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 June 30, 2011, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2011.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updated 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.

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 $38.4 million at June 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

Approximately 27 percent of the Company’s inventories use the last in first out (LIFO) method of determining cost. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of expected year-end inventory levels and costs. Because these are subject to many factors beyond management’s control, estimated interim results are subject to change in the final year-end LIFO inventory valuation and therefore, no adjustment was recorded at June 30, 2011.

Acquisitions

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

The change in goodwill for the six months ended June 30, 2011 was as follows:

										Foreign
(Amount in thousands)		Balance at								Currency								Balance at
Segment		January 1, 2011				Acquisitions				Translation				Impairment				June 30, 2011
Distribution		$	214			$	-0-			$	-0-			$	-0-			$	214
Engineered Products			707				-0-				-0-				-0-				707
Material Handling — North America			30,383				-0-				-0-				-0-				30,383
Lawn and Garden			9,588				-0-				190				-0-				9,778
Total		$	40,892			$	-0-			$	190			$	-0-			$	41,082

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 (Loss) Per Common Share

Net income (loss) per common share, as shown on the Condensed Consolidated Statements of Income (Loss), is determined on the basis of the weighted average number of common shares outstanding during the period as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Weighted average common shares outstanding
Basic			35,249,616				35,303,727				35,279,504				35,297,283
Dilutive effect of stock options and restricted stock			-0-				-0-				156,608				116,860
Weighted average common shares outstanding diluted			35,249,616				35,303,727				35,436,112				35,414,143

Options to purchase 1,172,729 and 1,757,404 shares of common stock that were outstanding at June 30, 2011 were not included in the computation of diluted earnings per share for the three months and six months ended June 30, 2011, respectively, 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 1,584,830 that were outstanding at June 30, 2010 were not included in the computation of diluted earnings per share for the three and six months ended June 30, 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. In addition, 119,232 dilutive common shares were excluded from the computation of the loss per common share in the three months ended June 30, 2010 due to the Company’s net loss position.

Supplemental Disclosure of Cash Flow Information

The Company’s cash payments for interest and income taxes for the three and six months ended June 30, 2011 and 2010 are as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In thousands)		2011				2010				2011				2010
Interest		$	1,548			$	3,288			$	2,057			$	3,389
Income taxes		$	6,304			$	5,974			$	6,373			$	7,637

Comprehensive Income

A summary of comprehensive income for the three and six months ended June 30, 2011 and 2010 is as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In thousands)		2011				2010				2011				2010
Net income (loss)		$	4,658			$	(1,099	)		$	11,377			$	4,431
Other comprehensive income:
Foreign currency translation adjustment			824				(2,861	)			2,634				(1,021	)
Comprehensive income (loss)		$	5,482			$	(3,960	)		$	14,011			$	3,410

Accumulated Other Comprehensive Income

As of June 30, 2011 and December 31, 2010, the balance in the Company’s accumulated other comprehensive income is comprised of the following:

		June 30,				December 31,
(In thousands)		2011				2010
Foreign currency translation adjustments		$	14,868			$	12,234
Pension adjustments			(2,070	)			(2,070	)
Total		$	12,798			$	10,164

Restructuring

During the six months ended June 30, 2011 and 2010, the Company recorded total expenses of $1.2 million and $1.7 million, respectively, for costs associated with restructuring plans including impairment of property, plant and equipment, lease obligations, severance, consulting and other related charges. 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 six months ended June 30, 2011, the Company recorded expenses of $0.6 million and $1.2 million, respectively, related to restructuring activities. The restructuring costs included charges of $0.3 million and $0.7 million in the three and six months ended June 30, 2011, respectively, related to the Distribution Segment and a $0.3 million write-down for an idle Lawn and Garden manufacturing facility from the first quarter of 2011.

In the three and six months ended June 30, 2010, the Company recorded expenses of approximately $0.9 million and $1.7 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 on the Condensed Consolidated Statement of Financial Position. Activity related to the Company’s restructuring reserves as of June 30, 2011 is as follows:

(Dollars in thousands)
Balance at January 1, 2011		$	763
Provision			(285	)
Less: Payments			(200	)
Balance at June 30, 2011		$	278

As a result of restructuring activity and plant closures, approximately $5.0 million of property, plant, and equipment has been classified as held for sale at both June 30, 2011 and December 31, 2010, and is included in other assets in the Condensed Consolidated Statements of Financial Position.

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 three to five years and expire ten years from the date of grant.

Stock compensation expense was $1.0 million for the three months ended June 30, 2011 and $0.6 million for the three months ended June 30, 2010, respectively. Stock compensation expense was $1.6 million and $1.1 million for the six months ended June 30, 2011 and 2010, respectively. Stock compensation is included in SG&A expense in the accompanying Condensed Consolidated Statements of Income. Total unrecognized compensation costs related to non-vested share based compensation arrangements at June 30, 2011 was approximately $3.9 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 six months ended June 30, 2011:

						Average				Weighted
						Exercise				Average
		Shares				Price				Life
Outstanding at January 1, 2011			1,845,210			$	11.65
Options Granted			355,025				10.10
Options Exercised			(1,727	)			8.00
Cancelled or Forfeited			(121,184	)			12.88
Outstanding at June 30, 2011			2,077,324			$	11.32			7.21 years
Exercisable at June 30, 2011			1,352,727			$	11.81

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 stock options exercised during the six months ended June 30, 2011 and 2010 was approximately $4 and $13, respectively.

In addition, at June 30, 2011 and December 31, 2010, the Company had outstanding 291,850 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

As of December 31, 2010, the total amount of gross unrecognized tax benefits was $5.8 million of which $5.5 million would reduce the Company’s effective tax rate. The unrecognized tax benefits include $4.2 million from the tax position taken on the Company’s 2007 U.S. Corporate Income Tax Return relating to the loss on the sale of its European Material Handling business. The amount of accrued interest expense related to uncertain tax positions within the Company’s consolidated financial position at December 31, 2010 was $0.4 million. No material changes have occurred in the liability for unrecognized tax benefits during the six months ended June 30, 2011.

The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of its income tax expense within its Condensed Consolidated Statements of Income.

As of June 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 2006 in the United States. The Company and its subsidiaries are subject to examination in certain states within the United States starting after 2005 and in the remaining states after 2006 and 2007.

In the current year, certain unrecognized tax benefits, including $4.2 million related to the Company’s 2007 sale of its European Material Handling business, are expected to be recognized in the quarter ending September 30, 2011.

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 six months ended June 30, 2011 and 2010, respectively, are as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Service cost		$	18			$	9			$	36			$	18
Interest cost			76				80				152				160
Expected return on assets			(77	)			(74	)			(154	)			(148	)
Amortization of actuarial net loss			16				15				32				30
Net periodic pension cost		$	33			$	30			$	66			$	60

As of June 30, 2011, the Company made contributions of $76 to the pension plan and expects to make contributions totaling $268 in 2011.

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.

A number of parties, including the Company and its subsidiary, Buckhorn Inc., 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 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.

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.

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 (loss) 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								Six Months Ended
		June 30,								June 30,
Net Sales		2011				2010				2011				2010
Lawn and Garden		$	41,358			$	45,241			$	106,446			$	114,746
Material Handling			67,008				62,729				132,738				122,940
Distribution			46,091				43,955				87,725				82,687
Engineered Products			27,897				29,747				55,822				54,156
Intra-segment elimination			(5,549	)			(5,766	)			(12,485	)			(12,200	)
Sales from continuing operations		$	176,805			$	175,906			$	370,246			$	362,329

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Income (Loss) Before Income Taxes		2011				2010				2011				2010
Lawn and Garden		$	(1,619	)		$	(5,479	)		$	2,259			$	(722	)
Material Handling			8,396				3,452				18,657				8,862
Distribution			4,015				3,628				7,087				6,530
Engineered Products			2,591				3,084				5,380				5,637
Corporate			(4,709	)			(4,694	)			(12,341	)			(9,835	)
Interest expense-net			(1,153	)			(1,851	)			(2,391	)			(3,651	)
Income from continuing operations before income taxes		$	7,520			$	(1,860	)		$	18,651			$	6,821