Good morning. My name is Jody and I will be your conference operator today. At this time, I would like to welcome everyone to the Myers Industries' Third Quarter 2017 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.

Thanks Jody. Good morning. Thank you for joining us today. I am Monica Vinay, the Vice President of Investor Relations and Treasurer at Myers Industries. Joining me 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 third quarter of 2017. 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. This call is also being webcast on our website and will be archived there along with a transcript of the call 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. 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. Thank you for joining us. We're going to start on slide three with an overview of our third quarter 2017 results. We're very pleased with our performance in the quarter. We generated $9.7 million of free cash flow and our operating improvements are really yielding this cash flow from continued working capital and capital spending discipline. Our niche market strategy is delivering results, double-digit year-over-year growth in our consumer and food and beverage markets. Just a little color on that, while some of that consumer increase is due to some of the storm events that we saw in the quarter, there's also a big chunk of that that came from strong growth in our food processing business as well as our Ag business. So, we're very pleased about that. We continue to see positive momentum in our vehicle market, driven primarily by our RV business. It showed high single-digit growth in the quarter and that business continues to execute very well and deliver for their customers in a market that's also growing very nicely. Positive sales mix in our lean initiatives which that are driving gross margin expansion year-over-year, up 250 basis points and the highlight of our cash flow here is we're continuing to pay down debt and as you can see we're down $31.5 million year-to-date in debt pay down and if you add the dividend we've been paying that, we've delivered back to shareholders over $40 million in cash year-to-date. On the challenges side, our distribution segment continues to have some challenges although it was a better quarter and we're seeing some momentum gaining there. Our sales increased third quarter over the second quarter, down mid-single-digit year-to-date and I'll highlight a big -- the majority of that decline was due to…

Thanks Dave and good morning everyone. If we turn to slide four, I will walk you through an overview of our third quarter performance on a GAAP basis and as always, all the numbers in the presentation reflect continuing operations. As you can see, starting from the top left side of the page, net sales increased 8.6% to $144 million compared to $132.7 million of the third quarter of last year. Now, if we exclude the impact of foreign exchange, the increasing sales year-over-year was 8.1%. The increase was primarily the result of higher sales in the food and beverage and consumer market, partially offset by a decline in the auto aftermarket and industrial. Gross profit margin increased 120 basis points year-over-year due to higher sales volume, positive sales mix, and cost savings coming from our strategic realignment. Higher raw material cost were more than offset by the price gains in the positive sales mix. Additionally, restructuring expenses resulted from the strategic realignment in our material handling segment were $1.9 million in the quarter. At this point, we believe the strategic realignment is mostly completed and we expect -- expecting to be fully wrapped up by early 2018. As a result, the GAAP diluted earnings per share were $0.11 compared to $0.01 in the third quarter of 2016. If we turn to slide five, we'll provide you an overview of the key variances on an adjusted basis. Adjusted gross profit margin was 29.6% in third quarter compared to 27.1% of last year, corresponding to an increase of approximately 250 basis points. The increase compared to last year was due to the higher sales volumes, the positive sales mix, and restructuring in real estate. As I just mentioned, the price actions combined with a positive sales mix more than offset the…

Thanks Matteo. Let's switch to slide eight and I'll take -- walk through the 2017 revised outlook and strategic update. We're increasing our outlook. Our full year revenue, we now expect to be up low single-digits due to continued strong demand in our food and beverage and consumer markets and that's up from flat on our prior estimates. If you go to the right side, I'll walk through the five markets that we serve and talk a little bit about some of the color in each of those markets to explain why we're taking up our forecast. Starting at the consumer market, we obviously benefited from the storm activity in the third quarter, but you'll remember that that market has been very strong for us all year and we've executed very well in that, so that -- we obviously were helped a little bit more in the third quarter by hurricane activity, but we see that business continuing to grow and, in fact, we have very strong backlog for the fourth quarter as well in that business. In the vehicle market, this is we're expecting to be up high single-digits and it's driven primarily by our RV business. That market continues to be strong and on top of that, our team there has executed very well, particularly through the third quarter here and delivering to the customers in that market. The food and beverage, real nice story here, we expect that to be up high single-digits now. Really two main drivers to that. First one is in our food processing portion of the business, we won some new customers there, saw nice growth in the third quarter out of that, and expect that to continue. We've also, after three years of decline, are seeing the Ag market return more to…

[Operator Instructions] Your first question comes from the line of Chris Manuel of Wells Fargo. Your line is open.

Good morning, gentlemen and thank you for the color. A couple of questions. First, I appreciate the we're still in 2017 but it sounds like Dave as you went through some of your end markets, you've seen quite a nice pick-up ending the year and particularly you noted that Ag this is kind of the beginning of the season. So if you could maybe give us some thoughts as you head into 2018 as I -- as you look across these units you talked about seeing momentum in both the segments that have been down in 2017. Could we in fact perhaps see all five of these segments positive next year or just kind of some you know how are you thinking about that?

Sure. Well, I'm going to refrain from giving you any kind of 2018 guidance here, but I will talk as I did mention the Ag market. It is the beginning of the season, so this is the time when you start building backlog and looking at how the season is playing out and the strength there. So I will highlight that and I think that's going to carry into the first half of next year which is the season typically picks up in the fourth quarter through the for -- you know mostly through the first quarter and then a little bit in the second quarter. And I think that's going to be as they were back to a normal state there and maybe even some growth in general. So I think that market is favorable for us. We've done a good job of maintaining those customer relationships through the downturn and continuing to serve those customers well and certainly we're well-positioned there. The rest of them I'm not going to comment now. We'll talk more at the next earnings release. Chris but I think you can read my commentary as such.

Well, the one area I did want to kind of maybe touch on a little was the distribution side or aftermarket component because you've done quite a bit of work there training and advancing the commercial efforts with sales. Just to understand your most of the way down the fall there are we in a spot where again, I appreciate you're not trying to talk about 2018, but we should start to resume all the negative stuff spin anniversary, I guess at this point we should start to see positive trends on that component?

I mean that's a fair comment that all of the negatives are anniversary, I mean there's still challenges. I'd say the challenges are you know the pockets are getting smaller and smaller so we can focus more on specific spots. But you're going to still see some we've -- the product line that we exited with Patch will continue to have some runway here for the next couple of quarters. But the MTS distribution cushion that the front facing portion of that segment, I think we're -- we've really narrowed down to some real specific stocks where we're still having trouble with there's momentum in other places that’s overcoming them.

Okay. One question for Matteo. With respect to I know you've been doing a lot of work with -- plain [ph] realtor, divesting and moving around different components within corporate owned real estate and facilities. I think, he has noted you got one done in the quarter and it brought in $6 million, what’s kind of an appreciating there's a lot of pieces but as you look at you've got lot to do there over the next I don't know 12, 18, 24 months, Dave could you give us a timeframe on how long you think it'll take to kind of do those things? And then B, what would you estimate you'd be able to reduce debt by from either sale leasebacks or exiting altogether or is it something that’s double-digit number in terms of millions or how should we think about that?

Well, Chris, so we are at the beginning of the process. As you highlighted, we just sold one. It was a good transaction, it's worth almost $6 million, so that was positive. But I would add, I would not expect that all the others will yield to the same amount. We but -- just I would focus overall on the strategy that we have here which is really, we own today most of the facilities that we operate of we want to change that because we want to use some of the proceeds to lower our debt and then be ready to fire the bullets to invest in M&A activity when we are ready to do that. So that's the strategy is going to take as you said 12, 18 months at least. We have many facilities we're working on, but I think it's a little early for me to give you a range or a number on how much of this is going to really yield at the end of the project, but we are working on it.

All right. Thank you. Good luck.

Thank you.

Thanks Chris.

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

Hi, good morning. It’s actually Michael [indiscernible] sitting in for Adam. How are you all doing?

Hi Michael, good morning.

Just a couple of me, on cash flow. First, can you talk about why exactly you cut your CapEx guidance for 2017? And then, I think if I'm not mistaken your CapEx is only about 1% of sales this year, so do you think that's a sustainable level going forward?

So, let me talk about a couple of things. I think, in order to understand I think the CapEx level of this year, we need to take into account the focus of the team, what the focus of the team has been this year which really we had a few initiatives lean, the material handling realignment and 80/20 sales initiatives. So, the team was mostly focused on these three key items which drove obviously or lower CapEx expenditure in 2017. I would also stress the fact that particularly for example, the lean, the team is doing a fantastic job in some product lines the team was able to increase the capacity just by working on the cycle time, working on the efficiency of the equipment rather than doing in the old way which would have been purchasing new equipment which also drives a depressed CapEx expenditure. So, I would say, we’re back to the second portion of your question. I think the CapEx level this year for this reason I just mentioned is pretty low. We are expecting CapEx in 2018 to be definitely higher and more probably in the range of the $10 million, $12 million that we are expecting to have in 2017.

Okay.

But we will give you probably a better outlook on the CapEx when we talk in the next earnings call.

Let me add one piece here. I mean capital spending is driven by two things. One is capacity which is a function of productivity and two is new needs. You can also solve all of those problems with partners and so it’s really not appropriate for you to look at history to understand what our capital profile is moving forward. It's irrelevant frankly. So, we’re first of all with our main activities are getting much more efficient in productivity. So if you can measure productivity properly which we can and will prove that you don’t need as much capital. We’ve partners that can do ancillary things or even in some cases primary things that are not super important to your value proposition, you can use that as well. Those two things alone significantly reduce our capital needs. And then there's going to be things where we're inventing something new that is very unique and that we have do ourselves. And we're are going to spend capital on that, and you're going to see some of that this winter and that's the way it works. So, just using an academic ratio is not the way to look at our business.

Okay. That's helpful. And just one more on working capital, so you're obviously running below the 9% target. Can just talk about a much room you have on that front?

Michael, I would say we're always -- we're big believers of continuous improvement. So, we always look at opportunities to be better, to negotiate better terms with our suppliers, payment terms, collect receivables earlier, avoid having past dues. So, this is a continues focus of the team. Now, if you look at -- which is one of the reasons why the team has done a fantastic job this year in working capital. I think if you look at where we are today, this 7.5% over sales, I don't think you will see a big step improvement compared to where we are today.

Great. That's all from me. Thank you.

There are no further questions in the queue at this time. I turn the call back over to Monica Vinay for final remarks.

Thanks Jody. Thanks everyone.

This concludes today's--

We got another call.

Chris?

Certainly. Your next question comes from the line of Chris Manuel of Wells Fargo. Your line is open.

I just wanted to ask one follow-up question. I'm sorry, I apologize. When you guys talked about a full pipeline and looking at different transactions and things of that nature. I know it's always difficult to handicap would be that precise. But do you feel that you've got activity or things that are reasonably in the horizon, i.e., next 12 month that you feel you can get something done? Or is it more exploratory at this point? I mean I know you put together kind of the team from the C-level suite. You rechanged a lot of the upper level management. So, you've kind of got the heavy lifting done. How we would we think about the opportunity over the next -- to get something across the finish line perhaps in the next 12 months?

Yes, Chris, I'll answer that. M&A is feast or famine? It's very lumpy. Timing can be short fuse or longer tail. I think we're actively participating. I wouldn't say it's exploratory in any sense. So, the market is very strong right now. It's sellers' market. So, you have to be careful from a pricing standpoint for sure. But we're looking at a lot of stuff. It's a very busy part of our activity level of right now and it's not just exploratory. There is some of that -- I mean, you build a funnel by exploring and trying understand certain targets in the market and learning their business and trying to understand whether it's a good fit, but there are a quite a few other activities that are more robust. Not all of them are going to play out. We have to evaluate each deal as it comes across. But if you're asking whether it's feast or famine, the market is feast right now. But of course, can also be profit risk. So, we're very -- you know me well enough to know that I'm very careful and conservative person and we're evaluate each one very carefully, but it is an interesting part of what we're doing right now.

Okay. That's very helpful actually. Thank you. good luck guys.

Thanks Chris.

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

Good morning. Thanks for taking my questions. You may have gone through this. I've been jumping on different -- couple of different conference calls. Could you just maybe talk a little bit about the strengths in the quarter on material handling? And was it stronger end market related new product offerings. Can you maybe just dive into that? Again, sorry if have already asked this question.

No, it's a slightly different way of framing it than others have asked, so not a repeat, Chris. The -- there is some market strength. I'll go through. So, it's not -- none of the -- the strength you saw in the quarter was new products. We haven't launched anything yet this year that qualifies for that. What I would say is in the vehicle markets, the RV market is very strong right now, where I think we're winning there as if our operations there are performing very well and these are customers that require -- they don't carry a lot of inventory, so they require a lot of just-in-time type of deliveries. And our team is than a phenomenal job. And I think we're gaining share because of that. In the food and beverage markets, it's tale of two things. It's -- on the food pressing said, the team has done a wonderful job of seeking out new opportunities and winning those and so we've added some customers. So, that's good old-fashioned selling right there and targeting and that's with existing partners that we have -- that we think we have good and way of with. The Ag market is bit of a market rebound. I think the farm income is projected to be slightly up this year, not a V-shaped [ph] recovery by any stretch, but I think that's market returning to normal. And we are the thing premium packaging proceeds and so when the market starts coming back, our customers come back and so that's been helpful for us as well. And then, lastly, our consumer market, the portable fuel containers, we did see some life in the quarter from storm events that occurred in Florida and Eastern Texas, but that business has also been a phenomenal job of gaining share this year. So, their momentum has been going strong all year. We do have -- again, some of the lift we saw on third quarter was from that, but it's not the whole story. That business continues to perform really well just from a pure commercial execution standpoint and we see that momentum continue in the fourth quarter.

Okay, great. And then last question and you may have touched on this. But just outsourcing initiative, can you just maybe us give us an update where you're at and how you're kind of seeing that fit into the -- your playbook over the next two years?

Sure. It's -- we largely have completed big chunks of that quarter. And essentially the strategy is there to find people who are better at some of the basic things that we do than we are. Sometimes that's because that capital equipment that we don't have, we don't want to have. Sometimes that's just because they have some expertise that we don't have and sometimes it's purely because the operation itself is a fairly basic one and it's not something we need to be doing inside of our building. And so we found a number of great suppliers through that process. And we have given each of them -- strategy supply chain you don't want to have your eggs all in one basket, so to speak, but you want to have good partnerships. So, our suppliers have great opportunity to continue to grow their business with us if they perform. So, far that's been a positive. We've seen some good performance out of most of them. And that's the relationship we want to have with them is that we use them as great external partners and allow them to grow their business while we're also growing. So, it's -- I think it's a mutually benefiting type relationship and we're seeing that with some very, very good suppliers.

Great. Well, thanks for taking my questions. Congrats on a good quarter and good in Q4.

Thanks Chris.

Thank you.

There are no further questions in the queue at this time. I turn the call back over to Monica.

Thanks Jody. This concludes our call for today. Thanks everyone for joining us and for interest in Myers Industries. As a reminder, a transcript of this call will be available on our website immediately after this event. A replay will also be immediately available via webcast or call. Details can be found on the Myers Industries website under the Investor Relations tab. Thanks and have a great day.

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