MYERS INDUSTRIES INC, 10-K filed on 3/4/2013
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Feb. 22, 2013
Jun. 30, 2012
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, 2012 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2012 
 
 
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
 
 
$ 541,754,413 
Entity Common Stock, Shares Outstanding
 
33,439,663 
 
Consolidated Statements of Income (Loss) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Statement [Abstract]
 
 
 
Net sales
$ 791,188 
$ 755,654 
$ 737,618 
Cost of sales
575,907 
557,385 
573,094 
Gross profit
215,281 
198,269 
164,524 
Selling expenses
85,519 
81,475 
74,185 
General and administrative expenses
77,906 
77,136 
65,968 
Impairment charges
1,249 
72,014 
Operating Expenses
163,425 
159,860 
212,167 
Operating income (loss)
51,856 
38,409 
(47,643)
Other income, net
3,827 
Interest
 
 
 
Income
(164)
(65)
(561)
Expense
4,679 
4,787 
7,766 
Interest expense-net
4,515 
4,722 
7,205 
Income (loss) before income taxes
47,341 
33,687 
(51,021)
Income tax expense (benefit)
17,379 
9,182 
(8,187)
Net income (loss)
$ 29,962 
$ 24,505 
$ (42,834)
Income (loss) per common share
 
 
 
Basic (in dollars per share)
$ 0.89 
$ 0.71 
$ (1.21)
Diluted (in dollars per share)
$ 0.88 
$ 0.71 
$ (1.21)
Dividends declared per share (in dollars per share)
$ 0.32 
$ 0.28 
$ 0.26 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statement of Other Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ 29,962 
$ 24,505 
$ (42,834)
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustment
2,791 
(2,240)
3,413 
Pension liability, net of tax of $80 in 2012, $339 in 2011 and $0 in 2010
558 
(630)
(26)
Other Comprehensive Income (Loss), Net of Tax
3,349 
(2,870)
3,387 
Comprehensive income (loss)
33,311 
21,635 
(39,447)
Tax on pension liability
$ 80 
$ 339 
$ 0 
Consolidated Statements of Financial Position (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current Assets
 
 
Cash
$ 3,948 
$ 6,801 
Accounts receivable-less allowances of $3,255 and $3,863, respectively
115,508 
105,830 
Inventories
 
 
Finished and in-process products
72,899 
67,721 
Raw materials and supplies
34,603 
27,496 
Inventory net
107,502 
95,217 
Prepaid expenses
9,033 
5,415 
Deferred income taxes
3,605 
5,189 
Total Current Assets
239,596 
218,452 
Other Assets
 
 
Goodwill
61,056 
44,666 
Patents and other intangible assets
25,839 
17,267 
Other
7,882 
7,438 
Total other non current assets
94,777 
69,371 
Property, Plant and Equipment, at Cost
 
 
Land
4,438 
4,540 
Buildings and leasehold improvements
57,058 
58,299 
Machinery and equipment
445,789 
412,704 
Property, Plant and Equipment, at cost
507,285 
475,543 
Less allowances for depreciation and amortization
(356,802)
(334,609)
Property, plant and equipment, net
150,483 
140,934 
Total Assets
484,856 
428,757 
Current Liabilities
 
 
Accounts payable
72,417 
64,717 
Accrued expenses
 
 
Employee compensation
18,885 
20,566 
Income taxes
1,090 
3,379 
Taxes, other than income taxes
2,606 
2,729 
Accrued interest
240 
161 
Other
19,239 
18,799 
Current portion of long-term debt
305 
Total Current Liabilities
114,477 
110,656 
Long-term debt, less current portion
92,814 
73,725 
Other liabilities
17,865 
14,343 
Deferred income taxes
29,678 
23,893 
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 33,480,189 and 33,420,488; net of treasury shares of 4,356,160 and 4,492,169, respectively)
20,316 
20,312 
Additional paid-in capital
266,419 
265,000 
Accumulated other comprehensive income
10,643 
7,294 
Retained deficit
(67,356)
(86,466)
Total Shareholders’ Equity
230,022 
206,140 
Total Liabilities and Shareholders’ Equity
$ 484,856 
$ 428,757 
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 3,255 
$ 3,863 
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)
33,480,189 
33,420,488 
Common shares, treasury (in shares)
4,356,160 
4,492,169 
Consolidated Statement of Shareholders' Equity (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulative Other Comprehensive Income (Loss) [Member]
Retained Income (Deficit) [Member]
Balance at Dec. 31, 2009
 
$ 21,474 
$ 278,894 
$ 6,777 
$ (49,147)
Balance, shares at Dec. 31, 2009
 
35,286,129 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
(42,834)
 
 
 
(42,834)
Restricted shares issued
 
10,750 
 
 
 
Sales under option plans, shares
5,650 
5,650 
 
 
 
Sales under option plans
 
20 
 
 
Dividend reinvestment plan, shares
 
13,203 
 
 
 
Dividend reinvestment plan
 
136 
 
 
Stock based compensation
 
 
2,326 
 
 
Foreign currency translation adjustment
3,413 
 
 
3,413 
 
Declared dividends
 
 
 
 
(9,240)
Pension liability, net of tax
(26)
 
 
(26)
 
Balance at Dec. 31, 2010
 
21,486 
281,376 
10,164 
(101,221)
Balance, shares at Dec. 31, 2010
 
35,315,732 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
24,505 
 
 
 
24,505 
Sales under option plans, shares
59,031 
59,031 
 
 
 
Sales under option plans
 
36 
597 
 
 
Dividend reinvestment plan, shares
 
11,610 
 
 
 
Dividend reinvestment plan
 
111 
 
 
Restricted stock and stock option grants, net (shares)
 
28,750 
 
 
 
Restricted stock and stock option grants, net
 
 
2,595 
 
 
Foreign currency translation adjustment
(2,240)
 
 
(2,240)
 
Purchase for treasury, shares
 
(2,000,000)
 
 
 
Purchases for treasury
 
(1,220)
(19,726)
 
 
Stock contribution, shares
 
5,365 
 
 
 
Stock contribution
 
47 
 
 
Declared dividends
 
 
 
 
(9,750)
Pension liability, net of tax
(630)
 
 
(630)
 
Balance at Dec. 31, 2011
206,140 
20,312 
265,000 
7,294 
(86,466)
Balance, shares at Dec. 31, 2011
 
33,420,488 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
29,962 
 
 
 
29,962 
Sales under option plans, shares
288,794 
278,659 
 
 
 
Sales under option plans
 
145 
2,870 
 
 
Dividend reinvestment plan, shares
 
7,112 
 
 
 
Dividend reinvestment plan
 
102 
 
 
Restricted stock vested, shares
 
40,500 
 
 
 
Restricted stock award
 
24 
(24)
 
 
Restricted stock and stock option grants, net (shares)
 
11,484 
 
 
 
Restricted stock and stock option grants, net
 
 
2,708 
 
 
Cancellations and terminations of share grants
 
 
(253)
 
 
Foreign currency translation adjustment
2,791 
 
 
2,791 
 
Purchase for treasury, shares
 
(281,797)
 
 
 
Purchases for treasury
 
(172)
(4,032)
 
 
Stock contribution, shares
 
3,743 
 
 
 
Stock contribution
 
48 
 
 
Declared dividends
 
 
 
 
(10,852)
Pension liability, net of tax
558 
 
 
558 
 
Balance at Dec. 31, 2012
$ 230,022 
$ 20,316 
$ 266,419 
$ 10,643 
$ (67,356)
Balance, shares at Dec. 31, 2012
 
33,480,189 
 
 
 
Consolidated Statement of Shareholders' Equity (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Tax on pension liability
$ 80 
$ 339 
$ 0 
Dividends declared per share (in dollars per share)
$ 0.32 
$ 0.28 
$ 0.26 
Accumulative Other Comprehensive Income (Loss) [Member]
 
 
 
Tax on pension liability
$ 80 
$ 339 
 
Retained Income (Deficit) [Member]
 
 
 
Dividends declared per share (in dollars per share)
$ 0.32 
$ 0.28 
$ 0.26 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash Flows From Operating Activities
 
 
 
Net income (loss)
$ 29,962,000 
$ 24,505,000 
$ (42,834,000)
Items not affecting use of cash
 
 
 
Depreciation
29,667,000 
31,245,000 
30,628,000 
Impairment charges and asset write-offs
1,249,000 
72,014,000 
Amortization of other intangible assets
3,340,000 
2,969,000 
2,922,000 
Non-cash stock compensation
2,708,000 
2,595,000 
2,326,000 
(Recovery of ) provision for loss on accounts receivable
(543,000)
915,000 
(1,455,000)
Deferred taxes
1,052,000 
(184,000)
(13,285,000)
Other long-term liabilities
4,057,000 
4,251,000 
151,000 
Gain on sale of property, plant and equipment
(1,085,000)
(875,000)
(733,000)
Other
50,000 
50,000 
Payments on performance based compensation
(333,000)
Cash flow (used for) provided by working capital, net of acquisitions:
 
 
 
Accounts receivable
(2,002,000)
(8,665,000)
(9,994,000)
Inventories
(2,780,000)
455,000 
4,958,000 
Prepaid expenses
(2,119,000)
2,662,000 
548,000 
Accounts payable and accrued expenses
(1,222,000)
3,000,000 
392,000 
Net cash provided by operating activities
60,752,000 
64,172,000 
45,638,000 
Cash Flows From Investing Activities
 
 
 
Additions to property, plant and equipment
(26,977,000)
(21,930,000)
(20,533,000)
Acquisition of business, net of cash acquired
(18,543,000)
(1,100,000)
(411,000)
Proceeds from sale of property, plant and equipment
3,086,000 
1,089,000 
5,213,000 
Other
(50,000)
(96,000)
358,000 
Net cash used for investing activities
(42,484,000)
(22,037,000)
(15,373,000)
Cash Flows From Financing Activities
 
 
 
Repayment of long-term debt
(27,258,000)
(305,000)
(65,380,000)
Net borrowing (repayment) of credit facility
17,700,000 
(9,383,000)
44,900,000 
Cash dividends paid
(13,006,000)
(9,523,000)
(9,209,000)
Proceeds from issuance of common stock
3,122,000 
751,000 
138,000 
Tax benefit from options exercised
(253,000)
Repurchase of common stock
(4,204,000)
(20,946,000)
Deferred financing costs
(1,169,000)
Net cash used for financing activities
(23,899,000)
(39,406,000)
(30,720,000)
Foreign Exchange Rate Effect on Cash
2,778,000 
(633,000)
432,000 
Net (decrease) increase in cash
(2,853,000)
2,096,000 
(23,000)
Cash at January 1
6,801,000 
4,705,000 
4,728,000 
Cash at December 31
3,948,000 
6,801,000 
4,705,000 
Supplemental Disclosures of Cash Flow Information
 
 
 
Interest
4,008,000 
4,129,000 
6,920,000 
Income taxes
$ 21,375,000 
$ 11,168,000 
$ 9,468,000 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
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 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.
Reclassification
Certain prior year amounts in the accompanying consolidated financial statements have been reclassified in conformity with generally accepted accounting principles to conform to the current year’s reporting presentation.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income requiring new disclosures regarding reclassification adjustments from accumulated other comprehensive income ("AOCI"). ASU No. 2013-02 requires disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes. The standard is effective for fiscal years beginning after December 15, 2012. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements. The Company plans to adopt this guidance beginning in the first quarter of 2013.
In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350) which simplifies the impairment test for indefinite-lived intangible assets other than goodwill. ASU No. 2012-02 gives the option to first assess qualitative factors to determine if it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amounts as a basis for determining whether it is necessary to perform a quantitative valuation test. ASU No. 2012-02 is effective for fiscal years and interim periods beginning on or after September 15, 2012. The Company conducted its annual impairment assessment as of October 1, which included adoption of this guidance. The adoption of this guidance on October 1, 2012 did not have a significant impact on the Company's consolidated financial position, results of operations or cash flows.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income. The new accounting standard requires companies to present the components of net income and other comprehensive income either as one continuous statement or two separate but consecutive statements. The update eliminated the option to report other comprehensive income and its components in the statement of changes in equity. On December 23, 2011, the FASB issued a final standard to defer the new requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Effective January 1, 2012, we adopted this ASC guidance and have presented net income and other comprehensive income in two consecutive statements.
Translation of Foreign Currencies
All asset and liability accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated monthly at an average currency exchange rate for the period. The resulting translation adjustment is recorded in other comprehensive income (loss) as a separate component of shareholders’ equity.
Fair Value Measurement
The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied to U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.
Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.
The fair value of the Company’s cash, accounts receivable, accounts payable and accrued expenses are considered to have a fair value which approximates carrying value due to the nature and relative short maturity of these assets and liabilities.
The fair value of debt under the Company’s Credit Agreement approximates carrying value due to the floating interest rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement. The fair value of the Company’s $35.0 million fixed rate senior notes was estimated at $36.5 million at December 31, 2012 using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered level 2 inputs.
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 2012 accounts for approximately four percent of total sales, with only two other customers greater than three percent. Outside of the United States, only Canada, which accounts for approximately nine percent of total sales, is 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. In 2012, the Company recorded a bad debt recovery of $1.4 million related to a single customer. Expense related to bad debts was approximately $817, $2,343 and $1,117 for the years 2012, 2011 and 2010, respectively.
Inventories
Inventories are stated at the lower of cost or market. Approximately 20 percent of our inventories are valued using the last-in, first-out (“LIFO”) method of determining cost. All other inventories are valued at the first-in, first-out (“FIFO”) method of determining cost.
If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $8.7 million, $9.6 million and $9.9 million higher than reported at December 31, 2012, 2011 and 2010, respectively. In 2012, 2011 and 2010, the liquidation of LIFO inventories decreased cost of sales and increased income before taxes by approximately $0.4 million, $0.8 million and $0.7 million, respectively.

 
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 30 years
Machinery and Equipment
3 to 12 years
Vehicles
1 to 3 years
Leasehold Improvements
7 to 10 years

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.
At both December 31, 2012 and 2011, the Company had approximately $5.7 million of property, plant, and equipment held for sale, which represents the lower of net book value or estimated fair value based on level 2 inputs, and is included in other assets on the accompanying Consolidated Statement of Financial Position.
Revenue Recognition
The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title and risk of loss, which is generally at time of shipment, and collectability of the fixed or determinable sales price is reasonably assured.
Accumulated Other Comprehensive Income (Loss)
As of December 31, 2012, 2011, and 2010, the balance in the Company’s accumulated other comprehensive income (loss) is comprised of the following:
 
 
2012
 
2011
 
2010
Foreign currency translation adjustments
$
12,785

 
$
9,994

 
$
12,234

Pension adjustments
(2,142
)
 
(2,700
)
 
(2,070
)
Total
$
10,643

 
$
7,294

 
$
10,164


Shipping and Handling
Shipping and handling expenses are primarily classified as selling expenses in the accompanying Consolidated Statements of Income (Loss). The Company incurred shipping and handling costs of approximately $32.2 million, $26.6 million and $24.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Stock Based Compensation
The Company has stock plans that provide for the granting of stock-based compensation to employees and, in certain instances, to non-employee directors. Shares are issued upon exercise from authorized, unissued shares. The Company records the costs of the plan under the provisions of ASC 718, Compensation — Stock Compensation. For transactions in which we obtain employee services in exchange for an award of equity instruments, we measure 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). Cash flows resulting from tax benefits for deductions in excess of compensation cost recognized are included in financing cash flows.
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). 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 within operations as 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 $0.4 million and $1.8 million of accrued capital expenditures in 2012 and 2011, respectively.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets
The Company is required to test for impairment on at least an annual basis. The Company conducted its annual impairment assessment as of October 1. In addition, the Company tests for impairment whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit 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.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350) effective for fiscal years beginning after December 15, 2011. The update gives companies the option to perform a qualitative assessment that may enable them to forgo the annual two-step test for impairment. ASU No. 2011-08 allows a qualitative assessment to first be performed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If a company concludes that this is the case, it must perform the two-step test. Otherwise a company does not have to perform the two-step test. The ASU also includes a revised list of events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company adopted this guidance in 2011 and conducted its annual impairment assessment as of October 1.
In evaluating goodwill for impairment using the two-step test, the Company uses a combination of valuation techniques primarily using discounted cash flows to determine 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 are based on the weighted average cost of capital determined for each of the Company’s reporting units and ranged from 8.4% to 11.9% in 2012. In addition we make certain judgments about the selection of comparable companies used in determining market multiples in valuing our business units, as well as certain assumptions to allocate shared assets and liabilities to calculate values for each of our business units. The underlying assumptions used are based on historical actual experience and future expectations that are consistent with those used in the Company’s strategic plan. The Company compares the fair value of each of its reporting units to their respective carrying values, including related goodwill. We also compare 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 we re-evaluate and adjust, if necessary, the assumptions underlying our Income and Market Approach models. Our estimate of the fair values of these business 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.
In 2010, the Company determined that all reporting units had an estimated fair value substantially in excess of carrying value except for Lawn and Garden which initially passed but not by a substantial amount. In the fourth quarter, persistently high raw material costs and weak demand resulted in operating results and cash flows in the Lawn and Garden Segment that were significantly below forecasts which also impacted projections for future years. As a result of this triggering event, the Company determined that the Lawn and Garden reporting unit needed to complete a Step 1 test as of December 31, 2010. This reporting unit failed Step 1 of this impairment test, requiring a Step 2 test to be performed. Based on the results of Step 2 testing, which included a valuation of the reporting unit’s net assets in accordance with ASC 805, Business Combinations ("ASC 805"), a goodwill impairment charge of $72.0 million was recorded in the fourth quarter of 2010 writing down its implied fair value to $9.3 million. The fair values for the valuation of the net assets were developed using both level 2 and 3 inputs.
The changes in the carrying amount of goodwill for the years ended December 31, 2012 and 2011 is as follows:
 
 
Distribution
 
Engineered
Products
 
Material Handling
 
Lawn and
Garden
 
Total
January 1, 2011
$
214

 
$
707

 
$
30,383

 
$
9,588

 
$
40,892

Acquisitions

 

 
3,896

 

 
3,896

Foreign currency translation

 

 

 
(122
)
 
(122
)
Impairments

 

 

 

 

December 31, 2011
$
214

 
$
707

 
$
34,279

 
$
9,466

 
$
44,666

Acquisitions

 

 
16,240

 

 
16,240

Foreign currency translation

 

 
2

 
148

 
150

Impairments

 

 

 

 

December 31, 2012
$
214

 
$
707

 
$
50,521

 
$
9,614

 
$
61,056



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 with a value of $6,812. 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. Estimated annual amortization expense for intangible assets with finite lives for the next five years is: $3,494 in 2013; $3,121 in 2014; $3,016 in 2015, $3,015 in 2016 and $2,107 in 2017.
Intangible assets at December 31, 2012 and 2011 consisted of the following:
 
 
Weighted Average Useful Life (years)
Gross
 
2012
Accumulated
Amortization
 
Net
 
Gross
 
2011
Accumulated
Amortization
 
Net
Trade Names
7.3
$
7,273

 
$
(46
)
 
$
7,227

 
$
4,442

 
$
(14
)
 
$
4,428

Customer Relationships
4.9
18,702

 
(10,163
)
 
8,539

 
13,747

 
(8,437
)
 
5,310

Technology
10.4
7,837

 
(2,433
)
 
5,404

 
4,071

 
(2,181
)
 
1,890

Patents
4.2
10,900

 
(6,359
)
 
4,541

 
10,900

 
(5,269
)
 
5,631

Non-Compete
1.8
569

 
(441
)
 
128

 
426

 
(418
)
 
8

 
 
$
45,281

 
$
(19,442
)
 
$
25,839

 
$
33,586

 
$
(16,319
)
 
$
17,267

Net Income Per Common Share
Net Income Per Common Share
Net Income Per Common Share
Net income per common share, as shown on the Consolidated Statements of Income (Loss), is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:
 
 
2012
 
2011
 
2010
Weighted average common shares outstanding:
 
 
 
 
 
Basic
33,597,020

 
34,584,558

 
35,304,817

Dilutive effect of stock options and restricted stock
512,212

 
158,985

 

Weighted average common shares outstanding diluted
34,109,232

 
34,743,543

 
35,304,817


 
Options to purchase 212,000 and 1,105,229 shares of common stock that were outstanding at December 31, 2012 and 2011 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. There were 58,555 dilutive common shares at December 31, 2010 excluded from the computation of the loss per common share due to the Company’s net loss for the year then ended.
Acquisitions
Acquisitions
Acquisitions
In October 2012, the Company acquired 100% of the stock of Jamco Products Inc. ("Jamco"), an Illinois corporation that is a leading designer and manufacturer of heavy-duty industrial steel carts and safety cabinets used across many markets. The total purchase price was approximately $15.1 million in cash, net of $0.1 million of cash acquired.
Jamco's assets and liabilities are recorded at fair value as of the date of acquisition using primarily level 2 and level 3 fair value inputs. Intangible assets included in the acquisition of Jamco are trade name of $1.2 million, technology of $2.0 million, non-compete agreement of $0.1 million and customer relationships of $2.4 million. The technology, non-compete agreement and customer relationships are subject to amortization and have estimated useful lives of ten, two and six years, respectively. The Jamco trade name has an indefinite life and will be subject to evaluation for impairment. The Company is awaiting final valuation studies to complete the purchase price allocation.
In July 2012, the Company acquired 100% of the stock of Plasticos Novel do Nordeste S.A. ("Novel"), a Brazil-based designer and manufacturer of reusable plastic crates and containers used for closed-loop shipping and storage. Novel also produces a diverse range of plastic industrial safety products. The total purchase price was approximately $31.0 million, which includes a cash payment of $3.4 million, net of $0.6 million of cash acquired, assumed debt of approximately $26.0 million and contingent consideration of $0.9 million based on an earnout. A majority of the debt was repaid shortly after acquisition. The contingent consideration is contingent upon the results of Novel exceeding predefined earnings before interest, taxes, depreciation and amortization over the next four years.
Novel's assets and liabilities are recorded at fair value as of the date of acquisition using primarily level 3 fair value inputs. Intangible assets included in the acquisition of Novel include trade name of $1.6 million, know-how of $1.8 million and customer relationships of $2.4 million. The know-how and customer relationships are subject to amortization and have estimated useful lives of ten and six years, respectively. The Novel trade name has an indefinite life and will be subject to evaluation for impairment.
The operating results of both businesses acquired have been included in our Material Handling Segment since the date of acquisition.
The allocation of the purchase price and the estimated goodwill, which is not deductible for income tax purposes, and other intangibles are as follows:

 
 
(dollars in thousands)
Novel
 
Jamco (Preliminary)
Assets acquired:
 
 
 
Cash
$
630

 
$
88

 
 
 
 
Accounts receivable
5,467

 
1,690

Inventory
5,993

 
3,282

Property, plant & equipment
13,636

 
2,559

Intangibles
5,790

 
5,680

Deferred tax assets
435

 
28

Prepaid assets
1,451

 
48

Other
719

 
2

Assets acquired
33,491

 
13,289

 
 
 
 
Liabilities assumed:
 
 
 
Accounts payable and accruals
$
3,134

 
$
1,436

Other taxes
3,608

 
676

Other long-term obligations
2,293

 
454

Debt
26,028

 

Deferred income taxes
3,804

 
3,044

Liabilities assumed
38,867

 
5,610

Goodwill
8,805

 
7,435

Total consideration, less cash acquired
$
3,429

 
$
15,114

 
 
 
 

The Consolidated Statement of Income (Loss) for the Company for the year ended December 31, 2012 following the acquisition of Novel effective July 1, 2012 and Jamco on October 1, 2012 included total revenues of $21.5 million and net income of $0.2 million. Transactional costs of approximately $0.9 million were incurred during the year and are included in general and administrative expenses in the Consolidated Statements of Income (Loss) in 2012.
The following unaudited pro forma information presents a summary of consolidated results of operations for the Company including Novel and Jamco as if the acquisitions had occurred on January 1, 2011.
(Amounts in thousands, except per share data)
2012
 
2011
Net sales
$
820,649

 
$
807,244

Cost of sales
596,178

 
593,870

Gross profit
224,471

 
213,374

Selling, general & administrative expenses
168,794

 
169,433

Operating income
55,677

 
43,941

Interest expense, net
7,333

 
7,931

Income before taxes
48,344

 
36,010

Income taxes
17,784

 
9,508

Net income
$
30,560

 
$
26,502

 
 
 
 
Income per basic share
$
0.91

 
$
0.77

Income per diluted share
$
0.90

 
$
0.76


These unaudited pro forma results have been prepared for comparative purposes only and may not be indicative of results of operations which actually would have occurred had the acquisitions taken place on January 1, 2011 or indicative of future results.
In July 2011, the Company acquired tooling assets and intellectual property for a new reusable plastic container used in producing, shipping and processing bulk natural cheese from Material Improvements L.P. The total purchase price was $5.7 million, comprised of a $1.1 million cash payment and $4.6 million contingent consideration none of which has been paid as of December 31, 2012. The contingent consideration was reduced by approximately $1.0 million due to a change in projections used to estimate the value of the liability at December 31, 2012. The allocation of purchase price included $0.3 million of property, plant and equipment, amortizable intangible assets, which included $1.3 million in technology and $0.2 million for trade name, and $3.9 million in goodwill. These assets and liabilities incurred were recorded at estimated fair value as of the date of the acquisition using primarily level 3 inputs. The consolidated operating results of the business acquired have been included in our Material Handling Segment since the date of acquisition. 
In July 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.
Restructuring
Restructuring
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 goods sold. The Distribution, Material Handling, Lawn and Garden Segments and Corporate costs are recorded in SG&A and the Engineered Products Segment expenses are recorded in cost of goods sold. The restructuring charges by segment are presented in the following table.
Segment
December 31, 2012
 
December 31, 2011
 
December 31, 2010
Distribution
$
727

 
$
2,060

 
$
571

Lawn and Garden
487

 
687

 
359

Engineered Products
1,198

 
724

 
944

Material Handling

 

 
735

Corporate
318

 

 
127

Total
$
2,730

 
$
3,471

 
$
2,736


In 2012, restructuring costs of $0.7 million for severance and non-cancelable lease costs were offset by a gain of $0.8 million on the sale of four facilities in the Distribution Segment. In addition, $1.2 million of restructuring charges were recorded in the Engineered Products Segment related to non-cancelable lease costs and termination charges. The Lawn and Garden Segment had $0.5 million restructuring charges for severance costs incurred. The Corporate costs included $0.3 million of restructuring charges related to severance costs.
In 2011, restructuring costs of $2.1 million for severance and non-cancelable lease costs were offset by a gain of $0.7 million on the sale of facilities in the Distribution Segment. In addition, $0.3 million of restructuring charges were recorded in the Engineered Products Segment related to non-cancelable lease costs and $0.4 million of costs related to mold remediation for a closed facility were recorded in the fourth quarter. In the Lawn and Garden Segment, a $0.3 million write-down for an idle manufacturing facility was recorded in the first quarter and severance costs of $0.4 million were recorded in the fourth quarter related to restructuring.
In 2010, the $2.7 million of restructuring costs were primarily related to rigging, freight and other costs to move machinery and equipment. In addition, the Company recorded some idle facility charges and consulting costs which were expensed and paid in the period.
 
The accrued liability balance for severance and other exit costs associated with restructuring is included in Other Accrued Expenses on the accompanying Consolidated Statements of Financial Position.
 
 
Severance
and
Personnel
 
Other
Exit Costs
 
Total
Balance at January 1, 2010
$
423

 
$
1,651

 
$
2,074

Provision

 
2,736

 
2,736

Less: Payments
(423
)
 
(3,624
)
 
(4,047
)
Balance at December 31, 2010
$

 
$
763

 
$
763

Provision
1,102

 
2,369

 
3,471

Reversal

 
(285
)
 
(285
)
Less: Payments
(1,102
)
 
(2,242
)
 
(3,344
)
Balance at December 31, 2011
$

 
$
605

 
$
605

Provision
1,102

 
1,628

 
2,730

Less: Payments
(784
)
 
(2,233
)
 
(3,017
)
Balance at December 31, 2012
$
318

 
$

 
$
318


As a result of restructuring activity including plant closures, approximately $5.7 million of property, plant and equipment has been classified as held for sale for both periods ended December 31, 2012 and 2011 and is included in other assets in the Consolidated Statements of Financial Position. The Company is actively pursuing disposal including the sale of these facilities. During 2010, the Company sold its facility in Shelbyville, Kentucky, which was previously classified as held for sale with a carrying value of $4.4 million. The proceeds from this sale were $5.1 million and the Company recorded a gain of $0.7 million which is included in general and administrative expenses.
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 3 to 5 year period and expire 10 years from the date of grant.
The following tables summarize stock option activity in the past three years:
Options granted in 2012, 2011 and 2010:
 
Year
Options
 
Exercise
Price
2012
323,950

 
$12.96
2011
365,025

 
$10.10 to $10.28
2010
345,600

 
$9.97 to $12.46


Options exercised in 2012, 2011 and 2010:
 
Year
Options
 
Exercise
Price
2012
288,794

 
$8.00 to $12.55

2011
59,031

 
$8.00 to $12.55

2010
5,650

 
$
8.00



In addition, options totaling 113,913, 153,426 and 175,909 expired or were forfeited during the years ended December 31, 2012, 2011 and 2010, respectively.
Options outstanding and exercisable at December 31, 2012, 2011 and 2010 were as follows:
 
Year
Outstanding
 
Range of Exercise
Prices
 
Exercisable
 
Weighted Average
Exercise Price
2012
1,919,021

 
$8.00 to $18.62
 
1,355,112

 
$
11.63

2011
1,997,778

 
$8.00 to $18.62
 
1,429,040

 
$
11.75

2010
1,845,210

 
$8.00 to $18.62
 
1,191,865

 
$
12.21



Stock compensation expense reduced income before taxes approximately $2,708, $2,595 and $2,326 for the years ended December 31, 2012, 2011, and 2010, respectively. These expenses are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income (Loss). Total unrecognized compensation cost related to non-vested share based compensation arrangements at December 31, 2012 was approximately $3.8 million, which will be recognized over the next three to four years.
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 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 2012, the Company used the binomial lattice option pricing model based on assumptions set forth in the following table. There is no material difference in the valuation of these options using prior models.
 
 
2012
 
2011
 
2010
Risk free interest rate
2.00
%
 
3.79
%
 
3.09
%
Expected dividend yield
2.20
%
 
2.90
%
 
2.86
%
Expected life of award (years)
5.4

 
6.0

 
5.2

Expected volatility
50.00
%
 
50.72
%
 
48.77
%
Fair value per option share
$
4.93

 
$
3.69

 
$
3.01


 
The following table provides a summary of stock option activity for the period ended December 31, 2012:
 
 
Shares
 
Average
Exercise
Price
 
Weighted
Average
Life
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2011
1,997,778

 
$
11.33

 
 
 
 
Options Granted
323,950

 
12.96

 
 
 
 
Options Exercised
(288,794
)
 
16.22

 
 
 
 
Cancelled or Forfeited
(113,913
)
 
11.67

 
 
 
 
Outstanding at December 31, 2012
1,919,021

 
$
11.63

 
6.30 years
 
$
6,755

Exercisable at December 31, 2012
1,355,112

 
$
11.63

 
5.31 years
 
$
4,770



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 2012, 2011 and 2010 was $1,502, $117 and $14, respectively.
The following table provides a summary of restricted stock activity for the period ended December 31, 2012:
 
 
Shares
 
Average
Grant-Date
Fair Value
Unvested shares at December 31, 2011
288,500

 
 
Granted
165,495

 
13.79

Vested
(40,500
)
 

Forfeited
(50,370
)
 
10.73

Unvested shares at December 31, 2012
363,125

 
$
11.01


The restricted stock awards are rights to receive shares of common stock, subject to forfeiture and other restrictions, which generally vest over a 3 to 4 year period. Restricted shares are considered to be non-vested shares under the accounting guidance for share-based payment and are not reflected as issued and outstanding shares until the restrictions lapse. At that time, the shares are released to the grantee and the Company records the issuance of the shares. Restricted shares are valued on the grant date based on the price issued. At December 31, 2012, shares of restricted stock had vesting periods up through December 2015.
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.
New Idria Mercury Mine
Effective October 2011, the U.S. Environmental Protection Agency (“EPA”) added the New Idria Mercury Mine site located near Hollister, California to the Superfund National Priorities List because of alleged contaminants discharged to California waterways. The New Idria Quicksilver Mining Company, founded in 1936, and later renamed the New Idria Mining & Chemical Company ("NIMCC") owned and/or operated the New Idria Mine through 1976. In 1981 NIMCC was merged into Buckhorn Metal Products Inc. and 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.
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 in 2011 related to performing a remedial investigation and feasibility study to determine the extent of remediation and the screening of alternatives. Expenses of approximately $0.3 million have been incurred and charged against the reserve classified in Other Liabilities on the Consolidated Statements of Financial Position as of December 31, 2012. As investigation and remediation proceed, it is likely 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.
In November 2011 the EPA completed an interim removal project at the New Idria Mercury Mine site. It is expected this removal action will be part of the final remediation strategy for the site. According to informal reports, EPA’s interim removal project costs were approximately $500,000. It is possible that at some future date the EPA will seek recovery of the costs of this work from PRPs.
California Regional Water Quality Control Board
A number of parties, including the Company and its subsidiary, Buckhorn Inc. (“Buckhorn”), were identified in a planning document adopted in October 2008 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 NIMCC which owned property and 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. 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. The Company was brought into the lawsuit by the plaintiff as an additional defendant. The manufacturer of the press filed a cross claim for indemnity against Buckhorn. The case was dismissed in December 2012 at no additional cost to the Company.
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, cash flows or overall trends in our results of operations. However, these matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or in future periods.
Long-Term Debt and Credit Agreements
Long-Term Debt and Credit Agreements
Long-Term Debt and Credit Agreements
Long-term debt at December 31, 2012 and 2011 consisted of the following:
 
 
2012
 
2011
Credit agreement
$
57,814

 
$
37,800

Senior notes
35,000

 
35,000

Industrial revenue bonds

 
1,230

 
92,814

 
74,030

Less current portion

 
305

 
$
92,814

 
$
73,725



Under terms of the Credit Agreement with a group of banks, the Company may borrow up to $180 million, reduced for letters of credit issued. As of December 31, 2012, the Company had $116.1 million available under the Credit Agreement. Interest is based on the bank’s Prime rate or Euro dollar rate plus an applicable margin that varies depending on the Company’s ratio of total debt to earnings before interest, taxes, depreciation and amortization. The average interest rate on borrowing under the Credit Agreement was 3.81 percent at December 31, 2012 and 3.25 percent at December 31, 2011 which includes a quarterly facility fee on the used and unused portion. The Credit Agreement expires November 19, 2015.
In December 2003, the Company issued $100 million in Senior Unsecured Notes (the Notes) consisting of $65 million of notes with an interest rate of 6.08 percent and a 7 year maturity and $35 million of notes with an interest rate of 6.81 percent and a 10 year maturity. Proceeds from the issuance of the Notes were used to pay down the term loan and revolving credit facility borrowing outstanding at that time. As of December 31, 2012, the Company has classified the $35 million of Senior Notes due in December 2013 as a long-term liability since it has the intent to refinance the debt on a long-term basis and has demonstrated the ability via capacity available under the non-cancelable revolver feature of our current Credit Agreement. In December 2010, the Company paid the $65 million Senior Notes at maturity with borrowings from the Credit Agreement.
In the fourth quarter of 2012, the Company repaid debt related to industrial revenue bonds for a total of $1.2 million.
As of December 31, 2012, the Company also has $6.0 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business.
As of December 31, 2012, the Company was in compliance with all its debt covenants associated with its Credit Agreement and Senior Notes. The significant financial covenants include an interest coverage ratio, defined as earnings before interest and taxes divided by interest expense, and a leverage ratio, defined as earnings before interest, taxes, depreciation, and amortization, as adjusted, compared to total debt. The ratios as of December 31, 2012 are shown in the following table:
 
 
 
 
 
Required Level                
Actual Level
Interest Coverage Ratio
2.25 to 1 (minimum)
11.46
Leverage Ratio
3.25 to 1 (maximum)
1.14


Maturities of long-term debt under the loan agreements in place at December 31, 2012 are as follows: $35,000 in 2013 (with intent and ability to refinance); $0 in 2014; and $57,814 in 2015.
Retirement Plans
Retirement Plans
Retirement Plans
The Company and certain of its subsidiaries have pension and profit sharing plans covering substantially all of their employees. The Company’s frozen defined benefit pension plan (“The Pension Agreement between Akro-Mils and United Steelworkers of America Local No. 1761-02”) provides benefits primarily based upon a fixed amount for each year of service as defined.
Net periodic pension cost for the years ended December 31, 2012, 2011 and 2010 was as follows:
 
 
2012
 
2011
 
2010
 
Underfunded
 
Underfunded
 
Underfunded
Service cost
$
70

 
$
74

 
$
39

Interest cost
287

 
303

 
320

Expected return on assets
(306
)
 
(309
)
 
(300
)
Amortization of net loss
101

 
64

 
59

Net periodic pension cost
$
152

 
$
132

 
$
118



The reconciliation of changes in projected benefit obligations are as follows:
 
 
2012
 
2011
Accumulated benefit obligation at beginning of year
$
6,591

 
$
5,973

Service cost
70

 
74

Interest cost
287

 
303

Actuarial loss
600

 
724

Expenses paid
(31
)
 
(70
)
Benefits paid
(408
)
 
(413
)
Accumulated benefit obligation at end of year
$
7,109

 
$
6,591



The assumptions used to determine the net periodic benefit cost and benefit obligations are as follows:
 
 
2012
 
2011
 
2010
Discount rate for net periodic pension cost
4.50
%
 
5.25
%
 
5.75
%
Discount rate for benefit obligations
3.75
%
 
4.50
%
 
5.25
%
Expected long-term return of plan assets
8.00
%
 
8.00
%
 
8.00
%

 
The expected long-term rate of return assumption is based on the actual historical rate of return on assets adjusted to reflect recent market conditions and future expectation consistent with the Company’s current asset allocation and investment policy. This policy provides for aggressive capital growth balanced with moderate income production. The inherent risks of equity exposure exists, however, returns generally are less volatile than maximum growth programs. The assumed discount rates represent long-term high quality corporate bond rates commensurate with the liability duration of its plan.

The following table reflects the change in the fair value of the plan’s assets:
 
 
2012
 
2011
Fair value of plan assets at beginning of year
$
3,731

 
$
3,946

Actual return on plan assets
575

 

Company contributions
661

 
268

Expenses paid
(31
)
 
(70
)
Benefits paid
(408
)
 
(413
)
Fair value of plan assets at end of year
$
4,528

 
$
3,731



The fair value of plan assets are all categorized as level 1 and were determined based on period end closing prices in active markets. The weighted average asset allocations at December 31, 2012 and 2011 are as follows:
 
 
2012
 
2011
U.S. Equities securities
79
%
 
80
%
U.S. Debt securities
20
%
 
19
%
Cash
1
%
 
1
%
Total
100
%
 
100
%

The following table provides a reconciliation of the funded status of the plan at December 31, 2012 and 2011:
 
 
2012
 
2011
Projected benefit obligation
$
7,109

 
$
6,591

Plan assets at fair value
4,528

 
3,731

Funded status
$
(2,581
)
 
$
(2,860
)


The funded status shown above is included in other long term liabilities in the Company’s Consolidated Statements of Financial Position at December 31, 2012 and 2011. The Company expects to make a contribution of $364 to the plan in 2013.
Benefit payments projected for the plan are as follows:
 
2013
$
416

2014
405

2015
399

2016
397

2017
391

2018-2022
1,911


Effective January 1, 2012 the Company changed its profit sharing and 401(k) plan which includes an increase in the Company’s matching contributions and the frequency of the Company’s match. The Myers Industries Profit Sharing and 401(k) Plan is maintained for the Company’s U.S. based employees, not covered under defined benefit plans, who have met eligibility service requirements. The Company recognized expense related to the 401(k) employer matching contribution in the amount of $2,609 in 2012. The Company recognized profit sharing plan expense of $1,678 and $1,355 in 2011 and 2010, respectively, and contributed that amount.
In addition, the Company has a Supplemental Executive Retirement Plan (“SERP”) to provide certain participating senior executives with retirement benefits in addition to amounts payable under the 401(k) plan. Expense related to the SERP was approximately $477, $784, and $459 for the years ended December 2012, 2011 and 2010, respectively. The SERP liability is based on the discounted present value of expected future benefit payments using a discount rate of 3.75%. The SERP liability was approximately $4.5 million and $4.5 million at December 31, 2012 and 2011, respectively, and is included in accrued employee compensation and Other Long-Term Liabilities on the accompanying Consolidated Statements of Financial Position. The SERP is unfunded.
Leases
Leases
Leases
The Company and certain of its subsidiaries are committed under non-cancelable operating leases involving certain facilities and equipment. Aggregate rental expense for all leased assets was $10,045, $10,372 and $10,880 for the years ended December 31, 2012, 2011 and 2010, respectively.
Future minimum rental commitments are as follows:
 
Year Ended December 31,
Commitment
2013
$
9,262

2014
6,805

2015
5,925

2016
5,030

2017
3,961

Thereafter
14,715

Total
$
45,698

Income Taxes
Income Taxes
Income Taxes
The effective tax rate was 36.7% in 2012, 27.3% in 2011 and 16.0% in 2010. A reconciliation of the Federal statutory income tax rate to the Company’s effective tax rate is as follows:
 
 
Percent of Income before
Income Taxes
 
2012
 
2011
 
2010
Statutory Federal income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes — net of Federal tax benefit
4.2

 
0.7

 
(1.4
)
Foreign tax rate differential
0.5

 
0.4

 
(5.1
)
Domestic production deduction
(2.9
)
 
(3.5
)
 
0.8

Non-deductible expenses
1.5

 
2.0

 
(0.9
)
Changes in unrecognized tax benefits
(1.6
)
 
(14.4
)
 

Non-deductible goodwill

 
3.1

 
(16.2
)
Non-taxable claims settlement gain

 

 
2.6

Valuation allowances
1.2

 
3.0

 

Other
(1.2
)
 
1.0

 
1.2

Effective tax rate for the year
36.7
 %
 
27.3
 %
 
16.0
 %


Income (loss) before income taxes was attributable to the following sources:
 
 
2012
 
2011
 
2010
United States
$
50,143

 
$
39,740

 
$
(18,807
)
Foreign
(2,802
)
 
(6,053
)
 
(32,214
)
Totals
$
47,341

 
$
33,687

 
$
(51,021
)


Income tax expense (benefit) consisted of the following:
 
 
2012
 
2011
 
2010
 
Current
 
Deferred
 
Current
 
Deferred
 
Current
 
Deferred
Federal
$
13,093

 
$
2,124

 
$
6,509

 
$
2,057

 
$
5,712

 
$
(12,933
)
Foreign
297

 
(1,168
)
 
612

 
(371
)
 
(1,519
)
 
(544
)
State and local
2,937

 
96

 
1,906

 
(1,531
)
 
983

 
115

 
$
16,327

 
$
1,052

 
$
9,027

 
$
155

 
$
5,176

 
$
(13,362
)


Significant components of the Company’s deferred taxes as of December 31, 2012 and 2011 are as follows:
 
 
2012
 
2011
Deferred income tax liabilities
 
 
 
Property, plant and equipment
$
24,748

 
$
23,974

Tax-deductible goodwill
5,206

 
2,884

Non-deductible intangibles
5,069

 
1,564

State deferred taxes
1,487

 
1,286

Other
392

 
423

 
36,902

 
30,131

Deferred income tax assets
 
 
 
Compensation
6,243

 
5,175

Inventory valuation
806

 
630

Allowance for uncollectible accounts
967

 
1,343

Non-deductible accruals
3,820

 
4,199

Other
78

 
80

Capital loss carryforwards

 
26,138

Net operating loss carryforwards
4,975

 
2,037

 
16,889

 
39,602

Valuation Allowance
(6,060
)
 
(28,175
)
 
10,829

 
11,427

Net deferred income tax liability
$
26,073

 
$
18,704


ASC 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance, if based on all available evidence, it is more likely than not that the deferred tax asset will not be realized. Available evidence includes the reversal of existing taxable temporary differences, future taxable income exclusive of temporary differences, taxable income in carryback years and tax planning strategies. The decrease in the valuation allowance of $22.1 million resulted from the expiration of $26.1 million valuation allowance associated with 2007 capital loss carryforward and an increase of $4.0 million in the valuation allowance from additional federal non-deductible expenses as well as foreign and state net operating losses from jurisdictions with uncertainty of future profitability. The Company has deferred tax assets of $5.0 million resulting from state and foreign net operating tax loss carryforwards of approximately $25.2 million, with carryforward periods that expire starting in 2019.
No provision has been recorded for unremitted earnings of foreign subsidiaries as it is the Company’s intention to indefinitely reinvest these earnings of these subsidiaries. Accordingly, at December 31, 2012, the Company had not recorded a deferred tax liability for temporary differences related to investments in its foreign subsidiaries that are essentially permanent in duration. The amount of such temporary differences was estimated to be approximately $11.8 million and may become taxable in the U.S. upon a repatriation of assets or a sale or liquidation of the subsidiaries. It is not practical to estimate the related amount of unrecognized tax liability.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
 
 
2012
 
2011
 
2010
Balance at January 1
1,217

 
5,767

 
6,117

Increases related to current year tax positions

 

 
198

Increases related to acquired businesses
236

 

 

Increases related to previous year tax positions
580

 
395

 
79

Reductions due to lapse of applicable statute of limitations
(256
)
 
(4,945
)
 
(627
)
Reduction due to settlements
(699
)
 

 

Balance at December 31
$
1,078

 
$
1,217

 
$
5,767



The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $1.1 million, $1.1 million and $5.5 million at December 31, 2012, 2011 and 2010, respectively. The amount of accrued interest expense included as a liability within the Company’s Consolidated Statements of Financial Position as of December 31, 2012, 2011 and 2010 was $0.1 million, $0.1 million and $0.4 million, respectively.
As of December 31, 2012, the Company and its significant subsidiaries are subject to examination for the years after 2006 in Brazil and after 2007 in Canada. The Company and its subsidiaries are subject to examination in certain states within the United States either after 2007 or after 2008.
During 2012, the Company closed its 2009 and 2010 examination of Federal income tax returns in the United States. In February 2013, the Company closed its examination of its Canadian income tax returns for 2008. Ongoing examinations continue in a few states. The Company does not expect any significant changes to its unrecognized tax benefits in the next 12 months.
Industry Segments
Industry Segments
Industry Segments
Using the criteria of ASC 280 Segment Reporting, the Company has four operating segments: Material Handling, Lawn and Garden, Distribution and Engineered Products. Each of these operating segments is also a reportable segment under the ASC 280 criteria. None of the reportable segments include operating segments that have been aggregated. Some of these segments contain individual business components that have been aggregated on the basis of common management, customers, products, production processes and other economic characteristics. The Company accounts for intersegment sales and transfers at cost plus a specified mark-up.
The Material Handling Segment includes a broad selection of plastic reusable containers, pallets, small parts bins, bulk shipping containers, and storage and organization products. This segment has primary operations conducted in the United States, but also operates in Canada and Brazil. Markets served encompass various niches of industrial manufacturing, food processing, retail/wholesale products distribution, agriculture, automotive, healthcare, appliance, bakery, electronics, textiles, consumer, and others. Products are sold both direct to end-users and through distributors.
The Lawn and Garden Segment serves the North American horticultural market with plastic products such as seedling trays, nursery pots, hanging baskets, and custom printed containers, as well as decorative resin planters. Markets/customers include professional growers, greenhouses, nurseries, retail garden centers, mass merchandisers, and consumers.
The Distribution Segment is engaged in the distribution of equipment, tools, and supplies used for tire servicing and automotive undervehicle repair. The product line includes categories such as tire valves and accessories, tire changing and balancing equipment, lifts and alignment equipment, service equipment and tools, and tire repair/retread supplies. The Distribution Segment operates domestically through sales offices, and four regional distribution centers in the United States and in foreign countries through export sales. In addition, the Distribution Segment operates directly in certain foreign markets, principally Canada and Central America, through foreign branch operations. Markets served include retail and truck tire dealers, commercial auto and truck fleets, auto dealers, general service and repair centers, tire retreaders, and government agencies.
The Engineered Products Segment engineers and manufactures plastic and rubber original equipment and replacement parts, rubber tire repair and retread products, and a diverse array of custom plastic and rubber products. Representative products include: plastic HVAC ducts, water/waste storage tanks, and interior/exterior vehicle trim components; rubber air intake hoses, vibration isolators, emissions tubing assemblies, and trailer bushings; and custom products such as plastic tool boxes and calendered rubber sheet stock. This segment serves a diverse group of niche markets including automotive, recreational vehicle, recreational marine, construction and agriculture equipment, healthcare, and transportation.
 Total sales from foreign business units and export to countries outside the U.S. were approximately $127.6 million, $107.0 million, and $109.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. Sales made to customers in Canada accounted for approximately 9% of total net sales in 2012, 9% in 2011 and 10% in 2010. There are no other individual foreign countries for which sales are material. Long-lived assets in foreign countries, consisting primarily of property, plant and equipment, intangible assets and goodwill, were approximately $43.6 million at December 31, 2012 and $18.8 million at December 31, 2011.
 
2012
 
2011
 
2010
Net Sales
 
 
 
 
 
Material Handling
$
285,994

 
$
261,812

 
$
257,806

Lawn and Garden
205,814

 
217,140

 
223,809

Distribution
176,645

 
183,726

 
174,917

Engineered Products
141,658

 
116,243

 
104,763

Intra-segment elimination
(18,923
)
 
(23,267
)
 
(23,677
)
 
$
791,188

 
$
755,654

 
$
737,618

Income (Loss) Before Income Taxes
 
 
 
 
 
Material Handling
$
47,483

 
$
34,123

 
$
22,577

Lawn and Garden
2,905

 
4,226

 
(74,650
)
Distribution
14,838

 
15,736

 
15,154

Engineered Products
14,481

 
10,810

 
8,865

Corporate
(27,851
)
 
(26,486
)
 
(15,762
)
Interest expense-net
(4,515
)
 
(4,722
)
 
(7,205
)
 
$
47,341

 
$
33,687

 
$
(51,021
)
Identifiable Assets
 
 
 
 
 
Material Handling
$
238,500

 
$
164,738

 
$
169,599

Lawn and Garden
128,267

 
138,894

 
136,539

Distribution
44,913

 
48,100

 
47,234

Engineered Products
40,377

 
40,840

 
41,044

Corporate
32,799

 
36,185

 
37,979

 
$
484,856

 
$
428,757

 
$
432,395

Capital Additions, Net
 
 
 
 
 
Material Handling
$
17,029

 
$
12,165

 
$
8,912

Lawn and Garden
5,240

 
6,411

 
8,017

Distribution
796

 
1,101

 
332

Engineered Products
3,342

 
1,831

 
1,861

Corporate
570

 
422

 
1,411

 
$
26,977

 
$
21,930

 
$
20,533

Depreciation and Amortization
 
 
 
 
 
Material Handling
$
17,308

 
$
16,009

 
$
15,890

Lawn and Garden
11,370

 
13,911

 
13,171

Distribution
379

 
342

 
271

Engineered Products
3,185

 
3,230

 
3,543

Corporate
765

 
722

 
675

 
$
33,007

 
$
34,214

 
$
33,550

Summary of Significant Accounting Policies (Policies)
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 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 prior year amounts in the accompanying consolidated financial statements have been reclassified in conformity with generally accepted accounting principles to conform to the current year’s reporting presentation.
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income requiring new disclosures regarding reclassification adjustments from accumulated other comprehensive income ("AOCI"). ASU No. 2013-02 requires disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes. The standard is effective for fiscal years beginning after December 15, 2012. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements. The Company plans to adopt this guidance beginning in the first quarter of 2013.
In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350) which simplifies the impairment test for indefinite-lived intangible assets other than goodwill. ASU No. 2012-02 gives the option to first assess qualitative factors to determine if it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amounts as a basis for determining whether it is necessary to perform a quantitative valuation test. ASU No. 2012-02 is effective for fiscal years and interim periods beginning on or after September 15, 2012. The Company conducted its annual impairment assessment as of October 1, which included adoption of this guidance. The adoption of this guidance on October 1, 2012 did not have a significant impact on the Company's consolidated financial position, results of operations or cash flows.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income. The new accounting standard requires companies to present the components of net income and other comprehensive income either as one continuous statement or two separate but consecutive statements. The update eliminated the option to report other comprehensive income and its components in the statement of changes in equity. On December 23, 2011, the FASB issued a final standard to defer the new requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Effective January 1, 2012, we adopted this ASC guidance and have presented net income and other comprehensive income in two consecutive statements.
Translation of Foreign Currencies
All asset and liability accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated monthly at an average currency exchange rate for the period. The resulting translation adjustment is recorded in other comprehensive income (loss) as a separate component of shareholders’ equity.
Fair Value Measurement
The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied to U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.
Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.
The fair value of the Company’s cash, accounts receivable, accounts payable and accrued expenses are considered to have a fair value which approximates carrying value due to the nature and relative short maturity of these assets and liabilities.
The fair value of debt under the Company’s Credit Agreement approximates carrying value due to the floating interest rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement.
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 2012 accounts for approximately four percent of total sales, with only two other customers greater than three percent. Outside of the United States, only Canada, which accounts for approximately nine percent of total sales, is 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.
Inventories
Inventories are stated at the lower of cost or market. Approximately 20 percent of our inventories are valued using the last-in, first-out (“LIFO”) method of determining cost. All other inventories are valued at the first-in, first-out (“FIFO”) method of determining cost.
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 30 years
Machinery and Equipment
3 to 12 years
Vehicles
1 to 3 years
Leasehold Improvements
7 to 10 years
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.
Revenue Recognition
The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title and risk of loss, which is generally at time of shipment, and collectability of the fixed or determinable sales price is reasonably assured.
Shipping and Handling
Shipping and handling expenses are primarily classified as selling expenses in the accompanying Consolidated Statements of Income (Loss).
Stock Based Compensation
The Company has stock plans that provide for the granting of stock-based compensation to employees and, in certain instances, to non-employee directors. Shares are issued upon exercise from authorized, unissued shares. The Company records the costs of the plan under the provisions of ASC 718, Compensation — Stock Compensation. For transactions in which we obtain employee services in exchange for an award of equity instruments, we measure 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). Cash flows resulting from tax benefits for deductions in excess of compensation cost recognized are included in financing cash flows.
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). 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 within operations as 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.
Summary of Significant Accounting Policies (Tables)
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 30 years
Machinery and Equipment
3 to 12 years
Vehicles
1 to 3 years
Leasehold Improvements
7 to 10 years
As of December 31, 2012, 2011, and 2010, the balance in the Company’s accumulated other comprehensive income (loss) is comprised of the following:
 
 
2012
 
2011
 
2010
Foreign currency translation adjustments
$
12,785

 
$
9,994

 
$
12,234

Pension adjustments
(2,142
)
 
(2,700
)
 
(2,070
)
Total
$
10,643

 
$
7,294

 
$
10,164

Goodwill and Intangible Assets (Tables)
The changes in the carrying amount of goodwill for the years ended December 31, 2012 and 2011 is as follows:
 
 
Distribution
 
Engineered
Products
 
Material Handling
 
Lawn and
Garden
 
Total
January 1, 2011
$
214

 
$
707

 
$
30,383

 
$
9,588

 
$
40,892

Acquisitions

 

 
3,896

 

 
3,896

Foreign currency translation

 

 

 
(122
)
 
(122
)
Impairments

 

 

 

 

December 31, 2011
$
214

 
$
707

 
$
34,279

 
$
9,466

 
$
44,666

Acquisitions