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Myers Industries Reports 2018 Fourth Quarter and Full Year Results

AKRON, Ohio--(BUSINESS WIRE)--

Strong earnings growth in 2018; free cash flow of $55 million

Myers Industries, Inc. (MYE), a manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets, today announced results for the fourth quarter and year ended December 31, 2018.

Business Highlights

  • GAAP income per diluted share from continuing operations for 2018 was $0.09 for the fourth quarter and a loss of $0.05 for the full year (includes $33.3 million of pre-tax charges related to the Company’s sale of its Lawn and Garden business, which was sold in 2015), compared to income of $0.06 and $0.35, respectively, for the fourth quarter and full year 2017
  • Adjusted income per diluted share from continuing operations was $0.13 for the fourth quarter and $0.76 for the full year, compared to $0.09 and $0.51, respectively, for the fourth quarter and full year 2017
  • Net sales for the fourth quarter decreased 1.2% compared to the fourth quarter 2017; net sales for the full year increased 3.6% compared to the full year 2017
  • Gross margin expanded 310 basis points to 30.4% for the fourth quarter and 280 basis points to 31.6% for the full year
  • Generated $55 million in free cash flow from continuing operations for 2018, an increase of 28% compared to 2017
  • Income per diluted share from continuing operations estimated to be between $0.75 and $0.85 for the full year 2019

“We are pleased with our performance for both the fourth quarter and full year of 2018. We made progress in our Myers Tire Supply business during the fourth quarter, growing top line at a low single digit rate. In addition, we increased our enterprise gross profit margin significantly, contributing to a more than 35 percent increase in our adjusted operating income for the quarter. As a result of our operating performance, combined with a reduction in working capital, we generated free cash flow of nearly $18 million during the quarter, an increase of 118% year-over-year,” said Dave Banyard, President and Chief Executive Officer of Myers Industries.

Mr. Banyard continued, “Through our continued focus on executing our strategy centered on growing the key niche markets where we deliver value, reducing costs through flexible operations and generating strong cash flow, we were able to deliver sales growth for the year of 3.6 percent, and adjusted operating income and free cash flow growth of nearly 30 percent. We continued to stress the importance of living a culture built around continuous improvement, and we continued to invest in areas to help further align ourselves with our customers’ needs as we help them be safer and more efficient.”

   
Quarter Ended December 31, Year Ended December 31,

 

    % Inc     % Inc

(Dollars in thousands, except per share data)

2018 2017 (Dec) 2018 2017 (Dec)
Net sales $ 138,388 $ 140,106   (1.2 )% $ 566,735 $ 547,043   3.6 %
Gross profit $ 42,096 $ 38,257 10.0 % $ 179,293 $ 157,453 13.9 %
Gross profit margin 30.4 % 27.3 % 31.6 % 28.8 %
Operating income $ 7,033 $ 4,003 75.7 % $ 6,327 $ 24,888 (74.6 )%
Income (loss) from continuing operations:
Income (loss) $ 3,126 $ 1,821 71.7 % $ (1,648 ) $ 10,844 (115.2 )%
Income (loss) per diluted share $ 0.09 $ 0.06 50.0 % $ (0.05 ) $ 0.35 (114.3 )%
 
Operating income as adjusted(1) $ 7,652 $ 5,642 35.6 % $ 40,425 $ 31,468 28.5 %
Income (loss) from continuing operations as adjusted(1):
Income $ 4,768 $ 2,674 78.3 % $ 25,835 $ 15,473 67.0 %
Income per diluted share $ 0.13 $ 0.09 44.4 % $ 0.76 $ 0.51 49.0 %
EBITDA as adjusted $ 13,829 $ 12,532 10.3 % $ 65,965 $ 60,306 9.4 %

(1) Detail regarding the adjustments is provided on the Reconciliations of Non-GAAP Financial Measures included in this release.

 

Fourth-Quarter 2018 Financial Summary

Fourth quarter 2018 net sales decreased $1.7 million or 1.2% (0.9% excluding currency fluctuation) to $138.4 million, compared to the fourth quarter of 2017. The decrease was the result of a sales decline in the Material Handling Segment, partially offset by a sales increase in the Distribution Segment. Gross profit increased $3.8 million to $42.1 million, compared to the fourth quarter of 2017. Higher pricing and savings from the footprint realignment completed in 2017 were partially offset by the lower sales volume. Selling, general and administrative expenses increased $1.3 million to $35.0 million, compared to the fourth quarter of 2017, due mostly to $1.4 million of incremental costs incurred to engage resources to assist with the planning and implementation of the transformation initiatives in the Distribution Segment. The departure of the Company’s previous CFO resulted in a reduction of costs of $1.0 million, which were offset by higher variable compensation costs. GAAP income per diluted share from continuing operations was $0.09, compared to $0.06 for the fourth quarter of 2017. Adjusted income per diluted share from continuing operations was $0.13, compared to $0.09 for the fourth quarter of 2017.

Net sales in the Material Handling Segment for the fourth quarter of 2018 decreased $2.0 million or 2.0% (1.6% excluding currency fluctuation) compared to the fourth quarter of 2017. The decrease in net sales was primarily due to anticipated sales declines in the Company’s consumer (unusually high hurricane related volume in 2017), food and beverage (unusually high seed box demand in 2017) and vehicle (declining RV sales) markets. Segment adjusted EBITDA increased 27.1% to $19.3 million for the fourth quarter, compared to $15.2 million for the fourth quarter of 2017. The increase in adjusted EBITDA was due primarily to favorable pricing and the savings from the 2017 strategic footprint realignment, partially offset by the lower sales volume.

Net sales in the Distribution Segment for the fourth quarter of 2018 increased $0.2 million or 0.6% compared to the fourth quarter of 2017. Sales in the Myers Tire Supply business increased low single digits due to higher sales of both consumables and equipment, partially offset by lower international sales. Sales in the Patch Rubber business were down low single digits year-over-year during the fourth quarter. The segment’s adjusted EBITDA was $0.6 million for the fourth quarter of 2018, compared to $1.6 million for the fourth quarter of 2017. The decrease in adjusted EBITDA was primarily the result of $1.4 million of incremental costs incurred to engage outside resources to assist with the planning and implementation of a set of initiatives to transform the business.

Full-Year 2018 Financial Summary

Full-year net sales increased 3.6% to $566.7 million, compared to full-year 2017. The increase in sales was the result of sales growth in the Material Handling Segment, partially offset by a sales decline in the Distribution Segment. Gross profit increased $21.8 million to $179.3 million, due mostly to favorable price and volume and savings from the 2017 strategic footprint realignment. Selling, general and administrative expenses increased $3.8 million during 2018 to $139.3 million primarily as a result of higher compensation costs and the incremental costs incurred to engage outside resources to assist with the transformation initiatives in the Distribution Segment. GAAP income per diluted share from continuing operations was a loss of $0.05 (includes $33.3 million of pre-tax charges related to the sale of the Company’s Lawn and Garden business completed in 2015), compared to income of $0.35 for the full year of 2017. Adjusted income per diluted share from continuing operations was $0.76, compared to $0.51 for the full year of 2017.

The Material Handling Segment’s net sales for the full year of 2018 increased 6.6% compared to the full year of 2017. The increase in net sales was due primarily to increased demand in the Company’s food and beverage, vehicle and industrial markets, partially offset by sales declines in the consumer (unusually high hurricane related volume in 2017) market. Segment adjusted EBITDA was $82.8 million for the full year of 2018, compared to $70.6 million for the full year of 2017.

The Distribution Segment’s net sales for the full year of 2018 declined 4.3% compared to the full year of 2017. The decrease in net sales was primarily due to lower equipment and international sales compared to 2017. The segment’s adjusted EBITDA was $7.9 million for the full year of 2018, compared to $10.2 million for the full year of 2017. The decline in adjusted EBITDA was primarily due to the lower sales volume and the incremental costs incurred to engage outside resources to assist with the planning and implementation of a set of transformation initiatives for the segment.

2019 Outlook

For fiscal year 2019, the Company anticipates that total revenue will be flat on a constant currency basis compared to the prior year. Anticipated sales increases in the consumer, industrial and auto aftermarket end markets are expected to be offset by sales decreases in the food and beverage and vehicle markets due to more normalized seed box demand and a continued decline in the RV market following years of strong growth. The Company expects that a positive sales mix and an ongoing focus on executing pricing and continuous improvement actions will lead to adjusted operating margin growth again in 2019. The Company expects depreciation and amortization to be approximately $25 million, net interest expense to be approximately $5 million, and the effective tax rate to be approximately 27%. Income per diluted share from continuing operations is estimated to be between $0.75 and $0.85, based on a fully diluted share count of 36.0 million shares. Capital expenditures are expected to be approximately $10 million.

Mr. Banyard concluded, “We will remain diligent in executing our strategy in 2019 and one of our top priorities remains the transformation of our Distribution Segment, which is underway. Through enhancements in our go-to-market strategy, the implementation of 80/20 to drive improved contribution margins, and optimization of our logistics and overhead costs, our goal is to expand our Distribution Segment EBITDA margin to 10% by the end of 2020. Additionally, through the new product introduction in our Material Handling Segment that is expected to help us grow our consumer market, to anticipated strength in our industrial and auto aftermarket end markets, we expect to offset lower sales in our food and beverage and vehicle (i.e. RV) end markets during 2019. Lastly, we will continue to evaluate opportunities to leverage our strong balance sheet into accretive acquisition opportunities, but only when we find the optimal complement to our platform that will position the Company to deliver long-term shareholder value.”

Conference Call Details

The Company will host an earnings conference call and webcast for investors and analysts on Thursday, February 28, at 8:30 a.m. ET. The call is anticipated to last approximately one hour and may be accessed by dialing: (US) 833-233-3452 or (Int’l) 647-689-4129. The Conference ID # is 1662969. 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 1662969.

Use of Non-GAAP Financial Measures

The Company uses certain non-GAAP measures in this release. Adjusted income per diluted share from continuing operations, operating income as adjusted, income from continuing operations as adjusted, EBITDA as adjusted, adjusted operating income, adjusted EBITDA, adjusted EPS 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 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”, “outlook”, “target”, “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; operational problems at our manufacturing facilities, or unexpected failures at those 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 and per share data)
 
Quarter Ended Year Ended
December 31,   December 31, December 31,   December 31,
2018 2017 2018 2017
Net sales $ 138,388 $ 140,106 $ 566,735 $ 547,043
Cost of sales   96,292   101,849   387,442   389,590
Gross profit 42,096 38,257 179,293 157,453
Selling, general and administrative expenses 34,975 33,724 139,335 135,503
Loss (gain) on disposal of fixed assets 88 530 (8 ) (3,482 )
Impairment charges 308 544
Other expenses       33,331  
Operating income 7,033 4,003 6,327 24,888
Interest expense, net 1,103 1,464 4,938 7,292
Loss on extinguishment of debt     1,888     1,888
Income from continuing operations before income taxes 5,930 651 1,389 15,708
Income tax expense (benefit)   2,804   (1,170 )   3,037   4,864
Income (loss) from continuing operations 3,126 1,821 (1,648 ) 10,844
Income (loss) from discontinued operations, net of income taxes   (788 )   (20,074 )   (1,701 )   (20,733 )
Net income (loss) $ 2,338 $ (18,253 ) $ (3,349 ) $ (9,889 )
Income (loss) per common share from continuing operations:
Basic $ 0.09 $ 0.06 $ (0.05 ) $ 0.36
Diluted $ 0.09 $ 0.06 $ (0.05 ) $ 0.35
Income (loss) per common share from discontinued operations:
Basic $ (0.02 ) $ (0.66 ) $ (0.05 ) $ (0.69 )
Diluted $ (0.02 ) $ (0.65 ) $ (0.05 ) $ (0.68 )
Net income (loss) per common share:
Basic $ 0.07 $ (0.60 ) $ (0.10 ) $ (0.33 )
Diluted $ 0.07 $ (0.59 ) $ (0.10 ) $ (0.33 )
Weighted average common shares outstanding:
Basic 35,355,863 30,423,324 33,426,855 30,222,289
Diluted 35,576,611 30,851,536 33,426,855 30,562,646
 
   
MYERS INDUSTRIES, INC.
SALES AND EARNINGS BY SEGMENT (UNAUDITED)
(Dollars in thousands)
 
Quarter Ended December 31, Year Ended December 31,
2018   2017   % Change 2018   2017   % Change
Net sales    
Material Handling $ 99,578 $ 101,613 (2.0 )% $ 417,199 $ 391,313 6.6 %
Distribution 38,821 38,592 0.6 % 149,636 156,428 (4.3 )%
Inter-company Sales   (11 )   (99 )   -   (100 )   (698 )   -
Total $ 138,388 $ 140,106   (1.2 )% $ 566,735 $ 547,043   3.6 %
 
Operating income (loss)
Material Handling $ 13,083 $ 8,199 59.6 % $ 57,948 $ 38,874 49.1 %
Distribution 371 1,331 (72.1 )% 7,441 9,073 (18.0 )%
Corporate   (6,421 )   (5,527 )   -   (59,062 )   (23,059 )   -
Total $ 7,033 $ 4,003   75.7 % $ 6,327 $ 24,888   (74.6 )%
 
Operating income (loss) as adjusted
Material Handling $ 13,501 $ 8,838 52.8 % $ 58,871 $ 44,128 33.4 %
Distribution 371 1,331 (72.1 )% 6,776 9,073 (25.3 )%
Corporate   (6,220 )   (4,527 )   -   (25,222 )   (21,733 )   -
Total $ 7,652 $ 5,642   35.6 % $ 40,425 $ 31,468   28.5 %
 
Operating income margin as adjusted
Material Handling 13.6 % 8.7 % 14.1 % 11.3 %
Distribution 1.0 % 3.4 % 4.5 % 5.8 %
Corporate n/a n/a n/a n/a
Total   5.5 %   4.0 %   7.1 %   5.8 %
 
EBITDA as adjusted
Material Handling $ 19,318 $ 15,195 27.1 % $ 82,816 $ 70,641 17.2 %
Distribution 631 1,640 (61.5 )% 7,945 10,247 (22.5 )%
Corporate   (6,120 )   (4,303 )   -   (24,796 )   (20,582 )   -
Total $ 13,829 $ 12,532   10.3 % $ 65,965 $ 60,306   9.4 %
 
EBITDA margin as adjusted
Material Handling 19.4 % 15.0 % 19.9 % 18.1 %
Distribution 1.6 % 4.2 % 5.3 % 6.6 %
Corporate n/a n/a n/a n/a
Total   10.0 %   8.9 %   11.6 %   11.0 %
 
   
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Dollars in thousands)
 
December 31, 2018 December 31, 2017
Assets
Current Assets
Cash $ 58,894 $ 2,520
Restricted cash 8,659
Accounts receivable, net 72,939 76,509
Income tax receivable 4,892 12,954
Inventories 43,596 47,166
Prepaid expenses and other current assets   2,534   2,204
Total Current Assets 182,855 150,012
Property, plant, & equipment, net 65,460 83,904
Deferred income taxes 5,270 120
Other assets   95,060   121,906
Total Assets $ 348,645 $ 355,942
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable $ 60,849 $ 63,581
Accrued expenses   36,574   35,072
Total Current Liabilities 97,423 98,653
Long-term debt, net 76,790 151,036
Other liabilities 19,794 8,236
Deferred income taxes 4,265
Total Shareholders' Equity   154,638   93,752
Total Liabilities & Shareholders' Equity $ 348,645 $ 355,942
 
 
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 
Year Ended December 31,
2018   2017
Cash Flows From Operating Activities
Net income (loss) $ (3,349 ) $ (9,889 )
Income (loss) from discontinued operations, net of income taxes   (1,701 )   (20,733 )
Income (loss) from continuing operations (1,648 ) 10,844

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

Depreciation 17,638 19,952
Amortization 8,485 8,886
Accelerated depreciation associated with restructuring activities 16 1,993
Non-cash stock-based compensation expense 4,257 3,626
(Gain) loss on disposal of fixed assets (8 ) (3,482 )
Provision for loss on note receivable 23,008
Lease guarantee contingency 10,323
Loss on extinguishment of debt 1,888
Deferred taxes (9,450 ) (5,663 )
Interest income received (accrued) on note receivable (361 ) (1,384 )
Impairment charges 308 544
Other 457 256
Payments on performance based compensation (1,249 ) (1,010 ) null