Myers Industries Reports 2017 Fourth-Quarter and Full-Year Results

2017 free cash flow of $43 million, a 102% year-over-year improvement; Company expects growth in 2018

AKRON, Ohio--()--Myers Industries, Inc. (NYSE: MYE) today announced results for the fourth quarter and year ended December 31, 2017.

Business Highlights

  • Fourth-quarter and full-year 2017 net sales increased 13.6% and 2.4%, respectively; primarily the result of increased demand and market share gains in key niche markets in Material Handling, partially offset by declines in Distribution
  • GAAP income per diluted share from continuing operations was $0.06 for the fourth quarter and $0.35 for the full year, compared to a loss of $0.03 and income of $0.38, respectively for the fourth quarter and full year 2016; adjusted income per diluted share from continuing operations was $0.09 for the fourth quarter and $0.51 for the full year, compared to $0.01 and $0.48, respectively for the fourth quarter and full year 2016
  • Reduced debt by $38.5 million compared to prior year; decreased net-debt-to-adjusted EBITDA ratio to 2.5x
  • Working capital reduction of $10 million and disciplined capital spending resulted in $43 million in free cash flow for 2017, an increase of 102%
  • Divested our Brazil operations which were non-strategic and generated negative cash flow

President and Chief Executive Officer Dave Banyard commented, “We are excited about the pace of our strategic execution and the growth we achieved in the fourth quarter. This past year was transformational for Myers Industries. We focused the enterprise on the key niche markets where we deliver the strongest value. That focus resulted in double-digit revenue growth in our food and beverage and consumer end market products, and high single-digit growth in our vehicle end market. Additionally, we focused our efforts on flexible operations, closing and moving three facilities on time and under budget with no adverse impact on our customers. We accomplished these moves in the face of increased demand, both from external market forces and major weather events as well as from our commercial efforts to gain share. Finally, we delivered on our commitment to generate strong free cash flow throughout the year, demonstrating the power of our strategy and our ability to execute.”

     
Quarter Ended December 31, Year Ended December 31,
    % Increase     % Increase
2017 2016 (Decrease) 2017 2016 (Decrease)
(Dollars in thousands, except per share data)
Net sales $ 140,106 $ 123,289   13.6 % $ 547,043 $ 534,379   2.4 %
Gross profit $ 38,257 $ 35,300 8.4 % $ 157,453 $ 161,898 (2.7 )%
Gross profit margin 27.3 % 28.6 % 28.8 % 30.3 %
Operating income $ 4,003 $ 1,418 182.3 % $ 24,888 $ 27,362 (9.0 )%
Income from continuing operations:
Income (loss) $ 1,821 $ (899 ) --- $ 10,844 $ 11,324 (4.2 )%
Income (loss) per diluted share $ 0.06 $ (0.03 ) 300.0 % $ 0.35 $ 0.38 (7.9 )%
 
Operating income as adjusted(1) $ 5,642 $ 2,414 133.7 % $ 31,468 $ 31,810 (1.1 )%
Income from continuing operations as adjusted(1):
Income (loss) $

2,674

$

182

--- $ 15,473 $ 14,479 6.9 %
Income (loss) per diluted share $ 0.09 $ 0.01 --- $ 0.51 $ 0.48 6.3 %
 

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

Fourth-Quarter 2017 Financial Summary

Fourth-quarter net sales increased $16.8 million or 13.6% (13.0% excluding currency fluctuation) to $140.1 million, compared to the fourth quarter of 2016. The increase in sales was the result of sales growth in the Material Handling Segment, partially offset by sales declines in the Distribution Segment. Gross profit increased $3.0 million to $38.3 million due to increased volume and favorable pricing, partially offset by an unfavorable sales mix, raw material inflation, and operating inefficiencies. Selling, general and administrative expenses of $33.7 million were roughly flat year-over-year. Fourth-quarter GAAP income per diluted share from continuing operations was $0.06, compared to a loss of $0.03 for the fourth quarter of 2016. Adjusted income per diluted share from continuing operations was $0.09, compared to $0.01 for the fourth quarter of 2016.

Net sales in the Material Handling Segment for the fourth quarter of 2017 increased $20.7 million or 25.6% (24.7% excluding currency fluctuation) vs. the fourth quarter of 2016. The increase in net sales was due to increased demand and market share gains in the Company’s food and beverage, consumer and vehicle end markets, partially offset by a decline in net sales in the industrial end market. Segment GAAP operating income was $8.2 million for the fourth quarter of 2017, compared to $4.0 million for the fourth quarter of 2016. Segment adjusted operating income was $8.8 million for the fourth quarter of 2017, compared to $4.8 million for the fourth quarter of 2016. Increased operating income was due to higher sales volume and favorable pricing, partially offset by an unfavorable sales mix, raw material inflation, and operating inefficiencies.

Net sales in the Distribution Segment for the fourth quarter of 2017 decreased $3.8 million or 9.0% vs. the fourth quarter of 2016. The decrease in net sales was due mostly to the planned exit of a low margin product line within the Company’s Patch Rubber business, which contributed $2.7 million of the $3.8 million decline. The Myers Tire Supply business was down 3.1% for the quarter, showing improvement compared to the year-over-year sales performance during the first half of 2017. The segment’s operating income was $1.3 million for the fourth quarter of 2017, compared to $3.0 million for the fourth quarter of 2016. The decrease in operating income was the result of lower sales and higher selling, general and administrative expenses, partially offset by a favorable mix and higher pricing.

Full-Year 2017 Financial Summary

Full-year net sales increased 2.4% (or 2.2% excluding currency fluctuation) to $547.0 million, compared to full-year 2016. 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 margin decreased 150 basis points to 28.8%, due mostly to restructuring expenses of $7.4 million. Selling, general and administrative expenses increased 2.2% to $135.5 million primarily as a result of higher compensation costs and professional fees, partially offset by lower depreciation and amortization expenses. GAAP income per diluted share from continuing operations was $0.35, compared to $0.38 for the full year of 2016. Adjusted income per diluted share from continuing operations was $0.51, compared to $0.48 for the full year of 2016.

The Material Handling Segment’s net sales for the full year of 2017 increased 7.5% (or 7.2% excluding currency fluctuation) vs. the full year of 2016. The increase in net sales was due primarily to increased demand and market share gains in the Company’s food and beverage, consumer and vehicle end markets, partially offset by a sales decline in the industrial end market. Segment GAAP operating income was $38.9 million for the full year of 2017, compared to $40.8 million for the full year of 2016. Segment adjusted operating income was $44.1 million for the full year of 2017, compared to $40.9 million for the full year of 2016.

The Distribution Segment’s net sales for the full year of 2017 declined 8.3% compared to the full year of 2016. The decrease in net sales was primarily due to the planned exit of a low margin product line within the Company’s Patch Rubber business and sales declines in the Myers Tire Supply business, primarily during the first half of the year, partially offset by improved pricing. The segment’s operating income was $9.1 million for the full year of 2017, compared to $12.8 million for the full year of 2016.

2018 Outlook

For the fiscal year 2018, the Company anticipates that total revenue will be up low-to-mid single-digits on a constant currency basis compared to the prior year based on strong backlog, tempered by one-time large orders delivered in the second half of 2017, particularly in its consumer end market related to hurricane activity. It also expects capital expenditures to be in the range of $10 to $12 million, net interest expense to be between $7 and $8 million, and depreciation and amortization to be between $26 and $28 million. The Tax Cuts and Jobs Act will benefit the Company through a decrease in its effective tax rate, which is expected to be approximately 25%.

Mr. Banyard concluded, “We enter 2018 with excellent momentum. We have a strong order book coming into Q1 and expect to see the benefits of our operational efforts as we move throughout the year. Additionally, we expect to continue to improve our balance sheet and cash flow, both of which will allow us to invest in organic initiatives and acquisitive growth. We have a pipeline of potential acquisition candidates that we are evaluating and expect to be disciplined concerning price and valuation as we deploy cash toward these higher future growth opportunities. We will also continue to evaluate opportunities to reduce our manufacturing footprint and improve the operational flexibility of our business. These efforts, combined with our commitment to disciplined cash return metrics, should enable us to deliver compelling long-term value to our shareholders.”

Conference Call Details

The Company will host an earnings conference call and webcast for investors and analysts on Tuesday, March 6, 2018 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 passcode is Conference ID: 2699806. 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) 800-585-8367 or (Int’l) 416-621-4642. The replay passcode is Conference ID: 2699806.

Use of Non-GAAP Financial Measures

The Company uses certain non-GAAP measures in this release. Adjusted EPS, adjusted income per diluted share from continuing operations, adjusted operating income, 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 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except share and per share data)
 
For the Quarter Ended For the Year Ended
December 31,   December 31, December 31,   December 31,
2017 2016 2017 2016
Net sales $ 140,106 $ 123,289 $ 547,043 $ 534,379
Cost of sales   101,849   87,989   389,590   372,481
Gross profit 38,257 35,300 157,453 161,898
Selling, general and administrative expenses 33,724 33,639 135,503 132,579
(Gain) loss on disposal of fixed assets 530 243 (3,482 ) 628
Impairment charges   -   -   544   1,329
Operating income 4,003 1,418 24,888 27,362
Interest expense, net 1,464 2,122 7,292 8,643
Loss on extinguishment of debt   1,888   -   1,888   -
Income (loss) from continuing operations before income taxes 651 (704 ) 15,708 18,719
Income tax expense (benefit)   (1,170 )   195   4,864   7,395
Income (loss) from continuing operations 1,821 (899 ) 10,844 11,324
Income (loss) from discontinued operations, net of income taxes   (20,074 )   (559 )   (20,733 )   (10,267 )
Net income (loss) $ (18,253 ) $ (1,458 ) $ (9,889 ) $ 1,057
Income (loss) per common share from continuing operations:
Basic $ 0.06 $ (0.03 ) $ 0.36 $ 0.38
Diluted $ 0.06 $ (0.03 ) $ 0.35 $ 0.38
Income (loss) per common share from discontinued operations:
Basic $ (0.66 ) $ (0.02 ) $ (0.69 ) $ (0.35 )
Diluted $ (0.65 ) $ (0.02 ) $ (0.68 ) $ (0.35 )
Net income (loss) per common share:
Basic $ (0.60 ) $ (0.05 ) $ (0.33 ) $ 0.03
Diluted $ (0.59 ) $ (0.05 ) $ (0.33 ) $ 0.03
Weighted average common shares outstanding:
Basic 30,423,324 29,961,579 30,222,289 29,750,378
Diluted 30,851,536 29,961,579 30,562,646 29,967,912
 
   
MYERS INDUSTRIES, INC.
SALES AND EARNINGS BY SEGMENT (UNAUDITED)
(Dollars in thousands)
 
Quarter Ended December 31, Year Ended December 31,
2017   2016   % Change 2017   2016   % Change
Net Sales    
Material Handling $ 101,613 $ 80,924 25.6 % $ 391,313 $ 363,956 7.5 %
Distribution 38,592 42,413 (9.0 )% 156,428 170,660 (8.3 )%
Inter-company Sales   (99 )   (48 )   -   (698 )   (237 )   -
Total $ 140,106 $ 123,289   13.6 % $ 547,043 $ 534,379   2.4 %
 
Operating Income
Material Handling $ 8,199 $ 3,962 106.9 % $ 38,874 $ 40,776 (4.7 )%
Distribution 1,331 3,031 (56.1 )% 9,073 12,834 (29.3 )%
Corporate   (5,527 )   (5,575 )   -   (23,059 )   (26,248 )   -
Total $ 4,003 $ 1,418   182.3 % $ 24,888 $ 27,362   (9.0 )%
 
   
MYERS INDUSTRIES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
OPERATING INCOME BY SEGMENT (UNAUDITED)
(Dollars in thousands, except per share data)
 
Quarter Ended December 31, Year Ended December 31,
2017   2016 2017   2016

Material Handling

Operating income as reported $ 8,199 $ 3,962 $ 38,874 $ 40,776
Asset impairments - - 544 1,329
Reduction to contingent liability - - - (2,335 )
(Gain) loss on sale of assets 141 59 (3,946 ) 577
Restructuring expenses and other adjustments   498   751   8,656   525
Operating income as adjusted 8,838 4,772 44,128 40,872
 

Distribution

Operating income as reported 1,331 3,031 9,073 12,834
 

Corporate Expense

Corporate expense as reported (5,527 ) (5,575 ) (23,059 ) (26,248 )
Environmental reserve 1,000 - 1,326 2,155
CFO severance related costs   -   186   -   2,197
Corporate expense as adjusted (4,527 ) (5,389 ) (21,733 ) (21,896 )
 

Continuing Operations

Operating income as reported 4,003 1,418 24,888 27,362
Total of all adjustments above   1,639   996   6,580   4,448
Operating income as adjusted 5,642 2,414 31,468 31,810
Interest expense, net   (1,464 )   (2,122 )   (7,292 )   (8,643 )
Income (loss) before taxes as adjusted 4,178 292 24,176 23,167
Income tax expense*   (1,504 )   (110 )   (8,703 )   (8,688 )
Income (loss) from continuing operations as adjusted $ 2,674 $ 182 $ 15,473 $ 14,479
 
Adjusted earnings (loss) per diluted share from continuing operations $ 0.09 $ 0.01 $ 0.51 $ 0.48
 

*Income taxes are calculated using the normalized effective tax rate for each year. The normalized rate used in 2017 was 36% and in 2016 was 37.5%.

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.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDA AND ADJUSTED EBITDA (UNAUDITED)
(Dollars in thousands)
 
Year Ended
December 31, 2017
Income from continuing operations $ 10,844
Add: tax expense 4,864
Add: net interest expense 7,292
Add: extinguishment of debt 1,888
Add: depreciation 21,945
Add: amortization   8,886
EBITDA   55,719
Add: one-time adjustments (excludes one-time depreciation adjustments of $1,993)   4,587
EBITDA as adjusted $ 60,306
 

Note on Reconciliation of Income and Earnings Data: EBITDA and EBITDA as adjusted are non-GAAP financial measures that Myers Industries, Inc. calculates according to the schedule above, using amounts from the unaudited Reconciliation of Non-GAAP Financial Measures Income (Loss) Before Taxes by Segment and 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 EBITDA and EBITDA as adjusted provides useful information regarding a company's operating profitability. Management uses EBITDA and EBITDA as adjusted as well as other financial measures in connection with its decision-making activities. EBITDA and EBITDA as adjusted 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 EBITDA and EBITDA as adjusted may not be comparable to methods used by other companies.

     
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Dollars in thousands)
 
December 31, 2017 December 31, 2016
Assets
Current Assets
Cash $ 2,520 $ 2,404
Restricted cash 8,659 8,635
Accounts receivable, net 76,650 64,282
Income tax receivable 12,954 2,208
Inventories 47,025 44,785
Other 2,204 4,639
Current assets of discontinued operations   -   14,198
Total Current Assets 150,012 141,151
Property, Plant, & Equipment, Net 83,904 106,266
Other Assets 122,026 127,758
Noncurrent assets of discontinued operations   -   6,509
Total Assets $ 355,942 $ 381,684
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable $ 63,581 $ 47,573
Accrued expenses 35,072 28,989
Current liabilities of discontinued operations   -   2,750
Total Current Liabilities 98,653 79,312
Long-term debt, net 151,036 189,522
Other liabilities 8,236 9,203
Deferred income taxes 4,265 10,365
Non-current liabilities of discontinued operations - 249
Total Shareholders' Equity   93,752   93,033
Total Liabilities & Shareholders' Equity $ 355,942 $ 381,684
 
 
MYERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 
Year Ended December 31,
2017   2016
Cash Flows From Operating Activities
Net income $ (9,889 ) $ 1,057
Income (loss) from discontinued operations, net of income taxes   (20,733 )   (10,267 )
Income from continuing operations 10,844 11,324
Adjustments to reconcile income from continuing operations to net cash

provided by (used for) operating activities

Depreciation 19,952 22,049
Amortization 8,886 9,743
Accelerated depreciation associated with restructuring activities 1,993
Non-cash stock-based compensation expense 3,626 3,357
(Gain) loss on disposal of fixed assets (3,482 ) 628
Loss on extinguishment of debt 1,888
Deferred taxes (5,663 ) 555
Accrued interest income on note receivable (1,360 ) (1,268 )
Impairment charges 544 1,329
Other 256 155
Payments on performance based compensation (1,010 ) (1,794 )
Other long-term liabilities 723 (592 )
Cash flows provided by (used for) working capital
Accounts receivable (6,757 ) 6,411
Inventories (1,876 ) 8,603
Prepaid expenses and other assets 2,209 1,047
Accounts payable and accrued expenses   18,299   (27,594 )
Net cash provided by (used for) operating activities - continuing operations 49,072 33,953
Net cash provided by (used for) operating activities - discontinued operations   (4,633 )   (232 )
Net cash provided by (used for) operating activities   44,439   33,721
Cash Flows From Investing Activities
Capital expenditures (5,814 ) (12,489 )
Proceeds from sale of property, plant and equipment 11,058 450
Proceeds (payments) related to sale of business     (4,034 )
Net cash provided by (used for) investing activities - continuing operations 5,244 (16,073 )
Net cash provided by (used for) investing activities - discontinued operations   (1,107 )   (16 )
Net cash provided by (used for) investing activities   4,137   (16,089 )
Cash Flows From Financing Activities
Net borrowing (repayments) on credit facility (16,474 ) (3,804 )
Repayments of senior unsecured notes (23,798 )
Cash dividends paid (16,341 ) (16,221 )
Proceeds from issuance of common stock 4,527 3,374
Excess tax benefit from stock-based compensation 64
Repurchase of common stock
Shares withheld for employee taxes on equity awards (620 ) (1,166 )
Deferred financing costs   (1,030 )  
Net cash provided by (used for) financing activities - continuing operations (53,736 ) (17,753 )
Net cash provided by (used for) financing activities - discontinued operations    
Net cash provided by (used for) financing activities   (53,736 )   (17,753 )
Foreign exchange rate effect on cash (208 ) 665
Less: Net increase (decrease) in cash classified within discontinued operations   (5,484 )   493
Net increase (decrease) in cash 116 51
Cash at January 1   2,404   2,353
Cash at December 31 $ 2,520 $ 2,404
 
 
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 twelve months ended
December 31, 2017   December 31, 2016
Net cash provided by (used for) operating activities - continuing operations $ 49,072 $ 33,953
Capital expenditures   (5,814 )   (12,489 )
Free cash flow $ 43,258 $ 21,464
 

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.

Contacts

Myers Industries, Inc.
Monica Vinay, 330- 761-6212
Vice President, Investor Relations & Treasurer
mvinay@myersind.com

Release Summary

Myers Industries Reports 2017 Fourth-Quarter and Full-Year Results. 2017 free cash flow of $43 million, a 102% year-over-year improvement.

Contacts

Myers Industries, Inc.
Monica Vinay, 330- 761-6212
Vice President, Investor Relations & Treasurer
mvinay@myersind.com