SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[X] | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
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OR | ||
[ ] | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
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Commission File Number 1-8524
Myers Industries, Inc.
(Exact name of registrant as specified in its charter)
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Ohio | 34-0778636 | |
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1293 South Main Street |
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(330) 253-5592
(Registrant's telephone number, including area code)
not applicable(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No .
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No .
As of September 30, 2003,March 31, 2004, the number of shares outstanding of the issuer's Common Stock was 30,147,800.30,215,981.
TABLE OF CONTENTS
-1-
Part I - Financial Information
Myers Industries, Inc.
Condensed StatementsStatement of Consolidated Financial Position
As of September 30, 2003March 31, 2004 and December 31, 20022003
September 30, | December 31, | March 31, | December 31, | |||||||||||||
Assets | 2003 | 2002 | 2004 | 2003 | ||||||||||||
Current Assets | ||||||||||||||||
Cash and temporary cash investments | $8,788,299 | $1,702,334 | ||||||||||||||
Accounts receivable-less allowances |
113,718,691 | 111,207,172 | ||||||||||||||
Cash | $9,442,414 | $5,666,997 | ||||||||||||||
Accounts receivable-less allowances |
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Inventories | ||||||||||||||||
Finished and in-process products | 63,156,379 | 66,819,085 | 63,739,498 | 61,240,225 | ||||||||||||
Raw materials and supplies | 16,533,774 | 16,280,910 | 23,444,614 | 22,613,029 | ||||||||||||
79,690,153 | 83,099,995 | 87,184,112 | 83,853,254 | |||||||||||||
Prepaid expenses | 6,165,930 | 5,130,856 | 6,919,069 | 4,374,210 | ||||||||||||
Total Current Assets | 208,363,073 | 201,140,357 | 237,556,650 | 207,933,141 | ||||||||||||
Other Assets | ||||||||||||||||
Goodwill | 215,128,910 | 204,465,504 | 261,028,916 | 224,298,302 | ||||||||||||
Patents and other intangible assets | 2,500,190 | 2,422,772 | 2,068,762 | 2,321,584 | ||||||||||||
Other | 3,271,008 | 3,658,670 | 5,219,380 | 3,229,351 | ||||||||||||
220,900,108 | 210,546,946 | 268,317,058 | 229,849,237 | |||||||||||||
Property, Plant & Equipment, at Cost | ||||||||||||||||
Property, Plant and Equipment, at Cost | ||||||||||||||||
Land | 8,130,326 | 7,878,664 | 8,710,288 | 8,461,003 | ||||||||||||
Buildings and leasehold improvements | 78,356,919 | 77,061,850 | 86,873,667 | 80,588,395 | ||||||||||||
Machinery and equipment | 340,719,224 | 318,617,656 | 370,922,357 | 352,995,191 | ||||||||||||
427,206,469 | 403,558,170 | 466,506,312 | 442,044,589 | |||||||||||||
Less allowances for depreciationand |
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181,375,886 | 190,795,027 | 194,507,785 | 183,844,428 | |||||||||||||
$610,639,067 | $602,482,330 | $700,381,493 | $621,626,806 |
-2-
Part I - Financial Information
Myers Industries, Inc.
Condensed StatementsStatement of Consolidated Financial Position
As of September 30, 2003March 31, 2004 and December 31, 20022003
September 30, | December 31, | |||||||
Liabilities and Shareholders' Equity | 2003 | 2002 | ||||||
Current Liabilities | ||||||||
Accounts payable | $43,530,930 | $49,970,910 | ||||||
Accrued expenses | ||||||||
Employee compensation | 26,234,181 | 29,843,708 | ||||||
Taxes, other than income taxes | 3,118,689 | 3,260,304 | ||||||
Accrued interest | 754,972 | 754,668 | ||||||
Other | 13,466,843 | 12,849,101 | ||||||
Current portion of long-term debt | 26,045,984 | 20,690,265 | ||||||
Total Current Liabilities | 113,151,599 | 117,368,956 | ||||||
Long-term Debt, less current portion | 199,476,225 | 212,222,615 | ||||||
Deferred Income Taxes | 19,628,399 | 17,201,131 | ||||||
Shareholders' Equity | ||||||||
Serial Preferred Shares |
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Common Shares, without par value |
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Additional paid-in capital | 216,744,417 | 216,077,838 | ||||||
Accumulated other comprehensive |
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Retained income | 45,359,112 | 37,901,271 | ||||||
278,382,844 | 255,689,628 | |||||||
$610,639,067 | $602,482,330 | |||||||
March 31, | December 31, | |||||||
Liabilities and Shareholders' Equity | 2004 | 2003 | ||||||
Current Liabilities | ||||||||
Accounts payable | $50,188,215 | $39,731,250 | ||||||
Accrued expenses | ||||||||
Employee compensation | 29,605,792 | 30,975,836 | ||||||
Taxes, other than income taxes | 3,328,980 | 2,874,171 | ||||||
Accrued interest | 2,218,903 | 608,575 | ||||||
Other | 19,511,710 | 15,533,529 | ||||||
Current portion of long-term debt | 3,513,163 | 4,452,137 | ||||||
Total Current Liabilities | 108,366,763 | 94,175,498 | ||||||
Long-term Debt, less current portion | 268,704,850 | 211,002,691 | ||||||
Deferred Income Taxes | 24,828,162 | 21,924,269 | ||||||
Shareholders' Equity | ||||||||
Serial Preferred Shares |
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Common Shares, without par value |
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Additional paid-in capital | 217,253,092 | 217,019,810 | ||||||
Accumulated other comprehensive |
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Retained income | 55,545,920 | 48,200,438 | ||||||
298,481,718 | 294,524,348 | |||||||
$700,381,493 | $621,626,806 | |||||||
-3-
Part I - Financial Information
Myers Industries, Inc.
Condensed StatementsStatement of Consolidated Income
For the Three Months Ended March 31, 2004 and 2003
For The Three Months Ended | For The Nine Months Ended | March 31, | March 31, | ||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | 2004 | 2003 | ||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||||||
Net Sales | $185,518,527 | $163,220,254 | |||||||||||||||||||||||||
| $152,400,083 |
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Costs of Sales | 124,460,575 | 109,376,984 | |||||||||||||||||||||||||
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| 61,057,952 | 53,843,270 |
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| 43,906,135 | 39,937,720 | |||||||||||||||||||||
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| 3,143,646 | 2,502,713 | |||||||||||||||||||||
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| 14,008,171 | 11,402,837 | |||||||||||||||||||||
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Income Taxes | 5,152,000 | 4,211,000 | |||||||||||||||||||||||||
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| $8,856,171 | $7,191,837 | |||||||||||||||||||||
Net income per Common Share* | $0.05 | $0.10 | $0.40 | $0.67 | |||||||||||||||||||||||
Dividends per Common Share* | $0.05 | $0.05 | $0.15 | $0.15 | |||||||||||||||||||||||
Net income per Common Share | $0.29 | $0.24 | |||||||||||||||||||||||||
Weighted average number of |
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Dividends per Common Share | $0.05 | $0.05 | |||||||||||||||||||||||||
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Weighted average number of | |||||||||||||||||||||||||||
Common Shares outstanding | 30,205,201 | 30,083,688 |
*Adjusted for a five-for-four stock split in August, 2002.
-4-
Part I - Financial Information
Myers Industries, Inc.StatementsStatement of Consolidated Cash Flows
For the NineThree Months Ended September 30,March 31, 2004 and 2003 and 2002
September 30, | September 30, | |||||||
2003 | 2002 | |||||||
Cash Flows From Operating Activities | ||||||||
Net income | $11,975,070 | $19,915,671 | ||||||
Items not affecting use of cash | ||||||||
Depreciation | 27,482,195 | 25,578,998 | ||||||
Amortization of other intangible assets | 1,509,115 | 777,860 | ||||||
Deferred taxes | 2,188,985 | 1,333,696 | ||||||
Cash flow provided by (used for) working capital | ||||||||
Accounts receivable | 2,367,730 | (101,762 | ) | |||||
Inventories | 5,752,430 | 3,659,287 | ||||||
Prepaid expenses | (887,405 | ) | 483,685 | |||||
Accounts payable and accrued expenses | (15,130,033 | ) | (7,074,436 | ) | ||||
Net cash provided by operating activities | 35,258,087 | 44,572,999 | ||||||
Cash Flows From Investing Activities | ||||||||
Acquisition of business, net of cash acquired | (777,122 | ) | (2,819,901 | ) | ||||
Additions to property, plant and |
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Other | (41,270 | ) | 94,659 | |||||
Net cash used for investing activities | (14,222,708 | ) | (23,915,531 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Long-term debt repayment | (12,000,000 | ) | (9,000,000 | ) | ||||
Net borrowing (repayment) of credit facility | 1,854,837 | (10,514,055 | ) | |||||
Cash dividends paid | (4,517,229 | ) | (4,374,582 | ) | ||||
Proceeds from issuance of common stock | 712,978 | 2,128,496 | ||||||
Net cash used for financing activities | (13,949,414 | ) | (21,760,141 | ) | ||||
Increase in Cash | 7,085,965 | (1,102,673 | ) | |||||
Cash at January 1 | 1,702,334 | 7,074,964 | ||||||
Cash at September 30 | $8,788,299 | $5,972,291 | ||||||
March 31, | March 31, | |||||||
2004 | 2003 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $8,856,171 | $7,191,837 | ||||||
Items not affecting use of cash | ||||||||
Depreciation | 9,095,825 | 8,931,239 | ||||||
Amortization of other intangible assets | 723,603 | 280,543 | ||||||
Deferred taxes | 1,521,775 | 985,017 | ||||||
Cash flow provided by (used for) working capital | ||||||||
Accounts receivable | (11,266,025 | ) | (11,223,716 | ) | ||||
Inventories | (189,899 | ) | 2,001,623 | |||||
Prepaid expenses | (1,527,873 | ) | 1,369,067 | |||||
Accounts payable and accrued expenses | 6,841,126 | (5,799,104 | ) | |||||
Net cash provided by operating activities | 14,054,703 | 3,736,506 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of business, net |
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Additions to property, plant and |
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Other | 700,045 | (158,196 | ) | |||||
Net cash used for investing activities | (38,489,616 | ) | (5,886,635 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Long-term debt repayment | 0 | (4,000,000 | ) | |||||
Net borrowing (repayment) of credit facility | 31,005,440 | 12,200,117 | ||||||
Deferred financing costs | (1,536,846 | ) | 0 | |||||
Cash dividends paid | (1,510,689 | ) | (1,504,356 | ) | ||||
Proceeds from issuance of common stock | 252,425 | 162,032 | ||||||
Net cash provided by (used for) financing activities | 28,210,330 | 6,857,793 | ||||||
INCREASE IN CASH | 3,775,417 | 4,707,664 | ||||||
CASH AT JANUARY 1 | 5,666,997 | 1,702,334 | ||||||
CASH AT MARCH 31 | $9,442,414 | $6,409,998 | ||||||
-5-
Part I - Financial Information
Myers Industries, Inc.
Statement of Shareholders' Equity
For the NineThree Months Ended September 30, 2003March 31, 2004
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December 31, 2002 | $18,301,212 | $216,077,838 | ($16,590,693 | ) | $37,901,271 | ||||||
Net income | $11,975,070 | 11,975,070 | |||||||||
Foreign currency |
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Comprehensive |
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Common Stock |
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Dividends | (4,517,229 | ) | |||||||||
September 30, 2003 | $18,347,611 | $216,744,417 | $(2,068,296 | ) | $45,359,112 | ||||||
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December 31, 2003 | $18,369,240 | $217,019,810 | $10,934,860 | $48,200,438 | ||||||||
Net income | $8,856,171 | 8,856,171 | ||||||||||
Foreign currency |
(3,640,537 |
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Comprehensive |
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Common Stock |
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Dividends | (1,510,689 | ) | ||||||||||
March 31, 2004 | $18,388,383 | $217,253,092 | $7,294,323 | $55,545,920 | ||||||||
-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 state-mentsstatements 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 September 30, 2003,
March 31, 2004, and the results of operations and cash flows for the ninethree months ended September 30, 2003March 31, 2004 and 2002.2003.
(2) Subsequent EventAcquisition During the fourth quarter ending December 31, 2003,
On March 10, 2004, the Company anticipates that itacquired all of the shares of ATP Automotive, Inc. (ATP), a subsidiary of Applied Tech LLC. ATP and its operating subsidiaries Michigan Rubber Products (MRP) and WEK Industries (WEK) is a manufacturer of molded rubber and plastic products for the automotive industry with manufacturing facilities in Michigan (MRP) and Ohio (WEK). The acquired businesses had 2003 annual sales of approximately $60 million. The total purchase price was approximately $60 million, which includes the assumption of ATP debt outstanding as of the acquisition date. The purchase price will issue upbe allocated to $100 millionthe assets acquired and liabilities assumed based upon their estimated fair values when appraisals, other studies and additional information become available. The results of ATP's operations are included in senior unsecured notes. If completed, proceedsthe Company's consolidated results of operations from the senior notes would be used to pay down outstanding bank debt underdate of acquisition, and are reported within the Company's existing term loanmanufacturing segment.
The following unaudited proforma information presents a summary of consolidated results of operations for the Company and revolving credit facility.ATP as if the acquisition had occurred January 1, 2003.
Three Months Ended March 31, (In thousands,except per share) 2004 2003 Sales $197,810 $178,225 Net Income 9,259 7,937
Net Income Per Share
..31
..26
-7-
Part I - Financial Information
Myers Industries, Inc.
Notes to Financial Statements
These unaudited proforma results have been prepared for comparative purposes only and may not be indicative of results of operations which actually would have resulted had the acquisition taken place on January 1, 2003, or of future results.
(3) Net Income Per Share
Basic netNet income per share, as shown on the Condensed Statement of Consolidated Income, is determined on the basis of the weighted average number of common shares outstanding during the period, and for all periods shown basic and diluted earnings per share are identical. In August 2002, the Company declared a five-for-four stock split and, accordingly, all per share data has been adjusted to reflect the stock split.
(4) Supplemental Disclosure of Cash Flow Information
The Company made cash payments for interest expense of $2,030,000$1,534,000 and $2,959,000$2,559,000 for the three months ended September 30,March 31, 2004 and 2003, and 2002, respectively. Cash payments for interest totaled $7,098,000 and $8,974,000 for the nine months ended September 30, 2003 and 2002. Cash payments for income taxes totaled $675,000$747,000 and $2,359,000$1,030,000 for the three months ended September 30, 2003March 31, 2004 and 2002. Cash payments2003.
(5) Long-Term Debit and Credit Agreements
On February 27, 2004, the Company entered into a new unsecured revolving credit facility (the Credit Facility) which enables the Company to borrow up to $225 million, including up to $50 million available for incomemulti-currency loans in freely traded foreign currencies. Borrowing under the new Credit Facility were used to refinance the Company's existing Multi-Currency Loan Agreement, fund the acquisition of ATP Automotive, Inc. and for general corporate purposes. Interest is based on the Prime rate or Euro dollar rate (for U.S. or Canadian dollar loans) or Eurocurrency Rate (for other multi-currency loans) plus an applicable margin that varies depending of the company's ratio of total debt to earnings before interest, taxes, were $4,258,000 and $10,095,000depreciation and amortization. Related financing costs will be amortized over the term o f the new Credit Facility which expires in February 2009.
(6) Retirement Plans
For the Company's two defined benefit pension plans, the net periodic benefit cost for the ninethree months ended September 30,March 31, 2004 and 2003 and 2002.was as follows:(5) Acquisitions In August 1999, the Company acquired substantially all of the assets of Dillen Products Companies (Dillen), a Middlefield, Ohio, manufacturer of horticultural containers. During the quarter ended September 30, 2003, the Company paid approximately $777,000 as additional consideration related to the Dillen acquisition which is reflected as goodwill on the accompanying statement of consolidated financial position.
2004 | 2003 | |||||
Service cost | $60,078 | $49,576 | ||||
Interest cost | 83,443 | 79,823 | ||||
Expected return on assets | (86,398 | ) | (59,971 | ) | ||
Amortization of prior service cost | 10,694 | 10,694 | ||||
Amortization of a net loss | 16,884 | 19,187 | ||||
Amortization of transition obligation | -0- | (736 | ) | |||
Net periodic pension cost | $84,701 | $98,573 | ||||
-7-
-8-
Part I - Financial Information
Myers Industries, Inc.
Notes to Financial Statements
(6) Stock Compensation
The Company accountspreviously disclosed in its financial statements for stock compensation arrangements using the intrinsic valueyear ended December 31, 2003, that it expects to contribute approximately $996,000 to its defined benefit plans in Accounting Principles Board (APB) Opinion No.25, "Accounting for Stock Issued to Employees." In accordance with the intrinsic value method,2004. As of March 31, 2004, no contributions have been made, however, the Company has not recognized any expense relatedstill anticipates contributing approximately $996,000 to stock options, as options have only been granted with an exercise price equal to market value of the shares at the date of the grant.The alternative policyfund its defined benefit pension plans in SFAS No. 123, "Accounting for Stock Based Compensation," provides that compensation expense be recognized based on the fair value of the options awarded, determined by an option pricing model. If the Company had recognized compensation expense using the fair value method under SFAS No.123 rather than the APB 25, net income would not have been materially different than reported amounts and earnings per share would be identical for the nine months ended September 20, 2003. In calculating the compensation expense under SFAS No.123, the Company assumes that all options will vest and be exercised at the expiration date of the grant. Other assumptions used in calculating the compensation expense for options granted in the nine months ended September 30, 2003 include a dividend yield of 2.3 percent, a risk-free interest rate of 3.875 percent and a volatility measure based on the Company's stock beta of .85.2004.
(7) 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 of 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 4240 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.
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.
Sales to external customers for manufactured plastic products, including WEK Industries, were $99.2$130.9 million for the quarter and $333.0 million for the ninethree months ended September 30, 2003,March 31, 2004, while sales to external customers of rubber products, including Michigan Rubber Products, were $12.2 million and $37.3 million for the quarter and year-to-date periods, respectively.$17.1 million. In the prior year, sales of plastic products to external customers were $92.7$119.5 million for the quarter and $301.1 million for the ninethree months ended September 30, 2002March 31, 2003 while sales to external customers of rubber products were $12.1$11.8 million for the quarter and $34.8 million for the year-to-date periods, respectively.quarter.
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.
-8--9-
Part I --- Financial Information
Myers Industries, Inc.
Notes to Financial Statements
Three Months Ended March 31, (In thousands) 2004 2003 Net Sales Distribution of aftermarket Manufacturing of polymer products 151,473 134,309 Intra-segment elimination (3,507 ) (3,040 ) $185,519 $163,220 Income Before Income Taxes Distribution of aftermarket repair Manufacturing of polymer products 17,632 15,090 Corporate (3,540 ) (3,519 ) Interest expense -- net (3,144 ) (2,503 ) $14,008 $11,403(7)
repair products and services
$37,553
$31,951
products and services
$3,060
$2,335
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of OperationsSegment InformationResults of Operations
(con't)
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(In thousands) | 2003 | 2002 | 2003 | 2002 | ||||||||||||
Net Sales | ||||||||||||||||
Distribution of aftermarket |
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Manufacturing of polymer products | 115,239 | 108,803 | 380,963 | 346,869 | ||||||||||||
Intra-segment elimination | (3,825 | ) | (3,940 | ) | (10,721 | ) | (11,003 | ) | ||||||||
$152,400 | $146,626 | $484,584 | $448,660 | |||||||||||||
Income Before Income Taxes | ||||||||||||||||
Distribution of aftermarket repair |
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Manufacturing of polymer products | 3,734 | 6,014 | 26,183 | 38,608 | ||||||||||||
Corporate | (2,968 | ) | (2,303 | ) | (9,528 | ) | (7,544 | ) | ||||||||
Interest expense -- net | (2,386 | ) | (3,017 | ) | (7,550 | ) | (9,035 | ) | ||||||||
$1,802 | $4,970 | $18,337 | $33,064 | |||||||||||||
For the quarter ended March 31, 2004, the Company had sales of $185.5 million, an increase of 14 percent from the prior year and net income of $8.9 million, an increase of 23 percent from $7.2 million reported in the first quarter of 2003. Net income per share was $.29, an increase of 21 percent compared with $.24 in the prior year period. On March 10, 2004, the Company acquired ATP Automotive, Inc.(ATP) a manufacturer of molded rubber and plastic products through its subsidiaries Michigan Rubber Products (MRP) and WEK Industries (WEK). On a proforma basis, including the results of the acquired businesses for the full quarter, net sales for the quarter ended March 31, 2004 would have been $197.8 million with net income of $9.3 million or $.31 per share compared with net sales of $178.2 million for the first quarter of 2003 with net income of $7.9 million or $.26 per share.
The net sales of $185.5 million for the quarter ended March 31, 2004 were the highest of any quarter in the Company's history and reflected stronger demand in both the distribution and manufacturing segments. In addition, favorable foreign currency translation increased sales by $6.7 million or 4 percent and contributions from the acquisition of MRP and WEK increased sales by $4.4 million or 3 percent. Without the impact of the favorable foreign currency translation and acquired businesses, net sales would have increased $11.2 million or 7 percent. Sales in the distribution segment increased 18 percent to $37.6
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-10-
Myers Industries, Inc.
Part I - Financial Information
million reflecting higher unit volumes from increased sales to the auto dealer market and strong demand from tire dealers for both equipment and supplies. In the manufacturing segment, sales increased 13 percent to $151.5 million; however, without the impact of foreign currency translation or acquired businesses, sales increased only 5 percent. The increase in manufacturing segment sales was primarily the result of higher volume as the Company experienced positive growth in nearly all of its major markets.
Cost of sales increased $15.1 million or 14 percent reflecting the higher sales volume as well as increased costs for raw materials compared with the prior year. Gross profit, expressed as a percent of sales, was virtually unchanged at 32.9 percent compared to 33.0 percent in the prior year. In the distribution segment, relatively stable selling prices and costs resulted in consistent gross profit margins between years. In the manufacturing segment, margins were also consistent as slightly higher selling prices and improved capacity utilization offset an increase in plastic resin raw material costs.
Total operating expenses for the quarter ended March 31, 2004 increased $4.0 million or 10 percent compared to the prior year period. Approximately, $2.4 million or 60 percent of this increase was due to the impact of foreign currency translation. In addition, the Company experienced increased freight and selling expenses related to the higher sales volumes experienced in the current year. Expressed as a percent of sales, operating expenses were reduced to 23.7 percent for the quarter ended March 31, 2004 compared with 24.5 percent in the prior year
Net interest expense increased $.6 million or 26 percent compared with the prior year period. The increase was primarily the result of higher interest rates, particularly for the $100 million of senior notes at 6.08 percent and 6.81 percent issued in December 2003. In addition, the Company increased borrowing by approximately $60 million in March 2004 in connection with the ATP acquisition.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations Net sales for the quarter ended September 30, 2003 were $152.4 million, an increase of 4 percent from the $146.6 million reported in the prior year period, primarily as a result of favorable currency translations for the Company's foreign business units. In the distribution segment, sales of $41.0 million were down 2 percent from $41.8 million last year reflecting reduced sales of capital equipment. Sales in the manufacturing segment were up $6.4 million , or 6 percent, with $5.0 million of the increase resulting from foreign currency
translation due to the strength of the euro. Excluding the impact of foreign currency translation, sales in the manufacturing segment were slightly higher as increased unit volumes offset pricing reductions. The impact of foreign currency translation on net income for the quarter ended September 30, 2003 was not material. For the nine months ended September 30, 2003, net sales were $484.6 million, an increase of $35.9 million over the prior year. Sales in the distribution segment were up $1.5 million or one percent, based on slightly higher unit volumes. Sales in the manufacturing segment were up $34.1 million, or 10 percent reflecting both higher unit volumes and favorable foreign currency effects. Excluding the impact of foreign currency translation, sales in the manufacturing segment would have increased 4 percent year to date and total sales 3 percent. For the nine months ended September 30, 2003, favorable foreign currency translation increased net income by approximately $580,000 or $.02 per share. Cost of sales increased 6 percent for the quarter ended September 30, 2003, and accordingly, gross profit expressed as a percent of sales declined to 29.0 percent compared to 30.3 percent in the corresponding prior year quarter. This decrease was primarily the result of business in the manufacturing segment where higher raw material costs combined with competitive pricing conditions resulted in lower margins. For the nine months ended September 30, 2003, the gross profit margin declined to 30.5 percent compared to 33.6 percent in the prior year, primarily due to higher raw material costs. Costs for high density polyethylene and polypropylene plastic resins, the Company's primary raw materials, were approximately 15 percent higher for the quarter and 30 percent higher for the nine month periods of 2003 compared with the prior year. Total operating expenses increased $3.6 million or 10 percent compared with the prior year. Approximately 50 percent of this increase was due to the impact of foreign currency translation for costs incurred in foreign businesses with other increases due to higher freight and selling expenses resulting from higher unit volumes. For the nine months ended September 30, 2003, operating expenses increased $13.3 million or 12 percent compared with the prior year. Approximately 54 percent of this increase was due to the impact of foreign currency translation with other increases for selling expenses related to higher unit volume sales and information systems and software costs. Expressed as a percentage of sales, operating expenses increased to 26.2 percent for the quarter and 25.1 percent for the nine month period in 2003 compared with 24.8 percent and 24.2 percent for the same periods in the prior year. Net interest expense decreased $.6 million or 21 percent for the quarter and $1.5 million or 16 percent for the nine months ended September 30, 2003 compared with the prior year. The lower interest expense reflects the effects of both lower interest rates and lower average borrowing levels in 2003.
-10-Part I -- Financial InformationMyers Industries, Inc.Notes to Financial Statements
Results of Operations (con't)
Income taxes as a percent of income before taxes decreased to 16.4was virtually unchanged at 36.8 percent for the quarter and 34.7 percent for the nine months ended September 30, 2003March 31, 2004 compared with 38.336.9 percent and 39.8 percent forin the prior year periods. This reduction in the Company's effective tax rate is primarily the result of foreign tax rate differences, including the realization of approximately $300,000 in net operating loss carryforwards previously reserved.year.
Liquidity and Capital Resources
Cash provided by operating activities was $35.3$14.1 million for the nine monthsquarter ended September 30, 2003March 31, 2004 compared with $44.6$3.7 million for the same period in the prior year. At September 30, 2003, totalDuring the quarter, debt outstanding was $225.5increased $56.8 million compared with $232.9 million atas a result of the beginningacquisition of 2003, and debtATP. Debt as a percentage of total capitalization was reducedincreased to 4547 percent at September 30, 2003 from 48March 31, 2004 compared with 42 percent at the beginning of the year.December 31, 2003. At September 2003,
March 31, 2004, the Company had working capital of $95.2$129.2 million and a current ratio of 1.8.2.2.
On February 27, 2004, the Company entered into a new five year, $225 million unsecured revolving credit facility. Borrowings under the new credit facility were used to refinance the Company's then outstanding bank debt of $98.9 million and fund the acquisition of ATP for approximately $60 million. At March 31, 2004 the Company had approximately $63 million available under the new credit facility.
-11-
Part I - Financial Information
Myers Industries, Inc.
Capital expenditures for the nine months ended September 30, 2003quarter were $13.4$5.4 million and are anticipatedexpected to be approximatelyin the range of $20 to $25 million for the full year. Management believes that cash flows from operations and available credit facilities will be sufficient to meet expected business requirements including capital expenditures, dividends, working capital and debt service. On May 5, 2003, the Company entered into an amendment of its Multi-Currency Loan Agreement, primarily for the purpose of revising the covenants related to limitations as to payments for cash dividends and capital expenditures and the maintenance of maximum leverage ratios, defined as total debt to earnings before interest, taxes, depreciation and amortization. Essentially all other terms of the Loan Agreement, which expires in February 2005, were not affected by the amendment. During the fourth quarter ending December 31, 2003, the Company anticipates that it will issue up to $100 million in senior unsecured notes. If completed, proceeds from the senior notes would be used to pay down outstanding bank debt under the Company's existing term loan and revolving credit facility.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company has financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest. Our objective in managing the exposure to interest rate changes is to limit the volatility and impact of rate changes on earnings while maintaining the lowest overall borrowing cost. At present, the Company has not entered into any interest rate swaps or other derivative instruments to fix the interest rate on any portion of its financing arrangements with floating rates.
Some of the Company's subsidiaries operate in foreign countries and, as such, their financial results are subject to the variability that arises from exchange rate movements. The Company believes that foreign currency exchange rate fluctuations do not represent a significant market risk due to the nature of the foreign countries in which we operate, primarily Canada and Western Europe, as well as the size of those operations relative to the total Company.
-11-Part I -- Financial InformationMyers Industries, Inc.
Item 3. Quantitative and Qualitative Disclosure About Market Risk (con't)
The Company uses certain commodities, primarily plastic resins, in its manufacturing processes. As such, the cost of operations is subject to fluctuation as the market for these commodities changes. The Company monitors this risk but currently has no derivative contracts to hedge this risk, however, the Company also has no significant purchase obligations to purchase fixed quantities of such commodities in future periods.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2003.March 31, 2004. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2003.March 31, 2004.
-12-
Part II - Other Information
Myers Industries Inc.
Legal Proceedings | ||||
Reference is made to Item 3 of the Form 10-K for the period ended December 31, | ||||
Exhibits and Reports on Form 8-K | ||||
(a) | Exhibits | |||
(b) | Reports on Form 8-K | |||
(1) Form 8-K filed with the Commission on | ||||
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(2) Form 8-K filed with the Commission on | ||||
(3) Form 8-K filed with the Commission on February 17, 2004, whereby the registrant issued a press release announcing | ||||
(4) Form 8-K filed with the Commission on February 27, 2004, whereby the registrant issued a press release announcing that it had closed on a five-year $225 million senior unsecured revolving credit facility. | ||||
(5) Form 8-K filed with the Commission on March 11, 2004, whereby the registrant issued a press release announcing that it had closed on the acquisition of ATP Automotive, Inc., comprised of Michigan Rubber Products, Inc. and WEK Industries, Inc. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this | ||||||||||||
MYERS INDUSTRIES, INC. | ||||||||||||
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| Gregory J. Stodnick | |||||||||||
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Exhibit Index
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. |
3(b) | Myers Industries, Inc. Amended and Restated Code of Regulations. Reference is made to Exhibit (3)(b) to Form 10-K filed with the Commission on March 26, 2003. |
10(a) | Myers Industries, Inc. Amended and Restated Employee Stock Purchase Plan. Reference is made to Exhibit 10(a) to Form 10-K filed with the Commission on March 30, 2001. |
10(b) | Form of Indemnification Agreement for Directors and Officers. Reference is made to Exhibit 10(b) to Form 10-K filed with the Commission on March 30, 2001.* |
10(c) | Myers Industries, Inc. Amended and Restated 1992 Stock Option Plan. Reference is made to Exhibit 10(c) to Form 10-K filed with the Commission on March 30, 2001.* |
10(d) | Myers Industries, Inc. Amended and Restated Dividend Reinvestment and Stock Purchase Plan. Reference is made to Exhibit 10(d) to Form 10-K filed with the Commission on March 30, 2001. |
10(e) | Myers Industries, Inc. 1997 Incentive Stock Plan. Reference is made to Exhibit 10.2 to Form S-8 (Registration Statement No. 333-90367) filed with the Commission on November 5, 1999.* |
10(f) | Myers Industries, Inc. Amended and Restated 1999 Incentive Stock Plan. Reference is made to Exhibit 10(f) to Form 10-Q filed with the Commission on May 6, 2003.* |
10(g) | Myers Industries, Inc. Executive Supplemental Retirement Plan. Reference is made to Exhibit (10)(g) to Form 10-K filed with the Commission on March 26, 2003.* |
10(h) | Employment Letter between Myers Industries, Inc. and John C. Orr dated February 14, 2003. Reference is made to Exhibit 10(h) to Form 10-Q filed with the Commission on May 6, 2003.* |
10(i) | Change of Control Agreement between Myers Industries, Inc. and John C. Orr dated February 14, 2003. Reference is made to Exhibit 10(i) to Form 10-Q filed with the Commission on May 6, 2003.* |
10(j) | Non-Disclosure and Non-Competition Agreement between Myers Industries, Inc. and John C. Orr dated July 18, 2000. Reference is made to Exhibit 10(j) to Form 10-Q filed with the Commission on May 6, 2003.* |
10(k) | Supplemental Compensation Agreement for Milton I. Wiskind dated April 25, 1996. Reference is made to Exhibit (10)(h) to Form 10-K filed with the Commission on March 26, 2003.* |
10(l) | Employment Contract between Myers Europe, SA (fka Myers AE, SA) and Jean-Paul Lesage dated February 1, 1999. Reference is made to Exhibit (10)(i) to Form 10-K filed with the Commission on March 26, 2003.* |
10(m) | Description of the terms of employment between Myers Industries, Inc. and Kevin C. O'Neil dated June 10, 2003. Reference is made to Exhibit (10)(j) to Form 10-K filed with the Commission on March 26, 2003.* |
10(n) | Amended and Restated Loan Agreement between Myers Industries, Inc. and Banc One, |
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31.1 | Certification of Stephen E. Myers, President and Chief Executive Officer of Myers Industries, Inc, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Gregory J. Stodnick, Vice President-Finance (Chief Financial Officer) of Myers Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32 | Certifications of Stephen E. Myers, President and Chief Executive Officer, and Gregory J. Stodnick, Vice President--Finance (Chief Financial Officer), of Myers Industries, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* Indicates executive compensation plan or arrangement.
Exhibit 31.1
Certification Per Section 302 of the Sarbanes-Oxley Act of 2003
I, Stephen E. Myers, Chief Executive Officer of Myers Industries, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Myers Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of , and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e); and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrants'sregistrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: | /s/ Stephen E. Myers | |
Stephen E. Myers, Chief Executive Officer |
Exhibit 31.2
Certification Per Section 302 of the Sarbanes-Oxley Act of 2003
I, Gregory J. Stodnick, Chief Financial Officer of Myers Industries, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Myers Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report
4. The registrant's other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e); and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrants'sregistrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: | /s/ Gregory J Stodnick | |
Gregory J Stodnick, Chief Financial Officer |
Exhibit 32
CERTIFICATIONS
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Myers Industries, Inc. (the Company) on
Form 10-Q for the period ended SeptemberMarch 31, 2003,2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Stephen E. Myers, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, and to my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended
SeptemberMarch 31, 20032004 which this certification accompanies fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Stephen E. Myers | |||||
Stephen E. Myers, Chief Executive Officer | |||||
Dated: |
In connection with the Quarterly Report of Myers Industries, Inc. (the Company) on
Form 10-Q for the period ended SeptemberMarch 31, 2003,2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Gregory J. Stodnick, Vice President-Finance
(Chief Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and to my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended
SeptemberMarch 31, 20032004 which this certification accompanies fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Gregory J. Stodnick | |||||
Gregory J. Stodnick, Vice President-Finance | |||||
Dated: |