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 September 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 October 31, 1998, the number of shares outstanding of the issuer's Common Stock was: 18,325,212 ==========
2 -1- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 ------------------------------------------------------ <TABLE> <CAPTION> September 30, December 31, ASSETS 1998 1997 - ----------- -------------- ------------- <S> <C> <C> CURRENT ASSETS Cash and temporary cash investments $ 3,676,240 $ 6,297,726 Accounts receivable-less allowances of $2,576,000 and $2,102,000, respectively 58,422,817 54,940,671 Inventories Finished and in-process products 39,303,354 35,427,355 Raw materials and supplies 9,660,909 7,627,878 ------------ ------------ 48,964,263 43,055,233 Prepaid expenses 2,162,298 3,132,997 ------------ ------------ TOTAL CURRENT ASSETS 113,225,618 107,426,627 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired 28,019,090 20,484,628 Patents and other intangible assets 2,185,461 2,427,633 Other 7,185,891 3,188,125 ------------ ------------ 37,390,442 26,100,386 PROPERTY, PLANT & EQUIPMENT, AT COST Land 2,646,021 2,597,342 Buildings and leasehold improvements 49,198,840 42,043,716 Machinery and equipment 143,641,911 125,413,124 ------------ ------------ 195,486,772 170,054,182 Less allowances for depreciation and amortization 89,783,107 79,503,273 ------------ ------------ 105,703,665 90,550,909 ------------ ------------ $256,319,725 $224,077,922 ============ ============ </TABLE>
3 -2- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 ------------------------------------------------------ <TABLE> <CAPTION> September 30, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 - ------------------------------------ ------------- --------------- <S> <C> <C> CURRENT LIABILITIES Accounts payable $ 14,428,435 $ 14,414,557 Accrued expenses Employee compensation 11,415,550 12,014,848 Taxes, other than income taxes 1,641,083 1,162,642 Income taxes (1,737,306) 1,208,327 Other 13,090,714 9,996,832 Current portion of long-term debt 2,716,250 846,316 ------------- ------------- TOTAL CURRENT LIABILITIES 41,554,726 39,643,522 LONG-TERM DEBT, less current portion 16,880,644 4,261,257 DEFERRED INCOME TAXES 3,947,992 3,496,196 SHAREHOLDERS' EQUITY Serial Preferred Shares (authorized 1,000,000) ----- ----- Common Shares, without par value (authorized 30,000,000 shares; outstanding 18,318,365 and 18,278,895, respectively) 11,598,581 11,573,496 Additional paid-in capital 133,977,328 133,359,303 Foreign currency translation adjustment (446,119) (484,820) Retained income 48,806,573 32,228,968 ------------- ------------- 193,936,363 176,676,947 ------------- ------------- $ 256,319,725 $ 224,077,922 ============= ============= </TABLE>
4 -3- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED INCOME ------------------------------------------ <TABLE> <CAPTION> FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED -------------------------------- -------------------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Net sales $ 92,196,199 $ 81,141,353 $281,501,941 $244,115,071 Costs and expenses Cost of sales 61,714,821 57,072,104 185,577,303 169,286,385 Operating expenses 21,681,702 17,347,176 62,146,677 50,759,866 Interest expense, net 437,946 55,369 732,294 162,144 ------------ ------------ ------------ ------------ Total costs & expenses 83,834,469 74,474,649 248,456,274 220,208,395 Income before income taxes 8,361,730 6,666,704 33,045,667 23,906,676 Income taxes 3,444,000 2,734,000 13,540,000 9,852,000 ------------ ------------ ------------ ------------ Net income $ 4,917,730 $ 3,932,704 $ 19,505,667 $ 14,054,676 ============ ============ ============ ============ Net income per Common Share* $ .27 $ .21 $ 1.07 $ .76 Dividends per Common Share* $ .06 $ .05 $ .16 $ .14 Weighted average number of Common Shares outstanding* 18,311,241 18,496,143 18,297,332 18,529,742 </TABLE> *Adjusted for a ten percent stock dividend in August, 1997.
5 -4- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 ----------------------------------------------------- <TABLE> <CAPTION> Sept. 30, Sept, 30, 1998 1997 ------------ ------------ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 19,505,667 $ 14,054,676 Items not affecting use of cash Depreciation 11,204,958 8,925,178 Amortization of excess of cost over fair value of net assets of companies acquired 838,432 556,380 Amortization of other intangible assets 339,770 409,917 Cash flow provided by (used for) working capital Accounts receivable 1,813,539 5,588,688 Inventories (1,947,377) (385,923) Prepaid expenses 1,143,534 (730,245) Accounts payable and accrued expenses (2,221,037) (3,165,769) ------------ ------------ Net cash provided by operating activities 30,677,486 25,252,902 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of business, net of cash acquired (18,267,610) (7,955,077) Additions to property, plant and equipment, net (12,483,822) (18,868,810) Other 289,475 168,441 ------------ ------------ Net cash used for investing activities (30,461,957) (26,655,446) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) - net (552,063) 3,540,801 Cash dividends paid (2,928,062) (2,614,897) Proceeds from issuance of common stock 725,797 596,308 Repurchase of common stock (82,687) (5,176,838) ------------ ------------ Net cash provided by (used for) financing activities (2,837,015) (3,654,626) (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (2,621,486) (5,057,170) CASH AND TEMPORARY CASH INVESTMENTS JANUARY 1 6,297,726 5,600,349 ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS SEPTEMBER 30 $ 3,676,240 $ 543,179 ============ ============ </TABLE>
6 -5- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 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 $19,505,667 19,505,667 Foreign Currency Translation Adjustment 38,701 38,701 ------------ Comprehensive Income $19,544,368 ============ Common Stock Issued 28,285 697,512 Purchases for Treasury (3,200) (79,487) Dividends (2,928,062) ---------------------------------------------------------- September 30, 1998 $11,598,581 $133,977,328 ($446,119) $48,806,573 ========================================================== </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 September 30, 1998, and the results of operations and cash flows for the three months and the nine months ended September 30, 1998 and 1997. (2) Acquisitions ------------ Effective July 31, 1998, the Company acquired for cash all outstanding shares of Sherwood Plastics, Inc. Sherwood Plastics is a rotational molding manufacturer of transportation, medical, recreational and consumer products. 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 quarter ended June 30, 1998.
8 -7- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (2) Acquisitions (Con't) ------------ 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 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 $580,930 and $197,064 for the three months ended September 30, 1998 and 1997, respectively. Cash payments for interest expense were $1,587,712 and $397,848 for the nine months ended September 30, 1998 and 1997, respectively. Cash payments for income taxes were $5,199,443 and $4,901,731 for the three months ended September 30, 1998 and 1997, respectively. For the nine month period the payments for income taxes were $16,664,083 for 1998 and $12,610,677 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 - --------------------- For the quarter ended September 30, 1998 net sales increased 13.6 percent to a record $92.2 million as the Company experienced significant sales gains in both of its business segments. Net sales in the Distribution segment increased $3.3 million or 8.3 percent primarily resulting from higher unit volume. In the Manufacturing segment sales increased $7.8 million or 18.7 percent reflecting increased unit volumes combined with the contribution of acquired companies not included in the comparative prior year quarter. These acquisitions accounted for approximately 48 percent of the total sales increase for the quarter. Year-to-date net sales increased $37.4 million or 15.3 percent based on sales increases of 9.7 percent in the Distribution segment and 19.7 percent in the Manufacturing segment. Cost of sales for the quarter increased $4.6 million or 8.1 percent reflecting the higher sales levels; however, gross profit as a percentage of sales increased to 33.1 percent from 29.7 percent in the prior year. For the nine months ended September 30, 1998 gross profit increased to 34.1 percent of sales from 30.7 percent in the prior year. For both the quarter and year-to-date periods this improvement in gross margin was primarily achieved in the Manufacturing segment based on lower raw material costs and greater utilization of plant capacity. Operating expenses increased $4.3 million or 26.5 percent for the quarter and $11.4 million or 22.4 percent year to date. These increases reflect the additional operating costs of acquired companies combined with higher selling costs resulting from the increased sales volume. Expressed as a percentage of sales operating expenses were 23.5 percent for the quarter compared to 21.4 percent in the prior year. This reduction in operating expense leverage is due to additional spending for information systems along with the impact of acquired companies. Net interest expense increased to $437,946 for the quarter and $732,294 year to date compared with $55,369 and $162,144 in the prior year periods. This increase reflects the higher borrowing levels resulting from business acquisitions.
10 -9- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Results of Operations (con't) The Company's effective tax rate for the quarter increased slightly to 41.2 percent from 41.0 percent in the prior year. This increase reflects the impact of slightly higher tax rates experienced by foreign operations. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities is the primary source of liquidity and amounted to $30.7 million for the nine months ended September 30, 1998. Long-term debt increased by $12.6 million during the nine months of 1998 and debt as a percentage of total capitalization increased to 9.2 percent compared to 3.0 percent at December 31, 1997. Working capital increased to $71.7 million at September 30, 1998 from $67.7 million at December 31, 1997. Capital expenditures for the nine months ended September 30, 1998 were $12.5 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. Exhibits and Reports on Form 8-K -------------------------------- (a) Financial Data Schedule (b) Form 8-K None 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. 11/4/98 By: \s\ Gregory J. Stodnick - ----------------------- ------------------------------ Date Gregory J. Stodnick Vice President-Finance Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)