MYERS INDUSTRIES INC, 10-Q filed on 11/6/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 31, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name MYERS INDUSTRIES INC  
Entity Central Index Key 0000069488  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   35,352,452
v3.10.0.1
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Net sales $ 135,219 $ 135,113 $ 428,347 $ 406,937
Cost of sales 93,128 95,970 291,150 287,741
Gross profit 42,091 39,143 137,197 119,196
Selling, general and administrative expenses 34,381 35,107 104,360 101,779
(Gain) loss on disposal of fixed assets 218 (2,765) (96) (4,012)
Impairment charges 0 0 308 544
Other expenses 33,331 0 33,331 0
Operating income (loss) (25,839) 6,801 (706) 20,885
Interest expense, net 883 1,838 3,835 5,828
Income (loss) from continuing operations before income taxes (26,722) 4,963 (4,541) 15,057
Income tax expense (benefit) (5,585) 1,880 233 6,034
Income (loss) from continuing operations (21,137) 3,083 (4,774) 9,023
Income (loss) from discontinued operations, net of income tax (2) 174 (913) (659)
Net income (loss) $ (21,139) $ 3,257 $ (5,687) $ 8,364
Income (loss) per common share from continuing operations:        
Basic $ (0.60) $ 0.10 $ (0.15) $ 0.30
Diluted (0.60) 0.10 (0.15) 0.30
Income (loss) per common share from discontinued operations:        
Basic 0 0.01 (0.02) (0.02)
Diluted 0 0.01 (0.02) (0.02)
Net income (loss) per common share:        
Basic (0.60) 0.11 (0.17) 0.28
Diluted (0.60) 0.11 (0.17) 0.28
Dividends declared per share $ 0.14 $ 0.14 $ 0.41 $ 0.41
v3.10.0.1
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]        
Net income (loss) $ (21,139) $ 3,257 $ (5,687) $ 8,364
Other comprehensive income (loss)        
Adoption of ASU 2018-02     (315)  
Foreign currency translation adjustment 649 2,380 (1,194) 3,491
Pension liability, net of tax expense of $67 in 2018     201  
Total other comprehensive income (loss) 649 2,380 (1,308) 3,491
Comprehensive income (loss) $ (20,490) $ 5,637 $ (6,995) $ 11,855
v3.10.0.1
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical)
$ in Thousands
9 Months Ended
Sep. 30, 2018
USD ($)
Statement Of Income And Comprehensive Income [Abstract]  
Tax expense on pension liability $ 67
v3.10.0.1
Condensed Consolidated Statements of Financial Position - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current Assets    
Cash $ 46,505 $ 2,520
Restricted cash 0 8,659
Accounts receivable, less allowances of $2,375 and $1,777, respectively 69,250 76,509
Income tax receivable 7,043 12,954
Inventories, net 44,310 47,166
Prepaid expenses and other current assets 3,050 2,204
Total Current Assets 170,158 150,012
Other Assets    
Property, plant, and equipment, net 73,011 83,904
Goodwill 59,666 59,971
Intangible assets, net 32,518 39,049
Deferred income taxes 4,858 120
Notes receivable 0 18,737
Other 1,242 4,149
Total Assets 341,453 355,942
Current Liabilities    
Accounts payable 51,375 63,581
Accrued expenses    
Employee compensation 15,763 15,544
Taxes, other than income taxes 1,270 1,664
Accrued interest 1,015 2,392
Other current liabilities 16,814 15,472
Total Current Liabilities 86,237 98,653
Long-term debt 76,693 151,036
Other liabilities 19,264 8,236
Deferred income taxes 202 4,265
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 35,351,248 and 30,495,737; net of treasury shares of 7,201,209 and 7,456,720, respectively) 21,523 18,547
Additional paid-in capital 292,097 209,253
Accumulated other comprehensive loss (15,849) (14,541)
Retained deficit (138,714) (119,507)
Total Shareholders’ Equity 159,057 93,752
Total Liabilities and Shareholders’ Equity $ 341,453 $ 355,942
v3.10.0.1
Condensed Consolidated Statements of Financial Position (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current Assets    
Allowance for Doubtful Accounts Receivable, Current $ 2,375 $ 1,777
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) 35,351,248 30,495,737
Common shares, treasury (in shares) 7,201,209 7,456,720
v3.10.0.1
Condensed Consolidated Statement of Shareholders' Equity - 9 months ended Sep. 30, 2018 - 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, 2017 $ 93,752 $ 18,547 $ 209,253 $ (14,541) $ (119,507)
Stockholders' Equity [Roll Forward]          
Net loss (5,687) 0 0 0 (5,687)
Foreign currency translation adjustment (1,194) 0 0 (1,194) 0
Shares issued under incentive plans, net of shares withheld for tax 2,379 170 2,209 0 0
Stock compensation expense 3,919 0 3,919 0 0
Pension liability, net of tax 201 0 0 201 0
Shares issued in public offering, net of equity issuance costs 79,522 2,806 76,716 0 0
Declared dividends (13,835) 0 0 0 (13,835)
Ending balance at Sep. 30, 2018 159,057 21,523 292,097 (15,849) (138,714)
Stockholders' Equity [Roll Forward]          
Adoption of ASU 2018-02 $ 0 $ 0 $ 0 $ (315) $ 315
v3.10.0.1
Condensed Consolidated Statement of Shareholders' Equity (Parenthetical)
$ in Thousands
9 Months Ended
Sep. 30, 2018
USD ($)
$ / shares
Tax expense on pension liability | $ $ 67
Dividends declared per share | $ / shares $ 0.41
Accumulated Other Comprehensive Income (Loss) [Member]  
Tax expense on pension liability | $ $ 67
Retained Deficit [Member]  
Dividends declared per share | $ / shares $ 0.41
v3.10.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash Flows From Operating Activities    
Net income (loss) $ (5,687) $ 8,364
Income (loss) from discontinued operations, net of income taxes (913) (659)
Income (loss) from continuing operations (4,774) 9,023
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities    
Depreciation 13,329 15,226
Amortization 6,455 6,722
Accelerated depreciation associated with restructuring activities 16 2,018
Non-cash stock-based compensation expense 3,532 2,873
(Gain) loss on disposal of fixed assets (96) (4,012)
Provision for loss on note receivable 23,008 0
Impairment charges 308 544
Deferred taxes (7,666) 101
Interest income received (accrued) on note receivable (361) (999)
Other 211 39
Payments on performance based compensation (1,249) (1,010)
Other long-term liabilities 10,010 (102)
Cash flows provided by (used for) working capital    
Accounts receivable 7,890 (5,820)
Inventories 2,708 (1,608)
Prepaid expenses and other current assets (853) 1,639
Accounts payable and accrued expenses (11,347) 15,650
Net cash provided by (used for) operating activities - continuing operations 41,121 40,284
Net cash provided by (used for) operating activities - discontinued operations 858 (4,158)
Net cash provided by (used for) operating activities 41,979 36,126
Cash Flows From Investing Activities    
Capital expenditures (3,560) (5,109)
Proceeds from sale of property, plant and equipment 2,633 7,925
Net cash provided by (used for) investing activities - continuing operations (927) 2,816
Net cash provided by (used for) investing activities - discontinued operations 0 131
Net cash provided by (used for) investing activities (927) 2,947
Cash Flows From Financing Activities    
Net borrowings (repayments) on credit facility (74,557) (31,397)
Cash dividends paid (13,039) (12,230)
Proceeds from issuance of common stock 2,825 2,524
Proceeds from public offering of common stock, net of equity issuance costs 79,522 0
Shares withheld for employee taxes on equity awards (446) (273)
Deferred financing costs 0 (1,030)
Net cash provided by (used for) financing activities - continuing operations (5,695) (42,406)
Net cash provided by (used for) financing activities - discontinued operations 0 0
Net cash provided by (used for) financing activities (5,695) (42,406)
Foreign exchange rate effect on cash (31) (28)
Less: Net increase (decrease) in cash classified within discontinued operations 0 (3,890)
Net increase (decrease) in cash, cash equivalents, and restricted cash 35,326 529
Cash, cash equivalents, and restricted cash at January 1 11,179 11,039
Cash, cash equivalents, and restricted cash at September 30 $ 46,505 $ 11,568
v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
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 U.S. generally accepted accounting principles (“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, 2017.

During the fourth quarter of 2017, the Company completed the sale of certain subsidiaries in Brazil. As further discussed in Note 4, the results of operations and cash flows of these subsidiaries have been classified as discontinued operations in the condensed consolidated financial statements for all periods presented.

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, 2018, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2018.

Accounting Standards Adopted

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which allowed SEC registrants to record provisional amounts in earnings for the year ended December 31, 2017 due to the complexities involved in accounting for the enactment of the Tax Cuts and Jobs Act. The Company recognized the estimated income tax effects of the Tax Cuts and Jobs Act in its 2017 consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 118. Refer to Note 15 for further information regarding the provisional amounts recorded by the Company.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220). This ASU allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The new standard also requires certain disclosures about stranded tax effects. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (as further discussed in Note 15) is recognized. The Company early adopted this standard effective January 1, 2018 and as a result of adopting this standard, $315 of stranded tax effects were reclassified from accumulated other comprehensive income to retained earnings in the first quarter of 2018.

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.  This ASU requires that an employer report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period.  The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.  The ASU also allows only the service cost component to be eligible for capitalization when applicable. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods.  The ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.  The Company adopted this standard effective January 1, 2018 and the adoption did not have a material impact on its consolidated financial statements as the pension plan is frozen.


In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash. This ASU requires that companies include amounts generally described as restricted cash and restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows.  The ASU should be applied using a retrospective transition method to each period presented and is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted this standard effective January 1, 2018. The inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the consolidated statements of cash flows did not have a material impact on the Company’s net cash flows.

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). This ASU requires immediate recognition of the income tax consequences of intercompany asset transfers other than inventory. The ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted this standard effective January 1, 2018 and the adoption of this standard did not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Additional disclosures will also be required to help users of financial statements understand the nature, amount, and timing of revenue and cash flows arising from contracts. The Company adopted the new guidance effective January 1, 2018 using the modified retrospective approach and applied the new guidance to all open contracts at the date of adoption. Adoption of the new standard resulted in changes to the Company’s accounting policy and disclosures related to revenue recognition. The impact of adopting this standard on the Company’s consolidated financial statements was not material and there was no cumulative transition adjustment required.  

Accounting Standards Not Yet Adopted

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 ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted and this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. 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 2018-14, 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. The ASU is effective for annual periods ending after December 15, 2020, with early adoption permitted and should be applied on a retrospective basis to all periods presented. 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 2018-13, 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. This guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. Certain disclosures in this ASU are required to be applied on a retrospective basis and others on a prospective basis. The Company is currently evaluating the impact the adoption of this standard will have 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. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The guidance allows for early adoption for impairment testing dates after January 1, 2017.  While the Company has elected not to early adopt this guidance to date and will continue to evaluate the timing of adoption, it does not believe that the adoption of this guidance will have a material impact on its 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. This ASU is effective for fiscal years beginning after December 15, 2019 including interim periods within that reporting period, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet, and disclose key information about the amount, timing and uncertainty of cash flows arising from leasing arrangements. The new standard is effective for the Company beginning January 1, 2019, and must be adopted using either the modified retrospective approach, which requires application of the new guidance at the beginning of the earliest comparative period presented or the optional transition approach, which requires application of the new guidance at the standard’s effective date. The Company will adopt the new guidance effective January 1, 2019 using the optional transition method. The Company is currently designing and implementing changes to process, controls and systems, where necessary, to address the requirements of the new standard upon adoption. Based on the current lease population identified, the adoption of this standard is expected to have a material impact on the Company’s consolidated financial position due to the recognition of the right-of-use assets and lease liabilities associated with operating leases. The Company also expects to record a cumulative-effect adjustment to retained earnings upon adoption to recognize the remaining deferred gain on the sale-leaseback transaction that occurred prior to the date of initial application. It is not expected that the adoption of this standard will have a material impact on the consolidated results of operations or cash flows.

Fair Value Measurement

The Company follows guidance included in the Accounting Standards Codification (“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 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 September 30, 2018 and December 31, 2017, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated at $76.2 million and $78.0 million, respectively.

Accumulated Other Comprehensive Income (Loss)

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

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at January 1, 2018

 

$

(12,750

)

 

$

(1,791

)

 

$

(14,541

)

Other comprehensive income (loss) before reclassifications

 

 

(1,194

)

 

 

201

 

 

 

(993

)

Reclassification of stranded tax effects to retained earnings(1)

 

 

 

 

 

(315

)

 

 

(315

)

Net current-period other comprehensive income (loss)

 

 

(1,194

)

 

 

(114

)

 

 

(1,308

)

Balance at September 30, 2018

 

$

(13,944

)

 

$

(1,905

)

 

$

(15,849

)

 

 

(1)

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.

v3.10.0.1
Revenue Recognition
9 Months Ended
Sep. 30, 2018
Revenue Recognition [Abstract]  
Revenue Recognition

2.  Revenue Recognition

The following tables disaggregate the Company’s revenue by major market:

 

 

 

For the Three Months Ended September 30, 2018

 

 

 

 

Material

Handling

 

 

 

 

Distribution

 

 

 

 

Inter-company

 

 

 

 

Consolidated

 

Consumer

 

 

$

20,048

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

20,048

 

Vehicle

 

 

 

23,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,037

 

Food and beverage

 

 

 

19,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,159

 

Industrial

 

 

 

35,438

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

 

35,418

 

Auto aftermarket

 

 

 

 

 

 

 

 

37,557

 

 

 

 

 

 

 

 

 

 

37,557

 

Total net sales

 

 

$

97,682

 

 

 

 

$

37,557

 

 

 

 

$

(20

)

 

 

 

$

135,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2018

 

 

 

 

Material

Handling

 

 

 

 

Distribution

 

 

 

 

Inter-company

 

 

 

 

Consolidated

 

Consumer

 

 

$

64,325

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

64,325

 

Vehicle

 

 

 

75,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75,338

 

Food and beverage

 

 

 

72,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,124

 

Industrial

 

 

 

105,834

 

 

 

 

 

 

 

 

 

 

(89

)

 

 

 

 

105,745

 

Auto aftermarket

 

 

 

 

 

 

 

 

110,815

 

 

 

 

 

 

 

 

 

 

110,815

 

Total net sales

 

 

$

317,621

 

 

 

 

$

110,815

 

 

 

 

$

(89

)

 

 

 

$

428,347

 

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 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 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 Condensed Consolidated Statement of Financial Position (Unaudited) related to revenue recognition include:

 

 

 

September 30,

 

 

December 31,

 

 

Statement of Financial Position

 

 

2018

 

 

2017

 

 

Classification

Returns, discounts and other allowances

 

$

(1,272

)

 

$

(853

)

 

Accounts receivable

Right of return asset

 

 

529

 

 

 

433

 

 

Inventories, net

Customer deposits

 

 

(1,099

)

 

 

(140

)

 

Other current liabilities

Accrued rebates

 

 

(2,177

)

 

 

(2,962

)

 

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, General and Administrative Expenses for the Company’s manufacturing business and as Cost of Sales for the Company’s distribution business in the accompanying Condensed Consolidated Statements of Operations (Unaudited). The Company incurred costs for shipments to customers of approximately $2.1 million and $1.9 million for the three months ended September 30, 2018 and 2017, respectively, and $7.4 million and $6.2 million for the nine months ended September 30, 2018 and 2017, respectively, in Selling, General and Administrative Expenses and $1.4 million and $1.5 million for the three months ended September 30, 2018 and 2017, respectively, and $4.2 million and $4.5 million for the nine months ended September 30, 2018 and 2017, respectively, in Cost of Sales. All other internal distribution costs are recorded in Selling, General and Administrative Expenses.

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.

v3.10.0.1
Impairment Charges
9 Months Ended
Sep. 30, 2018
Asset Impairment Charges [Abstract]  
Impairment Charges

3.  Impairment Charges

As part of its ongoing strategy, the Company has been evaluating its various real estate holdings over the past two years. As a result of these initiatives, certain buildings have been reclassified to held for sale in 2017 and 2018. Based on the estimated fair value of these buildings (using primarily third party offers considered to be Level 2 inputs), less estimated costs to sell, the Company recorded impairment charges of $0.3 million and $0.5 million during the nine months ended September 30, 2018 and 2017, respectively. No impairment charges related to these initiatives were recorded during the three months ended September 30, 2018 and 2017. As of December 31, 2017, the Company had classified $0.3 million for these buildings as held for sale, in Other Assets in the Condensed Consolidated Statements of Financial Position (Unaudited). No assets were classified as held for sale as of September 30, 2018.

v3.10.0.1
Discontinued Operations
9 Months Ended
Sep. 30, 2018
Discontinued Operations And Disposal Groups [Abstract]  
Discontinued Operations

4.  Discontinued Operations

On December 18, 2017, the Company, collectively with its wholly owned subsidiary, Myers Holdings Brasil, Ltda. (“Holdings”), completed the sale of its subsidiaries, Myers do Brasil Embalagens Plasticas Ltda. and Plasticos Novel do Nordeste Ltda. (collectively, the “Brazil Business”), to Novel Holdings – Eireli (“Buyer”), an entity controlled by a member of the Brazil Business’ management team. The Brazil Business was part of the Material Handling Segment. Pursuant to the terms of the purchase agreement, the Buyer paid a purchase price of one U.S. Dollar to the Company and has assumed all liabilities and obligations of the Brazil Business, whether arising prior to or after the closing of the transaction. There are no additional amounts due, or to be settled, under the terms of the purchase agreement with the Buyer. The Company recorded a loss on the sale of the Brazil Business during the fourth quarter of 2017 of $35.0 million, which included $1.2 million of cash held by the Brazil Business and approximately $0.3 million of costs to sell. In addition, the Company recorded a U.S. tax benefit of approximately $15 million as a result of a worthless stock deduction related to the Company’s investment in the Brazil Business.

The Company has agreed to be the guarantor under a factoring arrangement between the Buyer and Banco Alfa de Investimento S.A. until December 31, 2019 for up to $7 million, in the event the Buyer is unable to meet its obligations under this arrangement. The Company also holds a first lien against certain machinery and equipment, exercisable only upon default by the Buyer under the guaranty. Based on the nature of the guaranty, as well as the existence of the lien, the Company believes the fair value of the guaranty is immaterial (based primarily on Level 3 inputs), and thus has recorded no liability related to this guaranty in the Condensed Consolidated Statement of Financial Position (Unaudited). This guaranty also creates a variable interest to the Company in the Brazil Business. Based on the terms of the transaction and the fact that the Company has no management involvement or voting interests in the Brazil Business following the sale, the Company does not have any power to direct the significant activities of the Brazil Business, and is thus not the primary beneficiary.

On February 17, 2015, the Company sold its Lawn and Garden business to an entity controlled by Wingate Partners V, L.P. (“L&G Buyer”), a private equity firm, for $110 million, subject to a working capital adjustment of approximately $4.0 million paid to the L&G Buyer in 2016. The terms of the agreement included a $90 million cash payment and promissory notes totaling $20 million that mature in August 2020 with a 6% interest rate, with approximately $8.6 million placed in escrow that was due to be settled by August 2016. The release of these funds had been extended pending the resolution of indemnification claims, as further described in Note 12. In April 2018, the Company reached agreement on the material terms of a settlement, and, as a result, recorded a pre-tax charge of $1.225 million to discontinued operations for the three months ended March 31, 2018. The settlement was finalized and paid in May 2018, and upon settlement and release of any further obligation on behalf of the Company, the remaining $7.4 million was released from escrow to the Company.

During the third quarter of 2018, management of the Lawn and Garden business, now named HC Companies, Inc. (“HC”), requested an extension to the maturity of the notes as part of an effort to restructure their debt. The Company believes there is uncertainty about the ability to collect on the notes and corresponding accrued interest. The fair market value of the notes at the date of the sale was $17.8 million. The fair value of the notes receivable was calculated using Level 2 inputs as defined in Note 1. The carrying value of the notes as of September 30, 2018 was $19.1 million, which represents the fair value at the date of sale plus accretion and is included in Notes Receivable in the accompanying Condensed Consolidated Statements of Financial Position (Unaudited). As a result of the uncertainty regarding the ability to collect on the notes and corresponding accrued interest, the Company recorded a provision for expected loss of $23.0 million within continuing operations to Other Expenses in the Condensed Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2018 based on the carrying value of the notes and corresponding accrued interest at September 30, 2018. In connection with the financial risk described above with HC, the Company further assessed its potential obligations under a lease guarantee granted as part of the sale of the Lawn and Garden business. Refer to Note 12 for further information with regards to this obligation.

Summarized selected financial information for discontinued operations for the three and nine months ended September 30, 2018 and 2017 are presented in the following table:

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net sales

 

 

 

$

 

 

$

8,963

 

 

$

 

 

$

21,145

 

Cost of sales

 

 

 

 

 

 

 

7,368

 

 

 

 

 

 

18,316

 

Selling, general, and administrative

 

 

 

 

123

 

 

 

1,284

 

 

 

1,348

 

 

 

3,782

 

(Gain) loss on disposal of assets

 

 

 

 

 

 

 

21

 

 

 

 

 

 

(64

)

Interest income, net

 

 

 

 

 

 

 

(53

)

 

 

 

 

 

(283

)

Income (loss) from discontinued operations before income tax

 

 

 

 

(123

)

 

 

343

 

 

 

(1,348

)

 

 

(606

)

Income tax expense (benefit)

 

 

 

 

(121

)

 

 

169

 

 

 

(435

)

 

 

53

 

Income (loss) from discontinued operations, net of income tax

 

 

 

$

(2

)

 

$

174

 

 

$

(913

)

 

$

(659

)

Net cash flows provided by discontinued operations in 2018 resulted from the payment of expenses related to the sale of the Brazil Business, the payment of the settlement with the L&G Buyer noted above and partial receipt of the tax benefit from the worthless stock deduction related to the Brazil Business. The worthless stock deduction has allowed the Company to reduce its estimated U.S. federal tax payments to date in 2018 by $4.3 million.

v3.10.0.1
Restructuring
9 Months Ended
Sep. 30, 2018
Restructuring And Related Activities [Abstract]  
Restructuring

5.  Restructuring

On March 9, 2017, the Company announced a restructuring plan (the “Plan”) to improve the Company’s organizational structure and operational efficiency within the Material Handling Segment, which related primarily to anticipated facility shutdowns and associated activities.  Total restructuring costs incurred related to the Plan were approximately $7.7 million, which includes employee severance and other employee-related costs of approximately $3.1 million, $2.6 million related to equipment relocation and facility shut down costs and non-cash charges, primarily accelerated depreciation charges on property, plant and equipment, of approximately $2.0 million.

All actions under the Plan are substantially completed. The Company incurred $0.1 million and $7.1 million of restructuring charges associated with the planned closure of facilities under the Plan during the nine months ended September 30, 2018 and 2017, respectively, and $2.1 million of restructuring charges during the three months ended September 30, 2017. No costs were incurred during the three months ended September 30, 2018. These costs were presented in the Condensed Consolidated Statements of Operations (Unaudited) as follows:

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Cost of sales

$

 

 

$

1,908

 

 

$

119

 

 

$

6,968

 

Selling, general and administrative expenses

 

 

 

 

164

 

 

 

 

 

 

164

 

 

$

 

 

$

2,072

 

 

$

119

 

 

$

7,132

 

 

The table below summarizes restructuring activity for the nine months ended September 30, 2018:

 

 

 

Employee Reduction

 

 

Accelerated Depreciation

 

 

Other Exit Costs

 

 

Total

 

Balance at January 1, 2018

 

$

1,098

 

 

$

 

 

$

90

 

 

$

1,188

 

Charges to expense

 

 

31

 

 

 

16

 

 

 

72

 

 

 

119

 

Cash payments

 

 

(1,035

)

 

 

 

 

 

(162

)

 

 

(1,197

)

Non-cash utilization

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Balance at September 30, 2018

 

$

94

 

 

$

 

 

$

 

 

$

94

 

 

In addition to the restructuring costs noted above, the Company also incurred other associated costs of the Plan of $0.3 million and $1.0 million for the three and nine months ended September 30, 2017, which are included in Selling, General and Administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited), and are primarily related to third party consulting costs. No such costs were incurred for the three and nine months ended September 30, 2018.

 

For the three and nine months ended September 30, 2018, the Company recognized a gain of $0.2 million, and for the three and nine months ended September 30, 2017, the Company recognized gains of $2.8 million and $4.1 million, respectively, on asset dispositions in connection with the planned facility closures.

v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Inventories

6.  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 30 percent of inventories are valued using the LIFO method of determining cost. All other inventories are valued at 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 necessarily be based on management’s estimates of expected year-end inventory levels and costs. Because these are based on estimates, interim results are subject to change in the final year-end LIFO inventory valuation. During the current year, one inventory pool had a reduction in inventory quantities that is expected to hold through year-end, and therefore an adjustment was recorded for the nine months ended September 30, 2018 to decrease cost of sales by $0.5 million as a result of the liquidation of LIFO inventories. No adjustment was recorded for the three months ended September 30, 2018 as the estimated interim LIFO adjustment was not material.

 

In the prior year, one inventory pool had an increase in commodity costs that was expected to hold through year-end, and therefore, an adjustment of $0.4 million was made to increase the LIFO reserve and cost of sales for the three and nine months ended September 30, 2017.

Inventories consisted of the following:

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Finished and in-process products

 

$

28,772

 

 

$

31,307

 

Raw materials and supplies

 

 

15,538

 

 

 

15,859

 

 

 

$

44,310

 

 

$

47,166

 

 

v3.10.0.1
Other Liabilities
9 Months Ended
Sep. 30, 2018
Other Liabilities Disclosure [Abstract]  
Other Liabilities

7.  Other Liabilities

The balance in other current liabilities is comprised of the following:

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Customer deposits and accrued rebates

 

$

3,276

 

 

$

3,102

 

Dividends payable

 

 

5,273

 

 

 

4,478

 

Accrued litigation, claims and professional fees

 

 

690

 

 

 

417

 

Current portion of environmental reserves

 

 

1,015

 

 

 

1,322

 

Other accrued expenses

 

 

6,560

 

 

 

6,153

 

 

 

$

16,814

 

 

$

15,472

 

 


The balance in other liabilities (long-term) is comprised of the following:

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Lease guarantee obligation

 

$

10,323

 

 

$

 

Environmental reserves

 

 

3,877

 

 

 

3,814

 

Supplemental executive retirement plan liability

 

 

2,169

 

 

 

2,416

 

Pension liability

 

 

1,045

 

 

 

1,318

 

Deferred gain on sale of assets

 

 

1,270

 

 

 

 

Other long-term liabilities

 

 

580

 

 

 

688

 

 

 

$

19,264

 

 

$

8,236

 

 

v3.10.0.1
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

8.  Goodwill and Intangible Assets

The change in goodwill for the nine months ended September 30, 2018 was as follows:

 

 

 

Distribution

 

 

Material

Handling

 

 

Total

 

January 1, 2018

 

$

505

 

 

$

59,466

 

 

$

59,971

 

Foreign currency translation

 

 

 

 

 

(305

)

 

 

(305

)

September 30, 2018

 

$

505

 

 

$

59,161

 

 

$

59,666

 

 

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 has indefinite-lived trade names which had a carrying value of $9.8 million and $10.0 million at September 30, 2018 and December 31, 2017, respectively.

v3.10.0.1
Net Income (Loss) per Common Share
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Net Income (Loss) per Common Share

9.  Net Income (Loss) per Common Share

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

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Weighted average common shares outstanding basic

 

 

35,229,171

 

 

 

30,266,838

 

 

 

32,783,853

 

 

 

30,149,818

 

Dilutive effect of stock options and restricted stock

 

 

 

 

 

385,105

 

 

 

 

 

 

374,343

 

Weighted average common shares outstanding diluted

 

 

35,229,171

 

 

 

30,651,943

 

 

 

32,783,853

 

 

 

30,524,161

 

 

Due to the net loss for the three and nine months ended September 30, 2018, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive. Options to purchase 256,600 and 261,100 shares of common stock that were outstanding for the three and nine months ended September 30, 2017, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of common shares, and were therefore anti-dilutive.

v3.10.0.1
Stock Compensation
9 Months Ended
Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock Compensation

10.  Stock Compensation

The Company’s Amended and Restated 2017 Incentive Stock Plan (the “2017 Plan”) authorizes the Compensation Committee of the Board of Directors to issue up to 5,126,950 shares of various stock awards including stock options, performance stock units, restricted stock units and other forms of equity-based awards to key employees and directors. Options granted and outstanding vest over the requisite service period and expire ten years from the date of grant.

In March 2018, the Company granted 255,072 stock options with a weighted average exercise price of $21.30 and a weighted average fair value of $6.30. The fair value of options granted is estimated using a binomial lattice option pricing model. Also in March 2018, the Company granted 62,653 and 92,169 time-based and performance-based restricted stock units, respectively, with a weighted average fair value of $21.30. There were no stock-based awards granted in the second or third quarter of 2018.

Stock compensation expense was approximately $1.2 million and $1.1 million for the three months ended September 30, 2018 and 2017, respectively, and $3.5 million and $2.9 million for the nine months ended September 30, 2018 and 2017, respectively. These expenses are included in Selling, General and Administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited). Total unrecognized compensation cost related to non-vested stock-based compensation arrangements at September 30, 2018 was approximately $6.9 million, which will be recognized over the next three years, as such compensation is earned.

v3.10.0.1
Equity
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Equity

11.  Equity

In May 2018, the Company completed a public offering of 4,600,000 shares of its common stock at a price to the public of $18.50 per share. The net proceeds from the offering were approximately $79.5 million, after deducting underwriting discounts and commissions and $0.5 million of offering expenses paid by the Company. The Company used a portion of the net proceeds received from the offering to repay a portion of its outstanding indebtedness during the second quarter of 2018.

v3.10.0.1
Contingencies
9 Months Ended
Sep. 30, 2018
Commitments And Contingencies Disclosure [Abstract]  
Contingencies

12.  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. When 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, including those described below, 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.

New Idria Mercury Mine

In September 2015, the U.S. Environmental Protection Agency (“EPA”) formally informed a subsidiary of the Company, Buckhorn, Inc. (“Buckhorn”) via a notice letter and related documents (the “Notice Letter”) that it considers Buckhorn to be a potentially responsible party (“PRP”) in connection with the New Idria Mercury Mine site (“New Idria Mine”).  New Idria Mining & Chemical Company (“NIMCC”), which owned and/or operated the New Idria Mine through 1976, was merged into Buckhorn Metal Products Inc. in 1981, which was subsequently acquired by Myers Industries in 1987.  As a result of the EPA Notice Letter, Buckhorn and the Company engaged in negotiations with the EPA with respect to a draft Administrative Order of Consent (“AOC”) proposed by the EPA for the Remedial Investigation/Feasibility Study (“RI/FS”) to determine the extent of remediation necessary and the screening of alternatives.

Buckhorn and the EPA are currently finalizing their negotiations on the AOC and related Statement of Work (“SOW”) with regards to the New Idria Mine and the Company anticipates executing the final AOC during the fourth quarter of 2018. The AOC will require the Company to provide $2 million of financial assurance to the EPA to secure its performance during the estimated 3 to 4 year life of the RI/FS.  Per federal statutes, this financial assurance can take several forms, including a financial guarantee by the Company, a letter of credit, or a surety bond.  The Company expects to provide this assurance within 30 days following the execution of the AOC, and is currently evaluating the options available under the statute.

Since October 2011, when New Idria was added to the Superfund National Priorities List by the EPA, the Company has recognized $5.7 million of costs, of which approximately $2.3 million has been paid to date. These costs are comprised primarily of negotiation of the AOC, identification of possible insurance resources and other PRPs, estimates to perform the RI/FS, EPA oversight fees, past cost claims made by the EPA, periodic monitoring, and response to a unilateral administrative order issued by the EPA in 2015. No expenses were recorded related to the New Idria Mine in the three and nine months ended September 30, 2018. Expenses of $0.3 million were recorded in the three and nine months ended September 30, 2017. As of September 30, 2018, the Company has a total reserve of $3.4 million related to the New Idria Mine, of which $0.7 million is classified in Other Current Liabilities and $2.7 million in Other Liabilities on the Condensed Consolidated Statements of Financial Position (Unaudited).


After preparation and EPA approval of the work plan for the RI/FS, which is anticipated to occur in the first half of 2019, it is possible that adjustments to the aforementioned reserves 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 remedial actions that may be required, the extent of oversight by the EPA, the number and financial condition of other PRPs that may be named as well as the extent of their responsibility for the remediation, and the availability of insurance coverage for these expenses.

At this time, we have not accrued for remediation costs in connection with this site as we are unable to estimate the liability, given the circumstances referred to above, including the fact that the final remediation strategy has not yet been determined.

New Almaden Mine

A number of parties, including the Company and its subsidiary, Buckhorn (as successor to NIMCC), were alleged by trustee agencies of the United States and the State of California to be responsible for natural resource damages due to environmental contamination of areas comprising the historical New Almaden mercury mines located in the Guadalupe River Watershed region in Santa Clara County, California (“County”). In 2005, Buckhorn and the Company, without admitting liability or chain of ownership of NIMCC, resolved the trustees’ claim against them through a consent decree that required them to contribute financially to the implementation by the County of an environmentally beneficial project within the impacted area.  Buckhorn and the Company negotiated an agreement with the County, whereby Buckhorn and the Company agreed to reimburse one-half of the County’s costs of implementing the project, originally estimated to be approximately $1.6 million. As a result, in 2005, the Company recognized expense of $0.8 million representing its share of the initial estimated project costs, of which approximately $0.5 million has been paid to date. In April 2016, the Company was notified by the County that the original cost estimate may no longer be appropriate due to expanded scope and increased costs of construction and provided a revised estimate of between $3.3 million and $4.4 million.  The Company completed a detailed review of the support provided by the County for the revised estimate, and as a result, recognized additional expense of $1.2 million in 2016.  No costs were incurred related to New Almaden in the three and nine months ended September 30, 2018 or 2017. As of September 30, 2018, the Company has a total reserve of $1.5 million related to the New Almaden Mine, of which $0.3 million is classified in Other Current Liabilities and $1.2 million in Other Liabilities on the Condensed Consolidated Statements of Financial Position (Unaudited).  

The project has not yet been implemented though significant work on design and planning has been performed. Based on the latest report from the County, field work on the project is expected to commence in 2019.  As work on the project occurs, it is possible that adjustments to the aforementioned reserves will be necessary to reflect new information.  In addition, the Company may have claims against and defenses to claims by the County under the 2005 agreement that could reduce or offset its obligation for reimbursement of some of these potential additional costs. With the assistance of environmental consultants, the Company will closely monitor this matter and will continue to assess its reserves as additional information becomes available.

Lawn and Garden Indemnification Claim

In connection with the sale of the Lawn and Garden business, as described in Note 4, the Company received Notices of Indemnification Claims in April 2015 and July 2016 (collectively, the “Claims”), alleging breaches of certain representations and warranties under the agreement resulting in alleged losses in the amount of approximately $10 million. As described in Note 4, approximately $8.6 million of the sale proceeds that were placed in escrow were due to be settled in August 2016; however, the release of these funds had been extended pending the resolution of the Claims, which were the subject of a lawsuit in the Delaware Chancery Court.

In April 2018, the Company reached agreement on the material terms of a settlement, and as a result, recorded a pre-tax charge of $1.225 million to discontinued operations for the three months ended March 31, 2018. The settlement agreement was finalized in May 2018, and the settlement amount was funded from the escrow account. In addition, upon settlement and release of any further obligation on behalf of the Company, the remaining $7.4 million was released from escrow to the Company in the second quarter of 2018.

Lawn and Garden Lease Guarantee

In connection with the sale of the Lawn and Garden business, as described in Note 4, the Company is a guarantor for one of HC’s facility leases expiring in September 2025 for any remaining rent payments under the lease for which HC is unable to meet its obligations. Current annual rent for the facility is approximately $2 million, and is subject to annual CPI increases throughout the lease term. In connection with the financial risk associated with HC, as described in Note 4, the Company assessed its range of potential obligations under the lease guarantee, and as a result of this analysis, recorded a liability of $10.3 million as of September 30, 2018 in Other Liabilities on the Condensed Consolidated Statements of Financial Position (Unaudited). The related pre-tax charge of $10.3 million for the three months ended September 30, 2018 was recorded to Other Expenses in the Condensed Consolidated Statements of Operations (Unaudited).

v3.10.0.1
Long-Term Debt and Loan Agreements
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Long-Term Debt and Loan Agreements

13.  Long-Term Debt and Loan Agreements

Long-term debt consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Loan Agreement

 

$

 

 

$

74,632

 

4.67% Senior Unsecured Notes due 2021

 

 

40,000

 

 

 

40,000

 

5.25% Senior Unsecured Notes due 2024

 

 

11,000

 

 

 

11,000

 

5.30% Senior Unsecured Notes due 2024

 

 

15,000

 

 

 

15,000

 

5.45% Senior Unsecured Notes due 2026

 

 

12,000

 

 

 

12,000

 

 

 

 

78,000

 

 

 

152,632

 

Less unamortized deferred financing costs

 

 

1,307

 

 

 

1,596

 

 

 

$

76,693

 

 

$

151,036

 

 

In March 2017, the Company entered into a Fifth Amended and Restated Loan Agreement (the “Loan Agreement”).  The Loan Agreement replaced the pre-existing $300 million senior revolving credit facility with a $200 million facility and extended the term from December 2018 to March 2022. The Company also holds Senior Unsecured Notes (“Notes”), which range in face value from $11 million to $40 million, with interest rates ranging from 4.67% to 5.45%, payable semiannually, and maturing between 2021 and 2026. At September 30, 2018, $78 million of the Notes were outstanding.  

Under the terms of the Loan Agreement, the Company may borrow up to $200 million, reduced for letters of credit issued. As of September 30, 2018, the Company had $195.6 million available under the Loan Agreement. The Company had $4.4 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business at September 30, 2018. Borrowings under the Loan Agreement bear interest at the LIBOR rate, prime rate, federal funds effective rate, the Canadian deposit offered rate, or the euro currency reference rate depending on the type of loan requested by the Company, plus the applicable margin as set forth in the Loan Agreement.

The weighted average interest rate on borrowings under the Company’s long-term debt was 6.55% and 5.18% for the three months ended September 30, 2018 and 2017, respectively, and 5.70% and 5.05% for the nine months ended September 30, 2018 and 2017, respectively, which includes a quarterly facility fee on the used and unused portion, as well as amortization of deferred financing costs. 

As of September 30, 2018, the Company was in compliance with all of its debt covenants associated with its Loan Agreement and Notes. The most restrictive financial covenants for all of the Company’s debt are an interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense) and a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and amortization, as adjusted).

v3.10.0.1
Retirement Plans
9 Months Ended
Sep. 30, 2018
Compensation And Retirement Disclosure [Abstract]  
Retirement Plans

14.  Retirement Plans

The Company and certain of its subsidiaries have pension and profit sharing plans covering substantially all of their employees. The Company’s 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. The plan was frozen in 2007, and thus benefits for service were no longer accumulated after this date.

Net periodic pension cost is as follows:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Interest cost

 

$

56

 

 

$

63

 

 

$

168

 

 

$

189

 

Expected return on assets

 

 

(79

)

 

 

(74

)

 

 

(237

)

 

 

(222

)

Amortization of net loss

 

 

21

 

 

 

24

 

 

 

63

 

 

 

72

 

Net periodic pension cost

 

$

(2

)

 

$

13

 

 

$

(6

)

 

$

39

 

 

The Company does not expect to make a contribution to the plan in 2018.

v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

15.  Income Taxes

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). Effective January 1, 2018, the Tax Act establishes a corporate income tax rate of 21%, replacing the 35% rate, and creates a territorial tax system rather than a worldwide system, which generally eliminates the U.S. federal income tax on dividends from foreign subsidiaries. The transition to the territorial system included a one-time deemed repatriation transition tax (“Transition Tax”) on certain foreign earnings previously untaxed in the United States. The Company has made reasonable estimates for certain provisions under the Tax Act and recorded a provisional net benefit to income tax expense of $1.2 million related to its enactment for the year ended December 31, 2017. This net benefit included a provisional deferred tax benefit of $3.0 million related to revaluing the net U.S. deferred tax liabilities to reflect the lower U.S. corporate tax rate. The deferred tax benefit was offset by a provision of $1.8 million related to the Transition Tax. In general, the Transition Tax imposed by the Tax Act results in the taxation of foreign earnings and profits (“E&P”) at a 15.5% rate on liquid assets and 8% on the remaining unremitted foreign E&P, both net of foreign tax credits. The provisional amounts for the Transition Tax recorded by the Company in 2017 included the undistributed E