Business Context and Reporting Period
Company: Myers Industries, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Business Overview: Myers Industries is an international manufacturer and distributor of polymer products and tire service supplies. Operations are divided into four segments: Material Handling, Lawn and Garden, Automotive and Custom, and Distribution. The company operates 18 manufacturing facilities and 39 distribution branches across the Americas with approximately 3,100 employees.
Key Financial Metrics
| Metric (in thousands) | 2009 | 2008 |
|---|---|---|
| Net Sales | $701,834 | $813,541 |
| Gross Profit | $170,895 | $196,662 |
| Gross Margin | 24.3% | 24.2% |
| Operating Income | $17,137 | $(34,699) |
| Income from Continuing Ops | $6,995 | $(45,749) |
| Net Income (Loss) | $(683) | $(44,493) |
| Diluted EPS (Continuing Ops) | $0.20 | $(1.30) |
| Cash from Operating Activities | $73,155 | $60,953 |
| Total Debt | $104,315 | $171,567 |
| Working Capital | $37,523 | $135,678 |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 14% to $701.8 million, driven by a weak economy, lower sales volumes, and unfavorable foreign currency translation (primarily the Canadian dollar). The Automotive and Custom segment saw the steepest decline at 28%.
- Profitability Recovery: The company returned to profitability from continuing operations ($7.0 million) compared to a significant loss in 2008 ($45.7 million). This improvement was largely due to the absence of the $60.1 million goodwill impairment charge recorded in 2008.
- Restructuring and Impairment: 2009 included $5.5 million in impairment charges and approximately $16.6 million in restructuring costs (severance, consulting, facility closures) across manufacturing segments. This compares to $70.1 million in impairment charges in 2008.
- Debt Reduction: Total debt decreased by approximately $67 million to $104.3 million. The company paid down borrowings under its credit facility, though $65 million in Senior Notes are due in December 2010.
- Discontinued Operations: The company sold substantially all assets of its Michigan Rubber Products and Buckhorn Rubber Products businesses in Q3 2009, resulting in a $7.7 million loss from discontinued operations.
Guidance, Outlook, and Risks
- Outlook: Management anticipates capital spending of $20 to $25 million for 2010. The company expects cash flows from operations and available credit ($248 million available under its Credit Agreement) to be sufficient to meet business requirements.
- Strategic Focus: The "Strategic Business Evolution" plan focuses on sustainable growth through innovation, cost control, and selective acquisitions. The company is consolidating manufacturing facilities to improve productivity.
- Key Risks:
- Raw Material Costs: Significant exposure to price fluctuations in plastic resins and rubber, which are commodity products tied to oil and natural gas prices.
- Customer Concentration: One customer accounted for approximately 13% of total net sales in 2009.
- Weather Dependence: The Lawn and Garden segment is highly sensitive to weather conditions during the peak gardening season.
- Environmental Liabilities: Potential cleanup costs related to historical mining operations in the Guadalupe River Watershed (California) remain uncertain, though no material estimate can currently be made.
Investor Verification Checklist
- Debt Maturity: Verify the refinancing plan for the $65 million Senior Notes due in December 2010.
- Customer Concentration: Assess the stability of the relationship with the single customer representing 13% of sales.
- Restructuring Progress: Monitor the completion of facility closures and the realization of cost savings from the Lawn and Garden and Material Handling segment realignments.
- Environmental Contingency: Track developments regarding the California Regional Water Quality Control Board planning document and potential remediation costs.
- Raw Material Hedging: Review strategies for mitigating volatility in plastic resin and rubber costs, as the company currently has no derivative contracts to hedge these risks.