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Text: If you've not yet received a copy of the release, you can access it on our website at www.
It's under the Investor Relations tab.
These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are based on management's current expectations and involve risks, uncertainties and other factors which may cause results to differ materially from those expressed or implied in these statements.
Further information concerning these risks, uncertainties and other factors are set forth in the company's periodic SEC filings and may be found in the company's 10-K and 10-Q filings.
Today, I'm excited to report strong volume growth resulting from robust end-market demand.
Sales were up 43% year-over-year, and this is the strongest growth Myers has obtained in over a decade.
This demand appears to be sustainable.
Strong end markets, a reengineered commercial organization and a new go-to-market model are delivering results.
Our new strategy, combined with successful execution of our self-help initiatives, set the stage for a solid 2021 and beyond.
I'm entering my second year at Myers, and I continue to see significant opportunities in our functions, businesses and end markets.
It continues to be the most exciting opportunity I've seen in my career.
Without further delay, let's get into the details.
As I mentioned, sales were up 43% year-over-year, driven by strong growth in both the Material Handling and Distribution Segments and a meaningful contribution from the Elkhart acquisition.
All end markets experienced healthy growth.
Specifically, sales were up significantly in our vehicle end market as a result of continued momentum in the RV and marine markets.
Wholesale RV shipments were up 79% in March and are projected to reach a record high in 2021.
We also saw increased demand and double-digit growth in the auto aftermarket, food and beverage, consumer and industrial end markets.
On an organic basis, sales were up 21%.
Despite strong volume growth in -- volume and revenue growth, gross margins were impacted by higher raw material costs in the quarter.
In response to the significant increases in raw material costs, partly due to Winter Storm Uri, we announced an 8% price increase across a broad portfolio of our products effective March 1.
Then in response to continued raw material pressure and a tight supply chain, we announced a second price increase of 9% to 12% effective April 1.
With these increases, we aim to protect, and in some cases, enhance our margins.
Due to the top line momentum we are seeing and robust demand and the additional pricing actions we announced since our last call, we continue to be optimistic in our ability to manage through this dynamic environment.
As a result, we are raising our full year sales guidance and now expect to be at the higher end of our previously provided earnings guidance.
Sonal will provide the details during our financial summary.
And after our comments, I will provide an update on the actions we've taken to execute our strategy.
Starting with the first quarter financial summary on slide four.
Net sales were up $52 million, an increase of 43%.
Excluding the impact of the Elkhart acquisition, organic net sales increased 21% due to volume mix.
Sales increased in both material handling and distribution segments as well as all key end markets and contributed to the strong organic growth.
Price and FX accounted for 1% of the net sales growth.
Adjusted gross profit was up $7.9 million, while gross margin decreased from 34.8% in the prior year to 28.9% in the quarter.
Margin was negatively impacted by an unfavorable price-to-cost relationship, unfavorable sales mix and higher manufacturing costs during the quarter.
The addition of Elkhart benefited profit but contributed to the unfavorable sales mix impacting gross margin.
As a reminder, we are targeting $4 million to $6 million in annual cost synergies over the course of the upcoming two years.
Additionally, we are encouraged by the growth synergies we have started to realize as we operate as One Myers.
Adjusted operating income increased slightly to $11.9 million.
The increase in gross profit was mostly offset by higher SG&A expenses, driven by the addition of Elkhart and higher incentive compensation costs, legal and professional fees and selling expenses.
Adjusted EBITDA was $17 million, a decline of $400,000 compared to the prior year.
Adjusted EBITDA margin was 9.8%.
And lastly, adjusted earnings per share was $0.22, flat compared to the prior year.
Turning now to slide five for an overview of segment performance.
Beginning with Material Handling, net sales increased $46 million or 55%, including the Elkhart acquisition.
On an organic basis, sales were up 22%, driven by strong volume mix.
Price and FX accounted for 1% of the growth.
Excluding Elkhart, sales were up double digits in the vehicle, food and beverage, consumer and industrial markets, driven by increased demand.
Material Handling adjusted operating income increased 12% to $16.9 million, driven by higher sales volume and the addition of Elkhart, which were mostly offset by an unfavorable price-to-cost relationship, unfavorable sales mix and higher manufacturing expenses, incentive compensation costs and legal and professional fees.
In the Distribution Segment, sales increased $6 million or 17%, driven by both equipment and consumable sales.
Distribution's adjusted operating income increased 5% to $2 million, primarily as a result of higher sales volume, partially offset by an unfavorable sales mix and unfavorable price-to-cost relationship and higher incentive compensation costs.
Turning to slide six.
Cash provided by operating activities was $6.6 million, an increase of $1.6 million over the prior year, reflecting the benefit of working capital.
Free cash flow decreased $1.1 million to $1.4 million, reflecting an increase in capital expenditures year-over-year.
Our balance sheet remains strong.
Cash on hand at quarter end was $16.6 million.
Based on our trailing 12-month adjusted EBITDA of $66 million, leverage was 1.2 times.
In mid-March, we amended and extended our credit facility, upsizing our borrowing capacity from $200 million to $250 million and extending the maturity date to March 2024, ultimately providing greater flexibility in our capital structure.
Turning to slide seven.
Let me now provide information on our revised outlook for fiscal 2021.
Reported net sales are anticipated to increase in the high 30% range, including an incremental 10.5 months of sales related to the Elkhart acquisition.
As a reminder, Elkhart's net sales at the time of acquisition were approximately $100 million.
The increase in net sales from our previous guidance, which was mid- to high 20% sales growth, incorporates the strength experienced in the first quarter, along with continued sales momentum expected throughout the year.
Additionally, the outlook includes the anticipated impact of the second price increase effective April one taken in response to continued increases in resin and steel costs.
From a quarterly cadence, recall that our prior year second quarter sales were significantly impacted by the slowdown due to COVID-19, particularly impacting our industrial and distribution businesses.
Given this comp, we expect strong sales growth in Q2 on a quarter-over-quarter basis.
With respect to margins, our price increases generally take a quarter or so to start flowing through our results.
Given this lag in price realization, we will continue to experience higher cost versus price in the first half of the year, but expect that relationship to turn favorable in the second half of the year as raw material costs flatten and eventually decline.
As demonstrated, our teams will continue to take pricing actions as necessary to mitigate the impact of cost increases.
SG&A expenses are now expected to approximate 23% of net sales benefiting from larger scale and the increase in our sales outlook.
Below operating income, we are projecting approximately $4 million of interest expense and an effective tax rate of 26%.
Our guidance reflects a weighted average share count of 36.5 million shares.
Taking all of these assumptions into account, we are reaffirming our 2021 outlook for adjusted earnings per share of $0.90 to $1.05 per share with growing confidence of achieving the higher end of the range.
Other key assumptions impacting EBITDA and cash flow include depreciation and amortization expenses of approximately $23 million and capex of approximately $15 million.
capex is expected to trend higher than past years with our renewed focus on investing in our facilities.
In closing, let me reiterate that we are encouraged by the sustainability of economic rebound and the impact on our business.
Every time I talk about Myers, I highlight two documents: our long-term road map for the company, and the execution plan to make it a reality.
And today is no exception.
On our long-term road map, we're currently in Horizon 1, which is based on three elements: self-help, organic growth and bolt-on M&A.
These three elements go well together.
I've used this approach many times over the past 20 years to kick-start and deliver business transformations.
Self-help consists of meaningful improvements in purchasing, pricing and SG&A optimization.
Self-help is important because it typically has a sizable financial impact, and I like it because it's largely within our control.
Self-help generates the cash and the returns that will be used to fund the two growth components, organic and M&A.
In terms of organic growth at Myers, we are driving change and delivering results.
We are strengthening our commercial processes, talent and capabilities.
We are investing in e-commerce.
We're changing how we go to market.
Under the One Myers approach, we now go to market as a single company instead of several disconnected independent businesses.
This scale brings strength.
We are one of the only companies that has expertise in the four major plastic molding technologies: rotational molding, injection molding, blow molding and thermoforming.
We now bring all of these solutions to our customers.
The approach delivers value to our customers and growth for Myers.
Our third element, bolt-on M&A, is focused on growing our businesses by acquiring companies that build out our current technologies, build on our competitive strengths or shore up our gaps.
We believe significant shareholder value can be unlocked when consolidating fragmented industries, like plastics molding and auto aftermarket distribution.
Myers will be a consolidator in these fragmented industries.
Consolidation should allow us to better serve our customers, provide better opportunities for our employees and better returns for our shareholders.
Once the key elements of Horizon one are in place, we'll move to Horizon 2, where we will execute larger enterprise-level acquisitions.
We continue to expect that when we are ready for Horizon 2, several ideal targets will be coming to market so the timing should work well.
Our long-term vision culminates with Horizon 3, which is focused on growing the company globally.
In order to maximize our potential as a company, we will need to expand globally at scale.
During Horizon one or 2, we will consider global acquisitions if they have the right strategic fit and are executable, though it will likely be Horizon three before we acquire internationally at scale.
Our long-term vision is ambitious but well grounded and focused on building on technologies and markets that we know well.
We still have a lot of work to do, but we have an experienced team, and we are making solid progress.
I won't spend time today reviewing each pillar.
However, I will say that each pillar has well-defined key performance indicators and an individual owner to drive results.
We have a robust internal integration, PMO or program management office, that ensures that KPIs are met.
In the organic growth pillar, we see significant opportunity to grow Myers faster.
We are in the process of implementing an improved commercial structure that standardizes and strengthens our capabilities in sales, marketing and asset and product management.
We recently reorganized our sales structure and launched the new sales training process focused on helping our teams improve their ability to cross-sell and bring all of the Myers solutions to our customers.
In addition, we continue to focus on growing our e-commerce channel.
In order to turbocharge this initiative, we held a summit to refine our strategy and approach to capitalize on the trends in digital and online.
We're investing in our talent pool, and we'll continue to build out our e-commerce team.
As a reminder, our goal for this channel is to be approximately 10% of sales by the end of 2023, and you can expect to hear more about our progress as we proceed through the year.
Moving on to M&A.
We are well under way having strengthened our portfolio with the acquisition of LCAR Plastics last year.
The Elkhart acquisition has exceeded our expectations so far and has been instrumental in helping us further advance our integration playbook and our deal flow.
We continue to build a robust funnel of potential acquisitions and believe that we have a strong opportunity to acquire complementary businesses in the near term.
Now onto our accomplishments in the third pillar, operational excellence.
Operational excellence involves multiple facets of how we work together to improve our performance every day.
One example is our focus on procurement on lowering costs and on securing supply.
Over the past months, supply scarcity has been an issue in the plastics value chain.
Our newly centralized procurement team was able to leverage our scale and their individual relationships to ensure consistent raw material supply.
I have several anecdotes where our purchasing professionals were able to work together, draw upon their individual areas of expertise to ensure Myers receive raw materials even in markets where product was very tight.
On the pricing side, we worked with our customers on a fair and constructive approach to pricing, announcing and implementing our March one and April one price increases.
We will continue to migrate to a value-based pricing approach where we will price to the value our products create with our customers.
We anticipate this approach will deliver margins that will allow us to continue innovating and to continue delivering a high level of service and supply reliability to our customer base.
Moving to the last of our four pillars culture.
In order to execute and achieve breakthrough performance, we need to have a high-performing culture.
Over the past several weeks, we took a significant step forward by holding companywide talent reviews across the organization, so we can build a strong succession planning road map that supports our aggressive growth strategy while developing our employees.
We are seeding our employee base with various experts and leaders from outside the company.
This approach is a catalyst and is accelerating our company's transformation.
At the same time, we're also actively developing our employees and promoting from within.
We have a lot of talent in-house as well.
Part of having a high-performance culture is to have a culture focused on employee safety.
To that end, this spring, we launched a robust companywide safety training curriculum, which includes live and online classes to ensure that we keep safety top of mind and work toward decreasing our incident rate on a year-over-year basis.
In a short period of time, we've made respectable progress against our strategic initiatives.
These work tracks and KPIs will ensure that our strategy comes to life and is delivered.
I will close out today by reinforcing my optimism for Myer's future.
I'm encouraged by the economic recovery we're seeing across all of our end markets.
The demand is there, and it looks to be lasting.
Myers' transformation is under way, and I anticipate it will create significant long-term value for our customers, our employees, our communities and our shareholders.

user
q1 adjusted earnings per share $0.22.
sees fy 2021 adjusted earnings per share $0.90 to $1.05.
sees fy 2021 net sales growth in high 30% range, including impact of elkhart plastics acquisition.

assistant