Myers Industries, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. Myers operates Material Handling and Distribution businesses, selling reusable plastic products and automotive service equipment and supplies.
Key financial results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Net sales | $215.7 million | $225.5 million | Down 4.3% |
| Gross profit / margin | $71.1 million / 32.9% | $71.9 million / 31.9% | Profit down 1.2%; margin up 1.0 point |
| Operating income | $19.0 million | $24.4 million | Down 22.3% |
| Net income | $13.0 million | $17.3 million | Down 25.1% |
| Diluted EPS | $0.35 | $0.47 | Down $0.12 |
| Operating cash flow | $25.8 million | $7.3 million | Up $18.5 million |
Revenue fell mainly on lower volume and mix ($25.4 million) and unfavorable currency translation ($0.7 million), partly offset by pricing ($2.5 million) and $13.9 million in Mohawk acquisition sales. Material Handling revenue declined 13.6% to $152.6 million; Distribution revenue rose 29.3% to $63.2 million, principally reflecting Mohawk and higher pricing. Gross margin improved with pricing, lower material costs, and Mohawk, partly offset by lower volume/mix and higher labor and freight costs. SG&A increased 8.5% to $52.1 million, including Mohawk costs, higher salaries and benefits, and $1.4 million in patent-trial success fees. Net interest expense rose 43.5% to $1.6 million as the weighted-average borrowing rate increased to 6.43% from 4.12%.
Liquidity, debt, and capital allocation
At March 31, 2023, cash was $28.2 million and $193.5 million was available under the $250 million revolving credit facility. Debt was $88.8 million before finance leases, including $26.0 million of notes classified as current and due January 2024; debt including finance lease liabilities was reported as $98.1 million. The revolver matures in September 2027. The company reported compliance with debt covenants; actual interest coverage was 17.83 versus a 3.00 minimum, and leverage was 0.93 versus a 3.25 maximum.
Operating cash flow was $25.8 million, supported in part by lower accounts receivable. Capital expenditures were $9.1 million; full-year 2023 capital expenditures are expected to be approximately $25–$30 million. Cash dividends paid were $5.3 million. Cash increased by $5.1 million to $28.2 million during the quarter.
Outlook, risks, contingencies, and unusual items
Management provided no specific earnings or revenue guidance in the supplied filing text. It said cash, operating cash flow, and available borrowing capacity should be sufficient for expected working capital, capital expenditures, dividends, debt service, and selective acquisitions. Management highlighted inflation, interest rates, commodity-price volatility, supply-chain disruption, labor availability, and geopolitical and economic uncertainty.
Environmental matters remain significant estimates and uncertainties. The New Idria Mine reserve was $10.7 million, with a separate $6.2 million receivable for probable insurance recoveries; the company had not accrued remediation costs because it could not estimate a reasonably possible range. For New Almaden, the reserve was $4.5 million; the company disputes responsibility for sharing the full increased project costs. The patent-infringement jury found for Scepter, and the court dismissed remaining claims with prejudice on April 24, 2023; the company said it would defend any appeal. A separate fuel-container injury lawsuit filed in February 2023 remained at an early stage, and the company said it could not meaningfully assess outcome or damages. The filing also notes floating-rate exposure: a 1 percentage-point rate increase would raise annual variable interest expense by approximately $0.5 million.
The Ameri-Kart facility consolidation is expected to have approximately $2.9 million of remaining costs, including about $0.5 million in 2023 and $2.4 million through 2026. The first-quarter results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Whether lower Material Handling volumes persist and whether pricing offsets labor, freight, and other cost pressures.
- How much Distribution growth is attributable to Mohawk and whether acquired sales translate into sustained profitability.
- The refinancing or repayment plan for $26.0 million of notes due January 2024, alongside floating-rate borrowing costs.
- Future changes in New Idria insurance recoveries and reserves, and the company’s eventual exposure at New Almaden.
- Execution of the $25–$30 million capital expenditure plan and the timing and cost of the remaining facility consolidation.