Nov 7, 2017   SOURCE: BusinessWire

Myers Industries Reports 2017 Third Quarter Results

Myers Industries, Inc. (NYSE: MYE) today announced results for the third quarter ended September 30, 2017.

Third Quarter 2017 Business Highlights

  • Net sales increased 8.6% (or 8.1% excluding currency fluctuation) compared to the third quarter of 2016
  • Gross profit margin of 28.3% compared to 27.1% in the third quarter of 2016
  • GAAP net income per diluted share from continuing operations of $0.11, compared to $0.01 in the third quarter of 2016
  • Adjusted net income per diluted share from continuing operations of $0.11, compared to $0.04 in the third quarter of 2016
  • Generated cash from continuing operations of $12.5 million and free cash flow of $9.7 million
  • Company raises full-year net sales outlook to low single-digit growth vs. previous outlook of flat sales year-over-year

The Company reported net sales of $144.1 million, compared to $132.7 million in the third quarter of 2016. Gross profit margin increased 120 basis points to 28.3% as compared to the prior year quarter, primarily due to the higher sales volume and favorable sales mix, partially offset by restructuring expenses and higher material costs in the Material Handling Segment. Excluding restructuring expenses, gross profit margin increased 250 basis points to 29.6% as compared to the prior year quarter. Selling, general and administrative expenses increased by $3.8 million to $36.4 million, in the third quarter of 2017, with the increase in expenses primarily attributable to higher incentive compensation costs.

President and Chief Executive Officer Dave Banyard commented, “We are very pleased with the progress we are making towards transforming Myers Industries. Our third-quarter results continue to demonstrate the improved cash flow generation potential of our business. Strong revenue growth in the quarter was driven by improved demand in our food and beverage end market, as well as increased sales of fuel cans in our consumer market associated with the recent hurricane season. Lean initiatives implemented over the prior year resulted in operating margin expansion and stronger cash flow during the quarter, and we are pleased with our free cash flow of $31.0 million year-to-date as compared to $7.1 million last year. We will continue to pursue opportunities to grow our business in targeted niche markets, and we are well positioned for sustained improvements in long-term financial and operating performance.”

   
Quarter Ended September 30, Nine Months Ended September 30,
    % Increase     % Increase
2017 2016 (Decrease) 2017 2016 (Decrease)
(Dollars in thousands, except per share data)  
Net sales $ 144,075 $ 132,676   8.6 % $ 428,081 $ 427,998 0.0 %
Gross profit $ 40,739 $ 35,918 13.4 % $ 122,025 $ 128,625 (5.1 )%
Gross profit margin 28.3 % 27.1 % 28.5 % 30.1 %
Operating income $ 7,111 $ 2,986 138.1 % $ 20,049 $ 15,281 31.2 %
Income from continuing operations:
Income (loss) $ 3,276 $ 424 --- $ 8,416 $ 2,772 203.6 %
Income (loss) per diluted share $ 0.11 $ 0.01 --- $ 0.28 $ 0.09 211.1 %
 
Operating income as adjusted(1) $ 6,998 $ 3,883 80.2 % $ 24,990 $ 27,278 (8.4 )%
Income from continuing operations as adjusted(1):
Income (loss) $ 3,336 $ 1,195 179.3 % $ 12,445 $ 13,563 (8.2 )%
Income (loss) per diluted share $ 0.11 $ 0.04 175.0 % $ 0.41 $ 0.45 (8.9 )%
 

(1) Details regarding the adjusted charges are provided on the Reconciliations of Non-GAAP Financial Measures included in this release.

Segment Results

Net sales in the Material Handling Segment increased 15.8% (or 15.1% excluding currency fluctuation) as compared to the third quarter of 2016. The increase in net sales was primarily due to increased volume in the Company’s food and beverage and consumer end markets. GAAP operating income was $10.3 million compared to $4.4 million in the third quarter of 2016. GAAP operating income in the third quarter of 2017 included a gain on the sale of an asset of $2.8M and restructuring and related charges of $2.3 million. Adjusted operating income was $9.9 million compared to $4.7 million in the third quarter of 2016. The increase in adjusted operating income was primarily the result of higher sales volumes, price, and a favorable sales mix, partially offset by higher material and compensation costs.

Net sales in the Distribution Segment declined 6.5% as compared to the third quarter of 2016. The decrease in net sales was primarily the result of the Company’s planned exit from a low-margin custom product in the Patch Rubber business. Net sales in the Myers Tire Supply business were down 1.2% compared to prior year as the organization continues to improve sales force effectiveness. Operating income was $3.2 million compared to $3.3 million in the third quarter of 2016.

2017 Outlook

The Company has revised its fiscal year 2017 outlook. The Company now anticipates that total revenue will be up low single digits on a constant currency basis in 2017 as compared to the prior year due to continued strength in the food and beverage and consumer end markets. This compares to the Company’s previous expectations for flat sales compared to the prior year. Capital expenditures are now expected to be in the range of $7 to $9 million, net interest expense in the range of $7 to $8 million, depreciation and amortization in the range of $32 to $34 million, and an effective tax rate (normalized) of approximately 36%.

Conference Call Details

The Company will host an earnings conference call and webcast for investors and analysts on Tuesday, November 7, at 10:00 a.m. ET. The call is anticipated to last approximately one hour and may be accessed at: (US) 833-233-3452 or (Int’l) 647-689-4129. The Conference ID # is 7289448. Callers are asked to sign on at least five minutes in advance. The live webcast of the conference call can be accessed from the Investor Relations section of the Company's website at www.myersindustries.com. Click on the Investor Relations tab to access the webcast. Webcast attendees will be in a listen-only mode. An archived replay of the call will also be available on the site shortly after the event. To listen to the telephone replay, callers should dial: (US) 800-585-8367 or (Int’l) 416-621-4642. The Conference ID # is 7289448.

Use of Non-GAAP Financial Measures

The Company uses certain non-GAAP measures in this release. Adjusted net income per diluted share from continuing operations, income from continuing operations as adjusted, adjusted income per diluted share from continuing operations, operating income as adjusted, adjusted operating income, adjusted EPS, adjusted EBITDA and free cash flow are non-GAAP financial measures and are intended to serve as a supplement to results provided in accordance with accounting principles generally accepted in the United States. Myers Industries believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

About Myers Industries

Myers Industries, Inc. is an international manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets. The Company is also the largest distributor of tools, equipment and supplies for the tire, wheel and under vehicle service industry in the United States. Visit www.myersindustries.com to learn more.

Caution on Forward-Looking Statements

Statements in this release may include “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that is not of historical fact may be deemed “forward-looking”. Words such as “expect”, “believe”, “project”, “plan”, “anticipate”, “intend”, “objective”, “goal”, “view” and similar expressions identify forward-looking statements. These statements are based on management's current views and assumptions of future events and financial performance and involve a number of risks and uncertainties, many outside of the Company's control that could cause actual results to materially differ from those expressed or implied. Risks and uncertainties include: 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; unexpected failures at our manufacturing 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; and other risks as detailed in the Company's 10-K and other reports filed with the Securities and Exchange Commission. Such reports are available on the Securities and Exchange Commission's public reference facilities and its website at www.sec.gov, and on the Company's Investor Relations section of its website at www.myersindustries.com. Myers Industries undertakes no obligation to publicly update or revise any forward-looking statements contained herein. These statements speak only as of the date made.

   
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except share data)
 
Quarter Ended Nine Months Ended
September 30,   September 30,

September 30,

  September 30,
2017 2016

2017

2016
Net sales $ 144,075 $ 132,676 $ 428,081 $ 427,998
Cost of sales   103,336   96,758   306,056   299,373
Gross profit 40,739 35,918 122,025 128,625
Selling, general and administrative expenses 36,391 32,617 105,560 103,087
(Gain) loss on fixed asset sales (2,763 ) 315 (4,128 ) 383
Impairment charges   -   -   544   9,874
Operating income 7,111 2,986 20,049 15,281
Interest expense, net   1,785   2,015   5,545   6,087
Income (loss) from continuing operations before income taxes 5,326 971 14,504 9,194
Income tax expense (benefit)   2,050   547   6,088   6,422
Income (loss) from continuing operations 3,276 424 8,416 2,772
Income (loss) from discontinued operations, net of income taxes   (19 )   (10 )   (52 )   (257 )
Net income (loss) $ 3,257 $ 414 $ 8,364 $ 2,515
Income (loss) per common share from continuing operations:
Basic $ 0.11 $ 0.01 $ 0.28 $ 0.09
Diluted $ 0.11 $ 0.01 $ 0.28 $ 0.09
Income (loss) per common share from discontinued operations:
Basic $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
Diluted $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
Net income (loss) per common share:
Basic $ 0.11 $ 0.01 $ 0.28 $ 0.08
Diluted $ 0.11 $ 0.01 $ 0.28 $ 0.08
Weighted average common shares outstanding:
Basic 30,266,838 29,849,005 30,149,818 29,682,798
Diluted 30,651,943 30,075,478 30,524,161 29,949,711
 
     
MYERS INDUSTRIES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONSOLIDATED GROSS PROFIT (UNAUDITED)
(Dollars in thousands)
 
Quarter Ended   Nine Months Ended
September 30,     September 30, September 30,     September 30,
2017 2016 2017 2016
Gross profit as reported $ 40,739 $ 35,918 $ 122,025 $ 128,625
Restructuring expenses and other adjustments in cost of sales
Material Handling Segment 1,879 - 7,077 -
Distribution Segment   -   -   -   -
Gross profit as adjusted $ 42,618 $ 35,918 $ 129,102 $ 128,625
 

Note on Reconciliation of Income and Earnings Data: Gross profit excluding the items above in the text of this presentation and in this reconciliation chart is a non-GAAP financial measure that Myers Industries, Inc. calculates according to the schedule above using GAAP amounts from the unaudited Condensed Consolidated Statement of Operations. The Company believes that the excluded items are not primarily related to core operational activities. The Company believes that gross profit excluding items that are not primarily related to core operating activities is generally viewed as providing useful information regarding a company's operating profitability. Management uses gross profit excluding these items as well as other financial measures in connection with its decision-making activities. Gross profit excluding these items should not be considered in isolation or as a substitute for gross profit prepared in accordance with GAAP. The Company's method for calculating gross profit excluding these items may not be comparable to methods used by other companies.

   
MYERS INDUSTRIES, INC.
SALES AND EARNINGS BY SEGMENT (UNAUDITED)
(Dollars in thousands)
 
Quarter Ended September 30, Nine Months Ended September 30,
2017   2016   % Change 2017   2016   % Change
Net Sales    
Material Handling $ 104,089 $ 89,911 15.8 % $ 310,343 $ 299,842 3.5 %
Distribution 40,004 42,793 (6.5 )% 117,836 128,248 (8.1 )%
Inter-company Sales   (18 )   (28 )   -   (98 )   (92 )   -
Total $ 144,075 $ 132,676   8.6 % $ 428,081 $ 427,998   0.0 %
 
Operating Income
Material Handling $ 10,325 $ 4,378 135.8 % $ 29,839 $ 26,152 14.1 %
Distribution 3,179 3,301 (3.7 )% 7,742 9,803 (21.0 )%
Corporate   (6,393 )   (4,693 )   -   (17,532 )   (20,674 )   -
Total $ 7,111 $ 2,986   138.1 % $ 20,049 $ 15,281   31.2 %
 
   
MYERS INDUSTRIES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
OPERATING INCOME BY SEGMENT (UNAUDITED)
(Dollars in thousands, except per share data)
 
Quarter Ended September 30, Nine Months Ended September 30,
2017   2016 2017   2016

Material Handling

Operating income as reported $ 10,325 $ 4,378 $ 29,839 $ 26,152
Asset impairments - - 544 9,874
Reduction to contingent liability - - - (2,335 )
Gain on sale of asset (2,758 ) - (4,087 ) -
Restructuring expenses and other adjustments   2,319   292   8,158   292
Operating income as adjusted 9,886 4,670 34,454 33,983
 

Distribution

Operating income as reported 3,179 3,301 7,742 9,803
 

Corporate Expense

Corporate expense as reported (6,393 ) (4,693 ) (17,532 ) (20,674 )
Environmental reserve 326 605 326 2,155
CFO severance related costs   -   -   -   2,011
Corporate expense as adjusted (6,067 ) (4,088 ) (17,206 ) (16,508 )
 

Continuing Operations

Operating income as reported 7,111 2,986 20,049 15,281
Total of all adjustments above   (113 )   897   4,941   11,997
Operating income as adjusted 6,998 3,883 24,990 27,278
Interest expense, net   (1,785 )   (2,015 )   (5,545 )   (6,087 )
Income (loss) before taxes as adjusted 5,213 1,868 19,445 21,191
Income tax expense*   (1,877 )   (673 )   (7,000 )   (7,628 )
Income (loss) from continuing operations as adjusted $ 3,336 $ 1,195 $ 12,445 $ 13,563
 
Adjusted earnings (loss) per diluted share from continuing operations $ 0.11 $ 0.04 $ 0.41 $ 0.45
 

*Income taxes are calculated using the normalized effective tax rate for each year. The normalized rate used above is 36%.

Note on Reconciliation of Income and Earnings Data: Income from continuing operations as adjusted and adjusted earnings per diluted share from continuing operations are non-GAAP financial measures that Myers Industries, Inc. calculates according to the schedule above, using GAAP amounts from the unaudited Consolidated Financial Statements. The Company believes that the excluded items are not primarily related to core operational activities. The Company believes that income (loss) excluding items that are not primarily related to core operating activities is generally viewed as providing useful information regarding a company's operating profitability. Management uses income (loss) excluding these items as well as other financial measures in connection with its decision-making activities. Income (loss) excluding these items should not be considered in isolation or as a substitute for net income (loss), income (loss) before taxes or other consolidated income data prepared in accordance with GAAP. The Company's method for calculating income (loss) excluding these items may not be comparable to methods used by other companies.

     
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Dollars in thousands)
 
September 30, 2017 December 31, 2016
Assets
Current Assets
Cash $ 4,511 $ 7,888
Restricted cash 8,650 8,635
Accounts receivable, net 88,278 73,818
Inventories 48,972 46,023
Other   2,881   4,787
Total Current Assets 153,292 141,151
Other Assets 128,181 129,051
Property, Plant, & Equipment, Net   91,934   111,482
Total Assets $ 373,407 $ 381,684
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable $ 61,990 $ 48,988
Accrued expenses   36,330   30,324
Total Current Liabilities 98,320 79,312
Long-term debt, net 158,010 189,522
Other liabilities 7,616 9,235
Deferred income taxes 11,729 10,582
Total Shareholders' Equity   97,732   93,033
Total Liabilities & Shareholders' Equity $ 373,407 $ 381,684
 
 
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 
Nine Months Ended September 30,
2017   2016
Cash Flows From Operating Activities
Net income $ 8,364 $ 2,515
Income (loss) from discontinued operations, net of income taxes   (52 )   (257 )
Income from continuing operations 8,416 2,772

Adjustments to reconcile income from continuing operations to net cash provided by (used for) operating activities

Depreciation 16,758 18,465
Amortization 6,764 7,428
Accelerated depreciation associated with restructuring activities 2,018 —
Non-cash stock-based compensation expense 2,873 2,804
(Gain) loss on fixed asset sales (4,128 ) 383
Deferred taxes 101 (1,985 )
Accrued interest income on note receivable (983 ) (948 )
Impairment charges 544 9,874
Other 29 (338 )
Payments on performance based compensation (1,010 ) (1,794 )
Other long-term liabilities (140 ) (431 )
Cash flows provided by (used for) working capital
Accounts receivable (12,754 ) 1,057
Inventories (2,490 ) 7,349
Prepaid expenses and other assets 1,696 484
Accounts payable and accrued expenses   18,416   (26,520 )
Net cash provided by (used for) operating activities - continuing operations 36,110 18,600
Net cash provided by (used for) operating activities - discontinued operations   —   —
Net cash provided by (used for) operating activities   36,110   18,600
Cash Flows From Investing Activities
Capital expenditures (5,128 ) (11,490 )
Proceeds from sale of property, plant and equipment 8,075 194
Proceeds (payments) related to sale of business   —   (4,034 )
Net cash provided by (used for) investing activities - continuing operations 2,947 (15,330 )
Net cash provided by (used for) investing activities - discontinued operations   —   —
Net cash provided by (used for) investing activities   2,947   (15,330 )
Cash Flows From Financing Activities
Net borrowing (repayments) on credit facility (31,397 ) 4,440
Cash dividends paid (12,230 ) (12,143 )
Proceeds from issuance of common stock 2,524 2,582
Excess tax benefit from stock-based compensation — 139
Shares withheld for employee taxes on equity awards (273 ) (925 )
Deferred financing costs   (1,030 )   —
Net cash provided by (used for) financing activities - continuing operations (42,406 ) (5,907 )
Net cash provided by (used for) financing activities - discontinued operations   —   —
Net cash provided by (used for) financing activities   (42,406 )   (5,907 )
Foreign exchange rate effect on cash   (28 )   831
Net increase (decrease) in cash (3,377 ) (1,806 )
Cash at January 1   7,888   7,344
Cash at September 30 $ 4,511 $ 5,538
 
 
MYERS INDUSTRIES, INC.
RECONCILIATION OF FREE CASH FLOW TO GAAP NET CASH PROVIDED BY
(USED FOR) OPERATING ACTIVITIES – CONTINUING OPERATIONS
(UNAUDITED)
(Dollars in thousands)
 
For the Nine Months Ended
September 30, 2017 September 30, 2016
Net cash provided by (used for) operating activities - continuing operations $ 36,110 $ 18,600
Capital expenditures   (5,128 )   (11,490 )
Free cash flow $ 30,982 $ 7,110
 
 
YTD YTD QTD
September 30, 2017 June 30, 2017 September 30, 2017
Net cash provided by (used for) operating activities - continuing operations $ 36,110 - $ 23,634 = $ 12,476
Capital expenditures   (5,128 ) -   (2,345 ) =   (2,783 )
Free cash flow $ 30,982 - $ 21,289 = $ 9,693
 

Note on Reconciliations of Cash Flow Data: Free cash flow is a non-GAAP financial measure that Myers Industries, Inc. calculates according to the schedules above using GAAP amounts from the unaudited Condensed Consolidated Statement of Cash Flows. The Company uses free cash flow as well as other financial measures in connection with its decision-making activities. The Company's method for calculating free cash flow may not be comparable to methods used by other companies.