MYERS INDUSTRIES INC, 10-K filed on 3/14/2016
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2015
Feb. 29, 2016
Jun. 30, 2015
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
MYERS INDUSTRIES INC 
 
 
Entity Central Index Key
0000069488 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2015 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 588,922,537 
Entity Common Stock, Shares Outstanding
 
29,546,342 
 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]
 
 
 
Net sales
$ 601,538 
$ 623,649 
$ 584,733 
Cost of sales
423,260 
462,370 
415,179 
Gross profit
178,278 
161,279 
169,554 
Selling expenses
60,752 
60,261 
55,398 
General and administrative expenses
86,665 
78,400 
69,840 
Operating Expenses
147,417 
138,661 
125,238 
Operating income
30,861 
22,618 
44,316 
Interest
 
 
 
Income
(1,317)
(127)
(213)
Expense
10,316 
8,662 
4,744 
Interest expense, net
8,999 
8,535 
4,531 
Income from continuing operations before income taxes
21,862 
14,083 
39,785 
Income tax expense
7,809 
5,122 
13,343 
Income from continuing operations
14,053 
8,961 
26,442 
Income (loss) from discontinued operations, net of tax
3,709 
(17,642)
(440)
Net income (loss)
$ 17,762 
$ (8,681)
$ 26,002 
Income per common share from continuing operations:
 
 
 
Basic
$ 0.46 
$ 0.28 
$ 0.78 
Diluted
$ 0.45 
$ 0.27 
$ 0.77 
Income (loss) per common share from discontinued operations:
 
 
 
Basic
$ 0.12 
$ (0.55)
$ (0.01)
Diluted
$ 0.12 
$ (0.54)
$ (0.01)
Net income (loss) per share:
 
 
 
Basic
$ 0.58 
$ (0.27)
$ 0.77 
Diluted
$ 0.57 
$ (0.27)
$ 0.76 
Dividends declared per share
$ 0.54 
$ 0.52 
$ 0.36 
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ 17,762 
$ (8,681)
$ 26,002 
Other comprehensive income (loss)
 
 
 
Foreign currency translation adjustment
(27,622)
(13,318)
(9,292)
Pension liability, net of tax expense (benefit) of $113 in 2015, ($448) in 2014 and $605 in 2013
200 
(797)
1,076 
Total other comprehensive income (loss), net of tax
(27,422)
(14,115)
(8,216)
Comprehensive income (loss)
$ (9,660)
$ (22,796)
$ 17,786 
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Tax expense (benefit) on pension liability
$ 113 
$ (448)
$ 605 
Consolidated Statements of Financial Position (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current Assets
 
 
Cash
$ 7,344 
$ 4,676 
Restricted cash
8,627 
Accounts receivable-less allowances of $559 and $782, respectively
77,633 
90,664 
Inventories
 
 
Finished and in-process products
39,840 
40,122 
Raw materials and supplies
14,898 
23,216 
Inventory net
54,738 
63,338 
Prepaid expenses and other assets
5,966 
6,591 
Deferred income taxes
2,397 
Assets held for sale - current
117,775 
Total Current Assets
154,308 
285,441 
Other Assets
 
 
Goodwill
64,035 
66,639 
Intangible assets, net
58,530 
72,235 
Deferred income taxes
840 
545 
Notes receivable
17,981 
Other
3,449 
3,207 
Total other non current assets
144,835 
142,626 
Property, Plant and Equipment, at Cost
 
 
Land
7,960 
8,405 
Buildings and leasehold improvements
62,519 
57,537 
Machinery and equipment
345,277 
335,963 
Property, Plant and Equipment, at cost
415,756 
401,905 
Less allowances for depreciation and amortization
(284,983)
(265,139)
Property, plant and equipment, net
130,773 
136,766 
Total Assets
429,916 
564,833 
Current Liabilities
 
 
Accounts payable
71,310 
77,320 
Accrued expenses
 
 
Employee compensation
17,832 
14,967 
Income taxes
3,086 
Taxes, other than income taxes
1,733 
1,940 
Accrued interest
2,709 
3,207 
Liabilities held for sale
27,122 
Other
23,228 
26,172 
Total Current Liabilities
116,812 
153,814 
Long-term debt
193,006 
236,429 
Other liabilities
12,354 
13,738 
Deferred income taxes
10,041 
14,281 
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 29,521,566 and 31,162,962; net of treasury shares of 8,430,891 and 6,604,175, respectively)
17,895 
18,855 
Additional paid-in capital
196,743 
218,394 
Accumulated other comprehensive loss
(39,110)
(11,688)
Retained deficit
(77,825)
(78,990)
Total Shareholders’ Equity
97,703 
146,571 
Total Liabilities and Shareholders’ Equity
$ 429,916 
$ 564,833 
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current Assets
 
 
Allowances for accounts receivable
$ 559 
$ 782 
Shareholders’ Equity
 
 
Preferred Shares, shares authorized (in shares)
1,000,000 
1,000,000 
Preferred Shares, shares issued (in shares)
Preferred Shares, shares outstanding (in shares)
Common Shares, shares authorized (in shares)
60,000,000 
60,000,000 
Common Shares, shares outstanding (in shares)
29,521,566 
31,162,962 
Common shares, treasury (in shares)
8,430,891 
6,604,175 
Consolidated Statements of Shareholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Retained Deficit
Balance at Dec. 31, 2012
$ 230,022 
$ 20,316 
$ 266,419 
$ 10,643 
$ (67,356)
Balance, shares at Dec. 31, 2012
 
33,480,189 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
26,002 
26,002 
Issuances under option plans
5,693 
299 
5,394 
Issuances under option plans, shares
503,321 
503,321 
 
 
 
Dividend reinvestment plan
113 
109 
Dividend reinvestment plan, shares
 
7,390 
 
 
 
Restricted stock vested
Restricted stock vested, shares
 
112,000 
 
 
 
Restricted stock and stock option grants
2,237 
2,237 
Restricted stock and stock option grants (shares)
 
33,152 
 
 
 
Tax benefit from options
389 
389 
Foreign currency translation adjustment
(9,292)
(9,292)
Repurchase of common stock
(8,096)
(314)
(7,782)
Repurchase of common stock (shares)
 
(530,983)
 
 
 
Stock contributions
202 
194 
Stock contributions, shares
 
12,682 
 
 
 
Shares withheld for employee taxes on equity awards
(684)
(684)
Shares withheld for employee taxes on equity awards, shares
 
(44,973)
 
 
 
Declared dividends
(12,155)
(12,155)
Pension liability, net of tax expense (benefit) of $113 in 2015, ($448) in 2014 and $605 in 2013
1,076 
1,076 
Balance at Dec. 31, 2013
235,507 
20,313 
266,276 
2,427 
(53,509)
Balance, shares at Dec. 31, 2013
 
33,572,778 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
(8,681)
(8,681)
Issuances under option plans
2,792 
138 
2,654 
Issuances under option plans, shares
228,064 
227,664 
 
 
 
Dividend reinvestment plan
134 
130 
Dividend reinvestment plan, shares
 
7,159 
 
 
 
Restricted stock vested
75 
(75)
Restricted stock vested, shares
 
123,829 
 
 
 
Restricted stock and stock option grants
2,835 
10 
2,825 
Restricted stock and stock option grants (shares)
 
15,055 
 
 
 
Tax benefit from options
679 
679 
Foreign currency translation adjustment
(13,318)
(13,318)
Repurchase of common stock
(54,897)
(1,660)
(53,237)
Repurchase of common stock (shares)
 
(2,742,506)
 
 
 
Stock contributions
200 
194 
Stock contributions, shares
 
9,376 
 
 
 
Shares withheld for employee taxes on equity awards
(1,083)
(31)
(1,052)
Shares withheld for employee taxes on equity awards, shares
 
(50,393)
 
 
 
Declared dividends
(16,800)
(16,800)
Pension liability, net of tax expense (benefit) of $113 in 2015, ($448) in 2014 and $605 in 2013
(797)
(797)
Balance at Dec. 31, 2014
146,571 
18,855 
218,394 
(11,688)
(78,990)
Balance, shares at Dec. 31, 2014
31,162,962 
31,162,962 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
17,762 
17,762 
Issuances under option plans
2,775 
162 
2,613 
Issuances under option plans, shares
239,508 
239,908 
 
 
 
Dividend reinvestment plan
149 
144 
Dividend reinvestment plan, shares
 
8,968 
 
 
 
Restricted stock vested
78 
(78)
Restricted stock vested, shares
 
120,723 
 
 
 
Restricted stock and stock option grants
5,277 
5,277 
Restricted stock and stock option grants (shares)
 
 
 
 
Tax benefit from options
38 
38 
Foreign currency translation adjustment
(27,622)
(27,622)
Repurchase of common stock
(30,023)
(1,193)
(28,830)
Repurchase of common stock (shares)
 
(1,992,379)
 
 
 
Stock contributions
148 
143 
Stock contributions, shares
 
8,250 
 
 
 
Shares withheld for employee taxes on equity awards
(975)
(17)
(958)
Shares withheld for employee taxes on equity awards, shares
 
(26,866)
 
 
 
Declared dividends
(16,597)
(16,597)
Pension liability, net of tax expense (benefit) of $113 in 2015, ($448) in 2014 and $605 in 2013
200 
200 
Balance at Dec. 31, 2015
$ 97,703 
$ 17,895 
$ 196,743 
$ (39,110)
$ (77,825)
Balance, shares at Dec. 31, 2015
29,521,566 
29,521,566 
 
 
 
Consolidated Statement of Shareholders' Equity (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dividends declared per share (in dollars per share)
$ 0.54 
$ 0.52 
$ 0.36 
Tax expense (benefit) on pension liability
$ 113 
$ (448)
$ 605 
Retained Deficit
 
 
 
Dividends declared per share (in dollars per share)
$ 0.54 
$ 0.52 
$ 0.36 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Tax expense (benefit) on pension liability
$ 113 
$ 448 
$ 605 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash Flows From Operating Activities
 
 
 
Net income (loss)
$ 17,762 
$ (8,681)
$ 26,002 
Income (loss) from discontinued operations, net of income taxes
3,709 
(17,642)
(440)
Income from continuing operations
14,053 
8,961 
26,442 
Adjustments to reconcile income from continuing operations to net cash provided by (used for) operating activities
 
 
 
Depreciation
24,712 
24,173 
20,386 
Amortization
10,267 
6,999 
3,142 
Non-cash stock compensation
4,934 
3,115 
2,557 
Deferred taxes
(315)
(2,665)
(2,729)
Tax benefit from options
(38)
(679)
(390)
Other
762 
562 
1,257 
Payments on performance based compensation
(1,303)
(1,293)
(1,719)
Accrued interest income on note receivable
(1,060)
Other long-term liabilities
1,106 
341 
(978)
Cash flows provided by (used for) working capital
 
 
 
Accounts receivable
3,499 
2,710 
(1,964)
Inventories
5,271 
2,377 
3,011 
Prepaid expenses and other assets
573 
(966)
(840)
Accounts payable and accrued expenses
(13,107)
8,122 
26,758 
Net cash provided by (used for) operating activities - continuing operations
49,354 
51,757 
74,933 
Net cash provided by (used for) operating activities - discontinued operations
(11,622)
(13,062)
21,135 
Net cash provided by (used for) operating activities
37,732 
38,695 
96,068 
Cash Flows From Investing Activities
 
 
 
Capital expenditures
(23,727)
(24,170)
(20,709)
Acquisition of business, net of cash acquired
(156,620)
(600)
Proceeds from sale of property, plant and equipment
1,261 
566 
Proceeds from sale of business
70,762 
Other
(273)
Net cash provided by (used for) investing activities - continuing operations
48,296 
(180,224)
(21,582)
Net cash provided by (used for) investing activities - discontinued operations
(581)
11,626 
(8,359)
Net cash provided by (used for) investing activities
47,715 
(168,598)
(29,941)
Cash Flows From Financing Activities
 
 
 
Proceeds from long-term debt
89,000 
11,000 
Repayments on long-term debt
(32,683)
Net (repayments) borrowing on credit facility
(37,110)
106,493 
(24,492)
Cash dividends paid
(16,675)
(15,707)
(9,103)
Proceeds from issuance of common stock
2,924 
2,926 
5,805 
Tax benefit from options
38 
679 
390 
Repurchase of common stock
(30,023)
(54,897)
(8,096)
Shares withheld for employee taxes on equity awards
(975)
(1,083)
(684)
Deferred financing costs
(547)
(608)
Net cash provided by (used for) financing activities - continuing operations
(81,821)
126,864 
(58,471)
Net cash provided by (used for) financing activities - discontinued operations
(2,317)
Net cash provided by (used for) financing activities
(81,821)
126,864 
(60,788)
Foreign exchange rate effect on cash
(958)
1,176 
(2,748)
Net increase (decrease) in cash
2,668 
(1,863)
2,591 
Cash at January 1
4,676 
6,539 
3,948 
Cash at December 31
7,344 
4,676 
6,539 
Supplemental Disclosures of Cash Flow Information
 
 
 
Interest
10,131 
4,973 
4,196 
Income taxes
$ 10,138 
$ 11,355 
$ 12,321 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

1.  Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”). 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 equity or cost method. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

Certain items previously reported in specific financial statement captions have been reclassified to conform to the fiscal 2015 presentation.

Accounting Standards Adopted

In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-17, Balance Sheet Classification of Deferred Taxes, which amends the existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet and eliminates the prior guidance, which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for financial statements for annual periods and interim periods within those annual periods beginning after December 15, 2016, with early adoption permitted. In addition, the new guidance can be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company adopted this ASU on a prospective basis effective as of December 31, 2015. As required by ASU 2015-17, all deferred tax assets and liabilities are classified as noncurrent in the accompanying Consolidated Statements of Financial Position as of December 31, 2015. As the Company elected prospective application of this ASU, prior periods were not adjusted.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 300): Simplifying the Measurement of Inventory, which applies to inventory measured using first-in, first out (“FIFO”) or average cost. This update prescribes that an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This update is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company adopted this standard in the fourth quarter of 2015, and the impact of adoption was not material to the Company’s results of operations, cash flows or financial position.

Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for the Company beginning January 1, 2019 and requires a modified retrospective approach. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments in relation to business combinations. Under existing standards, the measurement-period adjustments are calculated as if they were known at the acquisition date, and are recognized by revising information in prior periods. Under the new standard, measurement-period adjustments continue to be calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined, with no revisions to prior periods relating to the business combination. In addition to the current disclosure requirement explaining the nature and amount of the measurement-period adjustments, additional disclosures will be required to explain the impact on current period income statement line items of adjustments that would have been recognized in prior periods if such period information had been revised. ASU 2015-16 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2015, with early adoption permitted. ASU 2015-16 will be adopted on January 1, 2016. The adoption of this standard is not expected to have a material impact on the Company's financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-03) - Simplifying the Presentation of Debt Issuance Costs which requires unamortized debt issuance costs to be presented as a reduction of the corresponding debt liability rather than a separate asset. ASU 2015-03 will be adopted on January 1, 2016. The adoption of this standard is not expected to have a material impact on the Company's financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The new standard provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Under ASU 2014-15, management will be required to perform interim and annual assessments of the Company’s ability to continue as a going concern within one year of the date the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of this standard is not expected to have an impact on the Company’s financial statement disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Under the original issuance, the new standard would have been effective beginning January 1, 2017. In August 2015, the FASB issued ASU 2015-14 which delays the standard effective date by one year. In accordance with this delay, the new standard will be effective for the Company beginning January 1, 2018. Early adoption is permitted, but not before the original effective date of the standard. Companies can transition to the new standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements as well as the method by which the Company will adopt the new standard.

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 (loss) as a separate component of shareholders' equity.

Fair Value Measurement

The Company follows guidance included in Accounting Standards Codification (“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 under 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 Company has financial instruments, including cash, accounts receivable, accounts payable and accrued expenses. The fair value of these financial instruments approximate carrying value due to the nature and relative short maturity of these assets and liabilities.

The fair value of debt under the Company’s Loan Agreement approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement. The fair value of the Company’s fixed rate senior unsecured notes was estimated 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. At December 31, 2015 and 2014, the aggregate fair value of the Company's $100.0 million fixed rate senior unsecured notes was estimated at $102.1 million and $106.8 million, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk primarily consist of trade accounts receivable. The concentration of accounts receivable credit risk is generally limited based on the Company’s diversified operations, with customers spread across many industries and countries. The Company’s largest single customer in 2015 accounts for approximately 4% of net sales with no other customer greater than 3%. Outside of the United States, only customers located in Brazil and Canada, which account for approximately 5% and 5% of net sales, respectively, are significant to the Company’s operations. In addition, management has established certain requirements that customers must meet before credit is extended. The financial condition of customers is continually monitored and collateral is usually not required. The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific allowance for doubtful accounts is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. Additionally, the Company also reviews historical trends for collectability in determining an estimate for its allowance for doubtful accounts. If economic circumstances change substantially, estimates of the recoverability of amounts due the Company could be reduced by a material amount. Expense related to bad debts was approximately $0.3 million, $0.4 million and $0.5 million for the years 2015, 2014 and 2013, respectively. Deductions from the allowance for doubtful accounts, net of recoveries, were approximately $0.5 million, $0.9 million and $0.8 million for the years 2015, 2014 and 2013, respectively.

Factoring

The Company's wholly-owned subsidiaries Plasticos Novel Do Nordeste S.A. and Plasticos Novel Do Parana S.A. (collectively, "Novel") entered into a factoring agreement to sell, without recourse, certain of their Brazilian real-based trade accounts receivables to unrelated third party financial institutions as part of its working capital management. The sale of these receivables accelerated the collection of cash and reduced credit exposure. Under the terms of the factoring agreements, the Company retains no rights or interest and has no obligations with respect to the sold receivables. As such, the factoring of trade receivables under these agreements are accounted for as a sale. The Company accounts for its trade receivable factoring program as required under ASC 860, Transfers and Servicing. During 2015, $5.8 million of trade accounts receivables had been sold under the terms of the factoring agreement for cash proceeds of $5.4 million. During 2014, $9.1 million of trade accounts receivables had been sold under the terms of the factoring agreement for cash proceeds of $8.8 million. The receivables sold pursuant to the factoring agreements have been recorded as a reduction of trade accounts receivable and as cash provided by operating activities in the accompanying Consolidated Statements of Cash Flows. The Company pays an administrative fee based on the dollar value of the receivables sold. Administrative fees related to the program for 2015 and 2014 were approximately $0.4 million $0.3 million, respectively. These fees are included in general and administrative expenses in the accompanying Consolidated Statements of Operations.

Inventories

Inventories are valued at the lower of cost or market for last-in, first-out (“LIFO”) inventory and lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. Approximately 40 percent of our inventories are valued using the LIFO method of determining cost. All other inventories are valued at the FIFO method of determining cost.

If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $5.1 million, $6.8 million and $8.1 million higher than reported at December 31, 2015, 2014 and 2013, respectively. The liquidation of LIFO inventories decreased cost of sales and increased income from continuing operations before income taxes by less than $0.1 million in 2015, $0.4 million in 2014 and less than $0.1 million in 2013.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization on the basis of the straight-line method over the estimated useful lives of the assets as follows:

 

Buildings

20 to 40 years

Machinery and Equipment

3 to 10 years

Leasehold Improvements

5 to 10 years

 

At December 31, 2015 and 2014, the Company had approximately $4.1 million and $2.1 million, respectively, of capitalized software costs included in machinery and equipment on the accompanying Consolidated Statements of Financial Position. Amortization expense related to capitalized software costs was approximately $0.5 million, $0.3 million and $0.1 million in 2015, 2014 and 2013, respectively.

Long-Lived Assets

The Company reviews its long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Determination of potential impairment related to assets to be held and used is based upon undiscounted future cash flows resulting from the use and ultimate disposition of the asset. For assets held for disposal, the amount of potential impairment may be based upon appraisal of the asset, estimated market value of similar assets or estimated cash flow from the disposition of the asset. Refer to Note 4 for discussion of the Lawn and Garden business 2014 impairment charge.

Revenue Recognition

The Company recognizes revenues from the sale of products, net of 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 (Loss)

Changes in accumulated other comprehensive income (loss) and are as follows:

 

 

 

Foreign

Currency

 

 

Defined Benefit  Pension Plans

 

 

Total

 

Balance at January 1, 2013

 

$

12,785

 

 

$

(2,142

)

 

$

10,643

 

Other comprehensive income (loss) before reclassifications

 

 

(9,292

)

 

 

1,005

 

 

 

(8,287

)

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($40)(1)

 

 

 

 

 

71

 

 

 

71

 

Net current-period other comprehensive income (loss)

 

 

(9,292

)

 

 

1,076

 

 

 

(8,216

)

Balance at December 31, 2013

 

 

3,493

 

 

 

(1,066

)

 

 

2,427

 

Other comprehensive income (loss) before reclassifications

 

 

(13,318

)

 

 

(826

)

 

 

(14,144

)

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($16)(1)

 

 

 

 

 

29

 

 

 

29

 

Net current-period other comprehensive income (loss)

 

 

(13,318

)

 

 

(797

)

 

 

(14,115

)

Balance at December 31, 2014

 

 

(9,825

)

 

 

(1,863

)

 

 

(11,688

)

Other comprehensive income (loss) before reclassifications

 

 

(17,131

)

 

 

144

 

 

 

(16,987

)

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($32)(1)

 

 

(10,491

)

 

 

56

 

 

 

(10,435

)

Net current-period other comprehensive income (loss)

 

 

(27,622

)

 

 

200

 

 

 

(27,422

)

Balance at December 31, 2015

 

$

(37,447

)

 

$

(1,663

)

 

$

(39,110

)

 

(1)

The accumulated other comprehensive income (loss) components related to defined benefit pension plans are included in the computation of net periodic pension cost. (See Note 12-Retirement Plans for additional details.) Cumulative translation adjustment associated with the sale of the Lawn and Garden business was included in the carrying value of assets disposed of.

Shipping and Handling

Shipping and handling expenses are primarily classified as selling expenses in the accompanying Consolidated Statements of Operations. The Company incurred shipping and handling costs of approximately $16.4 million, $19.4 million and $17.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Stock Based Compensation

The Company has stock plans that provide for the granting of stock-based compensation to employees and to non-employee directors. Shares issued for option exercises or restricted shares may be either from authorized but unissued shares or treasury shares. The Company records the costs of the plan under the provisions of ASC 718, Compensation — Stock Compensation. For transactions in which the Company obtains employee services in exchange for an award of equity instruments, the Company measures the cost of the services based on the grant date fair value of the award. The Company recognizes the cost over the period during which an employee is required to provide services in exchange for the award, referred to as the requisite service period (usually the vesting period).

Income Taxes

Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be received or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company evaluates its tax positions in accordance with ASC 740, Income Taxes. ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized under ASC 740. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.

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.

Cash flows used in investing activities excluded $6.6 million, $0.2 million and $0.5 million of accrued capital expenditures in 2015, 2014 and 2013, respectively.

Acquisitions
Acquisitions

2.  Acquisitions

On July 2, 2014, CA Acquisition Inc., now known as Scepter Canada Inc., and a wholly-owned subsidiary of Myers Industries, Inc., completed the purchase of substantially all of the assets and assumption of certain liabilities of Scepter Corporation and certain real property of SHI Properties Inc., both located in Scarborough, Ontario, Canada. Contemporaneously with the asset acquisition, Crown US Acquisition Company, now known as Scepter US Holding Company, and another wholly-owned subsidiary of Myers Industries, Inc., completed the purchase of all of the issued and outstanding membership interests of Eco One Leasing, LLC and Scepter Manufacturing, LLC, both located in Miami, Oklahoma. Eco One Leasing, LLC was subsequently merged into Scepter Manufacturing, LLC. The total purchase price for these acquisitions (collectively, “Scepter”) was approximately $156.6 million in cash, which includes a final working capital adjustment of approximately $1.2 million. The acquisition of Scepter was funded from net proceeds from additional borrowings of approximately $134.1 million under the Fourth Amended and Restated Loan Agreement and cash on hand of $22.5 million.

The acquisition of Scepter strengthens and expands the Company's position as an industry leading producer of portable marine fuel containers, portable fuel and water containers and accessories, ammunition containers, storage totes and environmental bins for the marine, military, consumer and industrial markets. The acquisition of Scepter is consistent with the Company's business strategy and the products fit well with the Company's overall portfolio. The operating results of Scepter have been included within our Consolidated Statements of Operations and within the Company's Material Handling Segment since the date of acquisition. The Consolidated Statement of Operations for the Company for the year ended December 31, 2014 included net sales of $39.4 million and an operating loss of $5.4 million related to Scepter. Scepter's operating results included $2.3 million of inventory purchase accounting fair value adjustments charged to cost of sales as the inventory was sold. In addition, transactional costs of approximately $3.6 million for the year ended December 31, 2014 are included in general and administrative expenses in the accompanying Consolidated Statements of Operations.

The Company accounted for the acquisition of Scepter using the acquisition method of accounting, which requires among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date. The purchase price allocation is completed, and adjustments to the purchase price allocation in 2015 were not material.

Scepter's assets and liabilities were recorded at fair value as of the date of acquisition using primarily level 3 fair value inputs. The purchase consideration, related final allocations, and resulting excess over fair value of net assets acquired are as follows:

 

Assets acquired:

 

 

 

Current assets

$

34,572

 

Property, plant and equipment

 

44,613

 

Intangible assets

 

66,500

 

Assets acquired

$

145,685

 

 

 

 

 

Liabilities assumed:

 

 

 

Current liabilities

$

8,577

 

Total liabilities assumed

 

8,577

 

 

 

 

 

Goodwill

 

19,512

 

Total consideration

$

156,620

 

 

Goodwill is calculated as the excess of the consideration transferred over the assets acquired and liabilities assumed and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The Company expects that approximately $10.3 million of goodwill recognized for the acquisition will be deductible for tax purposes in Canada.

Identifiable intangible assets acquired in connection with the acquisition of Scepter are as follows:

 

 

 

 

 

 

 

Estimated

 

 

 

 

Fair Value

 

 

Useful Life

 

Valuation Method

Intangible assets not subject to amortization:

 

 

 

 

 

 

 

 

Trademarks and trade names

 

$

8,900

 

 

Indefinite

 

Relief from royalty

 

 

 

 

 

 

 

 

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

Technology

 

 

22,300

 

 

10 years

 

Relief from royalty

Customer relationships

 

 

35,300

 

 

6 years

 

Multi-period excess earnings

 

 

 

57,600

 

 

 

 

 

Total

 

$

66,500

 

 

 

 

 

 

The following unaudited pro forma information presents a summary of the consolidated results of operations for the Company as if the acquisition of Scepter had occurred on January 1, 2013.

 

 

 

For the Year Ended

 

 

 

December 31, 2014

 

 

December 31, 2013

 

Net sales

 

$

675,046

 

 

$

679,567

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

16,206

 

 

$

30,271

 

 

 

 

 

 

 

 

 

 

Net income per share from continuing operations:

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

 

$

0.89

 

Diluted

 

$

0.50

 

 

$

0.89

 

 

The unaudited pro forma consolidated results are based on the Company’s historical financial statements and those of Scepter and do not necessarily indicate the results of operations that would have resulted had the acquisition actually been completed at the beginning of the applicable period presented. The unaudited pro forma results reflect the business combination accounting effects from the acquisition including amortization charges from the acquired intangible assets, inventory purchase accounting adjustments charged to cost of sales as the inventory is sold and increased interest expense associated with debt incurred to fund the acquisition. The unaudited pro forma consolidated results do not give effect to the synergies of the acquisition and are not indicative of the results of operations in future periods.

Goodwill and Intangible Assets
Goodwill and Intangible Assets

3.  Goodwill and Intangible Assets

The Company is required to test for impairment of goodwill and indefinite-lived intangible assets on at least an annual basis. The Company conducted its annual impairment assessment as of October 1 for all of its reporting units, noting no impairment in 2015, 2014 or 2013. Based on procedures conducted to test impairment of goodwill of the Company’s reporting units, the fair values of the Plasticos Novel do Nordeste S. A. (“Novel”) and Jamco Products, Inc. (“Jamco”) reporting units did not substantially exceed their carrying value as of our assessment date in 2015. The estimated fair value of Novel and Jamco exceeded their carrying values by approximately 10% and 20%, respectively. Although no goodwill impairment charge is required for 2015, it does present a risk of future impairment for the goodwill assigned to those reporting units. The decline in the fair values of these businesses was driven primarily by reduced profitability as a result of lower margins and a prolonged economic downturn in the Brazilian economy impacting Novel. As a result, management decreased future projections of the operating results and cash flows in assessing goodwill at these reporting units. 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 is 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.

During the 2015 annual review of goodwill, management performed a two-step quantitative test for all of its reporting units. In evaluating goodwill for impairment using the two-step test, the Company uses a combination of valuation techniques primarily using discounted cash flows to estimate the fair values of its business reporting units and market based multiples as supporting evidence. The variables and assumptions used, all of which are level 3 fair value inputs, include the projections of future revenues and expenses, working capital, terminal values, discount rates and long term growth rates. The market multiples observed in sale transactions are determined separately for each reporting unit, and are based on the weighted average cost of capital for each of the Company’s reporting units, which ranged from 11.0% to 14.5% in 2015. In addition the Company makes certain judgments about the selection of comparable companies used in determining market multiples in valuing our reporting units, as well as certain assumptions to allocate shared assets and liabilities to calculate values for each of our reporting units. The underlying assumptions used are based on historical actual experience and future expectations. The Company compares the fair value of each of its reporting units to their respective carrying values, including related goodwill. The Company also compares our book value and the estimates of fair value of the reporting units to our market capitalization as of and at dates near the annual testing date. Management uses this comparison as additional evidence of the fair value of the Company, as our market capitalization may be suppressed by other factors such as the control premium associated with a controlling shareholder, our leverage or general expectations regarding future operating results and cash flows. In situations where the implied value of the Company under the Income or Market Approach are significantly different than our market capitalization, the Company re-evaluates and adjusts, if necessary, the assumptions underlying our Income and Market Approach models. Our estimate of the fair values of these reporting units, and the related goodwill, could change over time based on a variety of factors, including the aggregate market value of the Company’s common stock, actual operating performance of the underlying businesses or the impact of future events on the cost of capital and the related discount rates used.

The change in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 is as follows:

 

 

 

Distribution

 

 

Material

Handling

 

 

Total

 

January 1, 2014

 

$

505

 

 

$

50,570

 

 

$

51,075

 

Acquisitions

 

 

 

 

 

19,812

 

 

 

19,812

 

Foreign currency translation

 

 

 

 

 

(4,248

)

 

 

(4,248

)

December 31, 2014

 

 

505

 

 

 

66,134

 

 

 

66,639

 

Measurement period adjustments

 

 

 

 

 

(300

)

 

 

(300

)

Foreign currency translation

 

 

 

 

 

(2,304

)

 

 

(2,304

)

December 31, 2015

 

$

505

 

 

$

63,530

 

 

$

64,035

 

 

Intangible assets other than goodwill primarily consist of trade names, customer relationships, patents, and technology assets established in connection with acquisitions. These intangible assets, other than certain trade names, are amortized over their estimated useful lives. The Company performs an annual impairment assessment for the indefinite lived trade names which had a carrying value of $10,859 and $11,256 at December 31, 2015 and 2014, respectively. In performing this assessment the Company uses an income approach, based primarily on level 3 inputs, to estimate the fair value of the trade name. The Company records an impairment charge if the carrying value of the trade name exceeds the estimated fair value at the date of assessment.

Intangible assets at December 31, 2015 and 2014 consisted of the following:

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

Weighted

Average Remaining Useful

Life (years)

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

Trade Names - Indefinite Lived

 

 

 

 

 

$

10,859

 

 

$

 

 

$

10,859

 

 

$

11,256

 

 

$

 

 

$

11,256

 

Trade Names

 

 

4.3

 

 

 

280

 

 

 

(142

)

 

 

138

 

 

 

280

 

 

 

(110

)

 

 

170

 

Customer Relationships

 

 

4.1

 

 

 

40,427

 

 

 

(16,165

)

 

 

24,262

 

 

 

41,332

 

 

 

(7,964

)

 

 

33,368

 

Technology

 

 

8.0

 

 

 

27,177

 

 

 

(5,166

)

 

 

22,011

 

 

 

27,642

 

 

 

(2,552

)

 

 

25,090

 

Patents

 

 

1.2

 

 

 

11,724

 

 

 

(10,464

)

 

 

1,260

 

 

 

10,888

 

 

 

(8,538

)

 

 

2,350

 

Non-Compete

 

 

0.0

 

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

(149

)

 

 

1

 

 

 

 

 

 

 

$

90,467

 

 

$

(31,937

)

 

$

58,530

 

 

$

91,548

 

 

$

(19,313

)

 

$

72,235

 

 

Intangible amortization expense was $9,802, $6,466 and $2,769 in 2015, 2014 and 2013, respectively. Estimated annual amortization expense for intangible assets with finite lives for the next five years is: $9,492 in 2016; $8,584 in 2017; $8,200 in 2018, $7,705 in 2019 and $4,972 in 2020.

 

Discontinued Operations
Discontinued Operations

4.  Discontinued Operations

On June 20, 2014, the Company completed the sale of the assets and associated liabilities of its wholly-owned subsidiaries WEK Industries, Inc. and Whiteridge Plastics LLC (collectively “WEK”) for approximately $20.7 million, which includes a working capital adjustment of approximately $0.8 million. Of the total proceeds from the sale of WEK, approximately $1.0 million was held in escrow until it was received in December 2015. The Company recorded a gain on the sale of WEK in 2014 of approximately $3.0 million, net of tax of $1.6 million, which was included in income (loss) from discontinued operations in the Consolidated Statements of Operations.

During the second quarter of 2014, the Company’s Board of Directors approved the commencement of the sale process to divest its Lawn and Garden business to allow it to focus resources on its core growth platforms. The Lawn and Garden business served the North American horticulture market with plastic products such as seedling trays, nursery products, hanging baskets, custom print containers as well as decorative resin planters. The business was sold February 17, 2015 to an entity controlled by Wingate Partners V, L.P., a private equity firm, for $110.0 million, subject to a working capital adjustment. The sale of the Lawn & Garden business included manufacturing facilities and offices located in Twinsburg, Ohio; Middlefield, Ohio; Elyria, Ohio; Sparks, Nevada; Sebring, Florida; Brantford, Ontario; and Burlington, Ontario. The terms of the agreement include a $90.0 million cash payment, promissory notes totaling $20.0 million that mature in August 2020, a 6% interest rate and approximately $8.6 million placed in escrow that is due to be settled by August 2016. The fair market value of the notes at February 17, 2015 was $17.8 million and is included in Notes Receivable in the accompanying Consolidated Statements of Financial Position, in which the carrying value represents the fair value at date of sale plus accretion as of December 31, 2015. The fair value of the notes receivable was calculated using level 2 inputs as defined in Note 1. A disagreement between the parties over the calculation of the final working capital adjustment was resolved by arbitration on March 9, 2016. As a result of the final ruling, the Company recorded an additional gain of $0.6 million, net of tax, in 2015. The final working capital adjustment will result in a cash payment to the buyer of approximately $4.0 million in 2016. The total gain on the sale of the Lawn and Garden business was $4.7 million, net of tax, during 2015 and is included in income (loss) from discontinued operations in the accompanying Consolidated Statements of Operations.

Since the second quarter of 2014 and until the business was sold on February 17, 2015, the Lawn and Garden business met the held-for-sale criteria under the requirements of ASC 360, Property, Plant and Equipment. Accordingly, at December 31, 2014, the Company had classified and accounted for the assets and liabilities of the Lawn and Garden business as held for sale in the accompanying Consolidated Statements of Financial Position and the operating results of Lawn and Garden and WEK, for periods prior to the sale, net of tax, as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented. In addition, the Company performed a fair value assessment of the Lawn and Garden business. The fair value, determined as sales price less cost to sell the business, was less than its carrying value at December 31, 2014, resulting in an $18.9 million impairment charge reported as discontinued operations in the accompanying Consolidated Statements of Operations for the year ended December 31, 2014.

Summarized selected financial information for the Lawn and Garden business and WEK for the years ended December 31, 2015, 2014 and 2013 are presented in the following table:

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2015*

 

 

2014**

 

 

2013

 

Net sales

 

$

29,335

 

 

$

204,716

 

 

$

240,477

 

Loss from discontinued operations before income taxes

 

$

(1,214

)

 

$

(30,038

)

 

$

(394

)

Income tax (benefit) expense

 

 

(262

)

 

 

(9,408

)

 

 

46

 

Loss from discontinued operations

 

 

(952

)

 

 

(20,630

)

 

 

(440

)

Net gain on sale of discontinued operations, inclusive of tax benefit of ($2.8 million) for the year ended December 31, 2015 and tax provision of $1.6 million for the year ended December 31, 2014

 

 

4,661

 

 

 

2,988

 

 

 

 

Income (loss) from discontinued operations, net of income taxes

 

$

3,709

 

 

$

(17,642

)

 

$

(440

)

 

*

Includes Lawn and Garden operating results through February 17, 2015.

**

Includes WEK operating results through June 20, 2014.

The assets and liabilities of discontinued operations are stated separately as of December 31, 2014 in the Consolidated Statements of Financial Position and are comprised of the following items:

 

 

 

December 31, 2014

 

Assets

 

 

 

 

Accounts receivable-net

 

$

29,794

 

Inventories

 

 

50,951

 

Prepaid expenses and other current assets

 

 

1,709

 

Goodwill

 

 

9,107

 

Patents and other intangible assets, net

 

 

6,030

 

Property, plant and equipment, net

 

 

38,168

 

Net asset impairment*

 

 

(18,858

)

Other

 

 

874

 

Total Assets Held for Sale

 

$

117,775

 

 

 

 

 

 

Liabilities

 

 

 

 

Accounts payable

 

$

22,239

 

Accrued expenses and other liabilities

 

 

4,883

 

Total Liabilities Held for Sale

 

$

27,122

 

 

*

Impairment includes the cumulative translation credit adjustment associated with the Lawn and Garden business.

The Lawn and Garden business restructuring plan, announced in July 2013, detailed the closure of two manufacturing plants: one in Brantford, Ontario and the second in Waco, Texas. The restructuring actions included closure, relocation and employee related costs. Through December 31, 2014, the Lawn and Garden business incurred approximately $14.0 million of severance charges and personnel costs under its restructuring plan. Restructuring actions under the plan have been completed.

Restructuring charges related to discontinued operations for the year ended 2015, 2014 and 2013 are presented in the following table:

 

 

 

Year Ended

December 31,

 

 

 

2015

 

 

2014

 

 

2013*

 

Severance and personnel

 

$

 

 

$

1,743

 

 

$

2,614

 

Other exit costs

 

 

 

 

 

3,762

 

 

 

6,189

 

Total

 

$

 

 

$

5,505

 

 

$

8,803

 

 

*

Includes WEK restructuring charges of $0.2 million in 2013.

Net Income Per Common Share
Net Income (Loss) Per Common Share

5.  Net Income (Loss) Per Common Share

Net income (loss) per common share, as shown on the accompanying Consolidated Statements of Operations, is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:

 

 

 

2015

 

 

2014

 

 

2013

 

Weighted average common shares outstanding basic

 

 

30,616,485

 

 

 

32,232,965

 

 

 

33,588,720

 

Dilutive effect of stock options and restricted stock

 

 

327,208

 

 

 

471,047

 

 

 

454,705

 

Weighted average common shares outstanding diluted

 

 

30,943,693

 

 

 

32,704,012

 

 

 

34,043,425

 

 

Options to purchase 463,200, 198,500 and 123,900 shares of common stock that were outstanding at December 31, 2015, 2014 and 2013, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options was greater than the average market price of common shares, and were therefore anti-dilutive.

Restructuring
Restructuring

6.  Restructuring

The charges related to various restructuring programs implemented by the Company are included in selling, general and administrative (“SG&A”) expenses and cost of sales depending on the type of cost incurred. The restructuring charges are presented in the following table.

 

 

 

2015

 

 

2014

 

 

2013

 

Segment

 

Cost of

sales

 

 

SG&A

 

 

Total

 

 

Cost of

sales

 

 

SG&A

 

 

Total

 

 

Cost of

sales

 

 

SG&A

 

 

Total

 

Distribution

 

$

 

 

$

124

 

 

$

124

 

 

$

 

 

$

764

 

 

$

764

 

 

$

 

 

$

194

 

 

$

194

 

Material Handling

 

 

1,340

 

 

 

912

 

 

 

2,252

 

 

 

189

 

 

 

260

 

 

 

449

 

 

 

178

 

 

 

47

 

 

 

225

 

Corporate

 

 

 

 

 

35

 

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

17

 

Total

 

$

1,340

 

 

$

1,071

 

 

$

2,411

 

 

$

189

 

 

$

1,024

 

 

$

1,213

 

 

$

178

 

 

$

258

 

 

$

436

 

 

In 2015, the Material Handling Segment consolidated two manufacturing plants, streamlined Brazilian operations, closed a Canadian branch operation and sold a product line. The Company recorded $2.3 million of restructuring cost for these initiatives, primarily related to severance and moving expenses for equipment and inventory.

 

During 2014, the Distribution Segment closed its Canadian branches operating under the name Myers Tire Supply International.  The restructuring actions included closure, lease cancellation and employee related costs, which amounted to approximately $0.8 million.  Restructuring actions under the plan have been completed.

Also during 2014, the Material Handling Segment restructured its sales and finance organization within several of its businesses.  Restructuring costs of $0.4 million were incurred related to these actions.

During 2013, the Distribution Segment recorded restructuring costs of $0.2 million related to branch closure and severance costs.  The Material Handling Segment incurred costs of $0.2 million related to severance.

No accruals remain related to restructuring programs as of December 31, 2015 and 2014.  

Other Accrued Expenses
Other Accrued Expenses

7.  Other Accrued Expenses

As of December 31, 2015 and 2014, the balance in other accrued expenses is comprised of the following:

 

 

 

2015

 

 

2014

 

Deposits and amounts due to customers

 

$

9,351

 

 

$

10,591

 

Dividends payable

 

 

4,190

 

 

 

4,267

 

Accrued litigation and professional fees

 

 

308

 

 

 

3,458

 

Other accrued expenses

 

 

9,379

 

 

 

7,856

 

 

 

$

23,228

 

 

$

26,172

 

 

Stock Compensation
Stock Compensation

8.  Stock Compensation

The Company’s Amended and Restated 2008 Incentive Stock Plan (the “2008 Plan”) authorizes the Compensation Committee of the Board of Directors to issue up to 4,000,000 shares of various types of stock based awards including stock options, restricted stock, restricted stock units and stock appreciation rights to key employees and directors. Options granted and outstanding vest over the requisite service period and expire ten years from the date of grant.

The following tables summarize stock option activity in the past three years:

Options granted in 2015, 2014 and 2013:

 

Year

 

Options

 

 

Exercise

Price

 

2015

 

 

208,200

 

 

$

18.67

 

2014

 

 

209,500

 

 

$

20.93

 

2013

 

 

323,400

 

 

$

14.77

 

 

Options exercised in 2015, 2014 and 2013:

 

Year

 

Options

 

 

Exercise

Price

2015

 

 

239,508

 

 

$9.97 to $17.02

2014

 

 

228,064

 

 

$9.97 to $17.02

2013

 

 

503,321

 

 

$8.00 to $18.62

 

In addition, options totaling 71,567, 43,252 and 164,528 expired or were forfeited during the years ended December 31, 2015, 2014 and 2013, respectively.

Options outstanding and exercisable at December 31, 2015, 2014 and 2013 were as follows:

 

Year

 

Outstanding

 

 

Range of Exercise

Prices

 

Exercisable

 

 

Weighted Average

Exercise Price

 

2015

 

 

1,409,881

 

 

$9.00 to $20.93

 

 

1,231,544

 

 

$

13.47

 

2014

 

 

1,512,756

 

 

$9.00 to $20.93

 

 

1,066,219

 

 

$

11.58

 

2013

 

 

1,574,572

 

 

$9.00 to $18.62

 

 

1,057,694

 

 

$

11.48

 

 

Stock compensation expense reduced income before taxes approximately $4,934, $3,115 and $2,557 for the years ended December 31, 2015, 2014, and 2013, respectively. These expenses are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Total unrecognized compensation cost related to non-vested share based compensation arrangements at December 31, 2015 was approximately $3,918 which will be recognized over the next three years, as such compensation is earned.

The fair value of options granted is estimated using an 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 rate 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. In 2015, 2014 and 2013, the Company used the binomial lattice option pricing model based on assumptions set forth in the following table.

 

 

 

2015

 

 

2014

 

 

2013

 

Risk free interest rate

 

 

2.10

%

 

 

2.80

%

 

 

1.86

%

Expected dividend yield

 

 

2.90

%

 

 

2.50

%

 

 

2.40

%

Expected life of award (years)

 

 

8.0

 

 

 

7.0

 

 

 

7.0

 

Expected volatility

 

 

50.00

%

 

 

50.00

%

 

 

50.00

%

Fair value per option share

 

$

6.03

 

 

$

7.05

 

 

$

5.39

 

 

The following table provides a summary of stock option activity for the period ended December 31, 2015:

 

 

 

Shares

 

 

Average

Exercise

Price

 

 

Weighted

Average

Life

 

Aggregate

Intrinsic

Value

 

Outstanding at December 31, 2014

 

 

1,512,756

 

 

$

13.24

 

 

 

 

 

 

 

Options Granted

 

 

208,200

 

 

 

18.67

 

 

 

 

 

 

 

Options Exercised

 

 

(239,508

)

 

 

11.57

 

 

 

 

 

 

 

Canceled or forfeited

 

 

(71,567

)

 

 

17.30

 

 

 

 

 

 

 

Outstanding at December 31, 2015

 

 

1,409,881

 

 

 

14.12

 

 

5.47

 

$

1,904

 

Exercisable at December 31, 2015

 

 

1,231,544

 

 

$

13.47

 

 

5.02

 

$

1,904

 

 

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 in 2015, 2014 and 2013 was $1,151, $1,744 and $2,588, respectively.

The following table provides a summary of combined restricted stock units and restricted stock activity for the year ended December 31, 2015:

 

 

 

Shares

 

 

Average

Grant-Date

Fair Value

 

Unvested shares at December 31, 2014

 

 

236,196

 

 

 

 

 

Granted

 

 

224,994

 

 

$

16.65