Myers Industries, a manufacturer of a wide range of polymer and metal products and distributor for the tire, wheel and under-vehicle service industry, today announced results for the first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights
- Net sales of $215.7 million compared to $225.5 million in the prior year period
- Gross margin of 32.9%, up 100 basis points versus the prior year period
- GAAP net income per diluted share of $0.35 compared to $0.47 in the prior year period
- Adjusted earnings per diluted share of $0.38 compared to $0.50 in the prior year period
- Cash flow provided by operations was $25.8 million and free cash flow was $16.7 million
Myers Industries’ President and CEO Mike McGaugh said, “We are pleased with our gross margin expansion and increased cash flow generation in the first quarter. These results demonstrate the strength of our ongoing self-help initiatives and cost savings measures, which are a cornerstone of Horizon 1 of our Strategy. Countering those great results, though, was continued and anticipated reduced demand for our products that serve the Recreational Vehicle end-market and our products that are high-quality, high-dollar discretionary purchases for the consumer. Inflationary trends are impacting overall consumption and performance in those two markets year-over-year. To help offset these demand headwinds, we are laser-focused on pursuing growth and winning new business in our other end-markets.
“In the distribution segment, I continue to be optimistic about the strategic move of acquiring Mohawk Rubber; we are stronger together, we have more channel power, and we can serve our customers better than ever. As we continue to integrate Mohawk, I expect our Distribution segment to deliver breakthrough performance.”
McGaugh continued, “We are keenly focused on operational excellence, by way of the ‘Myers Business System,’ which serves as the foundation for sustainable and scalable improvements throughout our organization. The system is an integral part of our transformation into a world-class organization that generates significant value for all our stakeholders.”
McGaugh concluded, “We believe our Strategy to drive commercial and operational excellence, our leading positions in the strong markets in which we play, and our culture of continuous improvement will serve as a solid defense against these near-term macroeconomic headwinds and will propel our long-term growth as we progress through our 3-horizon strategy.”
Net sales were $215.7 million, a decrease of $9.7 million, or 4.3%, compared with $225.5 million for the first quarter of 2022. The decrease was the result of lower sales in the Material Handling segment, partially offset by higher sales in the Distribution segment largely from incremental sales of $13.9 million from the Mohawk Rubber acquisition. On an organic basis, the contribution from higher pricing was more than offset by lower volume/mix.
Gross profit decreased $0.9 million, or 1.2% to $71.1 million, as the contribution from pricing actions, lower raw material costs and the Mohawk Rubber acquisition was not enough to offset lower volume and a change in sales mix. Gross margin expanded to 32.9% compared with 31.9% for the first quarter of 2022. Selling, general and administrative expenses increased $4.1 million, or 8.5% to $52.1 million due to the Mohawk Rubber acquisition and higher legal fees, which were primarily due to $1.4 million of success fees payable in conjunction with a favorable patent trial result. SG&A as a percentage of sales increased to 24.1%, compared with 21.3% in the same period last year. Net income per diluted share was $0.35, compared with $0.47 for the first quarter of 2022. Adjusted earnings per diluted share were $0.38, compared with $0.50 for the first quarter of 2022.
First Quarter 2023 Segment Results
Net sales for the Material Handling segment were $152.6 million, a decrease of $24 million, or 13.6%, compared with $176.6 million for the first quarter of 2022. Net sales increases in the food and beverage end market were more than offset by decreases in the consumer, vehicle, and specific demand from industrial end markets. Operating income decreased 18.8% to $25.4 million, compared with $31.2 million in the first quarter of 2022. Adjusted EBITDA decreased 16.5% to $30.4 million, compared with $36.4 million in the first quarter of 2022. Lower sales volume and a change in sales mix more than offset lower raw material costs. SG&A expenses were higher year-over-year, primarily due to higher legal fees resulting from $1.4 million of success fees payable in conjunction with a patent infringement matter. The Material Handling segment’s GAAP operating income margin was 16.6% compared with 17.7% for the first quarter of 2022. The Material Handling segment’s adjusted EBITDA margin was 19.9% compared with 20.6% for the first quarter of 2022.
Net sales for the Distribution segment were $63.2 million, an increase of $14.3 million, or 29.3%, compared with $48.9 million for the first quarter of 2022. Excluding the incremental $13.9 million of net sales from the Mohawk Rubber acquisition, organic net sales increased 0.9%. Operating income decreased $1.1 million to $2.2 million, compared with $3.3 million for the first quarter of 2022. Adjusted EBITDA decreased 11.9% to $3.4 million, compared with $3.9 million in the first quarter of 2022. The decrease in operating income and adjusted EBITDA was due primarily to an unfavorable sales mix and higher freight costs. Additionally, SG&A was higher year-over-year. The increase in SG&A expenses was primarily the result of the Mohawk Rubber acquisition and higher labor costs at distribution centers. The Distribution segment’s GAAP operating income margin was 3.5% compared with 6.8% for the first quarter of 2022. The Distribution segment’s adjusted EBITDA margin was 5.4%, compared with 7.9% for the first quarter of 2022. The Distribution Segment continues to integrate the Mohawk Rubber acquisition and is implementing price increases to offset cost inflation and expand margins.
Based on current exchange rates, market outlook, and business forecast, the company reiterated its outlook for fiscal 2023, and currently forecasts:
- Net sales growth in the low-to-mid single digit range
- Net income per diluted share in the range of $1.50 to $1.80; adjusted earnings per diluted share in the range of $1.55 to $1.85
- Capital expenditures to be in the range of $25 to $30 million
- Effective tax rate to approximate 25%