Myers Industries, Inc. (MYE) Q2 2018 Earnings Report, Transcript and Summary

Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Myers Industries Q2 2018 Earnings Call. [Operator Instructions] I would now like to turn the call over to Monica Vinay. Monica, you may begin.

Thank you, Julie. Good morning, and welcome to Myers Industries second quarter 2018 earnings call. I'm 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 second quarter of 2018. If you've not yet received a copy of the release, you can access it on our website at www.myersindustries.com under the Investor Relations tab. This call is also being webcast on our website and will be archived there along with the 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 security 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 the statement. 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 am 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 Page 3 with an overview of the second quarter 2018. We had a nice quarter. We're very pleased with the solid execution that we had across the enterprise. You can really see the elements of our strategy play out in the results that we got in the second quarter. We had continued strong free cash flow, $13.3 million or 9.4% of sales. We're seeing some nice commercial wins, which is really a testament to the power of tools like 80/20 that we use, and in particular in the Material Handling business, saw some nice wins in the quarter. In our consumer markets, we had some nice wins with new customers, as well as some share gain there at Scepter. We saw some market share gains and new customer wins also at Buckhorn, particularly in the food and beverage market. And in the Ameri-Kart business, we saw some new industrial customer wins. All of these are due to strong commercial execution from using tools like 80/20. And as we improve our operational performance, we're able to focus more and more on these types of things. Speaking of operational performance, we had a great performance there, and we're seeing the savings from the restructuring efforts that we took last year, as well as some of the price initiatives that we've done throughout the year. Our gross profit margin expanded to 34% in the quarter. And then lastly, our balance sheet is in great shape. We reduced our net debt by over $100 million in the quarter. A big part of that was from a secondary offering that we did in the quarter, as well as the strong free cash flow for the quarter. Our Distribution segment does continue to make progress, although at a slower rate than we're happy with. Our year-over-year sales declined in the second quarter. Over 50% of that was from equipment sales in our MTS International business. Now, we are making some progress, and we see that in our daily sales run rate of consumables in our domestic business, which increased year-over-year in the second quarter, and the gross profit margin expanded year-over-year in the second quarter as well. Now, focusing forward, there are two key areas that we're focused on in this business to help continue to improve it. One of them is putting the right tools in the hands of our sales force, and we're doing that with a number of different initiatives. One in particular is a sales contest where we're incenting the sales force to focus on certain product lines as well as certain customers in certain segments. We did a bit of that in the first quarter through the second quarter with some success, and we're continuing that here in the third quarter. Secondly, we're very focused on recruiting and training, and it's both retaining the people that we have and training them better as well as recruiting the best people we can and training them well. With that, I’m going to turn it over to Matteo to go through some of the numbers.

Thanks, Dave, and good morning, everyone. Today, I will review our 2018 second quarter financial performance as well as our balance sheet and cash flow. So, if we turn to Slide 4 of the presentation, I will walk you through an overview of our second quarter operating performance. And as always, all the numbers in the presentation reflect our continuing operations. So, if we start from the top, net sales increased 3.9% to $140.6 million compared to $135.3 million in the second quarter of last year. If we exclude the impact of foreign exchange, the increasing sales year-over-year was 3.6%. This increase was primarily the result of higher sales in the consumer, food and beverage, and vehicle end markets all within the Material Handling segment, partially offset by sales declines in Distribution. The gross profit margin increased to 34% primarily due to the higher sales volume, increased price, the savings coming from the 2017 footprint realignment, as well as operating efficiencies, all of which more than offset the higher raw material cost and the unfavorable product mix. Our adjusted operating income margin increased 190 basis points year-over-year to 9.5%. The higher gross profit was partially offset by higher SG&A mostly due to the increased variable incentive compensation costs. As a result, of our GAAP diluted earnings per share were $0.26 compared to $0.08 in the second quarter of last year. And adjusted diluted earnings per share were $0.27 compared to $0.18 in the second quarter 2017. Now, if we turn to Slide 5, I will give you an overview of the performance of the two segments. So, if we start with the Material Handling, sales in Material Handling increased by 7.4%. The increase in sales was driven primarily by the sales growth in the three key end markets that I just mentioned earlier. So, consumer, food and beverage, and vehicle. Sales in all these three end markets grew double digits year-over-year. Specifically, in consumer, sales were up due to timing of orders, new customer wins and market share gains. Conversely, increased demand was the primary driver of the higher sales in food and beverage and vehicle. Adjusted EBITDA margin in the segment increased 300 basis points year-over-year to 22.7%. This increase was the result of pricing initiatives, restructuring actions and operating efficiencies at the factories. If we turn to Distribution, our net sales declined by 4.4% year-over-year while sales in the Myers Tire Supply business continue to be impacted by the sales team turnover and open territories. The new pricing structure that we implemented last year combined with a focus on selling higher margin products is driving gross margin expansion in the segment. And as a result, adjusted EBITDA margin in the segment was flat year-over-year at approximately 8% in spite of the lower sales volume. Specifically, positive price and favorable sales mix and operating efficiencies partially offset the negative impact of the lower sales. If we move to Slide 6, I will give you an overview of the balance sheet and the cash flow. So, as Dave mentioned earlier, we generated strong free cash flow in the quarter of $13.3 million or 9.4% of sales. Year-to-date cash flow, again on the second quarter, was $24.9 million or 8.5% of sales compared to $24 million in the first half of 2017. Through the issuance of common stock and strong free cash flow generation, we were able to reduce our net debt by $101.6 million during the quarter. As Dave mentioned, you may recall that in May, we announced a public offering of our common stock. Following that announcement, we sold 4.6 million shares, which resulted in net proceeds of $79.5 million during the quarter. Our net debt to adjusted EBITDA ratio decreased to 0.6 at the end of the quarter; and had we not issued a common stock, our net debt-adjusted EBITDA ratio would have been 1.9, which isn’t our target to be below 2 by the end of 2018. Working capital as a percent of sales in the quarter was 5.8%, which is pretty much consistent with the prior quarters, and remains well below our target of 9%. Capital expenditures during the quarter were $1.2 million compared to $1.8 million in the second quarter of last year. Capital expenditures were $2.3 million, which is pretty much flat to last year. With that, I will turn the call back to Dave who will review our 2018 outlook.

Thanks, Matteo. Moving to Slide 7, overview of the 2018 outlook for the full year. We are holding our previous outlook of sales growth low- to mid-single digits for the full year. I'm going to go through each of our five macro segments, and this is a full-year review of what we expect our participation in each of these markets to be from a top-line perspective. Starting at the top with consumer, we're expecting for the full year to have low-single digit growth. As I mentioned earlier, we're anticipating market share gains, and that's primarily through the launch of new innovative products in the second half of the year. But we do expect that to be offset by some unusual volume that we have last year due to the large number of hurricanes that came through North America. In food and beverage, we’re expecting high-single-digit growth. We've had a very strong start to the year in Ag already and very good traction in our food processing business. I will say here that there is some upside potential as we look forward. We have put in a fairly conservative view for the second half for our Ag business, and that's primarily because of the activity around trade tariffs. We're not – it's unclear right now what that impact might be on the Ag market. And so, while we do see good indicators for demand from our customer base, our current forecast that we have in here doesn't have that in it. And so, we think there's potential upside should those trade tariffs not have the impact that we're anticipating there. Moving down to the vehicle market, we're expecting high-single-digit growth there for the full year. We had had a very strong RV market year-to-date. We did see that market slow in the second quarter, particularly towards the end. We did see our customers take their customary July shutdown period, which they did not do last year. So, in the middle part of the year here, that market has slowed. But we do see looking forward that the slowing is really more of a steady demand. It's stopped growing at the double digit growth rate that it had over the past few years. So, we still see steady demand there but it is slower in terms of a growth rate year-over-year moving forward. Conversely, we're seeing increased demand and strong backlog coming into the third quarter in the automotive OEM market which to be honest was a bit of a surprise to us. And so, we're a little more bullish on that as we look forward. And so we're confident here in the high single digit for the full year growth in the vehicle segment. In the industrial market, we're anticipating our full year to be flat. The large majority of that is that we're expecting our volume to be lower due to the product simplification that we've been undergoing as part of our 80/20 initiatives over the past year. We expect that to be completed through the end of the third quarter, early fourth quarter. We do see some growth potential here going into the second half of the year from some of the initiatives that I highlighted earlier in terms of additional adjacent market segments in some of our businesses. Again, that's some upside that we see in this market. We don't have a lot of that baked into our outlook. As we get those wins, we think that that gives us an opportunity to over deliver for the rest of the year. In the auto aftermarket, we expect to be down low single digits. We expect it to be flat in the second quarter and we were not. And so we're meeting our expectations here. We do expect to grow in the second half of the year but we don't expect that that sales growth will be enough to overcome the declines that we had in the first half. So, overall, we're expecting a good year low to mid-single digit growth in the top line. Now, before we turn it over to questions, I do want to address, I briefly alluded to the trade situation and I wanted to address that in a little more detail here at the end. First and foremost, we're primarily a domestic company. And so, both on the commercial side as well as on the supply chain side, we deal mainly with U.S. and some – in aggregate, North American customers and suppliers. So for the most part, we're not directly impacted by the trade situation in the tariffs. We do, however, have some implications, some of the commercial ones I've highlighted already particularly around the ag market. But I also want to address specifically the cost impacts that we're seeing already and that we anticipate going into 2019. I think the best way to look at this is to look at the impact and what we anticipate to be the impact in 2019. A lot of what we're seeing, we've either been able to push out of 2018 or already taken action on in this year. But as we look forward, we won't be able to delay some of that into 2019. So, overall, though, again, as I said, we're mainly a domestic company, so not a very large impact on our enterprise, but we estimate that all in, the current tariff situations as scripted will have an impact of less than 1.5% of material inflation on our total material cost. So, that's less than 1.5% of our material cost inflationary impact in 2019 for the full year. Now, about three quarters of that relates to steel, and that's both domestic supply chain as well as imported steel. We're seeing price increases already in that. But that's normal course of business for us. And given our experience that we've had so far year-to-date, we feel that and actually already have in a number of cases counteracted that with price. And so, material cost inflation of that variety of raw materials like steel is a normal part of our business. It's not a huge impact as you can tell from the percentages, and we feel that we're going to be able to cover that and, as I said in many cases, already have covered that with price. The remaining 25% of the impact from tariffs are purchase goods that come – that are imported. We believe we have the opportunity for most of that to offset it with alternate supply chain. And that's one of the benefits we have of being of the scale that we are in the business and particularly in the Distribution business. We have multiple suppliers for a wide variety of our products, and we feel that we can cover any - the majority of the tariffs that we see through alternate supply chain. For those that we can’t that are direct sourced from China and only have singles or only have the ability to source from China, we would anticipate that – similar to steel that we will be able to cover that with price. And the reason we feel that way is that because of the fact that if there was an alternative supplier, we would have already found it. So, we feel we have a very good coverage of the supply chain in our businesses and that we – where we have the ability to find alternate supply, we will do it. And in some cases, we have an advantage there, because we have a broader supply chain than some of our competitors. Where we don't feel we can – are able to do that, we feel that our competitors have the same problems we do and that price will be available to everyone and be able to be pushed through to the market. So, just want to give everyone a summary of where we feel we are with tariffs. Again, I don't think it's going to be a very large impact and we feel it's one that we can cover. So with that, we had a very nice quarter. We're very pleased with our performance, and we're happy to turn it over to any questions that any of you may have.

[Operator Instructions] Your first question comes from Tyler Langton with JPMorgan. Tyler, your line is open.

Just in Material Handling. Obviously, the sort of the wins and share gains seem to be picking up and you seem to be doing well. Can you give us a sense, I guess, of what that might be contributing to growth overall versus just demand growth in the end markets?

Sure. I think the - I don't know if I’d quantify it other than what the way we quantified it here on Slide 7. But I'll say it this way. When you approach a market using 80/20, you’ve divide up your business into segments, and so that's how we look at it. In particular, each business has several segments within it and how they focus their attention. And what you do from that is you try to find the ones that have the most favorable profitability, the ones that are the most favorable growth characteristics. And so, it's a combination of both. You want to try to win in markets that you think have good growth rates. That's not always the case. So for example, I'd say in our consumer market that the growth rate of fuel cans is not necessarily double-digit, but we feel we have good products that we're launching this fall and are – and using that we're able to gain share with new customers. So, I think it depends on each situation and that's why if you break it down into much smaller pieces into these niche markets that we're in, we try to focus our attention on markets that we think have favorable growth, and so some of the wins are in those types of situations but not all them.

And then just on the distribution side, I mean the growth is coming in below expectations. Is it more – is it sort of turnover of the sales force? Is it just the sales force not being as effective that it should be? And I don’t know, I know sort of price and mix was benefiting margins, but does that sort of having a negative impact on volumes?

Right. So, I think it goes hand in hand. I think turnover gets poor performance, and that’s not because the people that we hire are poor performance sale people but it's difficult when you have a turn - when you turn the territory over to a period where it's difficult to - those customers have to buy it from somebody. This is a high-touch selling business. As much as we have focus, some attention on getting some customers to order either over the phone or online, there's still high-touch portion of this business. So when you had a gap in a territory, you tend to lose those customers for a period of time and in some cases for good. So when you're rebuilding, you're spending a lot of time going back to customers that you used to have and trying to win them back. In order to do that, you have to have some expertise and I think one of the things you're seeing I highlighted that equipment sales were down. Equipment is a much more technical sell; and so, newer salespeople, it's more difficult for them to make those deals happen. And so, that's the gap. That's one of the areas you see weighing on the top line. Now, fortunately those are larger projects but lower margin so we prefer the recurring revenue consumables which are somewhat easier to sell. But that's some of the impact that you're seeing there is when you do have turnover, it's hard to rebuild quickly. So, we're focusing a lot of attention with the leadership on how to help newer salespeople be more successful faster. And then also on top of that, because what we're seeing from our tenured sales force is really good results, we're trying to help them be even more successful. So in other words we're winning. We want not just be satisfied if that's good, we want to double down on those areas and win more. And that's, I mean some of these sales promotion activities that we're doing are really helping that. But then spending time out in the field, I mean really directing our sales leadership to be out there in the field with newer sales reps so that they can help train them and get them up to speed faster.

And then just final question on acquisitions. I know you want to remain disciplined but is – can you give a sense of the biggest obstacle to deal. Is it price or is it just not finding something that sort of that sort of fits with your strategy what you want to do?

Definitely not a lack of opportunities. There are lots of good things out there. We're continuing to be active participants there. We have a number of things on our plate right now. Price is an issue and so we're very disciplined about that, and we'll let good businesses walk away if they're too expensive. We certainly are not going to overpay for anything that's not great. So, it's just that's the market we're in right now. There's a ton of money in private equity. We've been outbid by a couple of private equity firms that – their math is different than mine, and that's the way it goes. But we’ll remain disciplined, and we still have lots of – lots of pitches coming at us to swing at, and we're actively doing that.

Your next question comes from Tim Wojs from Baird. Tim, your line is open.

So, I just - on the tariff impact from the ag business, I just wanted to make sure I totally understand. It sounds like you're not really seeing an impact on the ag business yet, but you've built in some slower growth in the back half the year just as a contingency, if you will.

Correct. I think - we want to make sure that we're paying attention to the macro world around us. And sometimes - sometimes markets behave differently that you participate in. We are not seeing that necessarily from our customers or directly in our order patterns. But it's prudent to look a couple of steps ahead and see what might come from that. Now, there's been a lot of different news around ag and where we might additionally export some of our agricultural products as a country. But this is a big market that's being affected by this. And so, we want to make sure we're cognizant of that. If things don't play out the way – if these headwinds don't materialize, which, again, as I said specifically, we haven't seen them, if they don't materialize, we think we have some upside there.

That sounds reasonable. And then the auto strengthening, what do you think is driving that, because it seems a little contrary to some other companies that we cover that are saying that there is a little bit of softness in auto?

And I've seen a mixed bag in that as I've listened to various participants in the market. I think there's a correlation for us in terms of model-year changeovers. So, the more of those there are, the better our business, because if you think, we're redoing this – we’re working within the supply chain. So, whenever they're redoing their supply chain or redoing the types of parts they use, they buy our product. So, I think that's a part of it. And I think it's also perhaps some of the balance of customers that we have. Some are doing better than others, and some of it is perhaps we're doing better than our competitors. I don't have specific facts for that, so I don't like to put that out there as a fact that, but that could be part of it. But it has been a better year than we had expected there, and I think – I'm going to attribute that mainly to the number of model-year changeovers that are going on. And that pace has changed. Cars are becoming more like our phone in a lot of ways in that they update them, the updates happen a lot faster. And to be competitive as a car manufacturer, you've got to change the models a lot more. And maybe that's the way of the future. It seems to be the pace that they're on regardless of the number of cars that they're selling. So, I mean, I know at a certain point, the math is difficult for them on that, but that's what we're seeing.

And then just on the - last one for me, on the industrial business, if you could attempt to kind of strip out some of the impacts from 80/20, is your kind of underlying industrial business growing in your estimate?

So, the answer to that is the baseline business is kind of a Steady Eddy I'd say is, yes, but it you know kind of a GDP type pace. Where we are seeing, and so when you add in product simplification that you’ll have a bit of a headwind. We're coming out of that phase towards the end of the year here as we've simplified a lot of our product offerings. Where we are seeing traction is in more specific – the idea here is to parse it down. Industrial is a very broad category. 80/20 helps us parse it down to more specific areas that we can focus on. I'm not at liberty to talk about specifics on those today, but we – our funnel is very strong in that regard and we are seeing some traction in that early here in the third quarter. And so, that's why I have that as a potential upside here in that business as well because we're seeing some traction from that – from the more focused approach rather than the broad brush – we’ll be across the board-type player in industrial. We're going to be a little more specific moving forward. And once we get there, we'll be able to explain that a bit more.

So, in the - just the guidance imply maybe a little bit of reaccelerating industrial, that's more just the 80/20 impacts falling off as opposed to the underlying getting a lot better?

I think at all of our industrial distribution, we're seeing the same things that they are. It's a fairly - it's very steady. We’ve had the ability to push through inflation, and it's been a steady business, I’d say.

[Operator Instructions] Your next question comes from Ryan Mills from KeyBanc Capital Markets. Ryan, your line open.

I just want to go back to the product introductions, is that only in consumer? And then is that more of a back-half opportunity for you guys, and could you maybe quantify the number of products you’re planning on launching?

Primarily our largest product launch is in that market space or a couple of them that you'll see towards the end of the year. There's timing of when you get stocked in to these various stores that they sell these products. And so, it’s a phased in approach to the back half of the year. There are also some newer customers that haven't bought from us in a while in that particular segment that are interested in that product. And a lot of these customers have come onboard today even though they're buying existing product. So, that was good it's been a nice benefit of having the innovation launch there. We have in the industrial space some of the opportunities we have involved new products in that market. We have the ability to be a bit more nimble from a product launch perspective because particularly in the America business the tooling is not as expensive or it doesn't need as much time to create. So, you can rapidly introduce new products there, and that's something that they're working on. So, I'd say that to a lesser extent and that's why it's not completely in our outlook. So, those are the two main areas that we're focused on for new product.

And then go into distribution looking at your updated guidance for auto aftermarket. Sounds like you're still expecting growth in the back half but not fully offset the declines in the first half. Looking at my model right now can't get tougher in 3Q than return the first half levels in 4Q. So, I guess I'm just asking what's given you the confidence that you'll see a return of growth and distribution in the second half?

I think the biggest leading indicator that I saw in the second quarter that was a positive was the domestic daily sales run rate improvement year-over-year on that consumable side of the business. And that, to me, is an indicator of health in terms of do we have customer growth. Do we have – also growth in same-store type of thing. So, that's the consumable, that's the ongoing portion of business that tells you are we winning customers or not. Equipment is probably the biggest headwind, and I said it's a combination of – that's an area that there is an impact from steel. Obviously, there's also potential impact from tariffs on that. So, there's going to be some price inflation there across the board for everybody, but also that's – the more difficult part of selling for our newer sales reps is that type of stuff. So, we're working on some initiatives around helping them be better at that. But I think, in general, I look at the daily sales for our consumable and tools business as an indicator of the health of the business, and that's been improving.

And then really nice performance in gross margins during the quarter. I mean, it looked like a lot of that was driven by price. Do you still see more pricing opportunities out there? And do you think this 34% range is a sustainable run rate going forward?

Well, I think it's - I mean, obviously, we do have a slower second half typically from a seasonality standpoint. So, you're going to run into a bit of – so, really, what I look at it is I look at contribution margin which we don't disclose, but that to me is the indicator of – because we're going to have - we generally do have less sales in the second half, and so that puts a weight on the gross margin side. So, I would look at it that way, if I were you, but I think this is what we expect. But to me, that's an indicator – that's one of the best indicators that our strategy is working. We're focusing on the right places. We're overcoming material cost inflation with price and simplifying and reducing our asset footprint will continue to improve that gross margin over time. So whether it fluctuates quarter-to-quarter, what our goal is to march that number higher and higher and we don't need to add a ton of SG&A long term to this business. And so that's going to be how we accrete this business higher and higher on an operating margin level.

And then, my last question, just thinking about your prepared remarks in the RV market and thinking about the June shipments indicated some slowness and the and the chatter has elevated inventories at the dealer level. It sounds like that might alleviate in a couple of months just. Can you give an update on the RV market and maybe what you're hearing from your customers?

Sure. It does depend by customer. I will say that some are winning, better than others. I'll let you go through our couple of big public companies that are in that mix and lets you parse do that. But the - so that's a factor in this. I will say though that they went back to what I'd see the normal pace of summer shutdowns in the first part of July which we expected and you did see some softness in the shipments coming out of their factories in June and I think so is that's normal. We've been in a very abnormal state in that market for the past 18 months. And so when you go back to normal after being in that elevated state, it feels like a big shock but it's really to me I kind of go. It's a steady demand level at this point. It's just when you go from double digit growth to zero, it feels like a massive change which it is but it doesn't mean it's an unhealthy environment. I think there's still – consumer sentiment is still good. I think people are still buying RVs. And if we can keep GDP growth the way it's going and unemployment down, I think you're going to see continued interest in owning toys like RVs and boats and things like that, and that helps our business. So, I don't see it as a retrenchment in the other way from total numbers but it's going to be slower from a growth rate standpoint moving forward. And it also does that some customers are doing better than others. I will say that. We see that because we do cover the whole market. So, we see some customers winning.

Your next question comes from Chris McGinnis with Sidoti & Company. Chris, your line is open.

I guess just on the distribution side, can you maybe just – and if you answered this I apologize, but on the sales force, can you maybe just talk about the mix of newer to older noticeably the more established or longer tenure have done well? Can you just maybe talk about that mix as it is now?

Yes. I'll break it up this way. We look at performance within our sales force by quartile. So, we divide them in four essentially. We have 140 territories divided that by 4, it’s not an even number but – and really, the top half are performing well both on the sales and the gross margin line and we evaluate them on that. The third quartile is doing okay on the gross margin side. And the bottom quartile is where the problems are and that's where we’ve had multiple territory turnovers. In other words, not just one turnover, replace the person and then off you go. It's been either a couple of times it’s turned over in that territory. So, when that happens, you really end up having a challenge from a customer erosion standpoint. And that's when you're rebuilding particularly with a new sales person that makes it harder. So, what we're focused on is trying to help those new salespeople with tools and expertise to help them get up to speed faster. And we've seen some success in some places in that. We've seen some challenges in others. But that's how I would characterize it.

And I guess just to help that bottom half is just. What’s the best approach to help you guys it’s just giving more tools or…

Well, no. I think – I mean, we've taken a different approach this year, and that prior to this year was a lot of on-the-job training, so go out with your sales leader and train while you're doing. What we've done this year is more much more what I'd call university training, if you will, where we're bringing them to Akron. We're bringing them to some of our suppliers who have these types of training events so which is an investment you're taking people out of the field. But I think it's a different approach where much more intensive but group-oriented sales training so that they can share ideas. The other thing I will say have set on our quarterly reviews last week that the sales leadership have been interacting a lot more with each other to help share ideas, so – and to help share the load, if you will. So, when there's one particular area, district, that's having trouble, their adjacent districts are coming in to help out, either to help cover some of the gaps or to also help with the training. So, this subject-matter-expert program that we have, we used to sprinkle those people out of the field to help we're bringing everybody into Akron now to train intensively for a week which, again, is an investment, and you do lose some sales by doing that. But I think in the long term you gain from doing that, so it's a different approach this year. We'll see how it goes. We're measuring the performance on that to see if that's a better methodology, and we will see how that plays out as we go in to the second half here.

Thanks for taking my questions, and good luck in Q3.

There are no further questions at this time. I will now turn the call back over to Monica for closing remarks.

Thank you. We thank all of you for your interest in Myers Industries and your time and participation today. As a reminder, a 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 and have a great day.

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