Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Myers Industries Incorporated Fourth Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. Monica Vinay, you may begin your conference.

Thank you. Good morning. Welcome to Myers Industries’ fourth quarter and full year 2016 earnings call. I am Monica Vinay, Vice President of Investor Relations and Treasurer for Myers Industries. Joining me on the call today are Dave Banyard, President and Chief Executive Officer; Matteo Anversa, Executive Vice President, Chief Financial Officer and Corporate Secretary; and Kevin Brackman, Chief Accounting Officer. Earlier this morning, we issued a news release outlining the financial results for the fourth quarter and full year of 2016. If you have not yet received a copy of the release, you can access it on our website at www.myersindustries.com, it’s under the Investor Relations tab. The call is also being webcast on our website and will be archived there along with a transcript of the call shortly after this event. Before I turn the call over to management for remarks, I would like to remind you that we may make some forward-looking statements during the course of this call. These comments are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. For further information concerning these risks, uncertainties and other factors is set forth in the company’s periodic SEC filings and maybe found in the company’s 10-K filing. I’m now pleased to turn the call over to Dave Banyard.

Thanks, Monica, and good morning, everyone. We’ve got a lot to cover today. I am going to start on slide three which is our agenda. So I’ll outline that since we have so much to cover. I am going to start with just one slide taking a look back in 2016 on some achievements and some challenges. And then I am going to turn it over to Matteo to go through our detail financial review and our 2017 outlook. And then he is going to hand it back to me and I am going to spend some time going through our strategic plan and our vision for the company and we are going to finalize that with the long-term target that we set for the company. So switching now to slide four, 2016 was a transition year for Myers and I am going to go through some of the things that we accomplished in the year. First and foremost we started building a foundation for the future for this company. A couple of key parts of that was building a management team at the senior level and in fact, I am pleased to welcome Matteo here, this is his first call as CFO. I am excited to have him here. But beyond that we built a senior management team here that we are very pleased with and very excited about. In addition to that, we focused on a lot of fundamentals in the year. One thing I want to highlight that I think is a critical fundamental to any business’ accounting control, lot of work and investment went into that this year and we did a super job in really building what we need for a finance -- a foundation in that area. In terms of strategy, we also spent…

Thanks, Dave, and good morning, everyone. First of all, let me start by saying that again very happy to be here in Myers and I look forward to speaking and meeting all of you in the upcoming quarters. So today I will discuss with you the 2016 financial performance and then we will go through the 2017 outlook. So if we turn to slide five of the presentation and I will walk you through an overview of the fiscal year ’16 performance on a GAAP basis and all the numbers in the presentation reflect our continued operations. So starting from the top left, our net sales declined 7.2% to $558 million compared to $601 million in 2015. Excluding the impact of foreign exchange the decrease in sales year-over-year was 6.7%. The decline was primarily due to continue weak demand in Material Handling Segment particularly around the agricultural products and lower retread and equipment sales in the Distribution Segment. Gross profit margin was roughly flat year-over-year due to lower one-time costs. One-time restructuring costs declined by $1.6 million compared to last year. However, operating income was negatively impacted by impairment charges of approximately $10 million, mostly due to Brazil and as you may recall these impairment charges was felt in the first quarter of 2016. GAAP diluted earnings per share were $0.05 compared to $0.45 in 2015. As we turn to slide six, we will give an overview of the key variances and maybe adjusted basis. Starting from the top right, adjusted gross profit margin was 29.5% in 2016 compared to 29.9 last year corresponding to decline of 40 basis points. The reduction in gross margin compared to last year was due mostly to lower sales volume and unfavorable product mix due to the decrease in agricultural sales, as well as…

Thanks, Matteo. So turn to slide 12, I am going to start with the big picture, what are strategic vision. There are really two key elements to our strategic vision, our culture and our business model and that’s what depicted here on this page and what I am going to do is talk briefly about them here and then we are going to go into a lot of detail on all the elements of it. For the cultural standpoints, culture is really what our people bring to the table and how we are going to function as a team and that’s encompass here on the top and at the bottom, right, in safety and efficiency and everything we do and acting like owners. I will take a few minutes here to explain what I mean by that. When I talk about safety and efficiency and everything we do, those are -- safety is a great foundation for continues -- for our continuous improvement culture and we started that here. We have had a good history of that. But I think we have even added further to that this past year. And if you think about efficiency that's what it's all about when it comes to continuous improvement. So the top statement there is talking to our desire and the culture to be constantly focused on continuous improvement. And we don’t want to just do that internally, we also want to bring that to our customers. We believe that that’s part of our competitive advantage that we can bring our culture, safety and efficiency not only internally but also out to our customers and the products and services that we offer. Now acting like owners really what that’s talking about, not just about how we treat our assets and how we…

[Operator Instructions] Our first question comes from the line of Adam Josephson from KeyBanc. Your line is open.

Thanks. Good morning, everyone.

Hi, Adam.

Dave or Matteo, yeah, just about the targets. They include significant margin expansion, obviously, despite the fact that you've been experiencing pretty notable sales weakness over the past couple years and I am just wondering how you expand margins that significantly with presumably continued week volume, obviously, you were not able to last year, just given the volume weakness? And relatedly there were no sales target that accompanies these other targets? Are you expecting any sales improvement in the years to come or any -- help along those lines would be good?

Sure. Let me break apart your question into two parts. There is no sales target on here and that’s a conscious decision. And the reason it’s a conscious decision, Adam, it -- I don’t want sales at any cost. So, in other words, a niche market strategy doesn't value sales growth above all else. It values cash flow growth and that’s part -- the three elements of our business model that’s what we value. Now that being said, in order to achieve these targets we do have to grow. So it's not as I highlighted, it’s not a cost cutting only model. It is -- it requires growth. What I want to highlight on here is that the more important is the growth -- is good growth. Is that niche market growth where you can take the contribution margin that you are getting and have a lot of that or all of that flow to the bottomline. That's how you achieve the margin expansion type goals that we are setting here. So there is sales growth, it have should, but that’s not some I am not going to pay people and our organization to grow sales and sales along. You will never see that kind of objective for anybody in our teams. So that answers your sales portion.

Yeah.

Let me talk a little bit about where that’s going to come from. So why do we think we can do this. First and foremost, we are going to be spending 2017 on that center section of the strategy around flexible operations changing how we -- our organized operationally is our enterprise. That’s a cost take up portion of that. That helps quite a bit. But it’s also allows us to be more flexible in terms of the growth and it takes away a big fixed cost element of it. Now obviously there is nothing comes from free, suppliers have to make profit and we intent to have good partnerships with our suppliers and we want them to be profitable. But what we are doing is we are making it more variable and we are finding people that are better at things that we -- than we are and so sensibly when you do that you make things more efficient and therefore cheaper. So that’s on the cost side. And then beyond that that when you start using and really or aligning your organization from a niche market focus along with the flexible operation you can really start driving lean tools to drive additional performance improvement. That cultural element is something we are going to be -- we started in 2016 and we are going to continue to build on that through ’17 and ’18, and that’s you are going to see a lot of growth from that. From the topline growth standpoint, couple key areas that I have highlighted is, first of all, orienting our organization with these we will call them tiger team or market focus teams, you get growth from those teams executing. So we're finding these niche pockets where we are going to focus a lot of our energy and that's going to drive sales growth in a couple spots that are highlighted in my prepared remarks there about things like the seat business. I mean, I think, there are some catalysts that should yield some growth for that business out in 2018 and beyond. Our MTS business is an area where, I think, there's a lot of growth opportunity there. We have had our challenges with that business but that's all a lot of that has been because we have been making changes and there are tough changes to make and that's cause some turnover. But once we have that turnover finish we have the best products in this market second to none and it’s the matter of getting that sales force functioning well. So those are two areas that we think we can grow and that’s going to add. As we grow without adding a lot of our overhead which we don’t think is necessary. We are going to see these kinds of margin expansions. That answers your question?

Yeah. No. It does. Thank you, Dave. And just relatedly, you're guiding for flat sales this year. So the focus on niche markets that you are talking about and the eventual sales growth that you are talking about, you are not going to see it this year, right. So you will see it presumably starting next year?

You are talking about sales growth portion of that?

Yeah. Right. The guidance has no…

Really the challenge we have this year is that the farm income trajectory has continued down through ‘16 and that doesn't bode well for ’17. You can always, I think, farm income from prior year tells you how farmers are going to spend in that coming year. So we are expecting and we are seeing and this is the busy time of year for us -- our ag business and it's off. So we are going to start in the whole of that here in the first half, because of the ag business. But then this niche market focus we will make up for some of that in the back half, so that’s where we are expecting to see and we are seeing a little bit of pockets here and there that with things like the industrial businesses are doing better than we would have expected and so forth.

Got it. And just relatedly, Dave, how would you characterize customer inventory to see [ph] balances (44:07) at the moment?

I think they have -- I think they are operating from a replacement mode at the moment, not a growth mode. So fixed -- what we are seeing spare part sales, we are seeing kind of end of life replacement type sales. We are getting and this is the good news if you will and is we are sort of reaching that replacement cycle volume of that. But there are few catalysts in the future that we will talk to later in the year that I think might have spark some growth there. There is a couple of other factors within that market which none the least have which is the M&A that’s going on there that is also a distraction. So you have got a couple of negatives in the market itself that make it tough.

Right.

But that should get flushed out in 2017.

Thanks. And then on the industrial side, you talked about industrial being a little better year-to-date, obviously we have seen the ISM PMI rock it have crossed to 58 now. That your tone seems to be indicating a much different environment than that, notwithstanding the modest improvement that you talked about year-to-date? I mean, what are you seeing in the industrial economy and does it bear any resemblance to the 58 on the ISM that we've all seen?

Yeah. I think, the, I think, it’s -- there is a couple of elements that we play in there. So we have what we call the industrial business there. But you should also cut vehicle in that, because automotive I think is weighs heavily nice and RV I would count as an indicator in there as well. We have seen positive growth in automotive and RV over the past 12 months, that’s been a solid thing, I think, automotive is probably reaching its ApEx, but it’s still strong. And all the associated manufacturing that goes with that, I mean, a huge part of our industrial economy still, if you think about the manufacturing has not been completely offshore it’s -- there is still lot of automotive and the supply base along with it. And so that’s, I think, those have been positive, but we are also seeing through our industrial distribution channel. They had a good start to the year and I think there's -- that’s good. I mean, it’s a -- if that more aligns with the ISM, we just didn't coming out of 2016 we didn’t necessarily think that that is going to have that kind of lift. So we are seeing a little bit of start to the year there. Conversely, it’s -- we are seeing some that the -- part of aftermarket side is a little worse and that’s really a lot of that’s focused in the northern states. We have a -- one of things we have really done a great job with over the past 12 months within that business is get better information and data and not only for us as managers but also for our sale team on field and as part of systems investments that we have been making. And really we are able to see trends a lot more there and the trend where you would expect to see good business this time a year is in the cold water states and it’s -- it hasn’t been there. So that's kind of a -- those are kind of counterbalancing I would say.

Got it. And then just couple more Dave. Thank you. One on CapEx, I know you said, you think current CapEx levels are sustainable? Obviously, they are well below D&A and even well below depreciation by itself. So and I think CapEx to sales was right about 2% last year, which was considerably lower than it was over the preceding four years or so? So can you help us why you think these levels are sustainable?

Well, it goes back to our strategy. Our strategies have flexible operations and by default you make much tougher capital allocation decisions there. You look for other people that can do what you have been doing vertically integrated and find those partners to do that for you and then not paying the capital and yes it does require as I said some variable cost addition you are paying for one way the other in some extent. But it’s not fix at that point. We have not ever operated that way before. We have always operated that capital was a bit more available wherever and whenever and that's not the way we operate. So we’ll move this year and moving forward. So when you look at our base of capital we’ve spent a lot of the past years. We have a lot of fairly new equipment and we don’t need all of it and we don’t need to be doing everything we have been doing. So, I don’t add together, I think, we are on a trajectory that we don’t need to having that kind of capital moving forward.

Thanks. And just lastly on the Distribution business the sales force improvement initiative that resulted in lower sales. Can you just talk about what exactly happened there?

Sure. Let me give you a couple of stats, I think, to help -- maybe add some clarity. The -- so the market was a big challenging and if you think about the types of customers we have there. When times are not -- when times are little tight, the first thing that goes is capital spending and there is -- in terms of cost in many businesses, but these small independent folks. We may not seeing a lot customers willing through their or sort of the flat pace. They are not going to invest lot of capital. So we saw our equipment sales go down quite a bit last year. The retread market took a big hit through the commodity down swing, these -- a lot of the best retread and patching type products go into the off road type vehicles and so that market has been down. So those are some market headwinds that we face last year. That account for about half of the story. The half is when we went through and started the changes that we are making with our sales force. We have some fall off. We have some people that didn’t want to do that and then we had some people that couldn’t do that. And so it was a combination of people that shows themselves to leave and some that were have to leave. So we spend 2016 basically re-ramping our sales force and that includes sales leadership as well which is a really critical part of executing in this type of sales model. And so on average we had about 10% of our territories gap last year. That’s on average. So there was a period of time was higher than that. We have rectified that by the end of the year.…

Thanks so much Dave. That’s all I have.

Thanks, Adam.

Our next question comes from the line of Gabriel Hajde from Wells Fargo. Your line is open.

Good morning, everybody. Welcome Matt to the call, Matteo.

Thank you.

Just a point of clarification, I guess, maybe for David, you state in the press ways that you would be consolidating some your manufacturing footprint.

Yes.

As well as seeking sort of the some of the new sourcing partnerships, I guess, the question is twofold, one, it sounds like the footprint optimization will be mostly done by the end of year, but perhaps a cultivating the new sourcing partnership can last in 2018 and maybe that’s an ongoing thing, just trying to understand timing of that? And then the $10 million you cited for cost, is there potentially more to come on this or is that just as it relates to this particular program that’s the best estimate at the time?

So, first question, actually I could answer both questions with the same comment really gave, this is part of our strategy. So this is -- we are highlighting this because it is a fairly large effort to start and it’s a change in our operating model. We have not been -- and apply to -- invested heavily in sourcing exceptional course of our Distribution business we have already do have the skills. And because of the size and magnitude of this first level of change we are highlighting it here and that will be done within ’17. But the change in the migration towards this vision is a -- it’s an ongoing process, you never -- you never done with a lean transformation and I don't say that's to scare anybody in the organization, it’s more -- I say to say we are going to continuously improve from here now, we have been working on that this year but it's a constant process where you’re reevaluating how you are organize and how you are align to best serve the customer base that you are really trying to serve. So that’s going to involve continued work on into the future. And but -- to answer your specific question the $10 million of -- approximately $10 million of cost is designed as part of this first really big project that we will transfer a lot from the organization.

Okay. That’s helpful. And then, I guess, sticking with this initiative, can you maybe Matteo help us, how the $10 million might flow through the financials, maybe some in restructuring spend and some in income statement or most of it show up in the cash flow.

Gabe, I will say that the $10 million cost, it’s about, I will say that the change $2.5 million is severance for people, $5.5 million is cost that we will spend in allocating equipment and facility shut downs and then we have about a couple of million of impairment charges will take on the equipment that we have. That the way I would characterize that.

So really $8 million of cash and this is above and beyond the $10 million to $12 million that you have slated for normal CapEx.

That is correct.

Okay. Helpful. And then switching gears, I guess, to the 15% reduction in corporate headcount. I guess, can you give us a sense for maybe number of folks, are a way to quantify this and how to think about it going forward? And then follow-on I guess to that is, do you anticipate, I think, the answer is probably, no, but do you anticipate having to hire some of these folks back maybe in different parts of the organization as it sounds like you sort of implement more of a decentralized strategy?

I think, the last part the answer is no. I think the points of doing this was to make sure we have the right resources in the right seats. So, yes, there are some adds that come after some cuts as we shuffle to make sure we have the right skill sets throughout. I think we are showing you the net effect of that in the kind of information we are giving you here. The idea here is that corporate is a -- at corporate we will pass the organization. We are an organization that deploys the capital and we are an organization has the ability to have some expertise that is broader than an individual brand within our portfolio might be able to afford. So it’s kind of internal consultant perhaps here and there. That’s it. We have tend to keep that very lean and I think we have bounce back and forth between what corporate role is in the big picture of things in the past and we are clearly defining that here and that’s what you are seeing as a result there. So across the wide -- I am not going to go into much detail, across the wide variety of functions and it’s a -- it was design to make a clear what corporate is responsible for and that way the businesses can then invest appropriately in everything else.

Okay. Is there a dollar amount that you would like to share with us in terms of expected savings or is it inside…

Yeah.

… maybe in the $10 million of savings?

Okay. Yeah. We -- it's -- yeah, it’s -- I think you can look at -- look towards our guidance there on the savings we are getting from our initiatives here in that maybe idea the total number…

Okay. That’s -- all right. And then, I guess, the other question, well, two final ones, one would be, you guys laid out obviously some long-term financial objectives and targets. But if we are just taking this year's EBITDA number adding the $10 million of savings that you expect to get from footprint optimization, it kind of get you where you think you might be the greater than $70 million without any movement in sales and I guess, [ph] once your (58:11) trajectory has been down, but seems like the overall economic climate seems to be pointing better or higher? And then you also identified or talk about some language in the press release about your company probably continued to find opportunities to improve operation. So should we interpret it that there is upside to maybe the $70 million and $80 million or and I know you mentioned some restructuring and some are not, again just trying to bridge the gap between what you did in ‘16 that the $10 million of savings here expect to get and obviously the continued focus on doing better year-over-year?

Gabe, this is in our forecast, so answering your question would be probably making a forecast, so I apologize to that, but I am not going to answer it because it’s, I am not going to forecast. You are math is certainly correct and I will go back to saying that as part of our plan we will be intend to grow business on the topline, just putting to go at the right way. So the topline is not our target. There are some stretches in certain areas of this and I am not but you can’t stretch an organization across every facet of what we do. So we are going to stretch where we think the most important methods are and you can see that here and that’s we are going to continue to do that.

Okay. That’s make sense. And then the last one just sort of I guess risk mitigation and thinking about what Myers had been at least within the Manufacturing or Material Handling aspect of the business, more heavy production assets, again finding folks to do things better than what you do and outsourcing that. Can you talk about maybe some specific examples or areas that you've identified where this might be applicable, just given where you guys are in your supply chain to your customers, just thinking maybe seat boxes there is a little bit better lead time and so you can outsource certain components or something like that versus some stuff that might be a little bit more real-time in terms of delivery?

Yeah. That’s a fair question, Gabe. Let’s do this. I think it would be better if we hunted back to later in the year once we finished the first two phases of this and then we can -- once you can explain a little bit about the what it will be clear what would the answer to your question. I would rather do it that way just because we are in process on some things here. I just want to make sure we are executing the way we think it will lay out before we talk about that. Is that fair?

That is fair.

Okay.

One, I guess, the last one, resin inflation anything that we should be thinking about, I mean, it seems like second half better than first half, I don’t know if that were -- ample costs were playing into that at all?

I would say, Gabe, in terms of the resin we are, I would say, we are seeing a -- we saw in first couple of months of the year slight increase in the cost, but we are projecting the cost then to go back down in the later part of the year. So right now we are not seeing any significant challenge for us in terms of resin industry percentage.

All right. Thank you, Matteo. Good luck guys.

Sure. Thank you.

Our next question comes from the line of Matthew Paige from Gabelli & Company. Your line is open.

Good morning. Thanks squeezing me in.

Hi, Matt.

So, I just want to go back to your overall strategy, you mentioned your M&A viewpoints, but is there any particular product area or geography that they are thinking about adding to that portfolio and I guess, conversely, as you look around your product portfolio was there anything that don't any longer view as over smart?

I am going to hunt on the second part of your questions just because I think it’s important to always go through an evaluation of your portfolio, but I think we are now and we have done that, but we are not in a position to talk about that today. In terms of where we would grow though from M&A standpoint. We are a small company. We are mainly playing in, I’d even say, United States, maybe generously North America with Scepter business. So, I think, it's important to start and stay close to what you know and then expand outlook from there, so from a geographical standpoint I think that this is a region we know and it’s from a management capacity standpoint it’s easier to start there. So we will focus there. It doesn’t mean we are not interested in the rest of the world, we are. But I think you get there over time. The -- in terms of targets, as I have said before, we are looking at the broad range of things, I think, you the word funnel is used appropriately when people talk about M&A because you start with the big number and you have a, one thing I will tell you, we have is a very strict filter for looking at things as they come in and you’ve got to boil that large funnel down quickly to an actionable group. But I will say that we are looking both at things that relate to kind of things we do today as well as things that might add a piece to Myers that again fits within our niche market orientation and our flexible operations. So we are not opposed to looking at a third segment if you will. These kind of things take longer to think through obviously because there change in direction, but we are not oppose to that. So those -- there are parts of the funnel that have those kind of things in that as well.

Great. That’s really helpful. Thank you. And then just a last question for me is just more housekeeping related, could you provide an update on the note Wingate and what the payment schedule look like?

No changes on that. It’s nothing, it’s different from what’s in the disclosed information already on it.

Okay. Well I appreciate it and good luck.

Thank you.

Our next question comes from the line of Chris McGinnis from Sidoti & Company. Your line is open.

Yeah. Good morning. Thanks for taking my questions and great presentation of the new plan here.

Thanks, Chris.

Quickly I just was thinking about the sourcing and if this was asked I apologies but how far long are you into the talks with any potential partners and how does that play out throughout the year in terms of, will you announce partnerships with some people or it will just be internal?

No. It’s -- first of all, to actually first question, we are very far long. We have a detailed plan for all what we are trying to accomplish this year. We have -- we are -- I have done this sort of thing before and it’s a -- we want to make sure we derisk it so we have spent the time necessary and we are going to take the time this year to do it in a very controlled and orderly fashion, it’s no rough just to meet some quick savings. So we have identified that and we are hoping to develop great partnerships down the road. I don't think they are going to be relevant enough to announce in a public way. But our goal is to have very solid partner that we are in -- for the long-term.

Great. And then second question, just obviously, a lot of changes happening in a lot of initiatives. Do you need to add anymore, I guess, you may be just talk about the talent you have and do you think you need to add more to execute on the plan and maybe just talk about that change in culture, maybe just comment on where that is currently, our imagine that they are excited with the new initiatives in place?

Well, I think, part of any growth strategy will revolves around having the talent that’s capable growing with it and so we are constantly looking for great talent to add in a lot of different areas. So I think there will be investment this year in talent and there are going to be investment every year in talent. So that’s something that we are going to continue to do. And companies that can execute on the strategy and the vision that we have are able to really orient their talent towards the thing they really need and that’s part of the strategy. So, absolutely, I am very pleased with the senior management team. There is a -- some of the things that we accomplish in 2016 were direct result of the skills and the quality of the senior management team we have on Board today. So we are happy with that and it’s going to -- we are going to continue to develop the team on into the future.

Thank you. Thanks. Thanks for the time today.

Thank you.

There are no further questions in queue. I will turn the call back to the presenters.

Thank you. Thank you everyone for your interest in Myers Industries and your time and participation today. As a reminder, transcript of this call will be available on our website within approximately 24 hours. A replay will immediately be available via webcast or call. Details can be found on our website under the Investor Relations tab. Thanks very much. Have a great day.

This concludes today's conference call. You may now disconnect.