Myers Industries, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the Myers Industries 2020 Fourth Quarter Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. And I'd like to hand the conference over to Ms. Monica Vinay. Please go ahead.

Thank you. Good morning and welcome to Meyers Industries' fourth quarter 2020 earnings call. I'm Monica Vinay, Vice President of Investor Relations and Treasurer at Meyers Industries. Joining me today are Mike McGaw, President and Chief Executive Officer, Sonal Robinson, Executive Vice President, Finance, and Dan Hoehn, Interim Chief Financial Officer. Earlier this morning, we issued a news release outlining the financial results for the fourth quarter and full year 2020. 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. This call is also being webcast on our website and will be archived along with the transcript of the call shortly after this event. Before I turn the call over to Mike, I would like to remind you that we may make some forward-looking statements during the course of this call. 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'm now pleased to turn the call over to Mike McGaugh.

Good morning. Thank you for joining us. I'd like to start the call by expressing my sincere appreciation to our entire Meyers 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 their 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 of 9% from $0.78 to $0.85. Thank you, Meyers teammates, for a job well done over the course of a challenging year. Before we begin with our business update, I want to welcome Sonal Robinson, who joined us as Executive Vice President of Finance in February and we'll assume the CFO role next week. 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 Meijer strategy. I also want to thank Dan Hoehn for his leadership as interim CFO during the past six months. 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. Please turn to slide three. 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 consists 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 Meyers. Our third element, Voltron 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 acquisitions. 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 technologies and markets that we know well. Granted, it's in the early innings, but we are making solid progress. Please turn to slide four, which outlines the four pillars that will drive the execution of our strategy, which is to transform our material handling segment into a high-growth, customer-centric innovator of engineered plastic solutions, while we also continue to optimize and grow our distribution segment. The first pillar focuses on organic growth and addresses four critical areas, sales and commercial excellence, innovation and new product development, Sustainability, and e-commerce. 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 execute 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 on 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 safety, on 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. Please turn to slide five, which speaks to our accomplishments so far. 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 e-commerce. Our vice president of sales and commercial excellence, Jim Gurney, 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 Meyers Industry is taking to e-commerce. We believe that e-commerce will be a compelling channel for the future, and we believe that Meyers is well-suited to capitalize on this trend. Just last year, in 2020, e-commerce sales grew more than 30% from our 2019 base. We achieved this growth with what was largely a skunkworks-type project. In order to turbocharge e-commerce at Meyers, We've now stood up an independent, focused organization to spearhead this channel in the market. The e-commerce business will be led by Chad Collins, who was previously the president of our Acro Mills and Jamco business units. Chad also helped develop our original relationship with Amazon for that business. Sales in the e-commerce 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 obtainable. As I noted earlier, we're well underway 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. Through this combination, we welcome 460 new members to our team. seven U.S.-based manufacturing facilities, and approximately $100 million of annualized revenues. The integration of Elkhart has gone smoothly and has been instrumental in helping 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've 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've strengthened our injection molding capabilities by combining Acro Mills, Jamco, and Buckhorn into one collective team. We've done the same in rotational molding by merging AmeriCart 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 Acro Mills, Jamco, and Buckhorn into a single platform, and by combining AmeriCart 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 will be able to deliver more innovation and more value to 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 3 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 negotiate a 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 focused on achieving company-wide success and fully executing our one-mile 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 a recent role as the president of International Brake Industries and prior leadership positions with Federal Mobile and General Motors. I believe Paul is the right leader to build, grow, and take this business forward. I'd also like to thank Chris DuPaul for his hard work in successfully running this segment over the last three and a half years. 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 in returning back to his roots in healthcare. Finally, two dynamic leaders with significant transformation and 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. Turning to our fourth quarter performance, which starts on slide six. 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 were still able to finish the quarter with sales up 8% on an organic basis and 18%, including contributions from Delcart acquisition. Topline 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 margins. The raw material increases that began towards the end of 2020 have 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 a 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 cost 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're 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 balanced with near-term headwinds I just spoke to. While a 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 e-commerce. Sana will provide more detail regarding our annual outlook, which includes both sales and EPS guidance. Before I turn it over to her, I'd like to reiterate that our One Meijer strategy is working. We are rapidly driving significant change in our organization, and our capabilities to ensure that we execute our Horizon One of our long-term strategy and create and deliver long-term shareholder value. With that, I'll turn it over to Sonal.