investor presentation november 2014
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Investor presentation november 2014TRANSCRIPT
Myers Industries, Inc.
Investor Presenta4on
November 2014
Forward-‐looking Statements
Statements in this presentation concerning the Company’s goals, strategies, and expectations for business and financial results may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on current indicators and expectations. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we "believe," "expect," or "anticipate" will occur, and other similar statements), you must remember that our expectations may not be correct, even though we believe they are reasonable. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You should review this presentation with the understanding that actual future results may be materially different from what we expect. Many of the factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statement. We do not intend, and undertake no obligation, to update these forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. Such risks include:
(1) Changes in the markets for the Company’s business segments (2) Changes in trends and demands in the markets in which the Company competes
(3) Unanticipated downturn in business relationships with customers or their purchases (4) Competitive pressures on sales and pricing
(5) Raw material availability, increases in raw material costs, or other production costs (6) Harsh weather conditions
(7) Future economic and financial conditions in the United States and around the world (8) Inability of the Company to meet future capital requirements
(9) Claims, litigation and regulatory actions against the Company (10) Changes in laws and regulations affecting the Company
(11) The Company’s ability to execute the components of its Strategic Business Evolution process Myers Industries, Inc. encourages investors to learn more about these risk factors. A detailed explanation of these factors is available in the Company’s publicly filed quarterly and annual reports, which can be found online at www.myersind.com and at the SEC.gov web site.
2
Why Myers
3
• Significant progress in streamlining business • Enhanced plaIorm to accelerate growth • Strong market posi4ons; plan to further penetrate expansion markets
• Financially strong; disciplined capital deployment
• Dedicated to enhancing shareholder value
4
Company at a Glance
Material Handling Distribution
Two core businesses and repor0ng segments: Material Handling • Polymer-‐based returnable packaging • Polymer-‐based storage and safety products • Specialty molding
Distribu0on • Largest wholesale distributor of tools, supplies and
equipment for the 4re, wheel and undervehicle service segment industry; parts produc4on
• Manufacturer of repair and retread products
74%
26%
70%
30%
2013 Net Sales*
2013 Adjusted EBIT*
Material Handing | Distribu0on
• Data has been updated to reflect discon4nued opera4ons presenta4on, segment realignment completed in June 2014, and inclusion of Scepter Corpora4on Group’s 2013 sales and EBIT.
Business Segments
Manufacturing
Material Handling Distribu4on
5
Growth Drivers
6
Net Sales Growth
+
• Select investments and acquisitions
• Richer product mix
• New markets and geographies
Profitability
+
• Optimize capacity
• Drive greater operating efficiency
• Enhance product mix
Free Cash Flow • Sales growth and profitability improvement
• Capital discipline
Strategic Goals
Strategic & Financial Goals
• Focus on markets that have strong, sustainable growth and profit poten4al
• Material Handling: • Liquid/Semi-‐liquid food products • Bulk packaging of dry, granular flowable products • Acquisi4ons
• Distribu0on: • Auto dealer 4re market • Value chain strategic customer partnerships • E-‐Commerce • Strategic geographic acquisi4ons
• Invest within our growth plaIorms for value crea4on
• Drive earnings growth faster than sales growth
• Maintain a strong and flexible balance sheet
7
• Sales Growth > 2.0x GDP
• Gross Margin > 30%
• EPS Growth > 20% CAGR
• Free Cash Flow ≥ 100% of Net Income
• ROIC > Cost of Capital
• InnovaDon/NPD > 10% of Sales
• Ops Excellence Savings = 3% of COGS (gross)
Financial Goals
Recent Announcements & Events
• Acquisi4on of Scepter
• Commencement of the sale of the Lawn & Garden Segment • Two-‐phase restructuring complete • Engaged William Blair to assist with the sale process • Expect the sale to be completed by mid-‐2015 • Reported as discon4nued opera4ons
• Sale of WEK Industries, Inc. to Industrial Opportunity Partners for ≈ $20 million – reported as discon4nued opera4ons
• Segment repor4ng realignment • Two reportable segments from four
• Material Handling • Distribu4on
8
Growth PlaIorms We will con4nuously upgrade Myers’ performance through:
Disciplined Por;olio Management and Investment in Profitable Growth
9
Pla;orm Growth 2012-‐2014 Acquisi0ons
Material H
andling Returnable
Packaging
Drive conversions to reusable products through further penetra4on of exis4ng growth markets, new end markets and broader geographic reach.
Novel/ Scepter
Storage & Safety Products
Further grow plaIorm with acquisi4ons. Strengthen compe44ve advantage through
distribu4on channels.
Jamco Products Inc.
Specialty Molding
Expand our capabili4es to further grow our posi4ons in Marine and RV. Scepter
Distribu0
on
Tire Supply Distribu0on
Grow through market reach, innova4ve products and expanded global sourcing.
Tire Repair & Retread Products
Leverage product and customer exper4se to grow niche market.
Scepter Acquisi4on Overview
• Completed acquisi4on of Scepter Corpora4on (Canadian company) and Scepter Manufacturing, LLC (US company), a manufacturer of polymer products, July 2, 2014
• Grows Material Handling Segment with adjacent products and technologies, and expands end markets and geographic reach
10
Transac4on Summary
Structure • Purchase price $157M • Increased senior secured revolving credit facility to $300M to fund
acquisi4on • Proceeds from the dives4ture of Lawn & Garden Segment will be used
to pay down debt • Closed July 2, 2014
Financial Contribu4on • Sales in 2013 of $94.8M • EBIT in 2013 of $16.7M; EBITDA in 2013 of $21.9M • Increases Material Handling 2013 revenue by 25% • An4cipate realizing synergies of more than $2M annually • Expected returns > cost of capital • Immediate contribu4on to adjusted EPS
11
Strong Combined PlaIorm for Growth
Myers Scepter New Myers
Returnable packaging ü ü ü Storage and safety ü ü Specialty molding ü ü ü
Industrial ü ü ü Marine ü ü ü Consumer ü ü Military ü ü
North America ü ü ü La4n America ü ü
12
Lawn & Garden Segment
• Completed mul4-‐phase restructuring of the segment in 1H 2014
• Announced commencement of the sale of Lawn & Garden Segment June 2, 2014
• As of second quarter 2014, the Lawn & Garden Segment is being reported as discon4nued opera4ons
• Expect sale to be completed by mid-‐2015
13
Progress Towards Financial Goals
14
Metric Goal 2013(4) 2012(4)
Sales Growth(1) > 2.0x GDP 7.2% 7.2%
Gross Profit Margin > 30% 29.0% 30.0%
Adjusted EPS Growth* >20% CAGR 28.3% 89.0%
Free Cash Flow ≥ 100% of Net Income 205% 90%
ROIC(2) > 10% 17% 15%
Innovation / NPD(3) >10% of Sales 7% 7%
Operations Excellence Savings 3% of COGS (gross) 2% 3%(1) Using real GDP forecasted and actual growth rates, 2.0x GDP growth = 4.4% and 4.6% for 2013 and 2012 respectively.
(2) ROIC = Net Operating Profit After Tax/(Debt + Equity).
(3) NPD = New Product Development calculation based on products/services introduced within the last three years.
(4) 2013 and 2012 reflect discontinued operations presentation and do not include Scepter acquisition completed in 2014.
Key Accomplishment Metrics
$31
$1 8
$29
$55
$77
$20
$57
$25
$42
$24
$54
$0
$20
$40
$60
$80
$100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Solid Cash Flow Genera4on
15
Notes: 1) Free cash flow calculated as cash flow from con4nuing opera4ons less capital expenditures. 2) Years 2012 and 2013 have been adjusted to reflect discon4nued opera4ons presenta4on.
$(Millions)
Free Cash Flow
Genera4ng Free Cash Flow, Inves4ng for the Future and Returning Cash to Shareholders
As Reported Continuing Operations
Strong & Flexible Balance Sheet
16
Notes: 1) Net Debt-‐to-‐Capital ra4o calculated as net debt/(net debt+equity). 2) Net Debt at September 30, 2014 was $268.5M. Available liquidity at September 30, 2014 was $117.8M. 3) Data has not been adjusted to reflect discon4nued opera4ons.
Net Debt-‐to-‐Capital
Maintaining strong balance sheet for investments and returning capital to shareholders
44%
41%
41%
34% 39%
28% 27% 25% 28%
14%
60%
0%
10%
20%
30%
40%
50%
60%
70%
$0
$50
$100
$150
$200
$250
$300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q3 2014
Net Debt ($ Millions) Net Debt-‐to-‐Capital
Balanced Approach to Capital Alloca4on
17
• Core markets • Adjacencies
• Dividends • Share repurchases • Debt reduc4on
Growth Through Acquisi4ons
Return Capital to Shareholders
Organic Growth • Reinvest in business • New product development • Process improvements
InvesDng for the future and returning cash to shareholders
$0.07$0.07
$0.08$0.09
$0.1 3
$0.03
$0.05
$0.07
$0.09
$0.1 1
$0.1 3
2010 201 1 201 2 201 3 201 4
Returning Cash to Shareholders
• Increasing Dividends • Increased Q1 2014 quarterly dividend by 44% to $0.13 per share
18
Quarterly Dividends Paid
Notes re: quarterly dividends: 1) Above adjusted for stock dividends and splits in 2000, 2001, 2002 and 2004. 2) In 2007 there was an addi4onal special dividend (not shown above) of $0.28 or $9.9M accrued but not paid un4l 2008, resul4ng from a merger termina4on payment.
• Buying Back Shares • Invested $33M to buy back 2.8M shares from 2011 to 2013 • Invested $48M to buy back 2.3M shares YTD September 2014 • 4.9 million shares remaining in Board authoriza4on (as of 9-‐30-‐14)
$Millions Invested in Share Repurchases
$0.0
$21 .0
$4.2$8.1
$48.0
$0.0
$1 0.0
$20.0
$30.0
$40.0
$50.0
$60.0
2010 2011 2012 2013 YTD Sept2014
Why Myers
19
• Significant progress in streamlining business • Enhanced plaIorm to accelerate growth • Strong market posi4ons; plan to further penetrate expansion markets
• Financially strong; disciplined capital deployment
• Dedicated to enhancing shareholder value
Appendix
20
Management Team
John C. Orr, President & Chief Execu4ve Officer • Named President and CEO May 2005 • Previously President and COO, responsible for global manufacturing and
distribu4on • Prior General Manager of Buckhorn • Previous 28 years with Goodyear, including Vice President of Manufacturing for
North America and Director of Manufacturing for La4n America Division
Gregg Branning, SVP, Chief Financial Officer & Corporate Secretary • Joined Myers as CFO in September 2012 • Previously VP of Finance and CFO of Danaher subsidiary, Thomson Industries, a
global industrial manufacturing business • Prior President of Danaher subsidiary, Accu-‐Sort, global developer and
manufacturer of technological products; also CFO of Joslyn Hi-‐Voltage • Prior to Danaher, 13 years with Hamilton Sundstrand & 7 in public accoun4ng
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More than 100 Years of Experience in Manufacturing
Management Team
22
More than 100 Years of Experience in Manufacturing
Joel Grant, SVP & General Manager, Material Handling Segment • Named VP & General Manager, Material Handling Segment in November of 2010, with
his 4tle changing to Senior VP & General Manager in July of 2011 • Previously Managing Director of Material Handling & GM of Buckhorn • Prior Director of Opera4ons of Material Handling, Director of Sales & Marke4ng,
Buckhorn, and Director of Sales, Buckhorn • Over 13 years of experience with the Sonoco Products Company and seven years with
Con4nental Group of New York (division sold to Sonoco Products)
Alex Williamson, VP & General Manager, Distribu4on Segment • Joined Myers as VP & General Manager, Distribu4on Segment in June 2014 • Previously Co-‐President of Seaman Corpora4on • Held senior leadership posi4ons at Noveon Inc. (now Lubrizol) • Over 24 years of experience in business management and an extensive background in
marke4ng, sales, chemistry, and product engineering
Market Indicators
Material Handling
Sources: U.S. Census Business and Industry - August 2014 MHI MHEM Forecast – July 2014
23
Sources: RVIA Forecasts, August 2014; FRB G17 Release, July 2014
Market Indicators
Distribution
24
Source: JP Morgan, RMA, Energy Information Administration, August 2014
Reconcilia4on of Non-‐GAAP Measures
25
Year EndedDecember 31
2013Net Income 11,754$
Add: interest expense 671 Add: income tax expense 4,309
EBIT* 16,734$
Add: depreciation 4,170 Add: depreciation of administrative assets 521 Add: amortization of intangible assets 482 EBITDA* 21,907$
SCEPTER CORPORATION GROUPRECONCILIATION OF NON-‐GAAP FINANCIAL MEASURESCOMBINED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
*EBIT and EBITDA are not defined terms under U.S. generally accepted accounting principles (non-‐GAAP measures). Non-‐GAAP measures should not be considered in isolation or as a substitute for netincome, cash flow or total debt figures prepared in accordance with GAAP and may not becomparable to similarly titled measures calculated by other companies.
Reconcilia4on of Non-‐GAAP Measures
26
Three Months Ended Three Months Ended Three Months Ended Three Months Ended Six Months Ended Nine Months Ended Year Ended March 31 June 30 September 30 December 31 June 30 September 30 December 31 2013 2013 2013 2013 2013 2013 2013
Material HandlingIncome before income taxes as reported 11,482$ 13,358$ 12,085$ 10,503$ 24,840$ 36,925$ 47,428$ Restructuring expenses and other adjustments 209 16 -‐ -‐ 225 225 225 Income before income taxes as adjusted 11,691 13,374 12,085 10,503 25,065 37,150 47,653
DistributionIncome before income taxes as reported 5,287 6,043 6,287 4,110 11,330 17,617 21,727 Restructuring and other adjustments 74 18 25 76 92 117 193 Income before income taxes as adjusted 5,361 6,061 6,312 4,186 11,422 17,734 21,920
Corporate and interest expense(Loss) before income taxes as reported (7,734) (7,899) (7,220) (6,517) (15,633) (22,853) (29,370) Other adjustments 17 -‐ -‐ -‐ 17 17 17 (Loss) before income taxes as adjusted (7,717) (7,899) (7,220) (6,517) (15,616) (22,836) (29,353)
Continuing operationsIncome from continuing operations before income taxes as reported 9,035 11,502 11,152 8,096 20,537 31,689 39,784 Restructuring expenses and other adjustments 300 34 25 76 334 359 435 Income from continuing operations before income taxes as adjusted 9,335 11,536 11,177 8,172 20,871 32,048 40,219 Income tax expense 3,454 4,268 4,136 2,942 7,722 11,858 14,479 Income from continuing operations as adjusted 5,881 7,268 7,042 5,230 13,149 20,190 25,740
Discontinued operationsIncome (loss) from discontinued operations before income taxes as reported 3,118 500 (188) (3,824) 3,618 3,430 (394) Restructuring expenses and other adjustments 406 736 1,141 9,315 1,142 2,283 11,598 Loss on disposal of assets 616 616 616 616 Depreciation recapture -‐ -‐ 1,264 -‐ -‐ 1,264 1,264 Income from discontinued operations before income taxes as adjusted 3,524 1,852 2,217 5,491 5,376 7,593 13,084 Income tax expense 1,304 685 820 1,977 1,989 2,809 4,710 Income from discontinued operations as adjusted 2,220 1,167 1,397 3,515 3,387 4,783 8,374
ConsolidatedNet income as adjusted 8,101$ 8,435$ 8,439$ 8,744$ 16,536$ 24,974$ 34,114$
Adjusted earnings per diluted share from continuing operations 0.17$ 0.21$ 0.21$ 0.15$ 0.39$ 0.59$ 0.75$ Adjusted earnings per diluted share from discontinued operations 0.07 0.04 0.04 0.10 0.10 0.14 0.25 Adjusted earnings per diluted share 0.24$ 0.25$ 0.25$ 0.26$ 0.49$ 0.73$ 1.00$
MYERS INDUSTRIES, INC.RECONCILIATION OF NON-‐GAAP FINANCIAL MEASURES
INCOME (LOSS) BEFORE TAXES BY SEGMENT (UNAUDITED)(Dollars in thousands, except per share data)
Note: His torica l information has been adjusted to reflect discontinued operations presentation and the segment rea l ignment completed in June 2014.
Note on Reconciliation of Income and Earnings Data: Income (loss ) excluding the items mentioned in this reconci l iation chart is a non-‐GAAP financia l measure that Myers Industries , Inc. ca lculates according to the schedule above, us ing GAAP amounts from the unaudited CondensedConsol idated Financia l Statements . The Company bel ieves that the excluded items are not primari ly related to core operational activi ties . The Company bel ieves that income (loss ) excluding i tems that are not primari ly related to core operating activi ties is genera l ly viewed asproviding useful information regarding a company's operating performance. Management uses income (loss ) excluding these i tems as wel l as other financia l measures in connection with i ts decis ion-‐making activi ties . Income (loss ) excluding these i tems should not be cons ideredin isolation or as a substi tute for net income (loss ), income (loss ) before taxes or other consol idated income data prepared in accordance with GAAP. The Company's method for ca lculating income (loss ) excluding these i tems may not be comparable to methods used by othercompanies .
Reconcilia4on of Non-‐GAAP Measures
27
Three Months Ended Three Months Ended Three Months Ended Three Months Ended Six Months Ended Nine Months Ended Year Ended March 31 June 30 September 30 December 31 June 30 September 30 December 31 2012 2012 2012 2012 2012 2012 2012
Material HandlingIncome before income taxes as reported 14,395$ 10,480$ 13,633$ 12,788$ 24,875$ 38,508$ 51,296$ Restructuring expenses and other adjustments -‐ -‐ -‐ 168 -‐ -‐ 168 Income before income taxes as adjusted 14,395 10,480 13,633 12,956 24,875 38,508 51,464
DistributionIncome before income taxes as reported 5,011 6,274 5,755 5,542 11,285 17,040 22,582 Gain on sale of buildings (310) (70) (460) (310) (380) (840) Restructuring and other adjustments 430 54 235 10 484 719 729 Income before income taxes as adjusted 5,441 6,018 5,920 5,092 11,459 17,379 22,471
Corporate and interest expense(Loss) before income taxes as reported (6,264) (7,130) (10,096) (8,192) (13,394) (23,490) (31,682) Other adjustments -‐ -‐ 1,486 318 -‐ 1,486 1,804 (Loss) before income taxes as adjusted (6,264) (7,130) (8,610) (7,874) (13,394) (22,004) (29,878)
Continuing operationsIncome from continuing operations before income taxes as reported 13,142 9,625 9,292 10,138 22,766 32,058 42,196 Gain on sale of building -‐ (310) (70) (460) (310) (380) (840) Restructuring expenses and other adjustments 430 54 1,721 496 484 2,205 2,701 Income from continuing operations before income taxes as adjusted 13,572 9,369 10,943 10,174 22,940 33,883 44,057 Income tax expense 5,293 3,560 4,158 3,764 8,717 12,876 16,301 Income from continuing operations as adjusted 8,279 5,809 6,785 6,409 14,223 21,008 27,756
Discontinued operationsIncome (loss) from discontinued operations before income taxes as reported 2,894 (686) (713) 3,650 2,207 1,494 5,144 Restructuring expenses and other adjustments 126 517 868 301 643 1,511 1,812 Income (loss) from discontinued operations before income taxes as adjusted 3,020 (169) 155 3,951 2,850 3,005 6,956 Income tax expense (benefit) 1,178 (64) 59 1,462 1,083 1,142 2,574 Income (loss) from discontinued operations as adjusted 1,842 (105) 96 2,489 1,767 1,863 4,382
ConsolidatedNet income as adjusted 10,121$ 5,704$ 6,881$ 8,898$ 15,990$ 22,871$ 32,138$
Adjusted earnings per diluted share from continuing operations 0.25$ 0.17$ 0.20$ 0.19$ 0.42$ 0.62$ 0.81$ Adjusted earnings per diluted share from discontinued operations 0.05 (0.00) 0.00 0.07 0.05 0.05 0.13 Adjusted earnings per diluted share 0.30$ 0.17$ 0.20$ 0.26$ 0.47$ 0.67$ 0.94$
MYERS INDUSTRIES, INC.RECONCILIATION OF NON-‐GAAP FINANCIAL MEASURES
INCOME (LOSS) BEFORE TAXES BY SEGMENT (UNAUDITED)(Dollars in thousands, except per share data)
Note: His torica l information has been adjusted to reflect discontinued operations presentation and the segment rea l ignment completed in June 2014.
Note on Reconciliation of Income and Earnings Data: Income (loss ) excluding the items mentioned in this reconci l iation chart is a non-‐GAAP financia l measure that Myers Industries , Inc. ca lculates according to the schedule above, us ing GAAP amounts from the unaudited CondensedConsol idated Financia l Statements . The Company bel ieves that the excluded items are not primari ly related to core operational activi ties . The Company bel ieves that income (loss ) excluding i tems that are not primari ly related to core operating activi ties is genera l ly viewed asproviding useful information regarding a company's operating performance. Management uses income (loss ) excluding these i tems as wel l as other financia l measures in connection with i ts decis ion-‐making activi ties . Income (loss ) excluding these i tems should not becons idered in isolation or as a substi tute for net income (loss ), income (loss ) before taxes or other consol idated income data prepared in accordance with GAAP. The Company's method for ca lculating income (loss ) excluding these i tems may not be comparable to methods usedby other companies .
