MYERS INDUSTRIES INC, 10-K filed on 3/11/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Feb. 28, 2014
Jun. 30, 2013
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, 2013 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2013 
 
 
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
 
 
$ 472,251,735 
Entity Common Stock, Shares Outstanding
 
33,424,302 
 
Consolidated Statements of Income (Loss) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Statement [Abstract]
 
 
 
Net sales
$ 825,210 
$ 791,188 
$ 755,654 
Cost of sales
607,582 
575,907 
557,385 
Gross profit
217,628 
215,281 
198,269 
Selling expenses
91,739 
85,519 
81,475 
General and administrative expenses
81,956 
77,906 
77,136 
Impairment charges
1,249 
Operating Expenses
173,695 
163,425 
159,860 
Operating income
43,933 
51,856 
38,409 
Interest
 
 
 
Income
(213)
(164)
(65)
Expense
4,755 
4,679 
4,787 
Interest expense-net
4,542 
4,515 
4,722 
Income before income taxes
39,391 
47,341 
33,687 
Income tax expense
13,389 
17,379 
9,182 
Net income
$ 26,002 
$ 29,962 
$ 24,505 
Income per common share:
 
 
 
Basic (in dollars per share)
$ 0.77 
$ 0.89 
$ 0.71 
Diluted (in dollars per share)
$ 0.76 
$ 0.88 
$ 0.71 
Dividends declared per share (in dollars per share)
$ 0.36 
$ 0.32 
$ 0.28 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 26,002 
$ 29,962 
$ 24,505 
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustment
(9,292)
2,791 
(2,240)
Pension liability, net of tax of $605 in 2013, $80 in 2012 and $339 in 2011
1,076 
558 
(630)
Total other comprehensive income (loss), net of tax
(8,216)
3,349 
(2,870)
Comprehensive income
$ 17,786 
$ 33,311 
$ 21,635 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Tax on pension liability
$ 605 
$ 80 
$ 339 
Consolidated Statements of Financial Position (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current Assets
 
 
Cash
$ 6,539 
$ 3,948 
Accounts receivable-less allowances of $2,945 and $3,255, respectively
112,459 
115,508 
Inventories
 
 
Finished and in-process products
73,475 
72,899 
Raw materials and supplies
33,049 
34,603 
Inventory net
106,524 
107,502 
Prepaid expenses
7,174 
9,033 
Deferred income taxes
2,214 
3,605 
Total Current Assets
234,910 
239,596 
Other Assets
 
 
Goodwill
60,642 
61,056 
Patents and other intangible assets, net
21,115 
25,839 
Other
3,312 
7,882 
Total other non current assets
85,069 
94,777 
Property, Plant and Equipment, at Cost
 
 
Land
5,107 
4,438 
Buildings and leasehold improvements
67,620 
57,058 
Machinery and equipment
461,397 
445,789 
Property, Plant and Equipment, at cost
534,124 
507,285 
Less allowances for depreciation and amortization
(384,646)
(356,802)
Property, plant and equipment, net
149,478 
150,483 
Total Assets
469,457 
484,856 
Current Liabilities
 
 
Accounts payable
98,263 
72,417 
Accrued expenses
 
 
Employee compensation
22,950 
18,885 
Income taxes
6,529 
1,090 
Taxes, other than income taxes
2,751 
2,606 
Accrued interest
103 
240 
Other
19,987 
19,239 
Total Current Liabilities
150,583 
114,477 
Long-term debt
44,347 
92,814 
Other liabilities
14,687 
17,865 
Deferred income taxes
24,333 
29,678 
Shareholders’ Equity
 
 
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding)
Common Shares, without par value (authorized 60,000,000 shares; outstanding 33,572,778 and 33,480,189; net of treasury shares of 4,203,179 and 4,356,160, respectively)
20,313 
20,316 
Additional paid-in capital
266,276 
266,419 
Accumulated other comprehensive income
2,427 
10,643 
Retained deficit
(53,509)
(67,356)
Total Shareholders’ Equity
235,507 
230,022 
Total Liabilities and Shareholders’ Equity
$ 469,457 
$ 484,856 
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 2,945 
$ 3,255 
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)
33,572,778 
33,480,189 
Common shares, treasury (in shares)
4,203,179 
4,356,160 
Consolidated Statement of Shareholders' Equity (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, 2010
 
$ 21,486 
$ 281,376 
$ 10,164 
$ (101,221)
Balance, shares at Dec. 31, 2010
 
35,315,732 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
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
 
20,312 
265,000 
7,294 
(86,466)
Balance, shares at Dec. 31, 2011
 
33,420,488 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
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 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
26,002 
 
 
 
26,002 
Sales under option plans, shares
503,321 
503,321 
 
 
 
Sales under option plans
 
299 
5,394 
 
 
Dividend reinvestment plan, shares
 
7,390 
 
 
 
Dividend reinvestment plan
 
109 
 
 
Restricted stock vested, shares
 
112,000 
 
 
 
Restricted stock and stock option grants, net (shares)
 
33,152 
 
 
 
Restricted stock and stock option grants, net
 
 
2,237 
 
 
Cancellations and terminations of share grants
 
 
389 
 
 
Foreign currency translation adjustment
(9,292)
 
 
(9,292)
 
Purchase for treasury, shares
 
(530,983)
 
 
 
Purchases for treasury
 
(314)
(7,782)
 
 
Stock contribution, shares
 
12,682 
 
 
 
Stock contribution
 
194 
 
 
Shares withheld for employee taxes on equity awards, shares
 
(44,973)
 
 
 
Shares withheld for employee taxes on equity awards
 
 
(684)
 
 
Declared dividends
 
 
 
 
(12,155)
Pension liability, net of tax
1,076 
 
 
1,076 
 
Balance at Dec. 31, 2013
$ 235,507 
$ 20,313 
$ 266,276 
$ 2,427 
$ (53,509)
Balance, shares at Dec. 31, 2013
 
33,572,778 
 
 
 
Consolidated Statement of Shareholders' Equity (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Tax on pension liability
$ 605 
$ 80 
$ 339 
Dividends declared per share (in dollars per share)
$ 0.36 
$ 0.32 
$ 0.28 
Accumulative Other Comprehensive Income (Loss) [Member]
 
 
 
Tax on pension liability
$ 605 
$ 80 
$ 339 
Retained Income (Deficit) [Member]
 
 
 
Dividends declared per share (in dollars per share)
$ 0.36 
$ 0.32 
$ 0.28 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Cash Flows From Operating Activities
 
 
 
Net income
$ 26,002 
$ 29,962 
$ 24,505 
Items not affecting use of cash
 
 
 
Depreciation
33,709 
29,667 
31,245 
Amortization of intangible assets
3,563 
3,052 
2,665 
Amortization of deferred financing costs
373 
288 
304 
Non-cash stock compensation
2,557 
2,708 
2,595 
Provision for (recovery of) loss on accounts receivable
1,098 
(543)
915 
Deferred taxes
(3,934)
1,052 
(184)
Other long-term liabilities
709 
4,057 
4,251 
Loss (gain) from asset disposition
749 
(1,085)
374 
Tax benefit from options
(389)
Cancellations and terminations of share grants
253 
Other
202 
50 
50 
Payments on performance based compensation
(1,719)
(333)
Cash flows provided by (used for) working capital, net of acquisitions:
 
 
 
Accounts receivable
(716)
(2,002)
(8,665)
Inventories
(1,585)
(2,780)
455 
Prepaid expenses
581 
(2,119)
2,662 
Accounts payable and accrued expenses
34,868 
(1,475)
3,000 
Net cash provided by operating activities
96,068 
60,752 
64,172 
Cash Flows From Investing Activities
 
 
 
Capital expenditures
(30,001)
(26,977)
(21,930)
Acquisition of business, net of cash acquired
(600)
(18,543)
(1,100)
Proceeds from sale of property, plant and equipment
933 
3,086 
1,089 
Other
(273)
(50)
(96)
Net cash used for investing activities
(29,941)
(42,484)
(22,037)
Cash Flows From Financing Activities
 
 
 
Proceeds from long-term debt
11,000 
Repayment of long-term debt
(35,000)
(27,258)
(305)
Net (repayment of) borrowing on credit facility
(24,492)
17,700 
(9,383)
Cash dividends paid
(9,103)
(13,006)
(9,523)
Proceeds from issuance of common stock
5,806 
3,122 
751 
Tax benefit from options
389 
Cancellations and terminations of share grants
(253)
Repurchase of common stock
(8,096)
(4,204)
(20,946)
Shares withheld for employee taxes on equity awards
(684)
Deferred financing costs
(608)
Net cash used for financing activities
(60,788)
(23,899)
(39,406)
Foreign Exchange Rate Effect on Cash
(2,748)
2,778 
(633)
Net increase (decrease) in cash
2,591 
(2,853)
2,096 
Cash at January 1
3,948 
6,801 
4,705 
Cash at December 31
6,539 
3,948 
6,801 
Supplemental Disclosures of Cash Flow Information
 
 
 
Interest
4,196 
4,008 
4,129 
Income taxes
$ 12,497 
$ 21,375 
$ 11,168 
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 equity and 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 reclassifications of prior year amounts have been made to the Consolidated Statement of Cash Flows in conformity with generally accepted accounting principles to conform to 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, which the Company has elected to disclose in the notes (see below). The Company adopted this guidance effective January 1, 2013.
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 $11.0 million fixed rate senior notes was estimated at $10.8 million at December 31, 2013 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 2013 accounts for approximately 4% of total sales with only three other customers greater than 3%. Outside of the United States, only Canada, which accounted for approximately 8% 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. Expense related to bad debts was approximately $1,098, $817 and $2,343 for the years 2013, 2012 and 2011, respectively. Deductions from the allowance for doubtful accounts, net of recoveries, was approximately $1,408, $1,425 and $1,430, for the years 2013, 2012 and 2011, 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 $8.1 million, $8.7 million and $9.6 million higher than reported at December 31, 2013, 2012 and 2011. The liquidation of LIFO inventories decreased cost of sales and increased income before taxes by less than $0.1 million in 2013, and $0.4 million and $0.8 million in 2012 and 2011, 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 40 years
Machinery and Equipment
3 to 10 years
Vehicles
1 to 3 years
Leasehold Improvements
5 to 10 years
At December 31, 2013, the Company had approximately $3.2 million of capitalized software costs included in machinery and equipment on the accompanying Consolidated Statements of Financial Position. Amortization expense related to capitalized software costs was approximately $0.1 million in 2013.
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.
During 2013, the Lawn and Garden segment restructuring plan included reopening a manufacturing plant in Sparks, Nevada in order to lower the Company's costs to serve the West Coast market and position the segment for future growth. As of July 2013, the facility was no longer actively marketed for sale and the Company reclassified $5.0 million from held for sale to property, plant, and equipment in the Consolidated Statements of Financial Position. Depreciation expense recapture of $1.3 million for this facility was recorded in 2013.
In addition, during 2013 a facility located in Dawson Springs, Kentucky, with a net book value of approximately $0.7 million previously classified as held for sale, was placed back into service in accordance with ASC 360 Property, Plant and Equipment as the assets did not meet the held for sale criteria.
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
As of December 31, 2013 and 2012, the balance in the Company’s accumulated other comprehensive income are as follows:
 
Foreign Currency
 
Defined Benefit Pension Plans
 
Total
Balance at January 1, 2012
$
9,994

 
$
(2,700
)
 
$
7,294

Other comprehensive income before reclassifications*
2,791

 
638

 
3,429

Amounts reclassified from accumulated other comprehensive income*

 
(80
)
 
(80
)
Net current-period other comprehensive income
2,791

 
558

 
3,349

Balance at December 31, 2012
12,785

 
(2,142
)
 
10,643

Other comprehensive income before reclassifications
(9,292
)
 
1,681

 
(7,611
)
Amounts reclassified from accumulated other comprehensive income

 
(605
)
 
(605
)
Net current-period other comprehensive income
(9,292
)
 
1,076

 
(8,216
)
Balance at December 31, 2013
$
3,493

 
$
(1,066
)
 
$
2,427

* Presented for comparative purposes only.
 
 
 
 
 

Shipping and Handling
Shipping and handling expenses are primarily classified as selling expenses in the accompanying Consolidated Statements of Income. The Company incurred shipping and handling costs of approximately $32.4 million, $32.2 million and $26.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Stock Based Compensation
The Company has stock plans that provide for the granting of stock-based compensation to employees and to non-employee directors. Shares 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).
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 $0.5 million, $0.4 million and $1.8 million of accrued capital expenditures in 2013, 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 accordance with ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350), the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company concludes that this is the case, it must perform the two-step test. Otherwise the Company does not perform the two-step test. 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 9.3% to 12.3% in 2013. 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.






The changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2012 is as follows: 
 
Distribution
 
Engineered
Products
 
Material Handling
 
Lawn and
Garden
 
Total
January 1, 2012
$
214

 
$
707

 
$
34,279

 
$
9,466

 
$
44,666

Acquisitions

 

 
16,240

 

 
16,240

Foreign currency translation

 

 
2

 
148

 
150

December 31, 2012
214

 
707

 
50,521

 
9,614

 
61,056

Reclassification of prepaid asset from Novel acquisition

 

 
1,028

 

 
1,028

Foreign currency translation

 

 
(1,199
)
 
(243
)
 
(1,442
)
December 31, 2013
$
214

 
$
707

 
$
50,350

 
$
9,371

 
$
60,642


Intangible assets other than goodwill primarily consist of trade names, customer relationships, patents, and technology assets established in connection with acquisitions. These intangible assets, other than certain trade names, are amortized over their estimated useful lives. The Company performs an annual impairment assessment for the indefinite lived trade names which had a carrying value of $6,503 and $6,993 at December 31, 2013 and 2012, respectively. In performing this assessment the Company uses an income approach, based primarily on level 3 inputs, to estimate the fair value of the trade name. The Company records an impairment charge if the carrying value of the trade name exceeds the estimated fair value at the date of assessment. Estimated annual amortization expense for intangible assets with finite lives for the next five years is: $3,004 in 2014; $2,899 in 2015; $2,898 in 2016, $1,989 in 2017 and $1,540 in 2018.
Intangible assets at December 31, 2013 and 2012 consisted of the following:
 
 
 
2013
 
2012
 
Weighted Average Useful Life (years)
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Trade Names
6.3
 
$
6,783

 
$
(78
)
 
$
6,705

 
$
7,273

 
$
(46
)
 
$
7,227

Customer Relationships
5.0
 
17,159

 
(10,841
)
 
6,318

 
18,702

 
(10,163
)
 
8,539

Technology
8.1
 
5,502

 
(918
)
 
4,584

 
7,837

 
(2,433
)
 
5,404

Patents
3.2
 
10,900

 
(7,448
)
 
3,452

 
10,900

 
(6,359
)
 
4,541

Non-Compete
1.0
 
261

 
(205
)
 
56

 
569

 
(441
)
 
128

 
 
 
$
40,605

 
$
(19,490
)
 
$
21,115

 
$
45,281

 
$
(19,442
)
 
$
25,839

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, is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:
 
2013
 
2012
 
2011
Weighted average common shares outstanding:
 
 
 
 
 
Basic
33,588,720

 
33,597,020

 
34,584,558

Dilutive effect of stock options and restricted stock
454,705

 
512,212

 
158,985

Weighted average common shares outstanding diluted
34,043,425

 
34,109,232

 
34,743,543


Options to purchase 123,900, 212,000 and 1,105,229 shares of common stock that were outstanding at December 31, 2013, 2012 and 2011, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options was greater than the average market price of common shares.
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 periodic (at least annual) evaluation for impairment.
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 $30.9 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 following 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 periodic (at least annual) 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:
 
Novel
 
Jamco
Assets acquired:
 
 
 
Current assets, excluding cash acquired
$
11,884

 
$
5,019

Property, plant & equipment
13,636

 
2,559

Other long-term assets
6,944

 
5,711

Assets acquired, less cash
$
32,464

 
$
13,289

 
 
 
 
Liabilities assumed:
 
 
 
Current liabilities
$
6,742

 
$
2,112

Debt
26,028

 

Long-term liabilities
6,097

 
3,498

Total liabilities assumed
38,867

 
5,610

Goodwill
9,832

 
7,435

Total consideration, less cash acquired
$
3,429

 
$
15,114

 
 
 
 

The Consolidated Statement of Income 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 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, 2012.
 
2012
Net sales
$
820,649

Cost of sales
596,178

Gross profit
224,471

Selling, general & administrative expenses
168,794

Operating income
55,677

Interest expense, net
7,333

Income before taxes
48,344

Income taxes
17,784

Net income
$
30,560

 
 
Income per basic share
$
0.91

Income per diluted share
$
0.90


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, 2012 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 of which less than $0.1 million has been paid as of December 31, 2013. The contingent consideration was reduced by approximately $1.2 million due to a change in projections used to estimate the value of the liability at December 31, 2013. 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.
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 sales depending on the type of cost incurred. The restructuring charges are presented in the following table.
 
2013
 
2012
 
2011
Segment
Cost of sales
Selling, general and administrative
Total
 
Cost of sales
Selling, general and administrative
Total
 
Cost of sales
Selling, general and administrative
Total
Distribution
$

$
194

$
194

 
$

$
727

$
727

 
$

$
2,060

$
2,060

Lawn and Garden
6,135

2,428

8,563

 

487

487

 

687

687

Engineered Products
240


240

 
1,198


1,198

 
724


724

Material Handling
178

47

225

 



 



Corporate

17

17

 

318

318

 



Total
$
6,553

$
2,686

$
9,239

 
$
1,198

$
1,532

$
2,730

 
$
724

$
2,747

$
3,471



In 2013, the Lawn and Garden Segment announced a restructuring plan that details the closure of two manufacturing plants: one in Brantford, Ontario and the second in Waco, Texas. The restructuring actions include closure, relocation and employee related costs. The Lawn and Garden Segment incurred $8.6 million of restructuring charges for severance costs and facility closure and relocation fees mainly attributable to the closure of two manufacturing plants. The majority of the benefits are planned to be realized throughout 2014 and 2015 in decreased labor, overhead, plant and freight costs.

The Lawn and Garden Segment restructuring plan also included reopening a manufacturing plant in Sparks, Nevada in order to lower the Company's costs to serve the West Coast market and position the segment for future growth. As of July 2013, the facility was no longer actively marketed for sale and was reclassified from held for sale to property, plant, and equipment in the Consolidated Statements of Financial Position. In addition to restructuring charges incurred, the Lawn and Garden segment recorded depreciation expense recapture of $1.3 million for this facility during 2013.

In addition, during 2013 the Distribution Segment recorded restructuring costs of $0.2 million related to branch closure and severance costs. Restructuring charges of $0.2 million were recorded in the Engineered Products Segment mainly attributable to the disposal of equipment related to facility closure. The Material Handling Segment incurred costs of $0.2 million related to severance.
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 of 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.
 




The accrued liability balance for severance and other exit costs associated with restructuring are presented in the following table.
 
Severance
and
Personnel
 
Other
Exit Costs
 
Total
Balance at January 1, 2011
$

 
$
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

Provision
2,991

 
6,248

 
9,239

Less: Payments
(1,366
)
 
(4,677
)
 
(6,043
)
Balance at December 31, 2013
$
1,943

 
$
1,571

 
$
3,514



Accrued severance and personnel costs associated with restructuring of $1.9 million at December 31, 2013 and $0.3 million at December 31, 2012 are included in accrued expenses on the accompanying Consolidated Statements of Financial Position. Other exit costs of $1.6 million at December 31, 2013 associated with restructuring are included in accounts payable on the accompanying Consolidated Statements of Financial Position.
Stock Compensation
Stock Compensation
Stock Compensation
The Company’s 2008 Incentive Stock Plan (the “2008 Plan”) authorizes the Compensation Committee of the Board of Directors to issue up to 3,000,000 shares of various types of stock based awards including stock options, restricted stock and stock appreciation rights to key employees and directors. In general, options granted and outstanding vest over a three year period and expire ten years from the date of grant.
The following tables summarize stock option activity in the past three years:
Options granted in 2013, 2012 and 2011:
Year
Options
 
Exercise
Price
2013
323,400

 
$
14.77

2012
323,950

 
$
12.96

2011
365,025

 
$10.10 to $10.28




Options exercised in 2013, 2012 and 2011:
Year
Options
 
Exercise
Price
2013
503,321

 
$8.00 to $18.62
2012
288,794

 
$8.00 to $12.55
2011
59,031

 
$8.00 to $12.55

In addition, options totaling 164,528, 113,913 and 153,426 expired or were forfeited during the years ended December 31, 2013, 2012 and 2011, respectively.
Options outstanding and exercisable at December 31, 2013, 2012 and 2011 were as follows: 
Year
Outstanding
 
Range of Exercise
Prices
 
Exercisable
 
Weighted Average
Exercise Price
2013
1,574,572

 
$9.00 to $18.62
 
1,057,694

 
$
11.48

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


Stock compensation expense reduced income before taxes approximately $2,557, $2,708 and $2,595 for the years ended December 31, 2013, 2012, and 2011, respectively. These expenses are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income. Total unrecognized compensation cost related to non-vested share based compensation arrangements at December 31, 2013 was approximately $3,309 which will be recognized over the next three years, as such compensation is earned.
The fair value of options granted is estimated using an option pricing model based on assumptions set forth in the following table. The Company uses historical data to estimate employee exercise and departure behavior. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and through the expected term. The dividend yield 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 2013 and 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.
 
2013
 
2012
 
2011
Risk free interest rate
1.86
%
 
2.00
%
 
3.79
%
Expected dividend yield
2.40
%
 
2.20
%
 
2.90
%
Expected life of award (years)
7.0

 
5.4

 
6.0

Expected volatility
50.00
%
 
50.00
%
 
50.72
%
Fair value per option share
$
5.39

 
$
4.93

 
$
3.69


The following table provides a summary of stock option activity for the period ended December 31, 2013:
 
Shares
 
Average
Exercise
Price
 
Weighted
Average
Life
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2012
1,919,021

 
$
11.63

 
 
 
 
Options Granted
323,400

 
14.77

 
 
 
 
Options Exercised
(503,321
)
 
11.34

 
 
 
 
Canceled or Forfeited
(164,528
)
 
13.89

 
 
 
 
Outstanding at December 31, 2013
1,574,572

 
12.14

 
5.98 years
 
$
14,142

Exercisable at December 31, 2013
1,057,694

 
$
11.48

 
4.73 years
 
$
10,194


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 2013, 2012 and 2011 was $2,588, $1,502 and $117, respectively.
The following table provides a summary of restricted stock activity for the period ended December 31, 2013:
 
Shares
 
Average
Grant-Date
Fair Value
Unvested shares at December 31, 2012
363,125

 
 
Granted
169,100

 
$
14.77

Vested
(112,000
)
 
10.02

Forfeited
(144,700
)
 
14.00

Unvested shares at December 31, 2013
275,525

 
$
12.99


Restricted stock units are rights to receive shares of common stock, subject to forfeiture and other restrictions, which vest over a two or three 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 stock awards are valued based on the market price of the underlying shares on the grant date. Compensation expense is recognized on a straight-line basis over the requisite service period. At December 31, 2013, restricted stock awards had vesting periods up through March 2016.
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 at the mine site, 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, on an undiscounted basis, in 2011 related to performing a remedial investigation and feasibility study to determine the extent of remediation and the screening of alternatives. Payments of approximately $0.6 million have been incurred and charged against the reserve classified in Other Liabilities on the Consolidated Statements of Financial Position as of December 31, 2013. As investigation and remediation proceed, it is likely that adjustments to the reserved expense 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, 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 $0.5 million. 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 or by other parties who have been involved in Watershed clean-up efforts that have been initiated as a result of the adoption of this planning document. Although assertion of a claim by the RWQCB or an other party involved in this clean up effort 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.
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 Loan Agreements
Long-term debt at December 31, 2013 and 2012 consisted of the following: 
 
2013
 
2012
Loan Agreement
$
34,200

 
$
57,814

Senior Unsecured Notes due 2024
11,000

 

Senior Unsecured Notes due 2013

 
35,000

 
45,200

 
92,814

Less unamortized deferred financing costs
853

 

 
$
44,347

 
$
92,814


On December 13, 2013, the Company entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement”). The agreement provides for a $200 million senior revolving credit facility expiring on December 13, 2018, which replaced the existing $180 million facility. Amounts borrowed under the Loan Agreement were used to replace the amounts outstanding under the existing $180 million loan agreement, working capital and general corporate purposes, and the repayment of our $35 million of 6.81% Senior Unsecured Notes. Amounts borrowed under the agreement are secured by pledges of stock of certain of our foreign and domestic subsidiaries.
Under the terms of the Loan Agreement, the Company may borrow up to $200 million, reduced for letters of credit issued. As of December 31, 2013 the Company had $161.2 million available under the Loan Agreement. The Company also had $4.6 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business at December 31, 2013. Borrowings under the Loan Agreement bear interest at the LIBOR rate, prime rate, federal funds effective rate, the Canadian deposit offered rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case plus the applicable margin as set forth in the Loan Agreement. The average interest rate on borrowings under our loan agreements were 3.71% percent at December 31, 2013 and 3.81% percent at December 31, 2012, which includes a quarterly facility fee on the used and unused portion.
On October 22, 2013, the Company entered into a note purchase agreement for the private placement of Senior Unsecured Notes totaling $100 million with a group of investors. The four series of notes range in face value from $11 million to $40 million, with interest rates ranging from 4.67% to 5.45%, payable semiannually, and expiring between 2021 and 2026. At December 31, 2013, the Company had received $11 million of it's 5.25% Senior Unsecured Notes due January 15, 2024 under the note purchase agreement. The remaining proceeds of $89 million under the note purchase agreement were subsequently received in January 2014.
Long-term debt of $44.3 million at December 31, 2013 includes $0.9 million of unamortized deferred financing costs, which is accounted for as a debt valuation account. Amounts outstanding at December 31, 2013 under the Loan Agreement and note purchase agreement mature in 2018 and 2024, respectively.
In December 2013, the Company repaid the remaining $35 million of 6.81% Senior Unsecured Notes that were issued under the December 2003 $100 million Senior Unsecured Notes purchase agreement through available cash and proceeds received from the Loan Agreement.
As of December 31, 2013, the Company was in compliance with all of its debt covenants associated with its Loan Agreement and Senior Unsecured 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, 2013 are shown in the following table:
 
 
 
 
 
Required Level                
 
Actual Level
Interest Coverage Ratio
3.00 to 1 (minimum)
 
20.72
Leverage Ratio
3.25 to 1 (maximum)
 
0.53
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, 2013, 2012 and 2011 was as follows:
 
2013
 
2012
 
2011
 
Underfunded
 
Underfunded
 
Underfunded
Interest cost
$
259

 
$
287

 
$
303

Expected return on assets
(333
)
 
(236
)
 
(235
)
Amortization of net loss
111

 
101

 
64

Net periodic pension cost
$
37

 
$
152

 
$
132


The reconciliation of changes in projected benefit obligations are as follows:
 
2013
 
2012
Accumulated benefit obligation at beginning of year
$
7,109

 
$
6,591

Interest cost
259

 
287

Actuarial (gain) loss
(738
)
 
670

Expenses paid
(74
)
 
(31
)
Benefits paid
(406
)
 
(408
)
Accumulated benefit obligation at end of year
$
6,150

 
$
7,109


The assumptions used to determine the net periodic benefit cost and benefit obligations are as follows:
 
2013
 
2012
 
2011
Discount rate for net periodic pension cost
3.75
%
 
4.50
%
 
5.25
%
Discount rate for benefit obligations
4.70
%
 
3.75
%
 
4.50
%
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 expectations 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:
 
2013
 
2012
Fair value of plan assets at beginning of year
$
4,528

 
$
3,731

Actual return on plan assets
1,165

 
575

Company contributions
364

 
661

Expenses paid
(74
)
 
(31
)
Benefits paid
(406
)
 
(408
)
Fair value of plan assets at end of year
$
5,577

 
$
4,528


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, 2013 and 2012 are as follows:
 
2013
 
2012
U.S. Equities securities
82
%
 
79
%
U.S. Debt securities
17
%
 
20
%
Cash
1
%
 
1
%
Total
100
%
 
100
%

The following table provides a reconciliation of the funded status of the plan at December 31, 2013 and 2012:
 
2013
 
2012
Projected benefit obligation
$
6,150

 
$
7,109

Plan assets at fair value
5,577

 
4,528

Funded status
$
(573
)
 
$
(2,581
)

The funded status shown above is included in other long-term liabilities in the Company’s Consolidated Statements of Financial Position at December 31, 2013 and 2012. The Company expects to make a contribution of $318 to the plan in 2014.
Benefit payments projected for the plan are as follows: 
2014
$
399

2015
382

2016
381

2017
376

2018
366

2019-2023
1,864


Effective January 1, 2012 the Company changed its profit sharing and 401(k) plan which included 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 $2,802 and $2,609 in 2013 and 2012, respectively. The Company recognized profit sharing plan expense of $1,678 in 2011 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. (Income) expense related to the SERP was approximately $(152), $477, and $784 for the years ended December 2013, 2012 and 2011, respectively. The SERP liability was based on the discounted present value of expected future benefit payments using a discount rate of 4.70% at December 31, 2013 and 3.75% at December 31, 2012. The SERP liability was approximately $4,270 and $4,843 at December 31, 2013 and 2012, 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 $10,338, $10,045 and $10,372 for the years ended December 31, 2013, 2012 and 2011, respectively.
Future minimum rental commitments are as follows:
Year Ended December 31,
Commitment
2014
$
9,421

2015
7,856

2016
6,245

2017
4,542

2018
2,860

Thereafter
13,317

Total
$
44,241

Income Taxes
Income Taxes
Income Taxes
The effective tax rate was 34.0% in 2013, 36.7% in 2012 and 27.3% in 2011. 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
 
2013
 
2012
 
2011
Statutory Federal income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes — net of Federal tax benefit
2.8

 
4.2

 
0.7

Foreign tax rate differential
0.2

 
0.5

 
0.4

Domestic production deduction
(3.2
)
 
(2.9
)
 
(3.5
)
Non-deductible expenses
1.5

 
1.5

 
2.0

Changes in unrecognized tax benefits
0.4

 
(1.6
)
 
(14.4
)
Non-deductible goodwill

 

 
3.1

Foreign tax incentives
(2.2
)
 
(1.2
)
 

Valuation allowances
(0.1
)
 
1.2

 
3.0

Other
(0.4
)
 

 
1.0

Effective tax rate for the year
34.0
 %
 
36.7
 %
 
27.3
 %

Income before income taxes was attributable to the following sources:
 
2013
 
2012
 
2011
United States
$
39,096

 
$
50,143

 
$
39,740

Foreign
295

 
(2,802
)
 
(6,053
)
Totals
$
39,391

 
$
47,341

 
$
33,687




Income tax expense (benefit) consisted of the following:
 
2013
 
2012
 
2011
 
Current
 
Deferred
 
Current
 
Deferred
 
Current
 
Deferred
Federal
$
13,853

 
$
(1,479
)
 
$
13,093

 
$
2,124

 
$
6,509

 
$
2,057

Foreign
1,573

 
(2,278
)
 
297

 
(1,168
)
 
612

 
(371
)
State and local
2,116

 
(396
)
 
2,937

 
96

 
1,906

 
(1,531
)
 
$
17,542

 
$
(4,153
)
 
$
16,327

 
$
1,052

 
$
9,027

 
$
155


Significant components of the Company’s deferred taxes as of December 31, 2013 and 2012 are as follows:
 
2013
 
2012
Deferred income tax liabilities
 
 
 
Property, plant and equipment
$
18,297

 
$
24,748

Tax-deductible goodwill
7,437

 
5,206

Non-deductible intangibles
4,135

 
5,069

State deferred taxes
1,148

 
1,487

Other
484

 
392

 
31,501

 
36,902

Deferred income tax assets
 
 
 
Compensation
6,104

 
6,243

Inventory valuation
765

 
806

Allowance for uncollectible accounts
1,007

 
967

Non-deductible accruals
2,116

 
3,820

Other

 
78

Net operating loss carryforwards
4,612

 
4,975

 
14,604

 
16,889

Valuation Allowance
(5,221
)
 
(6,060
)
 
9,383

 
10,829

Net deferred income tax liability
$
22,118

 
$
26,073


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. During 2013, the valuation allowance decreased $0.8 million due to changes in foreign currency of $0.8 million and a decrease in the federal valuation for non-deductible expenses of $0.2 million offset by the increase in the valuation allowance for current year losses of $0.2 million. During 2012, the valuation allowance decreased $22.1 million due to the expiration of $26.1 million of valuation allowance associated with 2007 capital loss carryforwards offset by an increase of $4.0 million from additional federal non-deductible expenses as well as foreign and state net operating losses from jurisdictions with uncertainty of future profitability. At December 31, 2013, the Company has deferred tax assets of $4.6 million resulting from state and foreign net operating tax loss carryforwards of approximately $24.4 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, 2013, the Company had not recorded a deferred tax liability related to investments in its foreign subsidiaries that are essentially permanent in duration. The amount of such temporary differences was estimated to be approximately $4.7 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:
 
2013
 
2012
 
2011
Balance at January 1
$
1,078

 
$
1,217

 
5,767

Increases related to current year tax positions
496

 

 

Increases related to acquired businesses

 
236

 

Increases related to previous year tax positions

 
580

 
395

Reductions due to lapse of applicable statute of limitations
(48
)
 
(256
)
 
(4,945
)
Reduction due to settlements
(22
)
 
(699
)
 

Balance at December 31
$
1,504

 
$
1,078

 
$
1,217


The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $1.5 million, $1.1 million and $1.1 million at December 31, 2013, 2012 and 2011, respectively. The amount of accrued interest expense included as a liability within the Company’s Consolidated Statements of Financial Position was $0.1 million as of December 31, 2013, 2012 and 2011, respectively The December 31, 2013 balance of unrecognized tax benefits includes approximately $0.4 million of unrecognized tax benefits for which it is reasonably possible that they will be recognized within the next twelve months. This amount represents a decrease in unrecognized benefits related to state income tax audits, and expiring statues in U.S. Federal, state,  and Non-U.S. jurisdictions.

The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of December 31, 2013 the Company is no longer subject to U.S. Federal, state and local examinations by tax authorities for tax years before 2011 and 2009, respectively.  In addition, the Company is subject to non-U.S. income tax examinations for tax years of 2008 through 2013.
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 conducts its primary operations 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 directly 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 $142.3 million, $127.6 million, and $107.0 million for the years ended December 31, 2013, 2012 and 2011, respectively. Sales made to customers in Canada accounted for approximately 8% of total net sales in 2013 and 9% in both 2012 and 2011. There are no other individual foreign countries for which sales are material. Long-lived assets in foreign countries, consisting of property, plant and equipment, were approximately $19.7 million at December 31, 2013 and $32.4 million at December 31, 2012. The decrease in long-lived assets in foreign countries is the result of assets transferred to our U.S. Lawn & Garden segment and the impact of foreign currency translation.
 
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
Material Handling
$
322,854

 
$
285,994

 
$
261,812

Lawn and Garden
204,890

 
205,814

 
217,140

Distribution
177,412

 
176,645

 
183,726

Engineered Products
137,745

 
141,658

 
116,243

Intra-segment elimination
(17,691
)
 
(18,923
)
 
(23,267
)
 
$
825,210

 
$
791,188

 
$
755,654

Income Before Income Taxes
 
 
 
 
 
Material Handling
$
41,076

 
$
47,483

 
$
34,123

Lawn and Garden
(1,540
)
 
2,905

 
4,226

Distribution
14,448

 
14,838

 
15,736

Engineered Products
15,296

 
14,481

 
10,810

Corporate
(25,347
)
 
(27,851
)
 
(26,486
)
Interest expense - net
(4,542
)
 
(4,515
)
 
(4,722
)
 
$
39,391

 
$
47,341

 
$
33,687

Identifiable Assets
 
 
 
 
 
Material Handling
$
224,207

 
$
238,500

 
$
164,738

Lawn and Garden
126,382

 
128,267

 
138,894

Distribution
49,488

 
44,913

 
48,100

Engineered Products
43,642

 
40,377

 
40,840

Corporate
25,738

 
32,799

 
36,185

 
$
469,457

 
$
484,856

 
$
428,757

Capital Additions, Net
 
 
 
 
 
Material Handling
$
17,847

 
$
17,029

 
$
12,165

Lawn and Garden
7,808

 
5,240

 
6,411

Distribution
845

 
796

 
1,101

Engineered Products
2,709

 
3,342

 
1,831

Corporate
792

 
570

 
422

 
$
30,001

 
$
26,977

 
$
21,930

Depreciation and Amortization
 
 
 
 
 
Material Handling
$
20,840

 
$
17,308

 
$
16,009

Lawn and Garden
11,862

 
11,370

 
13,911

Distribution
537

 
379

 
342

Engineered Products
3,466

 
3,185

 
3,230

Corporate
940

 
765

 
722

 
$
37,645

 
$
33,007

 
$
34,214

Other Accrued Expense (Notes)
Other Accrued Expenses
Other Accrued Expenses
As of December 31, 2013 and 2012, the balance in other accrued expenses is comprised of the following:
 
 
2013
 
2012
Deposits and amounts due to customers
 
$
10,194

 
$
10,255

Dividends payable
 
3,174

 
191

Other accrued expenses
 
6,619

 
8,793

 
 
$
19,987

 
$
19,239

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 equity and 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 reclassifications of prior year amounts have been made to the Consolidated Statement of Cash Flows in conformity with generally accepted accounting principles to conform to current year’s reporting presentation.
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 2013 accounts for approximately 4% of total sales with only three other customers greater than 3%. Outside of the United States, only Canada, which accounted for approximately 8% 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 40 years
Machinery and Equipment
3 to 10 years
Vehicles
1 to 3 years
Leasehold Improvements
5 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.
Stock Based Compensation
The Company has stock plans that provide for the granting of stock-based compensation to employees and to non-employee directors. Shares 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).
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 40 years
Machinery and Equipment
3 to 10 years
Vehicles
1 to 3 years
Leasehold Improvements
5 to 10 years
As of December 31, 2013 and 2012, the balance in the Company’s accumulated other comprehensive income are as follows:
 
Foreign Currency
 
Defined Benefit Pension Plans
 
Total
Balance at January 1, 2012
$
9,994

 
$
(2,700
)
 
$
7,294

Other comprehensive income before reclassifications*
2,791

 
638

 
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