the coming quarters, we anticipate a corresponding normalization in customer order activity and broader-end market demand beginning in the first half of 2025.”
“While our third quarter performance was below expectations, we continue to advance initiatives to grow market share across our key vertical markets, while deploying operational rigor across the organization, consistent with the strategy outlined at our Investor Day,” continued Reddy. “These actions, together with realized synergies from our MSA acquisition, position us to achieve our 2026 financial targets of $750 million to $850 million of net sales and Adjusted EBITDA margins of between 14% and 16%.”
“As previously announced, we settled an ongoing legal dispute with one of our former customers, which resulted in MEC receiving a gross cash settlement of $25.5 million in the fourth quarter of this year,” said Reddy. “I am pleased with this outcome, and I am grateful for the hard work of our team in helping us resolve this matter in a way that benefits all stakeholders. We will utilize some of the proceeds of the settlement to pay down debt and a portion of the proceeds for share repurchases. Our strengthening financial position will allow us to further focus on the execution of our long-term strategy going forward."
“Our strong, consistent free cash flow generation continues to provide us with significant balance sheet optionality,” continued Reddy. “Exiting the third quarter, our net leverage stood at 1.6x, well within our targeted range of 1.5 to 2.0x, while total cash and availability on our credit facility was more than $135 million. We remain highly disciplined in our approach to capital allocation, prioritizing debt repayment, opportunistic share repurchases, and accretive strategic acquisitions with compelling synergy potential. Entering the next demand cycle, MEC remains focused on targeted organic and inorganic expansion within high-value, emerging growth markets that position us to create long-term value for both our shareholders and customers.”
PERFORMANCE SUMMARY
Net sales decreased by 14.4% on a year-over-year basis in the third quarter 2024, due to a decrease in customer demand across all the Company’s key end-markets and customer de-stocking channel inventory, partly offset by incremental volumes associated with ongoing new project ramp-ups.
Manufacturing margin was $17.1 million in the third quarter of 2024, or 12.6% of net sales, as compared to $19.0 million, or 12.0% of net sales, in the prior year period. The year-over-year decrease in manufacturing margin was primarily attributable to lower customer demand, partially offset by the Company’s MBX initiatives, commercial pricing actions and self-help initiatives, most notably, a 12% reduction in its labor force. These efforts resulted in a 60 basis-point improvement in manufacturing margin as a percentage of net sales.
Other selling, general and administrative expenses were $7.6 million in the third quarter of 2024 as compared to $8.6 million for the same prior year period. The decrease in these expenses during the third quarter primarily reflects the reduction in legal costs associated with litigation with the former fitness customer and non-recuring costs associated with the acquisition of Mid-States Aluminum in the prior year period.
Interest expense was $2.7 million in the third quarter of 2024, as compared to $3.9 million in the prior year period, due to a decrease in borrowings and lower interest rates relative to the prior year period.
Net income for the third quarter of 2024 was $3.0 million, or $0.14 per diluted share, versus $1.4 million, or $0.07 per diluted share, in the prior-year period.
MEC reported Adjusted EBITDA of $17.1 million in the third quarter of 2024, or 12.6% of net sales, versus $19.2 million, or 12.1% of net sales, in the prior-year period. The decrease in Adjusted EBITDA reflects the impact of reduced customer demand, while the increase in Adjusted EBITDA margin was driven by the Company’s efforts to reduce costs in response to customer demand.