1 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 JUNE 30, 1997 ----------------------------------------- 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. ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO #34-0778636 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) 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 JULY 31, 1997, THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK WAS: 16,891,598 ========== 2 -1- PART I - FINANCIAL INFORMATION --------------------------------- MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF JUNE 30, 1997 AND DECEMBER 31, 1996 - -------------------------------------------------------------------------------- June 30, December 31, ASSETS 1997 1996 - ----------- ------------ ------------ CURRENT ASSETS Cash and temporary cash investments $ 1,567,624 $ 5,600,349 Accounts receivable-less allowances of $2,299,000 and $2,213,000, respectively 54,006,723 57,604,506 Inventories Finished and in-process products 34,277,646 33,042,266 Raw materials and supplies 6,394,835 6,788,086 ------------ ------------ 40,672,481 39,830,352 Prepaid expenses 5,451,975 3,274,673 ------------ ------------ TOTAL CURRENT ASSETS 101,698,803 106,309,880 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired 20,958,460 14,328,410 Patents and other intangible assets 2,589,082 2,750,530 Other 2,514,098 3,072,974 ------------ ------------ 26,061,640 20,151,914 PROPERTY, PLANT & EQUIPMENT, AT COST Land 2,476,194 2,547,509 Buildings and leasehold improvements 40,623,135 38,918,648 Machinery and equipment 119,193,618 108,594,273 ------------ ------------ 162,292,947 150,060,430 Less allowances for depreciation and amortization 74,940,266 69,400,497 ------------ ------------ 87,352,681 80,659,933 ------------ ------------ $215,113,124 $207,121,727 ============ ============ 3 -2- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF JUNE 30, 1997 AND DECEMBER 31, 1996 - -------------------------------------------------------------------------------- June 30, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 - ------------------------------------ ------------- ------------- CURRENT LIABILITIES Accounts payable $ 12,328,369 $ 15,189,488 Employee compensation and related items 7,825,664 10,562,313 Accrued expenses Taxes, other than income taxes 1,480,826 1,062,498 Income taxes 976,702 1,452,107 Other 9,659,546 8,066,838 Current portion of long-term debt 489,455 519,769 ------------- ------------- TOTAL CURRENT LIABILITIES 32,760,562 36,853,013 LONG-TERM DEBT, less current portion 7,941,834 4,569,396 DEFERRED INCOME TAXES 3,253,927 3,254,327 SHAREHOLDERS' EQUITY Serial Preferred Shares (authorized 1,000,000) -- -- Common Shares, without par value (authorized 30,000,000 shares; outstanding 16,878,558 and 16,854,529, respectively) 10,680,646 10,659,714 Additional paid-in capital 110,202,998 109,864,137 Foreign currency translation adjustment (297,636) (213,572) Retained income 50,570,793 42,134,712 ------------- ------------- 171,156,801 162,444,991 ------------- ------------- $ 215,113,124 $ 207,121,727 ============= ============= 4 -3- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED INCOME ------------------------------------------ FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED ------------------------------ ------------------------------- June 30, June 30, June 30, June 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $ 86,175,097 $ 79,951,159 $162,973,718 $152,505,415 Costs and expenses Cost of sales 59,502,875 54,362,658 112,214,281 102,566,872 Operating expenses 17,482,144 16,036,739 33,412,690 31,344,308 Interest, net 99,609 84,774 106,775 254,312 ------------ ------------ ------------ ------------ Total costs & expenses 77,084,628 70,484,171 145,733,746 134,165,492 Income before income taxes 9,090,469 9,466,988 17,239,972 18,339,923 Income taxes 3,777,000 3,861,000 7,118,000 7,519,000 ------------ ------------ ------------ ------------ Net income $ 5,313,469 $ 5,605,988 $ 10,121,972 $ 10,820,923 ============ ============ ============ ============ Net income per Common Share $ .31 $ .33 $ .60 $ .64 Dividends per Common Share $ .05 $ .04 $ .10 $ .08 Weighted average number of Common Shares outstanding 16,873,205 16,941,003 16,867,437 16,929,908 - ------------------------------ 5 -4- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 ----------------------------------------------- June 30, June 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES ------------ ------------ Net income $ 10,121,972 $ 10,820,923 Items not affecting use of cash Depreciation 5,915,506 5,216,492 Amortization of excess of cost over fair value of net assets of companies acquired 319,464 277,680 Amortization of other intangible assets 253,843 238,640 Cash flow provided by (used for) working capital Accounts receivable 4,129,576 (1,869,578) Inventories (417,566) 3,723,508 Prepaid expenses (2,209,722) (259,531) Accounts payable and accrued expenses (4,233,847) 1,949,419 ------------ ------------ Net cash provided by operating activities 13,879,226 20,097,553 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of business, net of cash acquired (7,955,077) -- Additions to property, plant and equipment, net (11,885,656) (9,164,891) Other 417,021 (48,540) ------------ ------------ Net cash used for investing activities (19,423,712) (9,213,431) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) - net 2,837,859 (8,888,394) Cash dividends paid (1,685,891) (1,354,789) Proceeds from issuance of common stock 359,793 428,865 ------------ ------------ Net cash provided by (used for) financing activities 1,511,761 (9,814,318) (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (4,032,725) 1,069,804 CASH AND TEMPORARY CASH INVESTMENTS JANUARY 1 5,600,349 3,387,562 ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS JUNE 30 $ 1,567,624 $ 4,457,366 ============ ============ 6 -5- 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 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 June 30, 1997, and the results of operations and cash flows for the three months and six months ended June 30, 1997 and 1996. (2) Supplemental Disclosure of Cash Flow Information ------------------------------------------------ The Company made cash payments for interest expense of $55,582 and $120,674 for the three months ended June 30, 1997 and 1996, respectively. Cash payments for interest expense were $200,784 and $517,656 for the six months ended June 30, 1997 and 1996, respectively. Cash payments for income taxes for the three months ended June 30, 1997 and June 30, 1996 were $6,687,748 and $8,442,685, respectively. For the six month period the payments for income taxes were $7,708,947 for 1997 and $9,712,303 for 1996. 7 -6- (3) Acquisition ----------- On April 25, 1997, the Company acquired substantially all of the assets of Molded Solutions, Inc., a manufacturer of custom engineered molded rubber products. The Asset Purchase Agreement provides for payment of additional consideration contingent upon the earnings of Molded Solutions during the 12 month period ending April 25, 1998. The acquisition has been accounted for using the purchase method and, accordingly, Molded Solution's results of operations, the amounts of which are not material, have been included in the Company's consolidated financial statements since the date of acquisition. The purchase price allocation has been based on preliminary estimates with the excess of purchase price over the fair value of assets acquired being amortized on a straight line basis over 15 years. 8 -7- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- RESULTS OF OPERATIONS - --------------------- Myers Industries, Inc. reported increased sales but lower earnings for both the quarter and six month periods ended June 30, 1997. For the quarter sales rose 7.8 percent to $86.2 million while earnings declined 5.2 percent to $5.3 million. Reported net earnings per share for the second quarter were $.31 down 6.1 percent from $.33 in the year earlier period. In the first six months, sales reached $163.0 million an increase of 6.9 percent from $152.5 million a year ago. Earnings in the first six months were $10.1 million or $.60 per share, a decrease of 6 percent compared with $10.8 million and $.64 per share in 1996. For the quarter and year-to-date periods net sales increased in both of the Company's business segments, primarily on the strength of unit volume increases. Net sales in the Distribution segment increased 10 percent for the quarter ended June 30, 1997 and 9 percent year to date. In the Manufacturing segment net sales increased 6 percent for the quarter and 5 percent year to date compared to the same periods in 1996. Cost of sales increased $5.1 million or 9.5 percent for the quarter and $9.6 million or 9.4 percent for the six months ended June 30, 1997. Gross profit, expressed as a percentage of sales declined to 31 percent for the quarter and 31.1 percent for the six month period compared to 32.0 percent and 32.7 percent for the same periods in 1996. The decline in gross profit margin is primarily due to higher raw material costs, principally plastic resins, used in the manufacturing segment. Operating expenses increased $1.4 million or 9.0 percent for the quarter and $2.1 million or 6.6 percent for the six month period ended June 30, 1997. Operating expenses, expressed as a percentage of sales increased slightly to 20.3 percent for the quarter compared with 20.1 percent in the second quarter of 1996. For the six month period, operating expenses as a percentage of sales decreased to 20.5 percent from 20.6 percent in the prior year. Interest expense for the quarter increased to $99,609 from $84,774 in 1996 reflecting higher borrowing levels as a result of the Molded Solutions acquisition. For the six month period interest expense decreased to $106,775 from $254,312 based on lower average borrowing levels. 9 -8- Results of Operations (con't) In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, "Earnings per Share" which eliminates the concept of common stock equivalents and replaces the existing "primary" earnings per share with "basic" earnings per share. Basic earnings per share excludes potential dilution and is calculated by dividing income available to common shareholders by the weighted average shares outstanding. The new statement also changes the calculation of diluted earnings per share and replaces the existing fully diluted earnings per share requirement. FASB Statement No. 128 is effective for periods ending after December 15, 1997, and requires that all prior period earnings per share presented be restated. The Company does not expect the new standard, when implemented, to have a material effect on the current or historical earnings per share amounts presented. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities is the primary source of liquidity and amounted to $13.9 million for the six months ended June 30, 1997. Long-term debt was increased by $3.4 million during the six months of 1997 and debt as a percentage of total capitalization increased to 4.7 percent compared to 3.0 percent at December 31, 1996. Working capital decreased to $68.9 million at June 30, 1997 from $69.5 million at December 31, 1996. Capital expenditures for the six months ended June 30, 1997 were $11.9 million. The Company currently anticipates annual capital expenditures in the range of $15.0 to $20.0 million over the next five years, primarily for increased polymer manufacturing capacity. Management believes that anticipated cash flows from operations and available credit facilities will be sufficient to fund capital expenditures and meet its short-term and long-term needs. 10 -9- PART II - OTHER INFORMATION --------------------------- MYERS INDUSTRIES, INC. ---------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Annual Meeting of Shareholders was held on April 24, 1997 and the following matters were voted on at that meeting. 1. The election of eight Directors were voted upon. All of the Directors nominated were elected. The results of this voting are as follows: Votes Votes Name of Director For Withheld Stephen E. Myers 13,762,515 376,530 Milton I. Wiskind 13,741,253 397,792 Edwin P. Schrank 13,763,469 375,576 Karl S. Hay 13,699,730 439,315 Richard P. Johnston 13,736,433 402,612 Richard L. Osborne 13,757,699 381,346 Jon H. Outcalt 13,762,889 376,156 Samuel Salem 13,755,510 383,535 2. Adoption of the Myers Industries, Inc. 1997 Incentive Stock Plan was approved by the following vote: For 12,286,418 Against 1,831,848 Abstain 199,155 3. Proposal to amend the Code of Regulations to classify the board of directors into three classes of directors serving staggered three year terms was not approved by the following vote: For 7,755,928 Against 4,100,155 Abstain 2,461,738 11 -10- 4. Proposal to amend the Articles of Incorporation to require a super majority vote of the shareholders for approval of certain extraordinary transactions and/or certain amendments to the Articles of Incorporation was not approved by the following vote: For 7,606,785 Against 4,261,928 Abstain 2,449,108 5. Proposal to amend the Code of Regulations to make the Ohio Control Share Acquisition Statute inapplicable to the Company was approved by the following vote: For 10,046,382 Against 1,751,717 Abstain 2,519,722 6. Ratification of the appointment of Arthur Andersen LLP as independent auditors for the fiscal year ending December 31, 1997 was approved by the following vote: For 14,077,743 Against 70,873 Abstain 169,205 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. 8/12/97 By: \s\ Gregory J. Stodnick - ----------------- ---------------------------------- Date Gregory J. Stodnick Vice President-Finance Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)