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Text: I'm Monica Vinay, Vice President of Investor Relations and Treasurer at Myers Industries.
If you've not yet received a copy of the release, you can access it on our website at www.
myersindustries.com, under the Investor Relations tab.
These comments are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements.
Further information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings and may be found in the company's 10-K and 10-Q filings.
I'd like to start the call by expressing my sincere appreciation to our entire Myers team for all their efforts in 2020.
I'm especially proud of how well they faced the challenges that were presented throughout the year due to the COVID-19 pandemic.
As a result of the resilience and hard work, we're able to continue to produce and deliver essential products to our customers.
We delivered strong bottom-line results for the year, increasing adjusted earnings per share at 9% from $0.78 to $0.85.
Sonal brings a proven track record of providing strong leadership in transformational environments along with considerable experience in capital markets, mergers and acquisitions and investor relations.
I look forward to partnering with her as we continue to drive and execute our One Myers strategy.
He did a great job helping us lay a strong foundation and we will continue to benefit from Dan's contributions as he returns to his role as Vice President and Corporate Controller.
Before I discuss our performance, I'd like to review with you our long-term vision, the strategic pillars that we have in place to drive its execution, and the progress we've made against those pillars.
I introduced this strategy and vision in our October 2020 earnings call, and we are successfully executing against it.
To review, we're currently in Horizon-1, which consist of three elements: self-help, organic growth, and bolt-on M&A.
Self-help focuses on purchasing, pricing and SG&A optimization, and you're going to hear about a number of strategic steps we've recently implemented along these lines in our discussion today.
In terms of organic growth, we are strengthening our commercial capabilities, which includes going to market as one company, One Myers.
Our third element, bolt-on M&A, is primarily focused on growing our plastics businesses by acquiring companies that build out our three technology platforms within the Material Handling segment.
We will continue to focus on companies that manufacture durable, sustainable and/or reusable end products.
Once the foundational drivers of Horizon-1 are in place, we will move to Horizon-2, where we will execute larger enterprise level acquisition.
Our long-term vision culminates with Horizon-3, which is focused on growing the company globally.
Our long-term vision is ambitious, but it's well-grounded and focused on building out the technology in markets that we know well.
Granted, it's in their early innings, but we are making solid progress.
The first pillar focuses on organic growth and addresses four critical areas: sales and commercial excellence, innovation and new product development, sustainability and eCommerce.
Our second pillar, strategic M&A, is geared around bolt-on M&A opportunities that build out our Plastics platforms.
You've already seen us executing one exciting acquisition in Elkhart Plastics during the fourth quarter, and our pipeline of opportunities continues to grow.
Core to this effort is our integration playbook that will ensure a world-class approach to acquisition integration.
The third pillar, operational excellence, continues the work we've done around continuous improvement, while also building our capabilities in what we call self-help, doing a world-class job in pricing, in purchasing and in internal integration, which is the process of transforming into a single company, our One Myers approach.
As a part of this journey, we will also optimize SG&A, redeploying our dollars into investments, in sales, engineering and manufacturing resources.
The final pillar is the heart of our company, our people.
We are on our way to building a high-performance culture, focused on developing our employees and promoting from within, having a culture that's focused on employee's safety, and having an inclusive work environment in a culture of servant leadership.
We continue to build out our values, focusing on integrity, customer focus, optimism, all with a can-do attitude.
Our transformation opportunities through our culture are very exciting to me.
In the organic growth pillar, we made significant progress in the second half of 2020, in particular in the area of sales and commercial excellence in eCommerce.
Our Vice President of Sales and Commercial Excellence, Jim Gurnee, launched our new commercial structure that standardized and strengthened our focus in sales, marketing and product management.
These elements will become critical parts of how we run our business.
Jim also launched a new sales training curriculum focused on growth.
This program will help our team improve their ability in cross-selling and in growing the new One Myers approach.
One of the more meaningful parts of today's discussion is the new and more aggressive approach Myers Industries is taking to eCommerce.
We believe that eCommerce will be a compelling channel for the future and we believe that Myers is well suited to capitalize on this trend.
Just last year, in 2020, eCommerce sales grew more than 30% from our 2019 base.
We achieved this growth with what was largely a skunk-works type project.
In order to turbocharge eCommerce at Myers, we've now stood up an independent, focused organization to spearhead this channel in the market.
E-commerce business will be led by Chad Collins, who was previously the President of our Akro-Mils and Jamco business units.
Chad also helped develop our original relationship with Amazon for that business.
Sales in the eCommerce channel for 2020 approached 5% of our total revenue.
Our goal is to double that by the end of 2023.
This is an ambitious target, but one that we believe is attainable.
As I noted earlier, we are well under way with our strategic M&A pillar, having strengthened our portfolio with the acquisition of Elkhart Plastics in November.
As a bolt-on acquisition within rotational molding, Elkhart fits perfectly into our strategy and our developing culture.
The integration of Elkhart has gone smoothly.
It has been instrumental to help us further advance our integration playbook and our deal flow.
We continue to build out a healthy funnel of potential acquisitions.
Next, I'd like to talk about our accomplishments in the third pillar, operational excellence.
Last month we announced that we consolidated our Material Handling businesses into three distinct technology platforms: injection molding, rotational molding and blow molding.
We believe that we are unique in having strength in all three of these core molding technologies.
We strengthened our injection molding capabilities by combining Akro-Mils, Jamco and Buckhorn into one collective team.
We've done the same in rotational molding by merging Ameri-Kart with our recent acquisition Elkhart Plastics.
Our third technology platform, blow molding, is currently comprised of our Scepter business.
This platform has tremendous opportunity for both organic and inorganic growth.
By combining Akro-Mils, Jamco and Buckhorn into a single platform, and by combining Ameri-Kart and Elkhart Plastics into a single platform, we will be able to streamline our SG&A investments in overhead and redeploy these dollars into sales, engineering and manufacturing.
As larger units with more scale and reach, these platforms will be more robust and we'll be able to deliver more innovation and more value for our customers.
We are excited about this change in approach, and believe it moves us forward in Horizon-1, enabling growth while also managing costs.
One last piece I'll mention on pillar three is that we consolidated our purchasing function and created a single centralized purchasing team across the company.
This new approach allows us to aggregate our purchases and become an easier company to do business with.
Longer term, this should help us negotiating more secure supply position and a more competitive cost position.
Moving to the last of our four pillars.
In order to execute and achieve breakthrough performance, we need to have a high performing culture.
One of our noteworthy achievements this year is goal alignment.
In order to ensure that we are collectively focus on achieving companywide success and fully executing our One Myers strategy, we replaced multiple legacy bonus plans with a single plan, centered on one performance metric: adjusted EBITDA.
We believe this new one team approach will drive alignment, unity and will help us deliver solid results in the future.
We also added talent in a number of leadership positions in our business.
Most recently, on Tuesday, we announced the addition of Paul Johnson to lead our Distribution segment.
Paul brings 30 years of leadership in the automotive and auto aftermarket industry, which includes the recent role as the President of International Brake Industries, and prior leadership positions with Federal-Mogul and General Motors.
I believe Paul is the right leader to build, grow and take this business forward.
Chris did an excellent job of leading the recent transformation of the Distribution segment, which led to sales growth and improved profitability.
I'd like to wish Chris well, as he pursues the next chapter of his career and to returning back to his roots in healthcare.
Finally, two dynamic leaders with significant transformation in growth experience joined our Board in February: Yvette Bright and Jeff Kramer.
I've already had a chance to see both in action this quarter and look forward to their ongoing counsel and leadership.
As you can see, we've made a lot of good progress against our strategic initiatives.
We still have a lot of work to do, but I'm pleased with what we've been able to accomplish in a short time.
Now turning to our fourth quarter performance, which starts on Slide 6.
I'm pleased with our results for the fourth quarter, all things considered.
In spite of several manufacturing plants being impacted by the COVID surge in mid-November and December, we're still able to finish the quarter with sales up 8% on an organic basis and 18%, including contributions from Elkhart acquisition.
Top line organic growth was driven by continued momentum in the RV auto aftermarket and consumer end markets.
We also saw demand improvement in our industrial and automotive markets, which gives me confidence that an economic recovery post-pandemic is on the horizon.
During the quarter, we experienced rising raw material costs and an unfavorable sales mix, which impacted our gross margin.
The raw material increases that began toward the end of 2020 has continued and accelerated into 2021; specifically, we have seen significant increases in resin prices as a result of tightening supply on the U.S. Gulf Coast.
In response, we announced an 8% price increase across the broad portfolio of our products, primarily in the Material Handling segment, which was effective March 1, 2021.
Please note, we will continue to be vigilant about managing our pricing actions throughout the year to offset these unprecedented cost increases.
In addition to costs being a headwind, the recent freeze on the Gulf Coast has had a significant impact on the short-term supply of polyethylene and polypropylene.
Certain grades of resin continue to be tight and we are working closely with our suppliers to secure materials to ensure that we can continue to meet the needs of our valued customers.
As we enter 2021, we have solid top line momentum, balance with near term headwinds I just spoke to.
While the majority of our top line growth will come from the Elkhart acquisition, both volume growth and pricing will also contribute.
We expect organic sales growth across most of our end markets as a result of the continuation of the demand trends in select end markets and our enhanced focus on our sales capability and eCommerce.
Sonal will provide more detail regarding our annual outlook, which includes both sales and earnings per share guidance.
We are rapidly driving significant change in our organization, in our capabilities to ensure that we execute our Horizon-1 of our long-term strategy and create and deliver long-term shareholder value.
Let me begin by saying I'm delighted to be joining Myers at this inflection point in the company's history, and I look forward to working with the team to drive and execute our long-term strategy.
Turning to fourth quarter results on Slide 7.
Net sales were up $21 million, an increase of 18%.
On an organic basis, net sales increased 8%, excluding the impact of the Elkhart acquisition.
Increased sales in both Material Handling and Distribution segments contributed to growth.
Adjusted gross profit was up $1.2 million while gross margin decreased from 33.6% in the prior year to 29.4% in the quarter.
Margin was negatively impacted by an unfavorable price-to-cost relationship, repairs and maintenance, employee benefit cost, and an unfavorable product mix.
The addition of Elkhart benefited profit but impacted gross margin unfavorably due to product mix sold.
As a reminder, we are targeting $4 million to $6 million in annual cost synergies over the course of the upcoming two years.
Adjusted operating income decreased $700,000.
The increase in gross profit was more than offset by higher SG&A expenses mostly due to the addition of Elkhart.
Adjusted EBITDA was $11.3 million, a decline of $1.6 million compared to the prior year.
Adjusted EBITDA margin was 8.2%.
Lastly, adjusted earnings per share was $0.11 versus $0.12 in the prior year.
Turning now to Slide 8 for an overview of segment profit performance in the quarter.
Beginning with Material Handling, net sales increased 26% or 10% on an organic basis.
Excluding Elkhart, sales in the Food and Beverage and Vehicle markets were up double digits, driven by increased sales in feed boxes and in the RV, marine and automotive end markets.
Organic sales in the consumer market were up high single-digit due to fuel container sales while the industrial market was flat.
Material Handling adjusted operating income was essentially flat at $9.1 million, as the impact of higher sales was offset by unfavorable price-to-cost relationship, repairs and maintenance, employee benefit cost, and an unfavorable product mix.
In the Distribution segment, sales increased 4%, driven by increased sales of equipment and consumables, partially offset by lower sales of tire repair products and advance traffic marking tapes.
Distribution's adjusted operating income increased 13% to $3.6 million, primarily as a result of higher sales.
Turning to Slide 9.
Fourth quarter free cash flow was $10.7 million, an increase of $7.8 million, reflecting an increase in cash provided by operating activities, including the benefit of working capital, net of deferred taxes.
During the quarter the company utilized approximately $63 million in cash to fund the Elkhart acquisition.
Cash on hand at year-end was $28 million.
Based on our trailing 12 month adjusted EBITDA of $66.4 million, leverage was 1.2 times.
Let me conclude my comments with additional color on our outlook for 2021.
Turning to Slide 10.
Net sales are expected to increase by mid to high 20%, including an incremental 10.5 month of sales related to the Elkhart acquisition and the expected impact of the March 1st price increase.
As a reminder, Elkhart's annual net sales at the time of acquisition were approximately $100 million.
Continued momentum in RV and marine business along with the rebound in industrial and automotive related revenues are expected to drive growth.
As a reminder, fuel container sales in 2020 were unusually strong due to one of the most active hurricane seasons on record.
Overall, commodity costs are projected to be higher, driven by increases in resin cost.
As Mike mentioned, the company announced an 8% price increase, primarily across the Material Handling segment, effective March 1st.
Higher cost versus price realization is expected to compress margins in the first half of 2021.
Our teams continue to stay close to the changing market dynamics, including the need for additional pricing actions.
SG&A expenses are expected to approximate 24% of net sales, benefiting from larger scale.
The low operating income, we are projecting approximately $4 million of interest expense and an effective tax rate of 26%.
Our guidance reflects the weighted average share count of 36.5 million shares.
Taking all of these assumptions into account, we expect adjusted earnings per share to be in the range of $0.90 to $1.05 per share.
Other key assumptions impacting EBITDA and cash flow include depreciation and amortization expenses of approximately $23 million in capex of approximately $15 million.
Capex is expected to trend higher than past years given our renewed focus on investing in our facilities.
In closing, let me reiterate that our One Myers vision is gaining momentum as we continue to execute against our strategy and strengthen the building blocks to drive long-term growth.

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q4 adjusted earnings per share $0.11 from continuing operations.
sees 2021 net sales growth in mid to high 20% range, including impact of elkhart acquisition.
sees 2021 diluted earnings per share in range of $0.88 to $1.03; adjusted diluted earnings per share in range of $0.90 to $1.05.
sees 2021 capital expenditures to approximately be $15 million.

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