Myers Industries, manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets, has announced results for the fourth quarter and year ended Dec. 31, 2018.
Fourth quarter 2018 net sales decreased $1.7 million or 1.2 percent (0.9 percent excluding currency fluctuation) to $138.4 million, compared to the fourth quarter of 2017. The decrease was the result of a sales decline in the Material Handling Segment, partially offset by a sales increase in the Distribution Segment.
Gross profit increased $3.8 million to $42.1 million, compared to the fourth quarter of 2017. Higher pricing and savings from the footprint realignment completed in 2017 were partially offset by the lower sales volume. Selling, general and administrative expenses increased $1.3 million to $35 million, compared to the fourth quarter of 2017, due mostly to $1.4 million of incremental costs incurred to engage resources to assist with the planning and implementation of the transformation initiatives in the Distribution Segment.
The departure of the company’s previous CFO resulted in a reduction of costs of $1 million, which were offset by higher variable compensation costs. GAAP income per diluted share from continuing operations was 9 cents, compared to 6 cents for the fourth quarter of 2017. Adjusted income per diluted share from continuing operations was 13 cents, compared to 9 cents for the fourth quarter of 2017.
Net sales in the Material Handling Segment for the fourth quarter of 2018 decreased $2 million or 2 percent (1.6 percent excluding currency fluctuation) compared to the fourth quarter of 2017. The decrease in net sales was primarily due to anticipated sales declines in the company’s consumer (unusually high hurricane related volume in 2017), food and beverage (unusually high seed box demand in 2017) and vehicle (declining RV sales) markets.
Net sales in the Distribution Segment for the fourth quarter of 2018 increased $0.2 million or 0.6 percent compared to the fourth quarter of 2017. Sales in the Myers Tire Supply business increased low single digits due to higher sales of both consumables and equipment, partially offset by lower international sales. Sales in the Patch Rubber business were down low single digits year-over-year during the fourth quarter. The segment’s adjusted EBITDA was $0.6 million for the fourth quarter of 2018, compared to $1.6 million for the fourth quarter of 2017. The decrease in adjusted EBITDA was primarily the result of $1.4 million of incremental costs incurred to engage outside resources to assist with the planning and implementation of a set of initiatives to transform the business.
“We are pleased with our performance for both the fourth quarter and full year of 2018. We made progress in our Myers Tire Supply business during the fourth quarter, growing top line at a low single digit rate. In addition, we increased our enterprise gross profit margin significantly, contributing to a more than 35 percent increase in our adjusted operating income for the quarter. As a result of our operating performance, combined with a reduction in working capital, we generated free cash flow of nearly $18 million during the quarter, an increase of 118 percent year-over-year,” said Dave Banyard, president and CEO of Myers Industries.
Banyard continued, “Through our continued focus on executing our strategy centered on growing the key niche markets where we deliver value, reducing costs through flexible operations and generating strong cash flow, we were able to deliver sales growth for the year of 3.6 percent, and adjusted operating income and free cash flow growth of nearly 30 percent. We continued to stress the importance of living a culture built around continuous improvement, and we continued to invest in areas to help further align ourselves with our customers’ needs as we help them be safer and more efficient.”
Full-Year 2018 Financial Summary
Full-year net sales increased 3.6 percent to $566.7 million, compared to full-year 2017. The increase in sales was the result of sales growth in the Material Handling Segment, partially offset by a sales decline in the Distribution Segment. Gross profit increased $21.8 million to $179.3 million, due mostly to favorable price and volume and savings from the 2017 strategic footprint realignment.
Selling, general and administrative expenses increased $3.8 million during 2018 to $139.3 million primarily as a result of higher compensation costs and the incremental costs incurred to engage outside resources to assist with the transformation initiatives in the Distribution Segment. GAAP income per diluted share from continuing operations was a loss of 5 cents (includes $33.3 million of pre-tax charges related to the sale of the company’s Lawn and Garden business completed in 2015), compared to income of 35 cents for the full year of 2017. Adjusted income per diluted share from continuing operations was 76 cents, compared to 51 cents for the full year of 2017.
The Material Handling Segment’s net sales for the full year of 2018 increased 6.6 percent compared to the full year of 2017. The increase in net sales was due primarily to increased demand in the company’s food and beverage, vehicle and industrial markets, partially offset by sales declines in the consumer (unusually high hurricane related volume in 2017) market. Segment adjusted EBITDA was $82.8 million for the full year of 2018, compared to $70.6 million for the full year of 2017.
The Distribution Segment’s net sales for the full year of 2018 declined 4.3 percent compared to the full year of 2017. The decrease in net sales was primarily due to lower equipment and international sales compared to 2017. The segment’s adjusted EBITDA was $7.9 million for the full year of 2018, compared to $10.2 million for the full year of 2017. The decline in adjusted EBITDA was primarily due to the lower sales volume and the incremental costs incurred to engage outside resources to assist with the planning and implementation of a set of transformation initiatives for the segment.
2019 Outlook
For fiscal year 2019, the company anticipates that total revenue will be flat on a constant currency basis compared to the prior year. Anticipated sales increases in the consumer, industrial and automotive aftermarket end markets are expected to be offset by sales decreases in the food and beverage and vehicle markets due to more normalized seed box demand and a continued decline in the RV market following years of strong growth.
Banyard concluded, “We will remain diligent in executing our strategy in 2019 and one of our top priorities remains the transformation of our Distribution Segment, which is underway. Through enhancements in our go-to-market strategy, the implementation of 80/20 to drive improved contribution margins, and optimization of our logistics and overhead costs, our goal is to expand our Distribution Segment EBITDA margin to 10 percent by the end of 2020. Additionally, through the new product introduction in our Material Handling Segment that is expected to help us grow our consumer market, to anticipated strength in our industrial and auto aftermarket end markets, we expect to offset lower sales in our food and beverage and vehicle (i.e. RV) end markets during 2019. Lastly, we will continue to evaluate opportunities to leverage our strong balance sheet into accretive acquisition opportunities, but only when we find the optimal complement to our platform that will position the Company to deliver long-term shareholder value.”
