Myers Industries Inc (MYE) 2009 Q4 法說會逐字稿

Greetings and welcome to the Myers Industries Incorporated 2009 fourth-quarter and full-year performance 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, Max Barton, director of investor relations for Myers Industries, Inc. Thank you. Mr. Barton, you may begin.

Thank you, and good morning. Welcome to the Myers Industries call to review our 2009 fourth-quarter and full-year financial results. With me today are John Orr, President and Chief Executive Officer; Donald Merril, Vice President and Chief Financial Officer; and David Knowles, our new Executive Vice President and Chief Operating Officer, who's been on board with the Company since June of 2009. This morning we issued our news release detailing the financial results for both the quarter and year. If you have not yet received a copy you may access it from our website at myersind.com under the investor relations tab. This call is also being audio webcast from our site and will be archived there along with the transcript.

Before I turn the call over to management for remarks I'd like to remind you that we may make forward-looking statements during the course of this 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 is may cause results to differ materially from those set fourth. These risks and uncertainties are detailed in the Company's SEC filings and may be found in the Company's 10-K filings. Following managements' remarks there will be a brief Q&A session with the investment community.

I'm now pleased to turn the call over to John Orr, President and Chief Executive Officer. John?

Thank you and good morning, everyone. It's a pleasure to have you with us. The economic conditions of 2008, that continued and worsened into the recession of 2009, truly tested our customers, our Company, our shareholders and our employees. Despite the challenges our employees responded with overwhelming committment to our business plans. Their work is particularly evident in our strong cash flow generation last year of approximately $72 million compared to $60 million in 2008. In this environment, or any, our cash flow performance is a critical measure of our diligence around improving working capital and maintaining appropriate cost controls. With this performance, we were able to reduce debt by $67.3 million last year to $104.3 million at the end of the year. We funded our necessary capital expenditures for strategic projects and maintained our regular dividend pay out to shareholders. For this hard work, I would like to thank each and every one of our people for helping to make us a stronger Company.

Wile most of you have read the detailed results from the release, I will review some brief highlights here for the fourth quarter. Net sales from continuing operations were up 5%. This increase primarily reflects higher volumes in our Material Handling and Lawn and Garden segments and this is the first time in the last several quarters that sales have moved into positive territory, which is quite encouraging after the impact of full-year economic weakness. Income from continuing operations was $2.0 million, or $0.06 per share, including special pre-tax expenses detailed in the earnings release and reconciliation statement. On an adjusted basis we achieved income from continuing operations of $5.6 million, or $0.16 per share in the fourth quarter, which also includes a pre-tax gain of $3.3 million on the sale of a manufacturing facility from our Lawn and Garden segment. This compares to an adjusted $1.5 million, or $0.05 per share in the fourth quarter of 2008.

Now for the full year. Net sales from continuing operations were $701 million -- $701.8 million, a decrease of 14%. Tracking with the broader economic weakness, this decrease was primarily due to reductions in volume and pricing in all of our segments, but was partially offset by increased sales of custom pallets through our Material Handling segment. Income from continuing operations was $7 million, or $0.20 per share, including the special pre-tax expenses detailed in the release. On an adjusted basis, income from continuing operations was $23 million, or $0.65 per share for the year, compared to $19.2 million, or $0.54 per share in 2008. Operationally, we undertook two major restructuring programs last year; one in Lawn and Garden and one in Material Handling. These programs helped us to adjust our cost structure to be more competitive and to better meet the needs of the market and our customers. In addition, our focus on operations excellence programs, both last your and continuing into this year, will allow us to better serve our markets and customers as we all experience economic recovery.

Looking into 2010, our strategy is to invest to grow in our key operating segments. With that focus we will drive higher levels of performance using operations excellence techniques to optimize supply chain efficiency. We will increase our raw material recycling capabilities and continue to explore internal rationalization initiatives to lower our costs. We will also continue to be opportunistically acquisitive, looking for potential leading brands and next-generation technologies that will accelerate our profitable growth. And we will continue to refine our succession planning and professional development of our management team, seeking world-class performance in teamwork that leads to growth and long-term success. Be assured as we execute on both the internal and external initiatives from our operating strategy we are taking the critical actions necessary to build a better business for customers, shareholders, 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'll turn the call over to Donald Merril, our Chief Financial Officer. Don?

Thanks, John. I want to echo your assertion that we are indeed executing on all aspects of our strategy throughout the business segments, and our ability to undertake major restructuring projects and other programs while still delivering profitable operating performance in this challenging environment clearly shows. As you indicated, our team has demonstrated the resolve and discipline to lead the Company through this or any other down cycle.

Now, turning to some of the other financial measures we reported in our earnings release this morning. Gross profit was 20% in the fourth quarter of 2009 compared to 24.8% in the fourth quarter of 2008. As we said, the decrease primarily reflects the impact of persistent market weakness, unfavorable mix in custom molded Material Handling products and competitive pricing pressures. For the year, gross profit was virtually flat at 24.3% versus 24.2% in 2008. Benefits from our restructuring programs, along with lower commodity pricing through the year, helped to mitigate the weaker volume environment and unfavorable mix during the full year. SG&A declined $7 million in the fourth quarter of 2009 and $12.9 million for the year compared to those same periods of 2008. Again, this was primarily due to a reduction in selling expenses on lower volumes and the ongoing benefits from our restructuring in Lawn and Garden and Material Handling. We also benefited from a reduction in interest expense of $1.1 million in the fourth quarter and $3 million for the full year due to lower debt levels and lower interest rates. On the plastic raw materials front, commodity prices were on the rise sequentially throughout 2009. We worked diligently on adjusting our selling prices to mitigate this pressure and to match our pricing with the value we put behind products and services for our customers.

Now, turning our attention to continuing operations in our business segments and their performance. This is detailed in the news release and, again, results for the fourth quarter and year are all compared to the same periods of 2008. On the discussion of pre-tax income, I will be referencing adjusted numbers as presented in the reconciliation statement in the back of the release. In our Lawn and Garden Segment, sales for the fourth quarter of 2009 increased 6%, primarily due to the seasonal increase in demand from grower markets and special advanced marketing promotions. The sales decline of 19% for the full year primarily reflects the weak economic conditions and demand through most of the year, as well as cautious inventory management by customers and the depressed housing market.

Profitability for both the 2009 fourth quarter and full year benefited from the segment's extensive restructuring program. On an adjusted basis, pre-tax income was $4 million in the quarter and $24.2 million for the year as compared to $1.5 million and $7.4 million adjusted in the same periods of 2008. This strong performance clearly reflects rewards from our heavy lifting in this segment. With its successful restructuring program, we believe the ongoing optimization of the resources in this segment presents unmatched capabilities to meet the needs of the professional grower, offering clear opportunities for growth.

In our Material Handling segment, sales increased 12% in the quarter but were down slightly at 3% for the full year. The sales increase in the fourth quarter was primarily due to an increase in sales in our new custom molded pallet program, which we invested in during 2008. As noted, however, the segment continues to experience soft demand across its wide range of markets for reusable containers and storage systems, as customers who must make capital expenditures for these products continue to conserve their cash while waiting for a sustainable improvement in the economy. On an adjusted basis, pre-tax income in the quarter was $2.2 million and $16.2 million for the full year, down 68% and 40% respectively. This is primarily due to the lower-volume pricing adjustments made in this heightened competitive environment, as well as the higher mix of sales from the lower-margin custom molded pallet program. We believe that our strong incrimentals in Buckhorn brands in this segment are well positioned to deepen their leadership in the reusable packaging markets through innovation and value-added solutions once our customers' capital spending and business levels return.

In our Distribution segment, sales declined 3% in the fourth quarter and 13% for the full year. This performance tracked closely with the slow demand for replacement tire and vehicle service throughout the year. Pre-tax income increased 30% in the fourth quarter, primarily due to favorable product mix of supplies and SG&A reductions and the decline -- and declined 22% for the year, again the result of market weakness and the resulting cautious just-in-time spending by customers to carry lower inventory.

In our Automotive and Custom segment, sales were down 12% and 28% respectively for the fourth quarter and full year, reflecting deep weakness in automotive markets and slow demand for other original equipment and custom products. On an adjusted basis, pre-tax income was $1.1 million during the quarter and $4.6 million for the year, up 83% for the quarter,however down 40% for the year. During the fourth quarter, we completed the divestiture of two rubber products businesses in this segment, Buckhorn rubber products and Michigan rubber products. This lessened our exposure to the difficult domestic automotive business, as well as heavy truck and construction markets. Our focus in 2010 is to optimize the capabilities of the three remaining brands in the segment -- Ameri-Kart, Patch Rubber and WEK -- to drive higher levels of operating performance. Additionally, to better reflect the capabilities and markets of these segments it will be renamed to Engineered Products as we report the first quarter of 2010.

Now, turning our attention back to the corporate level. As John referenced earlier, we made excellent progress on debt reduction for the year. This has further strengthened our balance sheet to allow the Company the flexibility to react quickly to future potential growth opportunities. Finally, capital expenditures for the year totaled approximately $16 million, most of which was focused on new products and manufacturing technologies. Over the last two years, the Company has invested close to $60 million in capital to foster new products and expand our manufacturing capabilities and expertise.

Now, I'll turn it back over to John for a wrap up. Thank you. John?

Thanks, Don. As we've stated we posted positive results for both the quarter and year but clearly our results for 2009 reflect the full impact of the recessionary climate. Notwithstanding, they also reflect the benefits and costs from our own internal actions to strengthen and improve long-term performance across our business segments. Restructuring and productivity initiatives in our Lawn and Garden and Material Handling segments will carryover into our other businesses as we implement the tactics in our evergreen operating strategy. In closing, we view 2010 as a year of gradual economic recovery. We will remain focused on innovation and operations excellence activities that support our growth objectives. With that, I'd like to thank our shareholders for the confidence you've placed in the Company's direction. I also thank our customers for their support and again, our employees for the committment they have to the success of Myers Industries.

That concludes managements' presentation so I'll turn it back over to Max so we can take your questions.

Thanks, John. I'll ask the operator to now direct the Q&A phase of the presentation. Go ahead, please.

Thank you, (Operator Instructions). Our first question is coming from the line of Chris Manuel with KeyBanc Capital Markets. Please go ahead with your question, sir.

Good morning, gentlemen.

Hey, Chris.

And congratulations on a very, very strong cash year this year.

Thank you.

I have a long list of questions so let me ask a few then I'll jump back in the queue but let's start with how we move forward here into 2010. If we could take a look to the different segments and start with your biggest one, Lawn and Garden. It looks like housing starts starting to improve, you still have some restructuring benefits coming through. How do you think about profitability 2010 versus 2009 and then particularly considering we're now about two months into your first quarter and that your first quarter's typically the guts of the year?

Yes, Chris, this is Don. I think that our profitability in 2010, we're 11% on an up income basis. I think going forward we're inching that up a little bit, probably closer to the 12% range. We are heading into a very difficult headwind on resin and I think that's important for everybody to understand as we go forward.

Okay, so some modest improvement. If we could move over to Material Handling, as well, and we had some favorable data out yesterday from one of your trade groups suggesting that Material Handling areas would be up mid to upper single digits in 2010. How do you think that would break out for consumable products and thinking about mix there, as well, as to a similar question, what profitability might be like in 2010?

This is John. Let me say, Chris, Material Handling, yes, there is a slight tic up in 2010. I think consumables in a lot of cases people have been waiting to reload their fleet, people have been sitting on cash, so I guess you could say we're seeing some of that. We're cautiously optimistic about Material Handling. One of our big products that we've invested in recently is plastic reusable and returnable pallet that are fire retardant. We're making those for a major customer who is selling to major customers in the-- in retail, food and industrial segments. We're -- we're seeing a little bit of a slowing there in that particular market, but we expect to see things happen as we move into the rest of the year. The key will be around CapEx and the amount of CapEx that customers have to be able to use, to redo their supply chain or improve their supply chain, which is our solution selling. That's getting people out of cardboard and wood and so on. Now, Don, do you have anything you want to add to that?

Yes, I think clearly in 2010 the issue in Material Handling is volume. We have pricing mechanisms around the resin so if you look at that business by itself, the pricing decrease has virtually offset the resin favorability so that wasn't the issue in Material Handling. It's really being driven by volume in our legacy business, so the indicators that you talk about, as that volume comes back we are poised to do very well in this business. Historically, we've been double-digit up income; in fact, mid teens. Today we're carrying it at about 6% and it's all driven by volume, so once that comes back I could see us jumping over 10% again and getting back to normalcy there once the volume (inaudible).

Okay, that's helpful. And then the last two pieces, Distribution, Auto -- well soon to be Engineered Products -- caught myself there -- but as I think about you're looking at miles driven, start to improvement and Distribution's one in particular that you were back to a double-digit margin it looked like, I believe, in 4Q, is that a reasonable sustainable rate here now that demand has started to appear to modestly tic up moving forward?

Yes, this is a -- Distribution is a heavy SG&A business, as you know, so you -- on the downside you lose on the leverage. That's clearly the issue in Distribution today, so as we see that tic up, as we see miles driven going up, as we see the demand for replacement tires going up, that directly correlates with our business, so when we see those come back we'll be back to the 9% Op income.

Okay, last question I have and I'll turn it over is, as we look at the restructuring actions you've taken over the past two years, actually, help to review for us the big actions. I think you've taken Lawn and Garden and Material Handling, where you are to date with those. I think you're done in Lawn and Garden and you're still working through Material Handling and when I think about it at review if you could help us with what you've probably seen thus far in savings, how much more might carry your spill into 2010 with the Material Handling and then some carry forward in L&G, et cetera?

Let's start with Lawn and Garden. We kicked off that project in August of 2008, worked our way through -- all the way through 2009. It's been a very successful project for us. Total expenses on that project were on the high end of what we'd anticipated, right around $27 million; however, we're also spot on the -- actually a little bit above the savings that we had said. We predicted about $20 million in savings and we are there in Lawn and Garden. Obviously those savings that are being offset by volume and some other things going on in Lawn and Garden but the project was very, very successful. A lot of that was creating a footprint that was more able to handle our customers needs, so we did close a lot of facilities in that segment.

Switching to Material Handling, we only announced the closure of one facility with that project so there wasn't as much fixed cost coming out. It was more of a productivity project and quite frankly, because of the loss of volume, we're suffering a little bit on the savings. We announced -- or we had said we could do $10 million to $13 million worth of savings. We're clearly at the low end of that. In fact we're a little shy of that on a run rate basis for 2009 and we're not going to see those savings until we start to see the volume come back like we talked about earlier in the call.

Okay, so on the L& G side, through 3Q you kind of hit your run rate. Is that still some of the $20 million that we'll carry forward into 2010?

We virtually got all $20 million in 2009, let's call it $19 million, so we got it in the quarter -- or in the year. However, there -- as volume picks up you're going to see some hangover there because of the productivity improvements in these facilities so clearly there's upside when volume comes back.

So there'll be some leverage to volume and on the Material Handling side --

Same thing.

-- I think there was only a little bit was supposed to come in 2009 anyway.

That's right.

So we'll probably see, let's call it an incremental -- I'm going to guess and say $7 million, $8 million, $9 million or something like that in 2010?

That's a very good number. We saw a little over a quarter -- let's call it almost $5 million of savings from the project in 2009, so we're going to double that going into 2010. Again the caveat I'm going to throw on that is these are productivity improvements and we've got to get the volume back.

Okay, that's helpful. Thanks for doing this conference call. I think it's very helpful to investors to hear you guys present the story. I'll jump back in the queue.

Sure, no problem.

Thanks.

Our next question is from Christopher Butler with Sidoti & Co. Please go ahead with your question, sir.

Hi, good morning guys.

Hi, Chris.

I wanted to start with just clarifying the adjustments that you had made on the pro forma EPS. You had adjusted out some impairment and restructuring but if I'm not mistaken, you've left in the $3.3 million from the gain on the sale of assets; is that correct?

We did when you're looking at the first page of the press release; however the back page does show you an apples to apples by taking that out.

And similarly on just little things, what kind of tax rate are you looking at for 2010?

2010 is probably going to go back to a more historical level. If you look back to 2007, we were right around 36% so I think we're heading back in that direction.

And if we're looking at the Distribution business, a lot of the indicators that I've been seeing on demand for tires and some of your peer groups seem to be showing a pretty sizeable step up in demand for car care services. Your results in the quarter, while improving, didn't necessarily show that. Could you help me out and give me an indication of what's going on with your Distribution?

Well, keep in mind last year that that market was down over 30% and what the market analysts are predicting this year is that that'll come back about 25% so it still could be down 5% from previous years, so we're seeing that as the first quarter starts. We didn't see it so much in the fourth quarter. Our business is dependent upon people coming in and getting their cars and tires serviced. With weather in January, December being pretty strong in some areas people haven't been doing that, but I guess we could say we're much more bullish looking forward than we have been looking backwards on it.

And you had mentioned on Lawn and Garden that there was some marketing promotions in the fourth quarter. Is that something that's pulled anything forward from the first quarter, or is that fairly typical for the business?

It's pretty typical. We did get a little bit more aggressive trying to level load our facilities so we did ask for orders up front, but it's fairly typical. I would say there may have been some movements from Q1 to Q4 but not all that much.

And looking at the new Engineered segment, all of the news coming out of Toyota and the Japanese auto manufacturers, could you give us an idea of the impact on that segment?

We don't supply anything to Toyota. We do supply to Honda; our WEK business is 100% Honda. Right now, Honda is seeing some increase in business. Whether that's the Toyota issue or other issues I'm not really too sure but at this point, any -- we don't have any impact -- we don't see any impact from the Toyota issue.

And let me just add that sales to the automotive sector -- the whole automotive sector under our Engineered Products division is still just a little less than 3% of the total sales for the Company.

I appreciate your time. I'll go back in the queue.

Thanks, Chris.

Our next question is from the line of Gary Farber with CL King. Please go ahead with your question.

Sure, good morning.

Good morning Gary.

Just two questions. On the -- the gross margin line seems like it's been moving around a fair amount this past year. Can you give us any feel for how we should think about it for next year? And then also on the acquisition front, can you -- is there any particular areas you're looking to fill in and how is the acquisition market today? Is it slow or is it picking up?

If you look at gross margin you're probably looking at it maybe by quarter and you can see it move pretty -- that's pretty for us. However, on a full-year basis it's running 24%, 2008 and 24%, 2009. I would look at gross margins being maybe a little bit better in 2010. We've got productivity projects, we've got restructuring hangover. The concern I have right now is the fact that we're starting to see some spikes in resin. Like I said earlier, we've got a real headwind coming at us here on resin.

On the acquisition front as we said in our release, we're going to continue to be looking at potential opportunities. Last year what we found was a lot of people had businesses they thought about selling but they thought the value was a lot higher than what the actual value was, so it didn't look to us to be a good year for deal making. We'll continue to look in our Material Handling, our Distribution, and our Lawn and Garden business for positive acquisitive acquisitions -- or positive acquisitions and we'll go from there. All I can say is we're going to continue to keep at it. I think one of the reasons that we have the cash position we have is the very quick availability of funds as necessary.

And how do you think about your -- this is my last question. How do you think about your free cash flow for fiscal 2010?

I think we've got more levers to pull as far as working capital goes. We've done, I think, a fabulous job over the last couple of years, specifically in AP and AR. I think we do have some work to do on inventory. I think CapEx is going to be up a little bit next year versus this year, so I think our cash flow is going to be -- not as going to be as robust as it was over the last couple of years.

And CapEx this past year was how much?

$16 million.

$16 million, okay. Thank you.

It was $21 million the year before.

Right. Okay, thanks again.

Thanks, Gary.

Our next question is from the line of Chris Lippincott with Systematic Financial. Please go ahead with your question.

Good morning guys.

Hey, Chris.

Good morning, Chris.

Question for you. On the Material Handling side can you try to break out or is there any way to break out the impact of the negative mix versus some of the resin input cost?

Yes, I can tell you that on that, if you look at what's going on in Material Handling, really the price reductions basically follow the resin reductions, so what you've got there is two issues, which is going to be the mix and volume, which are going to make up the rest of the delta.

And you see this negative mix impairing you for the next couple of quarters, being continued headwinds? It seemed to be your lowest margin I've seen in perhaps as long as this segment's been around.

Yes, obviously, what's happening here is the volume in our legacy business is exacerbating the issue. That legacy business has really taken a hit, as John explained earlier, as our customers just aren't wanting to sell -- or I'm sorry, spend capital dollars. Now, we're trying to address that in a lot of different ways and we're looking at potentially helping our customers through leasing mechanisms and set them up with third parties, et cetera, but we are trying to get through that. But clearly it's a headwind for us until we can get that legacy business back with an improved economy.

Okay. Is there any way you can break out what the Material Handling volumes were for the quarter?

What Material Handling volume reductions were?

Yes, just how does (inaudible) change the quarter? Unless you want to break it out in the Q.

Yes, you know what, we'll obviously have a lot more data in the Q -- I mean in the K.

Yes, probably the (inaudible).

So we'll break it out in a little bit more detail in the K.

Okay. And just as far as the Engineered Products, is this something that the margins -- I remember at one point you were talking about trying to get the double-digit operating margins, now I think at one point you were talking close to 10%. Is that still something that's attainable?

I believe that to be true, yes.

Yes, very much so.

And that's a 2010 event, more back half, or 2011?

I think we're on that run rate in 2010.

Yes, really, believe it or not, the RV business and the marine business is beginning to show some life. Our custom business there is beginning to show some life, so we're more bullish on that segment than we've been for the last couple of years.

All right, so it sounds like you're comfortable with -- about that double digit for 2010, good.

Yes.

All right, good. And again, also, congratulations on having a conference call. It's a welcoming change.

(LAUGHTER) Thanks, Chris.

Okay.

Our next question is from the line of David Leibowitz with Horizon Asset Management. Please go ahead with your question.

Good morning.

Hey, David.

You mentioned that resin prices are on the way up. Have you raised your selling prices in anticipation?

We are -- let me answer that on our two biggest segments. Our Material Handling segment typically comes with resin escalators and deescalators so those will automatically kick in and that affects about 50% of that business; actually now a little bit more than 50% of that business. And we are evaluating our Lawn and Garden business right now to look at some price increases there. The issue we're going to have is a lot of pricing was set back in early fourth quarter or late third quarter, which was prior to this, what I'll call pretty dramatic increase we're seeing so unfortunately, we're behind the curve a little bit, but we will definitely get tough on price like we have over the last four or five years.

Also, following up on acquisitions, first, in your prepared remarks you spoke about new technologies. Could you inform us what those are and how they impact the business?

Well, it's primarily in our Material Handling piece. It's different technology around producing lighter-weight products used in the supply chain of major industrial and agricultural users. I don't really want to go into a lot of detail about what all that is but suffice to say that it's technology that we've invested in, thus a major CapEx investment in 2008, getting it up and running in 2009. The first product that we're using it on is this plastic reusable pallet. If you think about the blue wood chip pallet, you see them everywhere, this plastic reusable pallet that has RFID chips in it, is going to be cutting into that chip market what we think significantly. So we're using this technology to produce those pallet but at the same time we're learning around that technology to make other of our -- especially some of our legacy products from a much decreased cost situation with a new technology, but I really don't want to go into what all that is. We have obviously competitors that listen to this phone call so I'll stay away from that.

We've also got a lot of new materials that we've been working on around green technology, especially in our Lawn and Garden business, as well as our Material Handling business. You just about name it, we've tried to make plastic out of it. We're working diligently at that. We've got some hits in some of our Lawn and Garden products so I'd say the best thing to do is just stay tuned and see what we come out with as the year goes on.

Okay. And staying with acquisitions, are there any talks in progress at this time?

Really can't comment on that.

Okay. And lastly on acquisitions, what is the size of the transaction you would be comfortable doing at this time?

Well, we've -- if you look at our history, we've stayed in the $50 million to $100 million range. I think we're pretty comfortable with those kinds of acquisitions. Again, our strategy has been around keeping our powder dry, holding onto our cash and being able to very quickly access what we need, so if you look at what excess we have and those size of acquisitions I think it matches up.

And the last question, if I may, what are your biggest concerns for this year outside of the overall economy?

Well, I think obviously, Materials is a big part of our business, David, and so we always have that bear in the closet. It kind of comes and goes. We're going to see it peeking up here in the next couple months and then we're expec -- our expectations and I think the Market expectations for it is to drop again. I think that's a big issue for us. We certainly -- you said not the economy but the economy is going to be an issue for us. I still don't see 2010 as a great year so we're going to have to work our way through that and we've made a lot of cost reductions using operations excellence techniques. We're learning more and more of those as we move forward here and we know that cost is a situation that we have to continue to work on very, very diligently and certainly volume. Volume is a key for us. We've taken capacity out. We think we've right sized the business, but we still need to have additional capacity to fill those plants that we have left and to continue to operate from a cost-effective standpoint.

Thank you very much.

Sure, Dave.

Thank you. (Operator Instructions). Our next question is a follow up from the line of Chris Manuel with KeyBanc Capital Markets. Please go ahead with your question.

Good morning again.

Good morning.

A couple questions for you, Don, if I could. As we look at the balance sheet, I think you had a couple maturities in 2010 and 2011 in the neighborhood of $100 million in total for some bonds. Where do you stand with those right now? Has that been what you paid some down of and could you talk to us maybe a little bit with respect to what your plans are there? I'm guessing -- we don't have the full balance sheet yet, but I'm guessing a chunk of those went current and that's why current liabilities were up.

That's exactly right. Current liabilities went up because you're seeing about $65 million worth of private placement notes that come due in December of this year -- of 2010. Right now, like John mentioned earlier, we ended up the year at $104 million, $105 million in total debt, $100 million of which is fixed debt and of that $65 million is a subset of that $100 million. So we clearly have enough room on the revolver to take care of those notes and we also are going to generate cash, so at the end of the year, all else being equal, we'll pay off some of that with cash and the rest we'll put to the revolver.

To continue with that, our revolver goes through 2011. We've started thinking about what to do there, right, but it all depends on how 2010 plays out as the last questions we saw were a lot about acquisitions and certainly we're thinking a lot about that so it depends on what the needs are of the Company going through 2010. But really, we feel we're not in a rush to look at that revolver right now. We believe the Market's coming to us a little bit. Spreads are improving, tenors are getting longer so as we go through the year we think we're going to be in a better position to take a look at that revolver.

Okay. And I'm not -- from a leverage standpoint, I would almost argue the Company is underlevered where you sit today.

We agree.

It's more of a timing and maturity standpoint that -- I won't say it's troubling, it's not troubling but is more of an issue. How do you think about balancing the priorities for cash through 2010 as you look at between -- acquisitions are clearly something you guys have mentioned. You have some of these maturities coming up. Two other -- there's a company that's for sale -- or that always has stock for sale that's by my numbers trading at about five types EBITDA and I'm referring to yourselves, how you balance looking at acquisitions with share repurchase, with dividends, things of that nature?

I think right now -- we just went -- in 2009,we went through a very robust strategic planning process. We looked very hard at each one of our segments and I think we are going to be active in 2010. We're looking at how do we grow these businesses and how do we grow them profitably through acquisitions to increase the size of some of our businesses and also as new technology. as John talked about. Right now, Chris, we're leveraged at about 1.5. We are -- at least I am very comfortable at 3.0. We have demonstrated the ability to generate cash on a very consistent basis in this Company. so based on that, we are looking at the business needs and we are looking to use some of the availability. And I'd be remiss if I didn't mention, we've got a great group of banks who we have very good relationships with and those folks are waiting for us to do something, too.

No, that's fair, okay. Last question for you is, I just wanted to fine tune a little bit on the price/cost discussion you had. As you look at where you typically have to take most of the actions and move price in Material Handling, the guts of that are a one a year adjustment, you've probably already started to make that with the rest on escalators so that'll resolve itself.

That's right.

You talked a little bit about the Lawn and Garden piece and that you might be a bit behind. Can you maybe help -- maybe provide us a little more color there. I know 1Q is typically your biggest quarter for the year and I guess I'm a bit concerned that if you're behind in 1Q how do you essentially make that up as the year goes on?

Well, we set pricing, as Don said, in the later third quarter, very early fourth quarter for the first part of the horticultural year, if you will. As we move forward now, around this timeframe we begin to see whether or not the spring is going to be a good spring from the growers' standpoint and if it's a good spring then there becomes a rebuy of product and that's the opportunity for a price increase because that hasn't been agreed to at the time. A little concern there in that -- the fact that we were in Florida two weeks ago and it was 35 degrees, 40 degrees so there is some concern in the South, Southeast of how that market is going to do. There's no panic yet on the part of the growers but certainly in a few weeks we'll have a better idea or a better handle on a potential for repurchase of additional product, which obviously then becomes a tremendous opportunity to improve our pricing.

David Knowles, our new COO, would like to make a comment, Chris, about that.

Yes, Chris, if I could just add, if you look at the Lawn and Garden business, which certainly is a raw material intensive business, most of the activity in that business occurs in the fourth quarter and third quarter and some of the challenge we have in reacting to raw material costs as quickly as raw material costs move is we try to level load our production by taking orders earlier in the cycle so that we can plan out our production. I can tell you, though, that given where we're at and the volatility we're seeing in raw materials now, we have prepared and are in the process of implementing pricing that will address raw material costs starting in March.

Okay, so where you sit today you've taken -- presumably some of these orders and quoted them at X price and gone out and sourced material that made that match, for lack of better term, put that together?

Right.

And it's from here forward as you're taking orders that you're envisioning making other adjustments? That's helpful.

Yes.

Okay. And for what it's worth, I would look at that horrific weather they've had through parts of the South, snow in Texas and other things as a big replacement opportunity, so hopefully --

We hope so.

Okay, good luck, gentlemen.

Thanks.

All right, thank you.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to Mr. Barton for closing comments.

Okay, thank you all for your time today. Just a reminder there'll be a transcript of the call available on the Myers site in approximately 24 hours. A replay is also available via webcast or call. All the details are found on the Myers website under the investor relations tab. Thank you all and have a pleasant day.

Thanks, everybody.

Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.