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 March 31, 1999 ------------------------------------------------ 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 . No X . --- --- 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 April 30, 1999, the number of shares outstanding of the issuer's Common Stock was: 18,382,955 ==========
2 -1- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF MARCH 31, 1999 AND DECEMBER 31, 1998 ------------------------------------------------------ <TABLE> <CAPTION> March 31 December 31, ASSETS 1999 1998 - ------ ------------ ------------ <S> <C> <C> CURRENT ASSETS Cash and temporary cash investments $13,112,571 $34,832,151 Accounts receivable-less allowances of $3,646,000 and $2,396,000, respectively 105,261,828 62,855,111 Inventories Finished and in-process products 50,809,938 44,182,030 Raw materials and supplies 19,823,204 9,236,913 ------------ ------------ 70,633,142 53,418,943 Prepaid expenses 1,344,967 2,543,996 ------------ ------------ TOTAL CURRENT ASSETS 190,382,508 153,650,201 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired 150,209,732 37,481,612 Patents and other intangible assets 2,543,359 2,104,327 Other 4,571,236 4,028,655 ------------ ------------ 157,324,327 43,614,594 PROPERTY, PLANT & EQUIPMENT, AT COST Land 5,554,306 2,854,905 Buildings and leasehold improvements 65,119,356 53,484,959 Machinery and equipment 191,075,560 147,405,559 ------------ ------------ 261,749,222 203,745,423 Less allowances for depreciation and amortization 101,183,831 94,302,430 ------------ ------------ 160,565,391 109,442,993 ------------ ------------ $508,272,226 $306,707,788 ============ ============ </TABLE>
3 -2- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF MARCH 31, 1999 AND DECEMBER 31, 1998 ------------------------------------------------------ <TABLE> <CAPTION> March 31, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 - ------------------------------------ ------------- ------------- <S> <C> <C> CURRENT LIABILITIES Accounts payable $33,851,723 $15,863,124 Accrued expenses Employee compensation 20,589,617 13,094,384 Taxes, other than income taxes 2,743,384 1,316,457 Income taxes 6,948,119 1,357,241 Other 17,055,893 13,214,158 Current portion of long-term debt 8,545,071 6,388,146 ----------- ----------- TOTAL CURRENT LIABILITIES 89,733,807 51,233,510 LONG-TERM DEBT, less current portion 205,797,702 48,832,240 DEFERRED INCOME TAXES 4,208,546 3,953,185 SHAREHOLDERS' EQUITY Serial Preferred Shares (authorized 1,000,000) 0 0 Common Shares, without par value (authorized 30,000,000 shares; outstanding 18,361,165 and 18,285,126, respectively) 11,625,116 11,610,996 Additional paid-in capital 134,563,475 134,280,522 Accumulated other comprehensive income (1,703,150) (83,002) Retained income 64,046,730 56,880,337 ------------ ------------ 208,532,171 202,688,853 ------------ ------------ $508,272,226 $306,707,788 ============ ============ </TABLE>
4 -3- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- CONDENSED STATEMENT OF CONSOLIDATED INCOME ------------------------------------------ FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 -------------------------------------------------- <TABLE> <CAPTION> March 31, March 31, 1999 1998 ------------ ------------ <S> <C> <C> Net sales $126,746,405 $88,191,166 Costs and expenses Cost of sales 79,519,275 57,575,412 Operating expenses 30,183,071 18,634,682 Interest expense, net 2,449,104 132,741 ------------ ------------ Total costs & expenses 112,151,450 76,342,835 Income before income taxes 14,594,955 11,848,331 Income taxes 6,327,000 4,858,000 ------------ ------------ Net income $8,267,955 $6,990,331 ============ ============ Net income per common share $.45 $.38 Dividends per common share $.06 $.05 Weighted average number of common shares outstanding 18,351,541 18,282,096 </TABLE>
5 -4- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 -------------------------------------------------- <TABLE> <CAPTION> March 31, March 31 1999 1998 ------------- ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES -- -- Net income $8,267,955 $6,990,331 Items not affecting use of cash Depreciation 6,782,805 3,640,688 Amortization of excess of cost over fair value of net assets of companies acquired 1,195,822 253,454 Amortization of other intangible assets 200,120 112,854 Cash flow provided by (used for) working capital Accounts receivable (579,608) 513,905 Inventories 645,252 (1,294,215) Prepaid expenses 1,182,872 (691,398) Accounts payable and accrued expenses 5,385,386 3,408,032 ------------- ------------- Net cash provided by operating activities 23,080,604 12,933,651 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of business, net of cash acquired (139,214,843) (11,763,119) Additions to property, plant and equipment, net (5,552,743) (3,152,125) Other (3,106,815) 115,510 ------------- ------------- Net cash used for investing activities (147,874,401) (14,799,734) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) - net 103,908,707 (1,503,350) Cash dividends paid (1,101,563) (914,176) Proceeds from issuance of common stock 297,073 182,181 Repurchase of common stock 0 (82,687) ------------- ------------- Net cash provided by (used for) financing activities 103,104,217 (2,318,032) (DECREASE) INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS (21,689,580) (4,184,115) CASH AND TEMPORARY CASH INVESTMENTS JANUARY 1 34,832,151 6,297,726 ------------- ------------- CASH AND TEMPORARY CASH INVESTMENTS MARCH 31 $13,142,571 $2,113,611 ============= ============= </TABLE>
6 -5- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1999 ----------------------------------------- <TABLE> <CAPTION> Accumulative Additional Other Comprehensive Common Paid-In Comprehensive Retained Income Stock Capital Income - ------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Income December 31, 1998 $11,610,996 $134,280,522 ($83,002) $56,880,337 Net Income $8,267,955 8,267,955 Foreign Currency Translation Adjustment (1,620,148) (1,620,148) ------------ Comprehensive Income $6,647,807 ============ Common Stock Issued 14,120 282,953 Purchases for Treasury 0 0 Dividends (1,101,562) ------------------------------------------------------------- March 31, 1999 $11,625,116 $134,563,475 ($1,703,150) $64,046,730 ============================================================= </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 March 31, 1999, and the results of operations and cash flows for the three months ended March 31, 1999 and 1998. (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. This transaction also completed the acquisition of Allibert-Contico, LLC, a joint venture between Sommer Allibert and Contico International, Inc. The acquired businesses have five manufacturing facilities in Europe and one in North America and had 1998 annual sales of approximately $145 million. The acquisitions will be accounted for under the purchase method of accounting and, accordingly, the total purchase price of approximately $150 million will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values. At March 31, 1999, the purchase price allocations have been based on estimates with the excess of purchase price over fair value of net assets acquired of approximately $110 million being amortized over lives of 16 and 40 years. The following unaudited proforma information presents a summary of consolidated results of operations of the Company and the acquired businesses as if the acquisitions had occurred January 1, 1998.
8 -7- PART I - FINANCIAL INFORMATION ------------------------------ MYERS INDUSTRIES, INC. ---------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (2) ACQUISITIONS (Con't) <TABLE> <CAPTION> Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 --------------------- -------------------- <S> <C> <C> Sales $135,255 $121,242 Net Income 7,763 4,917 Net Income Per Share .42 .27 </TABLE> 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 combination been in effect on January 1, 1998, or of future results. (3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The Company made cash payments for interest expense of $1,791,470 and $440,270 for the three months ended March 31, 1999 and 1998, respectively. Cash payments for income taxes were $568,598 and $1,021,198 for the three months ended March 31, 1999 and 1998, respectively. (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 and metal 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. 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.
9 -8- 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. <TABLE> <CAPTION> Three Months Ended (In Thousands) March 31, --------------------------- Net Sales 1999 1998 --------- --------- <S> <C> <C> Distribution of aftermarket repair products and services $34,941 $32,468 Manufacturing of polymer and metal products 94,876 58,776 Intra-segment elimination (3,071) (3,053) -------- ------- $126,746 $88,191 ======== ======= Income Before Income Taxes Distribution of aftermarket repair products and services $3,148 $2,577 Manufacturing of polymer and metal products 16,063 11,146 Corporate (2,167) (1,742) Interest expense - net (2,449) (133) ------- ------- $14,595 $11,848 ======= ======= </TABLE>
10 -9- 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 March 31, 1999 increased $38.6 million or 44 percent as the Company experienced significant improvements in both of its business segments. Sales in the Distribution segment increased $2.5 million or 8 percent primarily as a result of higher unit volumes. Sales in the Manufacturing segment increased $36.1 million or 61 percent with approximately 87 percent of the increase due to acquired companies not included in the prior year period. Without the acquisitions there was an 8 percent increase in sales for the Manufacturing segment which was primarily the result of higher unit volumes. Cost of sales increased $21.9 million or 38 percent reflecting the higher sales levels; however, gross profit as a percentage of sales improved from 34.7 percent to 37.3 percent. The gross margin improvement was primarily achieved in the Manufacturing segment reflecting lower raw material costs and greater utilization of plant capacity. Operating expenses for the quarter increased $11.5 million or 62 percent reflecting 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 23.8 percent for the quarter ended March 31, 1999 compared with 21.1 percent in the prior year. Net interest expense increased to $2.4 million for the quarter ended March 31, 1999 from $132,741 in the prior year. This increase reflects the significantly higher borrowing levels resulting from business acquisitions. Income taxes as a percent of income before taxes was 43.3 percent for the three months ended March 31, 1999 compared with 41.0 percent in the prior year. The higher tax rate in 1999 is attributable to an increase in non-deductible amortization expense combined with foreign tax rate differences.
11 -10- 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 was $23.1 million for the three months ended March 31, 1999 compared with $12.9 million for same period in the prior year. Long-term debt increased by $157 million from December 31, 1998 as a result of the Allibert Equipement acquisition and debt of percentage of total capitalization increased to 50 percent. Working capital decreased slightly to $100.6 million at March 31, 1999 and the Company's current ratio was 2.1 to 1. Capital expenditures for the three months ended March 31, 1999 were $5.6 million and the Company anticipates total capital expenditures in the range of $25.0 to $30.0 million for the full year. 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. Year 2000 - --------- The Company has conducted a review to identify potential Year 2000 issues related to both information technology (IT) and non-information technology (non-IT) matters. The Company has developed plans for each of its business units to correct or replace existing IT systems where significant potential year 2000 failures could occur. The majority of core business software utilized by the Company was acquired from third parties. As of March 31, 1999, core Corporate financial software is Year 2000 compliant, and core business software for the business units is either Year 2000 compliant or has been upgraded, tested and is ready for implementation. Full implementation of Year 2000 compliant software for all business units is expected to be completed during the third quarter of 1999. The Company is also in the process of verifying Year 2000 readiness of non-IT systems, including production equipment as well as evaluating the status of key vendors and service providers to determine Year 2000 readiness and determine alternatives and contingency plan requirements. To date, no material problems have been identified, and the Company is confident that the Year 2000 issue will not create significant operational problems. To date, the funds which have been spent on year 2000 issues have not been material and based on current assessments remaining expenses are not expected to be material.
12 -11- PART II - OTHER INFORMATION --------------------------- MYERS INDUSTRIES, INC. ---------------------- Item 4. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3(a) MYERS INDUSTRIES, INC. AMENDED AND RESTATED ARTICLES OF INCORPORATION. (b) MYERS INDUSTRIES, INC. AMENDED AND RESTATED CODE OF REGULATIONS. Reference is made to Exhibit (3)(ii) to Form 10-Q filed with the Commission on May 14, 1994. 21 Subsidiaries of the Registrant 27 Financial Data Schedule (b) Form 8-K Form 8-K filed on February 19, 1999 regarding the completion of (a) the acquisition of the material handling division of Sommer Allibert S.A., and (b) a new $250.0 million multicurrency credit facility with NBD Bank, N.A. 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. 5/17/99 By: \s\ Gregory J. Stodnick - -------------------- ------------------------- Date Gregory J. Stodnick Vice President-Finance Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)