Myers Industries, Inc., a manufacturer of polymer products and distributor for the tire, wheel and under-vehicle service industry, recently announced results for the first quarter ended March 31, 2020.

First Quarter 2020 Financial Highlights

• GAAP income per diluted share from continuing operations was $0.47, including $11.9 million of pre-tax income from the sale of notes and release of lease guarantee liability related to the company’s Lawn and Garden business (sold in 2015), compared with $0.19 for the first quarter of 2019.

• Adjusted income per diluted share from continuing operations was $0.22, compared with $0.23 for the first quarter of 2019.

• Net sales decreased 12.1% to $122.3 million, compared with $139.1 million for the first quarter of 2019.

• Gross margin increased to 34.8%, compared with 32.7% for the first quarter of 2019.

• Cash flow from continuing operations was $5.0 million and free cash flow was $2.5 million, compared with $5.3 million and $2.4 million, respectively, for the first quarter of 2019.

“During the first quarter, our teams continued to perform well, delivering gross margin expansion despite a decline in sales due to the softening of several end markets,” said Mike McGaugh, president and CEO of Myers Industries. “As I step into my role as the new CEO of Myers, we will continue to execute our strategic objectives, while maintaining our focus on minimizing the impact of COVID-19. Our primary concern is the safety and well-being of our employees and their families, our communities, our customers and our suppliers. We have implemented operational protocols at each of our locations providing our sites with detailed guidelines and procedures for responding to the COVID-19 pandemic, consistent with federal, state and local requirements. The Myers teams remain committed to meeting our customers’ needs during this unprecedented time of uncertainty and have quickly adapted to ensure our customers get the essential products they need.”

McGaugh continued, “As we navigate the current environment, we are well-positioned with a strong balance sheet, including $73.2 million in cash at the end of the quarter, and have sufficient liquidity to support our operations. We have conducted scenario planning and developed contingency plans that we will continue to adjust, as needed, to help mitigate any potential risks and capitalize on opportunities in the months ahead.”

First Quarter 2020 Financial Summary 

Net sales for the first quarter of 2020 decreased $16.9 million, or 12.1% to $122.3 million, compared with $139.1 million for the first quarter of 2019. The decrease was the result of sales declines across key markets in the Material Handling Segment. Gross profit decreased to $42.5 million, compared with $45.6 million for the first quarter of 2019. However, gross profit margin increased to 34.8% compared with 32.7% last year as favorable price-cost margin more than offset the lower sales volume during the quarter. Selling, general and administrative expenses decreased $3.4 million to $31.1 million, compared with $34.5 million in the first quarter of 2019, due primarily to lower compensation costs and savings from the transformation initiatives in the Distribution Segment. GAAP income per diluted share from continuing operations was $0.47 (including $11.9 million of pre-tax income from the sale of notes and release of lease guarantee liability related to the company’s Lawn and Garden business, which was sold in 2015), compared with $0.19 for the first quarter of 2019. Adjusted income per diluted share from continuing operations was $0.22, compared with $0.23 for the first quarter of 2019.

Segment Results

Net sales in the Material Handling Segment (consumer, food and beverage, industrial and vehicle end markets) for the first quarter of 2020 were $84.1 million, a decrease of $18.9 million or 18.3%, compared with $103.0 million for the first quarter of 2019. Sales declines in the company’s food and beverage, vehicle and industrial end markets were only partially offset by a sales increase in the company’s consumer end market. For the first quarter of 2020, operating income for this segment declined 6.4% to $15.2 million, compared with $16.2 million in 2019. Adjusted operating income declined 12.3% to $15.2 million, compared with $17.3 million in 2019. The lower volume was partially offset by favorable price-cost margin and lower variable incentive compensation costs. The Material Handling Segment’s adjusted operating income margin was 18.0%, compared with 16.8% for the first quarter of 2019.

Net sales in the Distribution Segment (auto aftermarket end market) for the first quarter of 2020 were $38.2 million, an increase of $2.0 million, or 5.6%, compared with $36.2 million in 2019. Incremental sales from the August 2019 acquisition of Tuffy Manufacturing Industries, Inc. led to the improvement. First quarter operating income for this segment increased to $1.9 million, compared with $0.2 million in 2019. Adjusted operating income increased to $1.9 million, compared with $1.1 million in 2019. The increase in adjusted operating income was due primarily to savings from the segment’s transformation initiatives. The Distribution Segment’s adjusted operating income margin was 4.9%, compared with 3.1% for the first quarter of 2019.

2020 Outlook

“As a result of the uncertainty related to the duration and extent of the potential impacts of COVID-19, and the lack of visibility we have going forward due to how quickly things are changing, we are withdrawing our 2020 earnings per share guidance that we provided during our fourth quarter 2019 earnings call,” said McGaugh. “That being said, we will continue to provide quarterly updates regarding sales trends and our revised outlook for end markets.”

The company now expects total revenue to decline approximately 10% year-over-year in 2020, down from its previous guidance of a mid-single-digit percentage increase. The company also anticipates that sales will be down approximately 20% year-over-year in the second quarter, with approximately 60% of the decline in the second quarter coming from continued sales decreases in the company’s food and beverage, industrial and vehicle end markets. The remainder of the decline is expected to come from sales decreases in the auto aftermarket end market, where sales dropped off significantly in the last couple weeks of March and continued to decline in the second quarter. The company is still anticipating that depreciation and amortization will be approximately $21 million, net interest expense will be approximately $4 million, the effective tax rate will be approximately 27%, and capital expenditures will be approximately $15 million.

“In spite of the short-term headwinds due to the COVID-19 pandemic, I remain optimistic about Myers’ longer-term growth prospects. We are a solid, well-operated company with a strong balance sheet. I believe these attributes will be a tailwind for Myers as the economy begins to re-start, and we continue to focus on executing our strategies to deliver profitable revenue growth,” said McGaugh.