Myers Industries, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request identifies 2021 Q4, this filing reports full-year results, not standalone fourth-quarter results. Myers manufactures reusable plastic material-handling products and distributes tire-service tools and supplies through its Material Handling and Distribution segments.
Key financial results
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $761.4 million | $510.4 million | +49.2% |
| Gross profit / margin | $211.4 million / 27.8% | $172.0 million / 33.7% | Profit +22.9%; margin -5.9 percentage points |
| Operating income / margin | $49.3 million / 6.5% | $53.6 million / 10.5% | -7.9% |
| Net income | $33.5 million | $36.8 million | -8.8% |
| Diluted EPS | $0.92 | $1.02 | -9.8% |
| Cash from continuing operations | $44.9 million | $46.5 million | -$1.6 million |
| Capital expenditures | $17.9 million | $13.4 million | +$4.5 million |
| Cash from operations less capital expenditures | $27.0 million | $33.1 million | -$6.1 million |
Sales drivers: Management attributed the $251.1 million increase to $122.2 million of acquired sales, $73.4 million higher volume/mix, $52.8 million of pricing, and $2.7 million favorable currency translation. Material Handling sales grew 64.0% to $564.1 million; Distribution sales grew 18.5% to $197.4 million.
Profitability: Gross margin fell as higher raw-material, labor, and other manufacturing costs outpaced pricing, with unfavorable mix also contributing. SG&A rose 25.5% to $163.5 million, including acquisition-related costs and higher compensation. FY2020 operating results included an unusual $11.9 million gain related to the sale of HC promissory notes and release from a lease guarantee; there was no comparable gain in FY2021.
Liquidity and debt: At year-end, cash was $17.7 million and availability under the revolving credit facility was $191.2 million. Debt had a face value of $100.9 million, including a $9.9 million finance-lease liability; balance-sheet long-term debt was $90.9 million. The company reported compliance with debt covenants, with an actual interest-coverage ratio of 18.58 versus a 3.00 minimum and leverage ratio of 1.36 versus a 3.25 maximum. Current assets were $219.9 million and current liabilities $132.5 million.
In March 2021, the revolving facility limit increased to $250 million and maturity was extended to March 2024. The company repaid $40 million of notes at maturity, drew $53 million net on its credit facility, and paid $19.6 million in dividends. The quarterly dividend remained $0.135 per share.
Material developments and outlook
- Myers acquired Trilogy Plastics in July 2021 for approximately $34.5 million; Trilogy was included in Material Handling. Elkhart Plastics, acquired in November 2020, also contributed to FY2021 growth.
- The Ameri-Kart facility consolidation was expected to be substantially completed in the first half of 2022. FY2021 restructuring charges were $0.9 million; management expected approximately $1.5 million of annualized benefits upon completion.
- Management provided no specific revenue or earnings guidance in the supplied filing text. It stated that cash, operating cash flow, and borrowing capacity should be sufficient for expected operating needs, capital spending, dividends, debt service, and selective acquisitions.
- Backlog was approximately $109 million at December 31, 2021, versus $39 million a year earlier. The company cautioned that backlog is not a reliable indicator of future sales; most orders generally ship within 90 days.
- Key operating risks include volatile resin and other commodity costs, supply-chain constraints, skilled-labor availability and cost, inflation, competitive pricing, COVID-19 effects, and execution and integration risks from acquisitions.
Contingencies, audit, and unusual matters
- New Idria Mercury Mine: The company recorded an $8.2 million liability for estimated investigation/feasibility-study costs and related matters. It has not accrued for eventual remediation because the amount cannot currently be reasonably estimated. The work plan was expected to be finalized with EPA in 2022; potential insurance recovery was not recognized.
- New Almaden Mine: A $1.5 million reserve was recorded for the company’s contribution to a remediation project; timing and final costs remained uncertain.
- Patent litigation: Scepter faced patent-infringement and related claims concerning fuel containers. The company had not recorded a reserve and said the outcome and financial impact could not be determined.
- Tax: The IRS was auditing the company’s 2017 federal return, including a tax benefit associated with the Brazil business. The filing states that the outcome could affect tax expense, net income, and cash flows.
- Ernst & Young issued unqualified opinions on the financial statements and internal controls. Management and the auditor excluded Trilogy from the 2021 internal-control assessment; Trilogy represented approximately 9% of year-end assets and 2% of annual sales.
Important facts for investors to verify
- How much of the sales increase reflects sustainable organic volume and pricing versus acquisitions, and whether pricing can catch up with input-cost inflation.
- Whether gross margins recover from FY2021’s 27.8%, and whether restructuring delivers the expected benefits.
- Working-capital and cash-flow trends, particularly the increases in receivables and inventory that reduced operating cash flow.
- The final costs and timing of the New Idria investigation and any subsequent remediation, as well as progress on the New Almaden project and insurance recovery.
- Acquisition integration, Trilogy valuation and performance, and the effect of the Trilogy control-assessment exclusion.
- Developments in the Scepter litigation and the 2017 IRS audit, and any resulting financial exposure.