Myers Industries(MYE) - 2025 Q1 - Quarterly Report

Part I — Financial Information Presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Myers Industries, Inc. and its subsidiaries, including statements of operations, comprehensive income (loss), financial position, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, restructuring activities, and other financial disclosures for the quarter ended March 31, 2025, compared to the prior year Condensed Consolidated Statements of Operations (Unaudited) Details the company's revenues, expenses, and net income for the first quarter of 2025 and 2024 Condensed Consolidated Statements of Operations (Unaudited) – Q1 2025 vs Q1 2024 (Dollars in thousands) | Metric | Q1 2025 | Q1 2024 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Net sales | $206,750 | $207,102 | $(352) | (0.2)% | | Cost of sales | $137,672 | $142,833 | $(5,161) | (3.6)% | | Gross profit | $69,078 | $64,269 | $4,809 | 7.5% | | Selling, general and administrative expenses | $44,755 | $47,113 | $(2,358) | (5.0)% | | Depreciation and amortization | $4,458 | $3,921 | $537 | 13.7% | | Freight out | $2,812 | $2,423 | $389 | 16.1% | | (Gain) loss on disposal of fixed assets | $403 | $(67) | $470 | -701.5% | | Operating income | $16,650 | $10,879 | $5,771 | 53.0% | | Interest expense, net | $7,386 | $6,079 | $1,307 | 21.5% | | Income before income taxes | $9,264 | $4,800 | $4,464 | 93.0% | | Income tax expense | $2,459 | $1,297 | $1,162 | 89.6% | | Net income | $6,805 | $3,503 | $3,302 | 94.3% | | Net income per common share: Basic | $0.18 | $0.09 | $0.09 | 100.0% | | Net income per common share: Diluted | $0.18 | $0.09 | $0.09 | 100.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Details net income and other comprehensive income components, including foreign currency and interest rate swap impacts Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Q1 2025 vs Q1 2024 (Dollars in thousands) | Metric | Q1 2025 | Q1 2024 | Change | | :------------------------------------------ | :------ | :------ | :----- | | Net income | $6,805 | $3,503 | $3,302 | | Other comprehensive income (loss): | | | | | Foreign currency translation adjustment | $(8) | $(831) | $823 | | Unrealized gain (loss) on interest rate swap contracts, net of tax | $(1,450) | — | $(1,450) | | Realized (gain) loss on interest rate swap contracts reclassified to interest expense | $85 | — | $85 | | Total other comprehensive income (loss) | $(1,373) | $(831) | $(542) | | Comprehensive income | $5,432 | $2,672 | $2,760 | Condensed Consolidated Statements of Financial Position (Unaudited) Outlines assets, liabilities, and shareholders' equity at March 31, 2025, compared to December 31, 2024 Condensed Consolidated Statements of Financial Position (Unaudited) – March 31, 2025 vs December 31, 2024 (Dollars in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change | | :---------------------------------------------------------------- | :------------- | :---------------- | :----- | | Assets | | | | | Cash | $35,302 | $32,222 | $3,080 | | Trade accounts receivable, net | $131,574 | $109,372 | $22,202 | | Inventories, net | $103,785 | $97,001 | $6,784 | | Total Current Assets | $289,140 | $259,307 | $29,833 | | Property, plant, and equipment, net | $135,993 | $137,564 | $(1,571) | | Goodwill | $255,545 | $255,532 | $13 | | Intangible assets, net | $162,531 | $166,321 | $(3,790) | | Total Assets | $883,842 | $860,815 | $23,027 | | Liabilities and Shareholders' Equity | | | | | Accounts payable | $84,890 | $71,049 | $13,841 | | Total Current Liabilities | $162,580 | $147,112 | $15,468 | | Long-term debt | $363,733 | $355,310 | $8,423 | | Total Liabilities | $606,419 | $583,303 | $23,116 | | Common Shares | $23,015 | $22,923 | $92 | | Additional paid-in capital | $324,631 | $325,163 | $(532) | | Accumulated other comprehensive loss | $(23,483) | $(22,110) | $(1,373) | | Retained deficit | $(46,740) | $(48,464) | $1,724 | | Total Shareholders' Equity | $277,423 | $277,512 | $(89) | | Total Liabilities and Shareholders' Equity | $883,842 | $860,815 | $23,027 | Condensed Consolidated Statements of Shareholders' Equity (Unaudited) Details changes in common shares, additional paid-in capital, accumulated other comprehensive loss, and retained deficit Condensed Consolidated Statements of Shareholders' Equity (Unaudited) – Q1 2025 vs Q1 2024 (Dollars in thousands) | Metric | Balance at Jan 1, 2025 | Q1 2025 Activity | Balance at Mar 31, 2025 | Balance at Jan 1, 2024 | Q1 2024 Activity | Balance at Mar 31, 2024 | | :------------------------------------------ | :--------------------- | :--------------- | :---------------------- | :--------------------- | :--------------- | :---------------------- | | Common Shares | $22,923 | $92 | $23,015 | $22,608 | $226 | $22,834 | | Additional Paid-In Capital | $325,163 | $(532) | $324,631 | $322,526 | $990 | $323,516 | | Accumulated Other Comprehensive Income (Loss) | $(22,110) | $(1,373) | $(23,483) | $(16,815) | $(831) | $(17,646) | | Retained Deficit | $(48,464) | $1,724 | $(46,740) | $(35,519) | $(1,534) | $(37,053) | | Total Shareholders' Equity | $277,512 | $(89) | $277,423 | $292,800 | $(1,159) | $291,651 | | Net income | — | $6,805 | | — | $3,503 | | | Foreign currency translation adjustment | — | $(8) | | — | $(831) | | | Interest rate swap, net of tax | — | $(1,365) | | — | — | | | Shares issued under incentive plans, net | — | $(533) | | — | $534 | | | Repurchase of common stock | — | $(1,008) | | — | — | | | Stock compensation expense | — | $1,101 | | — | $682 | | | Declared dividends | — | $(5,081) | | — | $(5,037) | | Condensed Consolidated Statements of Cash Flows (Unaudited) Summarizes cash flows from operating, investing, and financing activities for the first quarter of 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Unaudited) – Q1 2025 vs Q1 2024 (Dollars in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | Change | | :------------------------------------------ | :------ | :------ | :----- | | Net cash provided by (used for) operating activities | $10,131 | $20,270 | $(10,139) | | Net cash provided by (used for) investing activities | $(8,007) | $(354,522) | $346,515 | | Net cash provided by (used for) financing activities | $988 | $336,874 | $(335,886) | | Foreign exchange rate effect on cash | $(32) | $(182) | $150 | | Net increase (decrease) in cash | $3,080 | $2,440 | $640 | | Cash at January 1 | $32,222 | $30,290 | $1,932 | | Cash at March 31 | $35,302 | $32,730 | $2,572 | Notes to Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Myers Industries, Inc. and its subsidiaries, including statements of operations, comprehensive income (loss), financial position, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, restructuring activities, and other financial disclosures for the quarter ended March 31, 2025, compared to the prior year 1. Summary of Significant Accounting Policies Outlines the basis of financial statement preparation, recent accounting standard updates, and details on interest rate swap agreements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted. The Company updated its presentation of Depreciation and amortization expenses and third-party Freight out costs in Q1 2025, reclassifying them from Selling, general and administrative expenses[22][23][24] - The Company is evaluating the impact of new accounting standards: ASU 2023-09 (Income Tax Disclosures, effective after December 15, 2024) and ASU 2024-03 (Expense Disaggregation Disclosures, effective after December 15, 2026)[25][26] - The Company entered into an interest rate swap agreement on May 2, 2024, to hedge variable interest rate exposure on a portion of its floating rate indebtedness. The swap has a beginning notional value of $200.0 million, reducing to $190.0 million by March 31, 2025, and effectively fixes the rate at 4.606% plus the applicable margin[32][33] Changes in Accumulated Other Comprehensive Income (Loss) (Dollars in thousands) | Metric | Balance at Jan 1, 2025 | Other comprehensive income (loss) before reclassifications | Reclassification to (earnings) loss | Net current-period other comprehensive income (loss) | Balance at Mar 31, 2025 | | :-------------------------------- | :--------------------- | :------------------------------------------------------- | :-------------------------- | :------------------------------------------- | :---------------------- | | Foreign Currency | $(18,609) | $(8) | — | $(8) | $(18,617) | | Interest Rate Swap (1) | $(2,400) | $(1,450) | $85 | $(1,365) | $(3,765) | | Defined Benefit Pension Plans | $(1,101) | — | — | — | $(1,101) | | Total | $(22,110) | $(1,458) | $85 | $(1,373) | $(23,483) | 2. Revenue Recognition Explains the company's policies for recognizing revenue, including variable consideration, and details related freight out expenses - Revenue is recognized when control of products transfers to customers, typically at shipment or delivery. Contracts are generally short-term (within 90 days), and no significant deferred revenue is recorded[38] - Variable consideration, such as rebates and discounts, is estimated and recognized each period. Allowances for product returns are also recognized based on historical experience[39] Amounts Related to Revenue Recognition (Dollars in thousands) | Item | March 31, 2025 | December 31, 2024 | Statement of Financial Position Classification | | :-------------------------------- | :------------- | :---------------- | :--------------------------------------------- | | Returns, discounts and other allowances | $(706) | $(1,051) | Trade accounts receivable | | Right of return asset | $728 | $456 | Inventories, net | | Customer deposits | $(2,252) | $(2,565) | Other current liabilities | | Accrued rebates | $(2,922) | $(4,196) | Other current liabilities | - Freight out expenses were approximately $2.8 million for the manufacturing business in Q1 2025 (up from $2.4 million in Q1 2024) and approximately $2.6 million for the distribution business in Q1 2025 (down from $2.9 million in Q1 2024)[40] 3. Acquisitions Details the acquisition of Signature Systems, including its purchase price allocation and pro forma financial impacts - On February 8, 2024, the Company acquired Signature Systems, a manufacturer and distributor of composite matting ground protection, for $348.3 million cash (net of cash acquired). This acquisition is part of the Material Handling Segment and aligns with the Company's strategic plan for engineered plastic solutions[43] Final Purchase Price Allocation for Signature Acquisition (Dollars in thousands) | Item | Final Allocation | | :-------------------------------- | :--------------- | | Assets acquired: | | | Accounts receivable | $18,854 | | Inventories | $17,373 | | Property, plant and equipment | $28,263 | | Intangible assets | $136,700 | | Goodwill | $183,098 | | Total Assets acquired | $394,126 | | Liabilities assumed: | | | Accounts payable | $4,904 | | Deferred income taxes | $32,073 | | Total liabilities assumed | $45,814 | | Net acquisition cost | $348,312 | Intangible Assets Acquired from Signature (Dollars in thousands) | Intangible Asset | Fair Value | Weighted Average Estimated Useful Life | | :----------------------------- | :--------- | :------------------------------------- | | Customer relationships | $83,800 | 10.0 years | | Technology | $31,300 | 12.0 years | | Total amortizable intangible assets | $115,100 | | | Trademarks and trade names | $21,600 | Indefinite | Unaudited Pro Forma Results for Q1 2024 (assuming Signature acquisition on Jan 1, 2023) (Dollars in thousands) | Metric | Q1 2024 Pro Forma | | :--------- | :---------------- | | Net sales | $221,821 | | Net income | $8,345 | 4. Restructuring Describes the 'Focused Transformation' initiative, including cost savings targets, incurred charges, and expected remaining costs - The Company launched a 'Focused Transformation' initiative on March 6, 2025, aiming for $20 million in annualized cost savings (primarily SG&A) by year-end 2025. $0.4 million in restructuring charges were incurred in Q1 2025[50] - Restructuring within the Distribution Segment resulted in $0.8 million in charges for Q1 2025, including asset impairments, inventory write-downs, and severance. Approximately $1.7 million in remaining costs are expected[51] - The Ameri-Kart plan is complete, with $0.2 million in restructuring charges incurred in Q1 2024 and a $1.8 million lease termination payment in May 2024[52] - Other restructuring initiatives to streamline overhead costs totaled $0.8 million in Q1 2025, with $1.7 million in accrued and unpaid expenses at March 31, 2025[53] 5. Inventories Details the valuation methods for inventories and provides a breakdown of finished products, raw materials, and supplies - Approximately 30% of inventories are valued using the LIFO method, with all other inventories valued using the FIFO method. No adjustment to the LIFO reserve was recorded for Q1 2025 or Q1 2024[54] Inventories Breakdown (Dollars in thousands) | Inventory Type | March 31, 2025 | December 31, 2024 | | :------------------------ | :------------- | :---------------- | | Finished and in-process products | $64,832 | $62,601 | | Raw materials and supplies | $38,953 | $34,400 | | Total Inventories | $103,785 | $97,001 | 6. Other Liabilities Presents a breakdown of current and long-term liabilities, including customer deposits, environmental reserves, and hedge contracts Other Current Liabilities (Dollars in thousands) | Item | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Customer deposits and accrued rebates | $5,174 | $6,761 | | Dividends payable | $5,376 | $5,613 | | Current portion of environmental reserves | $5,405 | $6,605 | | Hedge contract liability | $1,068 | $753 | | Other accrued expenses | $6,433 | $6,952 | | Total Other Current Liabilities | $23,617 | $26,794 | Other Long-Term Liabilities (Dollars in thousands) | Item | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Environmental reserves | $10,530 | $9,984 | | Hedge contract liability | $4,019 | $2,490 | | Other long-term liabilities | $2,097 | $2,480 | | Total Other Long-Term Liabilities | $16,942 | $15,303 | 7. Goodwill and Intangible Assets Provides a breakdown of goodwill by segment and describes the composition of intangible assets Goodwill by Segment (Dollars in thousands) | Segment | January 1, 2025 | Foreign currency translation | March 31, 2025 | | :-------------- | :-------------- | :--------------------------- | :------------- | | Distribution | $14,730 | — | $14,730 | | Material Handling | $240,802 | $13 | $240,815 | | Total | $255,532 | $13 | $255,545 | - Intangible assets primarily include trade names, customer relationships, patents, non-competition agreements, and technology assets from acquisitions. Indefinite-lived trade names had a carrying value of $31.4 million at both March 31, 2025, and December 31, 2024[57] 8. Stockholders' Equity Details the calculation of net income per common share and outlines the Company's stock repurchase program Net Income Per Common Share Calculation | Metric | Q1 2025 | Q1 2024 | | :------------------------------------------ | :---------- | :---------- | | Weighted average common shares outstanding basic | 37,298,967 | 36,908,169 | | Dilutive effect of stock options and restricted stock | 115,043 | 214,850 | | Weighted average common shares outstanding diluted | 37,414,010 | 37,123,019 | | Diluted Net income per common share | $0.18 | $0.09 | - The Board of Directors authorized a new 2025 Repurchase Program on February 27, 2025, for up to $10.0 million in common stock, effective March 10, 2025. This program replaces the previous 2013 authorization[59] - During Q1 2025, the Company repurchased 76,800 shares for $1.0 million at an average cost of $13.00 per share under the 2025 Repurchase Program. Approximately $9.0 million remained authorized as of March 31, 2025[60] 9. Stock Compensation Reports stock compensation expenses and details the unrecognized compensation cost related to non-vested stock-based awards - Stock compensation expense was $1.1 million for Q1 2025, an increase from $0.7 million in Q1 2024. These expenses are included in Selling, general and administrative expenses[63] - The 2024 Long-Term Incentive Plan, approved by shareholders on April 25, 2024, authorizes the issuance of up to 2,500,000 additional stock awards. Total unrecognized compensation cost related to non-vested stock-based compensation was approximately $7.9 million at March 31, 2025, to be recognized over the next three years[62][63] 10. Contingencies Discusses legal matters, environmental liabilities, and potential insurance recoveries, including specific site-related costs and lawsuits - Management believes the ultimate outcome of current legal matters will not have a material adverse effect on the Company's financial position, cash flows, or results of operations, though inherent uncertainties exist[65] - For the New Idria Mercury Mine site, cumulative charges were $25.1 million, payments $15.3 million, and insurance recoveries $7.1 million through March 31, 2025. The ending reserve balance was $11.7 million and the probable insurance recovery receivable was $7.5 million at March 31, 2025[69][70] - For the New Almaden Mine, Buckhorn has a total reserve of $4.4 million at March 31, 2025. Project costs are expected to be higher than initial estimates, and the Company intends to challenge responsibility for cost increases[72][73] - Two lawsuits were filed in 2023 and 2025 against Scepter Manufacturing, LLC (a subsidiary) regarding portable fuel containers. The Company cannot yet assess the outcome or potential damages, but Scepter maintains insurance policies expected to cover substantial defense costs[74][75] 11. Long-Term Debt and Loan Agreements Details the composition of long-term debt, loan agreement terms, interest rates, and compliance with debt covenants Long-Term Debt Composition (Dollars in thousands) | Debt Type | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Amended Loan Agreement - Revolving Credit Facility | $13,000 | — | | Amended Loan Agreement - Term Loan A | $377,000 | $382,000 | | Total Gross Debt | $390,000 | $382,000 | | Less unamortized deferred financing costs | $6,618 | $7,041 | | Less current portion long-term debt | $19,649 | $19,649 | | Long-term debt (net) | $363,733 | $355,310 | - The Amended Loan Agreement, entered on February 8, 2024, permitted the Signature acquisition and provided a new 5-year $400 million Term Loan A, which amortizes in quarterly installments. $9.2 million in deferred financing fees were incurred[76][77] - As of March 31, 2025, the Company had $231.7 million available under the Amended Loan Agreement. Borrowings bear interest at various floating rates (Term SOFR, RFR, SONIA, EURIBOR, CORRA-based)[78] - The Company repaid $38.0 million of senior unsecured notes in Q1 2024, terminating the Note Purchase Agreement and recognizing a $0.1 million loss on debt extinguishment[79] - The weighted average interest rate on borrowings was 7.59% for Q1 2025, down from 8.93% for Q1 2024[80] - The Company was in compliance with all debt covenants as of March 31, 2025, with an interest coverage ratio of 3.95 (minimum 3.00) and a net leverage ratio of 2.77 (maximum 3.25)[81][122] 12. Income Taxes Reports the effective tax rate for the quarter and outlines the periods subject to tax examinations - The effective tax rate for Q1 2025 was 26.5%, a slight decrease from 27.0% in Q1 2024, primarily due to higher fixed non-deductible expenses in the prior year[83] - The Company is no longer subject to U.S. Federal examination for tax years before 2021 and is subject to state, local, and non-U.S. examinations for tax years 2020 through 2023[84] 13. Leases Presents lease assets and liabilities, components of lease expense, and weighted-average lease terms and discount rates Lease Assets and Liabilities (Dollars in thousands) | Item | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Assets: | | | | Operating lease assets (ROU asset) | $29,413 | $30,561 | | Finance lease assets | $7,741 | $7,927 | | Total lease assets | $37,154 | $38,488 | | Liabilities: | | | | Total operating lease liabilities | $29,244 | $30,297 | | Total finance lease liabilities | $8,461 | $8,615 | | Total lease liabilities | $37,705 | $38,912 | Components of Lease Expense (Dollars in thousands) | Lease Cost Component | Q1 2025 | Q1 2024 | | :------------------------------------ | :------ | :------ | | Operating lease cost (Cost of sales) | $1,790 | $1,732 | | Operating lease cost (SG&A) | $987 | $964 | | Finance lease cost (Amortization expense) | $185 | $185 | | Finance lease cost (Interest expense) | $77 | $83 | | Total lease cost | $3,039 | $2,964 | Weighted-Average Lease Terms and Discount Rates | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Weighted-average remaining lease term (years): Operating leases | 4.71 | 4.93 | | Weighted-average remaining lease term (years): Finance leases | 10.75 | 11.00 | | Weighted-average discount rate: Operating leases | 6.3% | 6.3% | | Weighted-average discount rate: Finance leases | 3.7% | 3.7% | 14. Segments Describes the Company's two reportable segments, Material Handling and Distribution, and provides their financial performance - The Company operates under two reportable segments: Material Handling (manufacturing plastic, metal, and rubber products like reusable containers, pallets, and ground protection matting) and Distribution (distributing tire servicing equipment and supplies, and manufacturing tire repair products and traffic markings)[89][90][91] Segment Performance – Q1 2025 vs Q1 2024 (Dollars in thousands) | Metric | Material Handling (2025) | Distribution (2025) | Corporate (2025) | Consolidated (2025) | Material Handling (2024) | Distribution (2024) | Corporate (2024) | Consolidated (2024) | | :------------------------------------ | :----------------------- | :-------------------- | :--------------- | :-------------------- | :----------------------- | :-------------------- | :--------------- | :-------------------- | | Net sales | $157,672 | $49,246 | — | $206,750 | $152,225 | $54,894 | — | $207,102 | | Cost of sales | $102,756 | $35,084 | — | $137,672 | $105,146 | $37,704 | — | $142,833 | | Selling, general and administrative expenses | $21,467 | $13,964 | $9,324 | $44,755 | $19,641 | $15,689 | $11,783 | $47,113 | | Operating income (loss) | $27,381 | $(1,181) | $(9,550) | $16,650 | $22,256 | $605 | $(11,982) | $10,879 | | Total assets | $734,577 | $98,941 | $50,324 | $883,842 | $796,713 | $106,601 | $43,822 | $947,136 | | Capital additions, net | $7,953 | $105 | $25 | $8,083 | $5,206 | $380 | $121 | $5,707 | | Depreciation and amortization | $8,846 | $824 | $765 | $10,435 | $7,525 | $773 | $430 | $8,728 | - Foreign business units contributed approximately $11.1 million in sales for Q1 2025, an increase from $9.9 million in Q1 2024[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, liquidity, and capital resources for the quarter ended March 31, 2025, compared to the prior year. It includes forward-looking statements, an executive overview of business segments and the economic environment, and a detailed discussion of key financial results and changes Forward-Looking Statements Highlights the inherent uncertainties and risks associated with the company's financial outlook and future business plans - The report contains forward-looking statements regarding financial outlook, future plans, objectives, business prospects, and anticipated financial performance, which are based on current beliefs and assumptions and involve inherent uncertainties and risks[97] - Specific risk factors include significant increases in raw material costs, competitive environment, changes in U.S. trade policy, production disruptions, new product development, intellectual property protection, price volatility of common stock, strategic growth initiatives, economic downturns, foreign business risks, access to credit financing, equity ownership concentration, claims, litigation, regulatory actions, and unforeseen catastrophic events[98] Executive Overview Provides an overview of the company's operating segments and its strategy for managing current economic uncertainties - Myers Industries operates in two reportable segments: Material Handling (manufacturing plastic, metal, and rubber products like reusable containers, pallets, and ground protection matting) and Distribution (distributing tire servicing equipment and supplies, and manufacturing tire repair products)[100][101] - The current economic environment presents heightened risks from tariffs, inflation, interest rates, volatile commodity costs, supply chain disruptions, and labor availability due to geopolitical factors. The Company believes it is well-positioned to manage these uncertainties with a strong balance sheet, sufficient liquidity, and a diverse product and customer base[102] Results of Operations: Comparison of the Quarter Ended March 31, 2025 to the Quarter Ended March 31, 2024 Analyzes the company's financial performance, including net sales, gross profit, operating expenses, and net income Net Sales by Segment (Dollars in thousands) | Segment | Q1 2025 | Q1 2024 | Change | % Change | | :---------------- | :------ | :------ | :----- | :------- | | Material Handling | $157,672 | $152,225 | $5,447 | 3.6% | | Distribution | $49,246 | $54,894 | $(5,648) | (10.3)% | | Inter-company sales | $(168) | $(17) | $(151) | | | Total net sales | $206,750 | $207,102 | $(352) | (0.2)% | - Total net sales decreased by 0.2% due to lower pricing ($6.0 million), lower volume ($0.2 million), and unfavorable currency translation ($0.6 million), partially offset by $6.4 million incremental sales from the Signature acquisition[103] - Gross profit increased by $4.8 million (7.5%) to $69.1 million, with gross margin improving to 33.4% from 31.0%. This was driven by benefits from the Signature acquisition, favorable mix, and lower material costs, partially offset by lower volume and pricing[106] - Selling, general and administrative (SG&A) expenses decreased by $2.4 million (5.0%) to $44.8 million, primarily due to lower acquisition and integration costs, variable selling expenses, legal fees, and salaries, partially offset by incremental SG&A from Signature and higher restructuring costs[107] - Net interest expense increased by $1.3 million (21.5%) to $7.4 million, mainly due to higher average outstanding borrowings from the Signature acquisition, partially offset by a lower weighted-average borrowing rate of 7.59% (down from 8.93%)[111] - The effective tax rate decreased to 26.5% from 27.0%, driven by higher fixed non-deductible expenses in the prior year[112] Liquidity and Capital Resources Examines the company's cash position, operating cash flow, investing activities, financing activities, and debt compliance - The Company's primary sources of liquidity are cash on hand ($35.3 million at March 31, 2025), cash generated from operations, and $231.7 million available under the Amended Loan Agreement. Total outstanding debt was $391.8 million[113] - Net cash provided by operating activities decreased to $10.1 million in Q1 2025 from $20.3 million in Q1 2024, primarily due to changes in working capital (increases in accounts receivable and inventories, partially offset by increases in accounts payable)[114] - Net cash used for investing activities significantly decreased to $8.0 million in Q1 2025 from $354.5 million in Q1 2024, as the prior year included the $348.3 million Signature acquisition. Capital expenditures increased to $8.1 million from $5.7 million[115] - Net cash provided by financing activities decreased to $1.0 million in Q1 2025 from $336.9 million in Q1 2024, primarily because Q1 2024 included $400 million proceeds from the Term Loan A for the Signature acquisition. Q1 2025 included $13.0 million net borrowings on the revolving credit facility, $5.0 million Term Loan A repayments, and $1.0 million for common stock repurchases[116] - The Company repaid $38.0 million of senior unsecured notes in Q1 2024. The Amended Loan Agreement, which facilitated the Signature acquisition, provided a new $400 million Term Loan A. An interest rate swap was entered into on May 2, 2024, to mitigate variable interest rate risk on $190.0 million notional debt[117][118][120] Debt Covenants as of March 31, 2025 | Covenant | Required Level | Actual Level | | :---------------------- | :------------- | :----------- | | Interest Coverage Ratio | 3.00 to 1 (minimum) | 3.95 | | Net Leverage Ratio | 3.25 to 1 (maximum) | 2.77 | - The Company does not have any off-balance sheet arrangements that are reasonably expected to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources[123] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the Company's exposure to various market risks, including interest rate risk, foreign currency exchange risk, and commodity price risk, and describes the strategies employed to manage these exposures - The Company is exposed to interest rate risk due to floating rate financing arrangements. A 1% change in market interest rates would change annual variable interest expense by approximately $2.0 million based on current debt levels. An interest rate swap mitigates this risk, effectively fixing rates on a portion of debt, where a 1% change would impact annual fixed rate interest expense on the swap by approximately $5.9 million[124][125] - Foreign currency exchange risk primarily arises from operations in Canada and the United Kingdom with U.S. dollar sales. The Company has a systematic program to limit exposure, typically using short-term contracts, but had no foreign currency arrangements in place at March 31, 2025[126] - The Company faces commodity price risk from raw materials, mainly plastic resins, and natural gas. It currently has no derivative contracts to hedge raw material pricing, and significant future increases in plastic resin costs could materially impact financial results[127] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and confirms that there have been no material changes in internal control over financial reporting during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2025[129] - There have been no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[130] Part II — Other Information Provides additional information on legal proceedings, equity sales, other disclosures, and exhibits filed with the report Item 1. Legal Proceedings This section refers to Note 10, Contingencies, for detailed information on legal proceedings and reiterates management's belief that these matters will not have a material adverse effect on the Company's financial position, results of operations, or cash flows - Legal proceedings are discussed in detail in Note 10, Contingencies, of the Unaudited Condensed Consolidated Financial Statements[132] - Management believes that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on the Company's consolidated financial position, results of operations, or cash flows[132] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's stock repurchase activities during the quarter ended March 31, 2025, including details of the newly authorized 2025 Repurchase Program - The Board authorized a new 2025 Repurchase Program on February 27, 2025, for up to $10.0 million in common stock, effective March 10, 2025. This program replaced the previously authorized 2013 repurchase program[134] Stock Repurchase Activity (Q1 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs | Maximum dollar value of Shares that may yet be Purchased Under the Plans or Programs | | :---------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :-------------------------------------------------------------------- | | 1/1/2025 to 1/31/2025 | — | $— | 5,547,665 | N/A | | 2/1/2025 to 2/28/2025 | — | — | 5,547,665 | N/A | | 3/1/2025 to 3/10/2025 | — | — | 5,547,665 | N/A | | 3/10/2025 to 3/31/2025 | 76,800 | $13.00 | 76,800 | $9,001,684 | Item 5. Other Information This section confirms that no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the first quarter of 2025 - During the three months ended March 31, 2025, none of the Company's directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any 'non-Rule 10b5-1 trading arrangement'[134] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, stock award agreements, certifications, and the interactive data file - Key exhibits filed include the Second Amended and Restated Articles of Incorporation, Amended and Restated Code of Regulations, Forms of 2025 Restricted Stock Unit and Performance Stock Unit Award Agreements, Certifications by the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and the Cover Page Interactive Data File (XBRL)[136] Signature This section contains the formal signature block for the Form 10-Q report, indicating its official submission - The report was signed on May 1, 2025, by Grant E. Fitz, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) of Myers Industries, Inc.[140]