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, 1998 ------------------------------------ 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, 1998, the number of shares outstanding of the issuer's Common Stock was: 18,311,033 ==========
2 -1- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 ------------------------------------------------------ <TABLE> <CAPTION> June 30, December 31, ASSETS 1998 1997 - ------ --------------- ------------------ <S> <C> <C> CURRENT ASSETS Cash and temporary cash investments $5,208,306 $6,297,726 Accounts receivable-less allowances of $2,397,000 and $2,102,000, respectively 62,064,436 54,940,671 Inventories Finished and in-process products 39,327,846 35,427,355 Raw materials and supplies 8,675,069 7,627,878 --------------- ------------------ 48,002,915 43,055,233 Prepaid expenses 2,479,449 3,132,997 --------------- ------------------ TOTAL CURRENT ASSETS 117,755,106 107,426,627 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired 24,255,958 20,484,628 Patents and other intangible assets 2,266,185 2,427,633 Other 7,064,569 3,188,125 --------------- ------------------ 33,586,712 26,100,386 PROPERTY, PLANT & EQUIPMENT, AT COST Land 2,613,503 2,597,342 Buildings and leasehold improvements 48,114,474 42,043,716 Machinery and equipment 138,460,054 125,413,124 --------------- ------------------ 189,188,031 170,054,182 Less allowances for depreciation and amortization 85,913,103 79,503,273 --------------- ------------------ 103,274,928 90,550,909 --------------- ------------------ $254,616,746 $224,077,922 =============== ================== </TABLE>
3 -2- PART I FINANCIAL INFORMATION ---------------------------- MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 ------------------------------------------------------ <TABLE> <CAPTION> June 30, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 - ------------------------------------ --------------- -------------- <S> <C> <C> CURRENT LIABILITIES Accounts payable $ 14,720,075 $ 14,414,557 Accrued expenses Employee compensation 10,826,345 12,014,848 Taxes, other than income taxes 1,623,366 1,162,642 Income taxes 30,614 1,208,327 Other 12,823,915 9,996,832 Current portion of long-term debt 1,934,108 846,316 --------------- -------------- TOTAL CURRENT LIABILITIES 41,958,423 39,643,522 LONG-TERM DEBIT, less current portion 19,031,507 4,261,257 DEFERRED INCOME TAXES 4,126,534 3,496,196 SHAREHOLDERS' EQUITY Serial Preferred Shares (authorized 1,000,000) -- -- Common Shares, without par value (authorized 30,000,000 shares; outstanding 18,301,247 and 18,278,895, respectively) 11,587,722 11,573,496 Additional paid-in capital 133,695,934 133,359,303 Foreign currency translation adjustment (771,076) (484,820) Retained income 44,987,702 32,228,968 --------------- -------------- 189,500,282 176,676,947 --------------- -------------- $254,616,746 $224,077,922 =============== ============== </TABLE>
4 -3- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED INCOME ------------------------------------------ <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------- ------------------------ June 30 June 30 June 30 June 30 1998 1997 1998 1997 ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Net sales $101,114,576 $ 86,175,097 $189,305,742 $162,973,718 Costs and expenses Cost of sales 66,287,070 59,502,875 123,862,482 112,214,281 Operating expenses 21,830,293 17,482,144 40,464,975 33,412,690 Interest, net 161,607 99,609 294,348 106,775 ------------ ------------ ------------ ------------ Total costs & expenses 88,278,970 77,084,628 164,621,805 145,733,746 Income before income taxes 12,835,606 9,090,469 24,683,937 17,239,972 Income taxes 5,238,000 3,777,000 10,096,000 7,118,000 ------------ ------------ ------------ ------------ Net income $ 7,597,606 $ 5,313,469 $ 14,587,937 $ 10,121,972 ============ ============ ============ ============ Net income per Common Share $ .42 $ .29 $ .80 $ .55 Dividends per Common Share $ .05 $ .045 $ .10 $ .09 Weighted average number of Common Shares outstanding 18,296,586 18,560,526 18,289,943 18,554,181 </TABLE> - -------------------------
5 -3- PART 1 - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 ----------------------------------------------- <TABLE> <CAPTION> June 30, June 30, 1998 1997 ------------ ------------ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 14,587,937 $ 10,121,972 Items not affecting use of cash Depreciation 7,414,491 5,915,506 Amortization of excess of cost over fair value of net assets of companies acquired 530,446 319,464 Amortization of other intangible assets 226,715 253,843 Cash flow provided by (used for) working capital Accounts receivable (2,662,420) 4,129,576 Inventories (1,486,097) (417,566) Prepaid expenses 779,963 (2,209,722) Accounts payable and accrued expenses (493,684) (4,233,847) ------------ ------------ Net cash provided by operating activities 18,897,351 13,879,226 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of business, net of cash acquired (13,088,119) ( 7,955,077) Additions to property, plant and equipment, net (7,502,995) (11,885,656) Other 91,989 417,021 ------------ ------------ Net cash used for investing activities (20,499,125) (19,423,712) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) - net 1,990,700 2,837,859 Cash dividends paid (1,829,203) (1,685,891) Proceeds from issuance of common stock 433,544 359,793 Repurchase of common stock (82,687) 0 ------------ ------------ Net cash provided by (used for) financing activities 512,354 1,511,761 (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (1,089,420) (4,032,725) CASH AND TEMPORARY CASH INVESTMENTS JANUARY 1 6,297,726 5,600,349 ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS JUNE 30 $ 5,208,306 $ 1,567,624 ============ ============ </TABLE>
6 -5- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENT OF SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1998 -------------------------------------- <TABLE> <CAPTION> Foreign Additional Currency Comprehensive Common Paid-In Translation Retained Income Stock Capital Adjustment Income ---------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> December 31, 1997 $11,573,496 $133,359,303 ($484,820) $32,228,968 Net Income $14,587,937 14,587,937 Foreign Currency Translation Adjustment (286,256) (286,256) ------------ Comprehensive Income $14,301,681 ============ Common Stock Issued 17,426 416,118 Purchases for Treasury (3,200) (79,487) Dividends (1,829,203) ------------------------------------------------------------------ June 30, 1998 $11,587,722 $133,695,934 ($771,076) $44,987,702 ================================================================== </TABLE>
7 -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 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, 1998, and the results of operations and cash flows for the three months and the six months ended June 30, 1998 and 1997. (2) Acquisitions ------------ Effective January 2, 1998, the Company acquired for cash all outstanding shares of A/S E. Damberg Group, a manufacturer of plastic and metal storage systems headquartered in Nykobing Falster, Denmark. Known by its principal brand name, raaco, it produces products for both industrial and consumer markets throughout Scandinavia and the European Common Market. The Stock Purchase Agreement provides for payment of additional consideration contingent upon the earnings of raaco during the 48 month period ending December 31, 2001. On April 25, 1997, the Company acquired substantially all of the assets of Molded Solutions, Inc., a manufacturer of custom engineered molded rubber products. As provided for in the Asset Purchase Agreement, an additional payment, which was contingent upon the earnings of Molded Solutions during the 12 month period ending April 25, 1998, was paid during the second quarter. These acquisitions have been accounted for using the purchase method and, accordingly, the results of operations for the acquired businesses have been included in the Company's consolidated financial statements from their
8 -7- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (2) Acquisitions (Con't) ------------ respective dates of acquisition. Consolidated pro forma sales, net income and net income per share, would not have been materially different from the reported amounts for all periods presented. The purchase price allocations have 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 to 30 years. (3) Net Income Per Share -------------------- 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 "primary" and "fully diluted" earnings per share with "basic" and "diluted" earnings per share. Basic net income per share on the Condensed Statements of Consolidated Income, is determined on the basis of the weighted average number of Common Shares outstanding during the period. The restatement of prior periods, as required by FASB 128, did not effect the earnings per share amounts previously reported and, for all periods shown, basic and diluted earnings per share are identical. Prior year per share data has been adjusted for the ten percent stock dividend distributed in August 1997. (4) Supplemental Disclosure of Cash Flow Information ------------------------------------------------ The Company made cash payments for interest expense of $556,795 and $55,582 for the three months ended June 30, 1998 and 1997, respectively. Cash payments for interest expense were $1,006,781 and $200,784 for the six months ended June 30, 1998 and 1997, respectively. Cash payments for income taxes were $9,793,026 and $6,687,748 for the three months ended June 30, 1998 and 1997, respectively. For the six month period the payments for income taxes were $11,464,640 for 1998 and $7,708,947 for 1997.
9 -8- 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 three months ended June 30, 1998 increased $14.9 million or 17.3 percent and $26.3 million or 16.2 percent for the six month period as the Company experienced significant improvements in both of its business segments. For both the quarter and year to date periods, approximately 42 percent of the sales increase was due to acquired companies not included in the comparative prior year periods. The remaining increase in sales was primarily the result of higher unit volumes experienced in both the Manufacturing and Distribution business segments. Cost of sales increased $6.8 million or 11.4 percent for the three month period and $11.6 million or 10.4 percent for the six month period ended June 30, 1998 reflecting the higher sales level; however, gross profit as a percentage of sales improved from 31.0 percent to 34.4 percent for the quarter and from 31.1 percent to 34.6 percent for the six month period. The gross margin improvement was primarily achieved in the Manufacturing segment reflecting lower raw material costs and greater utilization of plant capacity. Operating expenses increased $4.3 million or 24.9 percent for the quarter and $7.0 million or 21.1 percent year to date. These increases reflect the additional operating costs of acquired companies as well as costs associated with the increase in sales. Expressed as a percentage of sales operating expenses were 21.6 percent for the quarter ended June 30, 1998 compared with 20.3 percent in the prior year and 21.4 percent for the six month period compared with 20.5 percent in the prior year. This decrease in operating expense leverage is due to additional spending for sales training and systems in the Distribution segment along with the impact of acquired companies. Net interest expense increased to $161,609 for the quarter ended June 30, 1998 from $99,609 in the prior year. Net interest expense increased to $294,350 for the six months ended June 30, 1998 from $106,775 for the prior year. This increase reflects the higher borrowing levels resulting from business acquisitions but had no material impact on the Company's financial results.
10 -9- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities is the primary source of liquidity and amounted to $18.9 million for the six months ended June 30, 1998. Long-term debt increased by $15.9 million since December 31, 1997 primarily due to debt acquired and financing related to the acquisition of raaco. Debt as a percentage of total capitalization increased to 10 percent compared to 3 percent at December 31, 1997. Working capital increased to $75.8 million at June 30, 1998 from $67.7 million at December 31, 1997. Capital expenditures for the six months ended June 30, 1998 were $7.5 million. The Company currently anticipates annual capital expenditures in the range of $15.0 to $20.0 million over the next five years. 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.
11 -10- PART II - OTHER INFORMATION --------------------------- MYERS INDUSTRIES, INC. ---------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Annual Meeting Shareholders was held on April 30, 1998 and the following matters were voted on at that meeting. 1. The election of nine 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 14,492,038 118,049 Milton I. Wiskind 14,466,654 143,433 Edwin P. Schrank 14,486,656 123,431 Karl S. Hay 14,400,969 209,118 Richard P. Johnston 14,489,288 120,799 Richard Osborne 14,479,276 130,811 Jon H. Outcalt 13,796,372 813,715 Samuel Salem 14,467,762 142,325 Keith A. Brown 14,479,122 130,965 2. Proposal to amend the Myers Industries, Inc. Employee Stock Purchase Plan was approved by the following vote: For 14,397,742 Against 142,958 Abstain 69,387 3. Ratification of the appointment of Arthur Andersen LLP as Independent auditors for the fiscal year ending December 31, 1998 was approved by the following vote: For 14,565,593 Against 16,763 Abstain 27,731
12 -11- 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. MYERS INDUSTRIES, INC. August 11, 1998 By: \s\ Gregory J. Stodnick - ------------------ -------------------------- Date Gregory J. Stodnick Vice President-Finance Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)