|
||||||||||||||||||||||||||
| SEC Info℠ | | | Home | | | Search | | | My Interests | | | Help | | | Sign In | | | Please Sign In | |||||||
|
||||||||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/01/23 Myers Industries Inc. 10-Q 9/30/23 86:11M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 2.52M
2: EX-10.1 Material Contract HTML 48K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 27K
11: R1 Document and Entity Information HTML 76K
12: R2 Condensed Consolidated Statements of Operations HTML 85K
13: R3 Condensed Consolidated Statements of Comprehensive HTML 50K
Income (Loss)
14: R4 Condensed Consolidated Statements of Financial HTML 141K
Position (Unaudited)
15: R5 Condensed Consolidated Statements of Financial HTML 44K
Position (Parenthetical) (Unaudited)
16: R6 Condensed Consolidated Statements of Shareholders' HTML 65K
Equity (Unaudited)
17: R7 Condensed Consolidated Statements of Shareholders' HTML 26K
Equity (Parenthetical) (Unaudited)
18: R8 Condensed Consolidated Statements of Cash Flows HTML 99K
(Unaudited)
19: R9 Pay vs Performance Disclosure HTML 36K
20: R10 Insider Trading Arrangements HTML 30K
21: R11 Summary of Significant Accounting Policies HTML 154K
22: R12 Revenue Recognition HTML 237K
23: R13 Acquisitions HTML 113K
24: R14 Restructuring HTML 39K
25: R15 Inventories HTML 44K
26: R16 Other Liabilities HTML 75K
27: R17 Goodwill and Intangible Assets HTML 47K
28: R18 Net Income per Common Share HTML 56K
29: R19 Stock Compensation HTML 33K
30: R20 Contingencies HTML 124K
31: R21 Long-Term Debt and Loan Agreements HTML 83K
32: R22 Income Taxes HTML 33K
33: R23 Leases HTML 230K
34: R24 Segments HTML 122K
35: R25 Summary of Significant Accounting Policies HTML 147K
(Policies)
36: R26 Summary of Significant Accounting Policies HTML 147K
(Tables)
37: R27 Revenue Recognition (Tables) HTML 227K
38: R28 Acquisitions (Tables) HTML 110K
39: R29 Inventories (Tables) HTML 43K
40: R30 Other Liabilities (Tables) HTML 76K
41: R31 Goodwill and Intangible Assets (Tables) HTML 48K
42: R32 Net Income per Common Share (Tables) HTML 53K
43: R33 Contingencies (Tables) HTML 97K
44: R34 Long-Term Debt and Loan Agreements (Tables) HTML 61K
45: R35 Leases (Tables) HTML 229K
46: R36 Segments (Tables) HTML 113K
47: R37 Summary of Significant Accounting Policies - HTML 29K
Additional Information (Details)
48: R38 Summary of Significant Accounting Policies - The HTML 49K
Balances in the Company's Accumulated Other
Comprehensive Income (Loss) (Details)
49: R39 Summary of Significant Accounting Policies - HTML 32K
Summary of Changes in Allowance for Credit Losses
(Details)
50: R40 Revenue Recognition - Schedule of Revenue by Major HTML 70K
Market (Details)
51: R41 Revenue Recognition - Schedule of Balances HTML 41K
included in Condensed Consolidated Statements of
Financial Position (Unaudited) Related to Revenue
Recognition (Details)
52: R42 Revenue Recognition - Additional Information HTML 36K
(Details)
53: R43 Acquisitions - Additional Information (Details) HTML 32K
54: R44 Acquisitions - Summary of Allocation of Purchase HTML 85K
Price Based on Estimated Fair Value of Assets
Acquired and Liabilities Assumed - Mohawk
(Details)
55: R45 Acquisitions - Summary of Intangible Assets - HTML 37K
Mohawk (Details)
56: R46 Restructuring - Additional Information (Details) HTML 63K
57: R47 Inventories - Additional Information (Details) HTML 28K
58: R48 Inventories - Summary of Determination Cost of HTML 31K
Inventories (Details)
59: R49 Other Liabilities - Schedule of Other Current HTML 40K
Liabilities (Details)
60: R50 Other Liabilities - Schedule of Other Liabilities HTML 37K
(Long-term) (Details)
61: R51 Goodwill and Intangible Assets - Change in HTML 35K
Goodwill (Details)
62: R52 Goodwill and Intangible Assets - Additional HTML 28K
Information (Details)
63: R53 Net Income per Common Share (Details) HTML 33K
64: R54 Net Income per Common Share - Additional HTML 27K
Information (Details)
65: R55 Stock Compensation - Additional Information HTML 47K
(Details)
66: R56 Contingencies - Additional Information (Details) HTML 84K
67: R57 Contingencies - Schedule of Contingencies Reserve HTML 51K
Balance (Details)
68: R58 Contingencies - Schedule of Contingencies Reserve HTML 56K
Balance (Parenthetical) (Details)
69: R59 Long-Term Debt and Loan Agreements - Schedule of HTML 52K
Long Term Debt (Details)
70: R60 Long-Term Debt and Loan Agreements - Schedule of HTML 42K
Long Term Debt (Parenthetical) (Details)
71: R61 Long-Term Debt and Loan Agreements - Additional HTML 86K
Information (Details)
72: R62 Income Taxes - Additional Information (Details) HTML 35K
73: R63 Leases - Additional Information (Details) HTML 34K
74: R64 Leases - Summary of Amounts Included in the HTML 48K
Condensed Consolidated Statement of Financial
Position (Details)
75: R65 Leases - Summary of Components of Lease Expense HTML 42K
(Details)
76: R66 Leases - Summary of Supplemental Cash Flow HTML 38K
Information Related to Leases (Details)
77: R67 Leases - Summary of Lease Term and Discount Rate HTML 33K
(Details)
78: R68 Leases - Maturity of Lease Liabilities (Details) HTML 81K
79: R69 Segments - Additional Information (Details) HTML 35K
80: R70 Segments - Schedule of reporting information by HTML 58K
segment (Details)
81: R71 Segments - Schedule of reporting information by HTML 38K
segment (Parenthetical) (Details)
84: XML IDEA XML File -- Filing Summary XML 158K
82: XML XBRL Instance -- mye-20230930_htm XML 3.27M
83: EXCEL IDEA Workbook of Financial Report Info XLSX 144K
8: EX-101.CAL XBRL Calculations -- mye-20230930_cal XML 203K
9: EX-101.DEF XBRL Definitions -- mye-20230930_def XML 585K
10: EX-101.LAB XBRL Labels -- mye-20230930_lab XML 1.25M
7: EX-101.PRE XBRL Presentations -- mye-20230930_pre XML 967K
6: EX-101.SCH XBRL Schema -- mye-20230930 XSD 183K
85: JSON XBRL Instance as JSON Data -- MetaLinks 550± 832K
86: ZIP XBRL Zipped Folder -- 0000950170-23-057417-xbrl Zip 319K
| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form i 10-Q
i ☑ |
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended i September 30, i 2023 /
OR
i ☐ |
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number i 001-08524
i Myers Industries, Inc.
(Exact name of registrant as specified in its charter)
i Ohio |
i 34-0778636 |
(State or other jurisdiction of |
(IRS Employer Identification |
incorporation or organization) |
Number) |
|
|
i 1293 South Main Street |
|
i Akron, i Ohio |
i 44301 |
(Address of principal executive offices) |
(Zip code) |
( i 330) i 253-5592
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
|
Trading Symbol |
|
Name of Exchange on Which Registered |
i Common Stock, without par value |
|
i MYE |
|
i New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
i Accelerated filer |
☑ |
Non-Accelerated filer |
☐ |
Smaller reporting company |
i ☐ |
|
|
Emerging growth company |
i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☑ .
The number of shares outstanding of the issuer’s common stock, without par value, as of October 27, 2023 was i 36,838,466 shares.
Part I — Financial Information
Item 1. Financial Statements
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Net sales |
|
$ |
i 197,798 |
|
|
$ |
i 228,065 |
|
|
$ |
i 621,990 |
|
|
$ |
i 686,707 |
|
Cost of sales |
|
|
i 135,419 |
|
|
|
i 156,417 |
|
|
|
i 420,136 |
|
|
|
i 468,415 |
|
Gross profit |
|
|
i 62,379 |
|
|
|
i 71,648 |
|
|
|
i 201,854 |
|
|
|
i 218,292 |
|
Selling, general and administrative expenses |
|
|
i 43,698 |
|
|
|
i 51,756 |
|
|
|
i 148,130 |
|
|
|
i 152,066 |
|
(Gain) loss on disposal of fixed assets |
|
|
( i 22 |
) |
|
|
( i 5 |
) |
|
|
( i 78 |
) |
|
|
( i 693 |
) |
Operating income |
|
|
i 18,703 |
|
|
|
i 19,897 |
|
|
|
i 53,802 |
|
|
|
i 66,919 |
|
Interest expense, net |
|
|
i 1,539 |
|
|
|
i 1,719 |
|
|
|
i 4,975 |
|
|
|
i 4,077 |
|
Income before income taxes |
|
|
i 17,164 |
|
|
|
i 18,178 |
|
|
|
i 48,827 |
|
|
|
i 62,842 |
|
Income tax expense |
|
|
i 4,417 |
|
|
|
i 4,507 |
|
|
|
i 12,499 |
|
|
|
i 16,003 |
|
Net income |
|
$ |
i 12,747 |
|
|
$ |
i 13,671 |
|
|
$ |
i 36,328 |
|
|
$ |
i 46,839 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 0.35 |
|
|
$ |
i 0.37 |
|
|
$ |
i 0.99 |
|
|
$ |
i 1.29 |
|
Diluted |
|
$ |
i 0.34 |
|
|
$ |
i 0.37 |
|
|
$ |
i 0.98 |
|
|
$ |
i 1.28 |
|
See notes to unaudited condensed consolidated financial statements.
1
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in thousands)
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Net income |
|
$ |
i 12,747 |
|
|
$ |
i 13,671 |
|
|
$ |
i 36,328 |
|
|
$ |
i 46,839 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustment |
|
|
( i 948 |
) |
|
|
( i 2,376 |
) |
|
|
( i 141 |
) |
|
|
( i 2,985 |
) |
Total other comprehensive income |
|
|
( i 948 |
) |
|
|
( i 2,376 |
) |
|
|
( i 141 |
) |
|
|
( i 2,985 |
) |
Comprehensive income |
|
$ |
i 11,799 |
|
|
$ |
i 11,295 |
|
|
$ |
i 36,187 |
|
|
$ |
i 43,854 |
|
See notes to unaudited condensed consolidated financial statements.
2
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Position (Unaudited)
(Dollars in thousands)
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
Assets |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash |
|
$ |
i 24,768 |
|
|
$ |
i 23,139 |
|
Accounts receivable, less allowances of $ i 3,896 and $ i 3,259, respectively |
|
|
i 117,362 |
|
|
|
i 133,716 |
|
Inventories, net |
|
|
i 96,230 |
|
|
|
i 93,351 |
|
Prepaid expenses and other current assets |
|
|
i 9,051 |
|
|
|
i 7,001 |
|
Total Current Assets |
|
|
i 247,411 |
|
|
|
i 257,207 |
|
Property, plant, and equipment, net |
|
|
i 106,936 |
|
|
|
i 101,566 |
|
Right of use asset - operating leases |
|
|
i 27,384 |
|
|
|
i 28,908 |
|
Goodwill |
|
|
i 95,129 |
|
|
|
i 95,157 |
|
Intangible assets, net |
|
|
i 46,785 |
|
|
|
i 51,752 |
|
Deferred income taxes |
|
|
i 129 |
|
|
|
i 129 |
|
Other |
|
|
i 7,347 |
|
|
|
i 7,915 |
|
Total Assets |
|
$ |
i 531,121 |
|
|
$ |
i 542,634 |
|
|
|
|
|
|
|
|
||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 80,760 |
|
|
$ |
i 73,536 |
|
Accrued employee compensation |
|
|
i 18,008 |
|
|
|
i 24,664 |
|
Income taxes payable |
|
|
i 324 |
|
|
|
i 2,054 |
|
Accrued taxes payable, other than income taxes |
|
|
i 3,016 |
|
|
|
i 3,169 |
|
Accrued interest |
|
|
i 454 |
|
|
|
i 1,264 |
|
Other current liabilities |
|
|
i 29,138 |
|
|
|
i 26,380 |
|
Operating lease liability - short-term |
|
|
i 5,604 |
|
|
|
i 6,177 |
|
Finance lease liability - short-term |
|
|
i 581 |
|
|
|
i 518 |
|
Long-term debt - current portion |
|
|
i 25,994 |
|
|
|
i — |
|
Total Current Liabilities |
|
|
i 163,879 |
|
|
|
i 137,762 |
|
Long-term debt |
|
|
i 33,987 |
|
|
|
i 93,962 |
|
Operating lease liability - long-term |
|
|
i 22,023 |
|
|
|
i 22,786 |
|
Finance lease liability - long-term |
|
|
i 8,766 |
|
|
|
i 8,919 |
|
Other liabilities |
|
|
i 10,284 |
|
|
|
i 15,270 |
|
Deferred income taxes |
|
|
i 9,961 |
|
|
|
i 7,508 |
|
Total Liabilities |
|
|
i 248,900 |
|
|
|
i 286,207 |
|
|
|
|
|
|
|
|
||
Shareholders’ Equity |
|
|
|
|
|
|
||
Serial Preferred Shares (authorized i i 1,000,000 / shares; i i i i none / / / issued and outstanding) |
|
|
i — |
|
|
|
i — |
|
Common Shares, without par value (authorized i i 60,000,000 / shares;
|
|
|
i 22,590 |
|
|
|
i 22,332 |
|
Additional paid-in capital |
|
|
i 320,578 |
|
|
|
i 315,865 |
|
Accumulated other comprehensive loss |
|
|
( i 17,934 |
) |
|
|
( i 17,793 |
) |
Retained deficit |
|
|
( i 43,013 |
) |
|
|
( i 63,977 |
) |
Total Shareholders’ Equity |
|
|
i 282,221 |
|
|
|
i 256,427 |
|
Total Liabilities and Shareholders’ Equity |
|
$ |
i 531,121 |
|
|
$ |
i 542,634 |
|
See notes to unaudited condensed consolidated financial statements.
3
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
|
|
Quarter Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Common Shares |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Total |
|
|||||
Balance at July 1, 2023 |
|
$ |
i 22,572 |
|
|
$ |
i 319,553 |
|
|
$ |
( i 16,986 |
) |
|
$ |
( i 50,717 |
) |
|
$ |
i 274,422 |
|
Net income |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 12,747 |
|
|
|
i 12,747 |
|
Foreign currency translation |
|
|
i — |
|
|
|
i — |
|
|
|
( i 948 |
) |
|
|
i — |
|
|
|
( i 948 |
) |
Shares issued under incentive plans, |
|
|
i 18 |
|
|
|
i 339 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 357 |
|
Stock compensation expense |
|
|
i — |
|
|
|
i 686 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 686 |
|
Declared dividends - $ i 0.135 per share |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
( i 5,043 |
) |
|
|
( i 5,043 |
) |
Balance at September 30, 2023 |
|
$ |
i 22,590 |
|
|
$ |
i 320,578 |
|
|
$ |
( i 17,934 |
) |
|
$ |
( i 43,013 |
) |
|
$ |
i 282,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Quarter Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Common Shares |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Total |
|
|||||
Balance at July 1, 2022 |
|
$ |
i 22,304 |
|
|
$ |
i 311,939 |
|
|
$ |
( i 16,010 |
) |
|
$ |
( i 80,975 |
) |
|
$ |
i 237,258 |
|
Net income |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 13,671 |
|
|
|
i 13,671 |
|
Foreign currency translation |
|
|
i — |
|
|
|
i — |
|
|
|
( i 2,376 |
) |
|
|
i — |
|
|
|
( i 2,376 |
) |
Shares issued under incentive plans, |
|
|
i 17 |
|
|
|
i 101 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 118 |
|
Stock compensation expense |
|
|
i — |
|
|
|
i 1,308 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 1,308 |
|
Declared dividends - $ i 0.135 per share |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
( i 5,002 |
) |
|
|
( i 5,002 |
) |
Balance at September 30, 2022 |
|
$ |
i 22,321 |
|
|
$ |
i 313,348 |
|
|
$ |
( i 18,386 |
) |
|
$ |
( i 72,306 |
) |
|
$ |
i 244,977 |
|
See notes to unaudited condensed consolidated financial statements.
4
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(Dollars in thousands, except per share data)
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Common Shares |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Total |
|
|||||
Balance at January 1, 2023 |
|
$ |
i 22,332 |
|
|
$ |
i 315,865 |
|
|
$ |
( i 17,793 |
) |
|
$ |
( i 63,977 |
) |
|
$ |
i 256,427 |
|
Net income |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 36,328 |
|
|
|
i 36,328 |
|
Foreign currency translation |
|
|
i — |
|
|
|
i — |
|
|
|
( i 141 |
) |
|
|
i — |
|
|
|
( i 141 |
) |
Shares issued under incentive plans, |
|
|
i 258 |
|
|
|
( i 365 |
) |
|
|
i — |
|
|
|
i — |
|
|
|
( i 107 |
) |
Stock compensation expense |
|
|
i — |
|
|
|
i 5,078 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 5,078 |
|
Declared dividends - $ i 0.405 per share |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
( i 15,364 |
) |
|
|
( i 15,364 |
) |
Balance at September 30, 2023 |
|
$ |
i 22,590 |
|
|
$ |
i 320,578 |
|
|
$ |
( i 17,934 |
) |
|
$ |
( i 43,013 |
) |
|
$ |
i 282,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Common Shares |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Total |
|
|||||
Balance at January 1, 2022 |
|
$ |
i 22,172 |
|
|
$ |
i 306,720 |
|
|
$ |
( i 15,401 |
) |
|
$ |
( i 104,166 |
) |
|
$ |
i 209,325 |
|
Net income |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 46,839 |
|
|
|
i 46,839 |
|
Foreign currency translation |
|
|
i — |
|
|
|
i — |
|
|
|
( i 2,985 |
) |
|
|
i — |
|
|
|
( i 2,985 |
) |
Shares issued under incentive plans, |
|
|
i 149 |
|
|
|
i 1,460 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 1,609 |
|
Stock compensation expense |
|
|
i — |
|
|
|
i 5,168 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 5,168 |
|
Declared dividends - $ i 0.405 per share |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
( i 14,979 |
) |
|
|
( i 14,979 |
) |
Balance at September 30, 2022 |
|
$ |
i 22,321 |
|
|
$ |
i 313,348 |
|
|
$ |
( i 18,386 |
) |
|
$ |
( i 72,306 |
) |
|
$ |
i 244,977 |
|
See notes to unaudited condensed consolidated financial statements.
5
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
Cash Flows From Operating Activities |
|
|
|
|
|
|
||
Net income |
|
$ |
i 36,328 |
|
|
$ |
i 46,839 |
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
i 16,904 |
|
|
|
i 15,600 |
|
Amortization of deferred financing costs |
|
|
i 234 |
|
|
|
i 363 |
|
Non-cash stock-based compensation expense |
|
|
i 5,078 |
|
|
|
i 5,168 |
|
(Gain) loss on disposal of fixed assets |
|
|
( i 78 |
) |
|
|
( i 693 |
) |
Other |
|
|
i 2,473 |
|
|
|
i 292 |
|
Cash flows provided by (used for) working capital |
|
|
|
|
|
|
||
Accounts receivable |
|
|
i 13,764 |
|
|
|
( i 18,751 |
) |
Inventories |
|
|
( i 2,905 |
) |
|
|
( i 7,016 |
) |
Prepaid expenses and other current assets |
|
|
( i 2,053 |
) |
|
|
( i 4,912 |
) |
Accounts payable and accrued expenses |
|
|
i 1,027 |
|
|
|
i 13,869 |
|
Net cash provided by (used for) operating activities |
|
|
i 70,772 |
|
|
|
i 50,759 |
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( i 19,292 |
) |
|
|
( i 17,615 |
) |
Acquisition of business, net of cash acquired |
|
|
( i 160 |
) |
|
|
( i 24,253 |
) |
Proceeds from sale of property, plant and equipment |
|
|
i 142 |
|
|
|
i 1,525 |
|
Net cash provided by (used for) investing activities |
|
|
( i 19,310 |
) |
|
|
( i 40,343 |
) |
Cash Flows From Financing Activities |
|
|
|
|
|
|
||
Net borrowings (repayments) from revolving credit facility |
|
|
( i 34,000 |
) |
|
|
i 7,000 |
|
Payments on finance lease |
|
|
( i 403 |
) |
|
|
( i 374 |
) |
Cash dividends paid |
|
|
( i 15,266 |
) |
|
|
( i 14,872 |
) |
Proceeds from issuance of common stock |
|
|
i 1,948 |
|
|
|
i 2,059 |
|
Shares withheld for employee taxes on equity awards |
|
|
( i 2,055 |
) |
|
|
( i 450 |
) |
Deferred financing fees |
|
|
i — |
|
|
|
( i 718 |
) |
Net cash provided by (used for) financing activities |
|
|
( i 49,776 |
) |
|
|
( i 7,355 |
) |
Foreign exchange rate effect on cash |
|
|
( i 57 |
) |
|
|
( i 292 |
) |
Net increase (decrease) in cash |
|
|
i 1,629 |
|
|
|
i 2,769 |
|
Cash at January 1 |
|
|
i 23,139 |
|
|
|
i 17,655 |
|
Cash at September 30 |
|
$ |
i 24,768 |
|
|
$ |
i 20,424 |
|
See notes to unaudited condensed consolidated financial statements.
6
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022.
In the opinion of the Company, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2023, and the results of operations and cash flows for the periods presented. The results of operations for the quarter and nine months ended September 30, 2023 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2023.
Fair Value Measurement
The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.
Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.
The Company has financial instruments, including cash, accounts receivable, accounts payable and accrued expenses. The fair value of these financial instruments approximates carrying value due to the nature and relative short maturity of these assets and liabilities.
The fair value of debt under the Company’s Loan Agreement, as defined in Note 11, approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of any revolving borrowings under this agreement. The fair value of the Company’s fixed rate senior unsecured notes was estimated using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered Level 2 inputs. At September 30, 2023 and December 31, 2022, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated to be $ i 37.5 million and $ i 37.4 million, respectively.
The purchase price allocations associated with the May 31, 2022 acquisition of Mohawk Rubber Sales of New England Inc. ("Mohawk"), as described in Note 3, required fair value measurements using unobservable inputs which are considered Level 3 inputs. The fair value of the acquired intangible assets was determined using an income approach.
/Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) are as follows:
|
|
Foreign |
|
|
Defined Benefit |
|
|
Total |
|
|||
Balance at July 1, 2023 |
|
$ |
( i 15,603 |
) |
|
$ |
( i 1,383 |
) |
|
$ |
( i 16,986 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( i 948 |
) |
|
|
i — |
|
|
|
( i 948 |
) |
Net current-period other comprehensive income (loss) |
|
|
( i 948 |
) |
|
|
i — |
|
|
|
( i 948 |
) |
Balance at September 30, 2023 |
|
$ |
( i 16,551 |
) |
|
$ |
( i 1,383 |
) |
|
$ |
( i 17,934 |
) |
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
|
|
Foreign |
|
|
Defined Benefit |
|
|
Total |
|
|||
Balance at July 1, 2022 |
|
$ |
( i 14,544 |
) |
|
$ |
( i 1,466 |
) |
|
$ |
( i 16,010 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( i 2,376 |
) |
|
|
i — |
|
|
|
( i 2,376 |
) |
Net current-period other comprehensive income (loss) |
|
|
( i 2,376 |
) |
|
|
i — |
|
|
|
( i 2,376 |
) |
Balance at September 30, 2022 |
|
$ |
( i 16,920 |
) |
|
$ |
( i 1,466 |
) |
|
$ |
( i 18,386 |
) |
|
|
Foreign |
|
|
Defined Benefit |
|
|
Total |
|
|||
Balance at January 1, 2023 |
|
$ |
( i 16,410 |
) |
|
$ |
( i 1,383 |
) |
|
$ |
( i 17,793 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( i 141 |
) |
|
|
i — |
|
|
|
( i 141 |
) |
Net current-period other comprehensive income (loss) |
|
|
( i 141 |
) |
|
|
i — |
|
|
|
( i 141 |
) |
Balance at September 30, 2023 |
|
$ |
( i 16,551 |
) |
|
$ |
( i 1,383 |
) |
|
$ |
( i 17,934 |
) |
|
|
Foreign |
|
|
Defined Benefit |
|
|
Total |
|
|||
Balance at January 1, 2022 |
|
$ |
( i 13,935 |
) |
|
$ |
( i 1,466 |
) |
|
$ |
( i 15,401 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( i 2,985 |
) |
|
|
i — |
|
|
|
( i 2,985 |
) |
Net current-period other comprehensive income (loss) |
|
|
( i 2,985 |
) |
|
|
i — |
|
|
|
( i 2,985 |
) |
Balance at September 30, 2022 |
|
$ |
( i 16,920 |
) |
|
$ |
( i 1,466 |
) |
|
$ |
( i 18,386 |
) |
Allowance for Credit Losses
Management has established certain requirements that customers must meet before credit is extended. The financial condition of customers is continually monitored and collateral is usually not required. The Company evaluates the collectability of accounts receivable based on a combination of factors. The Company reviews historical trends for credit loss as well as current economic conditions in determining an estimate for its allowance for credit losses. Additionally, in circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific allowance for credit losses is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably expects will be collected.
The changes in the allowance for credit losses for the nine months ended September 30, 2023 and 2022 were as follows:
|
|
2023 |
|
|
2022 |
|
||
Balance at January 1 |
|
$ |
i 2,273 |
|
|
$ |
i 2,173 |
|
Provision for expected credit loss, net of recoveries |
|
|
i 1,224 |
|
|
|
i 218 |
|
Write-offs and other |
|
|
( i 739 |
) |
|
|
( i 469 |
) |
Balance at September 30 |
|
$ |
i 2,758 |
|
|
$ |
i 1,922 |
|
2. Revenue Recognition
The Company’s revenue by major market is as follows:
|
|
For the Quarter Ended September 30, 2023 |
|
|||||||||||||
|
|
Material |
|
|
Distribution |
|
|
Inter-company |
|
|
Consolidated |
|
||||
Consumer |
|
$ |
i 21,740 |
|
|
$ |
i — |
|
|
$ |
i — |
|
|
$ |
i 21,740 |
|
Vehicle |
|
|
i 29,770 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 29,770 |
|
Food and beverage |
|
|
i 26,770 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 26,770 |
|
Industrial |
|
|
i 54,204 |
|
|
|
i — |
|
|
|
( i 21 |
) |
|
|
i 54,183 |
|
Auto aftermarket |
|
|
— |
|
|
|
i 65,335 |
|
|
|
i — |
|
|
|
i 65,335 |
|
Total net sales |
|
$ |
i 132,484 |
|
|
$ |
i 65,335 |
|
|
$ |
( i 21 |
) |
|
$ |
i 197,798 |
|
8
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
|
|
For the Quarter Ended September 30, 2022 |
|
|||||||||||||
|
|
Material |
|
|
Distribution |
|
|
Inter-company |
|
|
Consolidated |
|
||||
Consumer |
|
$ |
i 24,476 |
|
|
$ |
i — |
|
|
$ |
i — |
|
|
$ |
i 24,476 |
|
Vehicle |
|
|
i 38,158 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 38,158 |
|
Food and beverage |
|
|
i 31,126 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 31,126 |
|
Industrial |
|
|
i 61,898 |
|
|
|
i — |
|
|
|
( i 9 |
) |
|
|
i 61,889 |
|
Auto aftermarket |
|
|
i — |
|
|
|
i 72,416 |
|
|
|
i — |
|
|
|
i 72,416 |
|
Total net sales |
|
$ |
i 155,658 |
|
|
$ |
i 72,416 |
|
|
$ |
( i 9 |
) |
|
$ |
i 228,065 |
|
|
|
For the Nine Months Ended September 30, 2023 |
|
|||||||||||||
|
|
Material |
|
|
Distribution |
|
|
Inter-company |
|
|
Consolidated |
|
||||
Consumer |
|
$ |
i 75,900 |
|
|
$ |
i — |
|
|
$ |
i — |
|
|
$ |
i 75,900 |
|
Vehicle |
|
|
i 97,983 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 97,983 |
|
Food and beverage |
|
|
i 86,915 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 86,915 |
|
Industrial |
|
|
i 167,543 |
|
|
|
i — |
|
|
|
( i 44 |
) |
|
|
i 167,499 |
|
Auto aftermarket |
|
|
i — |
|
|
|
i 193,693 |
|
|
|
i — |
|
|
|
i 193,693 |
|
Total net sales |
|
$ |
i 428,341 |
|
|
$ |
i 193,693 |
|
|
$ |
( i 44 |
) |
|
$ |
i 621,990 |
|
|
|
For the Nine Months Ended September 30, 2022 |
|
|||||||||||||
|
|
Material |
|
|
Distribution |
|
|
Inter-company |
|
|
Consolidated |
|
||||
Consumer |
|
$ |
i 90,989 |
|
|
$ |
i — |
|
|
$ |
i — |
|
|
$ |
i 90,989 |
|
Vehicle |
|
|
i 134,036 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 134,036 |
|
Food and beverage |
|
|
i 88,960 |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 88,960 |
|
Industrial |
|
|
i 191,399 |
|
|
|
i — |
|
|
|
( i 29 |
) |
|
|
i 191,370 |
|
Auto aftermarket |
|
|
i — |
|
|
|
i 181,352 |
|
|
|
i — |
|
|
|
i 181,352 |
|
Total net sales |
|
$ |
i 505,384 |
|
|
$ |
i 181,352 |
|
|
$ |
( i 29 |
) |
|
$ |
i 686,707 |
|
/
Revenue is recognized when obligations under the terms of a contract with customers are satisfied. In both the Distribution and Material Handling segments, this generally occurs with the transfer of control of the products. This transfer of control may occur at either the time of shipment from a Company facility, or at the time of delivery to a designated customer location. Obligations under contracts with customers are typically fulfilled within 90 days of receiving a purchase order from a customer, and generally no other future obligations are required to be performed. The Company generally does not enter into any long-term contracts with customers greater than one year. Based on the nature of the Company’s products and customer contracts, no deferred revenue has been recorded, with the exception of cash advances or deposits received from customers prior to transfer of control of the product. These advances are typically fulfilled within the 90-day time frame mentioned above.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products. Certain contracts with customers include variable consideration, such as rebates or discounts. The Company recognizes estimates of this variable consideration each period, primarily based on the most likely level of consideration to be paid to the customer under the specific terms of the underlying programs. While the Company’s contracts with customers do not generally include explicit rights to return product, the Company will in practice allow returns in the normal course of business and as part of the customer relationship. Expected returns allowances are recognized each period based on an analysis of historical experience, and when physical recovery of the product from returns occurs, an estimated right to return asset is also recorded based on the approximate cost of the product.
Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited) related to revenue recognition include:
9
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
|
|
September 30, |
|
|
December 31, |
|
|
Statement of Financial |
||
|
|
2023 |
|
|
2022 |
|
|
Classification |
||
Returns, discounts and other allowances |
|
$ |
( i 1,138 |
) |
|
$ |
( i 986 |
) |
|
Accounts receivable |
Right of return asset |
|
$ |
i 386 |
|
|
$ |
i 350 |
|
|
Inventories, net |
Customer deposits |
|
$ |
( i 4,013 |
) |
|
$ |
( i 5,896 |
) |
|
Other current liabilities |
Accrued rebates |
|
$ |
( i 4,093 |
) |
|
$ |
( i 4,711 |
) |
|
Other current liabilities |
Sales, value added, and other taxes collected with revenue from customers are excluded from net sales. The cost for shipments to customers is recognized when control over products has transferred to the customer and is classified as Selling, General and Administrative expenses for the Company’s manufacturing business and as Cost of sales for the Company’s distribution business. Costs for shipments to customers in Selling, General and Administrative expenses were approximately $ i 3.0 million and $ i 2.9 million for the quarters ended September 30, 2023 and 2022, respectively, and $ i 8.6 million and $ i 10.1 million for the nine months ended September 30, 2023 and 2022, respectively, and in Cost of sales were approximately $ i 2.7 million and $ i 3.1 million for the quarters ended September 30, 2023 and 2022, respectively, and $ i 9.9 million and $ i 7.0 million for the nine months ended September 30, 2023 and 2022, respectively.
Based on the short-term nature of contracts described above, contract acquisition costs are not significant. These costs, as well as other incidental items that are immaterial in the context of the contract, are recognized as expense as incurred.
/3. Acquisitions
Mohawk
On May 31, 2022, the Company acquired the assets of Mohawk, a leading auto aftermarket distributor, which is included in the Distribution Segment. The Mohawk acquisition aligns with the Company's long-term objective to optimize and grow its Distribution business. Cash consideration was $ i 27.8 million, net of $ i 1.1 million of cash acquired. Total cash consideration also includes a $ i 3.5 million working capital adjustment, of which $ i 3.3 million was settled in November 2022 and $ i 0.2 million was settled in February 2023. The Company funded the acquisition with proceeds from the Loan Agreement described in Note 11.
The acquisition of Mohawk was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. i The following table summarizes the allocation of the purchase price based on the estimated fair value of assets acquired and liabilities assumed, including measurement period adjustments.
|
Initial Allocation of Consideration |
|
Measurement Period Adjustments(1) |
|
Final Allocation |
|
|||
Assets acquired: |
|
|
|
|
|
|
|||
Accounts receivable |
$ |
i 10,137 |
|
$ |
i 458 |
|
$ |
i 10,595 |
|
Inventories |
|
i 8,209 |
|
|
( i 16 |
) |
|
i 8,193 |
|
Prepaid expenses |
|
i 104 |
|
|
i — |
|
|
i 104 |
|
Other assets - long term |
|
i 30 |
|
|
i — |
|
|
i 30 |
|
Property, plant and equipment |
|
i 1,432 |
|
|
( i 261 |
) |
|
i 1,171 |
|
Right of use asset - operating leases |
|
i 1,367 |
|
|
i — |
|
|
i 1,367 |
|
Intangible assets |
|
i 7,720 |
|
|
i 90 |
|
|
i 7,810 |
|
Goodwill |
|
i 7,485 |
|
|
( i 403 |
) |
|
i 7,082 |
|
Assets acquired |
$ |
i 36,484 |
|
$ |
( i 132 |
) |
$ |
i 36,352 |
|
|
|
|
|
|
|
|
|||
Liabilities assumed: |
|
|
|
|
|
|
|||
Accounts payable |
$ |
i 5,996 |
|
$ |
( i 191 |
) |
$ |
i 5,805 |
|
Accrued expenses |
|
i 1,414 |
|
|
( i 70 |
) |
|
i 1,344 |
|
Operating lease liability - short term |
|
i 399 |
|
|
i — |
|
|
i 399 |
|
Operating lease liability - long term |
|
i 968 |
|
|
i — |
|
|
i 968 |
|
Total liabilities assumed |
|
i 8,777 |
|
|
( i 261 |
) |
|
i 8,516 |
|
|
|
|
|
|
|
|
|||
Net acquisition cost |
$ |
i 27,707 |
|
$ |
i 129 |
|
$ |
i 27,836 |
|
(1) The Company's preliminary purchase price allocation changed due to additional information and further analysis.
10
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
The goodwill represents the future economic benefits arising from other assets acquired that could not be individually and separately recognized, and the Company expects that the goodwill recognized for the acquisition will be deductible for tax purposes.
The intangible assets included above consist of the following:
|
|
Fair Value |
|
|
Weighted Average |
|
Customer relationships |
|
$ |
i 5,500 |
|
|
i 12.0 years |
Trade name |
|
|
i 2,000 |
|
|
i 5.0 years |
Non-competition agreements |
|
|
i 310 |
|
|
i 5.0 years |
Total amortizable intangible assets |
|
$ |
i 7,810 |
|
|
|
4. Restructuring
Ameri-Kart Plan
In March 2019, the Company committed to implementing a restructuring plan involving its Ameri-Kart Corp. subsidiary (“Ameri-Kart”), a rotational molding business within the Material Handling Segment. The Company is consolidating certain manufacturing operations into a new facility in Bristol, Indiana (the “Ameri-Kart Plan”). In December 2019, as amended in March 2021, Ameri-Kart entered into a lease agreement for a newly constructed manufacturing and distribution facility in Bristol, Indiana. The building became substantially complete in March 2021 as defined in the lease agreement, and the i 15-year finance lease of the new Bristol facility commenced. In connection with the lease agreement, Ameri-Kart agreed to sell its original Bristol facility and lease it back for a period of i 5 years. During the second quarter of 2021, the sale of the original facility for net proceeds of $ i 2.8 million was completed, which resulted in a gain of $ i 1.0 million, and the lease back commenced. The new Bristol facility is in service and the original facility has been closed. Remaining costs to complete this consolidation are expected to be approximately $ i 2.5 million, including approximately $ i 0.3 million in 2023 related to remaining equipment moves and $ i 2.2 million to be incurred through 2026 related to remaining lease and maintenance costs for the idled facility.
The Company incurred $ i 0.2 million and $ i 0.7 million of restructuring charges related to the initiatives discussed above during the quarter and nine months ended September 30, 2023, respectively, and $ i 0.3 million and $ i 0.7 million of restructuring charges during the quarter and nine months ended September 30, 2022, respectively, which were recorded within both Cost of sales and Selling, General and Administrative. The Company also incurred $ i 0.3 million related to loss on disposal of fixed assets during the nine months ended September 30, 2022. Accrued and unpaid restructuring expenses were i i no / t significant at September 30, 2023 or December 31, 2022.
Other Initiatives
Severance charges from other restructuring initiatives to reduce and streamline overhead costs during the quarter and nine months ended September 30, 2023 totaled $ i 1.1 million and $ i 1.5 million, respectively which were recorded within Selling, General and Administrative. Accrued and unpaid costs for these initiatives totaled $ i 0.2 million at September 30, 2023 and remaining costs associated with these other restructuring initiatives are expected to be approximately $ i 0.1 million, related primarily to employee severance.
/5. Inventories
Inventories are valued at the lower of cost or market for last-in, first-out (“LIFO”) inventory and lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. Approximately i 35 percent of inventories are valued using the LIFO method of determining cost. All other inventories are valued using the FIFO method of determining cost. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation. i No adjustment to the LIFO reserve was recorded for the quarter ended September 30, 2023. During 2022, the Company incurred an adjustment of $ i i 1.1 / million to increase the LIFO reserve and cost of sales for the quarter and nine months ended September 30, 2022.
11
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
Inventories consisted of the following:
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
Finished and in-process products |
|
$ |
i 57,194 |
|
|
$ |
i 54,991 |
|
Raw materials and supplies |
|
|
i 39,036 |
|
|
|
i 38,360 |
|
|
|
$ |
i 96,230 |
|
|
$ |
i 93,351 |
|
6. Other Liabilities
The balance in Other Current Liabilities is comprised of the following:
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
Customer deposits and accrued rebates |
|
$ |
i 8,106 |
|
|
$ |
i 10,607 |
|
Dividends payable |
|
|
i 5,828 |
|
|
|
i 5,722 |
|
Accrued litigation, claims and professional fees |
|
|
i 656 |
|
|
|
i 596 |
|
Current portion of environmental reserves |
|
|
i 8,005 |
|
|
|
i 3,284 |
|
Other accrued expenses |
|
|
i 6,543 |
|
|
|
i 6,171 |
|
|
|
$ |
i 29,138 |
|
|
$ |
i 26,380 |
|
The balance in Other Liabilities (long-term) is comprised of the following:
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
Environmental reserves |
|
$ |
i 7,581 |
|
|
$ |
i 13,078 |
|
Supplemental executive retirement plan liability |
|
|
i 618 |
|
|
|
i 824 |
|
Pension liability |
|
|
i 253 |
|
|
|
i 184 |
|
Other long-term liabilities |
|
|
i 1,832 |
|
|
|
i 1,184 |
|
|
|
$ |
i 10,284 |
|
|
$ |
i 15,270 |
|
7. Goodwill and Intangible Assets
The change in goodwill for the nine months ended September 30, 2023 was as follows:
|
|
Distribution |
|
|
Material |
|
|
Total |
|
|||
|
$ |
i 14,730 |
|
|
$ |
i 80,427 |
|
|
$ |
i 95,157 |
|
|
Foreign currency translation |
|
|
i — |
|
|
|
( i 28 |
) |
|
|
( i 28 |
) |
|
$ |
i 14,730 |
|
|
$ |
i 80,399 |
|
|
$ |
i 95,129 |
|
|
Intangible assets other than goodwill primarily consist of trade names, customer relationships, patents, non-competition agreements and technology assets established in connection with acquisitions. These intangible assets, other than certain trade names, are amortized over their estimated useful lives. Indefinite-lived trade names had a carrying value of $ i i 9.8 / million at both September 30, 2023 and December 31, 2022. Refer to Note 3 for the intangible assets acquired through the Mohawk acquisition in May 2022.
/12
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
8. Net Income per Common Share
Net income per common share, as shown on the accompanying Condensed Consolidated Statements of Operations (Unaudited), is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Weighted average common shares outstanding basic |
|
|
i 36,811,296 |
|
|
|
i 36,472,378 |
|
|
|
i 36,712,662 |
|
|
|
i 36,383,398 |
|
Dilutive effect of stock options and restricted stock |
|
|
i 168,584 |
|
|
|
i 244,775 |
|
|
|
i 259,722 |
|
|
|
i 295,557 |
|
Weighted average common shares outstanding diluted |
|
|
i 36,979,880 |
|
|
|
i 36,717,153 |
|
|
|
i 36,972,384 |
|
|
|
i 36,678,955 |
|
Options to purchase i i 104,409 / shares of common stock that were outstanding for the quarter and nine months ended September 30, 2023 and i i 114,540 / shares of common stock that were outstanding for the quarter and nine months ended September 30, 2022 were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of common shares, and were therefore anti-dilutive.
/9. Stock Compensation
The Company’s 2021 Long-Term Incentive Plan (the “2021 Plan”) was adopted by the Board of Directors on March 4, 2021, amended by the Board of Directors on April 20, 2021, and approved by shareholders in the annual shareholder meeting on April 29, 2021. The 2021 Plan authorizes the Compensation and Management Development Committee of the Board of Directors (“Compensation Committee”) to issue up to i 2,000,000 additional various stock awards including stock options, performance stock units, restricted stock units and other forms of equity-based awards to key employees and directors.
Stock compensation expense was approximately $ i 0.7 million and $ i 1.3 million for the quarters ended September 30, 2023 and 2022, respectively, and $ i 5.1 million and $ i 5.2 million for the nine months ended September 30, 2023 and 2022, respectively. These expenses are included in Selling, General and Administrative expenses. Total unrecognized compensation cost related to non-vested stock-based compensation arrangements at September 30, 2023 was approximately $ i 8.9 million, which will be recognized over the next i three years, as such compensation is earned. Outstanding options expire, if unexercised, i ten years from the date of grant.
/10. Contingencies
The Company is a defendant in various lawsuits and a party to various other legal proceedings arising in the ordinary course of business, some of which are covered in whole or in part by insurance. When a loss arising from these matters is probable and can reasonably be estimated, the most likely amount of the estimated probable loss is recorded, or if a range of probable loss can be estimated and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary.
Based on current available information, management believes that the ultimate outcome of these matters, including those described below, will not have a material adverse effect on our financial position, cash flows or overall trends in our results of operations. However, these matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or in future periods.
New Idria Mercury Mine
In September 2015, the U.S. Environmental Protection Agency (“EPA”) informed a subsidiary of the Company, Buckhorn, Inc. (“Buckhorn”) via a notice letter and related documents (the “Notice Letter”) that it considers Buckhorn to be a potentially responsible party (“PRP”) in connection with the New Idria Mercury Mine site (“New Idria Mine”). New Idria Mining & Chemical Company (“NIMCC”), which owned and/or operated the New Idria Mine through 1976, was merged into Buckhorn Metal Products Inc. in 1981, which was subsequently acquired by Myers Industries, Inc. in 1987. As a result of the EPA Notice Letter, Buckhorn and the Company engaged in negotiations with the EPA with respect to a draft Administrative Order of Consent (“AOC”) proposed by the EPA for the Remedial Investigation/Feasibility Study (“RI/FS”) to determine the extent of remediation necessary and the screening of alternatives. Buckhorn and the EPA finalized the AOC and related Statement of Work (“SOW”) with regards to the New Idria Mine, effective as of
13
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
November 27, 2018, the date that it was executed by the EPA. The AOC requires a $ i 2 million letter of credit to be provided for the duration of the RI/FS as assurance of Buckhorn's performance obligations.
All reasonably estimable costs related to the environmental remediation are accrued. These costs are comprised primarily of estimates to perform the RI/FS, negotiation of the AOC, identification of possible other PRPs, EPA oversight fees, past cost claims made by the EPA, periodic monitoring, and responses to demands issued by the EPA under the AOC. It is possible that adjustments to the aforementioned reserves will be necessary as new information is obtained, including after finalization and EPA approval of the work plan for the RI/FS. Estimates of Buckhorn’s liability are based on current facts, laws, regulations and technology. Estimates of Buckhorn’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluation and cost estimates, the extent of remedial actions that may be required, the extent of oversight by the EPA and the number and financial condition of other PRPs that may be named, as well as the extent of their responsibility for the remediation. Beginning in late 2021 and continuing through the current period, Buckhorn and the EPA continue to actively discuss the scope of the activities in the work plan for the RI/FS, resulting in changes to the estimated costs to perform the RI/FS work plan from time to time. Cost estimates will continue to be refined as the work plans for the RI/FS and the ultimate remediation are finalized and as the activities are performed over a period expected to last several years.
In the fourth quarter of 2022, Buckhorn reached an agreement with respect to certain insurance coverage related to defense costs, which is expected to apply to a substantial portion of the estimated RI/FS costs. Recovery of accrued costs are recorded as a receivable to the extent such recovery is determined to be probable under this agreement. Estimates of cost recoveries will continue to be refined as the RI/FS work plan is finalized and the activities are performed over a period expected to last several years. Buckhorn may also have opportunity for cost recovery under other insurance policies.
Since October 2011, when the New Idria Mine was added to the Superfund National Priorities List by the EPA, Buckhorn has recognized $ i 19.3 million of cumulative charges, made cumulative payments of $ i 10.1 million and received insurance recoveries of $ i 3.4 million through September 30, 2023. For the three and nine months ended September 30, 2023 i the following activity was recorded in connection with the New Idria Mercury Mine:
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Beginning reserve balance |
|
$ |
i 12,082 |
|
|
$ |
i 9,153 |
|
|
$ |
i 11,855 |
|
|
$ |
i 8,213 |
|
Changes in estimated environmental liability |
|
|
i 300 |
|
|
|
i 1,500 |
|
|
|
i 3,800 |
|
|
|
i 2,800 |
|
Payments made(1) (4) |
|
|
( i 1,182 |
) |
|
|
( i 123 |
) |
|
|
( i 4,455 |
) |
|
|
( i 483 |
) |
Ending reserve balance(2) |
|
$ |
i 11,200 |
|
|
$ |
i 10,530 |
|
|
$ |
i 11,200 |
|
|
$ |
i 10,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning receivable balance |
|
$ |
i 6,162 |
|
|
$ |
i — |
|
|
$ |
i 6,000 |
|
|
$ |
i — |
|
Changes in estimated probable insurance recovery |
|
|
i 400 |
|
|
|
i — |
|
|
|
i 1,600 |
|
|
|
i — |
|
Insurance recovery reimbursements |
|
|
( i 394 |
) |
|
|
i — |
|
|
|
( i 1,432 |
) |
|
|
i — |
|
Ending receivable balance(3) |
|
$ |
i 6,168 |
|
|
$ |
i — |
|
|
$ |
i 6,168 |
|
|
$ |
i — |
|
(1) Payments made in 2022 were offset by insurance refunds of $ i 0.3 million and $ i 0.4 million in the three and nine months ended September 30, 2022, respectively. In the fourth quarter of 2022, Buckhorn reached an agreement with respect to certain insurance coverage related to defense costs for which recovery of accrued costs are recorded as a receivable to the extent such recovery is determined to be probable under this agreement.
(2) As of September 30, 2023, Buckhorn has a total ending reserve balance of $ i 11.2 million related to the New Idria Mine, of which $ i 7.7 million is classified in Other current liabilities and $ i 3.5 million in Other liabilities (long-term).
(3) As of September 30, 2023, Buckhorn has a total receivable balance related to the probable insurance recovery of $ i 6.2 million, of which $ i 3.2 million
is classified in Accounts receivable and $ i 3.0 million is classified in Other (long-term).
(4) Payments made for the nine months ended September 30, 2023 include a $ i 1.9 million payment related to a settlement agreement with the EPA to resolve the past costs claim, which Buckhorn paid in the first quarter of 2023.
Given the circumstances referred to above, including the fact that the final remediation strategy has not yet been determined, Buckhorn has not accrued for remediation costs in connection with this site as it is unable to estimate the range of a reasonably possible liability for remediation costs.
14
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
New Almaden Mine
A number of parties, including the Company and its subsidiary, Buckhorn (as successor to NIMCC), were alleged by trustee agencies of the United States and the State of California to be responsible for natural resource damages due to environmental contamination of areas comprising the historical New Almaden mercury mines located in the Guadalupe River Watershed region in Santa Clara County, California (“County”). In 2005, Buckhorn and the Company, without admitting liability or chain of ownership of NIMCC, resolved the trustees’ claim against them through a consent decree that required them to contribute financially to the implementation by the County of an environmentally beneficial project within the impacted area. Buckhorn and the Company negotiated an agreement with the County ("Cost Sharing Agreement"), whereby Buckhorn and the Company agreed to reimburse one-half of the County’s costs of implementing the project. A detailed estimate was received from the County in 2016, and estimated costs for implementing the project to range between $ i 3.3 million and $ i 4.4 million. In 2022, the County informed the Company that it may begin implementation of the project in 2023 and that costs were expected to be higher. In January 2023, the County informed Buckhorn that the project will commence in 2023 and that it had accepted a bid to complete the project for approximately $ i 9.0 million. The Company and Buckhorn intend to vigorously challenge, under the terms of the Cost Sharing Agreement, their responsibility to share in the entirety of the project cost increases. i i i i No / / / additional costs were incurred related to New Almaden in the quarter and nine months ended September 30, 2023 or 2022, respectively and payments of $ i i 0.1 / million were made in the quarter and nine months ended September 30, 2023. As of September 30, 2023, the Company has a total reserve of $ i 4.4 million related to the New Almaden Mine, of which $ i 0.3 million is classified in Other Current Liabilities and $ i 4.1 million in Other Liabilities (long-term).
As work on the project occurs and dispute resolution proceeds, it is possible that adjustments to the aforementioned reserves will be necessary to reflect new information. In addition, the Company may have claims against and defenses to claims by the County under the 2005 agreement that could reduce or offset its obligation for reimbursement of some of these potential additional costs. With the assistance of environmental consultants, the Company will closely monitor this matter and will continue to assess its reserves as additional information becomes available.
No Spill Matter
On December 11, 2018, No Spill Inc. ("No Spill") filed suit against Scepter Manufacturing LLC in the United States District Court for the District of Kansas asserting infringement of two patents, breach of contract, and trade dress claims in relation to plastic gasoline containers Scepter manufactures and sells in the United States. Scepter Canada, Inc. was later added in a second amended complaint. On January 6, 2022, the District Court bifurcated the patent infringement and invalidity issues from the antitrust and other issues in the case. The trial on patent infringement and invalidity was held in early March 2023, resulting in a unanimous jury verdict on March 14, 2023 in favor of the defendant Scepter entities on each of the alleged claims of infringement. On April 24, 2023, the Court issued an Order dismissing all remaining claims in the case with prejudice and entered final Judgment of the jury verdict in favor of Scepter. On April 24, 2023, the parties dismissed the remaining claims and phase two of the bifurcated trial will not proceed.
Both parties filed post-trial motions with the District Court to preserve the issues for appeal. The District Court denied No Spill's motion for judgment as a matter of law and for a new trial. No Spill did not file an appeal. The underlying case is now concluded.
The Company has maintained insurance policies, which it believes may cover a substantial portion of the defense costs incurred in this matter. To date, Scepter has incurred $ i 13.3 million of defense costs in this matter, of which $ i 0.1 million and $ i 0.6 million were incurred in the quarters ended September 30, 2023 and 2022, respectively, and $ i 3.6 million and $ i 2.5 million were incurred in the nine months ended September 30, 2023 and 2022, respectively. The Company and Scepter are in active discussions with the insurer to recover these defense costs. In the third quarter of 2023 while discussions with the insurer were in progress, the Company received a preliminary $ i 0.5 million payment from the insurer, which was recorded as a reduction to legal costs within Selling, General and Administrative expenses. The Company believes it is entitled to additional insurance proceeds and will continue to pursue recovery with the insurer.
Other Matters
On February 14, 2023, a lawsuit was filed by Nan Morgan McCartney in the Circuit Court of Escambia County, Florida against the Company, Scepter US Holding Company, Scepter Manufacturing, LLC, Scepter Canada Inc., Walmart Inc., and Wal-Mart Stores East, LP. The complaint seeks compensatory damages and court costs for harm caused to Ms. McCartney allegedly arising from use of a 5-gallon portable fuel container manufactured by a Scepter company and alleges amounts in controversy in excess of $ i 30 thousand exclusive of costs. The case has been removed to the Northern District of Florida, Pensacola Division. The Myers' defendants filed their Answer to the Complaint on April 25, 2023. On May 19, 2023 the Court filed a Final Scheduling Order. Defendants have served written discovery on Plaintiff. Plaintiff was deposed on September 6, 2023. We are scheduling depositions for other fact witnesses. No other
15
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
proceedings have occurred in this litigation matter as of the date of this filing and the Company cannot assess with any meaningful probability the outcome or the potential damages.
On October 18, 2023, Tank Holding Corp. served a Complaint against Myers Industries, Inc. (“Myers”), asserting patent infringement with regard to a single product manufactured by Elkhart Plastics LLC. Myers has conducted a preliminary assessment of the allegations and believes it has strong defenses. No other proceedings or discovery have occurred in this matter as of the date of this filing and the Company cannot assess with any meaningful probability the outcome or the potential damages.
/11. Long-Term Debt and Loan Agreements
Long-term debt consisted of the following:
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
Loan Agreement |
|
$ |
i 22,000 |
|
|
$ |
i 56,000 |
|
i 5.25% Senior Unsecured Notes due i January 15, 2024 |
|
|
i 11,000 |
|
|
|
i 11,000 |
|
i 5.30% Senior Unsecured Notes due i January 15, 2024 |
|
|
i 15,000 |
|
|
|
i 15,000 |
|
i 5.45% Senior Unsecured Notes due i January 15, 2026 |
|
|
i 12,000 |
|
|
|
i 12,000 |
|
|
|
|
i 60,000 |
|
|
|
i 94,000 |
|
Less unamortized deferred financing costs |
|
|
i 19 |
|
|
|
i 38 |
|
|
|
|
i 59,981 |
|
|
|
i 93,962 |
|
Less current portion long-term debt |
|
|
i 25,994 |
|
|
|
i — |
|
Long-term debt |
|
$ |
i 33,987 |
|
|
$ |
i 93,962 |
|
i On September 29, 2022, the Company entered into a Seventh Amended and Restated Loan Agreement (the “Seventh Amendment”), which amended the Sixth Amended and Restated Loan Agreement (the "Sixth Amendment"), dated March 12, 2021. The Seventh Amendment, among other things, extended the maturity date to i September 2027 from i March 2024. / The Seventh Amendment did not change the senior revolving credit facility's $ i 250 million borrowing limit, which includes a letter of credit subfacility and swingline subfacility, or the outstanding letters of credit. In connection with the Seventh Amendment, the Company incurred $ i 0.9 million of deferred financing fees, which are included in Other Assets (long-term). Together with unamortized fees from the Sixth Amendment remaining deferred financing fees under the Company's Loan Agreement were $ i 1.2 million and $ i 1.4 million as of September 30, 2023 and December 31, 2022, respectively, which will be amortized to Interest expense over the term of the Loan Agreement (defined below).
In March 2021, the Company entered into the Sixth Amendment, which amended the Fifth Amended and Restated Loan Agreement (collectively with the Sixth and Seventh Amendments, the “Loan Agreement”) dated March 2017. The Sixth Amendment increased the senior revolving credit facility’s borrowing limit to $ i 250 million from $ i 200 million, extended the maturity date to i March 2024 from i March 2022, and increased flexibility of the financial and other covenants and provisions. Amounts borrowed under the credit facility are secured by pledges of stock of certain of the Company’s foreign subsidiaries and guaranties of certain of its domestic subsidiaries. In connection with the Sixth Amendment, the Company incurred $ i 1.1 million of deferred financing fees, which are included in Other Assets (long-term) and being amortized to Interest expense over the term of the Loan Agreement.
As of September 30, 2023, the Company had $ i 222.3 million available under the Loan Agreement, which is available for the ongoing working capital requirements of the Company and its subsidiaries and for general corporate purposes. The Company had $ i 5.7 million of letters of credit issued related to insurance and other contracts requiring financial assurance in the ordinary course of business. i Borrowings under the Loan Agreement bear interest at the Term SOFR, RFR, EURIBOR and CDOR-based borrowing rates. Amounts borrowed under the credit facility are secured by pledges of stock of certain of the Company’s foreign subsidiaries and guaranties of certain of its domestic subsidiaries.
The Company also holds Senior Unsecured Notes (“Notes”), which range in face value from $ i 11.0 million to $ i 15.0 million, with interest rates ranging from i 5.25% to i 5.45%, payable semiannually, and maturing between January 2024 and January 2026. At September 30, 2023, $ i 38.0 million of the Notes were outstanding, of which $ i 26.0 million are classified as current.
The weighted average interest rate on borrowings under the Company’s long-term debt was i 7.09% and i 5.50% for the quarters ended September 30, 2023 and 2022, respectively, and i 6.74% and i 4.55% for the nine months ended September 30, 2023 and 2022, respectively, which includes a quarterly facility fee on the used and unused portion, as well as amortization of deferred financing costs.
16
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
As of September 30, 2023, the Company was in compliance with all of its debt covenants associated with its Loan Agreement and Notes. The most restrictive financial covenants for all of the Company’s debt are a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and amortization, as adjusted) and an interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense).
/12. Income Taxes
The Company’s effective tax rate was i 25.7% and i 25.6% for the quarter and nine months ended September 30, 2023, respectively compared to i 24.8% and i 25.5% for the quarter and nine months ended September 30, 2022. The effective income tax rate for both periods was different than the Company’s statutory rate, primarily due to non-deductible expenses and state taxes.
i The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of September 30, 2023, the Company is no longer subject to U.S. Federal examination by tax authorities for tax years before 2019. The Company is subject to state and local examinations for tax years of 2018 through 2021. In addition, the Company is subject to non-U.S. income tax examinations for tax years of 2017 through 2021.
/13. Leases
The Company determines if an arrangement is a lease at inception. The Company has leases for manufacturing facilities, distribution centers, warehouses, office space and equipment, with remaining lease terms of one to i twelve years. i Certain of these leases include options to extend the lease for up to i five years, and some include options to terminate the lease early. / Leases with an initial term of 12 months or less are not recorded on the statement of financial position; the Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Operating leases with an initial term greater than 12 months are included in Right of use asset – operating leases (“ROU assets”), Operating lease liability – short term, and Operating lease liability – long term and finance leases are included in Property, plant and equipment, Finance lease liability – short term, and Finance lease liability – long term in the Condensed Consolidated Statements of Financial Position (Unaudited).
The ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the obligation to make lease payments. ROU assets and lease liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. When leases do not provide an implicit rate, the Company’s incremental borrowing rate is used, which is then applied at the portfolio level, based on the information available at commencement date in determining the present value of lease payments. The Company has also elected not to separate lease and non-lease components. The lease terms include options to extend or terminate the lease when it is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.
Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited) related to leases include:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
Classification |
|
2023 |
|
|
2022 |
|
||
Assets: |
|
|
|
|
|
|
|
||
Operating lease assets |
Right of use asset - operating leases |
|
$ |
i 27,384 |
|
|
$ |
i 28,908 |
|
Finance lease assets |
Property, plant and equipment, net |
|
|
i 8,854 |
|
|
|
i 9,075 |
|
Total lease assets |
|
|
$ |
i 36,238 |
|
|
$ |
i 37,983 |
|
|
|
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
|
||
Current |
Operating lease liability - short-term |
|
$ |
i 5,604 |
|
|
$ |
i 6,177 |
|
Long-term |
Operating lease liability - long-term |
|
|
i 22,023 |
|
|
|
i 22,786 |
|
Total operating lease liabilities |
|
|
|
i 27,627 |
|
|
|
i 28,963 |
|
Current |
Finance lease liability - short-term |
|
|
i 581 |
|
|
|
i 518 |
|
Long-term |
Finance lease liability - long-term |
|
|
i 8,766 |
|
|
|
i 8,919 |
|
Total finance lease liabilities |
|
|
|
i 9,347 |
|
|
|
i 9,437 |
|
Total lease liabilities |
|
|
$ |
i 36,974 |
|
|
$ |
i 38,400 |
|
17
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
The components of lease expense include:
|
|
|
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
Lease Cost |
|
Classification |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease cost (1) |
|
Cost of sales |
|
$ |
i 1,493 |
|
|
$ |
i 1,440 |
|
|
$ |
i 4,664 |
|
|
$ |
i 4,172 |
|
Operating lease cost (1) |
|
Selling, general and administrative expenses |
|
|
i 856 |
|
|
|
i 803 |
|
|
|
i 2,493 |
|
|
|
i 2,081 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization expense |
|
Cost of sales |
|
|
i 190 |
|
|
|
i 172 |
|
|
|
i 535 |
|
|
|
i 517 |
|
Interest expense on lease liabilities |
|
Interest expense, net |
|
|
i 89 |
|
|
|
i 85 |
|
|
|
i 251 |
|
|
|
i 256 |
|
Total lease cost |
|
|
|
$ |
i 2,628 |
|
|
$ |
i 2,500 |
|
|
$ |
i 7,943 |
|
|
$ |
i 7,026 |
|
Supplemental cash flow information related to leases was as follows:
|
|
For the Nine Months Ended September 30, |
|
|||||
Supplemental Cash Flow Information |
|
2023 |
|
|
2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
i 5,649 |
|
|
$ |
i 5,074 |
|
Operating cash flows from finance leases |
|
$ |
i 251 |
|
|
$ |
i 256 |
|
Financing cash flows from finance leases |
|
$ |
i 403 |
|
|
$ |
i 374 |
|
Right-of-use assets obtained in exchange for new lease liabilities: |
|
|
|
|
|
|
||
Operating leases |
|
$ |
i 3,756 |
|
|
$ |
i 3,638 |
|
Finance leases |
|
$ |
i 313 |
|
|
$ |
i — |
|
Lease Term and Discount Rate |
|
|
|
|
||||
Weighted-average remaining lease term (years): |
|
|
|
|
|
|
||
Operating leases |
|
|
i 5.93 |
|
|
|
i 6.44 |
|
Finance leases |
|
|
i 12.24 |
|
|
|
i 13.17 |
|
Weighted-average discount rate: |
|
|
|
|
|
|
||
Operating leases |
|
|
i 4.4 |
% |
|
|
i 3.6 |
% |
Finance leases |
|
|
i 3.7 |
% |
|
|
i 3.5 |
% |
Maturity of Lease Liabilities - As of September 30, 2023 |
|
Operating Leases |
|
|
Finance Leases |
|
|
Total |
|
|||
2023(1) |
|
$ |
i 1,783 |
|
|
$ |
i 225 |
|
|
$ |
i 2,008 |
|
2024 |
|
|
i 6,415 |
|
|
|
i 920 |
|
|
|
i 7,335 |
|
2025 |
|
|
i 5,506 |
|
|
|
i 924 |
|
|
|
i 6,430 |
|
2026 |
|
|
i 4,838 |
|
|
|
i 924 |
|
|
|
i 5,762 |
|
2027 |
|
|
i 3,948 |
|
|
|
i 945 |
|
|
|
i 4,893 |
|
After 2027 |
|
|
i 8,749 |
|
|
|
i 7,658 |
|
|
|
i 16,407 |
|
Total lease payments |
|
|
i 31,239 |
|
|
|
i 11,596 |
|
|
|
i 42,835 |
|
Less: interest |
|
|
( i 3,612 |
) |
|
|
( i 2,249 |
) |
|
|
( i 5,861 |
) |
Present value of lease liabilities |
|
$ |
i 27,627 |
|
|
$ |
i 9,347 |
|
|
$ |
i 36,974 |
|
18
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
14. Segments
The Company manages its business under i two operating segments, Material Handling and Distribution, consistent with the manner in which the Chief Operating Decision Maker (“CODM”) evaluates performance and makes resource allocation decisions. None of the reportable segments include operating segments that have been aggregated. These segments contain individual business components that have been combined on the basis of common management, customers, products, production processes and other economic characteristics. Intersegment sales are recorded with a reasonable margin and are eliminated in consolidation.
The Material Handling Segment manufactures a broad selection of durable plastic reusable containers that are used repeatedly during the course of their service life. At the end of their service life, these highly sustainable products can be recovered, recycled, and reprocessed into new products. The Material Handling Segment’s products include pallets, small parts bins, bulk shipping containers, storage and organization products, OEM parts, custom plastic products, consumer fuel containers and tanks for water, fuel and waste handling. Products in the Material Handling Segment are primarily injection molded, rotationally molded or blow molded. This segment conducts its primary operations in the United States and Canada. Markets served include industrial manufacturing, food processing, retail/wholesale products distribution, agriculture, automotive, recreational vehicles, marine vehicles, healthcare, appliance, bakery, electronics, textiles and consumer, among others. Products are sold both directly to end-users and through distributors.
The Distribution Segment is engaged in the distribution of equipment, tools, and supplies used for tire servicing and automotive under-vehicle repair and the manufacture of tire repair and retreading products. The product line includes categories such as tire valves and accessories, tire changing and balancing equipment, lifts and alignment equipment, service equipment and tools, and tire repair/retread supplies. The Distribution Segment also manufactures and sells certain traffic markings, including reflective highway marking tape. The Distribution Segment operates domestically through its sales offices and eight regional distribution centers in the United States, and in certain foreign countries through export sales. In addition, the Distribution Segment operates directly in certain foreign markets, principally Central America, through foreign branch operations. Markets served include retail and truck tire dealers, commercial auto and truck fleets, truck stop operations, auto dealers, general service and repair centers, tire retreaders, and government agencies. The acquisition of Mohawk, described in Note 3, is included in the Distribution Segment.
Total sales from foreign business units were approximately $ i 10.2 million and $ i 13.9 million for the quarters ended September 30, 2023 and 2022, respectively, and $3 i 3.9 million and $ i 40.4 million for the nine months ended September 30, 2023 and 2022, respectively.
Summarized segment detail for the quarters and nine months ended September 30, 2023 and 2022 are presented in the following table:
|
For the Quarter Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
||||
Material Handling |
$ |
i 132,484 |
|
|
$ |
i 155,658 |
|
|
$ |
i 428,341 |
|
|
$ |
i 505,384 |
|
Distribution |
|
i 65,335 |
|
|
|
i 72,416 |
|
|
|
i 193,693 |
|
|
|
i 181,352 |
|
Inter-company sales |
|
( i 21 |
) |
|
|
( i 9 |
) |
|
|
( i 44 |
) |
|
|
( i 29 |
) |
Total net sales |
$ |
i 197,798 |
|
|
$ |
i 228,065 |
|
|
$ |
i 621,990 |
|
|
$ |
i 686,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
||||
Material Handling |
$ |
i 19,978 |
|
|
$ |
i 23,962 |
|
|
$ |
i 70,157 |
|
|
$ |
i 83,216 |
|
Distribution (1) |
|
i 4,993 |
|
|
|
i 4,899 |
|
|
|
i 10,628 |
|
|
|
i 12,469 |
|
Corporate (1) (2) (3) |
|
( i 6,268 |
) |
|
|
( i 8,964 |
) |
|
|
( i 26,983 |
) |
|
|
( i 28,766 |
) |
Total operating income |
|
i 18,703 |
|
|
|
i 19,897 |
|
|
|
i 53,802 |
|
|
|
i 66,919 |
|
Interest expense, net |
|
( i 1,539 |
) |
|
|
( i 1,719 |
) |
|
|
( i 4,975 |
) |
|
|
( i 4,077 |
) |
Income before income taxes |
$ |
i 17,164 |
|
|
$ |
i 18,178 |
|
|
$ |
i 48,827 |
|
|
$ |
i 62,842 |
|
(1) In the nine months ended September 30, 2023, the company recognized $ i 0.7 million of executive severance, of which $ i 0.4 million was recognized in the Distribution Segment related to severance and $ i 0.3 million was recognized in Corporate related to charges for the acceleration of stock compensation.
(2) The company recognized $( i 0.1) million and $ i 1.5 million of expense (income) from changes to the estimated environmental reserve, net of probable insurance recoveries for the quarters ended September 30, 2023 and 2022, respectively, and $ i 2.2 million and $ i 2.8 million for the nine months ended September 30, 2023 and 2022, respectively, as described in Note 10. Environmental charges are not included in segment results and are shown with Corporate.
(3) Corporate includes $ i 1.3 million of consulting costs to improve the Company's capabilities to screen and execute large acquisitions in the nine months ended September 30, 2023.
/19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the information incorporated by reference contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including information regarding the Company’s financial outlook, future plans, objectives, business prospects and anticipated financial performance. Forward-looking statements can be identified by words such as “will,” “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” or variations of these words, or similar expressions. These forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, these statements inherently involve a wide range of inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. The Company’s actual actions, results, and financial condition may differ materially from what is expressed or implied by the forward-looking statements.
Specific factors that could cause such a difference on our business, financial position, results of operations and/or liquidity include, without limitation, raw material availability, increases in raw material costs, or other production costs; risks associated with our strategic growth initiatives or the failure to achieve the anticipated benefits of such initiatives; unanticipated downturn in business relationships with customers or their purchases; competitive pressures on sales and pricing; changes in the markets for the Company’s business segments; changes in trends and demands in the markets in which the Company competes; operational problems at our manufacturing facilities or unexpected failures at those facilities; future economic and financial conditions in the United States and around the world; inability of the Company to meet future capital requirements; claims, litigation and regulatory actions against the Company; changes in laws and regulations affecting the Company; impacts from the novel coronavirus (“COVID-19”) pandemic; and other risks and uncertainties detailed from time to time in the Company’s filings with the SEC, including without limitation, the risk factors disclosed in Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Given these factors, as well as other variables that may affect our operating results, readers should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance, nor use historical trends to anticipate results or trends in future periods. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company expressly disclaims any obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions associated with them.
Executive Overview
The Company conducts its business activities in two reportable segments: The Material Handling Segment and the Distribution Segment.
The Company designs, manufactures, and markets a variety of plastic, metal and rubber products. The Material Handling Segment manufactures a broad selection of plastic reusable containers, pallets, small parts bins, bulk shipping containers, storage and organization products, OEM parts, custom plastic products, consumer fuel containers and tanks for water, fuel and waste handling. Products in the Material Handling Segment are primarily injection molded, rotationally molded or blow molded. The Distribution Segment is engaged in the distribution of tools, equipment and supplies used for tire, wheel and under vehicle service on passenger, heavy truck and off-road vehicles, as well as the manufacturing of tire repair and retreading products.
The Company’s results of operations for the quarter and nine months ended September 30, 2023 are discussed below. The current economic environment includes heightened risks from inflation, interest rates, banking liquidity, volatile commodity costs, supply chain disruptions and labor availability stemming from the broader economic effects of the international geopolitical climate, including the conflict between Russia and Ukraine, and the COVID-19 pandemic. Russia’s invasion of Ukraine in the first quarter of 2022 in addition to other geopolitical events has increased volatility in global commodity markets, including oil (a component of many plastic resins), energy and agricultural commodities. The Company believes it is well-positioned to manage through this uncertainty as it has a strong balance sheet with sufficient liquidity and borrowing capacity as well as a diverse product offering and customer base.
20
Results of Operations:
Comparison of the Quarter Ended September 30, 2023 to the Quarter Ended September 30, 2022
Net Sales:
(dollars in thousands) |
|
Quarter Ended September 30, |
|
|
|
|
|
|
|
|||||||
Segment |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Material Handling |
|
$ |
132,484 |
|
|
$ |
155,658 |
|
|
$ |
(23,174 |
) |
|
|
(14.9 |
)% |
Distribution |
|
|
65,335 |
|
|
|
72,416 |
|
|
|
(7,081 |
) |
|
|
(9.8 |
)% |
Inter-company sales |
|
|
(21 |
) |
|
|
(9 |
) |
|
|
(12 |
) |
|
|
|
|
Total net sales |
|
$ |
197,798 |
|
|
$ |
228,065 |
|
|
$ |
(30,267 |
) |
|
|
(13.3 |
)% |
Net sales for the quarter ended September 30, 2023 were $197.8 million, a decrease of $30.3 million or 13.3% compared to the quarter ended September 30, 2022. Net sales decreased due to lower volume/mix of $24.9 million, the effect of unfavorable currency translation of $0.3 million and lower pricing of $5.1 million. The Company continues to pursue further pricing initiatives, and beginning in February 2023, the Company began to implement a series of additional pricing increases across a majority of its portfolio of products within its Distribution segment.
Net sales in the Material Handling Segment decreased $23.2 million or 14.9% for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022. Net sales decreased due to lower volume/mix $16.5 million, lower pricing $6.4 million and the effect of unfavorable currency translation of $0.3 million.
Net sales in the Distribution Segment decreased $7.1 million or 9.8% for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022, primarily due to lower volume of $8.4 million. The decrease in net sales was partially offset by higher pricing of $1.3 million.
Cost of Sales & Gross Profit:
|
|
Quarter Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Cost of sales |
|
$ |
135,419 |
|
|
$ |
156,417 |
|
|
$ |
(20,998 |
) |
|
|
(13.4 |
)% |
Gross profit |
|
$ |
62,379 |
|
|
$ |
71,648 |
|
|
$ |
(9,269 |
) |
|
|
(12.9 |
)% |
Gross profit as a percentage of sales |
|
|
31.5 |
% |
|
|
31.4 |
% |
|
|
|
|
|
|
||
Gross profit decreased $9.3 million, or 12.9%, for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022, due to lower volume/mix and pricing as described under Net Sales above and increased labor and productivity costs. Gross margin expanded to 31.5% for the quarter ended September 30, 2023 compared with 31.4% for the quarter ended September 30, 2022 as the benefits from lower material costs partially offset the decrease in gross profit for the quarter ended September 30, 2023.
Selling, General and Administrative Expenses:
|
|
Quarter Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
SG&A expenses |
|
$ |
43,698 |
|
|
$ |
51,756 |
|
|
$ |
(8,058 |
) |
|
|
(15.6 |
)% |
SG&A expenses as a percentage of sales |
|
|
22.1 |
% |
|
|
22.7 |
% |
|
|
|
|
|
|
||
Selling, general and administrative (“SG&A”) expenses for the quarter ended September 30, 2023 were $43.7 million, a decrease of 15.6% compared to the same period in the prior year. Decreases in SG&A expenses in the third quarter 2023 were primarily due to $5.3 million of lower incentive compensation, $1.2 million of lower facility costs and $0.9 million of lower variable selling expenses, partially offset by other professional fees and $0.3 million of higher salaries and benefits. Environmental matters, as described in Note 10 resulted in a net $0.1 million recovery for the quarter ended September 30, 2023, which compared to $1.5 million of charges for the quarter ended September 30, 2022.
21
Net Interest Expense:
|
|
Quarter Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Net interest expense |
|
$ |
1,539 |
|
|
$ |
1,719 |
|
|
$ |
(180 |
) |
|
|
(10.5 |
)% |
Average outstanding borrowings, net |
|
$ |
84,220 |
|
|
$ |
120,315 |
|
|
$ |
(36,095 |
) |
|
|
(30.0 |
)% |
Weighted-average borrowing rate |
|
|
7.09 |
% |
|
|
5.50 |
% |
|
|
|
|
|
|
||
Net interest expense for the quarter ended September 30, 2023 was $1.5 million, a decrease of $0.2 million, or 10.5%, compared with $1.7 million for the quarter ended September 30, 2022. The lower net interest expense was due to lower average outstanding borrowings in the current quarter, partially offset by a higher weighted-average borrowing rate.
Income Taxes:
|
|
Quarter Ended September 30, |
|
|||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
||
Income before income taxes |
|
$ |
17,164 |
|
|
$ |
18,178 |
|
Income tax expense |
|
$ |
4,417 |
|
|
$ |
4,507 |
|
Effective tax rate |
|
|
25.7 |
% |
|
|
24.8 |
% |
The Company’s effective tax rate was 25.7% for the quarter ended September 30, 2023, compared to 24.8% for the quarter ended September 30, 2022. The increase in the effective tax rate was driven primarily by non-deductible expenses.
Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022
Net Sales:
(dollars in thousands) |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
Segment |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Material Handling |
|
$ |
428,341 |
|
|
$ |
505,384 |
|
|
$ |
(77,043 |
) |
|
|
(15.2 |
)% |
Distribution |
|
|
193,693 |
|
|
|
181,352 |
|
|
|
12,341 |
|
|
|
6.8 |
% |
Inter-company sales |
|
|
(44 |
) |
|
|
(29 |
) |
|
|
(15 |
) |
|
|
|
|
Total net sales |
|
$ |
621,990 |
|
|
$ |
686,707 |
|
|
$ |
(64,717 |
) |
|
|
(9.4 |
)% |
Net sales for the nine months ended September 30, 2023 were $622.0 million, a decrease of $64.7 million or 9.4% compared to the nine months ended September 30, 2022. Net sales decreased due to lower volume/mix of $83.1 million, following high volume of certain products focused on outdoor activities, which were especially strong due to a surge in COVID-19 induced consumer discretionary spending in the prior period. Net sales also decreased due to the effect of unfavorable currency translation of $1.5 million and lower pricing of $3.2 million. The decrease in net sales was partially offset by $23.1 million of incremental sales from the acquisition of Mohawk on May 31, 2022, included in the Distribution Segment. Mohawk's annual sales were approximately $65 million at the time of the acquisition. The Company continues to pursue further pricing initiatives, and beginning in February 2023, the Company began to implement a series of additional pricing increases across a majority of its portfolio of products within its Distribution segment.
Net sales in the Material Handling Segment decreased $77.0 million or 15.2% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Net sales decreased due to lower volume/mix of $65.9 million, lower pricing of $9.6 million and the effect of unfavorable currency translation of $1.5 million.
Net sales in the Distribution Segment increased $12.3 million or 6.8% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to higher pricing of $6.4 million and $23.1 million of incremental sales from the acquisition of Mohawk on May 31, 2022. The increase in net sales was partially offset by lower volume/mix of $17.2 million.
22
Cost of Sales & Gross Profit:
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Cost of sales |
|
$ |
420,136 |
|
|
$ |
468,415 |
|
|
$ |
(48,279 |
) |
|
|
(10.3 |
)% |
Gross profit |
|
$ |
201,854 |
|
|
$ |
218,292 |
|
|
$ |
(16,438 |
) |
|
|
(7.5 |
)% |
Gross profit as a percentage of sales |
|
|
32.5 |
% |
|
|
31.8 |
% |
|
|
|
|
|
|
||
Gross profit decreased $16.4 million, or 7.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to lower volume/mix as described under Net Sales above and increased labor and productivity costs. Gross margin expanded to 32.5% for the nine months ended September 30, 2023 compared with 31.8% for the nine months ended September 30, 2022 as the benefits from lower material costs and the acquisition of Mohawk on May 31, 2022 both partially offset the decrease in gross profit for the nine months ended September 30, 2023.
Selling, General and Administrative Expenses:
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
SG&A expenses |
|
$ |
148,130 |
|
|
$ |
152,066 |
|
|
$ |
(3,936 |
) |
|
|
(2.6 |
)% |
SG&A expenses as a percentage of sales |
|
|
23.8 |
% |
|
|
22.1 |
% |
|
|
|
|
|
|
||
Selling, general and administrative (“SG&A”) expenses for the nine months ended September 30, 2023 were $148.1 million, a decrease of $3.9 million or 2.6% compared to the same period in the prior year. Decreases in SG&A expenses for the nine months ended September 30, 2023 were primarily due to $8.2 million of lower incentive compensation, $2.6 million of lower variable selling expenses and $2.3 million of lower facility costs. The decrease to SG&A expenses for the nine months ended September 30, 2023 was partially offset by $5.0 million of incremental SG&A from the acquisition of Mohawk on May 31, 2022, $1.9 million of higher salaries and benefits and $2.3 million of higher legal and other professional fees, primarily related to a success fees payable in conjunction with the favorable patent trial result, offset by insurance recoveries, as described in Note 10. Environmental matters, as described in Note 10 resulted in a net $2.2 million expense for the nine months ended September 30, 2023, which compared to $2.8 million of charges for the nine months ended September 30, 2022.
Net Interest Expense:
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
||||
Net interest expense |
|
$ |
4,975 |
|
|
$ |
4,077 |
|
|
$ |
898 |
|
|
|
22.0 |
% |
Average outstanding borrowings, net |
|
$ |
96,112 |
|
|
$ |
113,812 |
|
|
$ |
(17,700 |
) |
|
|
(15.6 |
)% |
Weighted-average borrowing rate |
|
|
6.74 |
% |
|
|
4.55 |
% |
|
|
|
|
|
|
||
Net interest expense for the nine months ended September 30, 2023 was $5.0 million, an increase of $0.9 million, or 22.0%, compared with $4.1 million for the nine months ended September 30, 2022. The higher net interest expense was due to a higher weighted-average borrowing rate, partially offset by lower average outstanding borrowings for the nine months ended September 30, 2023.
Income Taxes:
|
|
Nine Months Ended September 30, |
|
|||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
||
Income before income taxes |
|
$ |
48,827 |
|
|
$ |
62,842 |
|
Income tax expense |
|
$ |
12,499 |
|
|
$ |
16,003 |
|
Effective tax rate |
|
|
25.6 |
% |
|
|
25.5 |
% |
The Company’s effective tax rate was 25.6% and 25.5% for the nine months ended September 30, 2023 and 2022, respectively. The increase in the effective tax rate was driven primarily by non-deductible expenses.
23
Liquidity and Capital Resources:
The Company’s primary sources of liquidity are cash on hand, cash generated from operations and availability under the Loan Agreement (defined below). At September 30, 2023, the Company had $24.8 million of cash, $222.3 million available under the Loan Agreement and outstanding debt of $69.3 million, including the finance lease liability of $9.3 million. Based on this liquidity and borrowing capacity, the Company believes it is well-positioned to manage through the working capital demands and the heightened uncertainty in the current macroeconomic environment. The Company believes that cash on hand, cash flows from operations and available capacity under its Loan Agreement will be sufficient to meet expected business requirements including capital expenditures, dividends, working capital, debt service, and to fund future growth, including selective acquisitions.
Operating Activities
Net cash provided by operating activities was $70.8 million for the nine months ended September 30, 2023, compared to $50.8 million in the same period in 2022. The increase was primarily due to lower working capital driven by decreases in accounts receivable.
Investing Activities
Net cash used by investing activities was $19.3 million for the nine months ended September 30, 2023 compared to cash used of $40.3 million for the same period in 2022. In 2022, the Company paid $24.3 million to acquire Mohawk, before working capital adjustments, as discussed in Note 3 and received proceeds of $1.5 million from the sale of fixed assets. Capital expenditures were $19.3 million and $17.6 million for the nine months ended September 30, 2023 and 2022, respectively. Full year 2023 capital expenditures are expected to be approximately $25 million to $30 million.
Financing Activities
Cash used by financing activities was $49.8 million for the nine months ended September 30, 2023 compared to cash used by financing activities of $7.4 million for the same period in 2022. Net repayments of the credit facility for the nine months ended September 30, 2023 were $34.0 million compared to net borrowings of $7.0 million in the nine months ended September 30, 2022. Net proceeds from the issuance of common stock in connection with incentive stock option exercises were $1.9 million and $2.1 million for the nine months ended September 30, 2023 and 2022, respectively. Cash paid for tax withholdings on vesting of stock compensation totaled $2.1 million and $0.5 million in the nine months ended September 30, 2023 and 2022 respectively, primarily due to improved vesting of performance-based awards in the current year. Fees paid for the amendment and extension of the Loan Agreement in September 2022 totaled $0.7 million. The Company also used cash to pay dividends of $15.3 million and $14.9 million for the nine months ended September 30, 2023 and 2022, respectively.
Credit Sources
On September 29, 2022, the Company entered into a Seventh Amended and Restated Loan Agreement (the “Seventh Amendment”), which amended the Sixth Amended and Restated Loan Agreement (the "Sixth Amendment"), dated March 12, 2021. The Seventh Amendment, among other things, extended the maturity date to September 2027 from March 2024. There was no change to the credit facility's borrowing limit of $250 million.
In March 2021, the Company entered into the Sixth Amendment, which amended the Fifth Amended and Restated Loan Agreement (collectively with the Sixth and Seventh Amendments, the “Loan Agreement”) dated March 2017. The Sixth Amendment increased the senior revolving credit facility’s borrowing limit to $250 million from $200 million, extended the maturity date to March 2024 from March 2022, and increased flexibility of the financial and other covenants and provisions.
As of September 30, 2023, $222.3 million was available under the Loan Agreement, after borrowings and the Company had $5.7 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business. Borrowings under the Loan Agreement bear interest at the Term SOFR, RFR, EURIBOR and CDOR-based borrowing rates.
At September 30, 2023, $38 million face value of Senior Unsecured Notes are outstanding. The series of notes range in face value from $11 million to $15 million, with interest rates ranging from 5.25% to 5.45%, payable semiannually. As described in Note 11, $26.0 million of the Senior Unsecured Notes mature on January 15, 2024 and $12.0 million mature on January 15, 2026.
24
As of September 30, 2023, the Company was in compliance with all of its debt covenants. The most restrictive financial covenants for all of the Company’s debt are an interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense) and a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and amortization, as adjusted). The ratios as of and for the period ended September 30, 2023 are shown in the following table:
|
|
Required Level |
|
Actual Level |
|
|
Interest Coverage Ratio |
|
3.00 to 1 (minimum) |
|
|
15.72 |
|
Leverage Ratio |
|
3.25 to 1 (maximum) |
|
|
0.71 |
|
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources at September 30, 2023.
25
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company has certain financing arrangements that require interest payments based on floating interest rates, and to that extent, the Company’s financial results are subject to changes in the market rate of interest. Borrowings under the Loan Agreement bear interest at the Term SOFR, RFR, EURIBOR and CDOR-based borrowing rates. At present, the Company has not entered into any interest rate swaps or other derivative instruments to fix the interest rate on any portion of its financing arrangements with floating rates. Based on current debt levels at September 30, 2023, if market interest rates increase one percent, the Company’s annual variable interest expense would increase approximately $0.2 million.
Foreign Currency Exchange Risk
Certain of the Company’s subsidiaries operate in foreign countries and their financial results are subject to exchange rate movements. The Company has operations in Canada with foreign currency exposure, primarily due to U.S. dollar sales made from businesses in Canada to customers in the United States. The Company has a systematic program to limit its exposure to fluctuations in exchange rates related to certain assets and liabilities of its operations in Canada that are denominated in U.S. dollars. The net exposure is generally less than $1 million. The foreign currency contracts and arrangements created under this program are not designated as hedged items under ASC 815, Derivatives and Hedging, and accordingly, the changes in the fair value of the foreign currency arrangements, which have been immaterial, are recorded in the Condensed Consolidated Statements of Operations (Unaudited). The Company’s foreign currency arrangements are typically three months or less and are settled before the end of a reporting period. At September 30, 2023, the Company had no foreign currency arrangements or contracts in place.
Commodity Price Risk
The Company uses certain commodity raw materials, primarily plastic resins, and other commodities, such as natural gas, in its operations. The cost of operations can be affected by changes in the market for these commodities, particularly plastic resins. The Company currently has no derivative contracts to hedge changes in raw material pricing. The Company may from time to time enter into forward buy positions for certain utility costs, which were not material at September 30, 2023. Significant future increases in the cost of plastic resin or other adverse changes in the general economic environment could have a material adverse impact on the Company’s financial position, results of operations or cash flows.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
The Company carries out a variety of on-going procedures, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.
Changes in Internal Control Over Financial Reporting
During the nine months ended September 30, 2023, there have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II – Other Information
Item 1. Legal Proceedings
Certain legal proceedings in which the Company is involved are discussed in Note 10, Contingencies, in the Unaudited Condensed Consolidated Financial Statements in Part I of this report, and Part I, Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The Company’s disclosures relating to legal proceedings in Note 10, Contingencies, in the Unaudited Condensed Consolidated Financial Statements in Part I of this report are incorporated into Part II of this report by reference. The Company is a defendant in various lawsuits and a party to various other legal proceedings, in the ordinary course of business, some of which are covered in whole or in part by insurance. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on our consolidated financial position, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information regarding the Company’s stock repurchase plan during the quarter ended September 30, 2023:
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs |
|
|
Maximum number of Shares that may yet be Purchased Under the Plans or Programs (1) |
|
||||
7/1/2023 to 7/31/2023 |
|
|
— |
|
|
$ |
— |
|
|
|
5,547,665 |
|
|
|
2,452,335 |
|
8/1/2023 to 8/30/2023 |
|
|
— |
|
|
|
— |
|
|
|
5,547,665 |
|
|
|
2,452,335 |
|
9/1/2023 to 9/30/2023 |
|
|
— |
|
|
|
— |
|
|
|
5,547,665 |
|
|
|
2,452,335 |
|
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2023, none of our directors or executive officers adopted or i i terminated / any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of i Rule 10b5-1(c) or any “ i non-Rule 10b5-1 trading arrangement.”
27
3.1 |
|
3.2 |
|
10.1* |
Form of Non-Competition, Non-Solicitation and Confidentiality Agreement for Executive Officers.* |
31.1 |
|
31.2 |
|
32.1 |
|
101 |
The following financial information from Myers Industries, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, formatted in inline XBRL includes: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Financial Position, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements. |
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* |
Indicates executive compensation plan or arrangement |
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
MYERS INDUSTRIES, INC. |
|
|
/s/ Grant E. Fitz |
|
|
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
29
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 1/15/26 | ||||
| 1/15/24 | ||||
| 12/31/23 | ||||
| Filed on: | 11/1/23 | 8-K | ||
| 10/27/23 | ||||
| 10/18/23 | ||||
| For Period end: | 9/30/23 | |||
| 9/6/23 | ||||
| 7/1/23 | ||||
| 5/19/23 | CORRESP | |||
| 4/25/23 | ||||
| 4/24/23 | ||||
| 3/14/23 | 4 | |||
| 2/14/23 | SC 13G/A | |||
| 1/1/23 | ||||
| 12/31/22 | 10-K, 11-K, ARS | |||
| 9/30/22 | 10-Q | |||
| 9/29/22 | 8-K | |||
| 7/1/22 | 3, 3/A | |||
| 5/31/22 | 8-K | |||
| 1/6/22 | ||||
| 1/1/22 | ||||
| 4/29/21 | 4, 8-K, DEF 14A, PRE 14A, S-8 | |||
| 4/20/21 | 8-K, DEFA14A | |||
| 3/12/21 | 8-K | |||
| 3/4/21 | ||||
| 12/11/18 | 4, 8-K, 8-K/A | |||
| 11/27/18 | ||||
| 7/11/13 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 3/05/24 Myers Industries Inc. 10-K 12/31/23 109:16M Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 4/29/21 Myers Industries Inc. 8-K:5,9 4/29/21 13:686K ActiveDisclosure/FA |