MYERS INDUSTRIES INC, 10-Q filed on 11/5/2019
Quarterly Report
v3.19.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2019
Oct. 31, 2019
Cover [Abstract]    
Entity Registrant Name MYERS INDUSTRIES INC  
Entity Central Index Key 0000069488  
Trading Symbol MYE  
Document Type 10-Q  
Document Period End Date Sep. 30, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   35,520,001
Entity File Number 1-8524  
Entity Tax Identification Number 34-0778636  
Entity Address, Address Line One 1293 South Main Street  
Entity Address, City or Town Akron  
Entity Address, State or Province OH  
Entity Address, Postal Zip Code 44301  
City Area Code 330  
Local Phone Number 253-5592  
Entity Incorporation, State or Country Code OH  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, without par value  
Security Exchange Name NYSE  
Document Quarterly Report true  
Document Transition Report false  
v3.19.3
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Net sales $ 125,480 $ 135,219 $ 398,880 $ 428,347
Cost of sales 85,894 93,128 266,799 291,150
Gross profit 39,586 42,091 132,081 137,197
Selling, general and administrative expenses 31,515 34,381 102,792 104,360
(Gain) loss on disposal of fixed assets 11 218 (87) (96)
Impairment charges 0 0 916 308
Other expenses 0 33,331 0 33,331
Operating income (loss) 8,060 (25,839) 28,460 (706)
Interest expense, net 993 883 3,059 3,835
Income (loss) from continuing operations before income taxes 7,067 (26,722) 25,401 (4,541)
Income tax expense (benefit) 1,848 (5,585) 6,933 233
Income (loss) from continuing operations 5,219 (21,137) 18,468 (4,774)
Income (loss) from discontinued operations, net of income tax 0 (2) 127 (913)
Net income (loss) $ 5,219 $ (21,139) $ 18,595 $ (5,687)
Income (loss) per common share from continuing operations:        
Basic $ 0.15 $ (0.60) $ 0.52 $ (0.15)
Diluted 0.15 (0.60) 0.52 (0.15)
Income (loss) per common share from discontinued operations:        
Basic 0 0 0 (0.02)
Diluted 0 0 0 (0.02)
Net income (loss) per common share:        
Basic 0.15 (0.60) 0.52 (0.17)
Diluted $ 0.15 $ (0.60) $ 0.52 $ (0.17)
v3.19.3
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net income (loss) $ 5,219 $ (21,139) $ 18,595 $ (5,687)
Other comprehensive income (loss)        
Adoption of ASU 2018-02       (315)
Foreign currency translation adjustment (466) 649 1,069 (1,194)
Pension liability, net of tax expense of $67 in 2018       201
Total other comprehensive income (loss) (466) 649 1,069 (1,308)
Comprehensive income (loss) $ 4,753 $ (20,490) $ 19,664 $ (6,995)
v3.19.3
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
v3.19.3
Condensed Consolidated Statements of Financial Position - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current Assets    
Cash $ 74,814 $ 58,894
Accounts receivable, less allowances of $2,124 and $2,259, respectively 65,129 72,939
Income tax receivable 0 4,892
Inventories, net 44,009 43,596
Prepaid expenses and other current assets 3,441 2,534
Total Current Assets 187,393 182,855
Other Assets    
Property, plant, and equipment, net 56,096 65,460
Right of use asset - operating leases 6,384 0
Goodwill 66,428 59,068
Intangible assets, net 32,909 30,280
Deferred income taxes 6,074 5,270
Other 2,002 5,712
Total Assets 357,286 348,645
Current Liabilities    
Accounts payable 54,196 60,849
Accrued expenses    
Employee compensation 12,023 16,531
Income taxes 738 0
Taxes, other than income taxes 1,260 1,403
Accrued interest 811 1,939
Other current liabilities 18,035 16,701
Operating lease liability - short-term 2,215 0
Total Current Liabilities 89,278 97,423
Long-term debt 77,080 76,790
Operating lease liability - long-term 4,402 0
Other liabilities 22,706 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 35,512,301 and 35,374,121; net of treasury shares of 7,040,156 and 7,178,336, respectively) 21,663 21,547
Additional paid-in capital 295,560 292,558
Accumulated other comprehensive loss (17,211) (18,280)
Retained deficit (136,192) (141,187)
Total Shareholders’ Equity 163,820 154,638
Total Liabilities and Shareholders’ Equity $ 357,286 $ 348,645
v3.19.3
Condensed Consolidated Statements of Financial Position (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current Assets    
Allowance for Doubtful Accounts Receivable, Current $ 2,124 $ 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) 35,512,301 35,374,121
Common shares, treasury (in shares) 7,040,156 7,178,336
v3.19.3
Condensed 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, 2017 $ 93,752 $ 18,547 $ 209,253 $ (14,541) $ (119,507)
Stockholders' Equity [Roll Forward]          
Net income (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, netof 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)
Beginning balance at Jun. 30, 2018 181,261 21,430 289,088 (16,498) (112,759)
Stockholders' Equity [Roll Forward]          
Net income (21,139) 0 0 0 (21,139)
Foreign currency translation adjustment 649 0 0 649 0
Shares issued under incentive plans, net of shares withheld for tax 1,875 93 1,782 0 0
Stock compensation expense 1,227 0 1,227 0 0
Declared dividends (4,816) 0 0 0 (4,816)
Ending balance at Sep. 30, 2018 159,057 21,523 292,097 (15,849) (138,714)
Stockholders' Equity [Roll Forward]          
Adoption of ASU | ASU 2018-02 [Member] 0 0 0 (315) 315
Beginning balance at Dec. 31, 2018 154,638 21,547 292,558 (18,280) (141,187)
Stockholders' Equity [Roll Forward]          
Net income 18,595 0 0 0 18,595
Foreign currency translation adjustment 1,069 0 0 1,069 0
Shares issued under incentive plans, net of shares withheld for tax (230) 116 (346) 0 0
Stock compensation expense 3,348 0 3,348 0 0
Declared dividends (14,505) 0 0 0 (14,505)
Ending balance at Sep. 30, 2019 163,820 21,663 295,560 (17,211) (136,192)
Beginning balance at Jun. 30, 2019 162,410 21,646 294,066 (16,745) (136,557)
Stockholders' Equity [Roll Forward]          
Net income 5,219 0 0 0 5,219
Foreign currency translation adjustment (466) 0 0 (466) 0
Shares issued under incentive plans, net of shares withheld for tax 383 17 366 0 0
Stock compensation expense 1,128 0 1,128 0 0
Declared dividends (4,854) 0 0 0 (4,854)
Ending balance at Sep. 30, 2019 163,820 21,663 295,560 (17,211) (136,192)
Stockholders' Equity [Roll Forward]          
Adoption of ASU | ASU 2016-02 [Member] $ 905 $ 0 $ 0 $ 0 $ 905
v3.19.3
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Tax expense on pension liability       $ 67
Retained Deficit [Member]        
Tax amount related to retained deficit     $ 332  
Dividends declared per share $ 0.14 $ 0.14 $ 0.41 $ 0.41
Accumulated Other Comprehensive Income (Loss) [Member]        
Tax expense on pension liability       $ 67
v3.19.3
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Cash Flows From Operating Activities    
Net income (loss) $ 18,595 $ (5,687)
Income (loss) from discontinued operations, net of income taxes 127 (913)
Income (loss) from continuing operations 18,468 (4,774)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities    
Depreciation 11,505 13,329
Amortization 6,183 6,455
Accelerated depreciation associated with restructuring activities 0 16
Non-cash stock-based compensation expense 3,348 3,532
(Gain) loss on disposal of fixed assets (87) (96)
Provision for loss on note receivable 0 23,008
Lease guarantee contingency 0 10,323
Deferred taxes 0 (7,666)
Impairment charges 916 308
Other 441 (150)
Payments on performance based compensation (413) (1,249)
Other long-term liabilities 3,388 (313)
Cash flows provided by (used for) working capital    
Accounts receivable 9,775 7,890
Inventories 2,386 2,708
Prepaid expenses and other current assets (877) (853)
Accounts payable and accrued expenses (15,541) (11,347)
Net cash provided by (used for) operating activities - continuing operations 39,492 41,121
Net cash provided by (used for) operating activities - discontinued operations 7,297 858
Net cash provided by (used for) operating activities 46,789 41,979
Cash Flows From Investing Activities    
Capital expenditures (5,669) (3,560)
Acquisition of business (18,000) 0
Proceeds from sale of property, plant and equipment 7,514 2,633
Net cash provided by (used for) investing activities - continuing operations (16,155) (927)
Net cash provided by (used for) investing activities - discontinued operations 0 0
Net cash provided by (used for) investing activities (16,155) (927)
Cash Flows From Financing Activities    
Net borrowings (repayments) on credit facility 0 (74,557)
Cash dividends paid (14,524) (13,039)
Proceeds from issuance of common stock 755 2,825
Proceeds from public offering of common stock, net of equity issuance costs 0 79,522
Shares withheld for employee taxes on equity awards (985) (446)
Net cash provided by (used for) financing activities - continuing operations (14,754) (5,695)
Net cash provided by (used for) financing activities - discontinued operations 0 0
Net cash provided by (used for) financing activities (14,754) (5,695)
Foreign exchange rate effect on cash 40 (31)
Net increase in cash and restricted cash 15,920 35,326
Cash and restricted cash at January 1 58,894 11,179
Cash and restricted cash at September 30 $ 74,814 $ 46,505
v3.19.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
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, 2018.

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, 2019, and the results of operations and cash flows for the periods presented. The results of operations for the quarter and nine months ended September 30, 2019 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2019.

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 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 the sale-leaseback transaction that occurred in 2018. The standard did not have a material impact on the Company’s condensed consolidated results of operations or cash flows.

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

 

 

 

For the Quarter Ended September 30, 2019

 

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption of

ASC 842

 

Net sales

 

$

125,480

 

 

$

 

 

$

125,480

 

Cost of sales

 

 

85,894

 

 

 

 

 

 

85,894

 

Gross profit

 

 

39,586

 

 

 

 

 

 

39,586

 

Selling, general and administrative expenses

 

 

31,515

 

 

 

(34

)

 

 

31,481

 

(Gain) loss on disposal of fixed assets

 

 

11

 

 

 

 

 

 

11

 

Operating income

 

 

8,060

 

 

 

34

 

 

 

8,094

 

Interest expense, net

 

 

993

 

 

 

 

 

 

993

 

Income from continuing operations before income taxes

 

 

7,067

 

 

 

34

 

 

 

7,101

 

Income tax expense

 

 

1,848

 

 

 

9

 

 

 

1,857

 

Income from continuing operations

 

$

5,219

 

 

$

25

 

 

$

5,244

 

 

 

 

For the Nine Months Ended September 30, 2019

 

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption of

ASC 842

 

Net sales

 

$

398,880

 

 

$

 

 

$

398,880

 

Cost of sales

 

 

266,799

 

 

 

 

 

 

266,799

 

Gross profit

 

 

132,081

 

 

 

 

 

 

132,081

 

Selling, general and administrative expenses

 

 

102,792

 

 

 

(101

)

 

 

102,691

 

(Gain) loss on disposal of fixed assets

 

 

(87

)

 

 

 

 

 

(87

)

Impairment charges

 

 

916

 

 

 

 

 

 

916

 

Operating income

 

 

28,460

 

 

 

101

 

 

 

28,561

 

Interest expense, net

 

 

3,059

 

 

 

 

 

 

3,059

 

Income from continuing operations before income taxes

 

 

25,401

 

 

 

101

 

 

 

25,502

 

Income tax expense

 

 

6,933

 

 

 

27

 

 

 

6,960

 

Income from continuing operations

 

$

18,468

 

 

$

74

 

 

$

18,542

 

 

 

 

 

As of  September 30, 2019

 

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption of

ASC 842

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Right of use asset - operating leases

 

$

6,384

 

 

$

(6,384

)

 

$

 

Deferred tax asset

 

 

6,074

 

 

 

306

 

 

 

6,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

18,035

 

 

$

233

 

 

$

18,268

 

Operating lease liability - short-term

 

 

2,215

 

 

 

(2,215

)

 

 

 

Operating lease liability - long-term

 

 

4,402

 

 

 

(4,402

)

 

 

 

Other liabilities

 

 

22,706

 

 

 

1,135

 

 

 

23,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Retained deficit

 

$

(136,192

)

 

$

(829

)

 

$

(137,021

)

 

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.  The Company does not believe that the adoption of this guidance will 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. 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.

Fair Value Measurement

The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:

 

Level 1:

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

 

Level 2:

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

 

Level 3:

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

Financial assets that are measured at net asset value, which is a practical expedient to estimating fair value, are not classified in the fair value hierarchy.

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 14, 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, 2019 and December 31, 2018, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated at $79.3 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 significant 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.

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, 2019

 

$

(16,251

)

 

$

(2,029

)

 

$

(18,280

)

Other comprehensive income (loss) before reclassifications

 

 

1,069

 

 

 

 

 

 

1,069

 

Net current-period other comprehensive income (loss)

 

 

1,069

 

 

 

 

 

 

1,069

 

Balance at September 30, 2019

 

$

(15,182

)

 

$

(2,029

)

 

$

(17,211

)

 

 

v3.19.3
Revenue Recognition
9 Months Ended
Sep. 30, 2019
Revenue Recognition [Abstract]  
Revenue Recognition

2.  Revenue Recognition

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended September 30, 2019

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

19,205

 

 

$

 

 

$

 

 

$

19,205

 

Vehicle

 

 

21,951

 

 

 

 

 

 

 

 

 

21,951

 

Food and beverage

 

 

13,010

 

 

 

 

 

 

 

 

 

13,010

 

Industrial

 

 

29,944

 

 

 

 

 

 

(18

)

 

 

29,926

 

Auto aftermarket

 

 

 

 

 

41,388

 

 

 

 

 

 

41,388

 

Total net sales

 

$

84,110

 

 

$

41,388

 

 

$

(18

)

 

$

125,480

 

 

 

 

For the Quarter 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, 2019

 

 

 

Material

Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

59,505

 

 

$

 

 

$

 

 

$

59,505

 

Vehicle

 

 

66,433

 

 

 

 

 

 

 

 

 

66,433

 

Food and beverage

 

 

54,977

 

 

 

 

 

 

 

 

 

54,977

 

Industrial

 

 

102,048

 

 

 

 

 

 

(40

)

 

 

102,008

 

Auto aftermarket

 

 

 

 

 

115,957

 

 

 

 

 

 

115,957

 

Total net sales

 

$

282,963

 

 

$

115,957

 

 

$

(40

)

 

$

398,880

 

 

 

 

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

 

 

 

September 30,

 

 

December 31,

 

 

Statement of Financial

Position

 

 

2019

 

 

2018

 

 

Classification

Returns, discounts and other allowances

 

$

(593

)

 

$

(1,169

)

 

Accounts receivable

Right of return asset

 

 

310

 

 

 

535

 

 

Inventories, net

Customer deposits

 

 

(108

)

 

 

(806

)

 

Other current liabilities

Accrued rebates

 

 

(2,201

)

 

 

(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, 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 in Selling, General and Administrative Expenses of approximately $2.0 million and $2.1 million for the quarters ended September 30, 2019 and 2018, respectively, and $6.2 million and $7.4 million for the nine months ended September 30, 2019 and 2018, respectively, and in Cost of Sales of approximately $1.3 million and $1.4 million for the quarters ended September 30, 2019 and 2018, respectively, and $4.3 million and $4.2 million for the nine months ended September 30, 2019 and 2018, respectively. 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.

v3.19.3
Acquisition
9 Months Ended
Sep. 30, 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 $18.6 million, which includes a preliminary estimated working capital adjustment of $0.6 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

$

2,072

 

Inventories

 

2,657

 

Prepaid expenses

 

20

 

Property, plant and equipment

 

124

 

Right of use asset - operating leases

 

229

 

Intangible assets

 

8,400

 

Goodwill

 

7,051

 

Assets acquired

$

20,553

 

 

 

 

 

Liabilities assumed:

 

 

 

Accounts payable

$

1,714

 

Operating lease liability - short term

 

112

 

Operating lease liability - long term

 

117

 

Total liabilities assumed

 

1,943

 

 

 

 

 

Net acquisition cost

$

18,610

 

 

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
Assets Held for Sale
9 Months Ended
Sep. 30, 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. As a result of these initiatives, certain buildings were reclassified as held for sale in 2018 and 2019. 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 $0.9 million and $0.3 million during the nine months ended September 30, 2019 and 2018, respectively. No impairment charges were recorded during the quarters ended September 30, 2019 and 2018.  As of December 31, 2018, the Company had classified $4.4 million of 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, 2019. During the first nine months of 2019, the Company sold two buildings previously held for sale for total net proceeds of $7.4 million. These buildings were included in the Company’s Material Handling Segment.

v3.19.3
Disposal of Businesses
9 Months Ended
Sep. 30, 2019
Discontinued Operations And Disposal Groups [Abstract]  
Disposal of Businesses

5.  Disposal of Businesses

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.

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 Statements 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”). The terms of the sale included promissory notes totaling $20 million that were originally set to mature in August 2020 with a 6% interest rate. 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, and as a result, the Company recorded a provision for expected loss of $23.0 million within continuing operations during the third quarter of 2018. The Company ceased recognizing interest income as of September 30, 2018 following the recognition of the provision.  In April 2019, the Company entered into an agreement with HC to amend and restate the notes (“Amended and Restated Notes”). The Amended and Restated Notes maintain the amounts due under the original terms of the notes, including interest, and extend the maturity to August 2022. The agreement to amend and restate the notes did not change management’s assessment of the uncertainty to collect on the notes.

In addition, approximately $8.6 million of the purchase price related to the Lawn and Garden sale was 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 13. 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 quarter 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.

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 13 for further information with regards to this guarantee.

Summarized selected financial information for discontinued operations for the quarters and nine months ended September 30, 2019 and 2018 are presented in the following table:

 

 

 

For the Quarter Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

 

 

$

 

 

$

 

 

$

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

 

 

 

 

123

 

 

 

 

 

 

1,348

 

(Gain) loss on disposal of assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

 

 

 

 

 

 

(174

)

 

 

 

Income (loss) from discontinued operations before income tax

 

 

 

 

 

(123

)

 

 

174

 

 

 

(1,348

)

Income tax expense (benefit)

 

 

 

 

 

(121

)

 

 

47

 

 

 

(435

)

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

 

$

 

 

$

(2

)

 

$

127

 

 

$

(913

)

 

Net cash flows provided by discontinued operations in 2019 resulted from the remaining receipt of the tax benefit from a worthless stock deduction, which was recognized as part of the sale of the Brazil Business. Net cash flows provided by discontinued operations in 2018 resulted from the partial receipt of the tax benefit from the worthless stock deduction related to the Brazil Business. The worthless stock deduction allowed the Company to reduce its estimated U.S. federal tax payments in 2018 by $4.3 million. This was partially offset by the payment of expenses related to the sale of the Brazil Business and the payment of the settlement with the L&G Buyer noted above.

v3.19.3
Restructuring
9 Months Ended
Sep. 30, 2019
Restructuring And Related Activities [Abstract]  
Restructuring

6.  Restructuring

On March 20, 2019, the Company committed to implementing a restructuring plan involving its Ameri-Kart Corp. subsidiary (“Ameri-Kart”) that operates within the Company’s Material Handling Segment. The Company plans to consolidate manufacturing operations currently conducted at Ameri-Kart’s Cassopolis, Michigan facility with expanded operations in Indiana, and eliminate up to 30 positions in connection with the consolidation (the “Ameri-Kart Plan”). Total restructuring costs expected to be incurred are approximately $0.9 million, which include equipment relocation and facility shut down costs, employee severance and other employee-related costs and non-cash charges, primarily accelerated depreciation charges on property, plant and equipment. No costs were incurred during the quarter and nine months ended September 30, 2019 related to the Ameri-Kart Plan. The Ameri-Kart Plan is expected to be substantially completed in the first half of 2020.

On March 18, 2019, the Company committed to implementing a restructuring plan relating to transformation initiatives within the Company’s Distribution Segment (the “Distribution Transformation Plan”) that are intended to increase sales force effectiveness, reduce costs and improve contribution margins. The Company realigned its Distribution Segment’s commercial sales structure, which included the elimination of certain sales and administrative positions, and plans to expand its e-commerce platform. Total restructuring costs expected to be incurred are approximately $0.9 million, primarily related to employee severance and other employee-related costs. No significant amounts were recognized during the quarter ended September 30, 2019. During the nine months ended September 30, 2019, the Company incurred restructuring charges of $0.9 million and does not expect to incur any additional restructuring charges in connection with the Distribution Transformation Plan. The Distribution Transformation Plan is expected to be substantially completed by the end of 2019.

On March 9, 2017, the Company announced a restructuring plan to improve the Company’s organizational structure and operational efficiency within the Material Handling Segment (the “Material Handling Plan”), which related primarily to anticipated facility shutdowns and associated activities.  Total restructuring costs incurred related to the Material Handling 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 Material Handling Plan are completed. The Company incurred $0.1 million of restructuring charges associated with the Material Handling Plan during the nine months ended September 30, 2018. No costs were incurred during 2019.

 

As noted above, no significant amounts were recognized during the quarter ended September 30, 2019 and there were no restructuring charges incurred during the quarter ended September 30, 2018. The restructuring charges noted above for the nine months ended September 30, 2019 and 2018 are presented in the Condensed Consolidated Statements of Operations (Unaudited) as follows:

 

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Segment

 

Cost of

Sales

 

 

SG&A

 

 

Total

 

 

Cost of

Sales

 

 

SG&A

 

 

Total

 

Distribution

 

$

 

 

$

865

 

 

$

865