Myers Industries Inc (MYE) 2006 Q4 法說會逐字稿

Greetings, ladies and gentlemen. Welcome to the Myers Industries Inc. 2006 fourth quarter and full year earnings announcement conference call. (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. Thank you, Mr. Barton. You may begin.

Good afternoon and welcome to everyone. I am Max Barton, Investor Relations Manager for Myers. With me today are John Orr, our President and Chief Executive Officer, and Don Merril, our Vice President and Chief Financial Officer.

As you know, we issued our news release this morning, detailing some financial results for the quarter and year. If you have not received a copy, you may access it from our website at myersind.com at the bottom of the home page. As a reminder, this call is also being audio webcast from our site, and will be archived there, along with the transcript, within approximately two business days.

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 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. These risks and uncertainties are detailed in the Company's SEC filings, and may be found in the most recent 10-K filing.

Following management's remarks, there'll be a brief question-and-answer session. And now I am pleased to turn the call over to John Orr, President and Chief Executive Officer.

Thank you. And good afternoon to all of you. It is a pleasure to have you with us today. I'm pleased to report to you a very successful 2006 fourth quarter and year for Myers Industries. From continuing operations, and that is what we're going to focus on throughout the call, fourth quarter net sales of $194.3 million and full year net sales of $780 million were increases of 2 and 6%, respectively. These set records for both the quarter and the year compared to 2005 results, adjusted for continuing operations.

Fourth quarter net income and earnings per share at $7.3 million and $0.21, up 25% and 24%, respectively, marked our strongest fourth quarter performance in seven years. For the full year net income from continuing operations was $28.7 million, an increase of 48%. And earnings per share was $0.82, an increase of 46% compared to $0.56 in 2005.

Net loss per share as reported for the full year was $2.07, which includes a goodwill impairment charge in discontinued operations of $3.14 per share. Discontinued operations was the Company's European Material Handling segment, and its businesses were sold earlier in 2007. Taking both continuing and discontinued operations into account, and looking at earnings per share on a pro forma basis for the full year of 2006, we delivered earnings per share of $1.07 versus $0.76 in 2005.

Now turning our attention strictly to continuing operations, 2006 indeed showcased outstanding performance. The everyday actions we're taking to profitably grow the business for the long-term, including productivity improvements, cost controls, focusing on strategic customers and markets, niche product innovation, and pricing adjustments to manage raw material costs are all paying off.

As we said in our mid year conference call and subsequent communications, we're on track with the key elements of our strategic plan. Part of that includes potential divestitures and strategic acquisitions to accelerate growth and become more profitable. The purchase of ITML Horticultural Products earlier this year in our Lawn and Garden segment, followed by completion of the sale of our European Material Handling businesses are just two critical components of the growth strategy we're executing, putting our resources and investments in the core business segments and markets with the greatest growth potential. Don Merril will review some of this in a segment report coming up next.

Be assured as we execute on both the internal and external initiatives from our operating strategy, we're focused on sustainable, profitable growth, and taking the critical actions necessary to build a better business for our shareholders and customers and employees.

Now to review the fourth quarter and full year financial results from the business segments, as well as some other key financial metrics, I would like to turn the call over to Don Merril, our Chief Financial Officer.

I want to echo your assertion that we are indeed executing on all aspects of our strategy throughout the business segments, and our performance clearly shows that.

Turning to some financial measures, I once again am very pleased to report that the Company achieved much stronger gross margins for both the fourth quarter and the year. In the fourth quarter gross margin from continuing operations increased to 26.6% of net sales from 25.9% in the fourth quarter of 2005. This represents the fourth consecutive quarter for gross margin improvement over the prior year's comparable quarter.

For the 2006 full year, gross margin from continuing operations increased to 26.6% of net sales as compared to 24.6% in 2005. The gross margin improvement is the result of our continued focus on productivity gains and strategic pricing to help offset raw material inflation and to improve efficiency across our operations.

On the SG&A side of continuing operations, for the fourth quarter selling and administrative expenses increased slightly as a percent of sales to 19.3% from 19% in the fourth quarter of 2005. For the year, selling and administrative expenses increased as a percent of sales to 18.8% from 18.1% in 2005. As we indicated in the news release, this was due primarily to higher freight expenses, but also reflects higher compensation and some costs for streamlining our corporate infrastructure.

On the plastic raw material (technical difficulty) front, while the fourth quarter showed some muting in prices due to slow demand, prices for the year on average remained higher compared to 2005. High-density polyethylene and polypropylene prices were 8 to 10% higher on average compared to 2005, which as you may recall was the year of historically high raw material prices.

As John mentioned earlier, we have worked diligently on adjusting our selling prices to help offset raw material inflation and to match the value that we put behind products and services for our customers.

Now let's turn our attention to the continuing operations in our business segments and their performance. This is detailed in the press release. And again any figures for the 2006 fourth quarter and year are all compared to the same periods of 2005.

In our Distribution segment net sales were $50 million in the fourth quarter, an increase of 2%. For the year, sales in the segment were $197.3 million, an increase of 4%. Income before taxes in the Distribution segment increased 2% to $6.1 million in the fourth quarter. For the year income before taxes increased 8% to $22.2 million.

The key performance factors in Distribution included favorable product mix, continued purchasing and pricing management across productlines, productivity gains throughout the branch network, and strict attention to controllable costs. With an industry-leading brand, unrivaled capabilities and opportunities for adjacent acquisitions, this segment provides a solid foundation for continued growth.

In our North American Material Handling segment net sales in the fourth quarter were $58.2 million, an increase of 6%. For the year net sales were $240.1 million, an increase of 15%. Income before taxes for North American Material Handling was $9.5 million in the fourth quarter, an increase of 76%. For the year income before taxes was $34.9 million, an increase of 114%.

The key performance factors in North American Material Handling included a favorable product mix with value-added container systems and packaging conversions, growth with key customers across markets, pricing adjustments to help recover raw material costs, internal productivity gains, and cost control. Our strong Akro-Mils and Buckhorn brands in this segment are well-positioned to deepen their brand leadership in the reusable packaging market, and provide multiple growth platforms through innovation, product selection and value-added services.

In our Lawn and Garden segment, net sales for the fourth quarter were $40.5 million, a decrease of 11%. For the year net sales were $160.2 million, a decrease of 6%. Income before taxes for the Lawn and Garden segment was $1.6 million in the fourth quarter, a decrease of 70%. For the year income before taxes was $8.1 million, or a decrease of 51%.

This segment was hurt in 2006 due to poor weather conditions in the first half, then buying delays in the third quarter due to slowed retail forecasts being supplied to growers. Fourth quarter sales remain constrained by our customers' uncertainties around retail forecasting, as well as highly competitive pressures in the marketplace.

We indicated earlier that the industrywide buying delay would shift sales into the first half of 2007. In a strategic move to strengthen our competitive position in this segment, we acquired ITML Horticultural Products earlier this year. This move positions Myers with the strongest brands, strategic geographies, and unmatched resources to meet the changing needs of customers in the market, presenting clear opportunities for our growth.

In our Automotive and Custom segment net sales in the fourth quarter were $50.1 million, an increase of 4%. This reflects steady demand across several of the segment's markets and continued improvements in pricing. For the year net sales in the segment were $240.7 million, an increase of 5%. Income before taxes for the Auto and Custom segment was $2 million in the fourth quarter, an increase of 25%. For the year income before taxes was at $14 million, an increase of 40% from the prior year.

Other key factors driving improvements here for both the quarter and full year continue to be success through value-added engineering partnerships with customers, as well as cost controls and productivity gains. Within this segment we remain focused on identifying opportunities with internal synergies to strengthen our positions in diverse niche markets.

Now turning our attention back to the corporate level. We made excellent progress in debt reduction for the year. At the end of 2006 total debt was $201.5 million, a reduction of $51.3 million from $252.8 million at December 31, 2005. This marks the Company's lowest total debt level since 1998.

Capital expenditures for the year totaled $12.4 million from continuing operations. Given the divestiture actions and potential investment opportunities, we vigorously analyzed our resources at every level of the business last year; however, we did not forego any necessary investments for safety, new products, growth or productivity.

I will now turn it back over to John for a wrap up.

We are pleased with the outstanding operating results for both the quarter and year, and we have clear opportunities for continued growth across our business segments. Strict application of our business strategy yielded many significant internal improvements last year. We benefited from an ongoing focus on strategic customers and niche markets, strict cost controls, quality and service programs that heightened customer satisfaction, and rightsizing the business. We expect to realize further long-term contributions to sales, efficiency and profitability from these actions.

2007 will be a year of transformation for Myers Industries. We will remain focused on those activities that supported our growth in 2006, as well as potential bolt-on acquisitions. We intend to continue our acquisitive growth with strong companies that can provide the best potential to boost the Company's brand strength and leadership in our chosen niche markets.

All of these efforts will continue to position Myers Industries over the long-term to deliver sustainable benefits for all of its stakeholders. With that, I thank our shareholders for the confidence you have placed in the Company's direction. I also thank each of our dedicated employees who are positioning our great brands for unmatched innovation, customer service and growth.

That concludes management's presentation. I will turn it back over to Max so we can take your questions.

All right. We will throw it over to the operator. And you can go ahead and queue up the questions for us please.

(OPERATOR INSTRUCTIONS). Chris Manuel, KeyBanc Capital Markets.

A couple of questions for you. First of all, can we get a little more color on the Lawn and Garden business? It looks like, as you guys had discussed, that there were some order flow adjustments, and some of those trickled into the fourth quarter. But from where you sit today, do you think that, number one, any reason that the Lawn and Garden business still doesn't have mid to high single digit growth, and that we shouldn't -- is a characteristic of the group, number one. And then, number two, has the order flow came back around to support that thus far into 2007?

I guess anticipated this question. But we're still very bullish on this segment of our business. This correction that the Lawn and Garden industry is going through from the big-boxes to growers has really created a change in the way people have been doing business, and therefore there were some uncertainty, even as we hit the middle of the fourth quarter, as to what products were to be selected by the big-boxes to have the growers make.

We are in a serious situation right now of I think probably all of ourselves and our competitors to catch up. The orders are there and we're trying to produce. Again, we're still very bullish on this business. I think our acquisition of ITML was very substantive from our part, in that it helps to consolidate the industry. We chose to be the consolidator. So again, we see a good growth strategy here in this particular business.

Just as a follow-up was that from -- you mentioned that weather was a bit of an issue in the first half last year.

Right.

And heading into the first half this year, would there be any reason, with the orders all coming in now and with some what I guess we would consider some relatively easy comps, that we shouldn't start to see year-over-year improvement, aside from the ITML being added in, in the base business?

Yes, I would hope so. Again, it is hard to tell because we don't know what the weather is going to be in April, May. We kind of hope sometimes for a late -- not sometimes -- we hope for a late spring, because that usually requires a second buy then on containers. It makes things go out a little bit longer.

The key is what is happening on Mother's Day. If it is cold and rainy on Mother's Day it is probably not going to be a real good year. We really don't know looking forward, because I can't predict the weather. At this point from orders that -- moving forward, it still looks like a pretty nice growth year. But we will just as to see what happens.

Okay. One last question for you on the Lawn and Garden. That is in your press release and in your prepared remarks, you discussed some additional competitive landscape -- or I think some competitive actions -- issues there. Can you broaden that out and give us a little more color there?

Competitive action. Well, yes, in 2006 ITML is a major competitor of our Lawn and Garden group, and I think if we go back to what we said in previous discussions where there was a change in the requirements, approximately 15 to 20% less containers being needed for the industry as we went into the third and fourth quarter. Pricing pressure then becomes pretty intense, because everybody is struggling to get business to keep their plants full. Again, not the only reason, but one of the reasons that we saw the acquisition of ITML being important for us was just that, to help us to kind of organize the segment or the industry through consolidation.

Thank you much. And if I can switch gears a second to the Material Handling business. You had a fabulous quarter there. Some of the best margins that I think that I can remember seeing for long, long time. Is this with some of the pricing and some of the extra volumes and such that you mentioned? Is this a reiterable run rate that we could look at going forward?

I think probably the answer to that is yes definitely. We have seen a nice, a real nice pick up in that business, which started midpoint last year. Our team there has done just a fabulous job. It is hard to congratulate them too much for the job they have done in both pricing and in expanding their business. A couple of competitors also came -- have come together out there, and that sometimes can create real havoc. And we have worked our way through that pretty well. So I think there's nothing but great opportunities in this segment.

Bob Goldberg, Scopus Asset Management.

A couple of questions. I wanted to follow-up on Chris' question on Lawn and Garden. Do you expect you see some margin recovery as we move through 2007? Obviously, margins were under a lot of pressure as the volumes were constrained in the second half of '06. I'm wondering what --?

Yes, I think the answer is yes definitely we do. Again, with the ITML acquisition I think that is going to -- that will help, as well as just the general business coming back. Dependent upon how the season goes, but yes, I think we see some opportunities there to improve our margins.

Will ITML help right out of the box? It sounds like it will, if for nothing else, keep maybe a little bit more disciplined pricing environment. But how do you view the short-term impact from ITML?

Obviously we don't want to talk about specifics and so on. Having ITML become a part of our Lawn and Garden segment will help. I don't know it is going to help right off -- out of the box. But certainly from the synergy activities that we're going to be doing, that will improve our bottom line. That was really the biggest part of the plan of making the acquisition was to improve our factory utilizations and so on. They bring also some strategic customers and geographies and products that we didn't have. But I think if you wrap all of that together, including your point, I think, yes, that would be the overall improvement. Don?

Let me expand on that a little bit. I do think that the combination of these two businesses gives us a very unique opportunity to enhance the overall structure of that business environment. But to answer a little bit more specifically around accretion here, we do have some purchase price accounting right out of the box that we're going to have to take care of. Those are things that need to be cleaned up here in the first couple of quarters.

Have you thought more -- I'm sure you have -- but are you ready to talk a little bit more about what the potential synergies could be with this acquisition?

Yes, we have. We are working the project every day since the day we made -- got the deal done. We're not ready yet at this point to make any announcements, but we continue to look at some major synergy activities that would go on through this process. Again, it revolves around productline. It revolves around manufacturing facilities, people, sales capabilities, all the usual suspects that you would look at in synergy activities. When we get everything together then we would be more than happy to perhaps make an announcement as to what we're doing.

David Siino, Gabelli & Co.

John, could you be more specific on what you would define as your core businesses? I think you indicated perhaps some further divestitures later this year, and do you want to get into that?

Really what we were -- what I was talking about in the prepared remarks was the planned divestiture last year of Europe, and leaving four key segments of our business, Lawn and Garden, Automotive and Custom, Distribution and Material Handling. At this point I think we would have to say that all four are very key for us moving forward. There might be a part or a piece in one or two that we might take a look at as far as a potential divestiture goes.

But the ones that we certainly are focused on growing would be Lawn and Garden, Material Handling, and our Distribution business. Automotive and Custom, we are continuing to work on some synergy activities there, especially between our Buckhorn Rubber and our Michigan Rubber operations. The other pieces are doing pretty well. So at the end of 2007 you'll probably see a pretty similar landscape to what we have today, although you never know, there could be something that comes and goes. I guess that is the best way to say it.

The balance sheet being where it is, you're comfortable about this level of leverage?

Yes, absolutely. Don, do you want to --?

Yes, we are comfortable where we are right now.

Just a housekeeping question for Don. Fourth quarter and full year depreciation was --?

I can give you depreciation for the full year. Depreciation was $26.5 million and amortization $1.7 million, so a total really of $28.2 million.

Thank you.

For the year, right?

Yes.

Sam Nicholls, Quillen Securities.

Sorry to home in on the Lawn and Garden segment, but all your other divisions either met or beat my estimates. A question about your pretax margins there, which came out at 4% for the quarter on $40 million in revenue. If you go back to 4Q '05 on $45 million in revenue, they were 11.7%. Now granted resin prices are significantly higher, but your material handling unit didn't quite take the same hit, so I'm wondering if there's something else that has been going on that has brought margins down?

The biggest issue is competitive pressure in the third and fourth quarter.

Pricing?

Pricing, yes, 2006. Right, yes. Not going into a lot of detail there, I think again this situation that went on where there was a reduction in the required number of products -- serious reduction there, as everybody was rethinking how they were going to market. It really put us and our competitors on point to try to keep business and to keep factories going and so on. And obviously that is not a good situation, and so you can see what happens from a margin standpoint. You go back to the previous year in 2005, the market was very, very good. Everything was running well and margins were up. That is kind what happened.

Do you have a target pretax margin that you hope to do in '07 and '08 in Lawn and Garden? Do you think you can get back to 10%?

We're probably targeting somewhere between 8 to 10%.

Lastly in that segment, have you heard anything of any retailers expanding floor space that is dedicated to the Lawn and Garden section?

Not specifically. But I kind of measure it on just my own visits to the Lowe's and to the Home Depots and people like that, the big-box guys. I notice that their Lawn and Garden sections continue to get larger and larger. And 20 years ago they hardly had anything, and today it is the largest department in their stores generally. We are seeing some growth there. Obviously, it is geographical as well. You know dependent -- we're looking forward to as more and more baby boomers retire and take up the process around home -- horticultural growing that we see an impact there as well. A growth that will come back to us.

Just one quick question on Material Handling. Are you seeing your customers, perhaps some distribution centers carrying more inventory, expanding floor space, any changes taking place here that might bode well or even --?

Not necessarily. I think what we are seeing is a real desire on the part of a lot of our customers to work themselves out of cardboard and wood and use returnable plastic containers and pallets, totes and so on, because from their supply chain standpoint it does mean a lot of cost savings. And we see purchasing people being able to actually become heroes by explaining to their bosses why they need to buy the plastic reusable containers and what it can do to the bottom line. I think we are seeing growth from that standpoint, much more of an inroad into using reusables and getting themselves out of the higher cost of utilizing cardboard and wood and so on.

Bruce Geller, DGHM.

I am just curious how you guys view the acquisition market these days. It seems like it is pretty competitive out there with all the private equity companies flush with cash. Is that impairing your acquisition strategy at all in terms of pricing and attractiveness of properties you are looking at?

That is a good question. But we are such kind of a niche player I think, like the ITML acquisition, that was a deal where some contact was made that probably had been made over some period of time, and nobody else is really involved. I guess -- maybe Don (multiple speakers).

Let me just add to what John is saying here. We are a very strategic niche acquirer. Because of that, it gives us an advantage over the equity guys. We are seeing that certainly in anything that we look at. We think we have an advantage going into those types of acquisitions.

What about the availability of properties you are looking at today, is there a lot of exciting things you are looking at or is it pretty tough?

There are some pretty exciting things out there. Again, in our niche markets most all of our competitors are private companies. A lot of them are maybe even family-owned and started. There are people that are looking to become liquid or get out. And so it does make for some nice opportunities for us.

But back to Don's point, we have some pretty specific things that we might be looking for, and that requires that we find the right niche acquisition potential that will pair up with what we need in our particular segment.

Could you elaborate on that a little bit? What is the profile of the type of property you are looking for?

From an acquisitive standpoint, we obviously are looking for a company that we understand. We understand their processes. It has a great management team, or for sure a good management team, because we're not flush with executives here that we can send in to run it.

It definitely has to be accretive. And it has to make sense from a strategic standpoint. If it is say in the Lawn and Garden group or in the Material Handling group that makes sense for us where we see all that synergy activities that will make the deal accretive. That is kind of what we're looking at. Because we have been an acquirer, there's a lot of opportunities that come across Don's desk or my desk on a daily basis. It is something that we maybe honed our skills over the last few years to be able to do.

Let me add to that. We go through a pretty rigorous strategic process. And we really look through the areas where we want to add. And then it becomes a process of taking the opportunities that are given to us, plus the opportunities that we find internally, to really put it through a pretty tough financial rigorous test. That is really how we identity our acquisitions. And again, we think that we're very competitive when it comes to that.

Could you give a sense of the kind of EBITDA multiples you are being asked to pay on some of these?

Right now a lot we're looking at range from the 5.5 to 6.5 range on EBITDA multiple. And from our perspective, after you add on the synergistic impact, obviously that becomes a much better multiple for us.

That seems pretty attractive in this market, certainly.

It really is in this market. And we've got the ability to look at acquisitions. Potentially not buy the entire business, and by that what I mean is we don't necessarily need to buy let's say volume. We don't need to buy capacity. We can buy customers and molds and put them into our factories, and that is when it really becomes accretive very, very quickly.

Are we likely to see some action this year in that regard?

Yes, I would say yes. Stay tuned.

That sounds great. One last question. The heavy truck market is obviously going to have a difficult year. I forget exactly what that constitutes as a percent of your business, but I imagine it is a fairly profitable business as well. Could you give a sense of what the downturn in that market, how that might impact your overall P&L this year?

I think we always are concerned about the Class A truck business and how it turns up and turns down. But Buckhorn Rubber, which primarily services that market -- and because of the products that we make are a lot of niche products, under hood air handling products and so on, that really nobody else does, we still enjoy a fairly nice margin in that business.

Obviously, we can suffer from volume because of a downturn. But at this point we're still fairly bullish on 2007 with Class A trucks. And of course we know that in 2010 there's another major engine change coming, and that is always an upper for us as well, because there is usually complete engine changes that require complete new parts. Some of the customers have already begun to talk about that opportunity. We know it is cyclical but I think we do a pretty good job of looking and searching for niche products to keep us in play.

What percent of your overall revenue base would be attributable to that market?

Overall percent of the Class A truck is probably 2 to 3%.

Oh, that's it?

Of the total business.

Yes, of the total business.

I thought it was bigger than that.

It is pretty small.

David Leibowitz, Burnham.

A few brief each, totally unrelated one to another. First, what is your current factory utilization rate by each of the four component businesses?

We don't really break it out that way. I would say overall we're probably 65 to 70%. Number one, we don't have factories for distribution, so that --.

If we were to raise that from the current rate to let's say 80%, what would that mean to fattening your pretax margins?

It would put more money in our pocket. I can't tell you exactly what that number would be. But I will tell you that is what we strive for. That is why with the kind of acquisitions that we have made and are looking to make, that is one of the major activities around that. Certainly consolidating factories is a plus. I'm an old factory guy. I have been doing that for 30 years. So I know the value of running factories at full level.

It becomes -- it is even more important in the plastics plant. You want to run them as much as possible. So a good question.

Second, in response to the prior questioner, and acquisitions you said stay tuned or something to that effect. Are we to take that to mean that you are at this point in talks for an acquisition or more?

I can't say that.

You can't say that because of Sarbanes-Oxley, or you can't say that because you're not talking yet?

It is fair to say that we are always in some kind of conversation with somebody, and that would be true right now.

What you didn't say with all of the acquisition comments was what size transactions you are looking at.

That is going to vary. The ITML was a fairly large size transaction. There could be some smaller bolt-ons for us. As discussions go forward, they probably could range anywhere from a $30 million business to a $150 million or larger business.

Lastly, being anti-politically correct, this one hurts me to even ask, but the green movement has suddenly become embraced by corporate America, as you are very well aware, whether it is Wal-Mart, etc. Where do you see potential pick up in your businesses because of that?

I think we have a couple there, because the acquisition of ITML, when we first talked about that and their ability to use recycled material, we are going to leverage that technology across all of our business segments that we can. The more that we can go out into industry and tell people that this is recycled material, either it be post consumer or what have you, that really -- that is a great statement. Because there are a lot of people starting to ask us that question. If you look at ITML, it is a great process for us to leverage across our business.

(OPERATOR INSTRUCTIONS). Chris Manuel.

A couple of quick once. CapEx and D&A outlook for 2007 post the asset swap?

From continuing ops our CapEx in 2006 was about $12.5 million. I would anticipate us to be in that range, maybe a little bit higher going into 2007.

And that includes the acquired properties as well with ITML included?

Yes.

Yes.

As I look at today -- this may be more a guidance oriented question -- but when I look at a range estimates out there today around it looks like about $1.27 or so for '07, does that looks reasonable to you, given where you sit today with what you think from the competitive landscape?

You are right, that is a guidance question, and we're going to steer clear of that one.

Bob Goldberg.

On the Lawn and Garden, the margin, the pretax margin you're targeting of 8 to 10% over time, is that for the entire business, including ITML?

Yes.

Yes.

Okay. Do I remember -- if I remember correctly ITML was approximately the same size as your existing business in terms of revenue?

Yes, approximately.

A little but bigger.

The combined business would be something north of $300 million?

Right. We almost doubled the size.

And you think that is achievable in 2007 or is that a longer-term goal?

Given the fact that we've got some purchase accounting issues here that we're going to get through, I would say that on a run rate basis it is achievable in 2007, but on a run rate basis.

A similar type question on North American Material Handling segment you did a 14.6% margin in 2006. It was a tremendous improvement over the prior year, almost doubling. Do you think that is a sustainable margin as we look out the next 12 to 24 months? Is there room to improve that margin?

We think it is for sure sustainable, unless there is some major issue out there. But we're going to continue to work on improvement because we still see lots of opportunities. One of the -- going back to the question about capital, we have spent a lot of capital over the last four or five years in buying equipment and so on. We now have the capacity to grow the business without having to buy any more additional equipment.

So we do see opportunities, synergistic opportunities to combine facilities and so on, which will definitely improve our cost situation. It goes back to that question about what percent of utilization are we at. All these things added together is why we're very bullish on our Material Handling segment as we move forward.

It had a 6% topline growth in '06. What do you think is a sustainable -- what are you targeting for topline growth in that business?

Probably 6%. 6 to 8%. Somewhere in that range.

Do you have any price initiatives in 2007 in that business?

Well, we certainly are not going to give up any pricing. We thought hard with the major increase in resin. And our attention is to continue to educate our customers about why we have to add those price increases or keep those prices at the level. We're not sure where resin is going. There's a slight pick up began in the first quarter. So we will have to see what happens, but our intention is if needed, we will ask and seek price increases, or we just don't do business. Otherwise, we will try everything we can to hold onto any price increases if there is a major reduction in resin.

It doesn't sound like you have seen too much benefit so far from lower resin.

Not really. Actually resin is up (multiple speakers).

A little breathing room towards the end of Q4, and then it is coming right back.

It is almost like just with your neighborhood gas station you watch those prices go up and down virtually every day. It is the same way. It is brought to you by the same guys. It is the same companies that produce gasoline as produce resins. And so the same processes they use on gasoline, as far as price increases go and reasons for it, whether that be shutdowns of factories or rail strikes in Canada or what have you, that changes pricing.

If we assumed a relatively stable resin environment, do you think you could -- is it feasible to get those margins beyond the mid teens, or is there a ceiling?

To be out of the mid teens, that would be difficult probably at this point. It is going to depend on what -- all the things I have already said, but what happens in the whole segment as far as synergy activities, cost savings and so on, and increased sales of the right kind of product.

Mr. Barton, there are no further questions at this time.

Okay. We thank all of you for your time. As a reminder, the transcript will be available on Myers' Website within two business days, and a replay will be available immediately after the call. Please see the news release for complete access detail. Thank you and have a pleasant afternoon everyone.

Thank you.