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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission file number I-8524
MYERS INDUSTRIES, INC.
| OHIO | #34-0778636 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 1293 SOUTH MAIN STREET, AKRON, OHIO | 44301 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (330) 253-5592
Indicate whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x . No .
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes . No .
As of April 30, 2000, the number of shares outstanding of the issuer’s Common Stock was:
19,765,007
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1
PART 1 — FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
| March 31, | December 31, | ||||||||||
| ASSETS | 2000 | 1999 | |||||||||
| CURRENT ASSETS | |||||||||||
| Cash and temporary cash investments | $ | 5,330,473 | $ | 1,094,300 | |||||||
| Accounts receivable-less allowances of $3,735,000 and $3,810,000, respectively | 123,466,120 | 115,754,304 | |||||||||
| Inventories | |||||||||||
| Finished and in-process products | 64,286,368 | 65,145,885 | |||||||||
| Raw materials and supplies | 18,834,522 | 19,275,065 | |||||||||
| 83,120,890 | 84,420,950 | ||||||||||
| Prepaid expenses | 1,509,870 | 5,721,436 | |||||||||
| TOTAL CURRENT ASSETS | 213,427,353 | 206,990,990 | |||||||||
| OTHER ASSETS | |||||||||||
| Excess of cost over fair value of net assets of companies acquired | 189,497,946 | 196,694,408 | |||||||||
| Patents and other intangible assets | 3,059,341 | 2,725,345 | |||||||||
| Other | 3,727,173 | 4,503,381 | |||||||||
| 196,284,460 | 203,923,134 | ||||||||||
| PROPERTY, PLANT & EQUIPMENT, AT COST | |||||||||||
| Land | 6,700,466 | 6,841,222 | |||||||||
| Buildings and leasehold improvements | 63,477,696 | 62,982,807 | |||||||||
| Machinery and equipment | 241,624,356 | 238,240,041 | |||||||||
| 311,802,518 | 308,064,070 | ||||||||||
| Less allowances for depreciation and amortization | 125,297,996 | 118,568,562 | |||||||||
| 186,504,522 | 189,495,508 | ||||||||||
| $ | 596,216,335 | $ | 600,409,632 | ||||||||
2
PART I — FINANCIAL INFORMATION
| March 31, | December 31, | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | 2000 | 1999 | |||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | $ | 50,240,251 | $ | 39,620,814 | |||||||
| Accrued expenses | |||||||||||
| Employee compensation | 22,411,502 | 26,963,274 | |||||||||
| Taxes, other than income taxes | 2,404,509 | 2,086,045 | |||||||||
| Income taxes | 4,604,247 | 1,326,344 | |||||||||
| Other | 14,039,715 | 19,773,861 | |||||||||
| Current portion of long-term debt | 13,741,966 | 12,474,081 | |||||||||
| TOTAL CURRENT LIABILITIES | 107,442,190 | 102,244,419 | |||||||||
| LONG-TERM DEBT, less current portion | 273,288,754 | 280,103,906 | |||||||||
| DEFERRED INCOME TAXES | 9,814,505 | 10,314,490 | |||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
| Serial Preferred Shares (authorized 1,000,000) | 0 | 0 | |||||||||
| Common Shares, without par value (authorized 60,000,000 shares; outstanding 19,810,525 and 19,987,446, respectively) | 12,159,809 | 12,256,209 | |||||||||
| Additional paid-in capital | 167,196,842 | 169,508,024 | |||||||||
| Accumulated other comprehensive income | (25,819,749 | ) | (19,013,675 | ) | |||||||
| Retained income | 52,133,984 | 44,996,259 | |||||||||
| 205,670,886 | 207,746,817 | ||||||||||
| $ | 596,216,335 | $ | 600,409,632 | ||||||||
3
PART I — FINANCIAL INFORMATION
| March 31, | March 31, | ||||||||
| 2000 | 1999 | ||||||||
| Net sales | $ | 161,586,409 | $ | 126,746,405 | |||||
| Costs and expenses | |||||||||
| Cost of sales | 104,632,686 | 79,519,275 | |||||||
| Operating expenses | 36,984,381 | 30,183,071 | |||||||
| Interest expense, net | 5,611,096 | 2,449,104 | |||||||
| Total costs & expenses | 147,228,163 | 112,151,450 | |||||||
| Income before income taxes | 14,358,246 | 14,594,955 | |||||||
| Income taxes | 6,026,000 | 6,327,000 | |||||||
| Net income | $ | 8,332,246 | $ | 8,267,955 | |||||
| Net income per common share | $ | .42 | $ | .41 | |||||
| Dividends per common share | $ | .06 | $ | .05 | |||||
| Weighted average number of common shares outstanding | 19,869,436 | 20,186,695 | |||||||
4
PART I — FINANCIAL INFORMATION
| March 31, | March 31, | |||||||||||
| 2000 | 1999 | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net income | $ | 8,332,246 | $ | 8,267,955 | ||||||||
| Items not affecting use of cash | ||||||||||||
| Depreciation | 8,578,720 | 6,782,805 | ||||||||||
| Amortization of excess of cost over fair value of net assets of companies acquired | 2,361,498 | 1,195,822 | ||||||||||
| Amortization of other intangible assets | 57,621 | 200,120 | ||||||||||
| Cash flow provided by (used for) working capital | ||||||||||||
| Accounts receivable | (9,889,919 | ) | (579,608 | ) | ||||||||
| Inventories | 343,956 | 645,252 | ||||||||||
| Prepaid expenses | 4,176,729 | 1,182,872 | ||||||||||
| Accounts payable and accrued expenses | 5,953,063 | 5,385,386 | ||||||||||
| Net cash provided by operating activities | 19,913,914 | 23,080,604 | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Acquisition of business, net of cash acquired | 0 | (139,214,843 | ) | |||||||||
| Additions to property, plant and equipment, net | (7,847,728 | ) | (5,552,743 | ) | ||||||||
| Other | (282,772 | ) | (3,106,815 | ) | ||||||||
| Net cash used for investing activities | (8,130,500 | ) | (147,874,401 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Long-term debt proceeds (repayment) | (2,087,489 | ) | 75,000,000 | |||||||||
| Net borrowing (repayment) of credit facility | (1,857,649 | ) | 28,908,707 | |||||||||
| Cash dividends paid | (1,194,521 | ) | (1,101,563 | ) | ||||||||
| Proceeds from issuance of common stock | 213,351 | 297,073 | ||||||||||
| Repurchase of common stock | (2,620,933 | ) | 0 | |||||||||
| Net cash provided by (used for) financing activities | (7,547,241 | ) | 103,104,217 | |||||||||
| (DECREASE) INCREASE IN CASH AND | ||||||||||||
| TEMPORARY CASH INVESTMENTS | 4,236,173 | (21,689,580 | ) | |||||||||
| CASH AND TEMPORARY CASH INVESTMENTS | ||||||||||||
| JANUARY 1 | 1,094,300 | 34,832,151 | ||||||||||
| CASH AND TEMPORARY CASH INVESTMENTS | ||||||||||||
| MARCH 31 | $ | 5,330,473 | $ | 13,142,571 | ||||||||
5
PART I — FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
| Accumulative | ||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||
| Comprehensive | Common | Paid-In | Comprehensive | Retained | ||||||||||||||||||
| Income | Stock | Capital | Income | Income | ||||||||||||||||||
| December 31, 1999 | $ | 12,256,209 | $ | 169,508,024 | ($19,013,675 | ) | $ | 44,996,259 | ||||||||||||||
| Net Income | $ | 8,332,246 | 8,332,246 | |||||||||||||||||||
| Foreign Currency | ||||||||||||||||||||||
| Translation | ||||||||||||||||||||||
| Adjustment | (6,806,074 | ) | (6,806,074 | ) | ||||||||||||||||||
| Comprehensive Income | $ | 1,526,172 | ||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||
| Issued | 18,778 | 194,573 | ||||||||||||||||||||
| Purchases for Treasury | (115,178 | ) | (2,505,755 | ) | ||||||||||||||||||
| Dividends | (1,194,521 | ) | ||||||||||||||||||||
| March 31, 2000 | $ | 12,159,809 | $ | 167,196,842 | ($25,819,749 | ) | $ | 52,133,984 | ||||||||||||||
6
PART I — FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Statement of Accounting Policy
The accompanying financial statements include the accounts of Myers Industries, Inc. and subsidiaries (Company), and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. It is suggested that these financial statements be read in con-junction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K.
In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31, 2000, and the results of operations and cash flows for the three months ended March 31, 2000 and 1999.
(2) Acquisitions
On February 4, 1999, the Company acquired all of the shares of the entities comprising Allibert Equipement, the material handling division of Sommer Allibert S.A. and acquired Allibert-Contico, LLC, a joint venture between Sommer Allibert and Contico International, Inc. for a total purchase price of approximately $150 million. The acquired businesses have five manufacturing facilities in Europe and one in North America.
In August 1999, the Company acquired substantially all of the assets of the Dillen Products Companies of Middlefield, Ohio for approximately $50 million and all of the outstanding shares of Listo Products, Ltd. of Canada for approximately $15 million. Dillen and Listo are leading manufacturers of plastic horticultural containers including pots, trays, saucers and decorative planters for customers including greenhouses and nurseries as well as retail garden centers and mass merchandisers.
The acquisitions have been accounted for under the purchase method of accounting and, accordingly, the results of operations have been included in the Company’s consolidated financial statements since the dates of acquisition, and the acquisition costs have been allocated to the assets acquired and liabilities assumed based upon their estimated fair values. The purchase price allocations have been based on estimates with the excess of purchase price over fair value of net assets acquired of approximately $166 million being amortized over lives of 15 to 40 years.
7
PART I — FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(2) Acquisitions (Con’t)
The following unaudited pro-forma information presents a summary of consolidated results of operations of the Company and the acquired businesses as if the acquisitions had occurred January 1, 1999.
| Three Months Ended | ||||
| (In thousands, except per share) | March 31, 1999 | |||
| Sales | $ | 153,334 | ||
| Net Income | 9,126 | |||
| Net Income Per Share | .45 | |||
These unaudited pro-forma results have been prepared for comparative purposes only and may not be indicative of results of operations which actually would have resulted had the combination been in effect on January 1, 1999, or of future results.
(3) Supplemental Disclosure of Cash Flow Information
The Company made cash payments for interest expense of $5,077,000 and $1,791,000 for the three months ended March 31, 2000 and 1999, respectively. Cash payments for income taxes were $624,000 and $569,000 for the three months ended March 31, 2000 and 1999.
4) Segment Information
The Company’s business units have separate management teams and offer different products and services. Using the criteria of FASB No. 131, these business units have been aggregated into two reportable segments; Distribution of after-market repair products and services and Manufacturing of polymer products. The aggregation of business units is based on management by the chief operating decision maker for the segment as well as similarities of production processes, distribution methods and economic characteristics (e.g. average gross margin and the impact of economic conditions on long-term financial performance).
The Company’s Distribution segment is engaged in the distribution of equipment, tools and supplies used for tire servicing and automotive underbody repair. The Distribution segment operates domestically through 42 branches located in major cities throughout the United States and in foreign countries through export and businesses in which the Company holds an equity interest.
8
PART I — FINANCIAL INFORMATION
| (4) | Segment Information (Con’t) |
The Company’s manufacturing segment designs, manufactures and markets a variety of polymer based plastic and rubber products. These products are manufactured primarily through the molding process in facilities throughout the United States and Europe.
Operating income for each segment is based on net sales less cost of products sold, and the related selling, administrative and general expenses. In computing segment operating income general corporate overhead expenses and interest expenses are not included.
| Three Months Ended | ||||||||||||||
| (In Thousands) | March 31, | |||||||||||||
| Net Sales | 2000 | 1999 | ||||||||||||
| Distribution of aftermarket repair products and services | $ | 33,965 | $ | 34,941 | ||||||||||
| Manufacturing of polymer products | 130,643 | 94,876 | ||||||||||||
| Intra-segment elimination | (3,022 | ) | (3,071 | ) | ||||||||||
| $ | 161,586 | $ | 126,746 | |||||||||||
| Income Before Income Taxes | ||||||||||||||
| Distribution of aftermarket repair products and services | $ | 2,857 | $ | 3,148 | ||||||||||
| Manufacturing of polymer products | 19,718 | 16,063 | ||||||||||||
| Corporate | (2,606 | ) | (2,167 | ) | ||||||||||
| Interest expense — net | (5,611 | ) | (2,449 | ) | ||||||||||
| $ | 14,358 | $ | 14,595 | |||||||||||
9
PART I — FINANCIAL INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 2000 increased $34.9 million or 27 percent on the strength of higher unit volumes and contributions from acquired companies in our Manufacturing segment. Sales in the Manufacturing segment increased $35.8 million or 38 percent with approximately 80 percent of the increase due to acquired companies not included in the prior year period. Without the impact of acquired companies, sales in the Manufacturing segment increased 8 percent primarily as a result of higher unit volumes. Sales in the Company’s Distribution segment decreased $1 million or 3 percent from the prior year reflecting lower unit volumes.
Total sales and sales in the Manufacturing segment were reduced $3.4 million by the translation effect of weaker foreign currencies, particularly the Euro, on sales of foreign subsidiaries. Without this reduction, total sales would have increased 30 percent and Manufacturing segment sales would have increased 42 percent compared to the first quarter in 1999. The translation effect also decreased net income for the quarter by $150,000 or $.01 per share.
Cost of sales increased $25.1 million or 32 percent based on the higher sales levels in the current year period. Gross profit as a percentage of sales declined to 35.2 percent in the current year from 37.3 percent in the first quarter a year ago. The deterioration of gross margin was primarily the result of higher raw material costs experienced in the Manufacturing segment.
Total operating expenses for the quarter increased $6.8 million or 23 percent from the prior year. This increase reflects the higher selling costs associated with the increase in sales combined with the additional operating expenses of acquired businesses. Expressed as a percentage of sales, operating expenses were 22.9 percent in the current period compared with 23.8 percent in the first quarter a year ago. This improvement in operating expense leverage is principally due to the seasonality of sales for certain acquired businesses that were not included in the prior year period.
Net interest expense increased $3.2 million to $5.6 million for the quarter ended March 31, 2000 compared with $2.4 million in the prior year. Approximately 28 percent of this increase is due to higher average interest rates with the remainder resulting from the increased borrowing levels from business acquisitions.
Income taxes as a percent of income before taxes was 42 percent for the quarter ended March 31, 2000 compared with 43.4 percent in the prior year. The lower effective tax rate in 2000 is attributable to a reduction in the relative impact of non-deductible amortization expense combined with a change in the effect of foreign tax rate differences.
10
PART I — FINANCIAL INFORMATION
Results of Operations (Con’t)
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $19.9 million for the three months ended March 31, 2000 compared with $23.1 million for same period in the prior year. Long-term debt decreased by $6.8 million during the quarter and debt as a percentage of total capitalization at March 31, 2000 was 58 percent, virtually unchanged from December 31, 1999. Working capital increased slightly to $106.0 million at March 31, 2000 and the Company’s current ratio was 2.0 to 1.
Capital expenditures for the three months ended March 31, 2000 were $7.8 million and the Company anticipates total capital expenditures in the range of $30 million to $35 million for the full year. Management believes that anticipated cash flows from operations and available credit facilities will be sufficient to fund its capital expenditures and meet its short-term and long-term needs.
11
PART II — OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
| (a) | Exhibits | |||
| (3) | (a) | MYERS INDUSTRIES, INC. AMENDED AND | ||
| RESTATED ARTICLES OF INCORPORATION. | ||||
| Reference is made to Exhibit 3(a) to | ||||
| Form 10-Q filed with the Commission on | ||||
| May 17, 1999. | ||||
| (b) | MYERS INDUSTRIES, INC. AMENDED AND RESTATED | |||
| CODE OF REGULATIONS. Reference is made to | ||||
| Exhibit (3)(ii) to Form 10-Q filed with the Commission | ||||
| on May 14, 1994. | ||||
| 27 | Financial Data Schedule | |||
| (c) | Form 8-K | |||
| No reports on Form 8-K were filed during the quarter. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MYERS INDUSTRIES, INC. | ||
| 5/11/00 | By: \s\ Gregory J. Stodnick | |
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| Date | Gregory J. Stodnick | |
| Vice President-Finance | ||
| Financial Officer (Duly Authorized | ||
| Officer and Principal Financial | ||
| and Accounting Officer) |
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