Myers Industries Reports 2008 Third Quarter & Nine-Month Results
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AKRON, Ohio, November 7, 2008: Myers Industries, Inc. today reports results for the third quarter and nine months ended September 30, 2008. Performance highlights from continuing operations in the third quarter include:
President and Chief Executive Officer John C. Orr said, “Despite the challenges of a recessionary economy during the third quarter, we continued to focus on basic fundamentals such as appropriate pricing to cover raw material inflation, staying close to our customers with product and service solutions to help them through this tough environment, controlling our own expenses and identifying avenues to support our long-term growth.
“We also began an analysis to identify potential productivity and manufacturing streamlining opportunities in our Lawn and Garden Segment. The Company is in the process of assessing options, with the goal to position ourselves with the best brands, capabilities and competitive structure to serve the needs of the horticultural growers and distributors in that marketplace.” Despite the adversity influencing nearly every sector of the U.S. economy, net sales during the third quarter of 2008 were flat compared to the third quarter of 2007 and down slightly for the nine-month period. Product pricing initiatives were implemented to cover higher raw material costs, which mitigated the impact of lower unit volumes due to the weak conditions in the Company’s end markets.
Income from continuing operations was down in the 2008 third quarter and nine-month periods due to lower volumes and higher raw material costs, which were partially offset by improved selling prices and expense controls. In addition, interest expense was down $1.2 million and $3.4 million for the 2008 third quarter and nine months, respectively, due to reduced borrowing and lower interest rates. Income from continuing operations in the 2008 third quarter was also impacted by $2.6 million of special pre-tax items discussed above. Special pre-tax items for the nine months ended September 30, 2008 and 2007 were approximately $4.6 million and $16.2 million, respectively; these items primarily related to expenses from strategic initiatives in the Lawn and Garden Segment in 2008, and restructuring expenses, foreign currency transaction losses, expenses related to a proposed merger transaction and other items in 2007.
Raw Material Costs
Prices for raw materials used in the Company’s manufacturing operations, primarily high-density polyethylene (HDPE) and polypropylene (PP) plastic resins, were more than 30% higher on average for both the 2008 third quarter and nine months compared to the same periods in 2007.
Throughout 2008, the Company has implemented product price increases to recover higher costs from unprecedented raw material cost inflation. Currently, prices for plastic resins are showing some softening, although it is difficult to determine sustainability of lower raw material price levels due to the volatility in energy markets.
Net sales in the Lawn and Garden Segment for the third quarter of 2008 reflect the positive impact of pricing to recover raw material costs and favorable product mix. These factors helped to offset seasonal slowness in this segment.
Loss before taxes in the third quarter of 2008 was reduced compared to the third quarter of 2007 due to product mix and pricing, as well as expense controls. These factors helped to offset higher raw material costs and lower unit volumes. In the comparable third quarter of 2007, results were also negatively impacted by $1.3 million of foreign currency transaction losses.
Net sales in the North American Material Handling Segment for the third quarter of 2008 were down slightly due to weakness in automotive, industrial and other end markets. While selling prices helped to partially offset higher raw material costs, unit volumes declined as customers limited expenditures amid the continuing economic downturn.
Profitability in the third quarter of 2008 was down due to the impact of lower unit volumes on manufacturing absorption, as well as higher raw material costs. The positive impact from selling prices and expense reductions from restructuring actions completed in 2007 did not offset these factors. Net sales in the Distribution Segment for the third quarter of 2008 were adversely affected due to a reduction in tire service demand, reflecting lower sales of passenger and truck tires, higher fuel prices decreasing miles driven and idled construction vehicles from the downturn in housing development. These factors reduced unit volumes in consumable service supplies, while sales of capital equipment remained weak in tire dealer, auto dealer, fleet and retread markets as customers delayed purchases.
Profitability in the third quarter of 2008 was lower due to unfavorable end market demand, and the resulting lower unit volumes for both tire service supplies and equipment.
Net sales in the Automotive and Custom Segment for the third quarter of 2008 improved due to selling price adjustments and new, niche custom molding opportunities, which helped to offset the weakness in automotive, heavy truck, recreational vehicle and marine markets.
Profitability was down in the third quarter of 2008 due to weak end markets and higher raw material costs. Product pricing and savings from restructuring programs completed in 2007 did not entirely offset these factors.
Total debt for the third quarter ended September 30, 2008 was $199.7 million, compared to $226.9 million at September 30, 2007. The debt-to-capital ratio was approximately 38% at the end of the third quarter of 2008, compared with 42% at the end of the third quarter of 2007.
Commenting on the Company’s financial condition, John Orr said, “Myers Industries has a strong balance sheet and continues to have access to the capital we require to invest and guide our business through this turbulent economic period and beyond.”
While the economic conditions for the foreseeable future will remain a challenge, the Company’s internal business fundamentals remain solid. The Company continues to review each of its business segments to identify areas for new operational initiatives that can provide for sustainable, profitable growth in the years ahead.
The Company continues to assess potential opportunities under its strategic manufacturing realignment and productivity project in the Lawn and Garden Segment. Additional details will be made available as major project elements are determined.