MYERS INDUSTRIES INC, 10-K filed on 3/6/2020
Annual Report
v3.19.3.a.u2
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 28, 2020
Jun. 28, 2019
Cover [Abstract]      
Entity Registrant Name MYERS INDUSTRIES INC    
Entity Central Index Key 0000069488    
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Amendment Flag false    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Interactive Data Current Yes    
Entity Current Reporting Status Yes    
Entity Filer Category Accelerated Filer    
Entity Shell Company false    
Entity Small Business false    
Entity Emerging Growth Company false    
Title of 12(b) Security Common Stock, without par value    
Trading Symbol MYE    
Security Exchange Name NYSE    
Entity File Number 001-08524    
Entity Incorporation, State or Country Code OH    
Entity Tax Identification Number 34-0778636    
Entity Address, Address Line One 1293 S. 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    
Document Annual Report true    
Document Transition Report false    
Entity Public Float     $ 349,734,506
Entity Common Stock, Shares Outstanding   35,719,817  
Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant’s Definitive Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

   
v3.19.3.a.u2
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Net sales $ 515,698 $ 566,735 $ 547,043
Cost of sales 344,386 387,442 389,590
Gross profit 171,312 179,293 157,453
Selling expenses 56,350 59,503 56,614
General and administrative expenses 76,780 79,832 78,889
Operating expenses excluding impairment charges 133,130 139,335 135,503
(Gain) loss on disposal of fixed assets 0 (8) (3,482)
Impairment charges 916 308 544
Other expenses   33,331  
Operating income 37,266 6,327 24,888
Interest income (808) (1,221) (1,361)
Interest expense 4,891 6,159 8,653
Interest expense, net 4,083 4,938 7,292
Loss on extinguishment of debt 0 0 1,888
Income from continuing operations before income taxes 33,183 1,389 15,708
Income tax expense 8,968 3,037 4,864
Income (loss) from continuing operations 24,215 (1,648) 10,844
Income (loss) from discontinued operations, net of income tax 118 (1,701) (20,733)
Net income (loss) $ 24,333 $ (3,349) $ (9,889)
Income (loss) per common share from continuing operations:      
Basic $ 0.68 $ (0.05) $ 0.36
Diluted 0.68 (0.05) 0.35
Income (loss) per common share from discontinued operations:      
Basic 0 (0.05) (0.69)
Diluted 0 (0.05) (0.68)
Net income (loss) per common share:      
Basic 0.68 (0.10) (0.33)
Diluted 0.68 (0.10) (0.33)
Dividends declared per share $ 0.54 $ 0.54 $ 0.54
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]      
Net income (loss) $ 24,333 $ (3,349) $ (9,889)
Other comprehensive income (loss)      
Adoption of ASU 2018-02   (315)  
Foreign currency translation adjustment 1,649 (3,501) 2,391
Reclassification of foreign currency translation adjustment into net income (loss)     17,201
Pension liability, net of tax expense of $94, $25 and $14, respectively 282 77 41
Total other comprehensive income (loss) 1,931 (3,739) 19,633
Comprehensive income (loss) $ 26,264 $ (7,088) $ 9,744
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]      
Tax expense on pension liability $ 94 $ 25 $ 14
v3.19.3.a.u2
Consolidated Statements of Financial Position - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current Assets    
Cash $ 75,527 $ 58,894
Accounts receivable, less allowances of $1,945 and $2,259, respectively 62,279 72,939
Income tax receivable 142 4,892
Inventories, net 44,260 43,596
Prepaid expenses and other current assets 2,834 2,534
Total Current Assets 185,042 182,855
Property, plant, and equipment, net 54,964 65,460
Right of use asset - operating leases 5,901 0
Goodwill 66,774 59,068
Intangible assets, net 30,754 30,280
Deferred income taxes 5,807 5,270
Other 3,897 5,712
Total Assets 353,139 348,645
Current Liabilities    
Accounts payable 46,867 60,849
Accrued employee compensation 12,488 16,531
Accrued taxes payable, other than income taxes 1,104 1,403
Accrued interest 1,785 1,939
Other current liabilities 18,324 16,701
Operating lease liability - short-term 2,057 0
Total Current Liabilities 82,625 97,423
Long-term debt 77,176 76,790
Operating lease liability - long-term 4,074 0
Other liabilities 22,582 19,794
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 35,710,934 and 35,374,121; net of treasury shares of 6,841,523 and 7,178,336, respectively) 21,785 21,547
Additional paid-in capital 296,363 292,558
Accumulated other comprehensive loss (16,349) (18,280)
Retained deficit (135,117) (141,187)
Total Shareholders’ Equity 166,682 154,638
Total Liabilities and Shareholders’ Equity $ 353,139 $ 348,645
v3.19.3.a.u2
Consolidated Statements of Financial Position (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current Assets    
Allowance for Doubtful Accounts Receivable, Current $ 1,945 $ 2,259
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) 35,710,934 35,374,121
Common shares, treasury (in shares) 6,841,523 7,178,336
v3.19.3.a.u2
Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Total
Common Shares [Member]
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Deficit [Member]
Beginning balance at Dec. 31, 2016 $ 93,033 $ 18,234 $ 202,033 $ (34,174) $ (93,060)
Beginning balance, shares at Dec. 31, 2016   30,019,561      
Stockholders' Equity [Roll Forward]          
Net income (loss) (9,889) $ 0 0 0 (9,889)
Issuances under option plans $ 4,396 $ 229 4,167 0 0
Issuances under option plans, shares 375,292 375,292      
Dividend reinvestment plan $ 131 $ 5 126 0 0
Dividend reinvestment plan, shares   7,625      
Restricted stock vested 0 $ 79 (79) 0 0
Restricted stock vested, shares   130,036      
Stock compensation expense 3,626 $ 0 3,626 0 0
Shares withheld for employee taxes on equity awards (620) $ 0 (620) 0 0
Shares withheld for employee taxes on equity awards, shares   (36,777)      
Foreign currency translation adjustment 2,391 $ 0 0 2,391 0
Declared dividends (16,558) 0 0 0 (16,558)
Pension liability, net of tax 41 0 0 41 0
Reclassification of foreign currency translation adjustment into net loss 17,201 0 0 17,201 0
Ending balance at Dec. 31, 2017 93,752 $ 18,547 209,253 (14,541) (119,507)
Ending balance, shares at Dec. 31, 2017   30,495,737      
Stockholders' Equity [Roll Forward]          
Net income (loss) (3,349) $ 0 0 0 (3,349)
Issuances under option plans $ 2,735 $ 117 2,618 0 0
Issuances under option plans, shares 191,169 191,169      
Dividend reinvestment plan $ 118 $ 4 114 0 0
Dividend reinvestment plan, shares   5,712      
Restricted stock vested 0 $ 73 (73) 0 0
Restricted stock vested, shares   120,142      
Stock compensation expense 4,644 $ 0 4,644 0 0
Shares withheld for employee taxes on equity awards (714) $ 0 (714) 0 0
Shares withheld for employee taxes on equity awards, shares   (38,639)      
Foreign currency translation adjustment (3,501) $ 0 0 (3,501) 0
Declared dividends (18,646) 0 0 0 (18,646)
Pension liability, net of tax 77 0 0 77 0
Shares issued in public offering, net of equity issuance costs 79,522 $ 2,806 76,716 0 0
Shares issued in public offering, net of equity issuance costs, shares   4,600,000      
Ending balance at Dec. 31, 2018 $ 154,638 $ 21,547 292,558 (18,280) (141,187)
Ending balance, shares at Dec. 31, 2018 35,374,121 35,374,121      
Stockholders' Equity [Roll Forward]          
Adoption of ASU | ASU 2018-02 [Member] $ 0 $ 0 0 (315) 315
Net income (loss) 24,333 0 0 0 24,333
Issuances under option plans $ 3,207 $ 146 3,061 0 0
Issuances under option plans, shares 221,695 240,499      
Dividend reinvestment plan $ 129 $ 5 124 0 0
Dividend reinvestment plan, shares   7,619      
Restricted stock vested 0 $ 87 (87) 0 0
Restricted stock vested, shares   142,580      
Stock compensation expense 1,715 $ 0 1,715 0 0
Shares withheld for employee taxes on equity awards (1,008) $ 0 (1,008) 0 0
Shares withheld for employee taxes on equity awards, shares   (53,885)      
Foreign currency translation adjustment 1,649 $ 0 0 1,649 0
Declared dividends (19,168) 0 0 0 (19,168)
Pension liability, net of tax 282 0 0 282 0
Ending balance at Dec. 31, 2019 $ 166,682 $ 21,785 296,363 (16,349) (135,117)
Ending balance, shares at Dec. 31, 2019 35,710,934 35,710,934      
Stockholders' Equity [Roll Forward]          
Adoption of ASU | ASU 2016-02 [Member] $ 905 $ 0 $ 0 $ 0 $ 905
v3.19.3.a.u2
Consolidated Statement of Shareholders' Equity (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dividends declared per share $ 0.54 $ 0.54 $ 0.54
Tax expense on pension liability $ 94 $ 25 $ 14
Retained Deficit [Member]      
Dividends declared per share $ 0.54 $ 0.54 $ 0.54
Accumulated Other Comprehensive Income (Loss) [Member]      
Tax expense on pension liability $ 94 $ 25 $ 14
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash Flows From Operating Activities      
Net income (loss) $ 24,333 $ (3,349) $ (9,889)
Income (loss) from discontinued operations, net of income taxes 118 (1,701) (20,733)
Income (loss) from continuing operations 24,215 (1,648) 10,844
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities      
Depreciation 15,120 17,638 19,952
Amortization 8,463 8,485 8,886
Accelerated depreciation associated with restructuring activities 0 16 1,993
Non-cash stock-based compensation expense 1,715 4,257 3,626
(Gain) loss on disposal of fixed assets 0 (8) (3,482)
Provision for loss on note receivable 0 23,008 0
Lease guarantee contingency 0 10,323 0
Loss on extinguishment of debt 0 0 1,888
Deferred taxes (922) (9,450) (5,663)
Interest income accrued on note receivable 0 (361) (1,384)
Impairment charges 916 308 544
Other 583 457 256
Payments on performance based compensation (413) (1,249) (1,010)
Other long-term liabilities 3,578 180 723
Cash flows provided by (used for) working capital      
Accounts receivable 12,479 4,927 (6,709)
Inventories 2,222 3,151 (1,876)
Prepaid expenses and other current assets (243) (353) 2,209
Accounts payable and accrued expenses (20,687) 713 18,299
Net cash provided by (used for) operating activities - continuing operations 47,026 60,394 49,096
Net cash provided by (used for) operating activities - discontinued operations 7,297 858 (4,633)
Net cash provided by (used for) operating activities 54,323 61,252 44,463
Cash Flows From Investing Activities      
Capital expenditures (10,294) (5,123) (5,814)
Acquisition of business (18,000) 0 0
Proceeds from sale of property, plant and equipment 7,537 2,633 11,058
Net cash provided by (used for) investing activities - continuing operations (20,757) (2,490) 5,244
Net cash provided by (used for) investing activities - discontinued operations 0 0 (1,107)
Net cash provided by (used for) investing activities (20,757) (2,490) 4,137
Cash Flows From Financing Activities      
Net repayments of credit facility 0 (74,557) (16,474)
Repayments of senior unsecured notes 0 0 (23,798)
Cash dividends paid (19,316) (17,862) (16,341)
Proceeds from issuance of common stock 3,336 2,853 4,527
Proceeds from public offering of common stock, net of equity issuance costs 0 79,522 0
Shares withheld for employee taxes on equity awards (1,008) (714) (620)
Deferred financing costs 0 0 (1,030)
Net cash provided by (used for) financing activities - continuing operations (16,988) (10,758) (53,736)
Net cash provided by (used for) financing activities - discontinued operations 0 0 0
Net cash provided by (used for) financing activities (16,988) (10,758) (53,736)
Foreign exchange rate effect on cash 55 (289) (208)
Less: Net increase (decrease) in cash classified within discontinued operations 0 0 (5,484)
Net increase in cash and restricted cash 16,633 47,715 140
Cash and restricted cash at January 1 58,894 11,179 11,039
Cash and restricted cash at December 31 75,527 58,894 11,179
Supplemental Disclosures of Cash Flow Information      
Interest 4,657 6,236 8,913
Income taxes $ 11,437 $ 5,539 $ 5,651
v3.19.3.a.u2
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Summary of Significant Accounting Policies

1.  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 or 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 timing and amount of assets, liabilities, equity, revenues, and expenses recorded and disclosed. Actual results could differ from those estimates.

During the fourth quarter of 2017, the Company completed the sale of certain subsidiaries in Brazil. As further discussed in Note 6, the results of operations and cash flows of these subsidiaries have been classified as discontinued operations in the consolidated financial statements for all periods presented.

Accounting Standards Adopted

In February 2016, the FASB issued ASU 2016-02, Leases, which created Accounting Standards Codification (“ASC”) Topic 842. Under ASU 2016-02, an entity recognizes right-of-use assets and lease liabilities on its balance sheet, and discloses key information about the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company adopted the new guidance effective January 1, 2019, using the optional transition method, which required application of the new guidance to only those leases that existed at the date of adoption. The Company elected the “package of practical expedients,” which permitted the Company to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected to apply the guidance at a portfolio level and to use the discount rate corresponding to the remaining lease term at transition. Adoption of the new standard resulted in the recognition of right-of-use assets and lease liabilities of $5.9 million and $6.2 million, respectively, on January 1, 2019. The difference between the right-of-use assets and lease liabilities related primarily to the removal of previously recorded accrued rent balances as a result of recording straight-line rent expense for certain leases. In addition, the adoption resulted in an adjustment to opening retained earnings (deficit) of approximately $0.9 million, net of tax, on January 1, 2019. This cumulative-effect transition adjustment to opening retained earnings (deficit) related to the recognition of the remaining deferred gain on a sale-leaseback transaction that occurred in 2018. The standard did not have a material impact on the Company’s consolidated results of operations or cash flows.

The following tables summarize the impacts of ASC 842 on the Company’s consolidated financial statements:

 

 

 

For the Year Ended December 31, 2019

 

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption of

ASC 842

 

Net sales

 

$

515,698

 

 

$

 

 

$

515,698

 

Cost of sales

 

 

344,386

 

 

 

 

 

 

344,386

 

Gross profit

 

 

171,312

 

 

 

 

 

 

171,312

 

Selling, general and administrative expenses

 

 

133,130

 

 

 

(135

)

 

 

132,995

 

Impairment charges

 

 

916

 

 

 

 

 

 

916

 

Operating income

 

 

37,266

 

 

 

135

 

 

 

37,401

 

Interest expense, net

 

 

4,083

 

 

 

 

 

 

4,083

 

Income from continuing operations before income taxes

 

 

33,183

 

 

 

135

 

 

 

33,318

 

Income tax expense

 

 

8,968

 

 

 

36

 

 

 

9,004

 

Income from continuing operations

 

$

24,215

 

 

$

99

 

 

$

24,314

 

 

 

 

As of  December 31, 2019

 

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption of

ASC 842

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Right of use asset - operating leases

 

$

5,901

 

 

$

(5,901

)

 

$

 

Deferred tax asset

 

 

5,807

 

 

 

298

 

 

 

6,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

18,324

 

 

$

230

 

 

$

18,554

 

Operating lease liability - short-term

 

 

2,057

 

 

 

(2,057

)

 

 

 

Operating lease liability - long-term

 

 

4,074

 

 

 

(4,074

)

 

 

 

Other liabilities

 

 

22,582

 

 

 

1,102

 

 

 

23,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Retained deficit

 

$

(135,117

)

 

$

(804

)

 

$

(135,921

)

 

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 consolidated financial statements.

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). For the Company, the ASU is effective prospectively beginning with the first quarter of 2020. As the Company has not had and is not in process of implementing significant hosted software arrangements as of December 31, 2019, the adoption of this standard is not expected to have a material effect on its 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. Adoption of this guidance is not expected to have a material impact on its 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. For the Company, the ASU is effective beginning with the first quarter of 2020. Certain disclosures in this ASU are required to be applied on a retrospective basis and others on a prospective basis. Adoption of this guidance is not expected to have a material impact on its 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. For the Company, this ASU is effective for annual and any interim goodwill impairment tests beginning in 2020.  Adoption of this guidance is not expected to have a material impact on its consolidated financial statements unless a goodwill impairment were to occur.

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, including trade accounts receivable. For the Company, this ASU is effective beginning with the first quarter of 2020. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

Translation of Foreign Currencies

All asset and liability accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated monthly at an average currency exchange rate for the period. The resulting foreign currency translation adjustment is recorded in other comprehensive income (loss) as a separate component of shareholders’ equity.

Fair Value Measurement

Fair value is the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability. Accounting standards prioritize the use of observable inputs in measuring fair value. The level of a fair value measurement is determined entirely by the lowest level input that is significant to the measurement. The three levels are (from highest to lowest):

 

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 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 approximate 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 the 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 December 31, 2019 and 2018, the aggregate fair value of the Company’s outstanding fixed rate senior unsecured notes was estimated at $79.0 million and $76.8 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 the income approach.

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. In 2019, there were no customers that accounted for more than ten percent of net sales. Outside of the United States, only customers located in Canada, which account for approximately 4.7% of net sales, are 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 $0.6 million, $0.7 million and $0.7 million for 2019, 2018 and 2017, respectively, and is recorded within selling expenses in the Consolidated Statements of Operations. Deductions from the allowance for doubtful accounts, net of recoveries, were approximately $0.3 million, $0.5 million and $0.7 million for 2019, 2018 and 2017, respectively.

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 40 percent of our inventories are valued using the LIFO method of determining cost. All other inventories are valued at the FIFO method of determining cost.

 

Inventories at December 31 consist of the following:

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Finished and in-process products

 

$

32,537

 

 

$

27,960

 

Raw materials and supplies

 

 

11,723

 

 

 

15,636

 

 

 

$

44,260

 

 

$

43,596

 

 

If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $4.4 million and $5.1 million higher than reported at December 31, 2019 and 2018, respectively. Cost of sales decreased by $0.7 million, $0.5 million and $0.1 million in 2019, 2018 and 2017, respectively, as a result of the liquidation of LIFO inventories.

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

Leasehold Improvements

5 to 10 years

 

The Company’s property, plant and equipment by major asset class at December 31 consists of:

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Land

 

$

6,622

 

 

$

7,017

 

Buildings and leasehold improvements

 

 

43,803

 

 

 

53,821

 

Machinery and equipment

 

 

252,384

 

 

 

253,785

 

 

 

 

302,809

 

 

 

314,623

 

Less allowances for depreciation and amortization

 

 

(247,845

)

 

 

(249,163

)

 

 

$

54,964

 

 

$

65,460

 

 

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 and related asset group. For assets held for sale, 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. Refer to Note 4 for discussion of impairment charges.

Accumulated Other Comprehensive Income (Loss)

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

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at January 1, 2017

 

$

(32,342

)

 

$

(1,832

)

 

$

(34,174

)

Other comprehensive income (loss) before reclassifications

 

 

2,391

 

 

 

(31

)

 

 

2,360

 

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($24) (1) (2)

 

 

17,201

 

 

 

72

 

 

 

17,273

 

Net current-period other comprehensive income (loss)

 

 

19,592

 

 

 

41

 

 

 

19,633

 

Balance at December 31, 2017

 

 

(12,750

)

 

 

(1,791

)

 

 

(14,541

)

Other comprehensive income (loss) before reclassifications

 

 

(3,501

)

 

 

14

 

 

 

(3,487

)

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($21) (1)

 

 

 

 

 

63

 

 

 

63

 

Reclassification of stranded tax effects to retained earnings(3)

 

 

 

 

 

(315

)

 

 

(315

)

Net current-period other comprehensive income (loss)

 

 

(3,501

)

 

 

(238

)

 

 

(3,739

)

Balance at December 31, 2018

 

 

(16,251

)

 

 

(2,029

)

 

 

(18,280

)

Other comprehensive income (loss) before reclassifications

 

 

1,649

 

 

 

209

 

 

 

1,858

 

Amounts reclassified from accumulated other comprehensive income, net

   of tax of ($24) (1)

 

 

 

 

 

73

 

 

 

73

 

Net current-period other comprehensive income (loss)

 

 

1,649

 

 

 

282

 

 

 

1,931

 

Balance at December 31, 2019

 

$

(14,602

)

 

$

(1,747

)

 

$

(16,349

)

 

(1)

The accumulated other comprehensive income (loss) components related to defined benefit pension plans are included in the computation of net periodic pension cost. See Note 15, Retirement Plans for additional details.

(2)

Cumulative translation adjustment associated with the 2017 sale of the Brazil Business, as further disclosed in Note 6, was realized as part of the loss on disposal included within discontinued operations when the subsidiary was disposed.

(3)

Reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act to retained earnings due to the adoption of ASU 2018-02 during the first quarter of 2018.

Stock Based Compensation

The Company has stock incentive plans that provide for the granting of stock-based compensation to employees and directors. Shares issued for option exercises, restricted stock units and performance units may be either from authorized, but unissued shares or treasury shares. For equity-classified awards, the fair value is determined on the date of the grant and not remeasured. The fair value of restricted stock units and performance units are determined using the closing price of the Company’s common stock on the grant date (Level 1 measurement). The fair value of options are determined using a binomial lattice option pricing model as further described in Note 10, which uses market-based inputs (Level 2 measurement). Expense for all stock-based awards is recognized on a straight-line basis over the requisite service period, which is generally equivalent to the vesting term. Forfeitures result in reversal of previously recognized expenses for unvested shares and are recognized in the period in which the forfeiture occurs.

 

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. Any effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period the change is enacted.

Deferred tax assets are 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. The Company evaluates the recovery of its deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates.

In the ordinary course of business there is inherent uncertainty in quantifying certain income tax positions. The Company evaluates uncertain tax positions for all years subject to examination based upon management’s evaluations of the facts, circumstances and information available at the reporting date. Income tax positions must meet a more-likely-than-not recognition threshold at the reporting date to be recognized. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of 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.

Cash flows used in investing activities excluded $0.6 million, $1.1 million and $0.6 million of accrued, but unpaid, capital expenditures in 2019, 2018 and 2017, respectively.

v3.19.3.a.u2
Revenue Recognition
12 Months Ended
Dec. 31, 2019
Revenue Recognition [Abstract]  
Revenue Recognition

2.  Revenue Recognition

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

 

 

 

 

For the Year Ended December 31, 2019

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

71,272

 

 

$

 

 

$

 

 

$

71,272

 

Vehicle

 

 

82,768

 

 

 

 

 

 

 

 

 

82,768

 

Food and beverage

 

 

68,416

 

 

 

 

 

 

 

 

 

68,416

 

Industrial

 

 

133,951

 

 

 

 

 

 

(58

)

 

 

133,893

 

Auto aftermarket

 

 

 

 

 

159,349

 

 

 

 

 

 

159,349

 

Total net sales

 

$

356,407

 

 

$

159,349

 

 

$

(58

)

 

$

515,698

 

 

 

 

For the Year Ended December 31, 2018

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

78,174

 

 

$

 

 

$

 

 

$

78,174

 

Vehicle

 

 

95,247

 

 

 

 

 

 

 

 

 

95,247

 

Food and beverage

 

 

101,610

 

 

 

 

 

 

 

 

 

101,610

 

Industrial

 

 

142,168

 

 

 

 

 

 

(100

)

 

 

142,068

 

Auto aftermarket

 

 

 

 

 

149,636

 

 

 

 

 

 

149,636

 

Total net sales

 

$

417,199

 

 

$

149,636

 

 

$

(100

)

 

$

566,735

 

 

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 Company’s 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, the Company has not recorded any deferred revenue, 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.  Thus, the Company estimates the expected returns each period based on an analysis of historical experience.  For certain businesses where physical recovery of the product from returns occurs, the Company records an estimated right to return asset from such recovery, based on the approximate cost of the product.

Amounts included in the Consolidated Statements of Financial Position related to revenue recognition include:

 

 

 

December 31,

 

 

December 31,

 

 

Statement of Financial

Position

 

 

2019

 

 

2018

 

 

Classification

Returns, discounts and other allowances

 

$

(589

)

 

$

(1,169

)

 

Accounts receivable

Right of return asset

 

 

312

 

 

 

535

 

 

Inventories, net

Customer deposits

 

 

(269

)

 

 

(806

)

 

Other current liabilities

Accrued rebates

 

 

(2,349

)

 

 

(2,559

)

 

Other current liabilities

 

Sales, value added, and other taxes the Company collects concurrent with revenue from customers are excluded from net sales.  The Company has elected to recognize the cost for shipments to customers when control over products has transferred to the customer.  Costs for shipments to customers are classified as selling expenses for the Company’s manufacturing businesses and as cost of sales for the Company’s distribution business in the accompanying Consolidated Statements of Operations. The Company incurred costs for shipments to customers of approximately $8.4 million, $9.7 million and $8.2 million in selling expenses for the years ended December 31, 2019, 2018 and 2017, respectively, and $5.9 million, $5.7 million, and $6.0 million in cost of sales for the years ended December 31, 2019, 2018 and 2017, respectively.

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

v3.19.3.a.u2
Acquisition
12 Months Ended
Dec. 31, 2019
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 Company’s 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 preliminary estimated working capital adjustment of $0.7 million subject to further adjustment based on the final working capital. 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 preliminary estimated fair values at the acquisition date, which are subject to adjustment. The purchase accounting will be finalized within one year from the acquisition date.

 

Assets acquired:

 

 

 

Accounts receivable

$

2,105

 

Inventories

 

2,662

 

Prepaid expenses

 

43

 

Property, plant and equipment

 

124

 

Right of use asset - operating leases

 

229

 

Intangible assets

 

8,400

 

Goodwill

 

7,211

 

Assets acquired

$

20,774

 

 

 

 

 

Liabilities assumed:

 

 

 

Accounts payable

$

1,685

 

Accrued expenses

 

162

 

Operating lease liability - short term

 

112

 

Operating lease liability - long term

 

117

 

Total liabilities assumed

 

2,076

 

 

 

 

 

Net acquisition cost

$

18,698

 

 

The goodwill represents the future economic benefits arising from other assets acquired that could not be individually and separately recognized, and the Company expects that the goodwill recognized for the acquisition will be 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

 

 

 

 

v3.19.3.a.u2
Assets Held for Sale
12 Months Ended
Dec. 31, 2019
Property Plant And Equipment Assets Held For Sale Disclosure [Abstract]  
Assets Held for Sale

4.  Assets Held for Sale

As part of its ongoing strategy, the Company continues to evaluate its various real estate holdings and has sold certain facilities. When a facility becomes held for sale, it is evaluated for impairment by comparing the carrying value to the estimated fair value of these buildings (using primarily third party offers considered to be Level 2 inputs), less estimated costs to sell. As a result of holding facilities for sale, the Company recorded impairment charges of $0.9 million, $0.3 million and $0.5 million during the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 and 2018, the Company had classified $1.9 million and $4.4 million as buildings held for sale, in Other Assets in the Consolidated Statements of Financial Position. During 2019, 2018 and 2017, the Company sold certain buildings previously held for sale for net proceeds of $7.4 million, $2.3 million and $3.1 million, respectively. The buildings sold during 2019 and 2017 were included in the Company’s Material Handling Segment and the building sold in 2018 was included in the Company’s Distribution Segment.

v3.19.3.a.u2
Goodwill and Intangible Assets
12 Months Ended
Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

5.  Goodwill and Intangible Assets

The Company tests goodwill and indefinite-lived intangible assets for impairment annually and between annual tests if impairment indicators are present. Such indicators 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.    

The Company’s annual goodwill impairment assessment as of October 1 for all of its reporting units found no impairment in continuing operations in 2019, 2018 or 2017. During 2019, management performed a qualitative assessment for all of its reporting units. After considering changes to assumptions used in the most recent quantitative annual testing for each reporting unit, including macroeconomic conditions, industry and market considerations, overall financial performance, the magnitude of the excess of fair value over the carrying amount of each reporting unit as determined in the most recent quantitative annual testing, and other factors, management concluded that it was not more likely than not that the fair values of the reporting units were less than their respective carrying values and, therefore, did not perform a quantitative analysis in 2019. A qualitative analysis was also performed at October 1, 2018 and 2017. 

The changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 were as follows:

 

 

 

Distribution

 

 

Material

Handling

 

 

Total

 

January 1, 2018

 

$

505

 

 

$

59,466

 

 

$

59,971

 

Foreign currency translation

 

 

 

 

 

(903

)

 

 

(903

)

January 1, 2019

 

$

505

 

 

$

58,563

 

 

$

59,068

 

Acquisition

 

 

7,211

 

 

 

 

 

 

7,211

 

Foreign currency translation

 

 

 

 

 

495

 

 

 

495

 

December 31, 2019

 

$

7,716

 

 

$

59,058

 

 

$

66,774

 

 

Intangible assets were established in connection with acquisitions. These intangible assets, other than goodwill and certain trade names, are amortized over their estimated useful lives. The Company performed an annual impairment assessment for the indefinite lived trade names as of October 1, 2019, 2018 and 2017. 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. An impairment charge would be recorded if the carrying value of the trade name exceeds the estimated fair value at the date of assessment. Refer to Note 3 for the intangible assets acquired through the Tuffy acquisition during 2019.

Intangible assets at December 31, 2019 and 2018 consisted of the following:

 

 

 

 

 

 

 

2019

 

 

2018

 

 

 

Weighted Average

Remaining Useful

Life (years)

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

Trade Names - Indefinite Lived

 

 

 

 

 

$

9,782

 

 

$

 

 

$

9,782

 

 

$

9,782

 

 

$

 

 

$

9,782

 

Trade Names

 

 

4.8

 

 

 

580

 

 

 

(84

)

 

 

496

 

 

 

80

 

 

 

(45

)

 

 

35

 

Customer Relationships

 

 

1.7

 

 

 

47,656