Myers Industries Reports 2017 First Quarter Results
Myers Industries, Inc. (NYSE: MYE) today announced results for the first quarter ended March 31, 2017.
First Quarter 2017 Business Highlights
- Net sales decreased 6.3% (or 7.2% excluding currency fluctuation) compared to the first quarter of 2016
- Gross profit margin of 29.6% compared to 31.9% in the first quarter of 2016
- GAAP net income per diluted share from continuing operations of $0.10, compared to $(0.11) in the first quarter of 2016
- Adjusted net income per diluted share from continuing operations of $0.13, compared to $0.21 in the first quarter of 2016
- Generated cash from continuing operations of $13.1 million and free cash flow of $12.6 million
The Company reported net sales of $141.7 million, compared to $151.2 million in the first quarter of 2016. Gross profit margin decreased 230 basis points to 29.6 percent as compared to the prior year quarter, primarily due to lower sales volume and higher restructuring and manufacturing costs in the Material Handling Segment. Selling, general and administrative expenses declined by $3.9 million to $34.6 million, in the first quarter of 2017, with the improvement in expenses primarily attributable to lower compensation costs.
President and Chief Executive Officer Dave Banyard commented, “First quarter earnings were in line with our expectations, despite softer than expected demand in the auto aftermarket end market. Net sales were down mid-single digits due to the decline in auto aftermarket as well as the expected continued weakness in agricultural end markets. Despite the lower sales volumes, we are executing well on our strategic initiatives. We have made solid progress with our niche market growth teams, and our strategic realignment to improve operating flexibility is well underway. Our continued focus on working capital and disciplined capital spending helped us generate strong free cash flow of $12.6 million during the quarter.”
| Quarter Ended March 31, | ||||||||||||
| 2017 | 2016 |
% Increase
(Decrease) |
||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||
| Net sales | $ | 141,703 | $ | 151,205 | (6.3 | )% | ||||||
| Gross profit | $ | 42,003 | $ | 48,171 | (12.8 | )% | ||||||
| Gross profit margin | 29.6 | % | 31.9 | % | ||||||||
| Operating income | $ | 7,358 | $ | 1,129 | 551.7 | % | ||||||
| Income from continuing operations: | ||||||||||||
| Income (loss) | $ | 3,128 | $ | (3,336 | ) | 193.8 | % | |||||
| Income (loss) per diluted share | $ | 0.10 | $ | (0.11 | ) | 190.9 | % | |||||
| Operating income as adjusted(1) | $ | 8,104 | $ | 11,685 | (30.6 | )% | ||||||
| Income from continuing operations as adjusted(1): | ||||||||||||
| Income (loss) | $ | 3,923 | $ | 6,186 | (36.6 | )% | ||||||
| Income (loss) per diluted share | $ | 0.13 | $ | 0.21 | (38.1 | )% | ||||||
| (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 declined 5.4% (or 6.6% excluding currency fluctuation) as compared to the first quarter of 2016. The reduction in net sales was primarily due to decreased volume in the Company’s agricultural end market. GAAP operating income was $12.1 million compared to $7.4 million in the first quarter of 2016. GAAP operating income in the first quarter of 2016 included non-cash impairment charges of $8.5 million in Brazil. Adjusted operating income was $12.8 million compared to $16.0 million in the first quarter of 2016. The decline in adjusted operating income was primarily the result of lower sales volumes and some impact from higher commodity prices that the Company expects to recover with price increases moving forward.
Net sales in the Distribution Segment declined 8.6% as compared to the first quarter of 2016. The decrease in net sales was across all product lines, particularly in our northern sales regions as a milder winter had an adverse effect on demand. We also continued to see lower capital spending on equipment across all regions. Operating income was $1.5 million compared to $2.5 million in the first quarter of 2016. The decrease in operating income was primarily the result of lower sales volumes.
Other Financial Items
In March 2017, in order to enable greater financial flexibility, the Company entered into a Fifth Amended and Restated Loan Agreement (the “Loan Agreement”). The Loan Agreement replaced the pre-existing $300 million senior revolving credit facility with a $200 million facility and extended the term from December 2018 to March 2022.
2017 Outlook
The Company continues to anticipate that total revenue will be flat on a constant currency basis in fiscal year 2017 as compared to the prior year. Capital expenditures are expected to be in the range of $10 to $12 million, net interest expense in the range of $8 to $9 million, depreciation and amortization in the range of $32 to $34 million, and an effective tax rate of approximately 36%.
Conference Call Details
The Company will host an earnings conference call and webcast for investors and analysts on Monday, May 8, 2017 at 10:00 a.m. ET. The call is anticipated to last approximately one hour and may be accessed at: (US) 866-393-4306 or (Int’l) 734-385-2616. The Conference ID # is 12996981. Callers are asked to sign on at least five minutes in advance. A 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) 855-859-2056 or (Int’l) 404-537-3406. The Conference ID # is 12996981.
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 undervehicle service industry in the U.S. 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. |
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| March 31, 2017 | March 31, 2016 | |||||||
| Net sales | $ | 141,703 | $ | 151,205 | ||||
| Cost of sales | 99,700 | 103,034 | ||||||
| Gross profit | 42,003 | 48,171 | ||||||
| Selling, general and administrative expenses | 34,645 | 38,497 | ||||||
| Impairment charges | - | 8,545 | ||||||
| Operating income | 7,358 | 1,129 | ||||||
| Interest expense, net | 1,975 | 2,019 | ||||||
| Income (loss) from continuing operations before income taxes | 5,383 | (890 | ) | |||||
| Income tax expense (benefit) | 2,255 | 2,446 | ||||||
| Income (loss) from continuing operations | 3,128 | (3,336 | ) | |||||
| Income (loss) from discontinued operations, net of income taxes | (14 | ) | (57 | ) | ||||
| Net income (loss) | $ | 3,114 | $ | (3,393 | ) | |||
| Income (loss) per common share from continuing operations: | ||||||||
| Basic | $ | 0.10 | $ | (0.11 | ) | |||
| Diluted | $ | 0.10 | $ | (0.11 | ) | |||
| Income (loss) per common share from discontinued operations: | ||||||||
| Basic | $ | - | $ | - | ||||
| Diluted | $ | - | $ | - | ||||
| Net income (loss) per common share: | ||||||||
| Basic | $ | 0.10 | $ | (0.11 | ) | |||
| Diluted | $ | 0.10 | $ | (0.11 | ) | |||
| Weighted average common shares outstanding: | ||||||||
| Basic | 30,029,679 | 29,547,514 | ||||||
| Diluted | 30,292,583 | 29,547,514 | ||||||
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MYERS INDUSTRIES, INC. |
||||||||||||
| Quarter Ended March 31, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| Net Sales | ||||||||||||
| Material Handling | $ | 103,180 | $ | 109,024 | (5.4 | )% | ||||||
| Distribution | 38,574 | 42,221 | (8.6 | )% | ||||||||
| Inter-company Sales | (51 | ) | (40 | ) | - | |||||||
| Total | $ | 141,703 | $ | 151,205 | (6.3 | )% | ||||||
| Operating Income | ||||||||||||
| Material Handling | $ | 12,088 | $ | 7,441 | 62.5 | % | ||||||
| Distribution | 1,538 | 2,536 | (39.4 | )% | ||||||||
| Corporate | (6,268 | ) | (8,848 | ) | - | |||||||
| Total | $ | 7,358 | $ | 1,129 | 551.7 | % | ||||||
|
MYERS INDUSTRIES, INC. |
||||||||
| Quarter Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
|
Material Handling |
||||||||
| Operating income as reported | $ | 12,088 | $ | 7,441 | ||||
| Asset impairments | - | 8,545 | ||||||
| Restructuring expenses and other adjustments | 746 | - | ||||||
| Operating income as adjusted | 12,834 | 15,986 | ||||||
|
Distribution |
||||||||
| Operating income as reported | 1,538 | 2,536 | ||||||
|
Corporate Expense |
||||||||
| Corporate expense as reported | (6,268 | ) | (8,848 | ) | ||||
| CFO severance related costs | - | 2,011 | ||||||
| Corporate expense as adjusted | (6,268 | ) | (6,837 | ) | ||||
|
Continuing Operations |
||||||||
| Operating income as reported | 7,358 | 1,129 | ||||||
| Total of all adjustments above | 746 | 10,556 | ||||||
| Operating income as adjusted | 8,104 | 11,685 | ||||||
| Interest expense, net | (1,975 | ) | (2,019 | ) | ||||
| Income (loss) before taxes as adjusted | 6,129 | 9,666 | ||||||
| Income tax expense* | (2,206 | ) | (3,480 | ) | ||||
| Income (loss) from continuing operations as adjusted | $ | 3,923 | $ | 6,186 | ||||
| Adjusted earnings (loss) per diluted share from continuing operations | $ | 0.13 | $ | 0.21 | ||||
| *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. |
|||||||
| March 31, 2017 | December 31, 2016 | ||||||
| Assets | |||||||
| Current Assets | |||||||
| Cash | $ | 7,325 | $ | 7,888 | |||
| Restricted cash | 8,637 | 8,635 | |||||
| Accounts receivable, net | 75,582 | 73,818 | |||||
| Inventories | 50,522 | 46,023 | |||||
| Other | 2,764 | 4,787 | |||||
| Total Current Assets | 144,830 | 141,151 | |||||
| Other Assets | 127,593 | 129,051 | |||||
| Property, Plant, & Equipment, Net | 105,426 |
111,482 |
|||||
| Total Assets | $ | 377,849 | $ | 381,684 | |||
| Liabilities & Shareholders' Equity | |||||||
| Current Liabilities | |||||||
| Accounts payable | $ | 56,654 | $ | 48,988 | |||
| Accrued expenses | 29,530 | 30,324 | |||||
| Total Current Liabilities | 86,184 | 79,312 | |||||
| Long-term debt, net | 179,571 | 189,522 | |||||
| Other liabilities | 7,923 | 9,235 | |||||
| Deferred income taxes | 10,527 | 10,582 | |||||
| Total Shareholders' Equity | 93,644 | 93,033 | |||||
| Total Liabilities & Shareholders' Equity | $ | 377,849 | $ | 381,684 | |||
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MYERS INDUSTRIES, INC. |
||||||||
| Quarter Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income (loss) | $ | 3,114 | $ | (3,393 | ) | |||
| Income (loss) from discontinued operations, net of income taxes | (14 | ) | (57 | ) | ||||
| Income (loss) from continuing operations | 3,128 | (3,336 | ) | |||||
|
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities |
||||||||
| Depreciation | 6,082 | 6,000 | ||||||
| Amortization | 2,436 | 2,499 | ||||||
| Accelerated depreciation associated with restructuring activities | 618 | — | ||||||
| Non-cash stock-based compensation expense | 894 | 1,282 | ||||||
| (Gain) loss on fixed asset sales | (1,008 | ) | — | |||||
| Deferred taxes | 101 | (967 | ) | |||||
| Excess tax benefit from stock-based compensation | — | 106 | ||||||
| Accrued interest income on note receivable | (322 | ) | (301 | ) | ||||
| Impairment charges | — | 8,545 | ||||||
| Other | 109 | 214 | ||||||
| Payments on performance based compensation | (992 | ) | (1,699 | ) | ||||
| Other long-term liabilities | (59 | ) | 427 | |||||
| Cash flows provided by (used for) working capital | ||||||||
| Accounts receivable | (1,799 | ) | (6,766 | ) | ||||
| Inventories | (4,403 | ) | (4,774 | ) | ||||
| Prepaid expenses and other assets | 2,030 | 1,143 | ||||||
| Accounts payable and accrued expenses | 6,234 | (13,690 | ) | |||||
| Net cash provided by (used for) operating activities - continuing operations | 13,049 | (11,317 | ) | |||||
| Net cash provided by (used for) operating activities - discontinued operations | — | — | ||||||
| Net cash provided by (used for) operating activities | 13,049 | (11,317 | ) | |||||
| Cash Flows From Investing Activities | ||||||||
| Capital expenditures | (498 | ) | (7,140 | ) | ||||
| Proceeds from sale of property, plant and equipment | 1,117 | 6 | ||||||
| Proceeds (payments) related to sale of business | — | (4,034 | ) | |||||
| Net cash provided by (used for) investing activities - continuing operations | 619 | (11,168 | ) | |||||
| Net cash provided by (used for) investing activities - discontinued operations | — | — | ||||||
| Net cash provided by (used for) investing activities | 619 | (11,168 | ) | |||||
| Cash Flows From Financing Activities | ||||||||
| Net borrowing (repayments) on credit facility | (9,310 | ) | 24,999 | |||||
| Cash dividends paid | (4,089 | ) | (4,079 | ) | ||||
| Proceeds from issuance of common stock | 247 | 47 | ||||||
| Excess tax benefit from stock-based compensation | — | (106 | ) | |||||
| Shares withheld for employee taxes on equity awards | (271 | ) | (502 | ) | ||||
| Deferred financing costs | (975 | ) | — | |||||
| Net cash provided by (used for) financing activities - continuing operations | (14,398 | ) | 20,359 | |||||
| Net cash provided by (used for) financing activities - discontinued operations | — | — | ||||||
| Net cash provided by (used for) financing activities | (14,398 | ) | 20,359 | |||||
| Foreign exchange rate effect on cash | 167 | 383 | ||||||
| Net increase (decrease) in cash | (563 | ) | (1,743 | ) | ||||
| Cash at January 1 | 7,888 | 7,344 | ||||||
| Cash at March 31 | $ | 7,325 | $ | 5,601 | ||||
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MYERS INDUSTRIES, INC. |
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| For the Three Months Ended | ||||||||
| March 31, 2017 | March 31, 2016 | |||||||
| Net cash provided by (used for) operating activities - continuing operations | $ | 13,049 | $ | (11,317 | ) | |||
| Capital expenditures | (498 | ) | (7,140 | ) | ||||
| Free cash flow | $ | 12,551 | $ | (18,457 | ) | |||
Note on Reconciliation of Cash Flow Data: Free cash flow 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 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.
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