MYE - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Myers Industries 2020 Second Quarter Earnings Call [Operator instructions]. I would now like to hand the conference over to Ms. Monica Vinay. Please go ahead.

Monica Vinay

Thank you. Myers Quarter to Earnings welcome morning, Industries XXXX Second call. Good Investor Vinay, Treasurer Vice Monica Relations President I'm of and Industries. at Myers

Joining this XXXX. financial morning, results President McGaugh, issued a Kevin President, are the outlining Executive we Chief today the release and Earlier and Vice Brackman, second and Officer. Financial for news Officer Executive me Chief Mike quarter of

Investor it www.MyersIndustries.com, a will not of the the our the access yet it's shortly can call at site received on copy of this tab. transaction is on you've be call Web event. If you our webcast with This also Relations under release, after the archived being along and website

to may factors, the Mike, during other to on materially Before over expressed statements Reform would management's these current am the are in differ I McGaugh. XX-Q now in company's forth implied this statements concerning is turn filings and from Further SEC I call. to and over may XXXX. be These risks, Litigation Securities call factors based call of pursuant the Act the Harbor turn provisions some of cause Mike and in uncertainties, company's Safe which periodic XX-K make information Such involve other to comments Private or the risks, forward-looking statements. that results these the those set I found filings. we uncertainties may and made to like and pleased to remind expectations you are

Mike McGaugh

us. Good morning. joining Thank you for

operating during of we the that originally together safe. employees, were than our to expected. had how focus while also to and pulled staying want better results were deliver they to and a say especially quarter of I am First, sales to teams, dedication challenging I deliver we able our solid results Due how proud

to an quarter share turn overview of the if XXXX. Now, slide second of you three presentation, we'll

well during the our businesses noted today's in performed quarter. we As release,

We anticipated COVID-XX needs, the demand aftermarket we delivered result year-over-year in end stay continue than from customers' also the restrictions Sales a to more crisis. by our significantly once demand higher encouraged at We auto challenges were place consumer despite as resulting the our higher increased that of in vehicles sales fuel our in took meet our complexities sector, lifted road. for home the to containers. returned were market and increase

to was operational Our which second delivered increased with expansion again quarter. sales quarter. execution during profit solid businesses the offset quarter XXXX this XX% the margin due favorable XX% to Adjusted and price-cost the volume This lower ago. gross year gross of than compared margin, in margin a more

that was result, pleased margin quarter. sales. gross decline the We're of and during also our positive the $X.X reductions, during free cash despite SG&A generated flat As flow of the operating in cost a expansion XX% margin million quarter we the

our liquidity growth result, sheet a have we our strong remains initiatives. and to balance and our to As support operations continue significant

the entire profitably remain staying financial that our team most as challenging right second results growth strength, a our our emerge we our strategies growing circumstances. quarter performance-as team performance future, dedicated once safe in subsides. strong Most an our meeting have in has the remains high-quality importantly, this even businesses. stronger while the organization crisis the industry-leading We demonstrates of second-quarter of and capable company customers' Our and confident generating a product, to to needs

of financial trends, our turn more to on call I'll full-year a guidance. our on and sales discussion outlook for our results, over details the Now Kevin second-quarter

Kevin Brackman

saw quarter sales sales to continuing for million, compared of X. increases Thanks, of Mike a were Net fuel Slide operations. quarter the Please container morning, in we and, second decrease second the XX%, were across with points end numbers the segment all and the costs. reflect good sales of more the market, the that primarily $XXX from price-cost due offset markets. XX% XXXX. decreases note our than end this Tuffy in everyone. operating turn The was favorable by Please distribution presentation basis increased the rest to XXX the margin to and in Gross lower acquisition consumer profit margin

operating and to gross This of primarily to compared as income XXXX. $X.XX as reductions. share expenses margin Our SG&A was the the adjusted the earnings second higher adjusted result $X.XX quarter. well compensation quarter cost $XX.X decreased diluted flat million Adjusted sales lower lower profit operating due the were to year-over-year for adjusted volume. the despite was of income variable XX% per for The margin, lower

to turn segment. segment, for XX.X%. net overview Handling sales In Slide the performance let's of business by Material an our X, decreased Now by

challenging to the environment the more in the sales and vehicle, end-market. Food These and led increase Beverage, end anticipated sales As industrial than large in business declines declines offset markets. consumer

positive a operating However, and volume favorable overall lower partially the sales lower by offset margin, costs. sales mix, price-cost was

decreased segment's compared income adjusted of increased result, with offset to sales acquisition incremental the the sales year. across As XX.X% of XX.X% of the as Distribution Tuffy Manufacturing partially from operating remainder sales quarter in XXXX second X.X% August the segment, for a In margin the the a last segment. decline the

quarter the operating quarter $X.X unfavorable adjusted end were quarter home sales were year, decreased of million $X.X second ago, the Consequently, in for and Distribution's eased This due to of mix. on the primarily at demand than income were earlier, compared road. factors. was improved mentioned result the anticipated. closures had with this to during year stay the sales a two restrictions million Mike this as market lifted, better vehicles more As throughout we

sales unfavorable mix base second, versus And the unfavorable higher of equipment mix product acquisition versus quarter. of an due volume. an consumables sales to First, during

operating X.X% second quarter As a income segment's of with result, adjusted the for X.X% the XXXX. compared was margin

review Turning to sheet our flow. I'll cash and balance Slide X,

quarter in the as X.X%, year. which in percent of For previous of our in quarter was $X.X The and a June, capital free in was million inventory accounts supply primarily higher increase sales strong crisis. chain with due second due million XXXX, working strategic Working higher at we capital to the $X.X the second generated during the to flow of cash quarters. protect was of inventory sales to receivable compared investments and balances last end than

which to adjusted was working previous sheet normal by capital Cash end to consistent of expect of quarters. was debt our balance to million EBITDA We end X.X the the return at quarter and with the levels the the year. second ratio times, is on $XX

there turn lot these of this on conditions, based projections. outlook seven Now still uncertainty XXXX note revenue slide that important a current is updated to a let's around end-market is projected market to and It's for outlook. and and

from For full in previous is decline to high a the anticipate single-digit we year, the now percentage an which slight decline improvement range, a approximate XX% year-over-year. of expectation our sales mid

the consumer Now with increase during let's review our outlook even market, what in quarter markets. end anticipated. greater current demand our end each had than than Starting the was for of second the we

boxes will we to and XXXX customer and occur result, the we expect We the full quarter with a XXXX. was for Beverage market increase the mid-single-digit year. season Because sales and digits year impacted our improved compared the quarter increase. about revenue of consolidations. this now continue for unfavorably anticipate mid-single in late end-market spring in increase a in anticipate in our In fourth a demand Food demand seed upcoming first in the low outlook As single-digit which season year's for reminder, by of a the last as previous

the sales anticipate to decline to that to experienced has we in during market our of vehicle end begun year. in we while improve, do that demand Turning will improvement the market second the half not the be first enough the RV half offset

a anticipated in both sales, Additionally, full-year we XXXX. end to sales we RV demand for in continues industrial of vehicle to to demand full result continue the in year the industrial of down and market our to throughout automotive a environment decline double-digits the soft, manufacturing continue remainder In soft the therefore, expect year. market, expect automotive be end-market the be as end customer

anticipated the our full teens be we industrial to market previous low year. now of aftermarket, single-digit As have of had because improving the auto decline. for And in a are our our result, we begin outlook outlook once to at stay we pretty restrictions sales maintained with lifted, than in compared single-digit range, high low our were quickly our the percentage forecasting in demand decline end more finally, home

Turning to XXXX. slide guidance for our you can eight, see

forecast be of decline. As will an I just a previous XX% full discussed, improvement high we anticipate is sales down slight mid approximate for digits, our over which single the year to

$XX We continue million to approximately to expense be be million, amortization shares, approximately of million. million, share and $XX to expect diluted XX expenditures net roughly to count $X interest a capital be and depreciation

our than tax Lastly, of to we it an now Mike. XX%. will previous of that, over effective is lower I With rate turn which guidance XX%, back slightly anticipate

Mike McGaugh

I plastics on Thanks, strength a the their critical communities Kevin. were and the take on comments. efforts a growth in environment. we'll segment, businesses M&A intend did Material like manufacturing. our questions, customers I'd sharp use team our to disciplined And In want Thanks to achieve few and they our we the shareholding extremely quarter. profitable before to our delivering us solid focus to tremendous process needs in a we close Handling financial job build the increasing an thank entire for In challenging during results helping value. we acquire coming second months, to able that the technological meet in of have to operating Myers with

addition out and marketing grow to M&A, we capabilities. sales, commercial, aim In our to building organically,

focus in costs, enhancing transformation key our include In future. our results chain the service improving will improvement supply to our We These positive teams execute and areas in accounts, initiatives. to to level. and continuous are growing and Distribution, business, and expanding see expect platform, new optimizing e-commerce strengthening winning lower our we while and these our continue

our it to now our on solid mindset, driving will we'll the and journey growth. believe on I'm over we questions. for this well-positioned to for continue and into future. With execution excited results an teams Focusing are turn that, I be strategy deliver

Operator

first Schemm KeyBanc from question comes The Carl instructions] Markets. with [Operator Capital

Carl Schemm

time for you've My little just Mike that a more first position. question your now in had

metrics kind philosophically and in capital are broadly how most about Just business considering are what you deployment? maybe you of important the thinking

Mike McGaugh

of a to standpoint, other again on important, operating income at get a our levels satisfaction is operations, company a capability Yes, solid From What question. comes very you'll control is when we'll looking rate. solid see to Where customer in future. build flow how customer-facing mechanisms commercial comes order looking metrics their very I'm capability, is our our cash we're number our but fill when it I company a important. do that businesses and to the I it is, minutiae the on into this operate, is listen clearly, technologies. the won't appreciate

be in to CapEx cash dividends, I in continues we've As dividend continue to barriers flow on cover going its to top no sacrosanct also times. delivering importance. We're growth the levels it challenging committed in capital to in invest the split relates to maintenance past, between and allocation, the see to our capital. even

the You and others other got capital going uncertain that that up deployment know, we're piece if a strong little I when play more business. business, of And the takeaway share be and and to our take are to a continue even This for sheet at exercise M&A. here balance to cautious. just strength assets, is, look then our may chance is times before game is us into a wrap going continue we've you to build to in we're

a we and more continue to up see of and activity there the the come. We in pipeline ramping to robust plastics a are number technologies,

Operator

comes Cowen Company. and question Vitanza with from Next Lance

Lance Vitanza

in do you and also there? this follow that saying do environment? bit internal possible just a for think respect then the So maybe that to make given or about with talked And, is you little can to Could to first, and want a that primary COVID Kevin question. controls you Carl's pause opportunity your really about on on you Or company no, bit got by the is questions for then talk progress you on the side. really some how a that to you need offense on And you but objectives more and is and you just so actually more forth. specific really of I've on so well there, customer-facing be production set necessarily Mike, the be forth. closed

Mike McGaugh

want to good Philosophically fearful. others when we've And Yes, got you Lance. are be a sure, strong business.

technologies in be frank, on with these parts providing good enough not operations, our and to the The and it's the This in to exactly we company that all no, we've have opportunity. dialed worried side so sure, and have all balance growth mindset. have I that's is within time good solutions being need great we those the people We're to We There be here but focus a to the is a businesses to just to to of operationally, allows on not more the is are I'm we've focused find enough not as that for when liquidity, done. organic got or continue about as on out that the solutions and us this of we're dialed M&A think opportunities pleasantly But there surprised side. is got And business growing. we sheet. play offense. well I build we mindset. need growth, unit need silos cross-selling company's going

Vitanza Lance

Thanks.

it, talk, up, the gross said got half. some struggling improvements, that first if Okay. margin I but was you there repeat and through strength? could I And driven then but I'm what you went I you'd know keep you the to missed had Kevin, operational could

Kevin Brackman

Yeah, margin sales favorable gross with really so in cost SG&A. cost in quarter in the also, nice and strength last we year. then a compared control And we did job price-cost we to margins both had

that improvement. And drove two those that were margin the gross big factors so the

Vitanza Lance

have what Do of these you quite see going think these forward sustainable think others to with were of going bit The from the how those expected. that and we mean, I'm to nature every up I suggest estimates you was about as about I margin. trying thought the guess we were quarter? a repeat had or business our those sort margin would just the forward,

Kevin Brackman

me let so by Yeah, I talk about guess margin, segment.

segments. for easier will both moving I think it be a because of there's lot

revenue big do So the in is that of Material continue three year. we One that. more will factors is expand really There expect driving second I year-over-year. favorable to the half margin Handling, in

forecasting first decline were the XX% mid full a of high half spending. we We're So, to year, revenue single-digit for the down year the enterprise. for

to flat roughly we're the So, year. going the of be half second in

margin. specific box growth So we seed with And with I this expecting Handling, that to noted in starts season, I would in say Material seed helps that which revenue upcoming the comment quarter. my starting in are fourth

as growth QX. expecting in enterprise are revenue we So an in

Maybe you below we product So the million it the bonds, on should be that first fact year not costs price-cost thing that's heard prior-year levels. year, we this the remember I And then expect which last significant continue margin. our as the the mentioned favorable one charge year-over-year, Xrd this as of thing, to the half remain don't that year in which quarter on year. to to I be favorable be mostly a $X.X the Material resin Handling had for side, if but to year-over-year. third is expect replacement continue

and So mix. year. to Distribution continue the a second into expect quarter, half One for year-over-year I the the continue our mix expect I to improve factors those three that second In is reasons, half. to of the segment, product margin really had two second we hurt in both

So consumables. on selling and a a The equipment we negative our fewer and mix are carries equipment so margin that lower margins. more impact has

other, a mix revenue The I you and clarify, revenue. QX on Hoping a and which is impact is to about comment acquisition made a I significant was legacy-based was, and between know this,

a legacy revenue business fall include to the decline contribution more it's an from through of revenue the that's costs acquisition year-over-year, a to post-acquisition, words, to in in and kind the incremental the margin. fall loaded going the other margin. of of year going the be business. first it's on operating of fully the going through fixed side a to The So going of In is

So the an differential. the contribution a the margin margin between margin difference XX on be and revenue, can operating you be can legacy acquisition That on the revenue. point percentage

And so about impact. $XX Tuffy it's that Yeah, a is so our big hurdle, million, million has that quarter. said a it's growth. from a a We've $X big revenue annual roughly before

said, expect that QX, continue So, significant half. I a you into that impact on the that's like we know, second to

August. completed the Now, at acquisition of the end we Tuffy

the impact date, go then we away. So, acquisition obviously, lack that once will

Vitanza Lance

have two if could. I questions, I more

with the coming The that less You traffic actually, already that restrictions like repair? just the is, segment. sounds for mentioned just lifted. there, back sticking road strong first tire The began is weakness on less equals Distribution it business maybe, need once travel the that were

would miles the half I a have there resurgence number driven. a on for the else there? So, anything expected, outlook seen just better maybe, year, given Is of back being we've the in going of

Kevin Brackman

DuPaul is of Chris Mike. have President Yes, the know, do Segment. the Lance. Distribution This is here, you who We

let I'll those. I'll ask So, address Chris to

Chris DuPaul

you when on market COVID-XX of the significant. fairly industry off, first QX, So, impact the was at look and

If broader XX% for tire shipments to were that quarter the indicators the two you driven quarter look of volume were on business, drive first range. at some down our some about of same for in of that down the the tend in replacement the in months ballpark. to the Miles XX%

the we toward up. into we as very economy As really third quarter, as back with to return we been opening the Have of we've we the pleased the June way the end encouraged got move seen were in volume quarter. see started

we back with of looking we're one of the crystal the line at here. are market of and we that. projections for year. we're sort tire tracking a ball volume forecasts look repair, some As see the industry broader What retreading the has around No where our end into part in

Lance Vitanza

that actually as of waves the In better to seemed sound virus, a been so we'll the you and with just sales flow but outlook. sales is equipment flash Obviously, the bit double-digit a flow guess, might little you know that I encouraging end-market resurgences there? have versus bottom the in Vehicle probably reading to RV about at and in that Is sales, resurgent is a was big have there difference and had to seeing up and hope my the through I Handling looking are a pan? have ties seen of that doesn't guys and manufacturers, would any cautious remain fears you a between Is potentially we And last be side just the the second that through. should result it's the is theme. were of like it outlook same we line of question if declines Well, that, into then when we've been Materials wondering more COVID, assume picking that a on there not anything back a time? it but last forth it thinking

Mike McGaugh

Lance.

So, this is Mike.

Let was into customers big I several with me week that of take that gauge point. Elkhart ours to very actually one. last

months. I think lot looking the implications runway, consumer I think RV be people that's trends, of the vacations, going got the and quarters years the at or are industry has not a way COVID, from probably to

there standpoint are We technology partnered leading from well-positioned with manufacturers. a and RV the

of good I business. about piece that So, feel our

In voting addition, the side.

make for doing fishing businesses As pontoon parts, parts, the you et are may recall and also. we boats. well boats cetera, tanks, plastic engineered seats, quite Those

existing an we What we That's technologies more That's great into how figure going the week, think our I'm next get be out weeks trying of a of quite just runway quite those process the well-positioned. and just part But results how think excited to those the for revenue I sell it. times be is is is to larger wish of there into portion I in is outlook longer-term I we're frankly when do So, to strong, or our last point technologies visit much delivers industries. even of not segments. regard more that to but there. solid, of months. is good, is it do our was are the something our the our of RV thought demand customers a and It eye-opening with I'm really with of how more

Operator

John [Operator instructions] Chen comes from Baird. Next question with

John Chen

to was thinking the nice some it of about Mike, strategic there. hear

dislocation talk be of? looking kind are the just that able what little the of you bit a you some and market kind companies about are current advantage environment that Could creating the M&A. to is more in of mentioned at, of take might and you property You

Mike McGaugh

good Yes, that's a question.

So that an on more channel in good capabilities, rigor we've to a Where molding, now. we us We is in companies looking injection before. space to the those look earn leader we space at. side. the an We've brought it blow And way molding, of held side, build inbounds side, on I'm great I'd deliver are in continue would outbound our we're to material of the add more side. more who like I and give on the better said It's, to Where thermoforming now. believe our areas we the quite There opportunities got knows to disciplined going market better but us roto-molding, on we're to more also that but more well funnel, engineering lower-middle with making technologies. excellent the We've the we're power surprised in that had this in specialty there. focus excellent to deliver leader out products, returns. even is privately that our I'm plastic rigor have the pleasantly space the allow to customers, even that commodity the not think receiving. got calls, space got in like at to number is an looking M&A to we're side

have really other I actually we're to side that the if the sort of frankly that out So about today. space, I'm deliver technologically well. as have barrier and Myers quite excited plastics that we're or positioned area seek on products technology the we are our that Chinese space get We're out. commodity that produce, technologies. value And can value, of paid that's advanced to focusing. more in build competition, from of an are where difficult And for where parts element from customers to some plastic competition that's

help? that I'll Any Does there. So stop

John Chen

And it's there. encouraging more to see there that might opportunities be

doesn't QX? the about continued second might, in to I that the QX in it assume I'm has business, momentum that consumer of wondering, So little talk seem into much would guide that? half. growth you you but on kind saw a Can more just very the think the

Kevin Brackman

in that through strong Remember from runs March that our business July. season really

So said, short so and activity shorter in business, of their kind the of period. we that's that like why, of nearing strong end season hurricane are any I

in expect would starting get to softer QX. You it a lot

John Chen

my very not guess those in close this term you increase, but be last that question to with manner? a the near might prices can I price? And get were ability dynamic, And think of happens if sort commodity you relatively what in historically that two do your to future, align kind of a

Kevin Brackman

Yes, said pricing so, some resin of actually to is we've the I think costs. indexed before our

there So, mechanisms once add XX, to change valued, yeah, if a But in the we of revenue employ And know, we then may resin happens. day have cost yeah pricing anything in wants be like adjusts. XX automatically add. price value-based to Mike actually percentage a the place the and is You in where our index, lag certain don't movement that

Mike McGaugh

in commercial near-term priorities we growth When our I talked pricing. a sales, the goods how as the at piece but do for finished there, company analytical approach to more also includes excellence look we about that

Xrd side The is integrations we forward there. process opportunity other there, a aggressively more the an piece acquisitions. robust then go across I more you'll is to in like we do be I'd into come the and I but fine see integration to centralize sure divisions more to procurement piece our on as very capability and there. want is on obtaining And aggressively area feel and We there the with procurement to job that have our move playbook. the synergy. that's fortify company a

but short-term. on three working So, I'm the are you in didn't ask really way it the those areas that

Operator

telephone [Operator turn will we any the questions presenters. And not time, Instructions]. call do over the this I to at have

Monica Vinay

you time thank of We Myers participation you. today. Thank and interest and all in your for your Industries

the replay Thanks this As website webcast our on our call. approximately found immediately tab. A XX on be will be Details Relations available under via and of call be day. a have reminder, will a or a within transcript website can Investor hours. great available

Operator

today's call. concludes This conference

You may now disconnect.

Myers Industries (MYE) 1 Aug 202020 Q2 Earnings call transcript