<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31,
1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Secu-
rities Exchange Act of 1934. 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 W. Phelps Street, P O Box 828, Springfield, Missouri 65801-0828
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (417) 831-3000
- ---------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all re-
ports 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 the number of shares outstanding of the issuer's Common Stock
as of May 7, 1997: 1,168,021
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared
by the Company without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial statements,
prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these condensed financial statements be read in connection with the
financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. This report reflects all adjust-
ments which are, in the opinion of management, necessary for a fair
statement of the results for the interim period.
2
<PAGE> 3
PAUL MUELLER COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Mar. 31 Dec. 31
1997 1996
------- -------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash............................................ $ 2,579 $ 2,221
Available-for-sale investments, at market....... 14,201 14,605
Accounts and notes receivable, less reserve
of $634 at March 31, 1997, and $698 at
December 31, 1996, for doubtful accounts...... 13,185 15,329
Inventories (Note 2) -
Raw materials and components.................. $ 5,416 $ 3,768
Work-in-process............................... 2,778 719
Finished goods................................ 2,370 1,498
-------- --------
$ 10,564 $ 5,985
Prepayments..................................... 320 403
-------- --------
Total Current Assets...................... $ 40,849 $ 38,543
Other Assets...................................... 3,601 3,486
Property, Plant & Equipment, at cost.............. $ 47,917 $ 47,107
Less - Accumulated depreciation................. 36,411 35,951
-------- --------
$ 11,506 $ 11,156
-------- --------
$ 55,956 $ 53,185
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Accounts payable................................ $ 3,737 $ 2,283
Accrued expenses................................ 6,517 6,093
Advance billings................................ 5,802 4,085
-------- --------
Total Current Liabilities................. $ 16,056 $ 12,461
Other Long-Term Liabilities....................... 629 1,188
Contingencies (Note 5)............................
Shareholders' Investment:
Common stock, par value $1 per share - Autho-
rized 20,000,000 shares - Issued 1,342,325
shares........................................ $ 1,342 $ 1,342
Preferred stock, par value $1 per share - Autho-
rized 1,000,000 shares - No shares issued..... - -
Paid-in surplus................................. 4,307 4,307
Retained earnings............................... 36,176 36,441
-------- --------
$ 41,825 $ 42,090
Less - Treasury stock, 174,304 shares at
March 31, 1997, and December 31, 1996,
at cost.................................. 2,554 2,554
-------- --------
$ 39,271 $ 39,536
-------- --------
$ 55,956 $ 53,185
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE> 4
PAUL MUELLER COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1997 1996
-------- --------
<S> <C> <C>
Net Sales........................................ $ 17,208 $ 18,690
Cost of Sales.................................... 12,979 14,625
-------- --------
Gross Profit............................. $ 4,229 $ 4,065
Selling, General & Administrative Expenses....... 3,903 3,680
-------- --------
Operating Income......................... $ 326 $ 385
Other Income (Expense):
Interest income.............................. $ 193 $ 168
Interest expense (Note 4).................... (2) (27)
Other, net................................... 112 187
-------- --------
$ 303 $ 328
-------- --------
Income from Operations before Provision
for Income Taxes............................. $ 629 $ 713
Provision for Income Taxes....................... 193 213
-------- --------
Net Income............................... $ 436 $ 500
======== ========
Earnings per Common Share (Note 3)............... $ 0.37 $ 0.43
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
PAUL MUELLER COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1997 1996
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income..................................... $ 436 $ 500
Adjustments to reconcile net income to net
cash provided (required) by operating
activities:
Bad debt expense............................. (45) 57
Depreciation and amortization................ 552 607
(Gain) on sales of fixed assets.............. (2) 0
Changes in assets and liabilities -
(Increase) in interest receivable.......... (45) (32)
Decrease (increase) in accounts and
notes receivable....................... 2,189 (731)
(Increase) in inventory.................... (4,579) (1,015)
Decrease in prepayments.................... 83 124
(Increase) decrease in other assets........ (138) 8
Increase in accounts payable............... 1,454 1,252
Increase in accrued expenses............... 424 1,624
Increase in advance billings............... 1,717 249
(Decrease) in long-term liabilities........ (559) (472)
-------- --------
Net Cash Provided by Operations........ $ 1,487 $ 2,171
Cash Flows Provided (Requirements) from
Investing Activities:
Proceeds from maturities of investments........ $ 4,950 $ 7,600
Purchases of investments....................... (4,500) (9,410)
Proceeds from sales of equipment............... 1 0
Additions to property, plant and equipment..... (879) (585)
-------- --------
Net Cash Provided (Required) by
Investing Activities................. $ (428) $ (2,395)
Cash Flows (Requirements) from
Financing Activities:
Dividends paid................................. $ (701) $ (584)
-------- --------
Net Cash (Required) by
Financing Activities................. $ (701) $ (584)
-------- --------
Net Increase (Decrease) in Cash.................. $ 358 $ (808)
Cash at Beginning of Period...................... $ 2,221 $ 2,491
-------- --------
Cash at End of Period............................ $ 2,579 $ 1,683
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for -
Interest..................................... $ - $ 25
Income taxes................................. 435 159
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
PAUL MUELLER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(Unaudited)
1. The condensed financial statements include the accounts of Paul
Mueller Company (Company) and its wholly owned subsidiaries,
Mueller International Sales Corporation and Mueller Transporta-
tion, Inc. A summary of the significant accounting policies is
included in Note 1 to the consolidated financial statements in-
cluded in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
2. Inventory is recorded at the lower of cost, last-in, first-out
(LIFO), or market.
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 time, interim LIFO determinations, in-
cluding those at March 31, 1997, must necessarily be based on
management's estimate of expected year-end inventory levels and
costs. Since estimates of future inventory levels and prices are
subject to many factors beyond the control of management, interim
financial results are subject to final year-end LIFO inventory
amounts. Accordingly, inventory components reported for the period
ending March 31, 1997, are estimates based on management's know-
ledge of the Company's production cycle, the costs associated with
this cycle and the sales and purchasing volume of the Company.
3. The net income per share of common stock has been computed on the
basis of weighted average shares outstanding: 1,168,021 for
periods ended March 31, 1997, and March 31, 1996. Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," was issued March 1997 and is effective for the Company's
1997 calendar year. Adoption of SFAS No. 128 will not affect the
calculation of earnings per share.
4. The $3,000,000 Floating Rate Weekly Demand Industrial Development
Revenue Bond issue due on December 1, 1996, was repaid as required.
5. The Company currently employs over 900 people, of which approxi-
mately 400 are represented by the Sheet Metal Workers Union. The
International Union called a strike beginning July 25, 1995, and
currently 25 employees are participating.
The Company is a defendant in two lawsuits pending at March 31,
1997. In the opinion of management, after consultation with legal
counsel, the outcome of these lawsuits will not have a material
adverse effect on the Company's consolidated financial statements.
6
<PAGE> 7
PAUL MUELLER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING RESULTS
AND FINANCIAL CONDITION
The following is Management's Discussion and Analysis of the signifi-
cant factors which have affected the Companies' financial condition
and operating results reflected in the accompanying Consolidated Con-
densed Financial Statements.
The information discussed below in Management's Discussion and Analy-
sis of Operating Results and Financial Condition contains statements
regarding matters that are not historical facts, but rather are
forward-looking statements. These statements are based on current
financial and economic conditions and current expectations, and
involve risk and uncertainties. Actual future results may differ
materially depending on a variety of factors. These factors, some of
which are identified in the discussion accompanying such forward-
looking statements, include, but are not limited to, milk prices paid
to dairy farmers, feed prices, weather conditions, dairy farm conso-
lidation and other factors affecting the profitability of dairy
farmers, the price of stainless steel, actions of competitors, labor
strife, the Registrant's execution of internal performance plans,
economic conditions in key export markets, the level of capital
expenditures in the U.S. economy, and other changes to business
conditions.
OPERATING RESULTS
Net sales for the quarter ended March 31, 1997, were $17,200,000
versus $18,690,000 for the quarter ended March 31, 1996. The lower
level of sales was all related to Processing Equipment, as sales of
Dairy Farm Equipment increased by about $1,200,000. Processing
Equipment sales for the first quarter of 1997 declined by about
$2,700,000, and this primarily related to Food and Pharmaceutical
Processing Equipment. A low backlog for these Processing Equipment
products at December 31, 1996, compared to December 31, 1995, ad-
versely affected shipments in the first quarter of 1997. These
Processing Equipment products have a fairly long production cycle,
so a lower-than-normal level of work-in-process at December 31, 1996,
due to significant sales in December 1996, also contributed to the
lower sales during the first quarter of 1997. The increase in Dairy
Farm Equipment sales was almost exclusively related to increased
shipments to the domestic market. The higher level of domestic Dairy
Farm Equipment sales was due to the increased backlog at December 31,
1996, that was the result of a sales promotion during the fourth
quarter of 1996. Export sales of Dairy Farm Equipment were up
slightly, and this is primarily attributable to the improved con-
ditions in the United Kingdom market where "mad cow disease" had
adversely affected sales during the first quarter of 1996.
The gross profit rate for the first quarter ended March 31, 1997, was
24.6% compared to 21.7% for the first quarter of 1996. The factors
contributing to the higher gross profit percentage were improved
margins and a lower level of manufacturing burden due to higher ab-
sorption. Margins improved during the first quarter of 1997 for Food
and Pharmaceutical Processing Equipment compared to the first quarter
of 1996, when operations were still being adversely affected by the
strike. Additionally, sales of Dairy Farm Equipment were proportion-
ately higher during the first quarter of 1997, and this segment
consistently has higher margins. Manufacturing burden absorption
increased during the first quarter of 1997 as work-in-process inven-
tory increased, and there was a significant improvement in labor
efficiency compared to the first quarter of 1996 when efficiency was
adversely affected by the strike.
Selling, general and administrative expenses for the quarter ended
March 31, 1997, increased by about $220,000 versus the same period
of a year ago. This difference is almost entirely due to the receipt
of a $312,000 group life insurance premium refund during the first
quarter of 1996, of which $234,000 was credited to general and ad-
ministrative expense.
7
<PAGE> 8
Interest income increased in the first quarter of 1997 compared to
the first quarter of 1996, as both the average level of investable
funds and interest rates were higher. Interest expense decreased in
the first quarter of 1997 compared to the first quarter of 1996, as
a $3,000,000 industrial revenue bond issue was retired in December
1996. Other, net decreased, as trucking income was lower due to re-
duced revenue miles during the first quarter of 1997.
The effective tax rate for the first quarter of 1997 and the first
quarter of 1996 varied from the statutory tax rate (34%) primarily as
a result of tax-exempt interest income and the lower effective tax
rate for the Foreign Sales Corporation.
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 Company 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 Company's
implementation of its offer.
However, on December 22, 1994, the Regional Director of the NLRB
issued an unfair labor practice complaint against the Company 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 implemen-
tation of changes in wages and benefits. A hearing on these and other
unfair labor practice issues was held in August 1996 by an adminis-
trative law judge of the NLRB, and a decision is expected in early
1997. A final determination of all the charges may take up to two
years, but management believes, based on an evaluation by counsel,
that there is no significant financial exposure to the Company.
The Company currently employs over 900 people, of which approximately
400 at the Springfield, Missouri, facility are represented by the
Sheet Metal Workers Union. The International Union called a strike
beginning on July 25, 1995, and currently there are approximately 25
employees participating. No action has been taken by the Union to
prevent nonstriking employees from working.
The Company has implemented the provisions of its revised and final
offer effective April 1, 1996, which remains open for the Union's
acceptance, and no further negotiations are scheduled.
The Company has facilities located in Springfield, Missouri, and
Osceola, Iowa. There are approximately 800 employees assigned to
the Springfield facility, and there are an additional 100 employees
at the Osceola facility (none of which are represented by a labor
union).
Looking to the balance of 1997, there are factors that could affect
the results of operations. If there is expanded employee partici-
pation for an extended period of time in the strike mentioned above,
this could have an adverse effect on the level of production and the
ability to secure orders. Stainless steel prices increased during
March by approximately 5%, and another 5% increase scheduled to take
effect in May has been delayed until June 1997. However, we expect
stainless steel pricing to remain relatively stable during 1997.
Domestically, the average price paid to farmers for milk was lower
for the first quarter of this year compared to the first quarter of
1996. Prices are expected to remain relatively low until late summer
or early fall, and this may have an adverse effect on sales of Dairy
Farm Equipment.
The backlog of sales at March 31, 1997, was $28,100,000 compared to
$26,500,000 at March 31, 1996. The March 31, 1997, backlog repre-
sents orders that will be completed and shipped over the next twelve
months.
8
<PAGE> 9
FINANCIAL CONDITION
The consolidated financial condition and the liquidity of the Company
at March 31, 1997, have not changed significantly since December 31,
1996. There are no significant commitments for capital expenditures
at March 31, 1997.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
------ ------------------------------------- --------
<S> <C> <C>
(27) Financial Data Schedule............... 11
</TABLE>
b. Reports on Form 8-K -- There were no reports on Form 8-K
filed for the three months ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PAUL MUELLER COMPANY
DATE: May 7, 1997 /S/ DONALD E. GOLIK
----------- --------------------------------------
Donald E. Golik, Senior Vice President
and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,579
<SECURITIES> 14,201
<RECEIVABLES> 13,819
<ALLOWANCES> 634
<INVENTORY> 10,564
<CURRENT-ASSETS> 40,849
<PP&E> 47,917
<DEPRECIATION> 36,411
<TOTAL-ASSETS> 55,956
<CURRENT-LIABILITIES> 16,056
<BONDS> 161
0
0
<COMMON> 1,342
<OTHER-SE> 40,483
<TOTAL-LIABILITY-AND-EQUITY> 55,956
<SALES> 17,208
<TOTAL-REVENUES> 17,208
<CGS> 12,979
<TOTAL-COSTS> 12,979
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (45)
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 629
<INCOME-TAX> 193
<INCOME-CONTINUING> 436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
