The company reported a loss of $59.1 million or $1.68 per share in the fourth quarter and a loss of $46.2 million or $1.31 per share for the year. This compares to income, including special items, of $18.2 million or 52 cents per share in the fourth quarter of 2007 and $36.9 million or $1.05 per share for the year. Results for 2008 include a non-cash goodwill impairment charge of $60.1 million and special pre-tax expenses of $18.1 million detailed below.
Excluding the impairment charge and special expenses, income, net of taxes, was $1.3 million or 4 cents per share in the fourth quarter and $18.7 million or 53 cents per share for the year. This compares to income, net of taxes and excluding special items, of $2.8 million or 8 cents per share in the fourth quarter of 2007 and $31.9 million or 91 cents per share for the year.
President and CEO John Orr said, “Despite the severe economic downturn and decline in demand during the fourth quarter, we are reporting positive operating results, exclusive of special items, for both the fourth quarter and full year. I am proud that our employees remained focused all year on initiatives we could control, such as product pricing, reducing expenses, developing new channels for growth and maximizing cash flow. Our actions will enable us to emerge stronger and to capitalize on new business and pent-up opportunities when the economy begins recovery.”
Net sales for the fourth quarter of 2008 were $189.9 million compared to $232.8 million in the fourth quarter of 2007. For the full year, net sales were $867.8 million compared to $918.8 million in 2007. The impact of higher selling prices, totaling approximately $38 million in 2008, enabled the company to recover most of its costs from record-setting raw material prices. Selling prices could not, however, fully offset the higher raw material costs and dramatic decline in volume due to the rapid economic deterioration and weakness in company’s markets in the second half of 2008.
Gross profit as a percent of sales was 24.1% in the fourth quarter of 2008 compared to 22.5% in the fourth quarter of 2007. Positive selling price momentum coming into the fourth quarter helped to mitigate the impact of raw material cost inflation, weakening demand and lower manufacturing volumes in the quarter. Gross profit as a percent of sales was 23.4% for the full year compared to 25.6% in 2007, reflecting the negative impact of higher raw material costs and lower volumes on manufacturing absorption.
The company reported a loss from continuing operations for the 2008 fourth quarter and full year of $59.1 million and $46.2 million, or $1.68 and $1.31 per share, respectively. This is compared to income from continuing operations of $18.2 million and $36.9 million, or 52 cents and $1.05 per share, respectively, for the 2007 fourth quarter and full year. Both years include special pre-tax items.
Prices for raw materials used in the company’s manufacturing operations, primarily high-density polyethylene (HDPE) and polypropylene (PP) plastic resins, reached record highs in 2008. For the nine months ended Sept. 30, 2008, raw material prices were approximately 33% higher on average compared to 2007. As economic conditions worsened during the fourth quarter, prices for raw materials softened, but year-over-year prices remained approximately 20% higher on average.
Throughout 2008, the company focused on product pricing actions required to recover the costs from unprecedented raw material price inflation, which began in 2007.
Operating cash flow was approximately $60 million for the year ended Dec. 31, 2008. This enabled the company to increase and maintain dividend payments in 2008 to provide returns to shareholders, and fund strategic capital expenditures without increasing debt.
Cash dividends paid in 2008 were $18.3 million, including a special payment of 28 cents per share in connection with termination of the company’s proposed merger. The regular quarterly cash dividend was increased 14% to 6 cents per share beginning with the January 2008 payment.
Capital expenditures were approximately $41 million in 2008 compared to $20 million in 2007. The 2008 expenditures exceeded the company’s projection of $20 to $25 million due to opportunistic investments made for technology to fuel new product development and productivity savings.
Total debt was $171.6 million at year-end, essentially unchanged from $170.9 million at Dec. 31, 2007. At Dec. 31, 2008, the company had a strong financial position with more than $185 million of available borrowing under its $250 million credit agreement, which expires in October 2011. The company remains in compliance with all of its debt covenants, and management believes cash flow from operations and available credit facilities will be sufficient to meet expected business requirements in 2009.
Income before taxes in the fourth quarter and through the full year of 2008 was negatively impacted by progressively lower demand and unit volumes. Higher selling prices, combined with internal and external cost reduction measures, did not offset these factors.
Income before taxes in the fourth quarter of 2008 was lower due to a sharp decline in end market demand and the resulting lower unit volumes for both tire service supplies and equipment. For the full year, benefits from favorable product mix and expense controls did not offset lower volumes.
While current economic conditions for the foreseeable future will remain challenging, the company will continue to focus on strengthening niche-market positions; improving manufacturing and distribution structure to reduce costs and increase productivity; and capitalizing on opportunities for sustainable, profitable growth.
The company continues to review its business segments for operational improvement opportunities, particularly in the Automotive and Custom Segment to determine long-term growth objectives. In addition, workforce and expense reductions have been implemented, including a company-wide freeze on wages, merit increases and hiring. Management believes these are essential actions in the best interest of the company and shareholders given the recessionary operating climate.
Orr concluded, “As a direct result of our transformation actions implemented over the past three years, Myers Industries is better prepared to weather future challenges. In 2009, we will remain vigilant for long-term growth and competitive positioning opportunities, while taking advantage of every instance to decrease costs and maximize cash flow. We are confident that, as demand in our end markets improves and the economy rebounds, we will emerge in an even stronger growth position.” (Tire Review/Akron)
