Business context and reporting period
Myers Industries, Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. It operates two segments: Material Handling, which manufactures reusable plastic containers, pallets and molded products, and Distribution, which supplies tire-service and automotive-under-vehicle tools, equipment and products. The filing reports annual results; it does not provide a clear standalone fourth-quarter financial summary.
Financial performance and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $899.5 million | $761.4 million |
| Gross profit / margin | $283.4 million / 31.5% | $211.4 million / 27.8% |
| Operating income | $83.9 million | $49.3 million |
| Net income | $60.3 million | $33.5 million |
| Diluted EPS | $1.64 | $0.92 |
| Cash provided by operating activities | $72.6 million | $44.9 million |
| Capital expenditures | $24.3 million | $17.9 million |
Material Handling sales were $647.6 million, up 14.8%; Distribution sales were $252.0 million, up 27.6%. At December 31, 2022, cash was $23.1 million, total assets were $542.6 million and shareholders’ equity was $256.4 million. Debt had a $103.4 million face value, including $9.4 million of finance lease liabilities. The company reported $188.3 million available under its $250 million revolving credit facility. Its $38 million of senior unsecured notes mature in 2024 and 2026. The company was compliant with debt covenants; its actual interest coverage ratio was 20.34 against a 3.00 minimum, and leverage ratio was 0.94 against a 3.25 maximum.
Material changes versus the prior year
- Sales rose 18.1%. Higher pricing contributed $95.8 million and acquisitions contributed $63.8 million; lower volume and mix reduced sales by $19.7 million, and currency translation by $1.8 million.
- Gross margin improved to 31.5%, reflecting pricing, acquisitions and lower raw-material costs, partly offset by inflation and lower volume/mix.
- SG&A increased 22.0% to $199.5 million, including higher acquisition-related costs, salaries, incentive compensation, commissions and facility expenses. SG&A was 22.2% of sales versus 21.5%.
- Mohawk Rubber Sales of New England was acquired in May 2022 for approximately $27.6 million net of cash acquired. It contributed $39.8 million of incremental Distribution sales. Trilogy, acquired in 2021, contributed $24.0 million of incremental Material Handling sales.
- Operating cash flow increased, while net cash used in investing activities was $50.4 million, including the Mohawk acquisition and capital spending. Dividends paid were $19.8 million; the quarterly dividend remained $0.135 per share.
Outlook, commentary, risks and unusual items
Management said it believed the company had sufficient liquidity and borrowing capacity to meet working-capital needs, capital expenditures, dividends, debt service and selective acquisition plans. The strategy remains focused on organic growth, operational excellence, bolt-on acquisitions and developing a high-performance culture. The company was transitioning from the first to the second three-year horizon of its strategic plan and exploring larger acquisitions. No specific financial guidance was provided.
- Management cited inflation, interest rates, volatile commodity costs, supply-chain disruption and labor availability, including broader effects associated with the Russia-Ukraine conflict and the COVID-19 pandemic. Risks include inability to pass on cost increases, production interruptions, competition, economic cyclicality and acquisition integration.
- Environmental liabilities are significant and uncertain. At year-end, reserves included $11.9 million for the New Idria Mine and $4.5 million for New Almaden. The company recorded a $6.0 million expected insurance recovery related to New Idria; it has not accrued for New Idria remediation costs because they could not be estimated. A $1.9 million New Idria past-cost settlement was expected to be paid in early 2023.
- For New Almaden, the county’s project bid was approximately $9.0 million, and Myers recorded a $3.0 million 2022 expense. The company disputes responsibility for sharing the full cost increase; further reserve changes are possible.
- A patent-infringement case involving Scepter had a trial scheduled for March 2023; no loss was accrued because an unfavorable outcome was not considered probable and possible losses were not reasonably estimable. A separate fuel-container lawsuit filed in February 2023 had not been served as of the filing date.
- The Ameri-Kart facility consolidation had approximately $3.4 million of remaining expected costs, including costs extending through 2026. A $0.6 million impairment was recorded for a Distribution joint-venture investment.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management’s control assessment excluded Mohawk, which represented about 6% of year-end assets and 4% of 2022 sales.
Important facts for investors to verify
- Whether pricing and margin gains can be sustained if raw-material, labor and other costs remain volatile, particularly given lower volume/mix.
- Actual cash generation, acquisition performance and integration costs, including results from Mohawk and Trilogy.
- Environmental reserve adequacy, insurance recoveries and potential exposure beyond recorded New Idria and New Almaden amounts.
- Debt and interest-rate exposure: revolving borrowings carry floating rates, and management estimated a 1% rate increase would add about $0.6 million of annual interest expense at year-end debt levels.
- Developments in the Scepter litigation and the Ameri-Kart consolidation, as well as the status of internal-control assessment for Mohawk.