Myers Industries, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing is not a standalone fourth-quarter report. Myers designs and manufactures reusable plastic, metal and rubber products and distributes tire-service tools and supplies through its Material Handling and Distribution segments.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $813.1 million | $899.5 million |
| Gross profit / gross margin | $259.1 million / 31.9% | $283.4 million / 31.5% |
| Operating income | $72.4 million | $83.9 million |
| Net income | $48.9 million | $60.3 million |
| Diluted EPS | $1.32 | $1.64 |
| Operating cash flow | $86.2 million | $72.6 million |
| Capital expenditures | $22.9 million | $24.3 million |
| Net interest expense / weighted-average borrowing rate | $6.3 million / 6.86% | $5.7 million / 4.87% |
| Effective tax rate | 26.0% | 22.9% |
At year-end, cash was $30.3 million, total debt had a face value of $67.2 million including $9.2 million of finance lease liabilities, and $224.3 million was available under the $250 million revolving facility. The company reported compliance with debt covenants; actual interest coverage was 16.17x and leverage was 0.70x. The annual dividend remained $0.54 per share.
Changes versus FY2022
- Net sales declined 9.6%, primarily from lower volume and mix ($99.9 million), following unusually strong demand for certain outdoor-oriented products in the prior year. Lower pricing and unfavorable currency translation also reduced sales.
- Material Handling sales fell 14.3% to $555.3 million; segment operating income was $100.1 million versus $104.1 million. Distribution sales rose 2.3% to $257.9 million, but segment operating income fell to $11.0 million from $15.9 million. Distribution benefited from pricing and Mohawk acquisition sales, offset by lower volume.
- Gross margin improved to 31.9% from 31.5%, despite lower gross profit, reflecting lower material costs and other factors; increased labor and productivity costs were a partial offset.
- Net income declined 18.9%. SG&A fell 6.3%, but was higher as a percentage of sales (23.0% versus 22.2%). Interest expense increased as borrowing rates rose, despite lower average borrowings.
- Operating cash flow increased, primarily due to lower working capital use. Cash dividends paid were $20.2 million.
Outlook, transactions and notable items
- The filing provides no quantified FY2024 revenue or earnings guidance. Management said the company was positioned to manage macroeconomic uncertainty, citing liquidity, borrowing capacity, product diversity and customer breadth.
- On February 8, 2024, after year-end, Myers acquired Signature Systems for $350 million plus customary adjustments. Signature had approximately $110 million in 2023 revenue and is assigned to Material Handling. The company financed the purchase through a new five-year $400 million term loan; the existing $250 million revolver remained in place. The loan amendment increased leverage flexibility temporarily, raised applicable interest margins, and expanded collateral to an all-asset lien. The company also repaid the remaining $12 million of senior notes.
- Backlog was approximately $75 million at December 31, 2023, down from $102 million a year earlier. The company expects most backlog to ship within three months but cautions that backlog is not a reliable indicator of future sales.
- Environmental matters are significant estimates and contingencies. The New Idria Mine reserve was $13.2 million, with a related probable insurance receivable of $7.2 million; remediation costs were not accrued because they could not be reasonably estimated. The New Almaden reserve was $4.4 million. Environmental matters generated a net $3.2 million expense in 2023.
- A $10 million insurer settlement related to No Spill litigation reduced 2023 legal costs; the underlying patent and other claims were concluded in the company’s favor. A separate fuel-container personal-injury lawsuit remained pending, with outcome and potential damages not meaningfully assessable. A patent complaint filed in 2023 was dismissed without prejudice in January 2024.
- Key risks include raw-material cost and availability, demand and competitive conditions, labor constraints, manufacturing interruptions, acquisition integration and debt service, floating interest rates, cybersecurity, and environmental and product-liability claims. No material cybersecurity incident was reported.
Most important facts for investors to verify
- Signature Systems’ post-acquisition performance, integration costs, realized synergies and contribution to Material Handling growth.
- Pro forma debt, interest expense, liquidity and covenant headroom after the acquisition and term-loan financing.
- Whether volume and mix stabilize after the prior-year demand normalization, and whether pricing and cost actions sustain margins.
- Changes in New Idria and New Almaden remediation estimates, insurance recoveries and potential cash requirements.
- Future cash generation relative to capital spending, dividends and scheduled term-loan amortization.
Ernst & Young issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. The audit identified the New Idria environmental liability as a critical audit matter.