Myers Industries, Inc., a manufacturer of polymer products and distributor for the tire, wheel and under-vehicle service industry, recently announced results for the third quarter ended Sept. 30, 2020.
Third Quarter 2020 Financial Highlights
• GAAP income per diluted share from continuing operations was $0.24, compared with $0.15 for the third quarter of 2019.
• Adjusted income per diluted share from continuing operations was $0.30, compared with $0.15 for the third quarter of 2019.
• Net sales were $132.3 million, up 5.4% compared with $125.5 million for the third quarter of 2019.
• Gross margin increased to 35.6%, compared with 31.5% for the third quarter of 2019.
• Cash flow from continuing operations was $19.5 million and free cash flow was $16.2 million, compared with $23.3 million and $22.1 million, respectively, for the third quarter of 2019.
“We are very pleased with our performance for the third quarter, which exceeded our expectations and was an improvement over last year. We successfully capitalized on the strong demand in our consumer end market, which was driven in part by an active hurricane season,” said Mike McGaugh, president and CEO of Myers Industries. “Additionally, as a result of continued momentum in our auto aftermarket end market, our Distribution Segment increased sales by 10%, increased adjusted operating income by 41%, and delivered an adjusted EBITDA margin of 12.4%.”
Strategic Vision Unveiled
Myers also announced the unveiling of a new, multi-phased strategic vision. The current phase, “Horizon 1,” runs through 2023 and is focused on strengthening the company through organic growth initiatives, commercial and operational excellence, pursuing bolt-on acquisitions in value added plastics molding, and driving a high-performance culture. Executing on this new strategy will transform the company’s Material Handling Segment into a high-growth, customer centric innovator of engineered plastic solutions, while continuing to optimize and grow its Distribution Segment.
McGaugh continued, “I joined Myers just over six months ago at a critical time when our markets were under pressure and the world was in the early stages of the pandemic. I’m pleased to report that we were able to develop and align on a path forward for the company. I am confident that this plan will advance our ability to accelerate growth, further improve our operations, and deliver continued financial strength and flexibility. Our vision is to transform Myers into a high-growth, customer-centric innovator of engineered plastic solutions. In addition, we are building a “One Myers” culture and mindset that drive alignment, centralize key functions, and enable the successful execution of our long-term vision.”
Third Quarter 2020 Financial Summary
Net sales for the third quarter of 2020 were $132.3 million, an increase of $6.8 million, or 5.4%, compared with $125.5 million for the third quarter of 2019. The increase was the result of higher sales in both the Material Handling and Distribution Segments. Gross profit increased $7.5 million to $47.1 million, compared with $39.6 million for the third quarter of 2019. Gross profit margin increased to 35.6% compared with 31.5% last year. The increase was due primarily to higher sales volume and favorable price-cost margin. Additionally, third quarter 2019 gross profit included a $3.5 million charge for estimated product replacement costs. Selling, general and administrative (SG&A) expenses increased to $33.9 million, compared with $31.5 million for the third quarter of 2019, due primarily to executive severance costs and higher incentive compensation costs, partially offset by lower depreciation and amortization expense. GAAP income per diluted share from continuing operations was $0.24, compared with $0.15 for the third quarter of 2019. Adjusted income per diluted share from continuing operations was $0.30, compared with $0.15 for the third quarter of 2019.
Segment Results
Net sales in the Material Handling Segment (consumer, food and beverage, industrial and vehicle end markets) for the third quarter of 2020 were $86.8 million, an increase of $2.7 million or 3.2%, compared with $84.1 million for the third quarter of 2019. The sales increase was due primarily to higher sales volumes in the company’s consumer end market as a result of heightened storm activity. For the third quarter of 2020, operating income for this segment increased 50.1% to $15.6 million, compared with $10.4 million in 2019. Adjusted operating income increased 58.9% to $16.5 million, compared with $10.4 million in 2019. The increase was due primarily to higher sales volume and favorable price-cost margin. Additionally, third quarter 2019 operating income included a $3.5M charge for estimated product replacement costs. As a result, the Material Handling Segment’s adjusted operating income margin increased to 19.0%, compared with 12.3% for the third quarter of 2019.
Net sales in the Distribution Segment (auto aftermarket end market) for the third quarter of 2020 were $45.5 million, an increase of $4.1 million, or 10.0%, compared with $41.4 million for the third quarter of 2019. Incremental sales from the Tuffy acquisition completed in August 2019 contributed $2.9 million to the increase. Third quarter operating income for this segment increased 50.5% to $5.1 million, compared with $3.4 million in 2019. Adjusted operating income increased 41.3% to $5.1 million, compared with $3.6 million in 2019, primarily due to higher sales volume and cost reductions. The Distribution Segment’s adjusted operating income margin was 11.2%, compared with 8.7% for the third quarter of 2019.
2020 Outlook
The company has revised its outlook for 2020 revenue. The company now expects full-year revenue to decline in the low-to-mid single digits, which is a slight improvement from its previous guidance of a decline in the mid-to-high single digit range. The company does not expect the events that drove sales in the consumer end market to recur in the fourth quarter. The company is maintaining its previous guidance that depreciation and amortization will be approximately $21 million, net interest expense will be approximately $4 million and capital expenditures will be approximately $15 million. The company continues to estimate that the effective tax rate will be approximately 26%.
“As we look to the future, we remain committed to successfully managing through these challenging times, while building a company and “One Myers” team that will become stronger and more aligned than ever before,” added McGaugh.
