Monica Vinay - Vice President, Investor Relations and Treasurer John Orr - President and Chief Executive Officer Greggory Branning - Senior Vice President, Chief Financial Officer and Corporate Secretary Joel Grant - Senior Vice President and General Manager, Material Handling Segment Alex Williamson - Vice President and General Manager, Distributions Segment Michael Valentino - Vice President and General Manager, Myers do Brasil, Novel, Scepter and Ameri-Kart.

Chris Manuel - Wells Fargo Adam Josephson - KeyBanc Capital Markets Brian Sponheimer - Gabelli Christopher Butler - Sidoti & Co. Gary Farber - C.L. King.

Greetings and welcome to the Myers Industries' second quarter 2015 earnings call. [Operator Instructions] I'd now like to turn the conference over to your host, Ms. Monica Vinay. Thank you. You may begin..

Thank you. Good morning, and welcome to Myers Industries' second quarter 2015 earnings conference call. I am Monica Vinay, the Vice President of Investor Relations and Treasurer at Myers Industries.

And joining me today are John Orr, President and Chief Executive Officer; Gregg Branning, Senior Vice President, Chief Financial Officer and Corporate Secretary; Joel Grant, Senior Vice President and General Manager of the Material Handling Segment; Alex Williamson, Vice President and General Manager of the Distributions Segment; and Mike Valentino, Vice President and General Manager of Myers do Brasil, Novel, Scepter and Ameri-Kart.

Earlier this morning we issued a news release outlining the financial results for the second quarter of 2015. If you have 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 there along with a transcript of the call shortly after this event. Before I turn the call over to management for remarks, 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 filings. I am now pleased to turn the call over to John Orr, President and CEO.

John?.

Thank you, and good morning, everyone. This morning we reported strong second quarter earnings per share growth, despite some headwinds in both our Material Handling and Distribution segments during the quarter.

In our Material Handling segment, we saw a softer demand for our products in the agricultural, industrial, recreational vehicle and marine end-markets in the second quarter of 2015.

On the agricultural side, lower commodity prices continued to impact capital expenditures in this end-market, leading to decreased sales of our agricultural storage containers again this quarter. Some of those declines were offset by a shift in some customers' orders from the third quarter to the second quarter of this year.

Although, the shift benefited the second quarter, it will lead to lower sales of those products in the third quarter of 2015. However, we are somewhat optimistic that the demand for our storage container should begin to improve near the end of this year. The segment also began the reintroduction of its legacy products in the third quarter as planned.

Those products will lower margin in some of the segment's niche products and will help to offset fixed overhead cost at the plant level, when sales of those niche products are down. As well as providing the segment with an expanded product portfolio that will counterbalance periods of weak demand in those other end-markets.

The Distribution segment sales were slightly lower in the second quarter of this year compared to the same quarter last year, due to weaker demand for some of the segments tire repair and retread products.

The segment has introduced a number of new products and services to offset some of this weakness, including the vending machine program we have discussed in recent quarters. That program is already leading to increased sales of our higher margin supply products with the same time improving inventory management at new and existing customer locations.

We continued our focus on offsetting the weaker sales volumes through pricing actions, cost reduction activities and productivity improvements, and realized total savings of $4.5 million in these areas during the second quarter, most of which is reflected in our higher gross margin.

I'd now like to turn the call over to Gregg, who will review our financial results for the quarter..

Thanks, John. Please turn to the Slide 3 of the presentation. Net sales from continuing operations in the second quarter of 2015 increased 7.6% to $164.3 million compared to $152.8 million in the second quarter of 2014. Sales in the second quarter of 2015 were negatively impacted by FX of approximately $5.8 million due to the strong dollar.

The incremental sales for the quarter were primarily a result of continued strong performance from our Scepter business, whose sales were $28.6 million during the quarter, despite some unfavorable impacts from the foreign currency translation I mentioned.

Sales of new products, which totaled 6.9% during the quarter also helped to drive the topline increase. Scepter sales and the new product sales during the quarter were partially offset by sales decreases in the agricultural and industrial end-markets, as a result of the softened demand, as John referenced.

Sales of our agricultural storage containers continue to be down significantly during the quarter, despite customers' acceleration of approximately $5 million of orders into Q2 2015 from Q3 2015.

Sales in our Brazilian operations decreased year-over-year, primarily as a result of the strengthening dollar, which impacted sales by $3.8 million during the quarter. Gross profit margin from continuing operations was 30.8% in the second quarter of 2015 compared to 27.8% in the second quarter of 2014.

The increase in gross margin compared to the second quarter of last year was due to the incremental contribution from Scepter, pricing actions, new product sales and ongoing operational cost reduction activities.

Reported income from continuing operations for the second quarter was $10.9 million or $0.35 per diluted share compared to $6.3 million or $0.19 per diluted share in the second quarter of 2014.

On an adjusted basis, which excludes restructuring costs and other special items, our earnings per diluted share from continuing operations in the second quarter of 2015 were $0.32 compared to $0.22 in the second quarter of 2014.

The adjusted earnings per diluted share during the second quarter were lower than the reported earnings per diluted share, due to the reversal of a previously reported litigation reserve that was excluded from adjusted earnings.

Selling, general and administrative expenses for continuing operations in the second quarter of 2015 were $30.8 million compared to $31.2 million in the second quarter of 2014.

Incremental expense from Scepter was more than offset by the reversal of a $3 million litigation reserve that I already mentioned, that the company recorded as a result of a reversal of a patent infringement lawsuit, where we were the plaintiff that had been previously awarded to the company.

Increases in salaries, other employee-related expenses and variable selling expensing, including freight, also contributed to the decline in selling, general and administrative expenses during the quarter. Our effective tax rate for continuing operations was 36.8% for the second quarter of 2015.

We anticipate that the effective tax rate for continuing operations for the full year 2015 will be approximately 32.5%, due to a shift to more international earnings with the inclusion of Scepter in our results for full year, and as a result of discrete tax benefits that will likely be recognized in 2015.

Now, please turn to Slide 4 of the presentation. Cash flow used for continuing operations for the six months ended June 30, 2015, was $3 million compared to cash flow used for continuing operations of $6.8 million for the same period in 2014.

Cash flow used for continuing operations decreased compared to the six months ended June 30, 2014, primarily as a result of increased earnings in this quarter. Capital expenditures for continuing operations totaled $9.4 million for the six months ended June 30, 2015, compared to $7 million for the same period last year.

We estimate that capital expenditures for continuing operations in 2015 will be approximately $30 million, and that approximately 70% will be for new product, growth and productivity projects.

We did not purchase shares of our common stock during the second quarter, and approximately 4.1 million shares were available for repurchase at June 30, 2015 under the company's current Board authorization. We remain flexible in our terms of our capital allocation priorities in an effort to maximize long-term shareholder value, as we look forward.

Now, let's turn to our business segments and their performance as summarized on Slides 5 and 6 of the presentation.

Results are compared to the same period in 2014, and I will be referencing the adjusted pre-tax income information by segment, as it appears under reconciliation of non-GAAP financial measures included in the appendix of the slide presentation and the earnings release issued earlier today.

In the Material Handling segment, net sales for the second quarter of 2015 increased 12.4% to $115.8 million compared to $103 million in the second quarter of 2014.

Incremental sales from Scepter were partially offset by sales declines versus the second quarter of 2014 in the agricultural and industrial end-markets, due to weaker demand for the products that we sell into those markets.

Adjusted income before taxes in Material Handling segment increased to $18.2 million for the second quarter of 2015 compared to $12.2 million in the second quarter of 2014.

The increase in adjusted income before taxes was due mostly to the contribution from Scepter, including its higher margin profile, pricing actions, reductions in labor hours, overhead costs and selling and general administrative expenses also contributed to the increase in adjusted income before taxes during the quarter.

Net sales in the Distribution segment were $48.6 million in the second quarter of 2015 compared to $49.8 million in the second quarter of 2014. The slight decline in sales compared to the second quarter of last year was a result of decreased demand for some of the segment's tire repair and retread products due to softer market conditions.

Adjusted income before taxes in the Distribution segment was $4.5 million in the second quarter of 2015 compared to $5.4 million in the second quarter of 2014. The lower sales volumes and the shift in product mix led to the decrease in adjusted income before taxes year-over-year. That concludes the financial review.

I'll now turn the call back over to John, for some summary and outlook remarks. Thank you.

John?.

Thanks, Gregg. If you would please turn to Slide 7 of the presentation, as many of you have seen by the choppy performance of many industrial companies so far this year, industrial markets around the world remain tough and inconsistent.

Our end markets in particular remain fairly stressed and our exposure to the agricultural market will continue to weigh on the business for the rest of 2015, despite some signs that order may increase late in the year.

Have we not made the strategic decisions that we made over the last 18 months to transform our business, I believe we'd be at a significant competitive disadvantage today. Instead, we believe that we remain very well-positioned for 2016 and beyond as global economies continue to recover and eventually accelerate.

Our mix of businesses today has significantly more growth potential and a higher margin profile than the Myers of the past. And we remain excited about the long-term opportunities that we have to create value for shareholders in the future.

More specifically, in terms of our short-term outlook for our Material Handling segment, while we see incremental profits from the reintroduction of some legacy products, which began in the third quarter of 2015, we expect that the third quarter results would be adversely impacted by continued weakness in our agricultural end markets, the shift in orders from the third quarter to the second quarter and ongoing softness in our other Material Handling end markets due to a tough and inconsistent industrial economy around the world.

We will continue to implement cost reduction initiatives to help offset these headwinds and have identified additional opportunities of legacy product reintroductions, which will take place in the first quarter of 2016.

Despite the headwinds we have outlined, we continue to expect the full year 2015 earnings to be better than 2014, as a result of our cost and pricing actions as well as the incremental profits from Scepter.

Again, we believe that the actions we have taken over the past 18 months to better focus the business on higher value end markets like our Scepter product line, and the actions we are taking currently to reduce costs, increase efforts on new product introductions, enhance marketing activities and invest capital for future growth will enable the company to better deliver increased profitability and shareholder value over the long-term.

Further, the solid cash flow profile of our business provides us with several leverage to create shareholder value over the long term, however, our near-term capital allocation priorities remain focused on investing in capital expenditures. It will drive growth and productivity, while also paying down debt to reduce leverage.

Over the longer-term, we'll maintain our balanced approach to capital allocation. That concludes management's presentation. But before I turn it back over to Monica, I'd like to comment on the other announcement that we made this morning concerning my retirement affecting December 31, the end of this year.

I think by making this announcement today, it gives ourselves and the Board plenty of time to make an extensive search to find the right person who is going to be able to run Myers Industries going forward and what I believe, truly believe, would be able to take it to the next level. I've made the decision, because I'll be 65 years old in November.

I worked 43 years, 28 at Goodyear and 15 at Myers, and I've been the CEO here for 10 years. I think it's been a great run. Certainly, over the last 10 years, there has been a lot of challenges to this business.

We've been able to take a lot of the spared businesses and bring it now into two, what I feel, high-performing segments, our Distribution business and our Material Handling business. And with the activities, especially over the last 18 months, would poise for long-term growth.

I think bringing the right person in and taking over, which I know what will, I'm sure have better ideas would be able to take us to that level. I also wanted to say that I'm very thankful to my colleagues and to the Board for all of the support that they've given me over the years that I've been here.

I would also like to mention the fact that we had three Board members who left, Dick Johnston, Bud Kissel and Vince Byrd. There were a lot of years of service to this company that they provided admirably and we'd just like to give them a salute. Finally, I would like to welcome our three new Board members.

We have the opportunity in June to have a very intensive onboarding process and orientation. I thought it went very well. All three of these Board members, I'm excited to have on the Board and anxious to work with in the time that I have remaining.

All individuals, I'm very confident are coming to this Board without any preconceived ideas, and quite frankly, just want to help and I think that's terrific; their experiences, their backgrounds, especially from the financial side of the business.

They've already given us some thoughts and ideas before we've even had really the first Board meeting, which is next week. So I would like to welcome them and appreciate them coming onboard. So from that standpoint, my reasons for retiring is after 43 years of work and discussing this with my family, I think it's the right thing for me to do.

I do have a personal reason that I won't go into, but at the end of the day, I've had a great run and I've still got until the end of the year to continue to operate this business, and I will, on a daily basis, and try to make it the best business that I possibly can. So thank you for listening to that. And that concludes our presentation.

I will turn to back over to Monica for some questions..

Thanks, John. The operator will now direct the Q&A phase of the presentation. As a reminder, in addition to John and Gregg, the following Segment Vice Presidents are also available to answer questions.

Joel Grant, from the Material Handling Segment; Mike Valentino, Vice President and General Manager of Myers do Brasil, Novel, Scepter and Ameri-Kart; and Alex Williamson, Vice President and General Manager of the Distribution Segment. Go ahead, please..

[Operator Instructions] Our first question comes from the line of Chris Manuel from Wells Fargo..

Couple of questions. First, the pull ahead that was in ag piece, if I heard you correctly, you said it's about $5 million of revenue.

I mean, Gregg, do you have a rough guess, is that somewhere between $0.2 to $0.4 or so, maybe they've got shifted between 2Q to 3Q just up, does that sound about right?.

Yes, you're in the right range. Obviously, we don't want disclose the specifics as to the margin profile given competitors tend to listen to our call and read our transcripts, but you're in the ballpark..

And then some of the new products and different elements that you're re-launching, some of the legacy products, things of that nature, do you have a rough sense for what you're targeting, as you look through the balance of this year and next year on an annual basis, what the revenue profile, that will look like? Is that $10 million, $20 million, $30 million sort of opportunity you're targeting? Is it something smaller than that, bigger than that? How would you couch that, number one? And then number two, Joel, margins that you're targeting in there, are those kind of at the some Material Handling average or are those potentially a bit below? How would you characterize that?.

I would characterize the items that are coming out, the dollar figures that you so cited in terms of the revenue profile probably on the high side as well just be launched and be taken off and ramp up on a trajectory path. As far as the margins, they are not in our business. And a wide range of things that we do all margin are not created equal.

So these are probably not what some of the agricultural that are missing. But they will, as John mentioned, help cover some of the fixed cost and generate additional revenue that we wouldn't have otherwise..

One question for Distribution piece.

Where you're at with the rollout of the vending machine products? Is that part of what was contributing to -- maybe some of the revenue didn't have as much margin as selling those or putting those in place or how should we think about that business? I think your objective there is kind of into target a roughly 10% EBIT margin.

I mean, we had lower gas prices, we've had more consumer miles driven things of that nature.

Should we begin to see some acceleration in that business?.

Our expectation for the year is that despite the fact that year-to-date replacement tire sales are down, miles driven are fairly flat. We would expect to end the year at a growth rate in the low-single digits.

In terms of vending machine program, without getting into specifics, what I'll say is that we've really seen some very nice growth at the accounts where we placed those machines. Very significant growth, I'll say, and very profitable growth and that's in very challenging environment. So we're very bullish on that program going forward..

I have a couple of questions. I'm just going to ask one more and then I'll jump back in a queue.

But John is it your intention that post December when you retire, do you intend to stay on the Board or kind of make a clean break?.

Well, I'm an elected Board member until next April. I guess, at this point, I would probably stay on till April. Anything that I can do to help the new person who is going to become President and CEO, obviously I want to do. I've got a lot of time and effort invested in this company.

So at this point, I actually haven't given that a whole lot of thought, but I'm a Board member until next April..

I'll jump back in the queue..

Our next question comes from the line of Adam Josephson with KeyBanc Capital Markets..

John, congratulations on your term, I've really enjoyed working with you..

Thank you, appreciated. I am not done yet..

John, just one on the succession question. I don't know precisely what you can say along these lines.

But do you have any sense for what qualities the Board is looking for, in terms of your successor, the capital allocation, operationally, otherwise?.

I think all of those, Adam, would be extremely important and obviously somebody with experience, perhaps significant leadership experience at increasing levels of responsibility. Obviously, the international research firm DHR is who we are using. They are very experienced at that.

And they are putting together a complete analysis, I guess, as to the requirements and the specifications for the job..

On Scepter, can you just put into prospect of what happened with that business since you acquired it last third quarter. It's been quite good the last couple of quarters, it wasn't so good in the third quarter of last year. Obviously, I assume resins been a nice benefit over the last two quarters.

But can you just walk us through the progression of that business from the time you acquired it last fall to now and precisely what's changed to the positive?.

Adam, this is Gregg. As I think it's well known, the business stumbled out of the gates in the third quarter of last year, our first quarter of ownership. Fourth quarter was in line with our expectation to that business.

As we spoke in the first quarter of this year, their performance was better than expected, and that improvement was enough to offset the mess, if you will, that happened in the third quarter of last year. Part of that was driven due to some additional sales volume with the harsh winter in the north east that we talked about last quarter.

And then here in the second quarter, they continue to perform well. For the 12 months we own them, they're ahead of our expectations. We're very pleased with them and the performance that we've gotten out of them. We continue to work on the integration. We've seen the benefits of the synergies that we've previously talked about.

And just like we talked about in the release and in our prepared remarks, we've been very cautious with all of our business, including Scepter. And cost controls and pricing actions throughout the first half of this year, and certainly that helped us as well. Their sales for the quarter were basically in line with our acquisition model.

Certainly we saw some headwind on FX, and that impacted us somewhat, because the costs are primarily denominated in local currency that didn't have an impact on the profitability.

But very, very pleased with the acquisition, very bullish on it going forward, and nicely accretive so far in the 12 months we've owned them and expect them to be very accretive going forward. All that, Mike, maybe embellish as to how other business from his perspective is going, given that he leads that organization..

As Gregg mentioned, we bought a very strong business. We're pleased with the results so far. We're seeing some synergies starting to materialize on the cross-selling side that we'll see here in the second half of 2015, as we launch our marine aftermarket program that we're in the process of doing right now.

And we're seeing very encouraging results and acceptance by the market. So we expect that new product of course to continue. From the Scepter team, they've done a great job there. And I was up there earlier this week meeting with the group, and expect that to continue as we head into the second half of '15 and into '16..

And just one follow-on on Scepter for Mike or Gregg.

Can you talk about whatever resin benefit you were able to realize by holding prices in a falling resin cost environment and what you're paster mechanisms such as they are in that business?.

Given that that's a piece of our total Material Handling segment and the competitive nature, obviously, we don't want to give that kind of specificity. But I'll say for our entire businesses, clearly the pricing actions were a key component for us.

What I will say with respect to Scepter, unlike some of our business with them, the rest of the material handling, very little there is on an index. And so we price competitively, but more importantly we price on value sale, and look at what the value of the product is that we're selling and what the price should be on that product..

And one on gross margin, obviously, significant gross margin expansion year-on-year 300 bps. Can you give us a rough sense, how much of that is the addition of Scepter and how much is I think you talked about $4.5 million of cost savings compared to a year ago, and then you talked about pricing actions.

Can you give us some sense of what the source of that 300 bps of improvement was?.

And, Adam, again, we're not going to get into that level of specificity. We saw benefits, as we said before in Scepter. Their margins are better than the rest of the base business, so it certainly helped us. But you can't discount the $4.5 million of savings that we mentioned through the pricing actions as well as through cost reduction.

So that $4.5 million, obviously, part of that was Scepter, but a lot of it was not Scepter too. So the key is I think when you look at our entire business, we're managing our cost very well and we're managing price very well..

And just one last one and I'll turn it over.

Has your full year profit outlook increased on account of your second quarter performance? And if so what specifically was better than your expectation?.

I would say, no, we don't necessarily see our full year increasing as a result of the performance in the second quarter. Obviously, we did see the impact, some of it coming out of third quarter and the second quarter on the Ag side. But we don't necessarily see our full year getting better than where we were.

The headwinds that we've outlined continue to be there primarily in the Material Handling segment, that will continue to be a headwind, but we do expect the full year to be better than last year..

Your next question comes from the line of Brian Sponheimer with Gabelli..

John, I'd just like to echo best wishes and congratulations in your retirement and wish you well in the future..

Thank you Brian, I appreciate it..

Just one question on the Distribution business. It kind of surprises me that there were some headwinds given the miles driven activity. We're above 3 trillion miles now again in the U.S.

Where do you see that kind of the end market inventory before we start to see that business pick back up on the tire side?.

Like I said earlier, this is a very challenging, from our perspective, a very challenging first half of the year. When we look at what we see in the end user market as well as the miles driven from our perspective being in essentially a flat situation.

Beyond that, much of our activities were very much driven by the choppy economic environment and our customers or our shops see that. So when consumer activity and commercial activity is uncertain and challenging, people are holding back on their spent.

Beyond that, there is some specific regions in the country that are still facing some challenging times and that's also kind of bit of a headwind for us. You mentioned the inventory. The tire inventory has been inflated to some degree by the influx of imports. And particularly, on the commercial side, that hurts our retread segment.

And when commercial operators move to imported tires as opposed to retreading existing tires, that hurts our sales in that segment. So that's also been a challenge for us..

Our next question comes from the line of Christopher Butler with Sidoti & Co..

Just staying on the tires for a second, starting to hear some better news from tire demand out of Europe.

Any sense that maybe that find its way over here as well, with those two completely distinct markets?.

We would view those as two completely distinct markets. And again, our outlook for the year would be growth in the low-single digits for the market as a whole..

And shifting gears to Material Handling.

Could you give us an idea of when or if you're planning on shifting Scepter to the index-based pricing that was so successful for you a few years ago with your legacy Material Handling business?.

In Scepter I think Gregg mentioned it earlier, our focus is really on value-added products where we can introduce innovative solutions to the marketplace and for our customers. That's a path that Scepter brought in with the acquisition. And we're going to look to continue that in a number of our other businesses as well.

So specific to your question, that's how I would say, we are going to continue on a value-added innovative new product approach in a number of our businesses going forward..

And staying with Materials Handling, any increase in foreign competition, because of the strong dollar?.

Well, I mean, exchange has certainly had an impact on our business. Gregg mentioned earlier on the result side of things that despite the exchange impact, our business in Brazil has kind of held its own in local currency despite extremely challenging market conditions throughout Brazil with the economy and the political landscape.

So again, as we look to introduce more innovative products that are specifically geared toward markets and customers, I'm optimistic about where we are taking these businesses..

It sounds like the difficulty would be Brazil rather than anybody, say, from Europe coming to the United States and making things more competitive here..

I would also add to that that while we see a little dribs and drabs of introductions of things, we don't have a lot of offshore competition at this time. It's just a matter of shifting and the nature of our product. Even from Mexico into the U.S., not as much activity as you might have expected..

Our next question come from0 the line of Gary Farber with C.L. King..

Just could you also update us on your acquisition pipeline and just generally your thoughts on what prices look like in the market right now?.

We continue to get a lot of things that come across the desk, and I think that's just been the nature of Myers over the years. Well, we have really doubled down on our screens that we use, both financially and operationally, and looking at acquisitions. And frankly nothing has been passing those screens.

Obviously, if something like Scepter would come along that might be something to at least take a look at. Right now we're kind of really focused on debt, worried about 2.67 debt level, we'd like to be below 2, between 1.5 and 2. And so we're really trying to drive cash to be able to do that.

So it's going to be a much tougher screen at this point for acquisitions. Now, down the road I think certainly if the right opportunity comes along and it passes all the screens and that's something that the Board would be more than happy to take a look at. That's kind of where we're at right now..

And do you have a bias towards increasing a particular end-market or something that's sort of a different product that sort of fits in, with the things that you are looking at it?.

We have two very strong segments now. Like I said, we've taken a bunch of the spared businesses and really boiled it down to where we have two very good operating businesses with growth potential. So it probably doesn't matter from the standpoint of picking something specifically.

If it makes sense again through our screens and make strategic sense and the Board is good with that, then I would say that we would certainly take a look at it, but nothing specific..

I would further add, specifically on the Material Handling side as we've talked in the past, the key for us is an engineered solution that we would be looking for, but as to whether that would enhance an existing product portfolio or geographic expansion, all of those would be on the table, but the multiples for so many businesses right now quite obviously are too high.

So what people think their businesses are worth versus what cash sizes are worth, is a completely different answer. There is disparity in there and our opinion..

I mean, would you say, over the last six months, since I know it's a relevant timeframe, that the prices have sort of increased, or they have sort of steadied out at a high level?.

The plastic side of the business they've increased, multiples have increased. I think there is still a lot of money out there, there is a lot of private equity money, and some of the deals you've got to kind of look at and shake your head and wonder, where do these come from.

I think on the distributions side the multiples are fairly high, and certainly, again as Gregg says, it kinds of precludes us from, we certainly don't want to over pay for anything, and so that kind of keeps us to where these deals aren't meeting our screens..

Yes, I mean the right deal, as John talked, great deal would really be a deal like we did with Scepter, something that's going to be very nicely accretive and as a good business that we're paying the right price for..

Our next question comes from the line of Chris Manuel with Wells Fargo..

First, I apologized, Mike, Alex, I confused your segments earlier, but Mike I do actually have a couple of questions for you regarding Scepter. So where were you at presently, so I think you were introducing some new products? I know that I've began to see a few of your products show up, in a large club store, things of that nature.

But in almost a full year on your belt with the business, are you, absent currency and raw material adjustments, I mean has the business continued to grow along the path you've anticipated, number one? Where are you with some new product introductions and looking at some new markets, new geographies, things, et cetera..

I am about six months into it, and have been working closely with the Scepter thing, almost daily. We've got a great team up there and I think on a year-to-date basis there has been a pretty minimal impact in the results that you've seen on the new product side as we get into the third and fourth quarter here, second half of the year.

You're going to see that activity pick up with some very nice niche products that address a lot of issues that currently exists in the market place. So I would call that a very -- a lot of innovative solutions coming.

Relative to new markets, the opportunity that we have that I talked about earlier in one of the other questions around the marine aftermarket segment we are seeing an extremely positive reception from the marketplace with those products that are being launched right now.

So we're continuing to look at geographies and markets where we can win and be successful, again, not with me two products at lower margin, but with innovative solutions where we can drive a competitive advantage and solution to the market that allow us to command higher margin..

I think there may have been some geographic opportunity as well, with taken a few of the spared lines from out, and I believe, Oklahoma and redeploying them to some other places around the globe.

Is that still something you're evaluating?.

We've taken a look at that and the challenge that presents there is there isn't the regulation in a lot of those markets that will allow us to command the margin that we think the product deserves. And as I said earlier, we're going to stay away from me too commodity driven products.

So despite that, I think in some of the other segments that we don't talk a lot about, specifically maybe military, there are opportunities where we have seen significant places where we know we can grow the business. And now we're looking at the resources that we need to be successful there and that will be part of our go-forward plans..

And then Gregg, the $4.5 million you referenced between price mix productivity and cost reductions.

How should we think about that as we go forward the next two, three, four quarters? Do we see a similar type of amount, so maybe if it's feasible to kind of parse it between some of those pieces, likely you'll continue to see productivity? And some of your cost reduction actions refers temporary pricing share there that may not translate through.

But how would we think about that number might compare the next two or three or four quarter as we look forward?.

I would say that a good chunk of it obviously came out of the cost and pricing actions. Clearly as we've talked about resin and the issues there, whatever indexing in some of our businesses, that will limit the benefit that we get there going forward. So I don't think we'll see near as much in the next couple of quarters.

We'll continue to work hard on the rest of our cost as we always do. And those costs saving will continue to move forward. But clearly we don't expect to see the level $4.5 million per quarter like we saw in this quarter..

So if I were to just ballpark something, I'm guessing we might see a-third to half of it on a quarterly basis, as we continue to move forward.

Would that be a fair assessment?.

Yes, I think that's fair..

And then last question is, when we look at cash flow, are you still kind of tracking towards -- I guess, two elements for cash flow. First, let me ask a CapEx question.

So you had talked $25 million to $30 million in the past, and are now kind of suggesting towards the high-end, what are maybe a few of the new projects or new areas that you're looking at that have kind of moved that towards the high-end of the range.

Are there any specific categories or cost reduction efforts or things that you're targeting, and number one? And then number two, are you still feeling that a free cash flow number up cash or less CapEx can still be in that $30 million to $35 million range?.

One of the major projects that's taking some of that additional CapEx is a redo of our manufacturing capabilities around our Akro-Mils business. We're moving equipment from one facility into another facility, taking that facility and making it 24x7. It's been a high performing facility for a long time for us, whereas high margins to those products.

And so that project includes some new equipment, which will increase efficiencies as well as reduce energy cost dramatically. All of these are major savings to bottomline. And so that's probably the major expenditure this year in CapEx. With respect to the second part of that question, I'll let Gregg..

I think with the higher CapEx that we have talked to now at the $30 million range, clearly that will have an impact on our free cash flow. So I think we're going to be down closer to the $30 million range than the high-end of the $35 million.

But at the same time, cash is very important to us, as we've talked about previously, and we will continue to work for cash very hard to try and outperform..

Our next question comes from the line of Adam Josephson from KeyBanc Capital Markets..

Mike or Gregg, one more on Scepter and Material Handling more broadly. So you've talked about your value pricing approach in Scepter, such that your pricing in that business is not tied to an index. In some of your other businesses in Material Handling, obviously your pricing is tied to an index.

So can you just talk about the distinction, like why is your pricing indexed in some of your Material Handling businesses and not others, but presumably you employ a value pricing approach in all of them?.

You're absolutely, right. We do employ value pricing approach to all of them. I think it really comes down to whether it's indexed or not comes down to the specific customer. Certain customers are more receptive of that. I think when you get into Scepter's customers the fact that they're big box in how they operate.

They certainly like to not move their prices around much from a retail perspective throughout the year. When they do it, your retailers tend to do it more relative to specific competition that they are seeing in regions.

And so they're less inclined to go to an index than I think your seed companies and some of the other food and ag companies out there that they understand it. Now, that being said, we'll continue to work with all of our customers on whether indexing makes sense to them.

But the key is, you're absolutely right, we clearly look for value sale on all of our products across all of our markets and customers..

Because obviously, the company has made an effort over the past few years to reduce its sensitivity to fluctuations in resin rate and with Scepter you to some extent increased your sensitivity to that, right? Unless you think that if resin were to spike there wouldn't be any drag as a result?.

I think in Scepter we haven't done that. And I think it's a good example of where, because we've got a competitive position with products that customers want, where we're playing in certain niches.

Specifically in the military segment and with some of the new products that we're in the process of introducing, where we've got some intellectual property protection, that really gives us the leverage to be able to do that..

One, just in terms of the ag business, you commented that order activity may increase in the second half. You're seeing signs of that.

What do you attribute that to? And can you give us some sense as to how significant that pickup could be?.

As far as the magnitude of it, as I said earlier, I think I said earlier, we're seeing signs of commodity prices moving in the right direction. Our sales and others, I saw John Deere on there site talking about the prices returning to historical average levels.

So in fact that we had some folks that moved product ahead in the year, I think that's all a good sign that things will begin moving in the right direction. There is a lot of moving pieces in it and it depends a little bit on how these companies decide to spend CapEx and expense money.

And they're all still on high alert in terms of what they're going to spend. So there's a lot of moving parts. Some of the preference by the end-users is going to play into it as well and we think that help us. We'll have to wait and see. In fact, there is a number of moving parts, and we're encouraged by several other factors I just mentioned..

Just a one follow-up to that.

I mean, could you characterize kind of what you think your order activity in that business this year will be compared to, say, last year or the last three or five years, just to give us some perspective?.

On a percentage basis, we're probably looking by yearend to be off in the low-30% in that specific market category..

In seed boxes, you mean?.

In ag, in general..

So off 30% from last year..

Correct..

Even with that pickup. And then just one on the food processing side, Joel. You've talked about, you have a large customer and just in the food processing business and there was a slowdown in orders from that costumer.

Can you talk about the situation there?.

Well, the situation with that particular customer hasn't changed. And I think we mention last time, we didn't really think it would change through the rest of 2015. I can't say in the second quarter we had very good activity out of the other folks that are in that same industry. And so we had a very good second quarter.

Tomato paste in California, for example, continues to run through September. They're having a very good crop. Water does not seem to be impacting the situation. So while the activity that I just described have been completely offset, that activity in Q1, as I say, we still have some time left in a very active market in California, so we're encourage..

Ms. Vinay, there are no further questions at this time. Would you like to make any closing remarks? End of Q&A.

Yes, thank you. We thank all of you for your interest in Myers Industries and your time and participation today. As a reminder, a transcript of this call will be available on our website within approximately 24 hours. A replay will also be available immediately via webcast or call.

Details can be found on the Myers Industries' website under the Investor Relations tab. Thank you for joining us and have a great day..