MYERS INDUSTRIES INC, 10-Q filed on 10/29/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 23, 2020
Cover [Abstract]    
Entity Registrant Name Myers Industries, Inc.  
Entity Central Index Key 0000069488  
Trading Symbol MYE  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   35,825,079
Entity File Number 1-8524  
Entity Tax Identification Number 34-0778636  
Entity Address, Address Line One 1293 South Main Street  
Entity Address, City or Town Akron  
Entity Address, State or Province OH  
Entity Address, Postal Zip Code 44301  
City Area Code 330  
Local Phone Number 253-5592  
Entity Incorporation, State or Country Code OH  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, without par value  
Security Exchange Name NYSE  
Document Quarterly Report true  
Document Transition Report false  
v3.20.2
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]        
Net sales $ 132,258 $ 125,480 $ 372,902 $ 398,880
Cost of sales 85,191 85,894 240,779 266,799
Gross profit 47,067 39,586 132,123 132,081
Selling, general and administrative expenses 33,927 31,515 95,360 102,792
(Gain) loss on disposal of fixed assets 0 11 (7) (87)
Impairment charges 0 0 0 916
Gain on sale of notes receivable 0 0 (11,924) 0
Operating income 13,140 8,060 48,694 28,460
Interest expense, net 1,204 993 3,467 3,059
Income from continuing operations before income taxes 11,936 7,067 45,227 25,401
Income tax expense 3,251 1,848 11,448 6,933
Income from continuing operations 8,685 5,219 33,779 18,468
Income from discontinued operations, net of income tax 0 0 0 127
Net income $ 8,685 $ 5,219 $ 33,779 $ 18,595
Income per common share from continuing operations:        
Basic $ 0.24 $ 0.15 $ 0.94 $ 0.52
Diluted 0.24 0.15 0.94 0.52
Income (loss) per common share from discontinued operations:        
Basic 0 0 0 0
Diluted 0 0 0 0
Net income per common share:        
Basic 0.24 0.15 0.94 0.52
Diluted $ 0.24 $ 0.15 $ 0.94 $ 0.52
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]        
Net income $ 8,685 $ 5,219 $ 33,779 $ 18,595
Other comprehensive income (loss):        
Foreign currency translation adjustment 611 (466) (924) 1,069
Total other comprehensive income (loss) 611 (466) (924) 1,069
Comprehensive income $ 9,296 $ 4,753 $ 32,855 $ 19,664
v3.20.2
Condensed Consolidated Statements of Financial Position - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current Assets    
Cash $ 83,746 $ 75,527
Accounts receivable, less allowances of $2,954 and $1,945, respectively 75,539 62,279
Income tax receivable 0 142
Inventories, net 48,137 44,260
Prepaid expenses and other current assets 4,553 2,834
Total Current Assets 211,975 185,042
Property, plant, and equipment, net 53,945 54,964
Right of use asset - operating leases 4,935 5,901
Goodwill 66,420 66,774
Intangible assets, net 25,477 30,754
Deferred income taxes 178 5,807
Other 3,453 3,897
Total Assets 366,383 353,139
Current Liabilities    
Accounts payable 47,562 46,867
Accrued employee compensation 13,348 12,488
Income taxes payable 3,391 0
Accrued taxes payable, other than income taxes 1,505 1,104
Accrued interest 965 1,785
Other current liabilities 16,454 18,324
Operating lease liability - short-term 1,786 2,057
Long-term debt - current portion 39,975 0
Total Current Liabilities 124,986 82,625
Long-term debt 37,501 77,176
Operating lease liability - long-term 3,365 4,074
Other liabilities 12,933 22,582
Shareholders’ Equity    
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding) 0 0
Common Shares, without par value (authorized 60,000,000 shares; outstanding 35,802,092 and 35,710,934; net of treasury shares of 6,750,365 and 6,841,523, respectively) 21,858 21,785
Additional paid-in capital 299,003 296,363
Accumulated other comprehensive loss (17,273) (16,349)
Retained deficit (115,990) (135,117)
Total Shareholders’ Equity 187,598 166,682
Total Liabilities and Shareholders’ Equity $ 366,383 $ 353,139
v3.20.2
Condensed Consolidated Statements of Financial Position (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current Assets    
Allowance for Doubtful Accounts Receivable, Current $ 2,954 $ 1,945
Shareholders’ Equity    
Preferred Shares, shares authorized (in shares) 1,000,000 1,000,000
Preferred Shares, shares issued (in shares) 0 0
Preferred Shares, shares outstanding (in shares) 0 0
Common Shares, shares authorized (in shares) 60,000,000 60,000,000
Common Shares, shares outstanding (in shares) 35,802,092 35,710,934
Common shares, treasury (in shares) 6,750,365 6,841,523
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Total
Cumulative Effect Period of Adoption Adjustment [Member]
Common Shares [Member]
Common Shares [Member]
Cumulative Effect Period of Adoption Adjustment [Member]
Additional Paid-In Capital [Member]
Additional Paid-In Capital [Member]
Cumulative Effect Period of Adoption Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Cumulative Effect Period of Adoption Adjustment [Member]
Retained Deficit [Member]
Retained Deficit [Member]
Cumulative Effect Period of Adoption Adjustment [Member]
Beginning balance at Dec. 31, 2018 $ 154,638 $ 905 $ 21,547 $ 0 $ 292,558 $ 0 $ (18,280) $ 0 $ (141,187) $ 905
Stockholders' Equity [Roll Forward]                    
Net income 18,595   0   0   0   18,595  
Beginning balance at Dec. 31, 2018 154,638 $ 905 21,547 $ 0 292,558 $ 0 (18,280) $ 0 (141,187) $ 905
Stockholders' Equity [Roll Forward]                    
Accounting Standards Update [Extensible List]   us-gaap:AccountingStandardsUpdate201602Member               us-gaap:AccountingStandardsUpdate201602Member
Foreign currency translation adjustment 1,069   0   0   1,069   0  
Shares issued under incentive plans, net of shares withheld for tax (230)   116   (346)   0   0  
Stock compensation expense 3,348   0   3,348   0   0  
Declared dividends (14,505)   0   0   0   (14,505)  
Ending balance at Sep. 30, 2019 163,820   21,663   295,560   (17,211)   (136,192)  
Beginning balance at Jun. 30, 2019 162,410   21,646   294,066   (16,745)   (136,557)  
Stockholders' Equity [Roll Forward]                    
Net income 5,219   0   0   0   5,219  
Beginning balance at Jun. 30, 2019 162,410   21,646   294,066   (16,745)   (136,557)  
Stockholders' Equity [Roll Forward]                    
Foreign currency translation adjustment (466)   0   0   (466)   0  
Shares issued under incentive plans, net of shares withheld for tax 383   17   366   0   0  
Stock compensation expense 1,128   0   1,128   0   0  
Declared dividends (4,854)   0   0   0   (4,854)  
Ending balance at Sep. 30, 2019 163,820   21,663   295,560   (17,211)   (136,192)  
Beginning balance at Dec. 31, 2019 166,682   21,785   296,363   (16,349)   (135,117)  
Stockholders' Equity [Roll Forward]                    
Net income 33,779   0   0   0   33,779  
Beginning balance at Dec. 31, 2019 166,682   21,785   296,363   (16,349)   (135,117)  
Stockholders' Equity [Roll Forward]                    
Foreign currency translation adjustment (924)   0   0   (924)   0  
Shares issued under incentive plans, net of shares withheld for tax (50)   73   (123)   0   0  
Stock compensation expense 2,763   0   2,763   0   0  
Declared dividends (14,652)   0   0   0   (14,652)  
Ending balance at Sep. 30, 2020 187,598   21,858   299,003   (17,273)   (115,990)  
Beginning balance at Jun. 30, 2020 181,695   21,845   297,522   (17,884)   (119,788)  
Stockholders' Equity [Roll Forward]                    
Net income 8,685   0   0   0   8,685  
Beginning balance at Jun. 30, 2020 181,695   21,845   297,522   (17,884)   (119,788)  
Stockholders' Equity [Roll Forward]                    
Foreign currency translation adjustment 611   0   0   611   0  
Shares issued under incentive plans, net of shares withheld for tax 77   13   64   0   0  
Stock compensation expense 1,417   0   1,417   0   0  
Declared dividends (4,887)   0   0   0   (4,887)  
Ending balance at Sep. 30, 2020 $ 187,598   $ 21,858   $ 299,003   $ (17,273)   $ (115,990)  
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Retained Deficit [Member]        
Dividends declared per share $ 0.135 $ 0.135 $ 0.405 $ 0.405
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash Flows From Operating Activities    
Net income (loss) $ 33,779 $ 18,595
Income (loss) from discontinued operations, net of income taxes 0 127
Income (loss) from continuing operations 33,779 18,468
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities    
Depreciation 10,400 11,505
Amortization 5,507 6,183
Non-cash stock-based compensation expense 2,763 3,348
Gain on disposal of fixed assets (7) (87)
Gain on sale of notes receivable (11,924) 0
Impairment charges 0 916
Other 844 441
Payments on long-term performance based compensation 0 (413)
Other long-term liabilities 1,538 3,388
Cash flows provided by (used for) working capital    
Accounts receivable (14,266) 9,775
Inventories (3,939) 2,386
Prepaid expenses and other current assets (1,728) (877)
Accounts payable and accrued expenses 8,367 (15,541)
Net cash provided by (used for) operating activities - continuing operations 31,334 39,492
Net cash provided by (used for) operating activities - discontinued operations 0 7,297
Net cash provided by (used for) operating activities 31,334 46,789
Cash Flows From Investing Activities    
Capital expenditures (8,955) (5,669)
Acquisition of business (716) (18,000)
Proceeds from sale of property, plant and equipment 0 7,514
Proceeds on sale of notes receivable 1,200 0
Net cash provided by (used for) investing activities - continuing operations (8,471) (16,155)
Net cash provided by (used for) investing activities - discontinued operations 0 0
Net cash provided by (used for) investing activities (8,471) (16,155)
Cash Flows From Financing Activities    
Cash dividends paid (14,570) (14,524)
Proceeds from issuance of common stock 367 755
Shares withheld for employee taxes on equity awards (416) (985)
Net cash provided by (used for) financing activities - continuing operations (14,619) (14,754)
Net cash provided by (used for) financing activities - discontinued operations 0 0
Net cash provided by (used for) financing activities (14,619) (14,754)
Foreign exchange rate effect on cash (25) 40
Net increase in cash 8,219 15,920
Cash at January 1 75,527 58,894
Cash at September 30 $ 83,746 $ 74,814
v3.20.2
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Summary of Significant Accounting Policies

1.  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”), and have been prepared 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 accounting principles generally accepted in the United States (“GAAP”) 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. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Results from our former Brazil Business, which was sold in 2017, are presented as discontinued operations. Net cash flows provided by discontinued operations in 2019 resulted from the remaining receipt of the tax benefit from a worthless stock deduction, which was recognized as part of the sale. Net income from discontinued operations for the nine months ended September 30, 2019 related to interest income net of tax recognized on the receipt of the tax benefit in the first quarter of 2019. There was no discontinued operations activity for the quarter and nine months ended September 30, 2020.

In the opinion of the Company, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2020, and the results of operations and cash flows for the periods presented. The results of operations for the quarter and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2020.

Accounting Standards Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (“LIBOR”). The amendments in this update are effective for the Company as of March 12, 2020 through December 31, 2022. The Company adopted this standard effective March 12, 2020. The adoption of this standard had no effect in the quarter or nine months ended September 30, 2020, and its future impact will depend on the manner in which the Company and its lenders ultimately address the removal of LIBOR as it relates to the Loan Agreement described in Note 13.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this standard effective January 1, 2020 and the adoption of this standard did not have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20). This ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For the Company, the ASU is effective retrospectively beginning with the 2020 annual financial statements, but is not applicable to its interim financial statements. The Company adopted this standard effective January 1, 2020 and the adoption of this standard is not expected to have a material impact on its annual consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures. Certain disclosures in this ASU are required to be applied on a retrospective basis and others on a prospective basis. The Company adopted this standard effective January 1, 2020 and the adoption of this standard did not have a material impact on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.  This ASU eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The Company adopted this standard effective January 1, 2020 and the adoption of this standard did not have a material impact on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which introduces new guidance for the accounting for credit losses on instruments.  The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The Company adopted the new guidance effective January 1, 2020. Adoption of the new standard resulted in changes to the Company’s accounting policy and disclosures related to its allowance for expected credit losses for accounts receivable. The impact of adopting this standard on its condensed consolidated financial statements was not material and no cumulative transition adjustment was required.

Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. For the Company, this ASU is effective beginning with the first quarter of 2021. Early adoption is permitted. Certain amendments within this ASU are required to be applied on a retrospective basis, certain other amendments are required to be applied on a modified retrospective basis and all other amendments on a prospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated 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. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:

 

Level 1:

Unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2:

Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.

 

Level 3:

Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.

The Company has financial instruments, including cash, accounts receivable, accounts payable and accrued expenses. The fair value of these financial instruments 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 Loan Agreement, as defined in Note 13, approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of any revolving borrowings under this agreement. The fair value of the Company’s fixed rate senior unsecured notes was estimated using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered Level 2 inputs. At September 30, 2020 and December 31, 2019, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated to be $80.3 million and $79.0 million, respectively.

The purchase price allocation associated with the August 26, 2019 acquisition of Tuffy Manufacturing Industries, Inc., as described in Note 3, required fair value measurements using unobservable inputs which are considered Level 3 inputs. The fair value of the acquired intangible assets was determined using an income approach.

Accumulated Other Comprehensive Income (Loss)

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

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at July 1, 2020

 

$

(16,137

)

 

$

(1,747

)

 

$

(17,884

)

Other comprehensive income (loss) before reclassifications

 

 

611

 

 

 

 

 

 

611

 

Net current-period other comprehensive income (loss)

 

 

611

 

 

 

 

 

 

611

 

Balance at September 30, 2020

 

$

(15,526

)

 

$

(1,747

)

 

$

(17,273

)

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at July 1, 2019

 

$

(14,716

)

 

$

(2,029

)

 

$

(16,745

)

Other comprehensive income (loss) before reclassifications

 

 

(466

)

 

 

 

 

 

(466

)

Net current-period other comprehensive income (loss)

 

 

(466

)

 

 

 

 

 

(466

)

Balance at September 30, 2019

 

$

(15,182

)

 

$

(2,029

)

 

$

(17,211

)

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at January 1, 2020

 

$

(14,602

)

 

$

(1,747

)

 

$

(16,349

)

Other comprehensive income (loss) before reclassifications

 

 

(924

)

 

 

 

 

 

(924

)

Net current-period other comprehensive income (loss)

 

 

(924

)

 

 

 

 

 

(924

)

Balance at September 30, 2020

 

$

(15,526

)

 

$

(1,747

)

 

$

(17,273

)

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at January 1, 2019

 

$

(16,251

)

 

$

(2,029

)

 

$

(18,280

)

Other comprehensive income (loss) before reclassifications

 

 

1,069

 

 

 

 

 

 

1,069

 

Net current-period other comprehensive income (loss)

 

 

1,069

 

 

 

 

 

 

1,069

 

Balance at September 30, 2019

 

$

(15,182

)

 

$

(2,029

)

 

$

(17,211

)

 

Allowance for Credit Losses

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. The Company reviews historical trends for credit loss as well as current economic conditions in determining an estimate for its allowance for credit losses. Additionally, in circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific allowance for credit losses is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably expects will be collected.

The change in the allowance for credit losses for the nine months ended September 30, 2020 was as follows:

 

 

 

2020

 

Balance at January 1

 

$

1,356

 

Provision for expected credit loss, net of recoveries

 

 

879

 

Write-offs and other

 

 

(324

)

Balance at September 30

 

$

1,911

 

 

v3.20.2
Revenue Recognition
9 Months Ended
Sep. 30, 2020
Revenue Recognition [Abstract]  
Revenue Recognition

2.  Revenue Recognition

The Company’s revenue by major market is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended September 30, 2020

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

26,865

 

 

$

 

 

$

 

 

$

26,865

 

Vehicle

 

 

19,715

 

 

 

 

 

 

 

 

 

19,715

 

Food and beverage

 

 

11,882

 

 

 

 

 

 

 

 

 

11,882

 

Industrial

 

 

28,307

 

 

 

 

 

 

(28

)

 

 

28,279

 

Auto aftermarket

 

 

 

 

 

45,517

 

 

 

 

 

 

45,517

 

Total net sales

 

$

86,769

 

 

$

45,517

 

 

$

(28

)

 

$

132,258

 

 

 

 

For the Quarter Ended September 30, 2019

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

19,205

 

 

$

 

 

$

 

 

$

19,205

 

Vehicle

 

 

21,951

 

 

 

 

 

 

 

 

 

21,951

 

Food and beverage

 

 

13,010

 

 

 

 

 

 

 

 

 

13,010

 

Industrial

 

 

29,944

 

 

 

 

 

 

(18

)

 

 

29,926

 

Auto aftermarket

 

 

 

 

 

41,388

 

 

 

 

 

 

41,388

 

Total net sales

 

$

84,110

 

 

$

41,388

 

 

$

(18

)

 

$

125,480

 

 

 

 

For the Nine Months Ended September 30, 2020

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

78,363

 

 

$

 

 

$

 

 

$

78,363

 

Vehicle

 

 

49,840

 

 

 

 

 

 

 

 

 

49,840

 

Food and beverage

 

 

38,373

 

 

 

 

 

 

 

 

 

38,373

 

Industrial

 

 

85,124

 

 

 

 

 

 

(51

)

 

 

85,073

 

Auto aftermarket

 

 

 

 

 

121,253

 

 

 

 

 

 

121,253

 

Total net sales

 

$

251,700

 

 

$

121,253

 

 

$

(51

)

 

$

372,902

 

 

 

 

For the Nine Months Ended September 30, 2019

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

59,505

 

 

$

 

 

$

 

 

$

59,505

 

Vehicle

 

 

66,433

 

 

 

 

 

 

 

 

 

66,433

 

Food and beverage

 

 

54,977

 

 

 

 

 

 

 

 

 

54,977

 

Industrial

 

 

102,048

 

 

 

 

 

 

(40

)

 

 

102,008

 

Auto aftermarket

 

 

 

 

 

115,957

 

 

 

 

 

 

115,957

 

Total net sales

 

$

282,963

 

 

$

115,957

 

 

$

(40

)

 

$

398,880

 

 

Revenue is recognized when obligations under the terms of a contract with customers are satisfied. In both the Distribution and Material Handling segments, this generally occurs with the transfer of control of the products.  This transfer of control may occur at either the time of shipment from a Company facility, or at the time of delivery to a designated customer location. Obligations under contracts with customers are typically fulfilled within 90 days of receiving a purchase order from a customer, and generally no other future obligations are required to be performed.  The Company generally does not enter into any long-term contracts with customers greater than one year.  Based on the nature of the Company’s products and customer contracts, no deferred revenue has been recorded, with the exception of cash advances or deposits received from customers prior to transfer of control of the product. These advances are typically fulfilled within the 90-day time frame mentioned above.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products.  Certain contracts with customers include variable consideration, such as rebates or discounts.  The Company recognizes estimates of this variable consideration each period, primarily based on the most likely level of consideration to be paid to the customer under the specific terms of the underlying programs.  While the Company’s contracts with customers do not generally include explicit rights to return product, the Company will in practice allow returns in the normal course of business and as part of the customer relationship.  Expected returns allowances are recognized each period based on an analysis of historical experience, and when physical recovery of the product from returns occurs, an estimated right to return asset is also recorded based on the approximate cost of the product.

Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited) related to revenue recognition include:

 

 

 

September 30,

 

 

December 31,

 

 

Statement of Financial

Position

 

 

2020

 

 

2019

 

 

Classification

Returns, discounts and other allowances

 

$

(1,043

)

 

$

(589

)

 

Accounts receivable

Right of return asset

 

 

379

 

 

 

312

 

 

Inventories, net

Customer deposits

 

 

(142

)

 

 

(269

)

 

Other current liabilities

Accrued rebates

 

 

(2,620

)

 

 

(2,349

)

 

Other current liabilities

 

Sales, value added, and other taxes collected with revenue from customers are excluded from net sales.  The cost for shipments to customers is recognized when control over products has transferred to the customer and is classified as Selling, General and Administrative expenses for the Company’s manufacturing business and as Cost of Sales for the Company’s distribution business. Costs for shipments to customers in Selling, General and Administrative expenses were approximately $2.2 million and $2.0 million for the quarters ended September 30, 2020 and 2019, respectively, and $5.5 million and $6.2 million for the nine months ended September 30, 2020 and 2019, respectively, and in Cost of Sales were approximately $1.7 million and $1.3 million for the quarters ended September 30, 2020 and 2019, respectively, and $4.6 million and $4.3 million for the nine months ended September 30, 2020 and 2019, respectively.

Based on the short-term nature of contracts described above, contract acquisition costs are not significant. These costs, as well as other incidental items that are immaterial in the context of the contract, are recognized as expense as incurred.

v3.20.2
Acquisition
9 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
Acquisition

3.  Acquisition

On August 26, 2019, the Company acquired the assets of Tuffy Manufacturing Industries, Inc. (“Tuffy”), a warehouse distributor of tire repair equipment and supplies, which is included in the Distribution Segment. The Tuffy acquisition aligns with the Company’s strategy to grow in key niche markets and focus on strategic account customers. The purchase price for the acquisition was $18.7 million, which includes a working capital adjustment of $0.7 million that was paid in 2020. The Company funded the acquisition using available cash.

The acquisition of Tuffy was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. The following table summarizes the allocation of the purchase price based on the estimated fair value of assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.

 

Assets acquired:

 

 

 

Accounts receivable

$

2,105

 

Inventories

 

2,719

 

Prepaid expenses

 

43

 

Property, plant and equipment

 

124

 

Right of use asset - operating leases

 

229

 

Intangible assets

 

8,400

 

Goodwill

 

7,143

 

Assets acquired

$

20,763

 

 

 

 

 

Liabilities assumed:

 

 

 

Accounts payable

$

1,675

 

Accrued expenses

 

143

 

Operating lease liability - short term

 

112

 

Operating lease liability - long term

 

117

 

Total liabilities assumed

 

2,047

 

 

 

 

 

Net acquisition cost

$

18,716

 

 

The goodwill represents the future economic benefits arising from other assets acquired that could not be individually and separately recognized and is deductible for tax purposes.

The intangible assets included above consist of the following:

 

 

 

Fair Value

 

 

Weighted Average

Estimated

Useful Life

Customer relationships

 

$

7,300

 

 

7.3 years

Trade name

 

 

500

 

 

5.0 years

Non-competition agreements

 

 

600

 

 

5.0 years

Total amortizable intangible assets

 

$

8,400

 

 

 

 

v3.20.2
Assets Held for Sale
9 Months Ended
Sep. 30, 2020
Property Plant And Equipment Assets Held For Sale Disclosure [Abstract]  
Assets Held for Sale

4.  Assets Held for Sale

As of September 30, 2020 and December 31, 2019, a building with a carrying value of $1.9 million was classified as held for sale and is included in Other Assets.  During the first half of 2019, the Company sold two buildings, which had previously been held for sale, for total net proceeds of $7.4 million. These buildings were in the Material Handling Segment.

When a facility meets held for sale classification criteria, it is also evaluated for impairment by comparing its carrying value to its estimated fair value less estimated costs to sell. Estimated fair value of these buildings was based on third party offers, which are Level 2 inputs. No impairment related to assets held for sale was recognized in the quarters ended September 30, 2020 or 2019 or for the nine months ended September 30, 2020. An impairment charge of $0.9 million was recorded during the nine months ended September 30, 2019 in connection with a building meeting the held for sale criteria.  

v3.20.2
Settlement of Note Receivable and Lease Guarantee
9 Months Ended
Sep. 30, 2020
Settlement Of Note Receivable And Lease Guarantee [Abstract]  
Settlement of Note Receivable and Lease Guarantee

5.  Settlement of Note Receivable and Lease Guarantee

In 2015, the Company sold its Lawn and Garden business to an entity controlled by Wingate Partners V, L.P. (“L&G Buyer”), which later became HC Companies, Inc. (“HC”). The terms of the sale included promissory notes from HC. Due to uncertainty of collection, a provision for expected loss of $23.0 million was recorded within continuing operations during the third quarter of 2018 to fully impair the notes and corresponding interest receivable. The Company also ceased recognizing interest income following recognition of the provision.  

Also, in connection with the sale of the Lawn and Garden business, the Company became a guarantor for any remaining rent payments under one of HC’s facility leases expiring in September 2025. Annual rent for the facility is approximately $2 million. Due to the financial risk associated with HC, the Company assessed its range of potential obligations under the lease guarantee, and recorded a liability and related pre-tax charge of $10.3 million during the third quarter of 2018. The carrying value of the lease contingency as of December 31, 2019 was $10.7 million, which represented the initial liability recorded plus accretion and was included in Other Liabilities.

In January 2020, the Company sold to HC the fully-reserved promissory notes and related accrued interest receivable in exchange for $1.2 million and the release from the lease guarantee resulting in an $11.9 million pre-tax gain.

v3.20.2
Restructuring
9 Months Ended
Sep. 30, 2020
Restructuring And Related Activities [Abstract]  
Restructuring

6.  Restructuring

In March 2019, the Company committed to implementing a restructuring plan involving its Ameri-Kart Corp. subsidiary (“Ameri-Kart”) that operates within the Material Handling Segment. The Company plans to consolidate manufacturing operations currently conducted at Ameri-Kart’s Cassopolis, Michigan and Bristol, Indiana facilities with expanded operations in a new facility in Bristol, Indiana (the “Ameri-Kart Plan”). In December 2019, the Company entered into an agreement where a new manufacturing and distribution facility in Bristol, Indiana will be constructed, and when substantially complete, the Company will lease that new facility and sell its existing facility in Bristol, Indiana. In December 2019, the Company also provided one year advance termination notice on the lease of its Cassopolis, Michigan facility. The Ameri-Kart Plan is expected to be substantially completed in the first quarter of 2021 and total restructuring costs expected to be incurred are approximately $1.1 million, primarily related to equipment relocation and facility shut down costs.

In March 2019, the Company committed to implementing transformation initiatives within the Distribution Segment (the “Distribution Transformation Plan”) that are intended to increase sales force effectiveness, reduce costs and improve contribution margins. The Company realigned its Distribution Segment’s commercial sales structure, which included the elimination of certain sales and administrative positions, and put into place plans to expand its e-commerce platform. All actions under the Distribution Transformation Plan were substantially completed by the end of 2019.

 

No restructuring charges were incurred during the quarter ended September 30, 2020 and no significant amounts were recognized  during the quarter ended September 30, 2019. Charges for the above restructuring plans for the nine months ended September 30, 2020 and 2019 are as follows:

 

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Segment

 

Cost of

Sales

 

 

SG&A

 

 

Total

 

 

Cost of

Sales

 

 

SG&A

 

 

Total

 

Distribution

 

$

 

 

$

 

 

$

 

 

$

 

 

$

865

 

 

$

865

 

Material Handling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

 

 

$

 

 

$

 

 

$

 

 

$

865

 

 

$

865

 

 

v3.20.2
Inventories
9 Months Ended
Sep. 30, 2020
Inventory Disclosure [Abstract]  
Inventories

7.  Inventories

Inventories are valued at the lower of cost or market for last-in, first-out (“LIFO”) inventory and lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. Approximately 50 percent of inventories are valued using the LIFO method of determining cost. All other inventories are valued using the FIFO 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 inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation. Based on management’s projections of inventory levels and costs, no adjustment to the LIFO reserve was recorded for the quarter or nine months ended September 30, 2020 or for the quarter ended September 30, 2019. During 2019, one inventory pool had a reduction in inventory quantities that was expected to remain through year-end, and therefore, a LIFO liquidation adjustment of $0.3 million was recorded to decrease cost of sales in the nine months ended September 30, 2019.

 

Inventories consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Finished and in-process products

 

$

34,035

 

 

$

32,537

 

Raw materials and supplies

 

 

14,102

 

 

 

11,723

 

 

 

$

48,137

 

 

$

44,260

 

 

v3.20.2
Other Liabilities
9 Months Ended
Sep. 30, 2020
Other Liabilities Disclosure [Abstract]  
Other Liabilities

8.  Other Liabilities

The balance in Other Current Liabilities is comprised of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Customer deposits and accrued rebates

 

$

2,762

 

 

$

2,618

 

Dividends payable

 

 

5,196

 

 

 

5,114

 

Accrued litigation, claims and professional fees

 

 

609

 

 

 

479

 

Current portion of environmental reserves

 

 

1,453

 

 

 

1,533

 

Accrued product replacement costs

 

 

477

 

 

 

1,835

 

Other accrued expenses

 

 

5,957

 

 

 

6,745

 

 

 

$

16,454

 

 

$

18,324

 

 

In August 2019, a manufacturing defect was identified for certain boxes produced within the Material Handling segment in May and June 2019. Certain of the affected boxes require replacement. The total range of cost to replace these boxes is estimated to be $3.5 million to $4.0 million. In the quarter ended September 30, 2019, approximately $3.5 million of estimated costs were recorded related to this matter, of which approximately $0.5 million remains accrued as of September 30, 2020 and is included within Other Current Liabilities.

 

The balance in Other Liabilities (long-term) is comprised of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Lease guarantee contingency

 

$

 

 

$

10,724

 

Environmental reserves

 

 

6,760

 

 

 

6,658

 

Supplemental executive retirement plan liability

 

 

1,542

 

 

 

1,776

 

Pension liability

 

 

875

 

 

 

956

 

Other long-term liabilities

 

 

3,756

 

 

 

2,468

 

 

 

$

12,933

 

 

$

22,582

 

 

v3.20.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

9.  Goodwill and Intangible Assets

The change in goodwill for the nine months ended September 30, 2020 was as follows:

 

 

 

Distribution

 

 

Material

Handling

 

 

Total