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 1934For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934For the transition period from ______________________ to _____________________
Commission file number I-8524
MYERS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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) Registrants 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 YearsIndicate 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 October 31, 1999, the number of shares outstanding of the issuers Common Stock was:
19,992,495
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PART 1 FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
September 30, December 31, ASSETS 1999 1998 CURRENT ASSETS Cash and temporary cash investments $ 7,913,061 $ 34,832,151 Accounts receivable-less allowances of $4,111,000 and $2,396,000, respectively 117,681,587 62,855,111 Inventories Finished and in-process products 62,935,871 44,182,030 Raw materials and supplies 18,121,598 9,236,913 81,057,469 53,418,943 Prepaid expenses 1,872,375 2,543,996 TOTAL CURRENT ASSETS 208,524,492 153,650,201 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired 208,602,946 37,481,612 Patents and other intangible assets 2,387,885 2,104,327 Other 4,776,409 4,028,655 215,767,240 43,614,594 PROPERTY, PLANT & EQUIPMENT, AT COST Land 6,752,584 2,854,905 Buildings and leasehold improvements 64,573,307 53,484,959 Machinery and equipment 226,156,081 147,405,559 297,481,972 203,745,423 Less allowances for depreciation and amortization 114,970,607 94,302,430 182,511,365 109,442,993 $ 606,803,097 $ 306,707,788 -1-
PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
September 30, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 CURRENT LIABILITIES Accounts payable $ 37,229,823 $ 15,863,124 Accrued expenses Employee compensation 25,138,929 13,094,384 Taxes 1,186,610 2,673,698 Other 20,260,918 13,214,158 Current portion of long-term debt 4,792,377 6,388,146 TOTAL CURRENT LIABILITIES 88,608,657 51,233,510 LONG-TERM DEBT, less current portion 293,444,295 48,832,240 DEFERRED INCOME TAXES 4,494,521 3,953,185 SHAREHOLDERS EQUITY Serial Preferred Shares (authorized 1,000,000) 0 0 Common Shares, without par value (authorized
60,000,000 shares; outstanding 20,246,295 and
20,171,867, respectively)12,815,706 11,610,996 Additional paid-in capital 172,510,509 134,280,522 Accumulated other comprehensive income (1,512,624 ) (83,002 ) Retained income 36,442,033 56,880,337 220,255,624 202,688,853 $ 606,803,097 $ 306,707,788 -2-
PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED INCOME
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1999 1998 1999 1998 Net Sales $ 139,768,838 $ 92,196,199 $ 414,158,294 $ 281,501,941 Costs of Sales 91,513,996 61,714,821 264,524,814 185,577,303 Gross Profit 48,254,842 30,481,378 149,633,480 95,924,638 Operating Expenses 36,113,558 21,681,702 101,338,599 62,146,677 Operating Income 12,141,284 8,799,676 48,294,881 33,777,961 Interest Expense 4,482,515 437,946 10,239,130 732,294 Income Before Income Taxes 7,658,769 8,361,730 38,055,751 33,045,667 Income Taxes 3,692,000 3,444,000 16,654,000 13,540,000 Net income $ 3,966,769 $ 4,917,730 $ 21,401,751 $ 19,505,667 Net income per Common Share* $ .20 $ .24 $ 1.06 $ .97 Dividends per Common Share* $ .06 $ .05 $ .17 $ .145 Weighted average number of Common
Shares outstanding*20,242,996 20,142,365 20,217,527 20,127,063
* | Adjusted for a ten percent stock dividend in August, 1999. |
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Sept. 30, | Sept. 30, | |||||||||
1999 | 1998 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income | $ | 21,401,751 | $ | 19,505,667 | ||||||
Items not affecting use of cash | ||||||||||
Depreciation | 22,580,451 | 11,204,958 | ||||||||
Amortization of excess of cost over fair value of net assets of companies acquired | 4,848,285 | 838,432 | ||||||||
Amortization of other intangible assets | 564,265 | 339,770 | ||||||||
Cash flow provided by (used for) working capital | ||||||||||
Accounts receivable | (6,742,146 | ) | 1,813,539 | |||||||
Inventories | (3,516,617 | ) | (1,947,377 | ) | ||||||
Prepaid expenses | 815,065 | 1,143,534 | ||||||||
Accounts payable and accrued expenses | (5,019,109 | ) | (2,221,037 | ) | ||||||
Net cash provided by operating activities | 34,931,945 | 30,677,486 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Acquisition of businesses, net of cash acquired | (207,002,970 | ) | (18,267,610 | ) | ||||||
Additions to property, plant and equipment, net | (18,516,824 | ) | (12,483,822 | ) | ||||||
Other | 364,261 | 289,475 | ||||||||
Net cash used for investing activities | (225,155,533 | ) | (30,461,957 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Long-term debt proceeds | 75,000,000 | 0 | ||||||||
Net borrowing (repayment) of credit facility | 90,709,869 | (552,063 | ) | |||||||
Cash dividends paid | (3,420,119 | ) | (2,928,062 | ) | ||||||
Proceeds from issuance of common stock | 1,014,748 | 725,797 | ||||||||
Repurchase of common stock | 0 | (82,687 | ) | |||||||
Net cash provided by financing activities | 163,304,498 | (2,837,015 | ) | |||||||
(DECREASE) INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS |
(26,919,090 | ) | (2,621,486 | ) | ||||||
CASH AND TEMPORARY CASH INVESTMENTS JANUARY 1 | 34,832,151 | 6,297,726 | ||||||||
CASH AND TEMPORARY CASH INVESTMENTS SEPTEMBER 30 | $ | 7,913,061 | $ | 3,676,240 | ||||||
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
STATEMENT OF SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Comprehensive | Common | Paid-In | Comprehensive | Retained | ||||||||||||||||
Income | Stock | Capital | Income | Income | ||||||||||||||||
December 31, 1998 | $ | 11,610,996 | $ | 134,280,522 | ($83,002 | ) | $ | 56,880,337 | ||||||||||||
Net Income | $ | 21,401,751 | 21,401,751 | |||||||||||||||||
Foreign Currency Translation Adjustment | (1,429,622 | ) | (1,429,622 | ) | ||||||||||||||||
Comprehensive Income | $ | 19,972,129 | ||||||||||||||||||
Common Stock Issued | 45,606 | 969,142 | ||||||||||||||||||
Purchases for Treasury | 0 | 0 | ||||||||||||||||||
10% Stock Dividend | 1,159,104 | 37,260,845 | (38,419,936 | ) | ||||||||||||||||
Dividends | (3,420,119 | ) | ||||||||||||||||||
September 30, 1999 | $ | 12,815,706 | $ | 172,510,509 | ($1,512,624 | ) | $ | 36,442,033 | ||||||||||||
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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 conjunction with the financial statements and notes thereto included in the Companys 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 September 30, 1999, and the results of operations and cash flows for the nine months ended September 30, 1999 and 1998.
(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 and had 1998 annual sales of approximately $145 million.
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. In fiscal 1998, Dillen and Listo had sales of approximately $40 million and $12 million, respectively.
The acquisitions will be accounted for under the purchase method of accounting and, accordingly, the total purchase price has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values. At September 30, 1999, the purchase price allocations have been based on estimates with the excess of purchase price over fair value of net assets acquired of approximately $175 million being amortized over lives of 15 to 40 years.
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(2) ACQUISITIONS (Cont)
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, 1998.
Three Months Ended | Nine Months Ended | |||||||||||||||
(In thousand, except per share) | September 30, | September 30, | ||||||||||||||
1999 | 1998 | 1999 | 1998 | |||||||||||||
Sales | $ | 143,219 | $ | 135,178 | $ | 458,805 | $ | 423,792 | ||||||||
Net Income | 3,367 | 3,505 | 21,985 | 17,601 | ||||||||||||
Net Income Per Share | .17 | .17 | 1.09 | .87 |
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, 1998, or of future results.
(3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The Company made cash payments for interest expense of $4,289,660 and $580,930 for the three months ended September 30, 1999 and 1998, respectively. Cash payments for interest were $9,370,295 and $1,587,712 for the nine months ended September 30, 1999 and 1998. Cash payments for income taxes were $8,330,477 and $5,199,443 for the three months ended September 30, 1999 and 1998. Cash payments for income taxes were $23,803,047 and $16,664,083 for the nine months ended September 30, 1999 and 1998, respectively.
(4) SEGMENT INFORMATION
The Companys 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 and metal 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 Companys 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.
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(4) SEGMENT INFORMATION (Cont)
The Companys 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 | Nine Months Ended | ||||||||||||||||
(In Thousands) | September 30, | September 30, | |||||||||||||||
NET SALES | 1999 | 1998 | 1999 | 1998 | |||||||||||||
Distribution of aftermarket repair
products and services |
$ | 41,759 | $ | 42,668 | $ | 118,570 | $ | 117,641 | |||||||||
Manufacturing of polymer and
metal products |
101,620 | 53,038 | 305,806 | 174,155 | |||||||||||||
Intra-segment elimination | (3,610 | ) | (3,510 | ) | (10,218 | ) | (10,294 | ) | |||||||||
$ | 139,769 | $ | 92,196 | $ | 414,158 | $ | 281,502 | ||||||||||
INCOME BEFORE INCOME TAXES | |||||||||||||||||
Distribution of aftermarket repair
products and services |
$ | 4,237 | $ | 4,474 | $ | 11,656 | $ | 10,796 | |||||||||
Manufacturing of polymer and
metal products |
9,160 | 6,420 | 42,691 | 28,766 | |||||||||||||
Corporate | (1,256 | ) | (2,094 | ) | (6,052 | ) | (5,784 | ) | |||||||||
Interest expense net | (4,482 | ) | (438 | ) | (10,239 | ) | (732 | ) | |||||||||
$ | 7,659 | $ | 8,362 | $ | 38,056 | $ | 33,046 | ||||||||||
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported record sales for both the quarter and nine month periods ended September 30, 1999. In total, sales rose 52 percent to $140 million for the quarter and 47 percent to $414 million for the first nine months as gains in existing business units combined with contributions from acquired companies. Net income for the quarter was down 19 percent to $4 million or $.20 per share from $4.9 million or $.24 per share in the prior year, primarily due to the seasonality of operations in acquired businesses and significantly higher interest expense. For the nine months ended September 30, 1999 net income increased 10 percent to $21.4 million or $1.06 per share from $19.5 million or $.97 per share in 1998. On a pro-forma basis, reflecting the acquired businesses as if they had been included for the full periods presented, sales increased six percent for the quarter and eight percent for the year to date period while net income per share was unchanged at $.17 per share for the quarter and up 25 percent to $1.09 per share for the nine months ended September 30, 1999 compared to $.87 per share for the prior year.
For the quarter, net sales increased $47.6 million as higher sales in the Companys Manufacturing segment offset a slight decline in Distribution segment sales. Sales in the Manufacturing segment increased $48.6 million or 92 percent based on an increase of six percent in existing business units combined with the impact of acquired companies not included in the prior year period. Net sales for the nine months ended September 30, 1999 increased $132.7 million as the Company experienced improvements in both of its business segments. Sales in the Distribution segment increased $1 million or one percent while sales in the Manufacturing segment rose $132 million or 76 percent. Without the impact of acquired companies there was an overall sales increase of 7 percent in the Manufacturing segment primarily the result of higher unit volumes.
Cost of sales for the quarter increased $29.8 million or 48 percent reflecting the higher sales levels; however, gross profit as a percentage of sales increased to 34.5 percent from 33.1 percent in the prior year. For the nine months ended September 30, 1999, gross profit increased to 36.1 percent of sales from 34.1 percent in the prior year. For both the quarter and year-to-date periods this improvement in gross margin was primarily attributable to the Manufacturing segment reflecting the impact of acquired companies.
Operating expenses increased $14.4 million or 66 percent for the quarter and $39.2 million or 63 percent year-to-date. These increases reflect the additional operating costs of acquired companies combined with higher selling costs resulting from increased sales volume. Expressed as a percentage of sales, operating expenses were 25.8 percent for the quarter and 24.5 percent for the nine months ended September 30, 1999 compared with 23.5 percent for the quarter and 22.1 percent for the nine month period in the prior year. This decrease in operating expense leverage is primarily due to the impact of acquired companies, particularly, those operating in foreign markets.
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PART I FINANCIAL INFORMATION
MYERS INDUSTRIES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Cont)
Net interest expense increased to $4.5 million for the quarter and $10.2 million for the nine month period ended September 30, 1999 compared with $437,946 and $732,294 in the same periods of the prior year. This significant increase reflects the higher borrowing levels resulting from business acquisitions.
Income taxes as a percent of income before taxes was 43.8 percent for the nine months ended September 30, 1999 compared with 41.0 percent in the prior year. The higher tax rate in 1999 is attributable to an increase in non-deductible amortization expense combined with foreign tax rate differences.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $34.9 million for the nine months ended September 30, 1999 compared with $30.7 million for same period in the prior year. Long-term debt increased by $245 million from December 31, 1998 as a result of the Allibert Equipement, Dillen and Listo acquisitions and debt as a percentage of total capitalization increased to 58 percent. Available borrowings under the Companys credit facility was approximately $85 million at September 30, 1999. Working capital increased to $119.9 million at September 30, 1999 and the Companys current ratio was 2.4 to 1.
Capital expenditures for the nine months ended September 30, 1999 were $18.5 million and the Company anticipates total capital expenditures in the range of $25.0 to $30.0 million for the full year. Management believes that anticipated cash flows from operations and available credit facilities will be sufficient to service debt, fund capital expenditures and meet its short-term and long-term needs.
YEAR 2000
The Company has been conducting an on-going review to identify potential Year 2000 issues related to both information technology (IT) and non-information technology (non-IT) matters. The Company has implemented plans for each of its business units to correct or replace existing IT systems where significant potential year 2000 failures could occur. The majority of core business software utilized by the Company was acquired from third parties. As of September 30, 1999, core Corporate financial software is Year 2000 compliant, and core business software for the business units is either Year 2000 compliant or has been upgraded and tested. The Company has also been performing an on-going assessment of the Year 2000 readiness of non-IT systems, including production equipment as well as evaluating the status of key vendors and service providers to determine Year 2000 readiness and determine alternatives and contingency plan requirements. To date, no material problems have been identified, and the Company is confident that the Year 2000 issue will not create significant operational problems. To date, the funds which have been spent on year 2000 issues have not been material and based on current assessments remaining expenses are not expected to be material.
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PART II OTHER INFORMATION
MYERS INDUSTRIES, INC.
Item 4. | 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. | |||||
(b) | Form 8-K | |||||
Form 8-K filed on August 13, 1999 regarding the completion of (a) the acquisition of the Dillen Products, Inc., and (b) increase to $350.0 million multi-currency credit facility with Bank One Michigan. |
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. |
November 12, 1999 |
By: \s\ Gregory J. Stodnick |
|
_______________________ Date |
_______________________ Gregory J. Stodnick Vice President-Finance Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) |
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