MYERS INDUSTRIES INC, 10-Q filed on 4/30/2012
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2012
Apr. 23, 2012
Document and Entity Information [Abstract]
Entity Registrant Name
Entity Central Index Key
Document Type
Document Period End Date
Mar. 31, 2012 
Amendment Flag
Document Fiscal Year Focus
Document Fiscal Period Focus
Current Fiscal Year End Date
Entity Filer Category
Accelerated Filer 
Entity Common Stock, Shares Outstanding
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Condensed Consolidated Statements of Income and Comprehensive Income [Abstract]
Net sales
$ 198,789 
$ 195,507 
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense, net
Income before income taxes
Income tax expense
Net income
Comprehensive income
$ 12,002 
$ 8,529 
Income per common share:
$ 0.30 
$ 0.19 
$ 0.29 
$ 0.19 
Dividends declared per share
$ 0.08 
$ 0.07 
Condensed Consolidated Statements of Financial Position (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Current Assets
$ 3,296 
$ 6,801 
Accounts receivable-less allowances of $3,238 and $3,863, respectively
Finished and in-process products
Raw materials and supplies
Inventory net
Prepaid expenses
Deferred income taxes
Total Current Assets
Other Assets
Patents and other intangible assets
Total other non current assets
Property, Plant and Equipment, at Cost
Buildings and leasehold improvements
Machinery and equipment
Property, Plant and Equipment, at cost
Less allowances for depreciation and amortization
Property, plant and equipment, net
Total Assets
Current Liabilities
Accounts payable
Accrued expenses
Employee compensation
Income taxes
Taxes, other than income taxes
Accrued interest
Current portion of long-term debt
Total Current Liabilities
Long-term debt, less current portion
Other liabilities
Deferred income taxes
Shareholders' Equity
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding)
Common Shares, without par value (authorized 60,000,000 shares; outstanding 33,460,491 and 33,420,488; net of treasury shares of 4,318,641 and 4,492,169, respectively)
Additional paid-in capital
Accumulated other comprehensive income
Retained deficit
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
$ 438,318 
$ 428,757 
Condensed Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Condensed Consolidated Statements of Financial Position [Abstract]
Allowances for accounts receivable
$ 3,238 
$ 3,863 
Preferred Shares, shares authorized
Preferred Shares, shares issued
Preferred Shares, shares outstanding
Common Shares, par value
Common Shares, shares authorized
Common Shares, shares outstanding
Treasury shares, shares
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Cash Flows From Operating Activities
Net income
$ 9,985 
$ 6,719 
Items not affecting use of cash:
Impairment charges and asset write-offs
Amortization of other intangible assets
Non-cash stock compensation
(Recovery of) provision for loss on accounts receivable
Deferred taxes
Other long-term liabilities
Gain on sale of property, plant and equipment
Cash flow provided by (used for) working capital:
Accounts receivable
Prepaid expenses
Accounts payable and accrued expenses
Net cash used for operating activities
Cash Flows From Investing Activities
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash used for investing activities
Cash Flows From Financing Activities
Repayment of long term debt
Net borrowing on credit facility
Cash dividends paid
Proceeds from issuance of common stock
Net cash provided by financing activities
Foreign Exchange Rate Effect on Cash
Net (decrease) increase in cash
Cash at January 1
Cash at March 31
$ 3,296 
$ 7,053 
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (USD $)
In Thousands
Common Stock
Additional Paid-In Capital
Accumulative Other Comprehensive Income
Retained Income (Deficit)
Balance at Dec. 31, 2011
$ 206,140 
$ 20,312 
$ 265,000 
$ 7,294 
$ (86,466)
Net income
Other comprehensive income
Common stock issued
Stock based compensation
Stock contribution
Dividends declared--$.08 per share
Balance at Mar. 31, 2012
$ 216,553 
$ 20,336 
$ 266,090 
$ 9,311 
$ (79,184)
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (Parenthetical)
3 Months Ended
Mar. 31, 2012
Dividends declared per share
$ 0.08 
Retained Income (Deficit)
Dividends declared per share
$ 0.08 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”), and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All intercompany accounts and transactions have been eliminated in consolidation. All subsidiaries that are not wholly owned and are not included in the consolidated operating results of the Company are immaterial investments which have been accounted for under the cost method. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K.

In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31, 2012, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2012.


Certain prior year amounts in the accompanying condensed consolidated financial statements have been reclassified in conformity with generally accepted accounting principles to conform to the current year’s presentation.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) No. 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income. ASU No. 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or two separate but consecutive statements. The update eliminates the option to report other comprehensive income and its components in the statement of changes in equity. ASU No. 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. The Company adopted this guidance on January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements, as this guidance simply modifies the presentation of other comprehensive income previously disclosed in the financial statements.

Translation of Foreign Currencies

All asset and liability accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated monthly at an average currency exchange rate for the period. The resulting translation adjustment is recorded in other comprehensive income as a separate component of shareholders' equity.



Fair Value Measurement

The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied to U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:


  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.


  Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.


  Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.

The fair value of the Company’s cash, accounts receivable, accounts payable and accrued expenses are considered to have a fair value which approximates carrying value due to the nature and relative short maturity of these assets and liabilities.

The fair value of debt under the Company’s Credit Agreement approximates carrying value due to the floating interest rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement. The fair value of the Company’s $35 million fixed rate senior notes was estimated at $37.5 million at March 31, 2012 using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered level 2 inputs.

Revenue Recognition

The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title and risk of loss, which is generally at time of shipment, and collectability of the fixed or determinable sales price is reasonably assured.

Accumulated Other Comprehensive Income

The balances in the Company’s accumulated other comprehensive income as of March 31, 2012 and March 31, 2011 are as follows:


          Defined     other  
    Foreign     benefit     comprehensive  

(In thousands)

  currency     pension plans     income  

Balance at January 1, 2011

  $ 12,234     $ (2,070   $ 10,164  

Current-period other comprehensive income

    1,810       -0-       1,810  










Balance at March 31, 2011

  $ 14,044     $ (2,070   $ 11,974  










Balance at January 1, 2012

  $ 9,994     $ (2,700   $ 7,294  

Current-period other comprehensive income

    1,385       -0-       1,385  

Tax effect of pension liability from prior periods

    -0-       632       632  










Balance at March 31, 2012

  $ 11,379     $ (2,068   $ 9,311  










Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company maintains operating cash and reserves for replacement balances in financial institutions which, from time to time, may exceed federally insured limits. The Company periodically assesses the financial condition of these institutions and believes that the risk of loss is minimal.




Approximately twenty percent of the Company’s inventories use the last in first out (LIFO) method of determining cost. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many factors beyond management's control, estimated interim results are subject to change in the final year-end LIFO inventory valuation and therefore, no adjustment was recorded as of the first quarter ended March 31.



In 2011, the Company acquired tooling assets and intellectual property for a new reusable plastic container used in producing, shipping and processing bulk natural cheese from Material Improvements L.P. The total purchase price was $5.7 million, comprised of a $1.1 million cash payment and $4.6 million contingent consideration. The allocation of purchase price included $0.3 million of property, plant and equipment, amortizable intangible assets, which included $1.3 million in technology and $0.2 million for trade name, and $3.9 million in goodwill. These assets and liabilities incurred were recorded at estimated fair value as of the date of the acquisition using primarily level 3 inputs. The operating results of the business acquired are included in our Material Handling Segment.



The Company is required to test for impairment on at least an annual basis. In addition, the Company tests for impairment whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit are below its carrying amount. Such events may include, but are not limited to, significant changes in economic and competitive conditions, the impact of the economic environment on the Company's customer base or its businesses, or a material negative change in its relationships with significant customers. The Company last conducted its annual impairment assessment as of October 1.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350), effective for fiscal years beginning after December 15, 2011. The update gives companies the option to perform a qualitative assessment that may enable them to forgo the annual two-step test for impairment. ASU No. 2011-08 allows a qualitative assessment to first be performed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If a company concludes that this is the case, it must perform the two-step test. Otherwise a company does not have to perform the two-step test. The ASU also includes a revised list of events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company conducted its annual impairment assessment as of October 1, 2011 which included adoption of this guidance.

The change in goodwill for the three months ended March 31, 2012 was as follows:

(In thousands)


    Balance at           Currency           Balance at  


  January 1, 2012     Acquisitions     Translation     Impairment     March 31, 2012  


  $ 214     $ -0-     $ -0-     $ -0-     $ 214  

Engineered Products

    707       -0-       -0-       -0-       707  

Material Handling

    34,279       -0-       -0-       -0-       34,279  

Lawn and Garden

    9,466       -0-       122       -0-       9,588  

















  $ 44,666     $ -0-     $ 122     $ -0-     $ 44,788  

















Net Income Per Common Share
Net Income Per Common Share

Net Income Per Common Share

Net income per common share, as shown on the Condensed Consolidated Statements of Income and Comprehensive Income, is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:


    Three Months Ended  
    March 31,  
    2012     2011  

Weighted average common shares outstanding



    33,439,012       35,320,589  

Dilutive effect of stock options and restricted stock

    473,153       130,034  







Weighted average common shares outstanding diluted

    33,912,165       35,450,623  







Options to purchase 217,500 and 1,767,454 shares of common stock that were outstanding at March 31, 2012 and 2011, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of common shares, and their effect would be anti-dilutive.

Supplemental Disclosure of Cash Flow Information
Supplemental Disclosure of Cash Flow Information

Supplemental Disclosure of Cash Flow Information


    Three Months Ended
March 31,

(In thousands)

  2012     2011  

Interest paid

  $ 296     $ 508  

Income taxes paid

  $ 2,455     $ 68  


During the quarter ended March 31, 2012, the Company recorded net expenses of $0.5 million in selling, general and administrative (“SG&A”) and $0.1 million in cost of goods sold for costs associated with restructuring plans including non-cancelable lease obligations, severance, consulting and other related charges. Estimated lease obligations associated with closed facilities were based on level 2 inputs.

In the quarter ended March 31, 2012, restructuring costs of $0.2 million for severance and personnel costs and $0.3 million for consulting and non-cancelable lease costs were recorded for the Distribution Segment. In addition, $0.1 million of restructuring charges were recorded in the Engineered Products Segment related to non-cancelable lease costs.

In the quarter ended March 31, 2011, the Company recorded $0.6 million of restructuring costs which included charges of $0.3 million related to the Distribution Segment and a $0.3 million for an impairment related to an idle Lawn and Garden manufacturing facility. Impairment charges for property, plant and equipment were based on appraisals or estimated market values of similar assets which are considered level 2 inputs.

The amounts for severance and other exit costs associated with restructuring are included in Other Accrued Expenses on the accompanying Condensed Consolidated Statements of Financial Position.


    and     Other        

(Dollars in thousands)

  Personnel     Exit Costs     Total  

Balance at January 1, 2012

  $ —       $ 605     $ 605  


    239       279       518  

Less: Payments

    (239     (316     (555










Balance at March 31, 2012

  $ —       $ 568     $ 568  










As a result of restructuring activity including plant closures, approximately $5.7 million of property, plant and equipment has been classified as held for sale as of both March 31, 2012 and December 31, 2011, and is included in other assets in the Condensed Consolidated Statements of Financial Position. The Company is actively pursuing disposal including the sale of these facilities.


Stock Compensation
Stock Compensation

Stock Compensation

The Company’s 2008 Incentive Stock Plan (the “2008 Plan”) authorizes the Compensation Committee of the Board of Directors to issue up to 3,000,000 shares of various types of stock based awards including stock options, restricted stock and stock appreciation rights to key employees and directors. In general, options granted and outstanding vest over a three period and expire ten years from the date of grant.

Stock compensation expense reduced income before taxes approximately $0.7 million and $0.6 million for the three months ended March 31, 2012 and 2011, respectively. These expenses are included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. Total unrecognized compensation cost related to non-vested share based compensation arrangements at March 31, 2012 was approximately $5.0 million, which will be recognized over the next three years.

On March 2, 2012, stock options for 323,200 shares were granted with a three year vesting period. The fair value of options granted is estimated using a binomial lattice option pricing model based on assumptions set forth in the following table. The Company uses historical data to estimate employee exercise and departure behavior. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and through the expected term. The dividend yield is based on the Company's historical dividend yield. The expected volatility is derived from historical volatility of the Company's shares and those of similar companies measured against the market as a whole.





Risk free interest rate


Expected dividend yield


Expected life of award (years)


Expected volatility


Fair value per option share

  $ 4.93  

The following table provides a summary of stock option activity for the period ended March 31, 2012:


          Average     Weighted  
          Exercise     Average  
    Shares     Price     Life  

Outstanding at January 1, 2012

    1,997,778     $ 11.33          

Options Granted

    323,200       12.96          

Options Exercised

    (35,996     10.86          

Cancelled or Forfeited

    (14,216     10.05          










Outstanding at March 31, 2012

    2,270,766     $ 11.58       6.99 years  










Exercisable at March 31, 2012

    1,604,460     $ 11.59          

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The intrinsic value of stock options exercised during the three months ended March 31, 2012 and 2011 was $94 and $1, respectively.

On March 2, 2012, 90,495 shares of restricted stock were granted with a three year vesting period. The restricted stock had a grant date fair value of $12.96 per share, which was the closing price of the common stock on the date of grant.

The following table provides a summary of restricted stock activity for the period ended March 31, 2012:


    Shares     Fair Value  

Unvested shares at January 1, 2012



    90,495     $ 12.96  


    —         —    


    (5,000     10.03  







Unvested shares at March 31, 2012

    373,995     $ 11.01  








The restricted stock awards are rights to receive shares of common stock, subject to forfeiture and other restrictions, which generally vest over a three to four year period. Restricted shares are considered to be non-vested shares under the accounting guidance for share-based payment and are not reflected as issued and outstanding shares until the restrictions lapse. At that time, the shares are released to the grantee and the Company records the issuance of the shares. Restricted shares are valued on the grant date based on the price issued. At March 31, 2012, shares of restricted stock had vesting periods up through March 2015.



The Company is a defendant in various lawsuits and a party to various other legal proceedings, in the ordinary course of business, some of which are covered in whole or in part by insurance.


In October 2009, an employee was fatally wounded while performing maintenance at the Company’s manufacturing facility in Springfield, Missouri. On February 22, 2011, the family of the deceased filed a civil complaint against the manufacturer of the press involved in the incident and the Buckhorn Inc. employee involved in the incident. Buckhorn Inc. has not been named as a party to this lawsuit. At this time the Company is not able to determine whether this proceeding or the incident will result in legal exposure to the Company, or if any such liability that results would be material to the Company’s financial statements. The Company believes that it has adequate insurance to resolve any claims resulting from this incident.

When management believes that a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the estimated loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable of occurrence than another. As additional information becomes available, any potential liability related to these matters will be assessed and the estimates will be revised, if necessary.

Based on current available information, management believes that the ultimate outcome of these matters will not have a material adverse effect on our consolidated financial position, cash flows or overall trends in our results of operations. However, these matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the consolidated financial position and results of operations of the period in which the ruling occurs, or in future periods.

Retirement Plans
Retirement Plans

Retirement Plans

The Company and certain of its subsidiaries have pension and profit sharing plans covering substantially all of their employees. The Company’s frozen defined benefit pension plan (“The Pension Agreement between Akro-Mils and United Steelworkers of America Local No. 1761-02”) provides benefits primarily based upon a fixed amount for each year of service as defined.

Net periodic pension cost for the three months ended March 31, 2012 and 2011 was as follows:


    Three Months Ended  
    March 31,  
    2012     2011  

Service cost

  $ 18     $ 18  

Interest cost

    72       76  

Expected return on assets

    (77     (77

Amortization of actuarial net loss

    25       16  







Net periodic pension cost

  $ 38     $ 33  







Company contributions

  $ 76     $ 76  


Effective January 1, 2012, the Company changed its profit sharing and 401(k) plan which includes an increase in the Company’s matching contributions and the frequency of the Company’s match. The Myers Industries Profit Sharing and 401(k) Plan is maintained for the Company’s U.S. based employees, not covered under defined benefit plans, who have met eligibility service requirements.

In addition, the Company has a Supplemental Executive Retirement Plan (“SERP”) to provide certain participating senior executives with retirement benefits in addition to amounts payable under the profit sharing plan. Expense related to the SERP was approximately $0.1 million and $0.2 million for the three months ended March 31, 2012 and 2011, respectively. The SERP liability is based on the discounted present value of expected future benefit payments using a discount rate of 4.50%. The SERP liability was approximately $4.6 million at March 31, 2012 and $4.5 million at December 31, 2011, and is included in accrued employee compensation and other long-term liabilities on the accompanying Condensed Consolidated Statements of Financial Position. The SERP is unfunded.

Income Taxes
Income Taxes

Income Taxes

The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $0.5 million at March 31, 2012 and $1.1 million at December 31, 2011. The recognition of $0.6 million of previously reserved tax benefits was based on the Company’s determination that various state and federal tax issues have been effectively settled in the quarter ended March 31, 2012. The impact of these tax benefits in the quarter ended March 31, 2012 was essentially offset by tax expense on pension liability previously recognized in other comprehensive income. The amount of accrued interest expense included as a liability within the Company’s Condensed Consolidated Statements of Financial Position as of March 31, 2012 and December 31, 2011 was $0.1 million.

As of March 31, 2012, the Company and its significant subsidiaries are subject to examination for the years after 2005 in Brazil, after 2006 in Canada, and after 2007 in the United States. The Company and its subsidiaries are subject to examination in certain states within the United States starting after 2006 and in the remaining states after 2007.

The Company is currently under examination of Federal income tax returns for 2009 and 2010 in the United States and for 2008 and 2007 in Canada, as well as certain states. The Company does not expect any significant changes to its unrecognized tax benefits in the next 12 months.

Industry Segments
Industry Segments

Industry Segments

Using the criteria of ASC 280 Segment Reporting, the Company has four operating segments: Material Handling, Lawn and Garden, Distribution and Engineered Products. Each of these operating segments is also a reportable segment under the ASC 280 criteria. None of the reportable segments include operating segments that have been aggregated. Some of these segments contain individual business components that have been aggregated on the basis of common management, customers, products, production processes and economic characteristics. The Company accounts for intersegment sales and transfers at cost plus a specified mark-up.

Income before income taxes for each business segment is based on net sales less cost of products sold, and the related selling, administrative and general expenses. In computing business segment operating income, general corporate overhead expenses and interest expenses are not included.


    Three Months Ended
March 31,

Net Sales

  2012     2011  

Material Handling

  $ 65,221     $ 65,730  

Lawn and Garden

    59,184       67,154  


    42,738       41,634  

Engineered Products

    37,227       27,925  

Intra-segment elimination

    (5,581     (6,936







Net Sales

  $ 198,789     $ 195,507  








    Three Months Ended
March 31,

Income Before Income Taxes

  2012     2011  

Material Handling

  $ 13,150     $ 10,261  

Lawn and Garden

    1,218       3,878  


    3,511       3,072  

Engineered Products

    4,591       2,789  


    (5,353     (7,632

Interest expense-net

    (1,081     (1,237







Income before income taxes

  $ 16,036     $ 11,131