of
Missouri. To the extent federal law does not apply, any questions
arising under the Plan will be determined under the laws of the State
of Missouri.
IN WITNESS WHEREOF, the Company hereby adopts this Supplemental
Executive Retirement Plan this 8th day of February, 1996.
PAUL MUELLER COMPANY
By: /S/ Daniel C. Manna
---------------------------
Title: President
---------------------------
ATTEST:
By: /S/ Donald E. Golik
---------------------------
Title: Secretary
---------------------------
33
<PAGE> 1
November 21, 1995
Mr. Philip K. Daniels
Paul Mueller Company
P.O. BOX 828
Springfield, Mo. 65801
Dear Phil:
This will confirm our agreement on the terms for the termination of your
employment.
1. Termination is by mutual agreement for the reasons set forth
in your letter to me of November 20, 1995 and will become effec-
tive December 1, 1995.
2. The Company will pay you $8,333.33 per month for a period of up
to twelve months with the first payment due on January 1,1996,
provided, however, that the Company's obligation for such pay-
ments shall cease immediately upon your commencement of a new job
paying you at a rate in excess of $125,000 per year. You have
agreed to notify us in the event you begin such work, and the
payment for any partial month will be apportioned accordingly.
3. In the event of your death during the term of this agreement, the
remaining payments will be made to your estate.
4. In consideration of the foregoing, you hereby release the
Company, its officers and directors, its subsidiaries and affili-
ates, from all liability, duties, obligations, causes of actions,
suits, debts and sums of money, claims and demands whatsoever,
known or unknown, present or future, arising out of your employ-
ment with the Company. Additionally, you waive your right to
request or receive a service letter.
5. You agree that you are owed no benefits of any kind whatsoever
except as set forth herein and the benefits provided under the
Paul Mueller Company Employee Benefit Plan.
6. This letter supersedes the Severance Agreement dated March 5,
1994.
7. Nothing herein shall affect the Agreement Not to Compete signed
by you on March 5, 1994.
34
<PAGE> 2
8. You agree that no promises have been made to you other than as
set forth herein.
Sincerely,
/S/ DANIEL C. MANNA
Dan Manna
President
Agreed:
/S/ PHILIP K. DANIELS
- ----------------------------
35
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Mueller International Sales Corporation, a Foreign Sales Corporation,
was organized December 18, 1984, and incorporated under the laws of the
Virgin Islands of the United States, and became active in 1985. This
is a wholly owned subsidiary and its accounts have been included in the
consolidated financial statements filed herein.
36
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> $ 2,491
<SECURITIES> 12,063
<RECEIVABLES> 13,565
<ALLOWANCES> 532
<INVENTORY> 11,198
<CURRENT-ASSETS> 39,403
<PP&E> 45,313
<DEPRECIATION> 33,882
<TOTAL-ASSETS> 54,679
<CURRENT-LIABILITIES> 15,896
<BONDS> 161
<COMMON> 1,342
0
0
<OTHER-SE> 38,776
<TOTAL-LIABILITY-AND-EQUITY> 54,679
<SALES> 78,376
<TOTAL-REVENUES> 78,376
<CGS> 61,012
<TOTAL-COSTS> 61,012
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 114
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 2,615
<INCOME-TAX> 660
<INCOME-CONTINUING> 1,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,955
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
