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MYE > SEC Filings for MYE > Form 10-Q on 30-Oct-2012All Recent SEC Filings

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Form 10-Q for MYERS INDUSTRIES INC


30-Oct-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations
Comparison of the Third Quarter of 2012 to the Third Quarter of 2011
Net Sales:

                              Quarter Ended
(dollars in millions)         September 30,
Segment                     2012        2011       Change    % Change
Material Handling         $  76.2     $  72.1     $  4.1        6 %
Lawn and Garden           $  45.3     $  45.8     $ (0.5 )     (1 )%
Distribution              $  45.1     $  48.8     $ (3.7 )     (8 %)
Engineered Products       $  35.7     $  29.4     $  6.3       21  %
Intra-segment elimination $  (5.0 )   $  (5.8 )   $  0.8       14  %
TOTAL                     $ 197.3     $ 190.3     $  7.0        4  %

Net sales in the quarter ended September 30, 2012 were $197.3 million, an increase of $7.0 million or 4% compared to the prior year. Strong sales in our Engineered Products Segment combined with an increase in our Material Handling Segment more than offset lower sales in our Distribution Segment. Sales for Lawn & Garden remained relatively flat quarter over quarter. Overall, net sales increased $3.3 million due to volume driven by our growth and innovation initiative and the inclusion of $9.0 million in sales from the date of acquisition of Plasticos Novel do Nordeste S.A. ("Novel") on July 3, 2012. These sales increases were partially offset by $4.0 million in lower pricing and unfavorable foreign currency translation of $1.3 million.
Net sales in the Material Handling Segment increased $4.1 million or 6% in the third quarter of 2012 compared to the same quarter in 2011. Sales recorded through our Novel acquisition contributed $9.0 million in the third quarter of 2012. Lower sales were recognized in the manufacturing, food processing and agricultural markets that were partially offset by higher sales in the industrial markets resulting in a net reduction in volume of $0.7 million. A delay in customer orders resulting from a shift in demand, primarily in the agricultural market, from the third quarter to the fourth quarter of 2012 was the primary cause of the sales decrease quarter over quarter. Sales were also negatively impacted in the quarter compared to the prior year quarter by lower pricing and mix of $3.2 million and a $1.0 million of unfavorable foreign currency translation.
Net sales in the Lawn and Garden Segment in the third quarter of 2012 decreased $0.5 million or 1% compared to the third quarter of 2011. Sales reflect higher volume of $1.0 million compared to the third quarter of 2011 resulting from stronger demand, but was more than offset by a decrease of $1.2 million in pricing and $0.3 million of unfavorable foreign currency translation. Net sales in the Distribution Segment decreased $3.7 million or 8% in the third quarter of 2012 compared to the third quarter of 2011 as a result of a decrease in sales volumes. The decreased sales were primarily due to slowing customer demand resulting from a decline in the replacement tire industry and from lower equipment sales.
In the Engineered Products Segment, net sales in the third quarter of 2012 increased $6.3 million or 21% compared to the prior year. Stronger sales in 2012 resulted from higher sales volumes of $6.0 million driven by product demand in the transplant automotive market, recreational vehicle, marine and custom markets. Higher selling prices of $0.3 million also contributed to the improved sales performance.


Table of contents

Cost of Sales & Gross Profit:

                                          Quarter Ended
(dollars in millions)                     September 30,
Cost of Sales and Gross Profit          2012        2011
Cost of sales                         $ 144.6     $ 142.5
Gross profit                          $  52.7     $  47.8
Gross profit as a percentage of sales    26.7 %      25.1 %

Gross margin expansion in the third quarter of 2012 compared to the same quarter of 2011 was largely the result of the Company's productivity efficiencies, lower manufacturing costs and raw material substitution cost savings generated by our operations excellence initiatives.
Selling, General and Administrative Expenses:

                                          Quarter Ended
(dollars in millions)                     September 30,
SG&A Expenses                            2012       2011      Change
SG&A expenses                          $ 43.0     $ 40.5     $    2.5
SG&A expenses as a percentage of sales   21.8 %     21.3 %

Selling, general and administrative ("SG&A") expenses for the quarter ended September 30, 2012 were $43.0 million, an increase of $2.5 million or 6% compared to the third quarter in the prior year. The increase in SG&A expenses was due to higher employee related costs of $1.1 million, primarily medical costs, increased selling and distribution costs of $0.9 million, and higher outside consulting costs of $0.9 million. Restructuring and unusual charges in the third quarter of 2012 included $1.7 million for severance costs and lease obligations offset by a gain of $0.1 million for the sale of a Distribution Segment warehouse. Included in SG&A expenses in third quarter 2011were restructuring and other unusual charges of $2.0 million, primarily for an environmental study at the New Idria Mercury Mine.

Interest Expense:

                          Quarter Ended
(dollars in millions)     September 30,
Net Interest Expense     2012       2011      Change    % Change
Net interest expense   $  1.2     $  1.3     $ (0.1 )     (8 )%
Outstanding borrowings $ 96.7     $ 80.2     $ 16.5
Average borrowing rate   4.71 %     5.64 %

Net interest expense in the third quarter of 2012 was $1.2 million, down slightly compared to the prior year. Lower average borrowing rates as a result of the mix of debt outstanding more than offset a higher average borrowing base quarter over quarter. Outstanding borrowings at September 30, 2012 were higher than September 30, 2011 as the Company borrowed from it's revolving credit facility for the acquisition of Novel in July 2012.

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