MYERS INDUSTRIES INC, 10-Q filed on 10/28/2011
Quarterly Report
Document and Entity Information (USD $)
9 Months Ended
Sep. 30, 2011
Oct. 25, 2011
Jun. 30, 2010
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
MYERS INDUSTRIES INC 
 
 
Entity Central Index Key
0000069488 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Sep. 30, 2011 
 
 
Amendment Flag
FALSE 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
Q3 
 
 
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
 
 
$ 261,520,997 
Entity Common Stock, Shares Outstanding
 
33,370,325 
 
Condensed Consolidated Statements of Financial Position (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
Current Assets
 
 
Cash
$ 2,851 
$ 4,705 
Accounts receivable-less allowances of $4,126 and $2,950, respectively
101,299 
98,799 
Inventories
 
 
Finished and in-process products
75,099 
67,580 
Raw materials and supplies
28,596 
28,824 
Inventory net
103,695 
96,404 
Prepaid expenses
5,752 
8,158 
Deferred income taxes
4,843 
5,781 
Total Current Assets
218,440 
213,847 
Other Assets
 
 
Goodwill
44,523 
40,892 
Patents and other intangible assets
17,725 
18,667 
Other
7,737 
7,174 
Total other non current assets
69,985 
66,733 
Property, Plant and Equipment, at Cost
 
 
Land
4,124 
4,369 
Buildings and leasehold improvements
55,659 
59,690 
Machinery and equipment
386,724 
383,664 
Property, Plant and Equipment, at cost
446,507 
447,723 
Less allowances for depreciation and amortization
(309,010)
(295,908)
Property, plant and equipment, net
137,497 
151,815 
Total Assets
425,922 
432,395 
Current Liabilities
 
 
Accounts payable
60,947 
64,143 
Accrued expenses
 
 
Employee compensation
20,380 
18,294 
Income taxes
3,462 
5,891 
Taxes, other than income taxes
2,683 
1,970 
Accrued interest
844 
195 
Other
17,088 
15,533 
Current portion of long-term debt
305 
305 
Total Current Liabilities
105,709 
106,331 
Long-term debt, less current portion
79,925 
83,530 
Other liabilities
13,107 
5,936 
Deferred income taxes
24,168 
24,793 
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 33,572,151 and 35,315,732; net of treasury shares of 4,340,506 and 2,592,175, respectively)
20,405 
21,486 
Additional paid-in capital
266,010 
281,376 
Accumulated other comprehensive income
6,621 
10,164 
Retained deficit
(90,023)
(101,221)
Total shareholders' equity
203,013 
211,805 
Total liabilities and stockholders' equity
$ 425,922 
$ 432,395 
Condensed Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data
Sep. 30, 2011
Dec. 31, 2010
Current Assets
 
 
Allowances for accounts receivable
$ 4,126 
$ 2,950 
Shareholders' Equity
 
 
Preferred Shares, shares authorized
1,000,000 
1,000,000 
Preferred Shares, shares issued
 
 
Preferred Shares, shares outstanding
 
 
Common Shares, par value
 
 
Common Shares, shares authorized
60,000,000 
60,000,000 
Common Shares, shares outstanding
33,572,151 
35,315,732 
Treasury Shares, shares
4,340,506 
2,592,175 
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Condensed Consolidated Statements of Income [Abstract]
 
 
 
 
Net sales
$ 190,045 
$ 187,045 
$ 560,291 
$ 549,374 
Cost of sales
142,543 
145,568 
416,732 
429,033 
Gross profit
47,502 
41,477 
143,559 
120,341 
Selling, general and administrative expenses
40,243 
35,183 
115,258 
103,575 
Operating income
7,259 
6,294 
28,301 
16,766 
Interest expense, net
1,264 
1,722 
3,655 
5,373 
Income before income taxes
5,995 
4,572 
24,646 
11,393 
Income tax (benefit) expense
(1,219)
1,353 
6,055 
3,743 
Net income
$ 7,214 
$ 3,219 
$ 18,591 
$ 7,650 
Income per common share:
 
 
 
 
Basic and diluted
$ 0.21 
$ 0.09 
$ 0.53 
$ 0.22 
Dividends declared per share
$ 0.07 
$ 0.065 
$ 0.21 
$ 0.195 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands
9 Months Ended
Sep. 30,
2011
2010
Cash Flows From Operating Activities
 
 
Net income
$ 18,591 
$ 7,650 
Items not affecting use of cash:
 
 
Depreciation
24,102 
22,482 
Impairment charges and asset write-offs
814 
Amortization of intangible assets
2,210 
2,217 
Non-cash stock compensation
2,151 
1,796 
Provision for loss on accounts receivable
1,179 
557 
Deferred taxes
635 
(930)
Other long-term liabilities
3,015 
51 
Gain on sale of property, plant and equipment
(591)
(733)
Other
50 
Cash flow provided by (used for) working capital:
 
 
Accounts receivable
(5,024)
(18,374)
Inventories
(8,759)
5,014 
Prepaid expenses
2,294 
1,442 
Accounts payable and accrued expenses
(422)
(6,634)
Net cash provided by operating activities
40,245 
14,538 
Cash Flows From Investing Activities
 
 
Additions to property, plant and equipment
(13,337)
(14,508)
Acquisition of business, net of cash acquired
(1,100)
(411)
Proceeds from sale of property, plant and equipment
1,082 
5,213 
Other
(92)
209 
Net cash used for investing activities
(13,447)
(9,497)
Cash Flows From Financing Activities
 
 
Net (repayment) borrowing on credit facility
(3,212)
2,700 
Cash dividends paid
(7,163)
(6,915)
Proceeds from issuance of common stock
173 
103 
Repurchase of common stock
(18,821)
Net cash used for financing activities
(29,023)
(4,112)
Foreign Exchange Rate Effect on Cash
371 
163 
Net (decrease) increase in cash
(1,854)
1,092 
Cash at January 1
4,705 
4,728 
Cash at September 30
$ 2,851 
$ 5,820 
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (USD $)
In Thousands
Total
Common Stock
Additional Paid-In Capital
Accumulative Other Comprehensive Income
Retained Income (Deficit)
Balance at Dec. 31, 2010
$ 211,805 
$ 21,486 
$ 281,376 
$ 10,164 
$ (101,221)
Net income
18,591 
 
 
 
18,591 
Foreign currency translation adjustment
 
 
 
(3,543)
 
Purchases for treasury
 
(1,095)
(17,726)
 
 
Common stock issued
 
14 
209 
 
 
Stock based compensation
 
 
2,151 
 
 
Dividends declared - $.21 per share
 
 
 
 
(7,393)
Balance at Sep. 30, 2011
$ 203,013 
$ 20,405 
$ 266,010 
$ 6,621 
$ (90,023)
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (Parenthetical)
9 Months Ended
Sep. 30, 2011
Dividends declared per share
$ 0.21 
Retained Income (Deficit)
 
Dividends declared per share
$ 0.21 
Statement of Accounting Policy
Statement of Accounting Policy
Statement of Accounting Policy
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”). 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 September 30, 2011, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2011.
Reclassification
Reclassification
Reclassification
Certain prior year amounts in the accompanying condensed consolidated financial statements have been restated in conformity with generally accepted accounting principles to conform to the current year’s presentation.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
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. The new accounting standard will require 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. The Company plans to adopt this guidance beginning in the first quarter of 2012. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial statements, as this guidance modifies presentation of other comprehensive income already disclosed in the financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350). 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 ASU is effective for fiscal years beginning after December 15, 2011 with early adoption permitted. The Company conducts its annual impairment assessment as of October 1, which will include adoption of this guidance.
Fair Value Measurement
Fair Value Measurement
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 $38.7 million at September 30, 2011 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.
Inventories
Inventories
Inventories
Approximately one quarter 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 an interim period.
Acquisitions
Acquisitions
Acquisitions
On July 20, 2011, the Company acquired tooling assets and intellectual property from Material Improvements L.P. for a new reusable plastic container used in producing, shipping and processing bulk natural cheese. The total purchase price was $5.7 million, comprised of a $1.1 million cash payment and $4.6 million contingent consideration. The preliminary allocation of purchase price included $0.3 million of property, plant and equipment, amortizable intangible assets, which included $1.2 million in technology and $0.2 million for trade name, and $3.9 million in goodwill. These assets and assumed liabilities 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; however, no sales have been recorded during the third quarter related to the acquisition. The Company is awaiting final valuation studies to complete the purchase price allocation.
On July 21, 2010, the Company acquired the assets of Enviro-Fill, Inc., a developer of a new fuel overfill prevention and fuel vapor capture system. The total purchase price was approximately $1.5 million, including contingent liabilities for additional future consideration. The allocation of purchase price includes $0.8 million of amortizable intangible assets and $0.7 million of goodwill. These assets were recorded at fair value as of the date of acquisition using primarily level 2 and 3 inputs. The Enviro-Fill business is included in the Company’s Engineered Products Segment.
Goodwill
Goodwill
Goodwill
The following table presents the net carrying amount of goodwill allocated by reporting unit, and changes for the nine months ended September 30, 2011:
                                         
                    Foreign                
(In thousands)   Balance at             Currency             Balance at  
Segment   January 1, 2011     Acquisitions     Translation     Impairment     September 30, 2011  
Distribution
  $ 214     $ -0-     $ -0-     $ -0-     $ 214  
Engineered Products
    707       -0-       -0-       -0-       707  
Material Handling
    30,383       3,896       -0-       -0-       34,279  
Lawn and Garden
    9,588       -0-       (265 )     -0-       9,323  
 
                             
Total
  $ 40,892     $ 3,896     $ (265 )   $ -0-     $ 44,523  
 
                             
Discontinued Operations
Discontinued Operations
Discontinued Operations
On February 1, 2007, the Company sold its former Material Handling — Europe business segment. On November 10, 2010, the French Tax Authorities issued a notice of assessment to the buyer, and current owner, of these businesses. The assessment related to business taxes for the years 2006, 2007 and 2008, and totaled 1.5 million euros. As part of the sale agreement, the Company provided indemnification to the current owner for any taxes, interest, penalties and reasonable costs related to these businesses for periods through the date of sale. On January 13, 2011, the Company filed a Notice of Claim to protest the assessment with the French Tax Authorities. The Company and its French legal counsel believe that the basis for the assessment is not valid, and accordingly, will continue to appeal the claim through all available means. Accordingly, no amounts have been recognized in the financial statements related to this matter.
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, is determined on the basis of the weighted average number of common shares outstanding during the period as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Weighted average common shares outstanding
                               
Basic
    34,354,210       35,310,744       34,938,806       35,301,608  
Dilutive effect of stock options and restricted stock
    106,742       71,667       89,607       59,131  
 
                       
Weighted average common shares outstanding diluted
    34,460,952       35,382,411       35,028,413       35,360,739  
 
                       
Options to purchase 692,810 and 1,159,679 shares of common stock that were outstanding for the three months and nine months ended September 30, 2011, respectively, were not included in the computation of diluted earnings per share for these respective periods as the exercise price of these options was greater than the average market price of common shares, and their effect would be anti-dilutive. Options to purchase 1,570,196 that were outstanding at September 30, 2010 were not included in the computation of diluted earnings per share amounts in 2010 as the exercise price of these options was 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
The Company’s cash payments for interest and income taxes for the three and nine month periods ended September 30, 2011 and 2010 are as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
(In thousands)   2011     2010     2011     2010  
Interest paid
  $ 441     $ 116     $ 2,498     $ 3,505  
Income taxes paid
  $ 1,576     $ 89     $ 7,855     $ 7,726  
Comprehensive Income
Comprehensive Income
Comprehensive Income
A summary of comprehensive income for the three and nine month periods ended September 30, 2011 and 2010 is as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
(In thousands)   2011     2010     2011     2010  
Net income
  $ 7,214     $ 3,219     $ 18,591     $ 7,650  
Other comprehensive income:
                               
Foreign currency translation adjustment
    (6,177 )     2,510       (3,543 )     1,489  
 
                       
Comprehensive income
  $ 1,037     $ 5,729     $ 15,048     $ 9,139  
 
                       
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
As of September 30, 2011 and December 31, 2010, the balance in the Company’s accumulated other comprehensive income is comprised of the following:
                 
    September 30,     December 31,  
(In thousands)   2011     2010  
Foreign currency translation adjustments
  $ 8,691     $ 12,234  
Pension adjustments
    (2,070 )     (2,070 )
 
           
Total
  $ 6,621     $ 10,164  
 
           
Restructuring
Restructuring
Restructuring
During the nine months ended September 30, 2011, the Company recorded net expenses of $0.1 million in selling, general and administrative (“SG&A”) and $1.2 million in cost of goods sold (“COS”) for costs associated with restructuring plans including impairment of property, plant and equipment, lease obligations, severance, consulting and other related charges. Restructuring expenses recorded during the nine months ended September 30, 2010 were $1.1 million in SG&A and $1.0 million in COS. Impairment charges for property, plant and equipment were based on appraisals or estimated market values of similar assets which are considered level 2 inputs. Estimated lease obligations associated with closed facilities were based on level 2 inputs.
In the three and nine months ended September 30, 2011, the Company recorded expenses of $0.1 million and $1.3 million, respectively, related to restructuring activities. Restructuring costs in the three months ended September 30, 2011 included charges of $0.5 million in the Distribution Segment related to severance and non-cancelable lease costs offset by a gain of $0.5 million on the sale of distribution facility. In addition, $0.1 million of restructuring charges were recorded in the Engineered Products Segment. In the nine months ended September 30, 2011, net restructuring costs of $0.7 million in the Distribution Segment related to charges of $1.2 million offset by a gain of $0.5 million from a sale of a facility and a $0.3 million write-down for an idle Lawn and Garden manufacturing facility in the first quarter. In addition, restructuring charges of $0.3 million in the Engineered Products Segment for the nine month period ended September 30, 2011 related to non-cancelable lease costs.
In the three and nine months ended September 30, 2010, the Company recorded expenses of approximately $0.4 million and $2.1 million, respectively, for restructuring costs that were primarily related to rigging and transportation costs in connection with the movement of certain machinery and equipment between facilities. In addition, during the first quarter of 2010 the Company sold its closed Material Handling plant in Shelbyville, Kentucky for $5.1 million and recorded a gain on the sale of $0.7 million.
The accrued liability balance for severance and other exit costs associated with restructuring is included in Other Accrued expenses in the Condensed Consolidated Statements of Financial Position. Activity related to the Company’s restructuring reserves as of September 30, 2011 is as follows:
         
(Dollars in thousands)        
Balance at January 1, 2011
  $ 763  
Provision (reversal)(a)
    (285 )
Less: Payments
    (237 )
 
     
Balance at September 30, 2011
  $ 241  
 
     
     
(a)  
Related to reserves for actions no longer needed for their originally intended purposes.
As a result of restructuring activity and plant closures, approximately $5.7 million of property, plant, and equipment has been classified as held for sale at September 30, 2011 and is included in Other Assets in the Condensed Consolidated Statements of Financial Position. At December 31, 2010 approximately $5.0 million was classified as held for sale.
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 to five year period and expire ten years from the date of grant.
Stock compensation expense was $0.5 million for the three months ended September 30, 2011 and $0.7 million for the three months ended September 30, 2010. Stock compensation expense was $2.2 million and $1.8 million for the nine months ended September 30, 2011 and 2010, respectively. Stock compensation is included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Income. Total unrecognized compensation costs related to non-vested share based compensation arrangements at September 30, 2011 was approximately $3.2 million which is expected to be recognized over the next three years.
On March 3, 2011, 355,025 stock option shares were granted with a three year vesting period. The fair value of these option shares was estimated using a Trinomial 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 rate is based on the Company’s historical dividend yield, and expected volatility is derived from historical volatility of the Company’s shares and those of similar companies measured against the market as a whole.
         
Model        
Risk free interest rate
    3.79 %
Expected dividend yield
    2.90 %
Expected life of award (years)
    6.00  
Expected volatility
    50.72 %
Fair value per option share
  $ 3.69  
The following table summarizes the stock option activity for the nine months ended September 30, 2011:
                         
            Average     Weighted  
            Exercise     Average  
    Shares     Price     Life  
Outstanding at January 1, 2011
    1,845,210     $ 11.65          
Options Granted
    365,025       10.10          
Options Exercised
    (8,868 )     9.52          
Cancelled or Forfeited
    (150,644 )     12.59          
 
                 
Outstanding at September 30, 2011
    2,050,723     $ 11.32     6.97 years
 
                 
 
                       
Exercisable at September 30, 2011
    1,329,708     $ 11.82          
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 total intrinsic value of all stock options exercised during the nine months ended September 30, 2011 and 2010 was approximately $16 and $13, respectively.
In addition, at September 30, 2011 and December 31, 2010, the Company had outstanding 288,500 and 177,250 shares of restricted stock, respectively, with vesting periods through March 2014. 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.
Income Taxes
Income Taxes
Income Taxes
For the quarter ended September 30, 2011, the Company had a tax benefit of $1.2 million. The Company recognized net favorable income tax adjustments of approximately $3.8 million that were largely the result of reversing previously reserved tax benefits related to the loss on the sale of one of our subsidiaries in 2007 and other tax adjustments, including provision to return adjustments resulting from changes in estimates. The tax benefit generated by the sale and the related accrued interest was reversed in the third quarter based on the expiration of the statute of limitations for assessment of the taxes.
The effective tax rate for the quarter ended September 30, 2010 was 29.6% and primarily reflects the benefit of approximately $0.3 million from the recognition of tax benefits previously reserved.
As of September 30, 2011, the total amount of unrecognized tax benefits was approximately $1.0 million of which $0.6 million would reduce the Company’s effective tax rate. The amount of accrued interest related to uncertain tax positions at September 30, 2011 was approximately $0.1 million. The Company recognizes accrued amounts of interest and penalties related to uncertain tax positions as part of its income tax expense.
The following table summarized current year activity related to the Company’s unrecognized tax benefits:
         
Balance at January 1, 2011
  $ 5,767  
Increase related to prior year tax positions
    288  
Expiration of statute of limitations for assessment of taxes
    (4,963 )
 
     
 
       
Balance at September 30, 2011
  $ 1,092  
 
     
As of September 30, 2011, the Company and its significant subsidiaries are subject to examination for the years after 2004 in Brazil, after 2005 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.
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 provides benefits primarily based upon a fixed amount for each year of service as defined. The net periodic pension cost for the three and nine months ended September 30, 2011 and 2010, respectively, are as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Service cost
  $ 18     $ 9     $ 54     $ 27  
Interest cost
    76       80       228       240  
Expected return on assets
    (77 )     (74 )     (231 )     (222 )
Amortization of actuarial net loss
    16       15       48       45  
 
                       
Net periodic pension cost
  $ 33     $ 30     $ 99     $ 90  
 
                       
Company contributions
                  $ 268     $ -0-  
 
                           
Contingencies
Contingencies
Contingencies
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. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental
New Idria Mercury Mine
In September 2011, a preliminary notification was issued from the U.S. Environmental Protection Agency (EPA) adding the New Idria Mercury Mine site located near Hollister, California to the Superfund National Priorities List (NPL) because of alleged contaminants discharged to California waterways. The effective date of the NPL is October 17, 2011. The New Idria Quicksilver Mining Company, founded in 1936, owned and operated the New Idria Mine through 1972. In 1981, New Idria was merged into Buckhorn Inc., which was subsequently acquired by Myers Industries in 1987. The EPA contends that past mining operations have resulted in mercury contamination and acid mine drainage in the San Carlos Creek, Silver Creek and a portion of Panoche Creek and that other downstream locations may also be impacted.
The Company is subject to environmental laws and regulations which may require that the Company investigate and remediate the effects of the release or disposal of materials at sites with past and present operations. Since Buckhorn Inc. may be a potentially responsible party (PRP) of the New Idria Mercury Mine, the Company recognized an expense of $1.9 million during the three months ended September 30, 2011 related to performing a remedial investigation and feasibility study to determine the extent of remediation, if any, and the screening of alternatives. As investigation and remediation proceed, it is possible that adjustments to the liability will be necessary to reflect new information. Estimates of the Company’s liability are based on current facts, laws, regulations and technology. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluation and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other PRPs, as well as the extent of their responsibility for the remediation, and the availability of insurance coverage for these expenses. At this time, further remediation cost estimates are not known and have not been prepared.
California Regional Water Quality Control Board
In October 2008, the Company and its subsidiary, Buckhorn Inc., along with a number of other parties were identified in a planning document adopted by the California Regional Water Quality Control Board, San Francisco Bay Region (RWQCB). The planning document relates to the presence of mercury, including amounts contained in mining wastes, in and around the Guadalupe River Watershed (Watershed) region in Santa Clara County, California. Buckhorn has been alleged to be a successor in interest to an entity that performed mining operations in a portion of the Watershed area. The Company has not been contacted by the RWQCB with respect to Watershed clean-up efforts that may result from the adoption of this planning document. The extent of the mining wastes that may be the subject of future cleanup has yet to be determined, and the actions of the RWQCB have not yet advanced to the stage where a reasonable estimate of remediation cost, if any, is available. Although assertion of a claim by the RWQCB is reasonably possible, it is not possible at this time to estimate the amount of any obligation the Company may incur for these cleanup efforts within the Watershed region, or whether such cost would be material to the Company’s financial statements.
Other
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 financial position or overall trends in its 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 financial position and results of operations of the period in which the ruling occurs, or in future periods.
Segment Information
Segment Information
Segment Information
Using the criteria of ASC 280 Segment Reporting, the Company has four operating segments: Lawn and Garden, Material Handling, 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 other economic characteristics.
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     Nine Months Ended  
    September 30,     September 30,  
Net Sales   2011     2010     2011     2010  
Lawn and Garden
  $ 45,552     $ 49,569     $ 151,998     $ 164,315  
Material Handling
    72,070       69,381       204,808       192,321  
Distribution
    48,785       45,979       136,511       128,666  
Engineered Products
    29,360       28,031       85,182       82,187  
Intra-segment elimination
    (5,722 )     (5,915 )     (18,208 )     (18,115 )
 
                       
Net Sales
  $ 190,045     $ 187,045     $ 560,291     $ 549,374  
 
                       
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
Income Before Income Taxes   2011     2010     2011     2010  
Lawn and Garden
  $ (1,413 )   $ (2,542 )   $ 846     $ (3,264 )
Material Handling
    8,870       7,080       27,526       15,942  
Distribution
    4,564       4,480       11,651       11,009  
Engineered Products
    3,001       2,334       8,381       7,971  
Corporate
    (7,763 )     (5,058 )     (20,103 )     (14,892 )
Interest expense-net
    (1,264 )     (1,722 )     (3,655 )     (5,373 )
 
                       
Income before income taxes
  $ 5,995     $ 4,572     $ 24,646     $ 11,393