Myers Industries - 10-Q quarterly report FY

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, 2000        

or

|    | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to                        

Commission file number     I-8524

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, 2000, the number of shares outstanding of the issuer’s Common Stock was:

19,614,520
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PART 1 — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

CONDENSED STATEMENT OF CONSOLIDATED INCOME

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(1) Statement of Accounting Policy

      The accompanying financial statements include the accounts of Myers Industries, Inc. and subsidiaries (Company), and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the 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, 2000, and the results of operations and cash flows for the six months ended June 30, 2000 and 1999.

(2) Acquisitions

      On February 4, 1999, the Company acquired all of the shares of the entities comprising Allibert Equipement, the material handling division of Sommer Allibert S.A. and acquired Allibert-Contico, LLC, a joint venture between Sommer Allibert and Contico International, Inc. for a total purchase price of approximately $150 million. The acquired businesses have five manufacturing facilities in Europe and one in North America.

      In August 1999, the Company acquired substantially all of the assets of the Dillen Products Companies of Middlefield, Ohio for approximately $50 million and all of the outstanding shares of Listo Products, Ltd. of Canada for approximately $15 million. Dillen and Listo are leading manufacturers of plastic horticultural containers including pots, trays, saucers and decorative planters for customers including greenhouses and nurseries as well as retail garden centers and mass merchandisers.

      The acquisitions have been accounted for under the purchase method of accounting and, accordingly, the results of operations have been included in the Company’s consolidated financial statements since the dates of acquisition, and the acquisition costs have been allocated to the assets acquired and liabilities assumed based upon their estimated fair values. The purchase price allocations have been based on estimates with the excess of purchase price over fair value of net assets acquired of approximately $166 million being amortized over lives of 15 to 40 years.

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(2) Acquisitions (Con’t)

      The following unaudited pro-forma information presents a summary of consolidated results of operations of the Company and the acquired businesses as if the acquisitions had occurred January 1, 1999.

      These unaudited pro-forma results have been prepared for comparative purposes only and may not be indicative of results of operations which actually would have resulted had the combination been in effect on January 1, 1999, or of future results.

(3) Supplemental Disclosure of Cash Flow Information

      The Company made cash payments for interest expense of $5,082,000 and $2,207,000 for the three months ended June 30, 2000 and 1999, respectively. Cash payments for interest were $10,159,000 and $3,785,000 for the six months ended June 30, 2000 and 1999. Cash payments for income taxes totaled $9,949,000 and $10,639,000 for the three months ended June 30, 2000 and 1999. Cash payments for income taxes were $10,573,000 and $12,457,000 for the six months ended June 30, 2000 and 1999.

(4) Segment Information

      The Company’s business units have separate management teams and offer different products and services. Using the criteria of FASB No. 131, these business units have been aggregated into two reportable segments; Distribution of after-market repair products and services and Manufacturing of polymer products. The aggregation of business units is based on management by the chief operating decision maker for the segment as well as similarities of production processes, distribution methods and economic characteristics (e.g. average gross margin and the impact of economic conditions on long-term financial performance).

      The Company’s Distribution segment is engaged in the distribution of equipment, tools and supplies used for tire servicing and automotive underbody repair. The Distribution segment operates domestically through 42 branches located in major cities throughout the United States and in foreign countries through export and businesses in which the Company holds an equity interest.

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(4) Segment Information (Con’t)

      The Company’s manufacturing segment designs, manufactures and markets a variety of polymer based plastic and rubber products. These products are manufactured primarily through the molding process in facilities throughout the United States and Europe.

      Operating income for each segment is based on net sales less cost of products sold, and the related selling, administrative and general expenses. In computing segment operating income general corporate overhead expenses and interest expenses are not included.

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

      Net sales for the quarter ended June 30, 2000 increased $18.6 million or 13 percent as higher sales in the Manufacturing segment offset a decline in Distribution segment sales. In total, sales in the Manufacturing segment increased $20 million or 18 percent while sales in the Distribution segment were down 3 percent from the prior year quarter. The increase in sales for the Manufacturing segment was primarily due to the impact of acquired companies not included in the prior year period. Excluding the contribution from these acquisitions, manufacturing sales increased 2 percent for the quarter and total net sales would have increased 1 percent. For the six months ended June 30, 2000, net sales increased $53.4 million or 20 percent compared with the same period in 1999. On a segment basis, sales in the Distribution segment were down 3 percent reflecting lower unit volumes while sales in the Manufacturing segment increased $55.8 million or 27 percent based on an increase of 4 percent in existing business units combined with the impact of acquired companies.

      Total sales and Manufacturing segment sales were also negatively impacted by the translation effect of weaker foreign currencies, particularly the Euro, on sales of foreign businesses. As a result, total sales and Manufacturing segment sales were reduced $4.5 million for the quarter and $8.0 million for the six month period ended June 30, 2000. Without the translation effect and excluding the impact of acquired businesses, total sales would have increased 4 percent for the quarter and 5 percent for the six months, and Manufacturing segment sales would have increased 7 percent for the quarter and 8 percent for the six months.

      Cost of sales increased $15.6 million or 17 percent for the quarter ended June 30, 2000 and $40.7 million or 24 percent for the six month period. Expressed as a percentage of sales, gross profit fell to 34.4 percent in the quarter and 34.8 percent for the six months ended June 30, 2000 compared with 36.7 percent for the quarter and 36.9 percent for the six month period in 1999. For both the quarter and year-to-date periods this reduction in gross margin was the result of significantly higher raw material costs, primarily plastic resins, used in the Company’s Manufacturing businesses. These plastic resin costs have, on the average, increased more than 50 percent in the current year compared with the same periods in 1999.

      Total operating expenses increased $2.9 million or 8 percent for the quarter and $9.7 million or 15 percent for the six months ended June 30, 2000 compared with the same periods in 1999. These increases primarily reflect the additional operating costs of acquired companies. Operating expenses, expressed as a percentage of sales, declined to 22.8 percent in the quarter and 22.8 percent for the six months ended June 30, 2000 compared to 23.7 percent for the quarter and 23.8 percent for the six month period last year. This improvement in operating leverage is principally due to the seasonality of sales for certain acquired businesses that were not included in the prior year periods.

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PART I — FINANCIAL INFORMATION

MYERS INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations (Con’t)

      Net interest expense increased $2 million or 60 percent for the quarter and $5.1 million or 89 percent for the six months ended June 30, 2000. The increased interest expense is primarily due to substantially higher borrowing levels resulting from business acquisitions combined with higher average interest rates in the current year.

      Income taxes as a percent of income before taxes was 42 percent for the both the quarter and six months ended June 30, 2000 compared with 42 percent for the quarter and 42.6 percent in the six month period in 1999.

LIQUIDITY AND CAPITAL RESOURCES

      Cash provided by operating activities was $30.3 million for the six months ended June 30, 2000 compared with $23.9 million for same period in the prior year. Long-term debt was reduced $12.4 million from December 31, 1999 and debt as a percentage of total capitalization was 57 percent at June 30, 2000. Working capital increased from $104.7 million at December 31, 1999 to $108.4 million at June 30, 2000.

      Capital expenditures for the six months ended June 30, 2000 were $14.9 million and are anticipated to be in the range of $35 million to $40 million for the full year. Management believes that anticipated 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.

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PART II — OTHER INFORMATION

MYERS INDUSTRIES, INC.

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.