MYERS INDUSTRIES INC, 10-K filed on 3/9/2018
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2017
Feb. 28, 2018
Jun. 30, 2017
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
MYERS INDUSTRIES INC 
 
 
Entity Central Index Key
0000069488 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 538,844,114 
Entity Common Stock, Shares Outstanding
 
30,509,220 
 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]
 
 
 
Net sales
$ 547,043 
$ 534,379 
$ 571,020 
Cost of sales
389,590 
372,481 
395,158 
Gross profit
157,453 
161,898 
175,862 
Selling expenses
56,614 
58,782 
58,456 
General and administrative expenses
78,889 
73,797 
82,333 
Operating expenses excluding impairment charges
135,503 
132,579 
140,789 
(Gain) loss on disposal of fixed assets
(3,482)
628 
556 
Impairment charges
544 
1,329 
Operating income
24,888 
27,362 
34,517 
Interest
 
 
 
Income
(1,361)
(1,262)
(1,067)
Expense
8,653 
9,905 
10,076 
Interest expense, net
7,292 
8,643 
9,009 
Loss on extinguishment of debt
1,888 
Income from continuing operations before income taxes
15,708 
18,719 
25,508 
Income tax expense
4,864 
7,395 
8,037 
Income from continuing operations
10,844 
11,324 
17,471 
Income (loss) from discontinued operations, net of income tax
(20,733)
(10,267)
291 
Net income (loss)
$ (9,889)
$ 1,057 
$ 17,762 
Income per common share from continuing operations:
 
 
 
Basic
$ 0.36 
$ 0.38 
$ 0.57 
Diluted
$ 0.35 
$ 0.38 
$ 0.56 
Income (loss) per common share from discontinued operations:
 
 
 
Basic
$ (0.69)
$ (0.35)
$ 0.01 
Diluted
$ (0.68)
$ (0.35)
$ 0.01 
Net income (loss) per common share:
 
 
 
Basic
$ (0.33)
$ 0.03 
$ 0.58 
Diluted
$ (0.33)
$ 0.03 
$ 0.57 
Dividends declared per share
$ 0.54 
$ 0.54 
$ 0.54 
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ (9,889)
$ 1,057 
$ 17,762 
Other comprehensive income (loss)
 
 
 
Foreign currency translation adjustment
2,391 
5,105 
(27,622)
Reclassification adjustment for foreign currency translation included in net income (loss)
17,201 
 
 
Pension liability, net of tax expense (benefit) of $14 in 2017, ($95) in 2016, and $113 in 2015
41 
(169)
200 
Total other comprehensive income (loss)
19,633 
4,936 
(27,422)
Comprehensive income (loss)
$ 9,744 
$ 5,993 
$ (9,660)
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Tax expense (benefit) on pension liability
$ 14 
$ (95)
$ 113 
Consolidated Statements of Financial Position (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current Assets
 
 
Cash
$ 2,520 
$ 2,404 
Restricted cash
8,659 
8,635 
Accounts receivable, less allowances of $1,313 and $1,497, respectively
76,650 
64,282 
Income tax receivable
12,954 
2,208 
Inventories, net
47,025 
44,785 
Prepaid expenses and other current assets
2,204 
4,639 
Current assets of discontinued operations
14,198 
Total Current Assets
150,012 
141,151 
Other Assets
 
 
Property, plant, and equipment, net
83,904 
106,266 
Goodwill
59,971 
59,219 
Intangible assets, net
39,049 
46,868 
Deferred income taxes
120 
83 
Notes receivable
18,737 
18,275 
Other
4,149 
3,313 
Noncurrent assets of discontinued operations
6,509 
Total Assets
355,942 
381,684 
Current Liabilities
 
 
Accounts payable
63,581 
47,573 
Accrued expenses
 
 
Employee compensation
15,544 
11,276 
Taxes, other than income taxes
1,664 
1,600 
Accrued interest
2,392 
3,202 
Other current liabilities
15,472 
12,911 
Current liabilities of discontinued operations
2,750 
Total Current Liabilities
98,653 
79,312 
Long-term debt
151,036 
189,522 
Other liabilities
8,236 
9,203 
Deferred income taxes
4,265 
10,365 
Noncurrent liabilities of discontinued operations
249 
Shareholders’ Equity
 
 
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding)
Common Shares, without par value (authorized 60,000,000 shares; outstanding 30,495,737 and 30,019,561; net of treasury shares of 7,456,720 and 7,932,896, respectively)
18,547 
18,234 
Additional paid-in capital
209,253 
202,033 
Accumulated other comprehensive loss
(14,541)
(34,174)
Retained deficit
(119,507)
(93,060)
Total Shareholders’ Equity
93,752 
93,033 
Total Liabilities and Shareholders’ Equity
$ 355,942 
$ 381,684 
Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current Assets
 
 
Allowance for Doubtful Accounts Receivable, Current
$ 1,313 
$ 1,497 
Shareholders’ Equity
 
 
Preferred Shares, shares authorized (in shares)
1,000,000 
1,000,000 
Preferred Shares, shares issued (in shares)
Preferred Shares, shares outstanding (in shares)
Common Shares, shares authorized (in shares)
60,000,000 
60,000,000 
Common Shares, shares outstanding (in shares)
30,495,737 
30,019,561 
Common shares, treasury (in shares)
7,456,720 
7,932,896 
Consolidated Statements of Shareholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Deficit [Member]
Beginning balance at Dec. 31, 2014
$ 146,571 
$ 18,855 
$ 218,394 
$ (11,688)
$ (78,990)
Beginning balance, shares at Dec. 31, 2014
 
31,162,962 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
17,762 
17,762 
Issuances under option plans
2,775 
162 
2,613 
Issuances under option plans, shares
239,508 
239,908 
 
 
 
Dividend reinvestment plan
149 
144 
Dividend reinvestment plan, shares
 
8,968 
 
 
 
Restricted stock vested
78 
(78)
Restricted stock vested, shares
 
120,723 
 
 
 
Restricted stock and stock option grants
5,277 
5,277 
Restricted stock and stock option grants (shares)
 
 
 
 
Tax benefit from options
38 
38 
Foreign currency translation adjustment
(27,622)
(27,622)
Repurchase of common stock
(30,023)
(1,193)
(28,830)
Repurchase of common stock (shares)
 
(1,992,379)
 
 
 
Stock contributions
148 
143 
Stock contributions, shares
 
8,250 
 
 
 
Shares withheld for employee taxes on equity awards
(975)
(17)
(958)
Shares withheld for employee taxes on equity awards, shares
 
(26,866)
 
 
 
Declared dividends
(16,597)
(16,597)
Pension liability, net of tax
200 
200 
Ending balance at Dec. 31, 2015
97,703 
17,895 
196,743 
(39,110)
(77,825)
Ending balance, shares at Dec. 31, 2015
 
29,521,566 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
1,057 
1,057 
Issuances under option plans
3,235 
205 
3,030 
Issuances under option plans, shares
334,836 
374,958 
 
 
 
Dividend reinvestment plan
139 
133 
Dividend reinvestment plan, shares
 
10,520 
 
 
 
Restricted stock vested
104 
(104)
Restricted stock vested, shares
 
169,929 
 
 
 
Stock compensation expense
3,357 
24 
3,333 
Tax benefit from options
64 
64 
Foreign currency translation adjustment
5,105 
5,105 
Shares withheld for employee taxes on equity awards
(1,166)
(1,166)
Shares withheld for employee taxes on equity awards, shares
 
(57,412)
 
 
 
Declared dividends
(16,292)
(16,292)
Pension liability, net of tax
(169)
(169)
Ending balance at Dec. 31, 2016
93,033 
18,234 
202,033 
(34,174)
(93,060)
Ending balance, shares at Dec. 31, 2016
30,019,561 
30,019,561 
 
 
 
Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income (loss)
(9,889)
(9,889)
Issuances under option plans
4,396 
229 
4,167 
Issuances under option plans, shares
375,292 
375,292 
 
 
 
Dividend reinvestment plan
131 
126 
Dividend reinvestment plan, shares
 
7,625 
 
 
 
Restricted stock vested
79 
(79)
Restricted stock vested, shares
 
130,036 
 
 
 
Stock compensation expense
3,626 
3,626 
Foreign currency translation adjustment
2,391 
2,391 
Shares withheld for employee taxes on equity awards
(620)
(620)
Shares withheld for employee taxes on equity awards, shares
 
(36,777)
 
 
 
Declared dividends
(16,558)
(16,558)
Pension liability, net of tax
41 
41 
Reclassification adjustment for foreign currency translation included in net income (loss)
17,201 
17,201 
Ending balance at Dec. 31, 2017
$ 93,752 
$ 18,547 
$ 209,253 
$ (14,541)
$ (119,507)
Ending balance, shares at Dec. 31, 2017
30,495,737 
30,495,737 
 
 
 
Consolidated Statement of Shareholders' Equity (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dividends declared per share (in dollars per share)
$ 0.54 
$ 0.54 
$ 0.54 
Tax expense (benefit) on pension liability
$ 14 
$ (95)
$ 113 
Retained Deficit [Member]
 
 
 
Dividends declared per share (in dollars per share)
$ 0.54 
$ 0.54 
$ 0.54 
Accumulated Other Comprehensive Income (Loss) [Member]
 
 
 
Tax expense (benefit) on pension liability
$ 14 
$ 95 
$ 113 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash Flows From Operating Activities
 
 
 
Net income (loss)
$ (9,889)
$ 1,057 
$ 17,762 
Income (loss) from discontinued operations, net of income taxes
(20,733)
(10,267)
291 
Income from continuing operations
10,844 
11,324 
17,471 
Adjustments to reconcile income from continuing operations to net cash provided by (used for) operating activities
 
 
 
Depreciation
19,952 
22,049 
22,418 
Amortization
8,886 
9,743 
9,912 
Accelerated depreciation associated with restructuring activities
1,993 
Non-cash stock-based compensation expense
3,626 
3,357 
4,934 
(Gain) loss on disposal of fixed assets
(3,482)
628 
556 
Loss on extinguishment of debt
1,888 
Deferred taxes
(5,663)
555 
211 
Accrued interest income on note receivable
(1,360)
(1,268)
(1,060)
Impairment charges
544 
1,329 
Other
256 
155 
104 
Payments on performance based compensation
(1,010)
(1,794)
(1,303)
Other long-term liabilities
723 
(592)
1,936 
Cash flows provided by (used for) working capital
 
 
 
Accounts receivable
(6,757)
6,411 
(5,032)
Inventories
(1,876)
8,603 
3,666 
Prepaid expenses and other current assets
2,209 
1,047 
147 
Accounts payable and accrued expenses
18,299 
(27,594)
(10,588)
Net cash provided by (used for) operating activities - continuing operations
49,072 
33,953 
43,372 
Net cash provided by (used for) operating activities - discontinued operations
(4,633)
(232)
(5,640)
Net cash provided by (used for) operating activities
44,439 
33,721 
37,732 
Cash Flows From Investing Activities
 
 
 
Capital expenditures
(5,814)
(12,489)
(21,787)
Proceeds from sale of property, plant and equipment
11,058 
450 
1,261 
Proceeds (payments) related to sale of business
(4,034)
70,762 
Net cash provided by (used for) investing activities - continuing operations
5,244 
(16,073)
50,236 
Net cash provided by (used for) investing activities - discontinued operations
(1,107)
(16)
(2,521)
Net cash provided by (used for) investing activities
4,137 
(16,089)
47,715 
Cash Flows From Financing Activities
 
 
 
Net borrowings (repayments) on credit facility
(16,474)
(3,804)
(37,110)
Repayments of senior unsecured notes
(23,798)
Cash dividends paid
(16,341)
(16,221)
(16,675)
Proceeds from issuance of common stock
4,527 
3,374 
2,924 
Excess tax benefit from stock-based compensation
64 
38 
Repurchase of common stock
(30,023)
Shares withheld for employee taxes on equity awards
(620)
(1,166)
(975)
Deferred financing costs
(1,030)
Net cash provided by (used for) financing activities - continuing operations
(53,736)
(17,753)
(81,821)
Net cash provided by (used for) financing activities - discontinued operations
Net cash provided by (used for) financing activities
(53,736)
(17,753)
(81,821)
Foreign exchange rate effect on cash
(208)
665 
(958)
Less: Net increase (decrease) in cash classified within discontinued operations
(5,484)
493 
3,992 
Net increase (decrease) in cash
116 
51 
(1,324)
Cash at January 1
2,404 
2,353 
3,677 
Cash at December 31
2,520 
2,404 
2,353 
Supplemental Disclosures of Cash Flow Information
 
 
 
Interest
8,913 
8,917 
10,131 
Income taxes
$ 5,651 
$ 8,136 
$ 10,136 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

1.  Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”). All intercompany accounts and transactions have been eliminated in consolidation. All subsidiaries that are not wholly owned and are not included in the consolidated operating results of the Company are immaterial investments which have been accounted for under the equity or cost method. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

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 consolidated financial statements for all periods presented.

Accounting Standards Adopted

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company adopted this ASU effective January 1, 2017 and elected to recognize forfeitures as they occur. The cash flow classification requirements of ASU 2016-09 were applied prospectively. The adoption of this ASU did not have a material impact on the Company’s results of operations, cash flows or financial position.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows.  The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows.  This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted.  The Company early adopted this standard in the fourth quarter of 2017. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

Accounting Standards Not Yet Adopted

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 11) is recognized. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

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 does not anticipate that adoption of this standard will have a material impact on its consolidated financial statements as the pension plan is frozen.

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 for fiscal year 2017 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 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. To the extent there are changes in the Company’s restricted cash balances, adoption of this standard will impact the presentation within the statement of 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 does not anticipate that adoption of this standard 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 leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for the Company beginning January 1, 2019 and requires a modified retrospective approach. The Company is currently evaluating the impact the adoption of this standard will have 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 new guidance is effective January 1, 2018, with early adoption permitted for January 1, 2017. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Statements of Shareholders’ Equity. The Company will adopt the new guidance effective January 1, 2018 under the modified retrospective approach. As part of the implementation plan developed, the Company identified its revenue streams and completed its contract review for each of these revenue streams to assess the impact of the new guidance on its consolidated financial statements. This assessment included the potential impact of whether revenue from certain product lines would be required to be recognized over time rather than at a point in time. Based on the results of these reviews, the adoption of this standard will not have a material impact on the timing or measurement of revenue recognition in the Company’s consolidated financial statements. Additionally, the standard requires new disclosures related to revenue, which the Company is in the process of finalizing.

Translation of Foreign Currencies

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

Fair Value Measurement

The Company follows guidance included in Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied under U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:

 

Level 1:

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

 

Level 2:

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

 

Level 3:

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

The Company has financial instruments, including cash, accounts receivable, accounts payable and accrued expenses. The fair value of these financial instruments approximate carrying value due to the nature and relative short maturity of these assets and liabilities.

The fair value of debt under the Company’s Loan Agreement, as defined in Note 10, approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement. The fair value of the Company’s fixed rate senior unsecured notes was estimated using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered Level 2 inputs. At December 31, 2017 and 2016, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated at $78.0 million and $98.0 million, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk primarily consist of trade accounts receivable. The concentration of accounts receivable credit risk is generally limited based on the Company’s diversified operations, with customers spread across many industries and countries. The Company’s largest single customer in 2017 accounts for approximately 5% of net sales with no other customer greater than 4%. Outside of the United States, only customers located in Canada, which account for approximately 2.4% of net sales, are significant to the Company’s operations. In addition, management has established certain requirements that customers must meet before credit is extended. The financial condition of customers is continually monitored and collateral is usually not required. The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific allowance for doubtful accounts is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. Additionally, the Company also reviews historical trends for collectability in determining an estimate for its allowance for doubtful accounts. If economic circumstances change substantially, estimates of the recoverability of amounts due the Company could be reduced by a material amount. Expense related to bad debts was approximately $0.7 million, $0.8 million and $0.3 million for 2017, 2016 and 2015, respectively, and is recorded within selling expenses in the Consolidated Statement of Operations. Deductions from the allowance for doubtful accounts, net of recoveries, were approximately $0.7 million, $0.4 million and $0.5 million for 2017, 2016 and 2015, respectively.

Inventories

Inventories are valued at the lower of cost or market for last-in, first-out (“LIFO”) inventory and lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. Approximately 30 percent of our inventories are valued using the LIFO method of determining cost. Cost of other inventories is determined using methods that approximate the FIFO method.

 

Inventories at December 31 consist of the following:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Finished and in-process products

 

$

30,874

 

 

$

31,081

 

Raw materials and supplies

 

 

16,151

 

 

 

13,704

 

 

 

$

47,025

 

 

$

44,785

 

 

If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $5.6 million and $4.7 million higher than reported at December 31, 2017 and 2016, respectively. Cost of sales decreased by $0.1 million and less than $0.1 million in 2017 and 2015, respectively, as a result of the liquidation of LIFO inventories. Cost of sales increased by $0.1 million in 2016 as a result of the liquidation of LIFO inventories.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization on the basis of the straight-line method over the estimated useful lives of the assets as follows:

 

Buildings

20 to 40 years

Machinery and Equipment

3 to 10 years

Leasehold Improvements

5 to 10 years

 

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

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Land

 

$

7,815

 

 

$

8,916

 

Buildings and leasehold improvements

 

 

59,730

 

 

 

65,425

 

Machinery and equipment

 

 

260,880

 

 

 

299,065

 

 

 

 

328,425

 

 

 

373,406

 

Less allowances for depreciation and amortization

 

 

(244,521

)

 

 

(267,140

)

 

 

$

83,904

 

 

$

106,266

 

 

At December 31, 2017 and 2016, the Company had approximately $6.9 million and $6.2 million, respectively, of capitalized software costs included in machinery and equipment. Amortization expense related to capitalized software costs was approximately $1.0 million, $0.6 million and $0.5 million in 2017, 2016 and 2015, respectively.

Long-Lived Assets

The Company reviews its long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Determination of potential impairment related to assets to be held and used is based upon undiscounted future cash flows resulting from the use and ultimate disposition of the asset. For assets held for sale, the amount of potential impairment may be based upon appraisal of the asset, estimated market value of similar assets or estimated cash flow from the disposition of the asset. Refer to Note 2 for discussion of the impairment charges.

Revenue Recognition

The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title and risk of loss, which is generally at time of shipment, and collectability of the fixed or determinable sales price is reasonably assured.

Accumulated Other Comprehensive Income (Loss)

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

 

 

 

Foreign

Currency

 

 

Defined Benefit

Pension Plans

 

 

Total

 

Balance at January 1, 2015

 

$

(9,825

)

 

$

(1,863

)

 

$

(11,688

)

Other comprehensive income before reclassifications

 

 

(17,131

)

 

 

144

 

 

 

(16,987

)

Amounts reclassified from accumulated other comprehensive income, net of tax of ($32) (1)

 

 

(10,491

)

 

 

56

 

 

 

(10,435

)

Net current-period other comprehensive income (loss)

 

 

(27,622

)

 

 

200

 

 

 

(27,422

)

Balance at December 31, 2015

 

 

(37,447

)

 

 

(1,663

)

 

 

(39,110

)

Other comprehensive income (loss) before reclassifications

 

 

5,105

 

 

 

(222

)

 

 

4,883

 

Amounts reclassified from accumulated other comprehensive income, net of tax of ($30) (1)

 

 

 

 

 

53

 

 

 

53

 

Net current-period other comprehensive income (loss)

 

 

5,105

 

 

 

(169

)

 

 

4,936

 

Balance at December 31, 2016

 

 

(32,342

)

 

 

(1,832

)

 

 

(34,174

)

Other comprehensive income before reclassifications

 

 

2,391

 

 

 

(31

)

 

 

2,360

 

Amounts reclassified from accumulated other comprehensive income, net of tax of ($24) (1) (2)

 

 

17,201

 

 

 

72

 

 

 

17,273

 

Net current-period other comprehensive income (loss)

 

 

19,592

 

 

 

41

 

 

 

19,633

 

Balance at December 31, 2017

 

$

(12,750

)

 

$

(1,791

)

 

$

(14,541

)

 

 

(1)

The accumulated other comprehensive income (loss) components related to defined benefit pension plans are included in the computation of net periodic pension cost. See Note 12, Retirement Plans for additional details.

 

(2)

Cumulative translation adjustment associated with the sale of the Brazil Business, as further discussed in Note 4, was included in the carrying value of assets disposed of.

Shipping and Handling

Costs for shipments to customers are classified as selling expenses for the Company’s manufacturing business and as cost of sales for the Company’s distribution business in the accompanying Consolidated Statements of Operations. The Company incurred costs for shipments to customers of approximately $8.2 million, $8.9 million and $8.5 million in selling expenses for the years ended December 31, 2017, 2016 and 2015, respectively and $6.0 million, $6.1 million, and $6.2 million in cost of sales for the years ended December 31, 2017, 2016 and 2015. All other internal distribution costs are recorded in selling expenses.

Stock Based Compensation

The Company has stock plans that provide for the granting of stock-based compensation to employees and to non-employee directors. Shares issued for option exercises or restricted shares may be either from authorized but unissued shares or treasury shares. The Company records the costs of the plan under the provisions of ASC 718, Compensation — Stock Compensation. For transactions in which the Company obtains employee services in exchange for an award of equity instruments, the Company measures the cost of the services based on the grant date fair value of the award. The Company recognizes the cost over the period during which an employee is required to provide services in exchange for the award, referred to as the requisite service period (usually the vesting period).

 

 

Income Taxes

Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be received or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the change is enacted.

The Company evaluates its tax positions in accordance with ASC 740, Income Taxes. ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized under ASC 740. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company maintains operating cash and reserves for replacement balances in financial institutions which, from time to time, may exceed federally insured limits. The Company periodically assesses the financial condition of these institutions and believes that the risk of loss is minimal.

Cash flows used in investing activities excluded $0.6 million, $0.1 million and $6.6 million of accrued capital expenditures in 2017, 2016 and 2015, respectively.

Impairment Charges
Impairment Charges

2.  Impairment Charges

During the second quarter of 2017, an underutilized building at the Company’s Scarborough, Ontario, Canada location, in the Material Handling Segment, was identified for closure and classified as held for sale as of June 30, 2017. This building was recorded at its fair value, less estimated costs to sell, of $3.2 million (based primarily on a third party offer considered to be a Level 2 input), which resulted in an impairment charge of approximately $0.5 million recognized in the second quarter of 2017. In December 2017, the building was sold for approximately $3.1 million, which resulted in an additional loss on sale of $0.1 million.

During 2016, the Company recorded impairment charges of $1.3 million, primarily related to long-lived assets associated with the exit of a non-strategic product line in the Material Handling Segment.  

Goodwill and Intangible Assets
Goodwill and Intangible Assets

3.  Goodwill and Intangible Assets

The Company tests for impairment of goodwill and indefinite-lived intangible assets on at least an annual basis, unless significant changes in circumstances indicate a potential impairment may have occurred sooner. Such changes in circumstances may include, but are not limited to, significant changes in economic and competitive conditions, the impact of the economic environment on the Company’s customer base or its businesses, or a material negative change in its relationships with significant customers.    

The Company conducted its annual impairment assessment as of October 1 for all of its reporting units, noting no impairment in continuing operations in 2017, 2016 or 2015.      

During the 2017 annual review of goodwill, management performed a qualitative assessment for all of its reporting units. After considering changes to assumptions used in the most recent quantitative annual testing for each reporting unit, including macroeconomic conditions, industry and market considerations, overall financial performance, the magnitude of the excess of fair value over the carrying amount of each reporting unit as determined in the most recent quantitative annual testing, and other factors, management concluded that it was not more likely than not that the fair values of the reporting units were less than their respective carrying values and, therefore, did not perform a quantitative analysis in 2017. A quantitative analysis was performed at October 1, 2016 and 2015.

The change in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 is as follows:

 

 

 

Distribution

 

 

Material

Handling

 

 

Total

 

January 1, 2016

 

$

505

 

 

$

58,382

 

 

$

58,887

 

Foreign currency translation

 

 

 

 

 

332

 

 

 

332

 

December 31, 2016

 

$

505

 

 

$

58,714

 

 

$

59,219

 

Foreign currency translation

 

 

 

 

 

752

 

 

 

752

 

December 31, 2017

 

$

505

 

 

$

59,466

 

 

$

59,971

 

 

Intangible assets other than goodwill primarily consist of trade names, customer relationships, patents, and technology assets established in connection with acquisitions. These intangible assets, other than certain trade names, are amortized over their estimated useful lives. The Company performs an annual impairment assessment for the indefinite lived trade names which had a carrying value of $9,972 and $10,050 at December 31, 2017 and 2016, respectively. In performing this assessment the Company uses an income approach, based primarily on Level 3 inputs, to estimate the fair value of the trade name. The Company records an impairment charge if the carrying value of the trade name exceeds the estimated fair value at the date of assessment.

Intangible assets at December 31, 2017 and 2016 consisted of the following:

 

 

 

 

 

 

 

2017

 

 

2016

 

 

 

Weighted

Average Remaining Useful

Life (years)

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

Trade Names – Indefinite

   Lived

 

 

 

 

 

$

9,972

 

 

$

 

 

$

9,972

 

 

$

10,050

 

 

$

 

 

$

10,050

 

Trade Names

 

 

7.5

 

 

 

80

 

 

 

(40

)

 

 

40

 

 

 

80

 

 

 

(34

)

 

 

46

 

Customer Relationships

 

 

2.0

 

 

 

41,043

 

 

 

(27,396

)

 

 

13,647

 

 

 

39,774

 

 

 

(21,127

)

 

 

18,647

 

Technology

 

 

6.2

 

 

 

24,980

 

 

 

(9,590

)

 

 

15,390

 

 

 

24,980

 

 

 

(7,037

)

 

 

17,943

 

Patents

 

 

0.0

 

 

 

11,730

 

 

 

(11,730

)

 

 

 

 

 

11,730

 

 

 

(11,548

)

 

 

182

 

 

 

 

 

 

 

$

87,805

 

 

$

(48,756

)

 

$

39,049

 

 

$

86,614

 

 

$

(39,746

)

 

$

46,868

 

 

Intangible amortization expense was $8,378, $9,277 and $9,447 in 2017, 2016 and 2015, respectively. Estimated annual amortization expense for intangible assets with finite lives for the next five years is: $8,198 in 2018; $7,824 in 2019; $4,946 in 2020; $2,278 in 2021 and $2,278 in 2022.

 

Discontinued Operations
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 divestiture of the Brazil Business will allow the Company to focus resources on its core businesses and additional growth opportunities. The Brazil Business is a leading designer and manufacturer of reusable plastic shipping containers, plastic pallets, crates and totes used for closed-loop shipping and storage in Brazil’s automotive, distribution, food, beverage and agriculture industries. The sale of the Brazil Business included manufacturing facilities and offices located in Lauro de Freitas City, Bahia, Brazil; Ibipora, Parana, Brazil; and Jaguarinuna, Brazil. The Brazil Business was part of the Company’s Material Handling Segment.

Pursuant to the terms of the Quota Purchase Agreement by and among the Company, Holdings and Buyer (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 Consolidated Statement of Financial Position. 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.

During the second quarter of 2014, the Company’s Board of Directors approved the commencement of the sale process to divest its Lawn and Garden business to allow it to focus resources on its core growth platforms. The business was sold February 17, 2015 to an entity controlled by Wingate Partners V, L.P. (“L&G Buyer”), a private equity firm, for $110.0 million, subject to a working capital adjustment. The terms of the agreement include a $90.0 million cash payment, promissory notes totaling $20.0 million that mature in August 2020, a 6% interest rate and approximately $8.6 million placed in escrow that was due to be settled by August 2016, but has been extended until certain indemnification claims are resolved, as discussed in Note 9. The fair value of the notes at the date of sale was $17.8 million. The carrying value of the notes as of December 31, 2017 and 2016, was $18.7 million and $18.3 million, respectively, which represents the fair value at date of sale plus accretion and is included in Notes Receivable in the accompanying Consolidated Statements of Financial Position. The fair value of the notes receivable was calculated using Level 2 inputs as defined in Note 1. Interest income on the notes receivable was $1.3 million, $1.3 million, and $1.0 million during the years ended December 31, 2017, 2016 and 2015 and was recognized based on the stated interest rate above. The final working capital adjustment resulted in a cash payment to the buyer of approximately $4.0 million in 2016. The total gain on the sale of the Lawn and Garden business in 2015 was $0.5 million, net of tax, and is included in income (loss) from discontinued operations in the accompanying Consolidated Statements of Operations.

On June 20, 2014, the Company completed the sale of the assets and associated liabilities of its wholly-owned subsidiaries WEK Industries, Inc. and Whiteridge Plastics LLC (collectively “WEK”) for approximately $20.7 million, which includes a working capital adjustment of approximately $0.8 million. Of the total proceeds from the sale of WEK, approximately $1.0 million was held in escrow until it was received in December 2015. The Company recorded a gain on the sale of WEK in 2014 of approximately $3.0 million, net of tax of $1.6 million, which was included in income (loss) from discontinued operations in the Consolidated Statements of Operations.

Summarized selected financial information for Brazil Business, Lawn and Garden business and WEK for the years ended December 31, 2017, 2016 and 2015 are presented in the following table:

 

 

 

 

For the Year Ended December 31,

 

 

 

 

2017*

 

 

2016

 

 

2015**

 

Net sales

 

 

$

29,976

 

 

$

23,683

 

 

$

59,853

 

Cost of sales

 

 

 

25,359

 

 

 

20,941

 

 

 

50,772

 

Selling, general, and administrative

 

 

 

6,748

 

 

 

5,438

 

 

 

13,898

 

(Gain) loss on disposal of assets

 

 

 

(32

)

 

 

226

 

 

 

62

 

Impairment charges

 

 

 

 

 

 

8,545

 

 

 

 

Interest income, net

 

 

 

(286

)

 

 

(469

)

 

 

(10

)

Gain (loss) on the disposal of the discontinued operations

 

 

 

(34,956

)

 

 

 

 

 

1,873

 

Loss from discontinued operations before income tax

 

 

 

(36,769

)

 

 

(10,998

)

 

 

(2,996

)

Income tax benefit

 

 

 

(16,036

)

 

 

(731

)

 

 

(3,287

)

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

 

 

$

(20,733

)

 

$

(10,267

)

 

$

291

 

*

Includes Brazil Business operating results through December 18, 2017.

**

Includes Lawn and Garden operating results through February 17, 2015.

 


The assets and liabilities of discontinued operations are stated separately as of December 31, 2016 in the Consolidated Statement of Financial Position and are comprised of the following items:

 

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

5,484

 

Accounts receivable, net

 

 

7,328

 

Inventories

 

 

1,238

 

Prepaid expenses and other current assets

 

 

148

 

Total current assets

 

 

14,198

 

 

 

 

 

 

Intangible assets, net

 

 

1,126

 

Deferred income taxes

 

 

134

 

Property, plant and equipment, net

 

 

5,215

 

Other

 

 

34

 

Total noncurrent assets

 

 

6,509

 

Total assets of the disposal group classified as discontinued operations

 

$

20,707

 

 

 

 

 

 

Accounts payable

 

$

1,415

 

Accrued expenses

 

 

1,335

 

Total current liabilities

 

 

2,750

 

 

 

 

 

 

Deferred income taxes

 

 

249

 

Total noncurrent liabilities

 

 

249

 

Total liabilities of the disposal group classified as discontinued operations

 

$

2,999

 

 

Net Income (Loss) Per Common Share
Net Income (Loss) Per Common Share

 

5.  Net Income (Loss) Per Common Share

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

 

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Weighted average common shares outstanding basic

 

 

30,222,289

 

 

 

29,750,378

 

 

 

30,616,485

 

Dilutive effect of stock options and restricted stock

 

 

340,357

 

 

 

217,534

 

 

 

327,208

 

Weighted average common shares outstanding diluted

 

 

30,562,646

 

 

 

29,967,912

 

 

 

30,943,693

 

 

Options to purchase 242,500, 551,761 and 463,200 shares of common stock that were outstanding at December 31, 2017, 2016 and 2015, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options was greater than the average market price of common shares, and were therefore anti-dilutive.

Restructuring
Restructuring

6.  Restructuring

The charges related to various restructuring programs implemented by the Company are included in cost of sales and selling, general and administrative (“SG&A”) expenses depending on the type of cost incurred. The restructuring charges recognized in the years ended 2017, 2016 and 2015 are presented in the following table.  

 

 

 

 

2017

 

 

2016

 

 

2015

 

Segment

 

 

Cost of

sales

 

 

SG&A

 

 

Total

 

 

Cost of

sales

 

 

SG&A

 

 

Total

 

 

Cost of

sales

 

 

SG&A

 

 

Total

 

Distribution

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

124

 

 

$

124

 

Material Handling

 

 

 

7,389

 

 

 

164

 

 

 

7,553

 

 

 

 

 

 

 

 

 

 

 

 

1,340

 

 

 

912

 

 

 

2,252

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

35

 

Total

 

 

$

7,389

 

 

$

164

 

 

$

7,553

 

 

$

 

 

$

 

 

$

 

 

$

1,340

 

 

$

1,071

 

 

$

2,411

 

 

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 expected to be incurred are approximately $7.6 million, which includes employee severance and other employee-related costs of approximately $3.1 million, $2.5 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 were substantially completed by the end of the year as further described below.

During 2017, the Company incurred restructuring charges of $5.5 million related to closing a manufacturing plant in Bluffton, Indiana. In the third quarter of 2017, the Bluffton facility and certain related equipment were sold for approximately $6.0 million, which resulted in a gain of $2.6 million. Additional gains of $1.5 million for the year ended December 31, 2017 were recognized on other asset dispositions in connection with closing this plant.  

In the second quarter of 2017, the Company finalized the specific actions to be taken under the Plan to reduce headcount in its Scarborough, Ontario, Canada location.  These actions resulted in the recognition of $1.6 million of severance and related costs for the year ended December 31, 2017.

During 2017, the Company recognized $0.5 million of restructuring charges related to the planned closure of a manufacturing plant in Sandusky, Ohio, which is expected to take place in the first quarter of 2018.

 

The table below summarizes restructuring activity for the year ended December 31, 2017:

 

 

 

Employee Reduction

 

 

Accelerated Depreciation

 

 

Other Exit Costs

 

 

Total

 

Balance at January 1, 2017

 

$

 

 

$

 

 

$

 

 

$

 

Charges to expense

 

 

3,022

 

 

 

1,993

 

 

 

2,538

 

 

 

7,553

 

Cash payments

 

 

(1,924

)

 

 

 

 

 

(2,448

)

 

 

(4,372

)

Non-cash utilization

 

 

 

 

 

(1,993

)

 

 

 

 

 

(1,993

)

Balance at December 31, 2017

 

$

1,098

 

 

$

 

 

$

90

 

 

$

1,188

 

 

In addition to the restructuring costs noted above, the Company has also incurred other associated costs of the Plan of $1.1 million for the year ended December 31, 2017, of which $0.1 million is included in cost of sales and $1.0 is included in general and administrative expenses in the accompanying Consolidated Statements of Operations, and are primarily related to third party consulting costs.  

 

In 2015, the Material Handling Segment consolidated two manufacturing plants, streamlined Brazilian operations, closed a Canadian branch operation and sold a product line. The Company recorded $2.3 million of restructuring cost for these initiatives, primarily related to severance and moving expenses for equipment and inventory.

Other Current Liabilities
Other Current Liabilities

7.  Other Current Liabilities

As of December 31, 2017 and 2016, the balance in other current liabilities is comprised of the following:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Deposits and amounts due to customers

 

$

3,102

 

 

$

2,562

 

Dividends payable

 

 

4,478

 

 

 

4,260

 

Accrued litigation and professional fees

 

 

417

 

 

 

452

 

Current portion of environmental reserves

 

 

1,322

 

 

 

605

 

Other accrued expenses

 

 

6,153

 

 

 

5,032

 

 

 

$

15,472

 

 

$

12,911

 

 

Stock Compensation
Stock Compensation

8.  Stock Compensation

Subject to shareholder approval, which was received on April 26, 2017, the Board of Directors approved the Company’s Amended and Restated 2017 Incentive Stock Plan (the “2017 Plan”) on March 2, 2017. 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.

The following tables summarize stock option activity in the past three years:

Options granted in 2017, 2016 and 2015 were as follows:

 

Year

 

Options

 

 

Exercise

Price

 

2017

 

 

397,759

 

 

$

14.30

 

2016

 

 

271,350

 

 

$

11.62

 

2015

 

 

208,200

 

 

$

18.67

 

 

Options exercised in 2017, 2016 and 2015 were as follows:

 

Year

 

Options

 

 

Exercise

Price

2017

 

 

375,292

 

 

$9.97 to $20.93

2016

 

 

334,836

 

 

$9.00 to $14.77

2015

 

 

239,508

 

 

$9.97 to $17.02

 

In addition, options totaling 218,130, 162,565 and 71,567 expired or were forfeited during the years ended December 31, 2017, 2016 and 2015, respectively.

Options outstanding and exercisable at December 31, 2017, 2016 and 2015 were as follows:

 

Year

 

Outstanding

 

 

Range of Exercise

Prices

 

Exercisable

 

 

Weighted Average

Exercise Price

 

2017

 

 

988,167

 

 

$9.97 to $20.93

 

 

539,993

 

 

$

16.23

 

2016

 

 

1,183,830

 

 

$9.97 to $20.93

 

 

934,898

 

 

$

14.88

 

2015

 

 

1,409,881

 

 

$9.00 to $20.93

 

 

1,231,544

 

 

$

13.47

 

 

The fair value of options granted is estimated using an option pricing model based on the assumptions set forth in the following table. The Company uses historical data to estimate employee exercise and departure behavior. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and through the expected term. The dividend yield rate is based on the Company’s historical dividend yield. The expected volatility is derived from historical volatility of the Company’s shares and those of similar companies measured against the market as a whole. In 2017, 2016 and 2015, the Company used the binomial lattice option pricing model based on the assumptions set forth in the following table.

 

 

 

2017

 

 

2016

 

 

2015

 

Risk free interest rate

 

 

2.50

%

 

 

1.80

%

 

 

2.10

%

Expected dividend yield

 

 

3.80

%

 

 

4.60

%

 

 

2.90

%

Expected life of award (years)

 

 

4.10

 

 

8.00

 

 

 

8.00

 

Expected volatility

 

 

50.00

%

 

 

50.00

%

 

 

50.00

%

Fair value per option

 

$

4.47

 

 

$

3.45

 

 

$

6.03

 

 

The following table provides a summary of stock option activity for the period ended December 31, 2017:

 

 

 

Shares

 

 

Average

Exercise

Price

 

 

Weighted

Average

Life (in Years)

 

Outstanding at December 31, 2016

 

 

1,183,830

 

 

$

14.50

 

 

 

 

 

Options granted

 

 

397,759

 

 

 

14.30

 

 

 

 

 

Options exercised

 

 

(375,292

)

 

 

11.71

 

 

 

 

 

Canceled or forfeited

 

 

(218,130

)

 

 

16.08

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

 

988,167

 

 

 

15.13

 

 

 

7.24

 

Exercisable at December 31, 2017

 

 

539,993

 

 

$

16.23

 

 

 

5.85

 

 

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The intrinsic value of stock options exercised in 2017, 2016 and 2015 was $2,813, $1,809 and $1,151, respectively.

The following table provides a summary of restricted stock units and restricted stock activity for the year ended December 31, 2017:

 

 

 

Shares

 

 

Average

Grant-Date

Fair Value

 

Unvested shares at December 31, 2016

 

 

331,410

 

 

 

 

 

Granted

 

 

238,111

 

 

$

14.57

 

Vested

 

 

(100,006

)

 

 

14.89

 

Forfeited

 

 

(56,865

)

 

 

13.91

 

Unvested shares at December 31, 2017

 

 

412,650

 

 

 

 

 

 

Restricted stock units are rights to receive shares of common stock, subject to forfeiture and other restrictions, which vest over a two or three year period. Restricted shares are considered to be non-vested shares under the accounting guidance for share-based payment and are not reflected as issued and outstanding shares until the restrictions lapse. At that time, the shares are released to the grantee and the Company records the issuance of the shares. Restricted stock awards are valued based on the market price of the underlying shares on the grant date. Compensation expense is recognized on a straight-line basis over the requisite service period. At December 31, 2017, restricted stock awards had vesting periods up through December 2020.

 

Included in the December 31, 2017 unvested shares are 211,769 performance-based restricted stock units. The fair value of these awards is calculated using the market price of the underlying common stock on the date of grant. In determining fair value, the Company does not take into account performance-based vesting requirements. For these awards, the performance-based vesting requirements determines the number of shares that ultimately vest, which can vary from 0% to 200% of target depending on the level of achievement of established performance criteria. Compensation expense is recognized over the requisite service period subject to adjustment based on the probable number of shares expected to vest under the performance condition.

 

Stock compensation expense was approximately $3,626, $3,357 and $4,934 for the years ended December 31, 2017, 2016 and 2015, respectively. These expenses are included in general and administrative expenses in the accompanying Consolidated Statements of Operations. Total unrecognized compensation cost related to non-vested share based compensation arrangements at December 31, 2017 was approximately $5,317 which will be recognized over the next three years, as such compensation is earned.

 

Contingencies
Contingencies

9.  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. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on our consolidated financial position, results of operations or cash flows.

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 Superfund site (“New Idria Mine”).  New Idria Mining & Chemical Company (“NIMCC”), which owned and/or operated the New Idria Mine from 1936 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 have been engaged in negotiations with the EPA with respect to a draft Settlement Agreement and Administrative Order on 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.

The Company and the EPA are in the final stages of negotiation on the AOC and related Statement of Work (“SOW”) with regards to the New Idria Mine, and the Company expects to execute the AOC in March 2018. The key terms of the AOC and SOW include, but are not limited to, scope of the site, categories of and schedules for completion of required tasks, administration of future oversight costs, stipulated penalties, and resolution of any disputed items between the parties. As a result of recent negotiations, the Company recognized expected future EPA oversight costs for the RI/FS of $1 million in 2017. In addition, the AOC will require the Company to provide $2 million of financial assurance to the EPA during the estimated three 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.

The New Idria Mine is located near Hollister, California and was added to the Superfund National Priorities List by the EPA in October 2011, at which time the Company recognized expense of $1.9 million related to performing the RI/FS.   In the second quarter of 2016, the Company, based on discussions with the EPA, determined that the RI/FS would begin in 2017 and therefore obtained updated estimated costs to perform the RI/FS.  As a result of the updated estimated costs, the Company recorded additional expense of $1.0 million in the second quarter of 2016.  In the second quarter of 2017, the Company, based on the status of its discussions with the EPA, determined that field work on the RI/FS would likely begin in 2018 with no changes to the cost estimates to perform the RI/FS. In the third quarter of 2017, the Company recorded an additional reserve of $0.3 million for this project, as a result of additional professional fees and other project costs expected to be incurred as part of the implementation of the AOC and site preparation and stabilization, in advance of starting the RI/FS field work in 2018.  

As part of the Notice Letter, the EPA also made a claim for approximately $1.6 million in past costs for actions it claims it has taken in connection with the New Idria Mine since 1993.  While the Company is evaluating this past cost claim and may challenge portions of it, in 2015 the Company recognized an expense of $1.3 million related to the claim. These past costs will not be addressed or settled upon execution of the AOC discussed above.

As of December 31, 2017 and 2016, the Company had a total reserve of $3.6 million and $2.5 million, respectively, related to the New Idria Mine.  As of December 31, 2017, $1.0 million is classified in Other Current Liabilities and $2.6 million is classified in Other Liabilities on the Consolidated Statements of Financial Position. All charges related to this claim have been recorded with general and administrative expenses in the Consolidated Statement of Operations.

As negotiations with the EPA proceed 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 negotiations with EPA, the nature and extent of the specific tasks required in the RI/FS, 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 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 (formerly referred to as Guadalupe River Watershed)

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, recognize