Myers Industries Inc (MYE) 2003 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Myers Industries fourth quarter and year-end financial results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Max Barton, Investor Relations manager for Myers Industries. Thank you Mr. Barton, you may begin.

Good afternoon everyone and welcome. With me are Stephen Myers, Chairman and Chief Executive Officer, John Orr, President and Chief Operating Officer and Greg Stodnick, Vice President and Chief Financial Officer. If you have not received a copy of this morning's press release you may call Sherry White at 330-761-7131. She will fax you a copy over immediately or you can access it from our website, MyersIND.com. Before I turn the call over to management remarks I want to remind you that we may make some forward-looking statements during the course of the call. These comments are made pursuant to the Safe Harbor provisions of the securities reform act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements.

Among other things these risks include various economic conditions that influence the Company's markets, the development, introduction and customer acceptance of new products. Competitive products and pricing, reliance on key customer relationships, dependence on foreign suppliers, supply and manufacturing constraints, fluctuation in raw material prices, cancellation or reduction of orders and other risks and uncertainties detailed from time to time in the Company's SEC filings. Following management's remarks this afternoon there will be a brief question-and-answer session and I will now please introduce Stephen Myers, Chairman and Chief Executive Officer.

Thanks, Max. As we reported in the news release we achieved fourth-quarter sales which were the highest of any quarter in the Company's history (technical difficulty) record sales for the year. Although profits jumped in the fourth quarter they were lower year-over-year due to higher cost of classic raw materials, coupled with pricing pressures in our markets for plastic products. Improving product pricing continues to be a focus for us. We achieved increases in some areas in the fourth quarter, not enough however to offset the effects of progressive price increases from the producers of the plastic raw materials we use in our manufacturing processes.

In our Manufacturing Segment, sales to most of our major markets increased over 2002. Industrial and automotive markets steadily improved during the year and were especially strong on the revenue side in the fourth quarter. These markets utilized our material handling systems and custom manufactured rubber and plastic products. Sales are remaining strong throughout the year in our cultural products in the global markets. Through consistent development of new products and services to support growers of changing operations and new merchandising programs, we feel that we're setting the industry standard in this market.

In the consumer niche of the horticultural planter market our development of unique decorative planter designs helped us to increase sales and achieve higher price points with retailers. During the year, we also used the molding expertise gained by supply and recreational vehicles storage tanks and component parts to enter a similar product niche in the marine watercraft market. With the opportunity we now have to make water storage tanks and fuel tanks, we are hopeful that we will be able to expand that area into other areas and other plastic components that we can make for that market.

We secured some new business from the OE truck market making replacement air hoses for engine intake systems. Our manufacturing capabilities now allow us to supply rubber and plastic finished hose assemblies which eliminate assembly operations of the customer's facility improving their efficiency and reducing costs. We continue to develop customer products and processes for niches of industrial and commercial markets, such as our EverKote structural wood product. EverKote is manufactured using a new process we developed that molds a thick plastic shell around an engineered wood core. The resulting product replaces toxic treated wood posts, such as those used to support children's outdoor play sets. EverKote's smooth surface will not splinter, it resists moisture and other elements and is more durable than extruded plastic wood. Molded in a wide range of attractive colors we feel that EverKote offers us good long-term growth opportunity with applications in fencing, decking and more.

In our distribution segment, we established partnerships to provide Myers with sales inroads to the service base, the auto dealer market. This niche offers growth potential with dealers expand their businesses to provide their customers with more tire and service packages. Tire dealers however, remain our major market and consolidation there remains a trend.

As the business dynamics change for independents and in other vehicle service niches we serve we adapt to give customers the continued advantage of single source supply of tire repair and service items from our unique vantage point of nationwide size, products scale and service. Overall, we made substantial operational changes last year and efficiency in cost management. I would like to now let John Orr discuss some of these initiatives.

Thank you, Stephen, and good afternoon to everyone joining us. I first want to cover some of the major areas of our operational improvement initiatives last year and then touch on our focus for positioning the business for the future. Again, looking at our 2003 initiatives for cost control and operational efficiency, we continue to streamline our manufacturing operations to a leaner profile. What has been involved in this is making our facilities more efficient by moving our operations from the high-cost factories into a lower-cost operations and filling them up, reducing the size of our higher cost plants. In addition, we have been adding high-speed machinery and robotic contributions to many of our major facilities. Moving the lower-cost facilities to 24/7 operations; in addition we have focused on streamlining all facets of our warehousing operations. We closed two major warehouses and have moved that product into our factories to lower overall warehousing costs, and we have continued to initiate spending reduction goals for each of the divisions.

On our distribution side, we consolidated three of our branches, moving that product into more efficient branches to cover a wider distribution area. We are continuing to analyze that business as we go on. From a marketing integrated marketing efforts, cross selling and manufacturing, Dillen, our horticultural business and Listo, our proprietary horticultural business have been working together to distribute products. Each one distributing the other's products now virtually across the country. Buckhorn and Ameri-Kart two of our divisions have worked closely in the refuse business to allow Ameri-Kart which is essentially a rotational molder to get into the injection molding of refuse carts, that being done at Buckhorn and allowing us to get into another channel of distribution in refuse.

We continued to increase market penetration and reduce selling costs, and better utilization of our internal capacities and capabilities. We have reutilized reverse manufacturing capabilities to supply to all of our product lines. From a purchasing standpoint, the volume purchasing, we continue to segregate all of our resin purchase for all of the Myers companies. This has helped dramatically over the last several years. However, we are faced this year with again the continuing problem of resin being up and continuing to climb in price. Resin in the fourth quarter was up 25 percent in North America and up 15 percent in Europe. For the year, high-density polyethylene one of our major materials, cost was up 36 percent, higher on average in North America.

What is happening is the resin processors are trying to improve their margins after years of what they say is losing money. They have removed 30 to 60 day price protection to all customers at the beginning of this year, and so now we're at the mercy of price increases as they see necessary to do it. Our focus is on realizing improved pricing in our markets by putting more value behind the solutions we provide. As we are a company that makes price to provide niche products for solutions, we still feel that there is value in that and that we can command a higher price. I can assure you that pricing initiatives are rolling out in most all of our markets as we speak.

In addition, we have worked on basic tight spending controls for both CAPEX and SG&A. Our CAPEX expenditure for last year was $20 million for the year versus 28.3 for 2002. From an operating expense standpoint we had 11 percent sales increase in the fourth quarter with only a slight 1.3 percent increase in SG&A. Fourth quarter improvements, these initiatives were started in the fourth quarter we are seeing improvements from these initiatives which we are starting to be realized and we expect to see greater benefits over 2004 by taking advantage of more cost management programs.

Now, looking at positioning the business for the future. We see an imperative for growth. The areas we must focus on to expand our market share, gain entry into new niche markets and accelerate the value rewards we bring to customers, employees and shareholders. We are going to do that through innovation. We continue to strengthen our competitive advantages of value added solutions based manufacture. Some of the consistent new product development that we are bringing to bear as Steve mentioned earlier, EverKote. On the horticultural side, have a new line of planters coming out from Listo. The Citadel container for Buckhorn for shipping food products, liquid food products, and our custom material handling systems for a variety of applications primarily automotive is being made by our Buckhorn custom manufacturing division. We are trying to focus on unique first to market items, for value added solutions for customers with a broad product scope across markets. That will help us to expand our market access.

From a customer satisfaction standpoint, we continue to build and to reinforce long-term customer loyalty. We try to be a single source supplier, we try to have a single source supplier strategy, anticipate customers needs and exceed expectations. Our consistent quality, virtually all of our manufacturing facilities are ISO and QS certified. And our design engineering molding and secondary process solutions are what create value for growth for Myers Industries.

Cost controls and operational efficiency I discussed earlier; from a standpoint of organizational development we continue to work on improving our management teams in all of our divisions. We have experienced management and teamwork across those organizations. We have invested in time and development of professional skills. We continue to use on-site and off-site employee training for key employees, and there's a continuous improvement of communications throughout the organization. Our people have a passionate commitment to the customer and to growing our business.

From the business growth side, the sales margins and NBP this comes from a dedicated application of all of the initiatives I have just covered backed by the strong fundamentals that have fueled the company's growth, such as our broad manufacturing and distribution capabilities, our diverse product offering, brand strength and market leadership, consistent quality, superior customer service, and complementary acquisitions were appropriate. For 2004, we have a sharp focus on heightened innovation to market expansion, operational initiatives to achieve sustainable competitive advantage, advantages with customers and advance our financial results.

I will now turn this over to Greg to highlight the 2003 fourth quarter and full year financials.

Thank you, John. The news release this morning basically details the quarter and the year-end results, but just to recap briefly. Net sales in the fourth quarter were almost 177 million, which is the highest sales quarter the Company's history. This was an increase of 11 percent over the previous year. Favorable effect from foreign currency translation helped increase sales by 7.4 million, so we had an actual sales increase of 6.1 million in the fourth quarter.

Breaking down on a segment basis, the sales and distribution in the fourth quarter were up 7 percent. While the sales and manufacturing for the quarter were up 12 percent. Again, the majority of our foreign exchange translation increase is in manufacturing, and manufacturing was up without the foreign exchange, again 6 percent. Net income per share for the quarter was 14 cents, up 1 cent a share an increase of 8 percent.

Some key points to summarize for the quarter. Our gross profit percent for the fourth quarter was 29.8 percent, versus 31.9 percent in the fourth quarter of last year. For those who follow the Company, its basically the same reasons we had raw materials price increases, domestically about 25 percent up in the fourth quarter, and 15 percent up over in Europe compared to last year. Basically, we had very little or no flexibility in passing on these price increases to customers. We have started the program and started to take effect but for the fourth quarter we had very little effect.

Operating expenses for the quarter which were up 7 percent of which 81 percent of this increase was due to foreign exchange. So, our actual increase was only 1.3 percent, so are starting to see some of the results of our cost control programs, which John had just mentioned. As a percent of sales, operating expenses, dropped from 25.8 in 2000 (ph) to 25.1 in 2002. Our overall tax rate for the quarter was 31 percent this year compared to 44.6 percent last year. The big difference in the year 2000 we had some foreign tax losses which we were not able to benefit. Those turned around into a profitable situation this year, upon which we had no basically taxes to owe. So, we basically had a change in -- we were able to utilize some foreign tax loss carry forwards.

For the full year, we had the highest sales in the Company's history of 661 million which was an increase of 9 percent. Again, without the foreign exchange the increase was actually 4 percent. On a segment basis, for the full year, distribution was up 3 percent, manufacturing was up 10 percent, without the foreign exchange manufacturing was still up 4 percent.

Net income for the year was 16.3 million, a decrease of 32 percent, and net income per share was 54 cents, a decrease of 33 percent. Again, summarize quickly, the main items on the income statement. The gross profit percent was 30.3 this current year versus 33.1 last year. Again, the same reasons. The increased raw material costs, the primary resin we use high-density polyethylene, averaged 36 percent for the year. Again, the pricing was a negative. Operating expenses for the year were up 10.7 percent. However, again 61 percent of this was due to the foreign exchange. Our operating expenses as a percent of sales increased from 24.7 to 25.2, however, as you saw by the fourth quarter, the trend is now becoming very positive for us.

Again, our overall tax rate for the year was 33.8 percent compared to 40.6 percent. Again, that was us being able to utilize some tax loss carry forwards. We still have about $2.5 million worth of tax loss carry forwards left, and if we do going forward this should give us a tax rate in the 37 to 38 percent range.

Strong working capital management enabled us to reduce total debt by 17.4 million for the year with 10 million of that coming in the fourth quarter. As a result of that, we finished the year with total debt down 7 percent to 215 million, from 232 million at the start of the year. For a little perspective on our debt paydown, the last few years have totaled 84.5 million and since our all-time high peak of debt in October of 2002, debt has decreased 96.5 million. Some of the key components of our working capital management our collection period was reduced to 60 days this year down from 62 days last year, and 67 days in 2001. Our inventory turn increased from 4.7 times last year to 5.3 turns this year.

Again, our overall days of working capital which we basically compute by adding a receivable turn to our inventory turn less our payables turn was reduced from 94 days last year to 90 days this year. That is also down substantially from 104 days which we had in 2001. In addition, our capital expenditures for the year were held to 20 million. Shareholders equity increased 15 percent to 94.5 million. And, debt-to-total capitalization finished the year at 42 percent versus 48 percent at the end of 2002. That's it.

Okay, everyone. That concludes management's presentation; we will now open the question-and-answer phase of our conference call.

Ladies and gentlemen, at this time we will begin conducting a question-and-answer session. (OPERATOR INSTRUCTIONS) David Siino with Gabelli & Co.

Good afternoon. Price increases in industrial for '04 on a weighted average basis looked like what?

Four percent, 4 to 6 percent depending on the product and the area.

Okay. And material prices, if the first month and a half of the year is anything to judge by, what are we looking at year-over-year?

That we don't know. That would be a guesstimate really. We're hoping that this thing is going to plane out. There is a lot of plastics companies both big and small that are beginning to not buy plastic because they just can't afford to do it and make product and lose money. So, what I am thinking will happen and maybe it is wishful thinking is that eventually the demand for plastic will start to recede and therefore the prices will begin to come down. So it's very difficult to say what we think is going to happen.

I guess any business with 4 to 6 percent price increases the gross margin would look a lot better.

Absolutely.

Could you just refresh my memory, how much of your business is heavy-duty truck in North America?

Less than 5 percent.

Okay. And this EverKote line you mentioned you identified as kind of a long-term grower for you. How big is it right now? How fast you think it can grow?

It is relatively small right now because it is essentially with one company who makes these backyard forts. We think it can grow substantially. We're working hard to market it into other areas such as docks, fencing, anywhere where you need no water permeability, you need long-term strength, the fact that it is into these backyard play sets as they continue to pass laws about the amount of arsenic in wood and so on, it is just an absolute natural thing to use for building materials. So, it would just be a guesstimate to tell you what we think the long-term is but we think it is a very substantial product.

The last question you identified some new opportunities in the press release related to distribution. Can you elaborate on that a little bit?

Basically, all of the tire work had always been done by tire dealers. The auto dealers are now doing more and more service work and also more and more tire work. They are combining auto service and tire service at the auto dealer. We are now working with basically auto dealers developing inventory systems for them and so on and so forth.

Okay. So you should see some nice growth in the automotive distribution side in '04?

We hope so.

Terrific. Thanks a lot.

Robert Kosowsky with Sidoti & Co.

I just had a question about the product mix on the distribution side. Was it pretty heavily weighted towards equipment or more towards the products (multiple speakers) are you seeing the capital expenditures kind of pickup?

It was basically on the comparative basis about the same.

Okay. Do you expect to see a pickup of that? I guess that is (indiscernible) improving economy?

I think we expect to see a pickup in the capital part of the business which has been on and off very slow for the last couple of years. It's been spotty a quarter up, two quarters down. I think as the economy picks up, it is becoming more and more technological advances in tire changing equipment, it still (indiscernible) but there are more and more technological advances which our customers are starting to take advantage of.

Okay. I guess on the pricing standpoint, how much did you guys try to raise prices during 2003? How successful do you think you are going to be at getting the 4 to 6 percent across the board?

We're all over the ballpark -- as to certain areas we're basically able to increase some, in some areas when you are dealing with the big box companies and/or the large industrial distributors, it went the other way. As to how successful we are, I think that is our question to ask. We are out there with our customers and our customers understand our problem from raw materials standpoint. They see articles like Rubbermaid getting out of the consumer business, Rubbermaid getting out of the commercial business, housewares business, they understand that we can't keep eating all of the increases.

Demand is picking up too so that might help out a little bit, too.

It could.

Just kind of curious, how much of the new products contribute to revenue? Do you guys break that out or?

No we don't.

What is the most exciting new area for you today, Everclear or EverKote?

The EverKote is exciting. The Citadel container which is something that is new to the food industry from the standpoint of shipping like tomato paste from California back to the East for processing so those are some exciting areas.

Okay. Thank you very much.

Greg Halter with LJR Great Lakes Review.

Good afternoon guys. I wondered if you could provide some more information on your balance sheet in terms of cash and receivables and so forth?

Okay, let us get it here. Cash was 5.7 million, receivables were 114.0 million, inventories were 83.9 million, total current was 207.9 million, other assets were 229.8 million, and PP&E were 103.8 million. Giving us total assets of 621.6 million. Liabilities, I assume you want also?

Yes, if you've got them there.

These may not be 100 percent right. We're still going through. Accounts payable were 39.7 million, current portion of long-term debt was 4.5 million, current total current liabilities were 94.2 million, long-term debt was 211.0 million, deferred taxes is 21.9 million, retained income 294.5 million, and that is basically all of the numbers.

Okay. In your other assets of that 229 or 230, how much of that is goodwill and other intangibles?

The majority of it is goodwill. About 224 million is goodwill.

Okay. And regarding your segments, do you have a breakdown yet on the dollars there in operating income for the two segments?

Yes. Operating income for distribution was 12.5 million, and manufacturing was 33.8 million, corporate was 11.6 million, negative, and interest expense was 10.1 million.

That is for the year correct?

That is correct.

Capacity utilization in manufacturing -- I would suppose that is something that you're working on increasing that. Can you tell me where you stand now and what your plans are going forward?

Last, 2003 we finished at 65.6 percent. 2002 was 63.9 percent, the good news is though in the fourth quarter we were at 72.2 percent which is the highest average it has been since March of 2001. So, we are continuing to up our utilization again as I said earlier, we're looking at higher cost plants becoming smaller and lower-cost facilities becoming larger on a 24-7 basis which really ups that utilization. We can then idle facilities that are higher cost. We won't necessarily close those facilities because as we continue to grow we expect to be able to use them or use the equipment.

But, we're working very diligently on improving our capacity utilization and the numbers are beginning to show that.

That's great. Regarding debt, in 2004 and beyond, do you have any initial plans on how much you would like to see that reduced?

In the last three years, it's been a reduction of 84 million. We will continue to keep going on it.

There is not a specific goal.

And your foreign business is about 30 percent of the total is that correct?

That is correct approximately.

How is Europe doing?

They had a pretty decent year.

Their economy overall economy there are not growing as ours are growing. However, they still had an overall up year, excluding the foreign exchange they had an improved performance.

Lastly, on depreciation and amortization, what was that in '03 and what do you expect for '04, as well as what are your capital spending plans for '04?

Depreciation was 34.8 million, other amortization was 1.8 million. I would say from a capital standpoint we will be at the 20 to $25 million range hopefully at the lower end of that.

Okay. Great. Thank you.

David Leibowitz of Burnham Securities.

Good afternoon. A few brief questions. Do we still have any foreign tax loss carry forward left?

Yes.

How large is that?

About 3 million.

Okay. Second, you did a marvelous job on the balance sheet in '03. Do you have any targets for long-term debt in shareholders equity through the end of '04 that you could share with us?

No, we have no specific targets other than Steve wants it to go down.

Steve always wants to get down, that is obvious. That never made your life easy, Greg.

There is no specific targets, David. Just work on it.

We try to not make promises we can't keep.

You can always make promises you can keep.

We just need to (indiscernible).

EverKote, is that a patented product?

Yes, it is not patented yet, but it is patent pending and it is trademark.

Okay. And on the patent, is there anything about toxicity in there in the way it is produced or anything else?

Absolutely not.

Okay. On the Citadel container, how many SKUs are in that line?

One. It's only one size in other words. It's only one container, it’s a 48 by 40 inch footprint; it is approximately 50 inches high, it weighs 275 pounds empty. It holds 3000 pounds of liquid material, primarily tomato paste, or diced tomatoes in water. They are shipped in a septic liner in the box by rail.

Having all of that data is at your fingertips is remarkable.

I been working on this for a while.

Can you tell us how many pizza pies (indiscernible).

No, but I can tell you it makes a hell of a lot of tomato paste.

On the liners, by the way, are you selling the liners? Are they commercially available from outside vendors?

There are three vendors in the country that make a septic liner, so it is whoever the potential customers like a Heinz or a Morningstar would want to use for their liners. They use them now in wooden boxes. This replaces wooden boxes. There are about one million and half wooden boxes out in California that eventually get replaced over the next number of years.

What are the cost effectiveness of your product versus the wooden?

Well, the issue is the amount of trips that the box will make versus wood. There are issues with wood from the standpoint of splinters breaking the bag going into the bag and then you have tomato paste everywhere. There are laws that are being passed about getting out of wood in the next five years. From a cost-effective standpoint, we are able to prove to the customer that it makes cost sense for them to go to plastic because the extra turns, but in addition, you know, with the food or food laws that are changing, they are going to have to go to plastic.

Okay. Lastly if I may, when people have conference calls and issue their press releases, there is usually guidance handed out for the year upcoming. I noticed an absence of any guidance in print and I didn't hear any guidance discussed. Is there anything you would like to leave us with in that regard?

Probably been noticing that for probably longer than anyone else on record.

Nobody's perfect.

We have not traditionally issued guidance.

We have no intention of beginning.

Excellent. At least we know where we stand for future conference calls and we say thank you for that. Again, keep up the good work especially the less part. Thank you again.

Elliott Schlang with LJR Great Lakes Review.

Good afternoon to all of you. You emphasized a few times that revenue was back at a record level which is encouraging, on the other hand, your margins are about a third of where they were not that many years ago. What is a realistic objective in today's environment or as you see the current year, what range would you be satisfied with?

That is a difficult question. We would love to be back where we were in '99. Anything, any movement.

Under current conditions, Elliott, any movement in that direction we would view as being very positive. It's difficult to be precise about what is realistic in that regard. The economy generally I guess the central bank economy is better than what we're seeing. The question with feedstocks and raw materials is a difficult one, it's been a consolidating industry amongst giant oil companies. So, what effectively they have been able to do is isolate themselves from the vicissitude of capacity utilization because having multiple plants, they really are not constrained to run one. So they can adjust output to always be in sync with their view of demand in terms of maintaining pricing power.

We are, as you heard from John, trying to do something similar in our processing operations. Unfortunately, as useful as our products are, they are not as central as petroleum derivatives. So, we just don't have that power. Obviously if the economy increases, the economic value of our products, especially in the material handling area increases. We think the flowerpot industry generally is a growth area albeit low-cost and competitive. That is basically it in terms of quantifying it for you, I wish I could.

I guess just an extension of that question would be, you referred to Rubbermaid before and the editing of their product line to get into -- put an emphasis in the more profitable sectors of their business. Is there any indication on your part or any action being taken to edit your product to get out of some of the low margin businesses that may be generating a lot of revenue but are just not worthwhile?

Absolutely Elliott. We definitely have a very strong program that we initiated several months ago. Only thing we didn't do is announce it to Plastics News like Rubbermaid did but we're definitely culling out especially in retail type products where we just can't make money, and we don't see the opportunity to make money no matter what we do from a cost standpoint.

Is there any bogey in that where you're simply eliminating products under a certain percentage return?

What we are doing is pricing them to get the return we need and letting the market determine that. If it's a low-volume product to begin with, we are eliminating it. So we're reducing our offering but where we have high-volume low growth, we are going to let the market decide that. It's basically we are not big enough to know what the capacity out there is. So, we decided we can't give it away, and maybe we don't have to, so we're just raising prices in those things and either our customers will decide whether we stay in it or get out.

Last, in your release, you refer to the pricing pressures being "offset in the future by new opportunities." I assume those are of many of the products that you talked about before in the call, but are there any others that you did not touch on as far as those specific opportunities?

None of material impact.

Thank you.

Richard Henderson with Pershing LLC.

Good afternoon. A couple of things. Can you tell me what the average resin price was in the fourth quarter? I had it around 34.5 cents in the third quarter. What did it move up in the fourth quarter to? Just kind of rough.

About 38, 39 cents.

Where is it now?

A little bit higher than that. Again it depends on what kind of resin we buy. It might peek out around 44, 45.

Now, in response to that last question, where you are looking at taking a strategic look at your product line and I'm sure you probably especially Steve was looking at, what has really been happening in the world economies and so forth, and kind of making a reasonable projections on what is going to be the landscape five years down the road. How much of your product line do you think it's just roughly kind of on the line? To where you would make a strategic decision perhaps to get out of --?

I would say 20 to $40 million maybe that is just a range. It doesn't mean every one of those are bad.

Is that also carrying on what Steve was saying in terms of the dynamics of the resin producers themselves? It seems that you would want to be more in the niche products where you control your destiny as opposed to the commodities and this idea of trying to just produce product so that you get bulk buying on resins. It doesn't have the validity that it would have had years back.

That is correct.

On the distribution, that was a pretty good sales increase in the fourth quarter. Can you kind of rough idea of what you think would be a realistic expectation for 2004?

If that trend continues -- I mean if you look at the distribution business back from about 1980, we have had since 1980 a compounded growth rate of almost 7 percent. Now the last couple of years has not been like that. This is the strongest quarter we've seen in quite a long time in the distribution and so far, it’s continued. But, again, we would like to see the 7 percent for the whole year, but for the last couple of years we have only been one or two percent.

You also mentioned in terms of new business opportunities, the movement of the auto dealers into a more service and total service, including the alignment and the tires and so forth. Is that business as profitable, more profitable, or what compared to the independent traditional independents?

It's about the same. That is very competitive. All that that under car stuff -- it is very competitive, so it's about the same.

What happened is the car companies used to run that out of there -- they would have a local concession which would buy it on a co-op basis. Their purchasing power was pretty good. The inventories for the nature of the product became something that was (indiscernible) maybe became more effective more efficient use of capital better, they just got out of. So, we are scrambling on a local basis in all cases to pick that up. So, we sell some supplies, we sell some lifts, brake stuff, air conditioners, things, so a lot of this equipment which is always dodging when you are dealing with local competition because they tend to be smaller and have fewer overhead concerns.

You mentioned that you guys were aggressive in implementing price increases during the fourth quarter -- it sounded like it was more later in the quarter and I guess it was in response to the resin hikes in December and everything sticking and then some more stuff in February. I would take it that one of your areas that you do have very good or one of your top markets that you have pricing flexibility is your horticultural business, and that is a real good driver in your first quarter and into the second quarter. Is that a correct assessment that your pretty much up on that?

We have been successful. I have to qualify, both quantify and qualify that. The retail flowerpot business, the distributed flowerpot business, tends to be a little more -- it is a hard equation to tell. One is very close because basically you are selling packaging to planters and growers so that is very high-volume. It's competitive margins. The other is lower volume going to retailers but you are going to a niche market within the big boxes. So, you are selling highly decorative products which do carry a little better margin for both the retailer and ourselves. But, its significant to the total pot is smaller because it is only maybe 15, 20 percent of the other business.

But your ability because you have a large share of that market -- I am talking about the grower, commodity kind of stuff -- is you are in a better position to kind of do what a lot of these metals guys are doing and almost just saying and implementing surcharges. Is that true?

We have not noticed that. (multiple speakers)

I understand, but my point is just simply is that you as a leading factor there can kind of cover your cost much more so than some of your other markets. The more decorative types of lines that go to the Kmarts and our friend Martha's line is that that is a small part of the business, high margin but a small part. I shouldn't say that, right?

I'm kidding. On the grower business, it depends. There are a couple of factors in that. One is it tends to go through the big boxes and some to a lesser extent to garden centers. The big boxes have our customers under the same kind of pressure that they have all their other suppliers and that gets translated back to us. On the other hand, even though it takes place in greenhouses, there is an agricultural component to it because people are buy and large taking them out and transplanting them into their yards. So, to the extent that the growers underestimate the draw that their customers are going to have, we have some ability to pass through prices because there is a demand component that gives us a little bit advantage because of our capacity and our ability to achieve high throughput of the raw material to finish product and deliver it. To the extent the other way we are susceptible to overcapacity in the competitive landscape situation that you get ,it's a highly elastic product.

One last question. In terms of your acquisitions, clearly it has been a difficult market, and there is a lot of other people that are reassessing the future landscape and the question is, Steve, do you see any niche opportunities that you can bring into the Myers family utilizing your various skills and plastics?

As you know, we don't have a formal development activity or strategy. We tend to be opportunistic to situations that come to our attention that happen to fit within our existing processes or markets or customer base or product grouping. So, there is that element of chance to which we hope we would be able to respond, what we deem, what we hope will be an appropriate opportunity arise, but on the other hand, we would like to keep our balance sheet in good condition. I don't know if that addresses your question precisely?

Actually, it does and it doesn't, but let me ask it a different way and do you see perhaps the opportunities kind of in your gut say that they would increase or decrease or you don't know?

I think during times of economic volatility, there is always its always more likely that something could pop up.

Okay. Thanks.

As we are approaching the top of the hour here at four o'clock, couple people have appointments that they have to get off to so, I know Mr. Orr is going to excuse himself from our conference.

(OPERATOR INSTRUCTIONS) Robert Kosowsky.

One more brief question. I wonder if you can give us some color as to the strength of the monthly progression throughout the fourth quarter and into the first quarter in the Manufacturing Segment?

I think it was pretty much across the board. It wasn't two good months and one bad month, it was pretty much increases were across the board.

Okay, and are you seeing increases and robust (indiscernible). (multiple speakers)

It's basically a continuation.

Okay. Thank you very much.

David Siino with Gabelli & Co.

Just a follow-up on the Citadel. Could you just give an idea of what, if I wanted to buy one, how much it would cost me and.

You couldn't buy one.

I love tomatoes so just in case...versus the existing equation for someone like Heinz or whoever else you might sell it to?

I think it is around 250, 275 something like that, maybe 300. I hate to say it because if I am quoting too low there might be customers out there. It is a high ticket item. Let us get back to you on that because John had to go to another meeting but we will get back to you on that.

David Siino And not to nitpick too much but you mentioned tomatoes but is this applicable to other sort of markets?

It's a form of intermediate bulk container so it could conceivably be used in juice concentrate or I don't know, pineapple sludge, things like that. And this is just a classic Buckhorn branded product where you are sticking something that was an application that had been served by corrugated or wood or some other material and transferring it to plastic. The current containers are plywood, they take couple or three people to break them down for storage and then they have to be reassembled. These things just fold up and down similar to our industrial bulk boxes, so it is a labor savings, its a cost per trip savings, its a durability savings, it is a sanitation savings, just a whole a lot of things.

How long do these things last?

We hope for a long time. Our tests indicate they should exist forever.

Okay.

Hopefully they won't, but they are quite durable.

You would like to replace a few of them every so often. Thanks, Steve.

Thank you.

Greg Halter with LJR Great Lakes Review.

Greg, do you have the cash flow from operations, either for the year or for the quarter?

Just for the year.

That will work.

What do you need? Oh, 51.1 million.

Secondly, on your debt, the private placement of $100 million, what does that do to your blended interest rate with all of your debt? Obviously a lot of that is probably still LIBOR based, but what is that doing to your interest expense going forward?

Our average interest rate outstanding at December 31st was 4.7 percent.

That includes only a month or so of the private placement?

No, that basically includes what the rate is at that point in time.

Okay. All right. Thank you.

David Leibowitz of Burnham Securities.

Very briefly, which of the four quarters this year is going to have the toughest comparison with the year before?

The first. We had a fairly decent first quarter last year that would be our toughest comparison.

Thank you very much.

Mr. Barton, there are no further questions at this time. I will turn the conference back over to you for any closing comments.

I want to thank everybody for joining us this afternoon, and the conference can be accessed. The replay number is at the bottom of the press release that you have. And it will be archived on the Myers Industry's web site for approximately a month. Again, thanks everyone for joining us and have a pleasant afternoon.

This concludes the conference; thank you for your participation. Have a great day.