Myers Industries Inc: Form 10-Q for the period ended Jun 30, 2025

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 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, significant increases in the cost of raw materials or disruption in the availability of raw materials; operating in a very competitive business environment; changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences; physical and other risks that could disrupt production; risks associated with our ability to develop and market new products; risks associated with protecting our intellectual property rights, including our unpatented proprietary know-how and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others; price volatility with our common stock; risks associated with our strategic growth initiatives or the failure to achieve the anticipated benefits of such initiatives; unanticipated downturn in business or inflationary conditions in the U.S. economy or global markets; risks associated with doing business in foreign countries; inability of the Company to maintain access to credit financing; risks associated with equity ownership concentration; claims, litigation and regulatory actions against the Company; changes in laws (including privacy laws), regulations and standards affecting the Company; current and future environmental and other governmental laws and requirements affecting the Company; unforeseen events, including natural disasters, unusual or severe weather events and patterns, public health crises, geopolitical crises, and other catastrophic events; instability in geographies impacted by political events, trade disputes, war, terrorism and other business interruptions; 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, 2024.

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, a leading manufacturer of products that protect the world from the ground up, 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, composite ground protection matting, consumer fuel containers and tanks for water, fuel and waste handling. Products in the Material Handling Segment are primarily injection molded, rotationally molded, compression 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 six months ended June 30, 2025 are discussed below. The current economic environment includes heightened risks from tariffs, 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 rapidly changing regulations which has increased volatility in global commodity markets, including oil (a component of many plastic resins), energy and agricultural commodities. Some of our businesses have been and may continue to be affected by these broader economic effects, including customer demand for our products, supply chain disruptions, labor availability, tariffs and inflation. 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.

Results of Operations:

Comparison of the Quarter Ended June 30, 2025 to the Quarter Ended June 30, 2024

Net Sales:

(dollars in thousands)

Net sales for the quarter ended June 30, 2025 were $209.6 million, a decrease of $10.7 million or 4.8% compared to the quarter ended June 30, 2024. Net sales decreased due to lower pricing of $4.2 million, lower volume of $6.4 million and the effect of unfavorable currency translation of $0.1 million.

Net sales in the Material Handling Segment decreased $7.4 million or 4.4% for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024. Net sales decreased due to lower pricing of $1.6 million, lower volume of $5.7 million and the effect of unfavorable currency translation of $0.1 million.

Net sales in the Distribution Segment decreased $3.3 million or 6.0% for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024, primarily due to lower pricing of $2.6 million and lower volume of $0.7 million.

Cost of Sales & Gross Profit:

(dollars in thousands)

Gross profit decreased $4.9 million, or 6.4%, for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024, due to lower volume and pricing as described under Net Sales above, unfavorable mix and unfavorable cost productivity, partially offset by lower material costs. Gross margin was 33.7% for the quarter ended June 30, 2025 compared with 34.3% for the quarter ended June 30, 2024.

Selling, General and Administrative Expenses:

(dollars in thousands)

Selling, general and administrative (“SG&A”) expenses for the quarter ended June 30, 2025 were $43.4 million, a decrease of $0.8 million or 1.8% compared to the same period in the prior year. Decreases in SG&A expenses for the quarter ended June 30, 2025 were primarily due to a $3.2 million recovery of purchased credit deteriorated assets that was recognized as a reduction to bad debt expense and $0.7 million of lower acquisition and integration costs due to the Signature acquisition as described in Note 3, in addition to $1.4 million of lower salaries and benefits, $1.8 million of lower variable selling expenses, $0.5 million of lower facility costs, $0.3 million of lower commissions and $0.1 million of lower legal and professional fees, partially offset by $1.8 million of higher incentive compensation, $3.8 million of higher restructuring costs as described in Note 4 and a $1.6 million pre-tax pension settlement charge within the Material Handling segment, as described in Note 1.

Depreciation and amortization:

Depreciation and amortization, exclusive of amounts within Cost of sales, decreased $0.4 million to $4.4 million for the quarter ended June 30, 2025 as compared to $4.8 million for the quarter ended June 30, 2024. The decrease was primarily related to asset disposals in conjunction with the facility consolidations, as described in Note 4.

Freight out:

Freight out costs increased $0.1 million to $2.8 million for the quarter ended June 30, 2025 as compared to $2.7 million for the quarter ended June 30, 2024. The increase was primarily related to higher overall freight costs partially offset by lower sales volume.

(Gain) loss on disposal of fixed assets:

The Company recognized $0.1 million of losses on the disposal of fixed assets in both the quarters ended June 30, 2025 and 2024, respectively, primarily related to the sale of fixed assets in the ordinary course of business during the quarter.

Net Interest Expense:

(dollars in thousands)

Net interest expense for the quarter ended June 30, 2025 was $7.4 million, a decrease of $1.6 million, or 18.2%, compared with $9.0 million for the quarter ended June 30, 2024. The lower net interest expense was due to lower average outstanding borrowings and a lower weighted-average borrowing rate for the quarter ended June 30, 2025.

Income Taxes:

(dollars in thousands)

The Company’s effective tax rate was 23.1% and 30.2% for the quarters ended June 30, 2025 and 2024, respectively. The decrease in the effective tax rate is driven by a current year benefit related to the termination of the Company's pension plan and higher fixed non-deductible expenses in the prior year, including expenses related to the Signature acquisition.

Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

Net Sales:

(dollars in thousands)

Net sales for the six months ended June 30, 2025 were $416.3 million, a decrease of $11.0 million or 2.6% compared to the six months ended June 30, 2024. Net sales decreased due to lower pricing of $9.8 million, lower volume of $6.9 million and the effect of unfavorable currency translation of $0.7 million, partially offset by $6.4 million of incremental sales from the acquisition of Signature on February 8, 2024, included in the Material Handling Segment.

Net sales in the Material Handling Segment decreased $1.9 million or 0.6% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Net sales decreased due to lower pricing of $4.5 million, lower volume of $3.1 million and the effect of unfavorable currency translation of $0.7 million, partially offset by $6.4 million of incremental sales from the acquisition of Signature on February 8, 2024.

Net sales in the Distribution Segment decreased $8.9 million or 8.2% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to lower pricing of $5.2 million and lower volume of $3.7 million.

Cost of Sales & Gross Profit:

(dollars in thousands)

Gross profit was flat for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, as the benefits of the acquisition of Signature on February 8, 2024 and lower material costs were fully offset by lower volume and pricing as described under Net Sales above, unfavorable mix and unfavorable cost productivity. Gross margin was 33.6% for the six months ended June 30, 2025 compared with 32.7% for the six months ended June 30, 2024.

Selling, General and Administrative Expenses:

(dollars in thousands)

Selling, general and administrative (“SG&A”) expenses for the six months ended June 30, 2025 were $88.1 million, a decrease of $3.1 million or 3.4% compared to the same period in the prior year. Decreases in SG&A expenses for the six months ended June 30, 2025 were primarily due to a $3.2 million recovery of purchased credit deteriorated assets that was recognized as a reduction to bad debt expense and $4.1 million of lower acquisition and integration costs due to the Signature acquisition as described in Note 3, in addition to $3.5 million of lower variable selling expenses, $2.5 million of lower salaries and benefits, $1.2 million of lower legal and professional fees, $0.7 million of lower facility costs and $0.4 million of lower commissions, partially offset by $3.1 million of incremental SG&A from the acquisition of Signature on February 8, 2024, $2.3 million of higher incentive compensation $5.6 million of higher restructuring costs as described in Note 4 and a $1.6 million pre-tax pension settlement charge within the Material Handling segment, as described in Note 1.

Depreciation and amortization:

Depreciation and amortization, exclusive of amounts within Cost of sales, increased $0.2 million to $8.9 million for the six months ended June 30, 2025 as compared to $8.7 million for the six months ended June 30, 2024. The increase was primarily related to the acquisition of Signature on February 8, 2024.

Freight out:

Freight out costs increased $0.5 million to $5.6 million for the six months ended June 30, 2025 as compared to $5.1 million for the six months ended June 30, 2024. The increase was primarily related to higher overall freight costs partially offset by lower sales volume.

(Gain) loss on disposal of fixed assets:

During the six months ended June 30, 2025 the Company recognized $0.5 million of losses on the disposal of fixed assets primarily related to fixed asset impairments and the disposal of fixed assets in conjunction with the previously announced facility consolidations as described in Note 4. During the six months ended June 30, 2024 the Company recognized $0.1 million of losses on the disposal of fixed assets primarily related to the sale of fixed assets.

Net Interest Expense:

(dollars in thousands)

Net interest expense for the six months ended June 30, 2025 was $14.8 million, a decrease of $0.3 million, or 2.2%, compared with $15.1 million for the six months ended June 30, 2024. The lower net interest expense was due to higher average outstanding borrowings as a result of the acquisition of Signature, which was funded through an amendment and restatement of Myers' existing loan agreement discussed below, offset by a lower weighted-average borrowing rate for the six months ended June 30, 2025.

Income Taxes:

(dollars in thousands)

The Company’s effective tax rate was 24.5% and 29.4% for the six months ended June 30, 2025 and 2024, respectively. The decrease in the effective tax rate is driven by a current year benefit related to the termination of the Company's pension plan and higher fixed non-deductible expenses in the prior year, including expenses related to the Signature acquisition.

Liquidity and Capital Resources:

The Company’s primary sources of liquidity are cash on hand, cash generated from operations and availability under the Amended Loan Agreement (defined below). At June 30, 2025, the Company had $41.3 million of cash, $239.7 million available under the Amended Loan Agreement and outstanding debt of $379.1 million, including the finance lease liability of $8.3 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 Amended Loan Agreement will be sufficient to meet expected business requirements including capital expenditures, dividends, working capital, debt service, and to fund future growth.

Operating Activities

Net cash provided by operating activities was $38.4 million for the six months ended June 30, 2025, compared to $34.6 million in the same period in 2024. The increase was primarily due to changes in working capital, primarily due to decreases in accounts receivable and accounts payable, partially offset by increases in inventories. Cash generated from working capital was $1.3 million for the six months ended June 30, 2025, compared to cash used for working capital of $3.7 million in the prior year to date period.

Investing Activities

Net cash used for investing activities was $11.5 million for the six months ended June 30, 2025 compared to cash used of $358.4 million for the same period in 2024. In 2024, the Company paid $348.3 million to acquire Signature, net of cash acquired and working capital adjustments, as discussed in Note 3. Capital expenditures were $11.7 million and $10.1 million for the six months ended June 30, 2025 and 2024, respectively. Full year 2025 capital expenditures are expected to be approximately 3% of revenue.

Financing Activities

Cash used by financing activities was $17.5 million for the six months ended June 30, 2025 compared to cash provided by financing activities of $331.0 million for the same period in 2024. Net borrowings (repayments) of the Company's revolving credit facility were $5.0 million and $(7.0) million for the six months ended June 30, 2025 and 2024, respectively. The company also made scheduled repayments of the Term Loan A totaling $10.0 million and $5.0 million for the six months ended June 30, 2025 and 2024, respectively. Net proceeds from the issuance of common stock in connection with incentive stock exercises were $0.6 million and $2.8 million for the six months ended June 30, 2025 and 2024, respectively. Cash paid for tax withholdings on vesting of stock compensation totaled $0.9 million and $2.0 million for the six months ended June 30, 2025 and 2024, respectively. The company also used $1.5 million for the repurchase of its common stock, as described in Note 8. In connection with the Signature acquisition in 2024, the Company received proceeds of $400 million under a new term loan facility and repaid $38.0 million of senior unsecured notes in conjunction with an amendment and restatement to the Loan Agreement described below. Fees paid for the amendment and restatement to the Loan Agreement in February 2024 totaled $9.2 million. The Company also used cash to pay dividends of $10.4 million for both the six months ended June 30, 2025 and 2024.

Credit Sources

Repayment and termination of Senior Unsecured Notes

On January 12, 2024, the Company repaid $26.0 million of senior unsecured notes upon maturity using cash on hand and availability under the Loan Agreement. On February 6, 2024, in connection with the first amendment and restatement to the Loan Agreement described below, the Company prepaid the remaining $12.0 million face value of senior unsecured notes, which were due January 15, 2026, using availability under the revolving credit facility under the Loan Agreement. After giving effect to the payment in full, all outstanding senior unsecured notes under the Note Purchase Agreement have been paid and the Note Purchase Agreement has been terminated. In conjunction with the termination the Company recognized a loss on debt extinguishment of $0.1 million, primarily representing the make-whole fees on the senior unsecured notes and the unamortized value of the original issuance discount.

First Amendment to Loan Agreement

On February 8, 2024, the Company entered into Amendment No. 1 to the Seventh Amended and Restated Loan Agreement (“Amendment No. 1”), which amended the Seventh Amended and Restated Loan Agreement (the "Loan Agreement” – see also Note 11) dated September 29, 2022 (collectively, the “Amended Loan Agreement”). Amendment No. 1, among other things, permitted the acquisition of Signature Systems and provided a new 5-year $400 million term loan facility (“Term Loan A”). Term Loan A will amortize in eight quarterly installment payments of $5 million beginning June 30, 2024, quarterly installment payments of $10 million thereafter, and any remaining balance due upon maturity. Term Loan A may be voluntarily prepaid at any time, in whole or in part, without penalty or premium, however, all amounts repaid or prepaid in respect of Term Loan A may not be reborrowed.

Amendment No. 1 did not change the existing revolving credit facility’s maturity date or $250 million borrowing limit, which includes a letter of credit subfacility and swingline subfacility. In connection with Amendment No. 1, the Company incurred deferred financing fees of $9.2 million.

On May 2, 2024, the Company entered into an interest rate swap agreement to mitigate the variable interest rate risk of borrowings under the Amended Loan Agreement. The swap has a beginning notional value of $200.0 million, which reduces proportionately with scheduled Term Loan A amortization payments, and has a final maturity date of January 31, 2029. At June 30, 2025, the remaining notional value of the Company's interest rate swap totaled $187.5 million. The swap is designated as a cash flow hedge and effectively results in a fixed rate of 4.606% plus the applicable margin for the hedged debt, as described in Notes 1 and 11.

As of June 30, 2025, $239.7 million was available under the Amended Loan Agreement, after borrowings and the Company had $5.3 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business. Borrowings under the Amended Loan Agreement bear interest at the Term SOFR, RFR, SONIA, EURIBOR and CORRA-based borrowing rates.

As of June 30, 2025, the Company was in compliance with all of its debt covenants. The most restrictive financial covenants for all of the Company’s debt are a net leverage ratio (defined as net 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). The ratios as calculated under the terms of the Amended Loan Agreement as of and for the period ended June 30, 2025 are shown in the following table:

30

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 June 30, 2025.

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 Amended Loan Agreement bear interest at the Term SOFR, RFR, SONIA, EURIBOR and CORRA-based borrowing rates. Based on current debt levels at June 30, 2025, if market interest rates decrease or increase one percent, the Company’s annual variable interest expense would change by approximately $1.9 million.

The Company has entered into an interest rate swap agreement to mitigate the variable interest rate risk under the Amended Loan Agreement, which effectively results in a fixed rate debt on a portion of its outstanding borrowings. Based on current debt levels at June 30, 2025, if market interest rates decrease or increase one percent, the Company's annual fixed rate interest expense on the fair value of the interest rate swap would change by approximately $5.5 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 and the United Kingdom with foreign currency exposure, primarily due to U.S. dollar sales made from businesses in Canada and the United Kingdom 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 and the United Kingdom 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 June 30, 2025, 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 June 30, 2025. 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.

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 June 30, 2025.

Changes in Internal Control Over Financial Reporting

During the six months ended June 30, 2025, 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.