Myers Industries, Inc. · NYSE:MYE
Myers Industries — Proxy Contest (April 2015)
33 slides from Myers Industries's proxy contest presentation, Apr 13, 2015
Slide 1: Improving Shareholder Value at Myers Industries
Improving Shareholder Value at Myers Industries 1-800-GABELLI www.gabelli.com
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE O
Slide 3: Executive Summary
Executive Summary Over the past several years, it has become apparent to GAMCO that shareholders of MYE require more appropriate representation at the Board level to assist in creating shareholder value. It is our view that the Board has failed in both its Advisory and Oversight mandate: 1. The M&A
Slide 4: Poor Oversight of M&A Strategy
Poor Oversight of M&A Strategy • The Board, under the leadership of Chairman Richard Johnston (Chairman since 2009, Director since 1992), has failed to properly oversee M&A transactions • Acquisitions have resulted in a series of transactions which have significantly damaged shareholder value • Time
Slide 5: Poor M&A Oversight under Johnston: European Material Handling
Poor M&A Oversight under Johnston Sommer Allibert S.A. Date Target Purchase Price Write-Down Sale Price 1999 Sommer Allibert’s Material Handling Division $1501 2 $1102 $683 All figures in millions • European Material Handling – In 1999, Myers purchased the Material Handling division of Sommer Allibe
Slide 6: Poor M&A Oversight under Johnston: Summary Lawn and Garden
Poor M&A Oversight under Johnston: Summary Lawn and Garden Date Target Purchase Price Write-Down Sale Price 2014 Lawn & Garden Segment $228 2 $821 $1102 2007 ITML Horticultural Products $119 3 2004 Productivity California $29 4 1999 Listo Products $18 5 1999 Dillen Products Companies $62 6 All figur
Slide 7: Lawn & Garden Disaster
Poor M&A Oversight under Johnston: Director since 1992, Chairman since 2009 Lawn & Garden Disaster • In 1999, Dillen Products Companies and Listo Products were acquired for $62 million and $18 million, respectively1 • In 2004, Productivity California was acquired for $29 million 2 • In January 2007,
Slide 8: Poor M&A Oversight under Johnston: Auto Products
Poor M&A Oversight under Johnston • Auto Products – In 2004, MYE acquired ATP Automotive (WEK and Michigan Rubber) for $61 million1 – 2014: WEK sold for $20.7 million2 – Based on the Company’s decision to restructure its segment reporting following the WEK sale, we can infer that WEK was of such a m
Slide 9: SAS Due Diligence?
Poor M&A Oversight under Johnston SAS Due Diligence? • In 2007, Myers acquired the North American Operations of Schoeller Arca Systems (SAS), including intellectual property, for $42 million1 • Myers then sued a competitor, Orbis, for patent infringement – However, it was discovered during the litig
Slide 10: Brazilian Accounting Challenge
Poor M&A Oversight under Johnston Brazilian Accounting Challenge • 2012: Acquired Novel Group (Brazil) for $31 million ($4 million cash, $26 million assumption of debt)1 • The company recently stated it needed an extension to file its 10-K due to “what appears to be errors in the accounting for inve
Slide 11: Scepter Acquisition
Poor M&A Oversight under Johnston Scepter Acquisition • In July 2014, MYE announces the acquisition of plastic fuel tank manufacturer Scepter for $157 million – The company estimated TTM EBITDA at $23.5 million, valuing the acquisition at 6.7x EBITDA, with no material synergies to be generated (just
Slide 12: The Lawn & Garden and Scepter Saga
Poor M&A Oversight under Johnston The Lawn & Garden and Scepter Saga Myer’s overall M&A strategy has been largely incoherent and has cost shareholders. With its perpetually underperforming Lawn & Garden business up for sale in an auction process that had already dragged on for 7 months, the Board ap
Slide 13: Poor M&A Oversight under Johnston
Poor M&A Oversight under Johnston • Company did not take into account that the trailing twelve months would provide a challenging high water mark • First three months Scepter performed materially below “expectations” – “…the performance of newly acquired Scepter was not as strong as expected in the
Slide 14: July 2014 CEO Comment on Scepter
Poor M&A Oversight under Johnston In July 2014, MYE CEO John Orr noted on a conference call regarding Scepter: “We found them and then they kind of found us. So it was not an auction”- John Orr1 1Factset Research: MYE July 9, 2014 Business Update Call 14
Slide 15: Lack of Oversight at Board Level
Lack of Oversight at Board Level • Troubling Notes on the Scepter Process – In 2014, the Board’s Capital Allocation Committee met only once1 – Outgoing Board member Dan Lee referred to “the board’s careless attitude toward important decisions” such as divestitures and executive compensation in his r
Slide 16: Poor M&A Oversight under Johnston
Poor M&A Oversight under Johnston • Post-Scepter, MYE Board and management allowed its balance sheet to be levered at over 3.7x EBITDA • The drawn-out sales process of Lawn & Garden put more power into acquirers’ hands • Myers announced the sale of Lawn & Garden in Jan 2015 to Wingate Partners for $
Slide 17: Poor M&A Oversight under Johnston
Poor M&A Oversight under Johnston • Subsequently, the private equity firm renegotiated the purchase price down an additional $5 million, to $110 million • Took back unsecured $20 million seller paper at 5% with no carried interest • Throughout 2014, management had described a year-long auction proce
Slide 18: Historic Failure to Act in the Best Interests of Shareholders
Historic Failure to Act in the Best Interests of Shareholders • On April 24, 2007, Myers agreed to be sold to Goldman Sachs Capital Partners (GSCP) for $22.50/ share1 • On December 9th, Myers provided GSCP an extension to complete the transaction and released it from any liabilities in return for a
Slide 19: Audit Committee's Rubber Stamp
Audit Committee’s Rubber Stamp • 19 days after issuing 4Q and FY 2014 results, the Company filed a form NT 10-K stating their inability to file their 10-K on time1 • No proper disclosure provided that the 10-K would be delayed due to two potential “material weaknesses” in its internal controls withi
Slide 20: Compensation Committee: Pay for Performance?
Compensation Committee: “Pay for Performance?” • 2014 Total Shareholder Return materially lagged the broader market, with MYE shares declining 14.2% while the S&P500 rose 13.5% MYE ended 2014 at $17.60 vs a price of $21.12 at the end of 2013. • Revenue grew 6.7% “mainly due to the purchase of Scepte
Slide 21: Pay for Performance?
“Pay for Performance?” • Management has shown a consistent inability to understand end market dynamics. Quotes from “Earnings Calls”: – 1Q14: “Unfortunately, extremely poor weather conditions and transportation issues negatively impacted net sales during the first quarter by approximately $9.6 milli
Slide 22: Pay for Performance?
“Pay for Performance?” • Management pay rose in 2014 despite poor operating performance, significant losses on the sale of WEK and Lawn & Garden, financial irregularities in Brazil and disappointing results from Scepter: – CEO base salary increased to $788k from $762k • Total Comp. $3.7mm – CFO Base
Slide 23: Pay for Performance?
“Pay for Performance?” • Myers’ proxy statement indicates bonuses and long-term compensation are based on a variety of factors that do not take into consideration the effectiveness of acquisitions and divestitures – Therefore, should the company acquire a business, mismanage it, have a “write down,”
Slide 24: Operating Performance Has Deteriorated
Operating Performance Has Deteriorated The company’s operating performance has weakened under CEO John Orr Deteriorating Operating Performance $70.0 9.0% Operating Operating Stock 7.8% 8.0% Income Income Price $60.0 6.5% 6.6% (Millions) Margin Year-End Operating Income (Millions) 7.0% $50.0 5.0% 201
Slide 25: Chief Executive Officer Compensation
Chief Executive Officer Compensation $70.0 $5.0 CEO John Orr $4.5 $60.0 $4.0 $50.0 $3.5 CEO Compensation (Millions) Operating Income (Millions) $3.0 $40.0 $2.5 $30.0 $2.0 $20.0 $1.5 $1.0 $10.0 $0.5 $- $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating Income CEO Compensation Source: Comp
Slide 26: Stock Underperformance: Cumulative Total Return
Stock Underperformance: Cumulative Total Return $250 $200 $150 $100 $50 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 S&P 600 S&P 500 Myers Industries MYE Price: $14.29 $15.35 $14.47 $8.00 $9.10 $9.74 $12.34 $15.15 $21.12 $17.60 S&P 500 Price: 1,248 1,418 1,468 903 1,115 1,257 1,257 1,426 1,8
Slide 27: Minimal Board Ownership Below 4%
Minimal Board Ownership Below 4% • Low level of ownership suggests the Board’s interests are not aligned with Shareholders: – Chairman owns 39,848 shares – Audit Chair owns 13,744 shares – Compensation Chair owns 17,905 shares – Nomination Chair owns 30,411 shares – CEO Orr sold a net of 78,000 shar
Slide 28: Board Composition
Board Composition • “Looking for diverse views that reflect interests of our shareholders.” • However, the current board at MYE is anything but diverse The Board needs shareholder representation. As a 21% shareholder GAMCO wants what is best for the shareholders. 28
Slide 29: Our Nominees: Bruce Lisman
Our Nominees: Bruce Lisman • Mr. Lisman, age 68, has served on the board of National Life Group, a mutual life insurance company with about $2 billion of revenues, since 2004. He has also served as a director of PC Construction, an engineering and construction company with about $500 million in reve
Slide 30: Our Nominees: Philip Blazek
Our Nominees: Philip Blazek • Mr. Blazek, age 47, has served as the President and Principal Executive Officer of Special Diversified Opportunities Inc. (OTC Markets: SDOI) leading this public company through the closing of the sale of its former operating business and related operational wind down a
Slide 31: Our Nominees: F. Jack Liebau, Jr
Our Nominees: F. Jack Liebau, Jr • Mr. Liebau, age 51, has been in the investment management industry for thirty years. He began as a research analyst with The Capital Group from 1984 to 1986, and from 1986 to 2003 was with Primecap Management Company (“Primecap”), where he was a partner and portfol
Slide 32: Appendix: Director Resignation Letter
Appendix EX-17.1 2 489398 1dex171 him EX-17.1 ‘Exhibit 17.1 DANIEL RLEE Las Vegas, NV 89134 Myers Industries, Ino. 1293 South Main Street Akron, OF 44301 ‘Atta: Board of Directors ‘March 13,2015 Dear Fellow Members of the Myers Board of Directors, Itis with sedness and disappointment that I write to
Slide 33: GAMCO Asset Management
AMCO SSET MANAGEMENT b