Myers Industries Inc (MYE) 2005 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Myers Industries fourth quarter and full year 2005 investor conference call. [OPERATOR INSTRUCTIONS] It is now my pleasure to introduce your host for this afternoon, Mr. Max Barton. Thank you, sir, please begin.

Good afternoon and welcome to the Myers Industries call to review our fourth quarter and fiscal 2005 financial results. I'm Max Barton, Investor Relations Manager for Myers. With me today are John Orr, President and Chief Executive Officer, Greg Stodnick, Vice President of Finance and Chef Financial Officer, and Don Merrill, Vice President of Business Development. This morning we issued our news release detailing the strong financial results for both the fourth quarter and year. If you have not received a copy, please call our offices at 330-253-5592 and speak to Marsha. She will fax you a copy immediately. Or you may access it from our website at myersind.com.

This call is also being carried as an audio webcast from our site and will be archived there, along with a transcript, within 24 hours. 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 Harbors 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. Details on these risks are presented in the Company's 10-K. Following management's remarks there will be a brief Q&A session. I am now pleased to introduce John Orr, President and Chief Executive Officer. John.

Thanks, Max, and good afternoon, everyone. It is a pleasure to have you with us. I am pleased to report to you a very successful fourth quarter and year for Myers Industries. We had the highest revenues in the Company's history for both the quarter and the year. Net income and earnings per share in the fourth quarter surpassed 2004 and was, in fact, our strongest fourth quarter performance in six years. While net income was up 3% for the year, our earnings per share for the year was the same as 2004. This is due to additional shares that were issued as part of our 2004 acquisition of Pro Cal, approximately 1.1 million shares, which resulted in about a 3% increase in average shares outstanding. Overall, I characterize our performance as outstanding, given the historically high raw material costs we faced throughout the year. Over the course of 2005, we continued to implement strategic pricing, cost control, productivity initiatives and other actions that enabled us to mitigate the impact of higher material costs and soft markets in certain business segments.

I believe our swift decisive actions on all fronts set the stage for a strong finish to the year and strong momentum coming into 2006, for further sustainable improvement across our businesses. Now to review the consolidated numbers for you compared to the fourth quarter and full year of 2004. In the fourth quarter of 2005 we had record sales of 231.4 million, an increase of 5%. Unfavorable currency translation effects, mainly from the weak Euro, reduced sales by 3.2 million in the quarter. Record sales for 2005 were 903.7 million, an increase of 13%. Included here is incremental revenue of 39 million from acquisitions and 2.5 million from favorable currency translation. Our top-line performance for both the fourth quarter and the year was very solid across all of our business segments except Europe. I will review each segment's performance shortly.

What I am delighted to report, however, is that we truly delivered on our pledge to strengthen profitability. Building on momentum started in the second quarter of last year to produce a record third quarter and, as I noted before, our strongest fourth quarter earnings performance in six years. Net income for the fourth quarter of 2005 was 8.7 million, up 25%, and earnings per share was $0.25 also up 25%. Unfavorable foreign currency translation decreased net income by approximately $350,000. Again, this is an excellent finish in the quarter given that we experienced the peak of raw material prices and market weakness in certain parts of our business. For the year net income was 26.6 million, up 3%. Earnings per share was $0.76, even with last year, due to the increase in average shares outstanding, as I explained earlier. Foreign currency translation did not have a significant effect on net income for the year.

Our net income of 25.7 million in 2004, included favorable currency effects of $520,000. I am very proud of our segment managers and general managers who made it their day-to-day mission to implement to the fullest extent our wide range of improvement initiatives in their businesses. And I am particularly proud of the commitment from our people at all levels of the Company to serve our customers and meet our goals. Before we get to the business segments, I want to address the impact of plastic raw material costs in 2005. Last year brought us the historically high prices topping out in November in the mid-$0.80 per pound range for high density polyethylene, as well as historically rapid increase intervals where pricing changes were being announced nearly every fifteen days through the summer and fall months. For the fourth quarter and for the full year of 2005, resin costs on average were 30% higher than in the fourth quarter and full year of 2004. What are we focused on to offset raw material costs?

I said some of this in the second quarter call, but it bears repeating so everyone is clear on what we're doing. Higher selling prices are the key. We must recover the costs for what we put into the product and the value it brings to the customers. Our customers, for the most part, understand this and we've been steadily implementing price increases across our business segment since mid-2004. Obviously we can't implement a complete increase across the board to cover all of the costs, especially since we started a bit behind the curve and increases came so quickly in 2005. We did, however, gain more traction last year coming into the third quarter as customers were willing to accept our price increases as a necessary part to meeting their business needs and their costs for everything else were soaring as well. In fact, we were able to completely offset increased raw material costs in the third quarter and mostly in the fourth quarter of 2005 through a combination of higher selling prices, increased unit volumes, increased productivity and major expense reductions and controls.

We are also not afraid to walk away from business that is not in our best interests with respects to profitability. We did that last year and still found that many customers returned to us, willing to pay the higher price simply because the value of quality and service could not be found in products from competitors. Did we recover everything from the record raw material costs last year? No. However, we do estimate, and this is only an estimate, that in 2005 we recovered approximately 75% of higher raw material cost of approximately 48 million. Where are we now with resin? As we said in the news release, prices started to retreat slightly in December from the fourth quarter historical highs and there has been a little more price erosion coming into the first quarter of 2006, due to over supply and slow demand. But percentage-wise this is a minimal retreat and we're starting to see some tightening in the market.

Now let's turn our attention to our business segments and their performance. Summarizing a few key factors at work there. This is detailed in the press release and so I don't have to say it each time. The figures for the fourth quarter and full year of 2005 are all compared to the same period of 2004. In our distribution segment, fourth quarter net sales were a record 49.1 million up 7%. For the year, net sale were a record 189.9 million, an increase of 11%. Income before taxes in the distribution segment increased 6% to 6 million in the fourth quarter. For the year income before taxes increased 19% to a record 20.6 million. The key performance factors in this segment, in both the fourth quarter and full year, were higher volumes across equipment and supply product lines, strong demand in both retail and truck tire service markets, last year there were shortages in both medium and large truck tires which dramatically increased service demands and less opportunities for our products. And we paid strict attention to controllable costs.

Last year we also took the opportunity to consolidate two distribution branches in the larger more efficient facilities. We also closed one central American sales office and merged its activities into our domestic sales function. This will help with cost reductions as well as improved customer service and more focused sales efforts in our markets outside the U.S. In addition to some changes in our North American operations, last year we established a new distribution facility in Brazil to meet emerging growth opportunities in its tire service markets. We believe this to be an excellent market for the range of products and services we provide in the distribution segment. In all, distribution presents an industry leading brand, deep customer relationships, the broadest selection of the highest quality products and unrivaled capabilities that provide an excellent foundation for continued growth.

In our North American Material Handling segment, fourth quarter net sales were 55 million, an increase of 7%. For the year net sales were 209.5 million, an increase of 11%. Income before taxes was 5.4 million in the fourth quarter, a decrease of 15%. For the year income before taxes was 16.3 million, a decrease of 17%. The key performance factors in the North America Material Handling segment for both the fourth quarter and full year were higher volumes throughout its product lines, due in large part to our focus on new bulk container systems, expansion into new markets and increased customer conversions to reusable packaging from cardboard. In addition to the higher sales achieved throughout the year, we implemented higher selling prices and maintained strict control in operating expenses. On the profitability line, however, our efforts were out paced by the record increases in raw material costs. This segment is aligning for a strong future with exceptional brand strength in our markets, new product development activities, a focus on providing total customer solutions for reusable packaging programs, and advancing growth opportunities in new markets.

This segment will also be utilizing the new facility established in Brazil last year, the manufacturer select Material Handling products for agricultural and industrial markets with an eye toward expanding the business across a wide range of high growth niche markets there. In 2006 we will strengthen initiatives in North America Material Handling to overcome raw material costs with even more productivity initiatives and improved selling prices. And we will raise the performance bar in the market to further justify our prices by delivering to customers the best value in quality, service and innovation versus competitors who want to gain business based simply on lower prices. Our customers want reliable products and suppliers focused on improving their business over the long-term and that's where our north American Material Handling brands excel. Economic weakness plagued the markets of our European Material Handling segment last year.

In the fourth quarter of 2005 net sales were 40.4 million, a decrease of 11%, the unfavorable translation of foreign currencies, primarily the weaker Euro, decreased net sales by 3.6 million. For the year net sales were 166.8 million, a slight decrease from the 167.2 million reported for 2004. Foreign currency translation did not have a significant effect on net sales for the year. Income before taxes for Europe was 3.8 million in the fourth quarter, an increase of 53%. The unfavorable translation of foreign currencies decreased income before taxes by 404,000 in the quarter. For the year income before taxes was 8.3 million, an increase of 40%. Foreign currency translation did not have a significant effect on income before taxes for the year.

The key factors influencing the European segment in the fourth quarter and year were lower sales volumes in the second half of the year, particularly in the fourth quarter, due to soft markets and higher raw material costs. Our new management team there took swift action to implement a strategy of higher selling prices and reduction in operating expenses. This really mitigated the impact of higher material costs and improved profitability for the year on a near constant level of sales compared to 2004. However, for approximately the same size business as we have in North America, income before taxes of 8.3 million in Europe, versus 16.3 million in North America, is a very telling scenario about the costs of operating in Europe. As we've said before, our segments and brands are under continuous review for their strategic fit within our overall portfolio of operations and where we determine the best avenues for growth lie.

In the case of European Material Handling, we've said before that we ask ourselves do we need to be there, does the product line complement North American operations, are there strategic customer synergies and even more. We're mindful of the trend towards consolidation in the European marketplace. There are only three main competitors there including us. Our priorities now in Europe are focused on determining where we put our resources and what's most advantageous for our overall growth. Our automotive and custom segment experienced another year of double-digit sales growth due in large part to strong customer demand for our engineered plastic and rubber components and assemblies and OEM automotive, recreational vehicle and heavy truck markets. In the fourth quarter of 2005 net sales in the segment were 48.2 million, an increase of 8%. For the year net sales were 195.1 million, an increase of 14%. Included there is incremental revenue of 10.1 million from acquisitions.

However, here is what we feel is the really good news in automotive and custom. After decreasing for the prior three quarters of 2005, income before taxes was 1.6 million in the fourth quarter, an increase of 38%. Higher selling prices kicked in and along with improved sales volumes and cost controls offset higher plastic and rubber raw material costs. This put us in good position coming into the first quarter of 2006, especially on the pricing front which is the key. For the year income before taxes was 10 million, a decrease of 24%. Our efforts with higher pricing to offset material costs in Automotive and Custom lagged during the first part of the year, which hurt the full year performance. As I said, however, now that we've gained some pricing traction for a strong fourth quarter finish, I think we have favorable momentum for improvement through 2006. Through synergies of products and capabilities in the Automotive and Custom segment, we continued to make strides in 2005 to further diversify our customer composition and lessen exposure to volatile markets.

We are reviewing this segment to target under developed niche markets and to refocus our efforts and resources on the areas with the most potential to deliver stronger, more profitable growth. Our Lawn and Garden segment turned in a stellar performance in the fourth quarter and throughout 2005. In the quarter net sales rose 21% to 45.5 million. For the year net sales increased 44% to a record 170.4 million, which includes incremental revenue of 28.9 million from acquisitions. Income before taxes in the Lawn and Garden segment was 5.3 million in the fourth quarter and 16.4 million for the year, increases of 59% and 37% respectively and record performance for both periods. The key factors influencing the segment for both the fourth quarter and the full year of 2005 were higher selling prices, increased unit volumes and cost controls, which offset the higher costs for plastic raw materials, strong customer response to our proprietary picture pot custom graphic containers, which put these colorful products into point of purchase displays at a leading home improvement chain nationwide, and business that we have expanded for 2006 to include other industry leading customers.

We introduced new decorative resin planters last year, featuring innovative designs and unique finishing techniques, which helped us to expand business with some of the top retailers throughout North America. And our unmatched selection of hanging baskets, flats and other plant packaging products and services fulfilled the high demand and the tight turn around schedules for plant growers and their suppliers throughout North America last year. We will continue to build on the gains from innovation, new customer development, exceptional service, product pricing, and expense control that characterize this segment last year. All of these efforts will only enhance the value we bring to the marketplace and boost our position as the industry leader in horticultural packaging products. I would now like it turn it over to Greg Stodnick, to review some other financial measures for the quarter and year. Greg, it is all yours.

Thanks, John. As you may already seen from the news release our gross margin in the fourth quarter decreased to 28% of sales compared to 29.4. However, this was basically the smallest percentage decrease we had for the year, as basically our selling price increases kicked in. While we're able to, we believe, are able to recover about 75% of our higher raw materials through increased pricing cost controls and other manufacturing initiatives, the impact of the higher raw material costs on full year increased gross margin to 27.2 compared to 29.7 last year. Our operating expenses decreased to 21% of sales. In the quarter operating expenses increased to 21.6% of sales from 23.6 in 2004. For the full year the SG&A decreased to 21.2% compared to 23.4%. Again, this positive change demonstrates our strict focus on cost control initiatives and advancements during the year.

Net interest expense increased 4%, even though we had lower borrowing levels because of the higher interest costs. For the whole year net interest expense increased 17%, which again reflects our higher interest rates and, on the average, slightly higher borrowing levels. Income before taxes for the year. Income taxes as a percent of income before taxes was 34.3% this year compared to 33.6% last year. As we said in the news release, the higher effective tax rate for 2005 was primarily due to the additional income taxes of approximately 281,000 which related to the repatriation of approximately 4.4 million in dividends from foreign subsidiaries. We continued to make good progress on our debt reduction last year. Total debt at the end of 2005 was 252.8 million, a reduction of 24.6 million from the 277.4 million at the end of 2004. Total debt as a percentage of total capitalization was 43% at the end of the year, compared to 44% at the end of 2004.

For the year our capital expenditures were 25.4 million. The two largest single units were basically our expansion with a new manufacturing and distribution facility in Brazil and the expansion of our Sandusky, Ohio plant to a little over 300,000 square feet, which will enable us to have greater efficiency in producing certain plastic and metal Material Handling products. For 2006 we expect our capital expenditures to be in the range of 25 and 30 million for the year. A quick working capital review. Even though we had a sales increase of 13% for the year, we actually had a working capital decrease of 4%. This was due basically to our improved collection periods. We went from 61.5 days last year to 58 days. We increased our inventory turns from 5.0 to 5.2 times. And we increased our payables turn by about 15 to 20%. John, that's it.

Thank you, Greg. A few more items before we go to the Q&A phase of the call. I would like to summarize the strategic business evolution process that we spoke about in the release and which we discussed briefly on the conference call in the second quarter last year. This will give you an idea of where we're going, how we plan to get there and what we are measuring ourselves against. Our marked improvements in performance last year, while still not to the level we want to achieve, are a direct result of new strategic operating initiatives enacted at every level of our business segments, pricing, new products, synergies, cost controls, the right customers, markets to emphasize or not emphasize and more. Our strategic business evolution is not a physical plan that we're going to announce, since it would involve many competitive items, but you will begin to see throughout 2006 that the Company will phase in more initiatives and elements to transform and evolve its operations to strengthen financial performance and return to shareholders.

As we said in the press release we have five key business principles that are central to defining the priorities in our strategic business evolution, what we do and how we do it. These principles are business growth, customer satisfaction, cost control, organizational development and positioning the business for the future. Each of those principles and their components are the cornerstones of how we will compete and win. Let me give you a few points on what components make up each of these areas. For business growth we're focused on new product innovation. We must lead our markets here. Developing new business in both existing and new markets, fully utilizing our cross marketing and selling synergies of our businesses, implementing pricing to match the value of our products and increasing return to the bottom-line. For customer satisfaction we emphasize being customer centered and easy to do business with, continuing to develop partnerships with customers to create mutually beneficial value and maintaining our hallmark high quality standards.

Under cost control our focus is on controlling expenses, which means spending money like it is our own, reserving cost reductions already made, withdrawing from low margin high cost markets, improving efficiency and equipment utilization throughout our business, justifying expenditures, focusing on the return on investment and passing on raw material increases to customers. The bottom-line is minimize expense, maximize cash flow. For organizational development we mean having the right people in the right positions, implementing succession planning at all levels, maintaining ongoing professional development for a continuous improvement culture, reinforcing employee accountability and rewarding performance. Finally, in positioning the business for the future we emphasize being the innovator of new, niche high profit products, being a low cost producer of certain commodity products, constantly evaluating the organization, asking the question what do we need to grow the business, making selective acquisitions to accelerate growth and making opportunistic divestitures to improve our growth potential, trimming the tree if necessary.

By pursuing these areas of opportunity in our business we strengthen our innovation, enhance brand leadership in the markets we serve, build stronger customer relationships and position ourselves to grow on a sustainable basis. Our key objective, which we believe bears repeating, is to deliver sustainable profitable growth across our markets and improve the financial health for our customers, shareholders and employees. I believe that can be achieved through all the areas just presented. Hopefully, that review of our strategic direction did not bore you, but so people ask the what, where and how of our businesses and I wanted to give you a basic understanding of how we're operating and how we will make decisions to evolve and grow. And now one last order of business. In April of this year Greg Stodnick will retire as CFO, after 26 years of dedicated service to Myers Industries. Greg has been an immeasurable help and support to me during my tenure as COO and now CEO, and I offer him my heartfelt thanks for that and best wishes for his retirement.

Transitioning to the CFO position in April will be Don Merrill. He joined the Company in January and is with us here today. I would like to welcome Don to our management team and let him introduce himself to all of you. Don.

Thanks, John. I am excited to be part of this truly fascinating and very well positioned Company. Greg has been an integral part of the Myers Industries growth and I to truly wish him all the best. Right now we are working to make a smooth transition and I am eager to work with our management team to build an even stronger future for the Company. Thanks. John.

Thanks, Don, I appreciate that. With that we can conclude management's presentation and move on to the questions phase of our program. With that I will turn it back over to Max.

Thanks, John. Our operator will now queue up questions. I'll turn it back over to him to give your directions.

[OPERATOR INSTRUCTIONS] Our first question comes from the line of David Siino, Gabelli & Co. Please proceed with your question.

Good afternoon. Can I echo those comments, congratulations, Greg, and welcome to Don. A couple questions. Your SG&A for the year and for the quarter, I believe, was about as low as it's been in about eight or nine years. And I am wondering if there is additional leverage on that line that you can get in '06?

I think there will still be additional leverage. I think of the programs we have in place you will continue to see that. I think you saw that during the year as each and every quarter got better than the quarter before, and I think you will see a bit more of that going into 2006.

Okay. On the gross margin line, John, which businesses do you think you have the most operating leverage in in 2006?

Probably our Lawn and Garden segment, our distribution segment, probably our Material Handling North America segment. We obviously have some pressure in the automotive and custom group and the European group because of the intense pressure in Europe on the economic situation. I think we have some pretty good opportunities in those first three that I mentioned.

Okay. You mentioned some actual pricing power on the automotive side, and that's unusual to hear. I am wondering for how long is that locked in for?

Again, David, it is not all the OEM. We do a lot of heavy truck and some are OEM, as Honda, Toyota, and people like that who basically they don't try to kill you if price increases. Again, our OEM business is not that much. It is maybe 5 to 7% of our total Company. When you look at that, we have made a lot of in-roads with the other type of customers in that group.

Sure. The last question on resin prices and I will jump back in the queue. You said mid-80's in November. Of what magnitude have you seen declines year-to-date?

On polyethylene we've seen a slight decrease, anywhere from $0.04 to $0.06. Polypropylene has been holding itself pretty well even. In fact, there is a little pressure there in the market to try to move that up, whether it will happen or not, we're not sure.

Thank you very much.

Our next question comes from line of Mr. Chris Manuel of Keybanc Capital Markets. Please proceed with your question, sir.

Good afternoon, gentlemen.

Good afternoon, Chris.

First let me -- Greg, can you run me through what the breakouts by segment for volume and price were? Then John, if you could give us what you think an outlook would be for growth in each of those segments going forward?

Chris, I can give you the overall, but once we start getting into segments, then I don't feel comfortable with those numbers that I would have to give out.

Okay.

Overall, our sales were up about 101 million for the year. Okay? 39 million came from acquisitions, the remainder of the 60 million was probably about 60% price and 40% volume.

Do you have a similar number for the quarter?

It is probably closer to 70/30 for the quarter. The quarter volume was basically -- there was no acquisitions in there and it was probably closer to 70/30 price and volume.

And then, John, can you maybe walk us through what you're seeing is your best opportunity for -- one of the pieces of your strategy was business growth. Can you talk us through each one of your strategies what you think -- each one of your segments, what you think your best opportunities for top-line growth are?

Yes, I will do the best we can like, Greg says, it is somewhat tough to breakout segments. Again, our -- .

Maybe not even necessarily the percentage, but just what you think the opportunities are.

Our Lawn and Garden business we think has some top-line growth. Our Distribution business, which is steady, grows every year. We're obviously the number one in that business. Material Handling North America will grow, I am just not so sure how much it will grow. A lot is going to depend on the economic situation. Automotive and Custom we have some businesses that will have a fairly nice growth rate, others won't. We'll probably call that one an even. And Material Handling Europe, that's a question mark because, again, we just don't know what's happening in Europe as far as what's the 2006 outlook going to be. There is pretty much three competitors in Europe. We're one of them. There is certainly a lot of pressure there for everybody to try to grow at the expense of each other. It makes it somewhat difficult.

Last question and I will turn it over. Is D&A for the quarter and what you're looking for for next year?

It was about 36 million for the year. I don't have the quarter, Chris. It was about 36 million for the year. We'll probably be in that same area, 35 to 36 million next year.

Okay, thank you.

Our next question comes from the line of David Leibowitz of Burnham Securities. Please proceed with your question.

Good afternoon. Very briefly a few unrelated issues. One, what is your biggest concern as we look forward through the balance of this year?

Biggest concern is a couple of things actually, David. Again, what will resin prices do? We're not sure. Secondly, economic situation in Europe. We're not sure. Potential economic situation here in North America in some of our markets. We're bullish on growth for 2006. As we said our strategy calls for that. We think we have the right things in place to do that. We are somewhat at the mercy of what happens with the price of plastic resin for sure.

A second question. How many new -- can't say how many, what percentage of your sales last year were from new products?

About 10%.

What would your target be for this year?

Hopefully 10%. We're trying to keep it in that vein.

And realistically, how much more margin expansion do you believe the Company is capable of going out not one year but let's say two or three years.

You mean our operating margins or gross margins.

Gross margins.

I think we'll see gross margins approaching the previous year's level and even going a little bit more. Like I said, we have done a very good job. Our operating people have done a very good job in getting the prices back up there. A lot is going to depend on resin. If resin stays about where it is, we'll be okay. If it goes up a little bit more, we'll see a little bit decline. If it goes down, we'll really be in good shape.

A piece of housekeeping, do we have much of an issue with expensing of stock options this year?

No. I think in total it would be maybe 2 to $300,000.

And lastly, do you have a larger than normal inventory of resin at this time of the year only because of the recent price declines?

No.

No.

No, we don't. We follow it very closely. We sometimes buy on the spot market. We try to play the percentages on pricing, so we don't load ourselves up.

And lastly, which is going to be the toughest fourth quarter -- quarterly comparison this year, year-over-year?

Probably the first because, again, our resin price comparisons are probably going to be looking at $0.70 versus $0.55. Our first quarter is going to be the toughest comparison.

Thank you very much. Greg, a very, very wonderful retirement. Enjoy it very much.

Thanks, David.

Thanks, David.

Our next question comes from the line of Mr. Jonathan Wicher of Fine Capital Partners. Please proceed with your question.

Hi, guys. I would like to start as well by congratulating Greg on his retirement, that's great, and welcoming Don.

Thank you.

Thank you.

Moving on to the quarter, it was another great quarter by you guys, real solid job managing your business in such a volatile environment. I guess I was most surprised by the gross margin in the quarter, particularly with what happened with raw materials, kind of post Katrina and Rita. I was just wondering if you could help me understand kind of the dynamics of what -- how those negotiations went. Were you in a good pricing position coming into quarter or did you feel like you were aggressively raising prices as the quarter went on?

We were in a good position because everybody knew what was happening. With Katrina, the media built it all out. Everybody knew that the gas and oil production were down. Our customers. I am saying that. It was easier at that standpoint to get in price increases and carrying on with the momentum we had going into the fourth quarter. Just everybody understood, the hurricanes did this and it was just easier to get price increases in.

And given that, would you expect any of that -- do you have to give back any of that as some of these pressures sort of relieved.

Not unless resin drops to about $0.45.

Let's hope it does.

We keep making sure our customers understand that we still have not gotten back to even yet. We're still a little bit behind on pricing. And so we try to do everything else we can from the stand point of making sure they got a quality product on time and that goes a long way, believe me, in our businesses. They're willing to pay a little bit more for that.

And then just a quick follow-up to that. This was even more pronounced in your European business. Was it, again, just more of an understanding on the pricing? Was it less robust competition?

I think it was a combination of a couple of things. We put a new management team in place at the beginning of last year.

Right.

A new general manager and a new CFO. Basically, they just took a much harder look at the business than we had before and got better pricing. But a lot of it just came from reduction in operating expenses.

Thanks.

Thank you.

Our next question comes from the line of Harry Teluri of Foresight Research Solutions. Please proceed with your question.

Hi, this is Harry for Brian Langenberg.

Hi.

My question has actually been answered. Thank you.

Our next question comes from the line of David Siino of Gabelli & Co.

You already had your turn.

I am sorry. Just a couple housekeeping items, Greg. The cash balance at the end of the year and do you have a cash flow from operations number?

Cash balance was about 18 million and cash flow from operations was about 68.3 million.

Okay. And John, just a follow-up to your re-engineering of the business.

Go ahead. What happened, Max?

I am sorry, sir, it appears that his line has dropped.

Oh. Okay. I couldn't hear the question.

Our next question is coming from the line of Mr. Chris Manuel of Keybanc Capital Markets.

Rich, you only get one turn.

I was going to wish you a happy retirement, but -- .

Now you're not?

That's right. No, I am just kidding. Have a great retirement, Greg.

Thanks, Chris.

Wanted to touch on another element that you talked about in your strategy, John, and that was selectively looking at pieces of the business, either that you may divest or areas where you think you want to grow, via acquisition, and I was hoping you could give us an assessment. I think you made it pretty clear when you spoke of which area you may be willing to look at paring back, but could you talk a little about areas where you may want to grow some and look at acquisitions and you how you think of those allocating capital those directions?

Yes, and to your first point, we're still making the evaluation that we need to of certain businesses, but from a growth standpoint, I think the Lawn and Garden business is an exceptionally good business. We enjoy it. I think there is some opportunities there to look at some potentials to bolt on if they're the right business. The distribution business as well, there is some nice opportunities out there to bolt onto that piece of it. I wouldn't rule out Material Handling North America if the right opportunity presented itself. Again, here there is a limited number of competitors, but they're pretty good competitors, and there will be a shake-out as we head through the next few years, I think, in that marketplace. Those are probably the ones that we would take a strong look at.

The one piece of the business that we didn't discuss either into those camps was the automotive business. Part of your business that you've grown a bit recently has been with one transplant OE that's here in Ohio and has been growing quite nicely. As you think of the rest of the auto business, is that something that parts or pieces of which you may consider to strategically look at one-way or the other?

It is always a possibility. I think that there is parts and pieces of the automotive and custom group that offer some real synergistic opportunities for us. We've done some of that, but there is still some more that needs to be done. I think as we move along through that process and accomplish that, then we would take a strong look at whether or not divestiture and/or acquisition is the right thing to do for that business segment.

Thank you very much, gentlemen.

[OPERATOR INSTRUCTIONS] Our next question comes from the line of Mr. David Siino of Gabelli & Co.

Sorry about that. I think I got cut off there.

You did.

John, I was just asking about return on capital and you improved this year and what are your targets for return on capital going forward? Thanks.

Greg, do you want to?

He asked you the question.

I know. I know.

Again, our return on assets did go up. Again, it is not as much as we thought it would be. In some cases we're getting very good return on assets, some were operating divisions, some were not. I think we've increased our return by about 15% this year, 16%. I think we're probably wanting to shoot for at least that kind of improvement next year also.

We went from 10 to 12. We're up about 20%.

Okay. Thank you.

Our next question comes from the line of Tim Burns of Cranial Capital. Please proceed with your question.

Good morning, John, or afternoon, and Greg and welcome to Don. Greg, is this your last official conference call?

Probably.

Yes, probably.

I would be going out and having a cold one after this one, I tell you. The question I have is one thing to watch out for, all season long we've listened to companies talk about how well they've done on the SG&A line, but they haven't talked about how the inflationary forces of energy and resin have kind of boosted the top-line, so if you do the math, it looks better. I would be careful on that. The other question I have for you is when you look at Material Handling and, John, your comments would be appreciated, is it a business where you have to participate in all markets both geographic and product? Is sounds like you've asked the question as to whether we need to stay in Europe or -- in other words, it is not a global business, it is a multinational business.

That's correct.

And then what about do you have to be in auto as well as food or can you sweeten it up by just focusing on certain segments as well?

In fact, we've done that with our North America Material Handling. There is about eight different segments in that business, whether it be agriculture, automotive, distribution and so on. Certainly our business leaders there pick and choose in what they want to be in, what they don't want to be in, where it makes sense. O it might be a niche if we have a particular product like seed processing and so on. The other part of your question, Material Handling you could say is a global business, but from our standpoint Europe is pretty different than what it is in North America, primarily because of size. Everything there is metric, so all the tooling is different. There is not a whole lot of interchangeability. People here in the states don't use the metric type sizes. They're not necessarily that you have to have both, we do have both. But it is certainly something that we continue to evaluate constantly.

Obviously if you could -- just sounds like if you could reallocate proceeds from Europe to either North America or another part of the world, it would have a net positive impact on your profitability and your returns?

It is a very real possibility.

And the Lawn and Garden area, are you benefiting partially as a result of some of the problems of your competitors or some of whom are soon approaching bankruptcy and things -- ?

I just think it is a fast growing market and we've had some innovative things like the picture pod(ph) in it. We have good relationships with basically a lot of the growers and the distributors and it is just we're leveraging basically our own expertise and our own innovations. We have a terrific product line in Listo that virtually nobody else can do. That's picture pod(ph) is proprietary but so is Listo. It is top of the line plastic planters. I think we've benefited from technology and innovation and cost control. I don't know of that many competitors going out of business in that area. Maybe there are some, but I think it is more what I said.

Listen, guys, nice job and good luck in the new year.

Thank you.

[Operator Instructions] Gentlemen, it appears that there are no further questions from our participants.

Thank you very much. Max.

With no other questions we thank everybody for your time and as a reminder the transcript of the call will be available on the Myers website within 24 hours and the replay will be there via webcast. Thank you all very much. Have a pleasant afternoon.

Ladies and gentlemen, this concludes today's teleconference. We thank you for your participation and you may now disconnect your lines.