SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
[X]
For the Fiscal Year Ended December 31, 20012002
Commission File Number 1-8524001-08524
MYERS INDUSTRIES, INC.
OHIO | 34-0778636 | |
(State or other jurisdiction of | (IRS Employer Identification Number) | |
incorporation or organization) |
1293 S. Main Street, Akron, Ohio | 44301 | (330) 253-5592 | ||
(Address of Principal Executive Offices) | (Zip Code) | (Telephone Number) |
Securities Registered Pursuant to | Name of Each Exchange | |
Section 12(b) of the Act: | on which registered: | |
Common Stock, Without Par Value | New York Stock Exchange | |
(Title of Class) |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
State the approximate aggregate market value of the voting and non-voting common equity stock held by non-affiliates using the closing price of the registrant as of February 28,June 30, 2002: $263,645,212.$362,087,599. Indicate the number of shares outstanding of registrant’s common stock as of February 28,June 30, 2002: 23,860,53724,000,475 Shares of Common Stock, without par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) | Portions of Registrant’s Notice of 2002 Annual Meeting and Proxy Statement, dated March |
CROSS REFERENCE SHEET
PURSUANT TO FORM 10-K GENERAL INSTRUCTION G(4)
Part/Item | Form 10-K Heading | Reference Material | |||||||
III/10 | Directors and Executive Officers of the Registrant | Proxy Statement(1) pages | |||||||
III/11 | Executive Compensation | Proxy Statement pages 9 through | |||||||
III/12 | Security Ownership of Certain Beneficial Owners and Management | Proxy Statement pages page 11, and page | |||||||
III/13 | Certain Relationships and Related Transactions | Proxy Statement Page | 7 |
(1) | Registrant’s Notice of |
PART I
ITEM 1. | Business |
(a) General Development of Business
In 2001,2002, Myers Industries, Inc. (Company) experienced lowerhad net sales ending a nine year run of annual increases and record sales. In addition,$608.0 million, virtually unchanged from the prior year. Despite the flat sales, net income declined,for 2002 of $24.0 million increased 58 percent from the net income of $15.2 million reported in 2001, primarily as a result of the recession that began in 2000 acceleratedcessation of goodwill amortization and created weak demand in most markets served by the Company’s operations. The fourth quarter, typically a strong one for the Company, was particularly weak.significantly lower interest expense.
Net sales for the fourth quarter ended December 31, 2002, were $148.5$159.3 million, a decreasean increase of 137 percent from the same period last year.$148.5 million reported in 2001. Net income was $4.0 million, an increase of $2.3 million was down 4873 percent compared to $4.5$2.3 million in the prior year’s fourth quarter. Net income per share was $.13, an increase of 63 percent compared with $.08 in the fourth quarter of 20002001.
The adoption of Statement of Financial Accounting Standards No. 142, which discontinued the amortization of goodwill, affected results positively in both the fourth quarter and for the full year. Goodwill amortization in the comparable quarter and year ended December 31, 2001, reduced income before taxes by $2.3 million and $9.2 million, net income by $1.8 million and $7.1 million and earnings per share of $.10 declined 47 percent compared with $.19 last year.by $.06 and $.24 respectively.
For the year, net sales were $608.0 million, a decrease of 7 percent from the $652.7 million reported last year. Net income was $15.2 million or $.64 per share, a decline of 37 percent from the $24.0 million and $1.01 per net share income in fiscal 2000.
Despite the challenges, the Company remained profitable and there were some positive gains made. Cashhad cash flow from operations was a record $76.8totaling $65.5 million and the Company was able to reduce total debt was reduced by $35.3$32.0 million. Debt to total capitalization was reduced to 48 percent at December 31, 2002 compared with 55 percent at the end of 2001. In addition,August, the Board of Directors declared a five-for-four stock split and a $.05 cash dividend on the split shares, making 2002 the 27th consecutive year in which cash dividends were increased for the 26th consecutive year.increased.
(b) Financial Information About Industry Segments
The response to this section of Item 1 is contained in the Industry Segments footnote of the Notes to Consolidated Financial Statements under Item 8 of this report.
(c) Description of Business
The Company conducts its business activities in two segments, Manufacturingmanufacturing and Distribution.distribution. For the fiscal year ended December 31, 2001,2002, the Manufacturing Segmentmanufacturing segment generated approximately 75% of sales, while the Distribution Segmentdistribution segment contributed approximately 25% of sales.
Our Manufacturingmanufacturing segment designs, manufactures, and markets a variety of plastic and rubber products, ranging from plastic material handling containers and storage boxes to rubber OEM parts and tire repair materials. These products are made through a variety of molding processes in 25 facilities located throughout North America and Europe.
Our Distribution Segmentdistribution segment is engaged in the distribution of tools, equipment, and supplies used for tire and wheel service and automotive underbody repair. The Distribution Segmentdistribution segment operates through 43 branches located in major cities throughout the United States and in foreign countries through export and businesses in which we hold an equity interest.
Our Manufacturing Segment |
In our Manufacturingmanufacturing segment, we design, manufacture, and market more than 11,000 products from plastic and rubber. We currently operate 18 manufacturing facilities in the United States, six in Western Europe and one in Canada. Our manufactured plastic and rubber products are sold nationally and internationally by a direct sales force and through independent sales representatives.
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Key Manufactured Product Areas
• | Reusable Plastic Material Handling Containers | |
• | Plastic Planters | |
• | Plastic Storage & Organization Products | |
• | Plastic Storage Tanks | |
• | Plastic and Metal Material Handling Carts | |
• | Rubber OEM & Replacement Parts |
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• | Tire Repair & Retreading Products | |
• | Custom Rubber Sheet Stock | |
• | Reflective Highway Marking Products |
Product Brands
• | Buckhorn | |
• | Akro-Mils | |
• | Allibert Équipement | |
• | Ameri-Kart | |
• | Buckhorn Rubber | |
• | Dillen | |
• | Listo | |
• | Patch Rubber | |
• | raaco |
Manufacturing Capabilities
• | Plastic & Rubber Injection Molding | |
• | Compression Molding | |
• | Winding Extrusion | |
• | Vacuum Forming | |
• | Rotational Molding | |
• | Rubber Compounding, Calendering & | |
• | Rubber-to-Metal Bonding | |
• | Blow Molding | |
• | Metal Forming |
Representative Markets
• | Agriculture | |
• | Automotive | |
• | Chemical | |
• | Construction | |
• | Consumer | |
• | Food Processing & Distribution | |
• | General Industrial | |
• | Healthcare | |
• | Horticulture | |
• | Marine/ Watercraft | |
• | Recreational Vehicle | |
• | Telecommunications | |
• | Tire Repair & Retread | |
• | Transportation | |
• | Waste Collection | |
• | Water Control |
Our largest product line is reusable plastic material handling containers. These products help customers efficiently and economically move products and reduce solid waste in closed-loop distribution systems. We are one of the leading manufacturers of these material handling products, which include collapsible bulk boxes, hand-held containers and trays, small parts bins, pallets, and a variety of other specialty items. We believe that
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Our material handling products are utilized for shipping and handling a wide range of industrial and commercial items, including automotive, appliance, and electronic components; food products such as meat, poultry, and produce; bulk seed and feed; health and beauty care products; apparel and textiles; and hardware. These products deliver specific cost-saving and productivity benefits to our customers. At the Saturn plant in Springhill, Tennessee, our containers and pallets are reused hundreds of times to carry fasteners and bumpers
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Growers, retailers, and consumers use our plastic planters and trays to create plant and floral displays. We manufacture a broad line of indoor/outdoor decorative planters, pots, bowls, window boxes, urns, and grower containers and trays; we are also North America’s largest producer of hanging baskets. These items serve the needs of the grower at greenhouses and nurseries, as well as retail garden centers, home centers, and mass merchandisers such as Target®, K-Mart®Kmart®, and Wal-Mart®.
For consumers, we adapt storage solutions for industry to home and office settings. Our popular KeepBox®containers help consumers organize everything from holiday decorations to school supplies. Storage organizers and cabinets provide efficient storage for small items and accessories in the home workshop or at the office. Hobbyists and craftsmen use our popular CraftDesign® products for efficient, portable storage of craft, sewing, and art supplies.
Part of our product line is plastic storage tanks used for storage and transport of a wide variety of solid and liquid materials. These tanks are produced in the United States using rotational molding and in Europe with both winding extrusion and rotational molding. Our extruded tanks are primarily used for storage in industries such as chemical and water treatment and are an effective alternative to stainless steel tanks, giving customers the same performance for a lower price. For industries such as agriculture, plastics, and food, our roto-molded tanks are commonly used as intermediate bulk containers (IBCs), transporting material from one location to another or as a temporary storage vessel; these uses are often “returnable” applications, in which the tanks can be reused for multiple round trips in a closed loop distribution system.
We manufacture plastic carts used in material handling and waste collection. Manufacturers apply our carts and dumpers for in-plant transport of products and scrap. More than 600Over 700 municipalities use the carts for residential waste collection.
From seals for water supply lines to hood latches and air hose assemblies for trucks, our engineered, molded OEM and replacement parts meet precise specifications for the waterworks, agriculture, transportation, and civil construction industries. Specialized manufacturing expertise enables us to create a range of specific-performance custom rubber products, including rubber-to-metal bonded items used in marine and maintenance equipment, watercontrol,water control, and environmental applications.
More than 50 years ago we started making tire patches. We now offer the most comprehensive line of tire repair and retreading products in the United States. To service the nearlymore than 221 million damaged tires that occur each year, we make all the materials and products customers need to perform safe and profitable tire repairs: the plug that fills a puncture, the cement that seats the plug, the tire innerliner patch, and the final sealing compound. Our products are used to repair the smallest puncture in passenger tires and the most severe tear in large, off-the-road tires.
Our calendered rubber sheet stock is used in many applications. The telecommunications industry splices cabling with our specialty tapes. In the mining industry, our materials are used to create linings for material handling conveyor systems. Another of our custom sheet stocks is used as the base material to produce the world’s top-selling line of golf grips, “Golf Pride®”.
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We have applied our rubber calendering and compounding expertise to create reflective marking products for the road repair and construction industry. Transportation professionals use our reflective tape striping, symbols, and legends for marking roadways, intersections, and hazardous areas. Our tape stock is easier to apply, more reflective, and longer lasting than paint. We make the tape in both temporary and permanent grades.
The Company’s Manufacturingmanufacturing business is dependent upon outside suppliers for raw materials, principally polyethylene, polypropylene, polystyrene and synthetic and natural rubber. We believe that the loss of
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Our Distribution Segment |
In our Distribution Segment,distribution segment, we are the largest distributor of tools, equipment, and supplies to tire, wheel, and automotive underbodyundervehicle service specialists in the United States. We buy and sell nearly 10,000 different tool, equipment, and supply items ranging from computerized alignment systems and tire balancers to tire patches, repair cement,valves and small hand tools.
Key Distribution Products
• | Tire Valves & Accessories | |
• | Tire Changing & Balancing Equipment | |
• | Lifts & Alignment Equipment | |
• | Service Equipment & Tools | |
• | Tire Repair/ Retread Equipment & Supplies |
Product Brand
• | Myers Tire Supply |
Capabilities
• | International Distribution | |
• | Broad Sales Coverage | |
• | Personalized Service | |
• | Customer Product Training | |
• | National Accounts |
Representative Markets
• | Retail Tire Dealers | |
• | Truck Tire Dealers | |
• | Auto Dealers | |
• | Commercial Auto & Truck Fleets | |
• | Tire Retreaders | |
• | General Repair Facilities |
Within the continental United States, we provide widespread distribution and sales coverage from 43 branches in 31 states. Each branch operates as a profit center and is staffed by a branch manager, salespeople, office, warehouse, and delivery personnel.
Internationally, we have five wholly owned warehouse distributors located in Canada and Central America. We also own interests in several foreign warehouse distributors. Sales personnel from our Akron, Ohio headquarters cover the Far East, Middle East, South Pacific and South American territories.
We buy products from top suppliers to ensure quality is delivered to our customers. Each of the brand-name products we sell is associated with superior performance in its respective area. Some of these leading brands include: Chicago Pneumatic air tools; Hennessy tire changing, balancing, and alignment equipment; Corghi tire changers and balancers; Ingersoll-Rand air service equipment; John Bean Co. tire balancing and changing equipment; our own Patch Rubber brand tire patches, cements, and repair supplies; and Rotary lifts and related equipment.
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An essential element of our success in the Distributiondistribution segment is our nearly 170 sales representatives, who deliver personalized service on a local level. Customers rely on Myers’ sales representatives to introduce the latest tools and technologies and provide training in new product features and applications. Representatives also teach the proper use of diagnostic equipment, and present on-site workshops demonstrating industry approved techniques for tire repair and undercar service.
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Competition |
Competition in the Manufacturingmanufacturing segment is substantial and varied in form and size from manufacturers of similar products and of other products which can be readily substituted for those produced by the Company. Competition in the Distributiondistribution segment is generally from local and regional businesses.
Employees |
As of December 31, 20012002 the Company had a total of 4,1144,293 full-time and part-time employees. Of these employees, 3,3933,583 were engaged in the Manufacturingmanufacturing segment, 623614 were employed in the Distributiondistribution segment and 9896 were employed at the Company’s corporate offices. Approximately 10% of the Company’s employees are members of unions, however, in certain countries in which the Company operates union membership is not known due to confidentiality laws. The Company believes it has a good relationship with its union employees.
(d) Financial Information about (d) Financial Information About Foreign and Domestic Operations and Export Sales
The Response to this section of Item 1 is contained in the Industry Segments footnote of the Notes to Consolidated Financial Statements under Item 8 of this Report.
ITEM 2. | Properties |
The following table sets forth by segment certain information with respect to properties owned by the Registrant:
Distribution:Distribution
Approximate | Approximate | |||||||||||
Floor Space | Land Area | |||||||||||
Location | (Square Feet) | (Acres) | Use | |||||||||
Akron, Ohio | 129,000 | 8 | Executive offices and warehousing | |||||||||
Akron, Ohio | 60,000 | 5 | Warehousing | |||||||||
Akron, Ohio | 31,000 | 2 | Warehousing | |||||||||
Pomona, California | 17,700 | 1 | Sales and distribution | |||||||||
Englewood, Colorado | 9,500 | 1 | Sales and distribution | |||||||||
San Antonio, Texas | 4,500 | 1 | Sales and distribution | |||||||||
Phoenix, Arizona | 8,200 | 1 | Sales and distribution | |||||||||
Akron, Ohio | 8,000 | 1 | Leased to non-affiliated party | |||||||||
Houston, Texas | 7,900 | 1 | Sales and distribution | |||||||||
Indianapolis, Indiana | 7,800 | 2 | Sales and distribution | |||||||||
Cincinnati, Ohio | 7,500 | 1 | Sales and distribution | |||||||||
York, Pennsylvania | 7,400 | 3 | Sales and distribution | |||||||||
Atlanta, Georgia | 7,000 | 1 | Sales and distribution | |||||||||
Minneapolis, Minnesota | 5,500 | 1 | Sales and distribution | |||||||||
Charlotte, North Carolina | 5,100 | 1 | Sales and distribution | |||||||||
Syracuse, New York | 4,800 | 1 | Sales and distribution | |||||||||
Franklin Park, Illinois | 4,400 | 1 | Sales and distribution |
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Manufacturing:Manufacturing
Approximate | Approximate | Approximate | Approximate | |||||||||||||||||||||
Floor Space | Land Area | Floor Space | Land Area | |||||||||||||||||||||
Location | (Square Feet) | (Acres) | Use | (Square Feet) | (Acres) | Use | ||||||||||||||||||
Gaillon, France | 500,000 | 23 | Manufacturing and distribution | 500,000 | 23 | Manufacturing and distribution | ||||||||||||||||||
Middlefield, Ohio | 400,000 | 24 | Manufacturing and distribution | |||||||||||||||||||||
Nykobing, Falster Denmark | 227,000 | 68 | Manufacturing and distribution | 227,000 | 68 | Manufacturing and distribution | ||||||||||||||||||
Springfield, Missouri | 227,000 | 19 | Manufacturing and distribution | 227,000 | 19 | Manufacturing and distribution | ||||||||||||||||||
Dawson Springs, Kentucky | 209,000 | 36 | Manufacturing and distribution | 209,000 | 36 | Manufacturing and distribution | ||||||||||||||||||
Wadsworth, Ohio | 197,000 | 23 | Manufacturing and distribution | 197,000 | 23 | Manufacturing and distribution | ||||||||||||||||||
Hannibal, Missouri | 196,000 | 10 | Manufacturing and distribution | 196,000 | 10 | Manufacturing and distribution | ||||||||||||||||||
Sparks, Nevada | 185,000 | 11 | Manufacturing and distribution | 185,000 | 11 | Manufacturing and distribution | ||||||||||||||||||
Bluffton, Indiana | 175,000 | 17 | Manufacturing and distribution | 175,000 | 17 | Manufacturing and distribution | ||||||||||||||||||
Roanoke Rapids, N. Carolina | 172,000 | 20 | Manufacturing and distribution | 172,000 | 20 | Manufacturing and distribution | ||||||||||||||||||
Shelbyville, Kentucky | 160,000 | 8 | Manufacturing and distribution | 160,000 | 8 | Manufacturing and distribution | ||||||||||||||||||
Sandusky, Ohio | 155,000 | 8 | Manufacturing and distribution | 155,000 | 8 | Manufacturing and distribution | ||||||||||||||||||
Bristol, Indiana | 139,000 | 12 | Manufacturing and distribution | 139,000 | 12 | Manufacturing and distribution | ||||||||||||||||||
Akron, Ohio | 121,000 | 17 | Manufacturing and distribution | 121,000 | 17 | Manufacturing and distribution | ||||||||||||||||||
Gloucester, England | 118,000 | 3 | Manufacturing and distribution | 118,000 | 3 | Manufacturing and distribution | ||||||||||||||||||
Dayton, Ohio | 85,000 | 5 | Manufacturing and distribution | 85,000 | 5 | Manufacturing and distribution | ||||||||||||||||||
Palua De Plegamans, Spain | 85,000 | 7 | Manufacturing and distribution | 85,000 | 7 | Manufacturing and distribution | ||||||||||||||||||
Prunay, France | 71,000 | 4 | Manufacturing and distribution | 71,000 | 4 | Manufacturing and distribution | ||||||||||||||||||
Goddard, Kansas | 62,000 | 7 | Manufacturing and distribution | 62,000 | 7 | Manufacturing and distribution | ||||||||||||||||||
Santa Perpetua De Mogoda, Spain | 61,000 | 3 | Manufacturing and distribution | 61,000 | 3 | Manufacturing and distribution | ||||||||||||||||||
Fostoria, Ohio | 50,000 | 3 | Manufacturing and distribution | 50,000 | 3 | Manufacturing and distribution | ||||||||||||||||||
Akron, Ohio | 49,000 | 6 | Manufacturing and distribution | 49,000 | 6 | Manufacturing and distribution | ||||||||||||||||||
Surrey, B.C., Canada | 42,000 | 3 | Manufacturing and distribution | 42,000 | 3 | Manufacturing and distribution | ||||||||||||||||||
Ontario, California | 40,000 | 2 | Distribution and warehousing | 40,000 | 2 | Distribution and warehousing | ||||||||||||||||||
Mebane, North Carolina | 30,000 | 5 | Manufacturing and distribution | 30,000 | 5 | Manufacturing and distribution | ||||||||||||||||||
Maia, Portugal | 13,000 | 3 | Sales and distribution | 13,000 | 3 | Sales and distribution |
The following table sets forth by segment certain information with respect to facilities leased by the Registrant:
Manufacturing
Approximate | ||||||||||||
Floor Space | Expiration Date | |||||||||||
Location | (Square Feet) | of Lease | Use | |||||||||
Middlefield, Ohio | 400,000 | August 31, 2018 | Manufacturing and distribution | |||||||||
Cassopolis, Michigan | 210,000 | October 31, 2005 | Manufacturing and distribution | |||||||||
Droitwich, England | 73,000 | December 31, 2002 | Sales and distribution | |||||||||
Mulheim, Germany | 54,000 | December 31, 2005 | Sales and distribution | |||||||||
Brampton, Ontario, Canada | 43,000 | Sales and distribution | ||||||||||
Nanterre Cedex, France | 25,000 | April 30, 2008 | Administration and sales | |||||||||
Milford, Ohio | 22,000 | August 31, 2006 | ||||||||||
Nivelles, Belgium | 14,000 | March | Sales and distribution | |||||||||
Orbassano, Italy | 3,000 | Sales and distribution |
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The Registrant also leases distribution facilities in 32 locations throughout the United States and Canada which, in the aggregate, amount to approximately 167,000 square feet of warehouse and office space. All of these locations are used by the distribution of aftermarket repair products and services segment.
The Registrant believes that all of its properties, machinery and equipment generally are well maintained and adequate for the purposes for which they are used.
ITEM 3. | Legal Proceedings |
There are no material pending legal proceedings other than ordinary routine litigation incidental to the Registrant’s business.
ITEM 4. | Submission of Matters to a Vote of Security Holders |
During the fourth quarter of the fiscal year ended December 31, 2001,2002, there were no matters submitted to a vote of security holders.
Executive Officers of the Registrant
Set forth below is certain information concerning the executive officers of the Registrant. Executive officers are elected annually by the Board of Directors and serve at the pleasure of the Board.
Years as | Years as | |||||||||||||||||||||||
Name | Age | Executive Officer | Title | Age | Executive Officer | Title | ||||||||||||||||||
Stephen E. Myers | 59 | 29 | President and Chief Executive Officer | 59 | 30 | President and Chief Executive Officer | ||||||||||||||||||
Milton I. Wiskind | 76 | 30 | Senior Vice President and Secretary | 77 | 31 | Senior Vice President and Secretary | ||||||||||||||||||
Gregory J. Stodnick | 59 | 22 | Vice President — Finance | 60 | 23 | Vice President - Finance | ||||||||||||||||||
Jean-Paul Lesage | 57 | 2 | Vice President | 58 | 3 | Vice President | ||||||||||||||||||
Kevin C. O’Neil | 46 | 3 | Assistant Secretary | 47 | 4 | General Counsel and Assistant Secretary |
Each executive officer has been principally employed in the capacities shown or similar ones with the Registrant for over the past five years with the exception of Mr. O’Neil. Mr. O’Neil who consultsconsulted as Assistant Secretary.Secretary until June 2002 at which time he became a full time employee of the Company. Prior to his full time employment, he was a partner and shareholder of Brouse McDowell Co., LPA.
Section 16(a) of the Securities Exchange Act of 1934 requires the Registrant’s Directors, certain of its executive officers and persons who own more than ten percent of its Common Stock (“Insiders”) to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New YorkAmerican Stock Exchange, Inc., and to furnish the Company with copies of all such forms they file. The Company understands from the information provided to it by the Insiders that they adhered to all filing requirements applicable to the Section 16 Filers, except that Mr. Wiskind sold 2,640 shares in October, 2001, which was reportedMyers, due to an administrative error by his brokerage firm, failed to timely report four transactions on hisDecember 27, 30, 31, 2002 and January 2, 2003. Mr. Myers made the necessary filing for these transactions on February 2002 Form 4.19, 2003.
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PART II
ITEM 5. | Market for Registrant’s Common Stock and Related Stockholder Matters |
The Company’s Common Stock is traded on the New York Stock Exchange (ticker symbol MYE). The approximate number of record holders at December 31, 20012002 was 2,200.2,214. High and low stock prices and dividends for the last two years were:
Sales Price | Sales Price | |||||||||||||||||||||||
2001 | Dividends | |||||||||||||||||||||||
2002 | Dividends | |||||||||||||||||||||||
Quarter Ended | High | Low | Paid | High | Low | Paid | ||||||||||||||||||
March 31 | 14.55 | 10.01 | .055 | 11.64 | 9.20 | .05 | ||||||||||||||||||
June 30 | 14.18 | 11.14 | .055 | 14.48 | 11.22 | .05 | ||||||||||||||||||
September 30 | 13.82 | 10.70 | .06 | 14.20 | 10.21 | .05 | ||||||||||||||||||
December 31 | 14.58 | 10.90 | .06 | 13.70 | 10.02 | .05 |
Sales Price | Sales Price | |||||||||||||||||||||||
2000 | Dividends | |||||||||||||||||||||||
2001 | Dividends | |||||||||||||||||||||||
Quarter Ended | High | Low | Paid | High | Low | Paid | ||||||||||||||||||
March 31 | 13.22 | 9.66 | .05 | 11.64 | 8.01 | .04 | ||||||||||||||||||
June 30 | 11.83 | 8.88 | .05 | 11.34 | 8.91 | .04 | ||||||||||||||||||
September 30 | 12.95 | 9.09 | .055 | 11.05 | 8.56 | .05 | ||||||||||||||||||
December 31 | 13.41 | 8.75 | .055 | 11.66 | 8.72 | .05 |
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ITEM 6. | Selected Financial Data |
2001 | 2000 | 1999 | 1998 | 1997 | |||||||||||||||||||
Operations for the Year | |||||||||||||||||||||||
Net sales | $ | 607,950,431 | $ | 652,659,900 | $ | 580,760,740 | $ | 392,019,900 | $ | 339,625,585 | |||||||||||||
Cost of sales | 403,011,346 | 435,081,945 | 367,635,460 | 256,506,103 | 232,376,615 | ||||||||||||||||||
Selling | 88,020,857 | 85,632,525 | 83,352,607 | 47,959,466 | 39,322,295 | ||||||||||||||||||
General and administrative | 70,979,067 | 68,675,568 | 60,265,518 | 38,181,368 | 29,613,322 | ||||||||||||||||||
Interest — net | 18,699,142 | 22,360,255 | 15,205,809 | 887,873 | 247,570 | ||||||||||||||||||
580,710,412 | 611,750,293 | 526,459,394 | 343,534,810 | 301,559,802 | |||||||||||||||||||
Income before income taxes | 27,240,019 | 40,909,607 | 54,301,346 | 48,485,090 | 38,065,783 | ||||||||||||||||||
Income taxes | 12,049,000 | 16,909,000 | 23,125,000 | 19,806,000 | 15,727,000 | ||||||||||||||||||
Net Income | $ | 15,191,019 | $ | 24,000,607 | $ | 31,176,346 | $ | 28,679,090 | $ | 22,338,783 | |||||||||||||
Net income per share* | $ | 0.64 | $ | 1.01 | $ | 1.28 | $ | 1.18 | $ | 0.91 | |||||||||||||
Financial Position — at Year End | |||||||||||||||||||||||
Total Assets | $ | 582,166,378 | $ | 622,103,970 | $ | 600,409,632 | $ | 306,707,788 | $ | 224,077,922 | |||||||||||||
Current assets | 196,618,597 | 219,307,253 | 206,990,990 | 153,650,201 | 107,426,627 | ||||||||||||||||||
Current liabilities | 104,899,238 | 112,890,230 | 102,244,419 | 51,233,510 | 39,643,522 | ||||||||||||||||||
Working capital | 91,719,359 | 106,417,023 | 104,746,571 | 102,416,691 | 67,783,105 | ||||||||||||||||||
Other assets | 194,811,960 | 201,291,971 | 203,923,134 | 43,614,594 | 26,100,386 | ||||||||||||||||||
Property, plant and equipment — net | 190,735,821 | 201,504,746 | 189,495,508 | 109,442,993 | 90,550,909 | ||||||||||||||||||
Less: | |||||||||||||||||||||||
Long-term debt | 247,145,234 | 284,273,097 | 280,103,906 | 48,832,240 | 4,261,257 | ||||||||||||||||||
Deferred income taxes | 12,595,697 | 11,037,935 | 10,314,490 | 3,953,185 | 3,496,196 | ||||||||||||||||||
Shareholders’ Equity | $ | 217,526,209 | $ | 213,902,708 | $ | 207,746,817 | $ | 202,688,853 | $ | 176,676,947 | |||||||||||||
Common Shares Outstanding* | 23,847,694 | 23,749,013 | 24,184,810 | 24,407,959 | 24,329,210 | ||||||||||||||||||
Book Value Per Common Share* | $ | 9.12 | $ | 9.01 | $ | 8.59 | $ | 8.30 | $ | 7.26 | |||||||||||||
Other Data | |||||||||||||||||||||||
Dividends paid | $ | 5,454,870 | $ | 4,969,876 | $ | 4,626,471 | $ | 4,027,721 | $ | 3,529,921 | |||||||||||||
Dividends paid per Common Share* | 0.23 | 0.21 | 0.19 | 0.17 | 0.14 | ||||||||||||||||||
Average Common Shares Outstanding during the year* | 23,801,899 | 23,862,568 | 24,401,973 | 24,363,691 | 24,581,382 | ||||||||||||||||||
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
2002 | 2001 | 2000 | 1999 | 1998 | |||||||||||||||||||
Operations for the Year | |||||||||||||||||||||||
Net sales | $ | 607,991,158 | $ | 607,950,431 | $ | 652,659,900 | $ | 580,760,740 | $ | 392,019,900 | |||||||||||||
Cost of sales | 406,572,783 | 403,011,346 | 435,081,945 | 367,635,460 | 256,506,103 | ||||||||||||||||||
Selling | 88,407,389 | 88,020,857 | 85,632,525 | 83,352,607 | 47,959,466 | ||||||||||||||||||
General and administrative | 60,840,409 | 70,979,067 | 68,675,568 | 60,265,518 | 38,181,368 | ||||||||||||||||||
Interest — net | 11,809,749 | 18,699,142 | 22,360,255 | 15,205,809 | 887,873 | ||||||||||||||||||
567,630,330 | 580,710,412 | 611,750,293 | 526,459,394 | 343,534,810 | |||||||||||||||||||
Income before income taxes | 40,360,828 | 27,240,019 | 40,909,607 | 54,301,346 | 48,485,090 | ||||||||||||||||||
Income taxes | 16,401,000 | 12,049,000 | 16,909,000 | 23,125,000 | 19,806,000 | ||||||||||||||||||
Net Income | $ | 23,959,828 | $ | 15,191,019 | $ | 24,000,607 | $ | 31,176,346 | $ | 28,679,090 | |||||||||||||
Net income per share* | $ | .80 | $ | .51 | $ | .80 | $ | 1.02 | $ | .94 | |||||||||||||
Financial Position — At Year End | |||||||||||||||||||||||
Total assets | $ | 602,482,330 | $ | 582,166,378 | $ | 622,103,970 | $ | 600,409,632 | $ | 306,707,788 | |||||||||||||
Current assets | 201,140,357 | 196,618,597 | 219,307,253 | 206,990,990 | 153,650,201 | ||||||||||||||||||
Current liabilities | 117,368,956 | 104,899,238 | 112,890,230 | 102,244,419 | 51,233,510 | ||||||||||||||||||
Working capital | 83,771,401 | 91,719,359 | 106,417,023 | 104,746,571 | 102,416,691 | ||||||||||||||||||
Other assets | 210,546,946 | 194,811,960 | 201,291,971 | 203,923,134 | 43,614,594 | ||||||||||||||||||
Property, plant and equipment — net | 190,795,027 | 190,735,821 | 201,504,746 | 189,495,508 | 109,442,993 | ||||||||||||||||||
Less: | |||||||||||||||||||||||
Long-term debt | 212,222,615 | 247,145,234 | 284,273,097 | 280,103,906 | 48,832,240 | ||||||||||||||||||
Deferred income taxes | 17,201,131 | 12,595,697 | 11,037,935 | 10,314,490 | 3,953,185 | ||||||||||||||||||
Shareholders’ Equity | $ | 255,689,628 | $ | 217,526,209 | $ | 213,902,708 | $ | 207,746,817 | $ | 202,688,853 | |||||||||||||
Common Shares Outstanding | 30,071,736 | 29,809,618 | 29,686,266 | 30,231,013 | 30,509,949 | ||||||||||||||||||
Book Value Per Common Share | $ | 8.50 | $ | 7.30 | $ | 7.21 | $ | 6.87 | $ | 6.64 | |||||||||||||
Other Data | |||||||||||||||||||||||
Dividends paid | $ | 5,878,169 | $ | 5,454,870 | $ | 4,969,876 | $ | 4,626,471 | $ | 4,027,721 | |||||||||||||
Dividends paid per Common Share* | 0.20 | 0.18 | 0.17 | 0.15 | 0.13 | ||||||||||||||||||
Average Common Shares | |||||||||||||||||||||||
Outstanding during the year* | 29,971,843 | 29,752,373 | 29,828,210 | 30,502,466 | 30,454,614 | ||||||||||||||||||
* | Adjusted for the five-for-four stock split distributed in August 2002; the ten percent stock dividends paid in August, |
ITEM 7. | Management’s Discussion and Analysis of Results of |
2002 Results of Operations
Net sales of $608.0 million for the year ended December 31, 2002 were virtually unchanged from the prior year. Despite the flat sales, net income for 2002 of $24.0 million or $.80 per share increased 58 percent from the net income of $15.2 million or $.51 per share reported in 2001, as a result of the cessation of goodwill amortization and significantly lower interest expense.
On a segment basis, sales in the distribution segment increased $3.1 million or 2 percent as sales of capital equipment picked up following several years of weak demand. In the manufacturing segment, sales
9
Gross profit, expressed as a percentage of sales, declined slightly to 33.1 percent for the year ended December 31, 2002, compared with 33.7 percent in the prior year. In the distribution segment, margins increased slightly based on continuing favorable sales mix of higher margin supplies. In the manufacturing segment, margins declined as a result of lower selling prices and an increase of unabsorbed fixed manufacturing costs due to lower production levels. Raw material costs, primarily for plastic resins, were lower than prior year costs through the first half of 2002 but increased throughout the year and were unfavorable in the third and fourth quarters.
Total operating expenses decreased $9.8 million or 6 percent to $149.2 million. Expressed as a percentage of sales, operating expenses were reduced to 24.5 percent in 2002 compared to 26.1 percent in 2001. The reduction in current year operating expenses was primarily due to the elimination of goodwill amortization which totaled $9.2 million in 2001. Other reductions in general and administrative expenses resulting from cost containment efforts were largely offset by significantly higher costs for medical, property, casualty and other insurances.
Net interest expense of $11.8 million for 2002 was down $6.9 million or 37 percent from the prior year. This decrease was primarily the result of lower interest rates, however, the Company also received the benefit of lower average borrowing levels by repaying $35.8 million of debt during the year.
Income taxes as a percentage of pretax income was 40.6 percent compared with 44.2 percent in the prior year. The lower effective tax rate reflects the elimination of the impact which non-deductible goodwill amortization had in prior years. In addition, the Company experienced a more favorable foreign tax rate difference in the current year.
2001 Results of Operations
For the year ended December 31, 2001, net sales of $608.0 million were down 7 percent from the $652.7 million in 2000. Net income for 2001 of $15.2 million or $.64 per share decreased 37 percent from the $24.0 million and $1.01 per share reported in 2000.million.
The Company experienced sales declines in both of its business segments. Distribution segmentssegment sales were down $7.2 million or 5 percent reflecting lower unit volumes, particularly for capital equipment. In the Manufacturingmanufacturing segment, sales decreased $37.7 million or 7 percent from the prior year as the Company experienced sharply lower demand brought on by the general recession and global economic slowdown affecting most of the industrial markets we serve. In addition, competitive pressures and lower raw material
9
Cost of sales decreased $32.1 million or 7 percent, reflecting the significant drop in fiscal 2001 sales. Gross profit, expressed as a percentage of sales, improved slightly to 33.7 percent for the year ended December 31, 2001, compared with 33.3 percent in the prior year. In the distribution segment, margins improved slightly reflecting a shift in sales mix to higher margin supplies versus capital equipment. In the manufacturing segment, margins were virtually unchanged as a benefit of lower raw material costs were offset by slightly lower selling prices and a decrease in the absorption of fixed manufacturing costs resulting from reduced production.
Total operating expenses increased $4.7 million, or 3 percent, to $159.0 million. The increase in fiscal 2001 reflects the full year impact of expenses of companies acquired in the fourth quarter of last year as well as the amortization of related goodwill. In addition, the Company experienced substantially higher costs for medical insurance and bad debt expense, including approximately $1.0 million as a result of the K-Mart Kmart
10
Net interest expense for 2001 decreased $3.7 million or 16 percent compared with the prior year. This decrease reflects primarily the impact of lower interest rates. In addition, the Company reduced total debt by $35.3 million in fiscal 2001 and, therefore, received the benefit of lower average borrowing levels.
Income taxes as a percent of income before taxes was 44.2 percent compared to 41.3 percent in the prior year. The higher effective tax rate reflects the more significant impact of non-deductible goodwill amortization resulting from lower pretax income combined with higher foreign tax rate difference.
2000 Results of Operations
Net sales for the year ended December 31, 2000, increased $71.9 million or 12 percent to a record $652.7 million. Excluding contributions from acquisitions, total net sales would have increased 3 percent. Sales in the distribution segment decreased 2 percent for the year as sales of capital equipment, the more cyclical part of the distribution segment, continued to be weak. In the manufacturing segment, sales increased 18 percent over the comparable 12 months. Excluding acquisitions, sales in the manufacturing segment increased 5 percent for the year. The translation effect of the euro reduced total sales and manufacturing segment sales by $20.0 million for the year. Without the translation effect and excluding acquisitions, both total sales and manufacturing segment sales would have increased 6 percent for the year.
Cost of sales increased $67.4 million, or 18 percent, reflecting the higher sales levels and increased cost of raw materials, mainly plastic resins, which reduced gross profit as a percentage of sales from 36.7 percent in 1999 to 33.3 percent in 2000.
Total operating expenses increased $10.7 million, or 7 percent, to $154.3 million. Included in fourth quarter 2000 administrative expense were costs of approximately $3.2 million related to the closing of the Company’s Dayton, Ohio manufacturing facility. These costs were primarily to cover the estimated loss on disposition of the land, buildings, machinery and equipment and other fixed assets used at the closed facility. Expressed as a percentage of sales, operating expenses were 23.6 percent in 2000 and 24.7 percent in 1999. This improvement reflects the benefit from greater integration of the various acquisitions made in 1999.
Net interest expense increased $7.2 million to $22.4 million for the year. This increase reflects the higher average borrowing levels resulting from acquisitions combined with slightly higher rates.
Income taxes as a percent of income before taxes was 41.3 percent for 2000 compared to 42.6 percent in the prior year. This decrease is attributable to foreign tax rate differences.
10
Financial Condition
Liquidity and Capital Resources
In 2001,2002, the Company generated cash from operating activities of $76.8$65.5 million. InvestmentsDuring the year investments in property, plant and equipment were $25.2 million. In 2001,totaled $28.4 million and total debt was reduced by $35.3 million and debt$32 million. Debt as a percentage of total capitalization was reduced from 58to 48 percent at December 31, 2002 compared to 55 percent.percent at the end of 2001. At December 31, 2001,2002, the Company had working capital of $91.7$83.8 million and a current rationratio of 1.91.7 to 1.
At December 31, 2001,2002, available borrowing under the Company’s revolving credit facility was approximately $47$70 million. In addition, there is an uncommitted $25 million springing facility. During the next five years management anticipatesanticipated on-going capital expenditures in the range of $25 to $30 million annually. Cash flows from operations and funds available under existing credit facilities will provide the Company’s primary source of future financing. Management believes that it has sufficient financial resources to meet anticipated business requirements in the foreseeable future, including capital expenditures, dividends, working capital and debt service.
The following summarizes the Company’s future cash outflows for the next five years resulting from financial contracts and commitments:
2003 | 2004 | 2005 | 2006 | 2007 | Total | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Long-term Debt | $ | 20,690 | $ | 26,516 | $ | 174,954 | $ | 736 | $ | 765 | $ | 223,661 | ||||||||||||
Operating Leases | 8,336 | 7,182 | 6,273 | 4,897 | 4,246 | 30,934 | ||||||||||||||||||
Total | $ | 29,026 | $ | 33,698 | $ | 181,227 | $ | 5,633 | $ | 5,011 | $ | 254,595 | ||||||||||||
Market RiskCritical Accounting Policies
Our discussion and Derivativeanalysis of the Company’s financial condition and results of operations are based on the accompanying consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. As indicated in Note 1 to our consolidated financial statements, the amount of assets, liabilities, revenue and expenses reported are affected by estimates and judgements that are necessary to comply with generally accepted accounting principles. We base our estimates on prior experience and other assumptions that we consider reasonable to our circumstances. While estimates and judgements are applied in arriving at reported amounts such as pension benefits and provisions for self-insured risks, we believe the following matters may involve a high degree of judgement and complexity.
Revenue Recognition — the Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title, which is generally at the time of shipment.
Bad Debts — the Company evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet it 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 reviews historical trends for collectibility in determining an estimate for its allowance for doubtful
11
Inventory — inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 41 percent of the Company’s inventories and the first-in, first-out (FIFO) method for all other inventories. Where appropriate, standard cost systems are utilized for purposes of determining cost; the standards are adjusted as necessary to ensure they approximate actual costs. Estimates of lower of cost or market value of inventory are determined based upon current economic conditions, historical sales quantities and patterns and, in some cases, the specific risk of loss on specifically identified inventories.
Goodwill — as a result of Statement of Financial InstrumentsAccounting Standards No. 142, “Goodwill and Other Intangible Assets,” recorded goodwill will be subject to annual impairment testing. Goodwill impairment testing requires, in part, that we estimate the fair value of our business units which, in turn, requires that we make judgements concerning future cash flows and appropriate discount rates for those businesses. Our estimate of the fair value of these business units and the related goodwill, could change over time based on a variety of factors, including the actual operating performance of the underlying businesses or the impact of future events on the cost of capital and the related discount rates used.
Contingencies — in the ordinary course of business, we are involved in various legal proceedings and contingencies. We have recorded liabilities for these matters in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (SFAS 5). SFAS5 requires a liability to be recorded based on our estimate of the probable cost of the resolution of a contingency. The actual resolution of these contingencies may differ from our estimates. If a contingency is settled for an amount greater than out estimates, a future charge to income would result. Likewise, if a contingency is settled for an amount that is less than our estimate, a future credit to income would result.
Income Taxes — deferred income taxes are provided to recognize the effect of temporary differences between financial and tax reporting. Deferred income taxes are not provided for undistributed earnings of foreign consolidated subsidiaries as it is our intention to reinvest such earnings for an indefinite period of time. The Company has significant operations outside the United States and in jurisdictions with statutory tax rates both higher and lower than in the United States. As a result, significant tax and treasury planning and analysis of future operations are necessary to determine the proper amounts of tax assets, liabilities and expense to be recognized.
The Company has reserved the deferred tax benefit of certain tax loss carry forwards in foreign countries that if realized would reduce future income tax expense by approximately $5,977,000. Of this amount, $2,657,000 expires in various years from 2003 through 2007, and $3,320,000 has no expiration date. The Company also has U.S. foreign tax credit carry forwards of approximately $800,000 expiring in 2004.
ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk |
The Company has financing arrangements that require interest payments based on floating interest rates. As such, the Company’s financial results are subject to changes in the market rate of interest. Our objective in managing the exposure to interest rate changes is to limit the volatility and impact of rate changes on earnings while maintaining the lowest overall borrowing cost. At present, the Company has not entered into any interest rate swaps or other derivative instruments to fix the interest rate on any portion of its financing arrangements with floating rates. Accordingly, based on current debt levels at December 31, 2001,2002, if market interest rates increasedincrease one percent, the Company’s interest expense would increase approximately $2.5 million.
Some of the Company’s subsidiaries operate in foreign countries and, as such, their financial results are subject to the variability that arises from exchange rate movements. The Company believes that foreign currency exchange rate fluctuations do not represent a significant market risk due to the nature of the foreign countries in which we operate, primarily Canada and Western Europe, as well as the size of those operations relative to the total Company.
12
The Company uses certain commodities, primarily plastic resins, in its manufacturing processes. As such, the cost of operations is subject to fluctuation as the market for these commodities changes. The Company monitors this risk but currently has no derivative contracts to hedge this risk, however, the Company also has no significant purchase obligations to purchase fixed quantities of such commodities in the future.
Accounting Standards for Business Combinations and Goodwill
The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standard No. 141 (SFAS 141), “Business Combinations,” and SFAS 142, “Goodwill and Other Intangible Assets.” The statements are effective for the Company on January 1, 2002. These statements will result in modifications relative to the Company’s accounting for goodwill and other intangible assets. Specifically, the Company will cease goodwill and certain intangible asset amortization beginning January 1, 2002. Upon adopting the new standards and cessation of amortization for goodwill, the Company anticipates increases in annual income before taxes of $9.2 million and earnings per shares of approximately $.30 per share. Additionally, intangible assets, including goodwill, will be subject to new impairment testing criteria. Other than the impact to future earnings of eliminating goodwill amortization, the Company has not yet made a complete evaluation regarding the impact of adoption on the Company’s financial statements, including the possible impairment of goodwill as recorded on the December 31, 2001, balance sheet.
Forward-Looking Informationperiods.
Statements contained in this report concerning the Company’s goals, strategies, and expectations for business and financial results may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on current indicators and expectations. These
11
ITEM 8. | Financial Statements and Supplementary Data |
The consolidated financial statements and accompanying notes and the reports of management and independent accountants follow Item 9 of this Report.
Summarized Quarterly Results of Operations
March 31 | June 30 | September 30 | December 31 | Total | March 31 | June 30 | September 30 | December 31 | Total | |||||||||||||||||||||||||||||||
Quarter Ended 2001 | ||||||||||||||||||||||||||||||||||||||||
Quarter Ended 2002 | ||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 165,260 | $ | 152,738 | $ | 141,447 | $ | 148,505 | $ | 607,950 | $ | 148,939 | $ | 153,095 | $ | 146,626 | $ | 159,331 | $ | 607,991 | ||||||||||||||||||||
Gross Profit | 58,891 | 50,291 | 45,970 | 49,787 | 204,939 | 54,499 | 51,730 | 44,395 | 50,794 | 201,418 | ||||||||||||||||||||||||||||||
Net Income | 7,987 | 3,181 | 1,691 | 2,332 | 15,191 | 10,046 | 6,802 | 3,068 | 4,044 | 23,960 | ||||||||||||||||||||||||||||||
Per Share | 0.34 | 0.13 | 0.07 | 0.10 | 0.64 | .34 | .23 | .10 | .13 | .80 |
March 31 | June 30 | September 30 | December 31 | Total | March 31 | June 30 | September 30 | December 31 | Total | |||||||||||||||||||||||||||||||
Quarter Ended 2000 | ||||||||||||||||||||||||||||||||||||||||
Quarter Ended 2001 | ||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 161,586 | $ | 166,235 | $ | 153,548 | $ | 171,291 | $ | 652,660 | $ | 165,260 | $ | 152,738 | $ | 141,447 | $ | 148,505 | $ | 607,950 | ||||||||||||||||||||
Gross Profit | 56,954 | 57,135 | 47,815 | 55,674 | 217,578 | 58,891 | 50,291 | 45,970 | 49,787 | 204,939 | ||||||||||||||||||||||||||||||
Net Income | 8,332 | 8,059 | 3,150 | 4,460 | 24,001 | 7,987 | 3,181 | 1,691 | 2,332 | 15,191 | ||||||||||||||||||||||||||||||
Per Share | 0.34 | 0.34 | 0.14 | 0.19 | 1.01 | .27 | .10 | .06 | .08 | .51 |
13 REPORT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS |
ThereWe have audited the accompanying statement of consolidated financial position of Myers Industries, Inc. (an Ohio Corporation) and Subsidiaries as of December 31, 2002 and the related statements of consolidated income, shareholders’ equity and comprehensive income and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of Myers Industries, Inc. and Subsidiaries as of December 31, 2001 and for each of the two years in the period then ended were no disagreementsaudited by other auditors who have ceased operations and whose report dated February 15, 2002, expressed an unqualified opinion on those statements before the revisions described below and in the Goodwill and Intangible Assets note and the 2002 restatement adjustment for the retroactive effect of the five-for-four stock split described below and in the Net Income Per Share note.
We conducted our audit in accordance with auditing standards generally accepted in the Registrant’s independent accountantsUnited States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial disclosure matters withinstatement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the two-yearfinancial statements referred to above present fairly, in all material respects, the consolidated financial position of Myers Industries, Inc. and Subsidiaries at December 31, 2002 and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
As explained in the Goodwill and Intangible Assets note, effective January 1, 2002, the Company changed its method of accounting for goodwill.
As discussed above, the financial statements of Myers Industries, Inc. as of December 31, 2001, and for each of the two years in the period then ended were audited by other auditors who have ceased operations. As described in the Goodwill and Intangible Assets note, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (SFAS) No. 142,Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures for 2001 and 2000 in the Goodwill and Intangible Assets note included (a) agreeing the previously reported net income and net income per share to the previously issued financial statements and the adjustments to those amounts representing amortization expense (including any related tax effects) recognized in those periods related to goodwill to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the calculation of adjusted net income. Also, as described in the Net Income Per Share note, in 2002 the Company’s Board of Directors approved a five-for-four stock split, and all references to the number of shares, per share information and the number of stock options in the financial statements have been adjusted to reflect the stock split on a retroactive basis. We audited the adjustments that were applied to restate the number of shares and per share information and the number of stock options reflected in the 2001 and 2000 financial statements. Our procedures included (a) agreeing the authorization for the five-for-four stock split to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the restated number of shares, net income per share, stock option information and all other per share amounts.
In our opinion, the disclosures for 2001 and 2000 in the Goodwill and Intangible Assets note are appropriate and the adjustments to reflect the five-for-four stock split are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 or 2000 financial statements of the Company other than with respect to such disclosures and adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 financial statements taken as a whole.
/s/ ERNST & YOUNG LLP
Akron, Ohio
14
This report is a copy and has not been reissued by Arthur Andersen, LLP.
This report references the Company’s balance sheet as of December 31, 2000 and its related consolidated statements of Income, shareholders’ equity and cash flows for the year ended December 31, 2001, or in any period subsequent to such date.
12
1999 which are not presented herein.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the accompanying statements of consolidated financial position of Myers Industries, Inc. (an Ohio Corporation) and Subsidiaries as of December 31, 2001 and 2000, and the related statements of consolidated income, shareholders’ equity and comprehensive income and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Myers Industries, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001,2000, in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Cleveland, Ohio,
1315
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
For The Years Ended December 31, 2002, 2001 2000 and 19992000
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
Net sales | Net sales | $ | 607,950,431 | $ | 652,659,900 | $ | 580,760,740 | Net sales | $ | 607,991,158 | $ | 607,950,431 | $ | 652,659,900 | ||||||||||||||
Cost of sales | Cost of sales | 403,011,346 | 435,081,945 | 367,635,460 | Cost of sales | 406,572,783 | 403,011,346 | 435,081,945 | ||||||||||||||||||||
Gross profit | 204,939,085 | 217,577,955 | 213,125,280 | Gross profit | 201,418,375 | 204,939,085 | 217,577,955 | |||||||||||||||||||||
Operating expenses | Operating expenses | Operating expenses | ||||||||||||||||||||||||||
Selling | 88,020,857 | 85,632,525 | 83,352,607 | Selling | 88,407,389 | 88,020,857 | 85,632,525 | |||||||||||||||||||||
General and administrative | 70,979,067 | 68,675,568 | 60,265,518 | General and administrative | 60,840,409 | 70,979,067 | 68,675,568 | |||||||||||||||||||||
158,999,924 | 154,308,093 | 143,618,125 | 149,247,798 | 158,999,924 | 154,308,093 | |||||||||||||||||||||||
Operating income | 45,939,161 | 63,269,862 | 69,507,155 | Operating income | 52,170,577 | 45,939,161 | 63,269,862 | |||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||
Income | (695,140 | ) | (972,248 | ) | (753,648 | ) | Income | (461,038 | ) | (695,140 | ) | (972,248 | ) | |||||||||||||||
Expense | 19,394,282 | 23,332,503 | 15,959,457 | Expense | 12,270,787 | 19,394,282 | 23,332,503 | |||||||||||||||||||||
18,699,142 | 22,360,255 | 15,205,809 | 11,809,749 | 18,699,142 | 22,360,255 | |||||||||||||||||||||||
Income before income taxes | Income before income taxes | 27,240,019 | 40,909,607 | 54,301,346 | Income before income taxes | 40,360,828 | 27,240,019 | 40,909,607 | ||||||||||||||||||||
Income taxes | Income taxes | 12,049,000 | 16,909,000 | 23,125,000 | Income taxes | 16,401,000 | 12,049,000 | 16,909,000 | ||||||||||||||||||||
Net income | Net income | $ | 15,191,019 | $ | 24,000,607 | $ | 31,176,346 | Net income | $ | 23,959,828 | $ | 15,191,019 | $ | 24,000,607 | ||||||||||||||
Net income per share | Net income per share | $ | 0.64 | $ | 1.01 | $ | 1.28 | Net income per share | $ | .80 | $ | .51 | $ | .80 | ||||||||||||||
Weighted average shares outstanding | Weighted average shares outstanding | 29,971,843 | 29,752,373 | 29,828,210 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
1416
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
As ofOf December 31, 20012002 and 20002001
2001 | 2000 | 2002 | 2001 | |||||||||||||||||
Assets | Assets | Assets | ||||||||||||||||||
Current Assets | Current Assets | Current Assets | ||||||||||||||||||
Cash and temporary cash investments | $ | 7,074,964 | $ | 2,177,983 | Cash | $ | 1,702,334 | $ | 7,074,964 | |||||||||||
Accounts receivable — less allowances of $4,417,000 and $3,644,000, respectively | 104,602,982 | 125,921,325 | Accounts receivable — less allowances of $4,507,000 and $4,417,000, respectively | 111,207,172 | 104,602,982 | |||||||||||||||
Inventories | Inventories | |||||||||||||||||||
Finished and in-process products | 66,239,288 | 66,143,998 | Finished and in-process products | 66,819,085 | 66,239,288 | |||||||||||||||
Raw materials and supplies | 15,109,952 | 22,660,460 | Raw materials and supplies | 16,280,910 | 15,109,952 | |||||||||||||||
81,349,240 | 88,804,458 | 83,099,995 | 81,349,240 | |||||||||||||||||
Prepaid expenses | 3,591,411 | 2,403,487 | Prepaid expenses | 5,130,856 | 3,591,411 | |||||||||||||||
Total Current Assets | Total Current Assets | 196,618,597 | 219,307,253 | Total Current Assets | 201,140,357 | 196,618,597 | ||||||||||||||
Other Assets | Other Assets | Other Assets | ||||||||||||||||||
Excess of cost over fair value of net assets of companies acquired | 187,960,222 | 194,205,707 | Goodwill | 204,465,504 | 187,960,222 | |||||||||||||||
Patents and other intangible assets | 2,834,582 | 2,955,593 | Patents and other intangible assets, net | 2,422,772 | 2,834,582 | |||||||||||||||
Other | 4,017,156 | 4,130,671 | Other | 3,658,670 | 4,017,156 | |||||||||||||||
194,811,960 | 201,291,971 | 210,546,946 | 194,811,960 | |||||||||||||||||
Property, Plant and Equipment | ||||||||||||||||||||
Property, Plant and Equipment, at Cost | Property, Plant and Equipment, at Cost | |||||||||||||||||||
Land | 7,311,493 | 7,365,005 | Land | 7,878,664 | 7,311,493 | |||||||||||||||
Buildings and leasehold improvements | 73,983,923 | 72,727,170 | Buildings and leasehold improvements | 77,061,850 | 73,983,923 | |||||||||||||||
Machinery and equipment | 282,140,259 | 266,506,306 | Machinery and equipment | 318,617,656 | 282,140,259 | |||||||||||||||
363,435,675 | 346,598,481 | 403,558,170 | 363,435,675 | |||||||||||||||||
Less allowances for depreciation and amortization | 172,699,854 | 145,093,735 | Less allowances for depreciation and amortization | 212,763,143 | 172,699,854 | |||||||||||||||
�� | ||||||||||||||||||||
190,735,821 | 201,504,746 | 190,795,027 | 190,735,821 | |||||||||||||||||
$ | 582,166,378 | $ | 622,103,970 | $ | 602,482,330 | $ | 582,166,378 | |||||||||||||
Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | ||||||||||||||||||
Current Liabilities | Current Liabilities | Current Liabilities | ||||||||||||||||||
Accounts payable | $ | 44,818,664 | $ | 49,964,169 | Accounts payable | $ | 49,970,910 | $ | 44,818,664 | |||||||||||
Accrued expenses | Accrued expenses | |||||||||||||||||||
Employee compensation and related items | 25,501,181 | 25,516,152 | Employee compensation and related items | 29,843,708 | 25,501,181 | |||||||||||||||
Taxes, other than income taxes | 2,632,663 | 2,481,602 | Taxes, other than income taxes | 3,260,304 | 2,632,663 | |||||||||||||||
Accrued interest | 1,207,733 | 2,834,366 | Accrued interest | 754,668 | 1,207,733 | |||||||||||||||
Other | 12,971,309 | 16,200,940 | Other | 12,849,101 | 12,971,309 | |||||||||||||||
Current portion of long-term debt | 17,767,688 | 15,893,001 | Current portion of long-term debt | 20,690,265 | 17,767,688 | |||||||||||||||
Total Current Liabilities | Total Current Liabilities | 104,899,238 | 112,890,230 | Total Current Liabilities | 117,368,956 | 104,899,238 | ||||||||||||||
Long-Term Debt, less current portion | 247,145,234 | 284,273,097 | ||||||||||||||||||
Long-term Debt, less current portion | Long-term Debt, less current portion | 212,222,615 | 247,145,234 | |||||||||||||||||
Deferred Income Taxes | Deferred Income Taxes | 12,595,697 | 11,037,935 | Deferred Income Taxes | 17,201,131 | 12,595,697 | ||||||||||||||
Shareholders’ Equity | Shareholders’ Equity | Shareholders’ Equity | ||||||||||||||||||
Serial Preferred Shares (authorized 1,000,000 shares) | — | — | Serial Preferred Shares (authorized 1,000,000 shares) | –0– | –0– | |||||||||||||||
Common Shares, without par value (authorized 60,000,000 shares; outstanding 23,847,694 and 23,749,013 shares, respectively) | 14,503,828 | 13,234,830 | Common Shares, without par value (authorized 60,000,000 shares; outstanding 30,071,736 and 29,809,618 shares, respectively) | 18,301,212 | 14,503,828 | |||||||||||||||
Additional paid-in capital | 217,594,648 | 189,779,843 | Additional paid-in capital | 216,077,838 | 217,594,648 | |||||||||||||||
Accumulated other comprehensive income | (34,411,755 | ) | (27,149,716 | ) | Accumulated other comprehensive income | (16,590,693 | ) | (34,411,755 | ) | |||||||||||
Retained income | 19,839,488 | 38,037,751 | Retained income | 37,901,271 | 19,839,488 | |||||||||||||||
217,526,209 | 213,902,708 | 255,689,628 | 217,526,209 | |||||||||||||||||
$ | 582,166,378 | $ | 622,103,970 | $ | 602,482,330 | $ | 582,166,378 | |||||||||||||
The accompanying notes are an integral part of these statements.
1517
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
For The Years Ended December 31, 2002, 2001 2000 and 19992000
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||
Common Shares | Additional | Other | Common Shares | Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||
Paid-in | Comprehensive | Retained | Comprehensive | Paid-in | Comprehensive | Retained | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||
Number | Amount | Capital | Income (loss) | Income | Income | Number | Amount | Capital | Income | Income | Income | |||||||||||||||||||||||||||||||||||||||
Balance at January 1, 1999 | 18,338,061 | $ | 11,610,996 | $ | 134,280,522 | $ | (83,002 | ) | $ | 56,880,337 | $ | –0– | ||||||||||||||||||||||||||||||||||||||
Additions | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | –0– | –0– | –0– | –0– | 31,176,346 | 31,176,346 | ||||||||||||||||||||||||||||||||||||||||||||
Sales under option plans | 75,221 | 42,820 | 744,713 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Employees stock purchase plan | 22,986 | 14,381 | 470,531 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Dividend reinvestment plan | 9,173 | 5,778 | 194,751 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Deductions | ||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases for treasury | (297,800 | ) | (576,843 | ) | (3,443,338 | ) | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||||||
Dividends — $.19 per share | –0– | –0– | –0– | –0– | (4,626,471 | ) | –0– | |||||||||||||||||||||||||||||||||||||||||||
10% stock dividend | 1,839,805 | 1,159,077 | 37,260,845 | –0– | (38,433,953 | ) | –0– | |||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | –0– | –0– | –0– | (18,930,673 | ) | –0– | (18,930,673 | ) | ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 1999 | 19,987,446 | $ | 12,256,209 | $ | 169,508,024 | $ | (19,013,675 | ) | $ | 44,996,259 | $ | 12,245,673 | ||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2000 | Balance at January 1, 2000 | 19,987,446 | $ | 12,256,209 | $ | 169,508,024 | $ | (19,013,675 | ) | $ | 44,996,259 | $ | 0 | |||||||||||||||||||||||||||||||||||||
Additions | Additions | Additions | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | –0– | –0– | –0– | –0– | 24,000,607 | 24,000,607 | Net income | –0– | –0– | –0– | –0– | 24,000,607 | $ | 24,000,607 | ||||||||||||||||||||||||||||||||||||
Sales under option plans | 14,796 | 9,134 | 135,970 | –0– | –0– | –0– | Sales under option plans | 14,796 | 9,134 | 135,970 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Employees stock purchase plan | 42,605 | 25,988 | 458,816 | –0– | –0– | –0– | Employees stock purchase plan | 42,605 | 25,988 | 458,816 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Dividend reinvestment plan | 13,033 | 7,949 | 164,223 | –0– | –0– | –0– | Dividend reinvestment plan | 13,033 | 7,949 | 164,223 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Deductions | Deductions | Deductions | ||||||||||||||||||||||||||||||||||||||||||||||||
Purchases for treasury | (428,800 | ) | (260,620 | ) | (5,271,582 | ) | –0– | –0– | –0– | Purchases for treasury | (428,800 | ) | (260,620 | ) | (5,271,582 | ) | –0– | –0– | –0– | |||||||||||||||||||||||||||||||
Dividends — $.21 per share | –0– | –0– | –0– | –0– | (4,969,876 | ) | –0– | Dividends — $.17 per share | –0– | –0– | –0– | –0– | (4,969,876 | ) | –0– | |||||||||||||||||||||||||||||||||||
10% stock dividend | 1,960,932 | 1,196,170 | 24,784,392 | –0– | (25,989,239 | ) | –0– | 10% stock dividend | 1,960,932 | 1,196,170 | 24,784,392 | –0– | (25,989,239 | ) | –0– | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | –0– | –0– | –0– | (8,136,041 | ) | –0– | (8,136,041 | ) | Foreign currency translation adjustment | –0– | –0– | –0– | (8,136,041 | ) | –0– | (8,136,041 | ) | |||||||||||||||||||||||||||||||||
Balance at December 31, 2000 | Balance at December 31, 2000 | 21,590,012 | $ | 13,234,830 | $ | 189,779,843 | $ | (27,149,716 | ) | $ | 38,037,751 | $ | 15,864,566 | Balance at December 31, 2000 | 21,590,012 | $ | 13,234,830 | $ | 189,779,843 | $ | (27,149,716 | ) | $ | 38,037,751 | $ | 15,864,566 | ||||||||||||||||||||||||
Additions | Additions | Additions | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income | –0– | $ | –0– | $ | –0– | $ | –0– | $ | 15,191,019 | $ | 15,191,019 | Net income | –0– | –0– | –0– | –0– | 15,191,019 | 15,191,019 | ||||||||||||||||||||||||||||||||
Sales under option plans | 46,404 | 26,707 | 331,899 | –0– | –0– | –0– | Sales under option plans | 46,404 | 26,707 | 331,899 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Employees stock purchase plan | 35,204 | 21,474 | 410,218 | –0– | –0– | –0– | Employees stock purchase plan | 35,204 | 21,474 | 410,218 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Dividend reinvestment plan | 11,830 | 8,840 | 365,917 | –0– | –0– | –0– | Dividend reinvestment plan | 11,830 | 8,840 | 365,917 | –0– | –0– | –0– | |||||||||||||||||||||||||||||||||||||
Deductions | Deductions | Deductions | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends — $.23 per share | –0– | –0– | –0– | –0– | (5,454,868 | ) | –0– | Dividends — $.18 per share | –0– | –0– | –0– | –0– | (5,454,868 | ) | –0– | |||||||||||||||||||||||||||||||||||
10% stock dividend | 2,164,244 | 1,211,977 | 26,706,771 | –0– | (27,934,414 | ) | –0– | 10% stock dividend | 2,164,244 | 1,211,977 | 26,706,771 | –0– | (27,934,414 | ) | –0– | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | –0– | –0– | –0– | (7,262,039 | ) | –0– | (7,262,039 | ) | Foreign currency translation adjustment | –0– | –0– | –0– | (7,262,039 | ) | –0– | (7,262,039 | ) | |||||||||||||||||||||||||||||||||
Balance at December 31, 2001 | Balance at December 31, 2001 | 23,847,694 | $ | 14,503,828 | $ | 217,594,648 | $ | (34,411,755 | ) | $ | 19,839,488 | $ | 7,928,980 | Balance at December 31, 2001 | 23,847,694 | $ | 14,503,828 | $ | 217,594,648 | (34,411,755 | ) | $ | 19,839,488 | $ | 7,928,980 | |||||||||||||||||||||||||
Additions | Additions | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | –0– | –0– | –0– | –0– | 23,959,828 | 23,959,828 | ||||||||||||||||||||||||||||||||||||||||||||
Sales under option plans | 166,837 | 102,297 | 1,562,041 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Employees stock purchase plan | 30,035 | 18,321 | 359,833 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Dividend reinvestment plan | 16,415 | 10,015 | 228,067 | –0– | –0– | –0– | ||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | –0– | –0– | –0– | 19,404,517 | –0– | 19,404,517 | ||||||||||||||||||||||||||||||||||||||||||||
Deductions | Deductions | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends — $.20 per share | –0– | –0– | –0– | –0– | (5,878,169 | ) | –0– | |||||||||||||||||||||||||||||||||||||||||||
Five-for-four stock split | 6,010,755 | 3,666,751 | (3,666,751 | ) | –0– | (19,876 | ) | |||||||||||||||||||||||||||||||||||||||||||
FAS 87 additional pension liability | –0– | –0– | –0– | (1,583,455 | ) | –0– | (1,583,455 | ) | ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2002 | Balance at December 31, 2002 | 30,071,736 | $ | 18,301,212 | $ | 216,077,838 | $ | (16,590,693 | ) | $ | 37,901,271 | $ | 41,780,890 | |||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
1618
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
For theThe Years Ended December 31, 2002, 2001 2000, and 19992000
2001 | 2000 | 1999 | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||||
Net income | $ | 15,191,019 | $ | 24,000,607 | $ | 31,176,346 | ||||||||
Items not affecting use of cash | ||||||||||||||
Depreciation | 33,361,480 | 33,075,562 | 30,331,491 | |||||||||||
Amortization of excess of cost over fair value of net assets of companies acquired | 9,223,542 | 8,949,361 | 7,016,458 | |||||||||||
Amortization of other intangibles | 1,320,197 | 802,606 | 194,525 | |||||||||||
Deferred income taxes | 1,632,285 | 964,870 | 3,539,481 | |||||||||||
Cash flow provided by (used for) working capital Accounts receivable | 18,608,281 | (11,646,970 | ) | (7,217,304 | ) | |||||||||
Inventories | 6,359,412 | (3,079,902 | ) | (7,665,075 | ) | |||||||||
Prepaid expenses | (1,220,662 | ) | 3,292,023 | (129,850 | ) | |||||||||
Accounts payable and accrued expenses | (7,674,145 | ) | 10,978,852 | 197,663 | ||||||||||
Net cash provided by operating activities | 76,801,409 | 67,337,009 | 57,443,735 | |||||||||||
Cash Flows from Investing Activities | ||||||||||||||
Acquisition of businesses, net of cash acquired | (7,480,000 | ) | (17,529,677 | ) | (213,630,987 | ) | ||||||||
Additions to property, plant and equipment, net | (25,182,509 | ) | (43,606,144 | ) | (27,526,755 | ) | ||||||||
Other | (1,807,899 | ) | 42,204 | (287,444 | ) | |||||||||
Net cash used for investing activities | (34,470,408 | ) | (61,093,617 | ) | (241,445,186 | ) | ||||||||
Cash Flows from Financing Activities | ||||||||||||||
Long-term debt proceeds | –0– | –0– | 75,000,000 | |||||||||||
Repayment of long-term debt | (12,000,000 | ) | (8,000,000 | ) | (4,041,065 | ) | ||||||||
Net borrowing (repayments) of credit facility | (21,144,207 | ) | 12,540,289 | 86,493,075 | ||||||||||
Cash dividends paid | (5,454,868 | ) | (4,969,876 | ) | (4,626,471 | ) | ||||||||
Proceeds from issuance of common stock | 1,165,055 | 802,080 | 1,458,242 | |||||||||||
Repurchase of common stock | –0– | (5,532,202 | ) | (4,020,181 | ) | |||||||||
Net cash provided by (used for) financing activities | (37,434,020 | ) | (5,159,709 | ) | 150,263,600 | |||||||||
Increase (Decrease) in Cash and Temporary Cash Investments | 4,896,981 | 1,083,683 | (33,737,851 | ) | ||||||||||
Cash and Temporary Cash Investments | ||||||||||||||
January 1 | 2,177,983 | 1,094,300 | 34,832,151 | |||||||||||
Cash and Temporary Cash Investments | ||||||||||||||
December 31 | $ | 7,074,964 | $ | 2,177,983 | $ | 1,094,300 | ||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||||
Cash paid during the year for | ||||||||||||||
Interest | $ | 19,715,515 | $ | 21,370,386 | $ | 14,360,716 | ||||||||
Income taxes | 11,478,129 | 17,558,167 | 27,731,272 |
2002 | 2001 | 2000 | ||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||
Net income | $ | 23,959,828 | $ | 15,191,019 | $ | 24,000,607 | ||||||||||
Items not affecting use of cash | ||||||||||||||||
Depreciation | 34,550,402 | 33,361,480 | 33,075,562 | |||||||||||||
Amortization of goodwill | 0 | 9,223,542 | 8,949,361 | |||||||||||||
Amortization of other intangibles | 1,163,688 | 1,320,197 | 802,606 | |||||||||||||
Deferred income taxes | 4,526,372 | 1,632,285 | 964,870 | |||||||||||||
Cash flow provided by (used for) working capital | ||||||||||||||||
Accounts receivable | 553,688 | 18,608,281 | (11,646,970 | ) | ||||||||||||
Inventories | 741,868 | 6,359,412 | (3,079,902 | ) | ||||||||||||
Prepaid expenses | (1,481,808 | ) | (1,220,662 | ) | 3,292,023 | |||||||||||
Accounts payable and accrued expenses | 1,491,683 | (7,674,145 | ) | 10,978,852 | ||||||||||||
Net cash provided by operating activities | 65,505,721 | 76,801,409 | 67,337,009 | |||||||||||||
Cash Flows From Investing Activities | ||||||||||||||||
Acquisition of businesses, net of cash acquired | (2,819,901 | ) | (7,480,000 | ) | (17,529,677 | ) | ||||||||||
Additions to property, plant and equipment, net | (28,389,133 | ) | (25,182,509 | ) | (43,606,144 | ) | ||||||||||
Other | (298,226 | ) | (1,807,899 | ) | 42,204 | |||||||||||
Net cash used for investing activities | (31,507,260 | ) | (34,470,408 | ) | (61,093,617 | ) | ||||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Repayment of long-term debt | (12,000,000 | ) | (12,000,000 | ) | (8,000,000 | ) | ||||||||||
Net borrowing (repayments) – on credit facility | (23,773,496 | ) | (21,144,207 | ) | 12,540,289 | |||||||||||
Cash dividends paid | (5,878,169 | ) | (5,454,868 | ) | (4,969,876 | ) | ||||||||||
Proceeds from issuance of common stock | 2,280,574 | 1,165,055 | 802,080 | |||||||||||||
Repurchase of common stock | 0 | 0 | (5,532,202 | ) | ||||||||||||
Net cash used for financing activities | (39,371,091 | ) | (37,434,020 | ) | (5,159,709 | ) | ||||||||||
Increase (Decrease) in Cash | (5,372,630 | ) | 4,896,981 | 1,083,683 | ||||||||||||
Cash at January 1 | 7,074,964 | 2,177,983 | 1,094,300 | |||||||||||||
Cash at December 31 | $ | 1,702,334 | $ | 7,074,964 | $ | 2,177,983 | ||||||||||
Supplemental Disclosures of Cash Flow Information | ||||||||||||||||
Cash paid during the year for | ||||||||||||||||
Interest | $ | 12,023,900 | $ | 19,715,515 | $ | 21,370,386 | ||||||||||
Income taxes | $ | 11,617,883 | $ | 11,478,129 | $ | 17,558,167 | ||||||||||
The accompanying notes are an integral part of these statements.
1719
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
For Thethe Years Ended December 31, 2002, 2001 2000 and 19992000
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (Company). Significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles 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. Certain amounts in the fiscal 2000 and 1999 financial statements have been reclassified to conform with the fiscal year 2001 presentation.
Translation of Foreign Currencies
All balance sheet 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 at an average currency exchange rate. The resulting translation adjustment is recorded in other comprehensive income as a separate component of shareholders’ equity and other comprehensive income.equity.
Financial Instruments
Temporary cash investments, all of which have an original maturity of ninety days or less, are considered cash equivalents. Other financialFinancial instruments, consisting of trade and notes receivable, and long-term debt, consisting of borrowings at variable interest rates, are considered to have a fair value which approximates carrying value at December 31, 2001.2002.
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. No single customer accounts for more than two percent of total sales and no country, outside of the United States, accounts for more than ten percent of total sales. 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.
Inventories
Inventories are stated at the lower of cost or market. For approximately 4541 percent of its inventories, the Company uses the last-in, first-out (LIFO) method of determining cost. All other inventories are valued at the first-in, first-out (FIFO) method of determining cost.
If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $4,455,000, $3,731,000 $4,756,000 and $3,779,000$4,756,000 higher than reported at December 31, 2002, 2001 and 2000, and 1999, respectively.
20
Notes to Consolidated Financial Statements — Continued
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 30 years | |||
Leasehold Improvements | 7 to 10 years | |||
Machinery & Equipment | 3 to 10 years | |||
Vehicles | 1 to 3 years |
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. Measurement of the amount of impairment may be based on appraisal, market values of similar assets or discounted future cash flows resulting from the use and ultimate disposition of the asset. There were no impairment charges recorded in connection with the long-lived assets in 2002, 2001 or 2000.
In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 became effective for the Company in 2002 and establishes guidelines for accounting for the impairment of long-lived assets. The provisions of SFAS No. 144 had no impact on the Company’s financial statements upon adoption.
Revenue Recognition
The Company recognizes revenue from sales when goods are shipped and title has passed to the customer.
18Income Taxes
Deferred income taxes are provided to recognize differences between financial statement and income tax reporting, principally for depreciation, non-deductible reserves and certain valuation allowances. No provision is made for U.S. income taxes on the unremitted earnings of foreign subsidiaries as the Company’s intention is to indefinitely reinvest these earnings in the operations of these subsidiaries.
Goodwill and Intangible Assets
Effective January 1, 2002, the Company adopted the provisions of SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that all business combinations be accounted for by the purchase method and that certain acquired intangible assets be recognized as assets apart from goodwill. No reclassification of intangible assets apart from goodwill was necessary as a result of the Company adopting the new standard.
Under the provisions of SFAS No. 142, the Company was required to perform a transitional goodwill impairment test within six months of adopting the new standard and to test for impairment on at least an annual basis thereafter. For purposes of transitional impairment testing, the Company determined the fair value of its reporting units using discounted cash flow models and relative market multiples for comparable businesses. The Company compared the fair value of each of its reporting units to their respective carrying values, including related goodwill, which resulted in no impairment being recognized. Evaluation of recorded
21
Notes to Consolidated Financial Statements — Continued
Income Taxes
Deferred income taxes are provided to recognize
Excess of Cost Over Fair Value of Net Assets of Companies Acquiredgoodwill impairment.
This asset representsIn accordance with SFAS No. 142, the excessCompany discontinued the amortization of cost over the fair value of net assets of companies acquired and is being amortized on a straight-line basis over periods ranging from 15 to 40 years. Accumulatedgoodwill effective January 1, 2002, at which time accumulated amortization at December 31,was $30.7 million. Had goodwill amortization not been recorded in 2001 and 2000, was $30,706,000 and $21,483,000, respectively.
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (SFAS 141), “Business Combinations”, and SFAS 142, “Goodwill and Other Intangible Assets”. These statements are effective for the Company on January 1, 2002 and will result in modifications relative to the accounting for goodwill and other intangible assets. Specifically, the Company will no longer amortize goodwill and certain intangible assets, however, such assets will be subject to periodic testing for potential impairment. Upon adopting the new standards and cessation of amortization for goodwill, the Company anticipates increases in annual income before taxes ofwould have increased $9.2 million and earnings$8.9 million, respectively, while net income would have increased $7.1 million to $22.3 million and $6.8 million to $30.8 million. Net income per share of approximately $.30 per share, however, the Company has not yet made a complete evaluation regarding the impact of the new standards, including the possible impairment of goodwill as recorded on the December 31,would have increased by $.24 and $.23 for 2001 balance sheet.and 2000, respectively.
Net Income Per Share
Basic netNet income per share, as shown on the Statements of Consolidated Income, is determined on the basis of the weighted average number of common shares outstanding during the year, and for all periods shown basic and diluted earnings per share are identical. During the yearsyear ended December 31, 2002, the Company declared a five-for-four stock split and during fiscal years 2001 2000 and 1999,2000, the Company paid a ten percent stock dividend. All per share data has been adjusted for the stock split and stock dividends.
Stock Compensation
The Company accounts for stock compensation arrangements using the intrinsic value in Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” In accordance with the intrinsic value method, the Company has not recognized any expense related to stock options, as options have only been granted with an exercise price equal to the market value of the shares at the date of the grant.
The alternative policy in SFAS No. 123, “Accounting for Stock Based Compensation,” provides that compensation expense be recognized based on the fair value of the options awarded, determined by an option pricing model. If the Company had recognized compensation expense using the fair value method under SFAS No. 123 rather than APB 25, net income would not have been materially different than reported amounts and net income per share would be identical for 2002, 2001 and 2000. In calculating the compensation expense under SFAS No. 123, the Company assumes that all options will vest and be exercised at the expiration date of the grant. Other assumptions used in calculating the compensation expense for options granted in 2002 include a dividend yield of 1.6 percent, a risk free interest rate of 3.85 percent and a volatility measure based on the Company’s stock beta of .40.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based Compensation-Transition and Disclosure,” as an amendment to SFAS No. 123. SFAS No. 148 provides for alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. In addition, SFAS No.148 amends the disclosure requirements to require prominent disclosure in both interim and annual financial statements about the method of accounting used for stock based employee compensation and the effect of the method on reported results. The Company adopted the disclosure provisions of SFAS No. 148 effective December 31, 2002.
Acquisitions
In October 2000, the Company acquired R.B. Manufacturing (RB), a Sandusky, Ohio manufacturer of material handling carts, and Best Plastics, Inc., a Cassopolis, Michigan manufacturer of thermoformed and rotational molded plastic products. Total cost of the acquisitions was approximately $18.2 million and both acquisitions have been accounted for under the purchase method of accounting. The excess of purchase price over the fair value of assets acquired was approximately $12.4 million which is being amortized on a straight line basis over 30 years.million. Consolidated pro-forma sales, income and earningearnings per share, adjusted to reflect the acquisitions of RB and Best, would not be materially different from the reported amounts for fiscal years 2000 or 1999.year 2000.
On February 4, 1999, the Company acquired all of the shares of the entities comprising Allibert Equipment (Allibert), the material handling division of Sommer Allibert S.A., and acquired Allibert-Contico, LLC, a joint venture between Sommer Allibert S.A. and Contico International, Inc. for a total purchase price of approximately $150 million. The acquired businesses have five manufacturing facilities in Europe and one in North America and had 1998 annual sales of approximately $145 million.
In August 1999, the Company acquired substantially all of the assets of Dillen Products Companies (Dillen) of Middlefield, Ohio, for approximately $54 million and all of the outstanding shares of Listo Products, Ltd. (Listo) of Canada for approximately $15 million. In 2001, the Company paid approximately $7.5 million as additional and final consideration in connection with the acquisition of Dillen. The Listo
1922
Notes to Consolidated Financial Statements — Continued
In 2002, the Company paid approximately $2.8 million as additional consideration contingent upon future earnings of the acquired business through February 2002. The Company anticipates a payment of approximately $2.5 million in 2002 asand final consideration in connection with the acquisition of Listo. Dillen and Listo are leading manufacturers of plastic horticultural containersProducts, Ltd. (Listo). Listo was acquired in August 1999 for a total cost, including pots, trays, saucers, and decorative planters for customers including greenhouses and nurseries as well as retail garden centers and mass merchandisers.
The acquisitions have been accounted for under the purchase method of accounting and, accordingly, the results of operations have been included in the Company’s consolidated financial statements since the dates of acquisition, and the acquisition costs have been allocated to the assets acquired and liabilities assumed based upon their estimated fair values. The excess of purchase price over fair value of net assets acquiredadditional consideration noted above, of approximately $166 million is being amortized over lives$18 million.
Stock Options
In 1999, the Company and its shareholders adopted the 1999 Stock Plan allowing the Board of 15Directors to 40 years.
The following unaudited pro-forma information presents a summary of consolidated results of operationsgrant key employees and Directors the right to purchase Common Stock of the Company at the market price on the date of grant. In general, options granted and outstanding permit 20 percent of the shares granted to be exercised after six months, with additional vesting of 20 percent exercisable each year thereafter, with the options expiring six years from the date of grant. At December 31, 2002, there were 1,551,733 stock option shares available for future grant. The activity listed below covers the 1999 Stock Plan, the 1997 Incentive Stock Plan and the acquisitions of Allibert, Dillen and Listo, as if1992 Stock Option Plan.
Options granted during the acquisitions of Allibert, Dillen and Listo had occurred January 1, 1999:past three years:
Fiscal Year Ended | ||||
(In thousands, except per share) | December 31, 1999 | |||
Net Sales | $ | 625,407 | ||
Net Income | 31,759 | |||
Net Income Per Share | 1.30 |
Year | Shares | Price | ||||||
2002 | 6,250 | $ | 12.32 | |||||
2001 | 300,212 | $ | 8.36 to $10.40 | |||||
2000 | 16,504 | $ | 8.18 to $ 9.32 |
These unaudited pro-forma results have been prepared for comparative purposes onlyOptions exercised during the past three years:
Year | Shares | Price | ||||||
2002 | 255,000 | $ | 8.18 to $9.92 | |||||
2001 | 72,098 | $ | 8.55 to $9.83 | |||||
2000 | 30,534 | $ | 7.13 to $8.12 |
Options outstanding and may not be indicative of results of operations which actually would have resulted had the combination been in effect on January 1, 1999, or of future results.exercisable at December 31, 2002, 2001 and 2000 were as follows:
Weighted | ||||||||||||||||
Range of | Average | |||||||||||||||
Year | Outstanding | Exercise Prices | Exercisable | Exercise Price | ||||||||||||
2002 | 911,871 | $ | 8.18 to $15.78 | 675,288 | $ | 10.51 | ||||||||||
2001 | 1,181,309 | $ | 8.18 to $15.78 | 743,719 | $ | 10.03 | ||||||||||
2000 | 1,028,616 | $ | 8.18 to $15.78 | 640,379 | $ | 10.26 |
Long-Term Debt and Credit Agreements
Long-term debt at December December��31, 2001 and 2000, consisted of the following:
2001 | 2000 | 2002 | 2001 | |||||||||||||
Revolving credit agreement | $ | 192,992,890 | $ | 214,461,680 | $ | 174,179,776 | $ | 192,992,890 | ||||||||
Term loan | 53,500,000 | 65,500,000 | 41,500,000 | 53,500,000 | ||||||||||||
Industrial revenue bonds | 4,000,000 | 4,000,000 | 4,000,000 | 4,000,000 | ||||||||||||
Other | 14,420,032 | 16,204,418 | 13,233,104 | 14,420,032 | ||||||||||||
264,912,922 | 300,166,098 | 232,912,880 | 264,912,922 | |||||||||||||
Less Current Portion | 17,767,688 | 15,893,001 | ||||||||||||||
Less current portion | 20,690,265 | 17,767,688 | ||||||||||||||
$ | 247,145,234 | $ | 284,273,097 | $ | 212,222,615 | $ | 247,145,234 | |||||||||
The Company has a Multi-Currency Loan Agreement with a group of banks which provides for a $53.5 million term loan facility and a revolving credit facility in five currencies, approximating $240 million (US). In addition, there is an uncommitted $25 million springing facility. Amounts available under the revolving credit facility are 185 million US dollars, 30 million euros, 22 million Canadian dollars, 63 million Danish kroners, and three million pound sterling. At December 31, 2001, the amount borrowed was $53.5 million under the term loan, and 157 million US dollars, 21 million euros, 15 million Canadian dollars, 40 million Danish kroners and two million pound sterling under the revolving credit facility.
The borrowing under this facility was used to retire the prior revolving credit agreement, fund acquisitions, and for general corporate purposes. Interest is based upon LIBOR for US dollars and similar bases for the other currencies plus an applicable margin that varies depending on the Company’s ratio of total
2023
Notes to Consolidated Financial Statements — Continued
The Company has a Multi-Currency Loan Agreement with a group of banks which at December 31, 2002 provides for a $41.5 million term loan facility and a revolving credit facility in five currencies, approximating $245 million (US). Amounts available under the revolving credit facility are 185 million US dollars, 30 million euros, 23 million Canadian dollars, 63 million Danish kroners, and 3.0 million pound sterling. At December 31, 2002, the amount borrowed was $41.5 million under the term loan, and $156.0 million US dollars, 2.3 million euros, 13.4 million Canadian dollars, 40.0 million Danish kroners and 1.0 million pound sterling under the revolving credit facility.
Interest is based upon LIBOR for U.S. dollars and similar bases for the other currencies plus an applicable margin that varies depending on the Company’s ratio of total debt to earnings before interest, taxes, depreciation and amortization (EBITDA). The current average interest rate on the outstanding advances at December 31, 2001,2002 is 3.973.31 percent. In addition, the Company pays a quarterly facility fee at a rate dependent on the EBITDA ratio, and is currentlywhich was 45 basis points.points at December 31, 2002. The Multi-Currency Loan Agreement expires in February 2005.
The CreditLoan Agreement contains the customary covenants which include among other things, the maintenance of certain financial ratios regarding leverage, net worth, interest coverage, and limits as to payments for cash dividends and capital expenditures. At December 31, 2001,2002, the Company was in compliance with all of its debt covenants. In addition, the facilityLoan Agreement restricts debt outside the facility to $35$25 million. At December 31, 2001,2002, the Company had $18.4$17.2 million borrowed against this limit consisting of industrial revenue bonds, certain indebtedness of acquired companies, and in-country credit facilities for the Company’s international operations. The weighted average interest rate on these amounts outstanding is 4.7%.was 3.8 percent at December 31, 2002.
Maturities of long-term debt for the five years ending December 31, 20062007 are: $18,000,000 in 2002; $17,000,000$21,000,000 in 2003; $27,000,000 in 2004; $195,000,000$175,000,000 in 20052005; $1,000,000 in 2006 and $1,000,000 in 2006.
Leases
The Company and certain of its subsidiaries are committed under non-cancelable operating leases involving certain facilities and equipment. Aggregate rental expense for all leased assets was $9,493,000, $5,416,000 and $4,436,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
Future minimum rental commitments for the next five years are as follows:
Year Ended December 31, | Commitment | |||
2002 | $ | 8,232,000 | ||
2003 | 7,101,000 | |||
2004 | 5,931,000 | |||
2005 | 5,284,000 | |||
2006 | 4,697,000 |
Retirement Plans
The Company and certain of its subsidiaries have pension and profit sharing plans covering substantially all of their employees. Two plans are defined benefit plans with benefits primarily based upon a fixed amount for each completed year of service as defined. It is the Company’s policy to fund pension costs accrued, which are at least equal to the minimum required contribution as defined by the Employee Retirement Income Security Act of 1974.
For the Company’s defined benefit plans, the net periodic pension cost was as follows:
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||
Service Cost | $ | 179,192 | $ | 131,294 | $ | 147,496 | ||||||||||||||||||
Interest Cost | 288,493 | 259,886 | 245,145 | |||||||||||||||||||||
Service cost | $ | 188,990 | $ | 179,192 | $ | 131,294 | ||||||||||||||||||
Interest cost | 303,202 | 288,493 | 259,886 | |||||||||||||||||||||
Expected return on assets | (291,192 | ) | (333,208 | ) | (304,447 | ) | (261,029 | ) | (291,192 | ) | (333,208 | ) | ||||||||||||
Amortization of transition obligation | 2,525 | 6,497 | 6,497 | (2,942 | ) | 2,525 | 6,497 | |||||||||||||||||
Amortization of prior service cost | 42,776 | 27,825 | 27,825 | 42,776 | 42,776 | 27,825 | ||||||||||||||||||
Amortization of net gain | –0– | (42,305 | ) | (6,046 | ) | |||||||||||||||||||
Amortization of net loss (gain) | 14,032 | 0 | (42,305 | ) | ||||||||||||||||||||
Net periodic pension cost | $ | 221,794 | $ | 49,989 | $ | 116,470 | $ | 285,029 | $ | 221,794 | $ | 49,989 | ||||||||||||
2124
Notes to Consolidated Financial Statements — Continued
The reconciliation of changes in projected benefit obligations are as follows:
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||||
Benefit obligation at beginning of year | Benefit obligation at beginning of year | $ | 3,980,688 | $ | 3,444,466 | $ | 3,475,325 | Benefit obligation at beginning of year | $ | 4,485,321 | $ | 3,980,688 | $ | 3,444,466 | ||||||||||||
Service Cost | 179,192 | 131,294 | 147,496 | Service cost | 188,990 | 179,192 | 131,294 | |||||||||||||||||||
Interest Cost | 288,493 | 259,886 | 245,145 | Interest cost | 303,202 | 288,493 | 259,886 | |||||||||||||||||||
Plan Amendments | –0– | 204,084 | 120,577 | Plan amendments | 0 | 0 | 204,084 | |||||||||||||||||||
Actuarial loss (gain) | 190,309 | 94,742 | (379,828 | ) | Actuarial loss (gain) | 66,248 | 190,309 | 94,742 | ||||||||||||||||||
Benefits paid | (153,361 | ) | (153,784 | ) | (164,249 | ) | Benefits paid | (159,006 | ) | (153,361 | ) | (153,784 | ) | |||||||||||||
Benefit obligation at end of year | Benefit obligation at end of year | $ | 4,485,321 | $ | 3,980,688 | $ | 3,444,466 | Benefit obligation at end of year | $ | 4,884,755 | $ | 4,485,321 | $ | 3,980,688 | ||||||||||||
The following table reflects the change in the fair value of the plans’ assets:
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 3,744,411 | $ | 4,236,512 | $ | 3,901,959 | $ | 3,199,226 | $ | 3,744,411 | $ | 4,236,512 | ||||||||||||
Actual return on plan assets | (380,259 | ) | (358,045 | ) | 523,851 | (550,240 | ) | (380,259 | ) | (358,045 | ) | |||||||||||||
Company contribution | 6,435 | 46,618 | –0– | 369,000 | 6,435 | 46,618 | ||||||||||||||||||
Expenses paid | (18,000 | ) | (26,890 | ) | (25,049 | ) | (15,668 | ) | (18,000 | ) | (26,890 | ) | ||||||||||||
Benefits paid | (153,361 | ) | (153,784 | ) | (164,249 | ) | (159,006 | ) | (153,361 | ) | (153,784 | ) | ||||||||||||
Fair value of plan assets at end of year | $ | 3,199,226 | $ | 3,744,411 | $ | 4,236,512 | $ | 2,843,312 | $ | 3,199,226 | $ | 3,744,411 | ||||||||||||
The following table provides a reconciliation of the funded status of the plans, both of which were underfunded at December 31, 20012002 and 2000:2001:
2001 | 2000 | |||||||
Funded Status | $ | (1,286,095 | ) | $ | (236,277 | ) | ||
Unrecognized net asset | (5,887 | ) | (3,362 | ) | ||||
Unrecognized prior service cost | 404,477 | 447,253 | ||||||
Unrecognized net loss (gain) | 707,248 | (172,512 | ) | |||||
(Accrued) prepaid benefit cost | $ | (180,257 | ) | $ | 35,102 | |||
2002 | 2001 | |||||||
Funded status | ($ | 2,041,443 | ) | ($ | 1,286,095 | ) | ||
Unrecognized liability | (2,946 | ) | (5,887 | ) | ||||
Unrecognized prior service cost | 361,702 | 404,477 | ||||||
Unrecognized net loss | 1,586,401 | 707,248 | ||||||
Net amount recognized | ($ | 96,286 | ) | ($ | 180,257 | ) | ||
Under the provisions of SFAS No. 87, the Company recorded an additional minimum pension liability of $1,945,157 at December 31, 2002, of which $1,583,455 has been recorded as a component of accumulated other comprehensive income and $361,702 as an intangible pension asset.
Assumptions used for these plans were a discount rate of 76.75 percent and expected rate of return on plan assets of 8.0 percent. Future benefit increases were not considered as there is no substantive commitment to increase benefits.
A profit sharing plan is maintained for the Company’s U.S. based employees, not covered under defined benefit plans, who have met eligibility service requirements. The amount to be contributed by the Company under the profit sharing plan is determined at the discretion of the Board of Directors. Profit Sharingsharing plan expense was $1,700,000, $1,500,000, $2,000,000 and $1,700,000$2,000,000 for the fiscal years 2002, 2001 2000 and 19992000, respectively. In addition, the Company has a Supplemental Executive Retirement Plan (SERP) to provide participating senior executives with retirement benefits in addition to amounts payable under the profit sharing plan. Expense related to the SERP was $253,000, $108,000 $128,000 and $375,000$128,000 for the years 2002, 2001 2000 and 1999,2000, respectively. The SERP is unfunded apart from the general assets of the Company.
2225
Notes to Consolidated Financial Statements — Continued
Leases
The Company and certain of its subsidiaries are committed under non-cancelable operating leases involving certain facilities and equipment. Aggregate rental expense for all leased assets was $9,395,000, $9,493,000 and $5,416,000 for the years ended December 31, 2002, 2001 and 2000, respectively.
Future minimum rental commitments for the next five years are as follows:
Year Ended December 31, | Commitment | |||
2003 | $ | 8,336,000 | ||
2004 | 7,182,000 | |||
2005 | 6,273,000 | |||
2006 | 4,897,000 | |||
2007 | 4,246,000 |
Income Taxes
The effective tax rate was 40.6% in 2002, 44.2% in 2001 and 41.3% in 2000 and 42.6% in 1999.2000. A reconciliation of the Federal statutory income tax rate to the Company’s effective tax rate is as follows:
Percent of | Percent of Pre-Tax Income | |||||||||||||||||||||||
Pre-Tax Income | ||||||||||||||||||||||||
2002 | 2001 | 2000 | ||||||||||||||||||||||
2001 | 2000 | 1999 | ||||||||||||||||||||||
Statutory federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||||||||
State income taxes — net of Federal tax benefit | 3.8 | 4.2 | 4.2 | |||||||||||||||||||||
Statutory Federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||||||||
State Income Taxes — net of Federal tax benefit | 4.2 | 3.8 | 4.2 | |||||||||||||||||||||
Foreign tax rate differential | 2.1 | (0.5 | ) | 2.1 | 1.1 | 2.1 | (.5 | ) | ||||||||||||||||
Effect of non-deductible depreciation and amortization | 2.3 | 1.3 | 0.7 | |||||||||||||||||||||
Effect of non deductible depreciation and amortization | 0.0 | 2.3 | 1.3 | |||||||||||||||||||||
Other | 1.0 | 1.3 | 0.6 | 0.3 | 1.0 | 1.3 | ||||||||||||||||||
Effective tax rate for the year | 44.2 | % | 41.3 | % | 42.6 | % | 40.6 | % | 44.2 | % | 41.3 | % | ||||||||||||
Income taxes consisted of the following:
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||||||||||||||||||||||||||
Current | Deferred | Current | Deferred | Current | Deferred | Current | Deferred | Current | Deferred | Current | Deferred | |||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Federal | $ | 6,518 | $ | 2,140 | $ | 12,152 | $ | 671 | $ | 13,052 | $ | 3,250 | $ | 7,269 | $ | 3,921 | $ | 6,518 | $ | 2,140 | $ | 12,152 | $ | 671 | ||||||||||||||||||||||||
Foreign | 2,322 | (529 | ) | 1,457 | (12 | ) | 3,190 | 9 | 2,392 | 202 | 2,322 | (529 | ) | 1,457 | (12 | ) | ||||||||||||||||||||||||||||||||
State and Local | 1,651 | (53 | ) | 2,325 | 316 | 3,343 | 281 | |||||||||||||||||||||||||||||||||||||||||
State and local | 2,135 | 482 | 1,651 | (53 | ) | 2,325 | 316 | |||||||||||||||||||||||||||||||||||||||||
$ | 10,491 | $ | 1,558 | $ | 15,934 | $ | 975 | $ | 19,585 | $ | 3,540 | $ | 11,796 | $ | 4,605 | $ | 10,491 | $ | 1,558 | $ | 15,934 | $ | 975 | |||||||||||||||||||||||||
Significant components of the Company’s deferred tax liabilities as of December 31, 2001 and 2000 are as follows:
2001 | 2000 | ||||||||
(Dollars in thousands) | |||||||||
Deferred income tax liabilities | |||||||||
Property, plant and equipment | $ | 19,689 | $ | 17,332 | |||||
Employee benefit trust | 435 | 354 | |||||||
Other | 388 | 969 | |||||||
20,512 | 18,655 | ||||||||
Deferred income tax assets | |||||||||
Compensation | 3,276 | 2,945 | |||||||
Inventory valuation | 1,246 | 1,129 | |||||||
Allowance for uncollectible accounts | 971 | 733 | |||||||
Non-deductible accruals | 2,423 | 2,810 | |||||||
7,916 | 7,617 | ||||||||
Net deferred income tax liability | $ | 12,596 | $ | 11,038 | |||||
Stock Options
In 1999, the Company and its shareholders adopted the 1999 Stock Option Plan allowing key employees to purchase Common Stock of the Company at the market price on the date of grant. The plan provides that
2326
Notes to Consolidated Financial Statements — Continued
Significant components of the shares granted each year. AtCompany’s deferred taxes as of December 31, 2002 and 2001 there were 1,336,289 stock option shares available for future grant. The activity listed below covers the 1999 Stock Plan, the 1997 Incentive Stock Plan, and the 1992 Stock Option Plan.
Options granted during the past three years:are as follows:
Year | Shares | Price | ||||||
2001 | 240,129 | $ | 10.45 to $13.00 | |||||
2000 | 13,200 | $ | 10.23 to $11.36 | |||||
1999 | 281,590 | $ | 10.95 to $17.37 |
2002 | 2001 | ||||||||
(Dollars in thousands) | |||||||||
Deferred income tax liabilities | |||||||||
Property, plant and equipment | $ | 20,101 | $ | 19,689 | |||||
Tax deductible goodwill | 2,206 | 0 | |||||||
Employee benefit trust | 556 | 435 | |||||||
Other | 1,641 | 388 | |||||||
24,504 | 20,512 | ||||||||
Deferred income tax assets | |||||||||
Compensation | 3,282 | 3,276 | |||||||
Inventory valuation | 1,108 | 1,246 | |||||||
Allowance for uncollectible accounts | 858 | 971 | |||||||
Non-deductible accruals | 2,055 | 2,423 | |||||||
7,303 | 7,916 | ||||||||
Net deferred income tax liability | $ | 17,201 | $ | 12,596 | |||||
Options exercised during the past three years:
Year | Shares | Price | ||||||
2001 | 57,671 | $ | 10.45 to $12.29 | |||||
2000 | 24,430 | $ | 8.92 to $10.15 | |||||
1999 | 111,411 | $ | 8.85 to $12.92 |
Options outstanding and exercisableIn addition, at December 31, 2001, 20002002 the Company has reserved the deferred tax benefit of certain tax loss carry forwards in foreign countries that if realized would reduce future income tax expense by approximately $5,977,000. Of this amount, $2,657,000 expires in various years from 2003 through 2007, and 1999 were as follows:
Year | Outstanding | Price | Exercisable | |||||||||
2001 | 946,661 | $ | 10.23 to $19.73 | 596,556 | ||||||||
2000 | 821,049 | $ | 10.23 to $19.73 | 511,615 | ||||||||
1999 | 866,553 | $ | 8.92 to $19.73 | 336,324 |
$3,320,000 has no expiration date. The Company accounts for stock options under APB Opinion No. 25 and, therefore, does not recognize employee compensation for options granted using the fair value method set forthalso has U.S. foreign tax credit carry forwards of approximately $800,000 expiring in the FASB Statement No. 123 “Accounting for Stock-Based Compensation”. If the Company had followed FASB 123 rather that APB 25, net income would not have been materially different than the reported amounts and earnings per share would be identical for 2001, 2000 and 1999.
In calculating the pro-forma compensation expense under SFAS 123 the Company assumes that all options issued will vest and be exercised at the expiration date of the grant. The compensation amount is determined using the Black-Scholes option pricing model with certain variables including an assumed risk free interest rate of 4.85 percent, a dividend yield of 2 percent on the shares and a volatility measure based on the Company’s stock beta of .90.2004.
Industry Segments
The Company’s business units have separate management teams and offer different products and services. Using the criteria of FASB No. 131,SFAS No.131, these business units have been aggregated into two reportable segments; Distributiondistribution of aftermarket repair products and services and Manufacturingmanufacturing of polymer products. The aggregation of business units is based on management by the chief operating decision maker for the segment as well as similarities of production processes, distribution methods and economic characteristics (e.g. average gross margin and the impact of economic conditions on long-term financial performance).
The Company’s distribution segment is engaged in the distribution of equipment, tools and supplies used for tire servicing and undervehicleautomotive underbody repair. The distribution segment operates domestically through 43 branches located in major cities throughout the United States and in foreign countries through export sales and businesses in which the Company holds an equity interest.
24
Notes to Consolidated Financial Statements — Continued
The Company’s manufacturing segment designs, manufactures and markets a variety of polymer based plastic and rubber products. These products are manufactured primarily through the molding process in facilities throughout the United States and in Europe. Sales to external customers for manufactured plastic products were $406.7 million, $411.1 million $443.7 million and $366.2$443.7 million for fiscal years 2002, 2001 and 2000, and 1999, respectively. SalesOutside sales of manufactured rubber products were $47.3 million, $46.0 million $50.8 million and $52.7$50.8 million for fiscal years 2002, 2001 2000 and 1999.2000.
Operating income for each segment is based on net sales less cost of products sold, and the related selling, administrative and general expenses. In computing segment operating income, general corporate overhead expenses and interest expenses are not included. The identifiable assets of each segment include: accounts receivable, inventory, net fixed assets, excess of cost over fair value of net assets acquired, patents and other intangible assets. Corporate assets are principally land, buildings, computer equipment, cash and temporary cash investments.
Total sales from foreign business units and export were approximately $182.0 million, $194.2 million and $173.8 million for the years 2001, 2000 and 1999, respectively. There are no individual foreign countries for which sales are material. Long-lived assets in foreign countries consist primarily of property, plant, equipment and excess of cost over fair value of net assets acquired were approximately $113.3 million at December 31, 2001, and $124.4 million at December 31, 2000. No single customer accounts for 10 percent or more of total company net sales or the net sales of either business segment.
2527
Notes to Consolidated Financial Statements — Continued
Total sales from foreign business units and export were approximately $182.5 million, $182.0 million and $194.2 million for the years 2002, 2001 and 2000, respectively. There are no individual foreign countries for which sales are material. Long-lived assets in foreign countries consisting primarily of property, plant and equipment and goodwill were approximately $133.9 million at December 31, 2002 and $113.3 million at December 31, 2001. No single customer accounts for 10 percent or more of total company net sales or the net sales of either business segment.
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||
Net Sales | Net Sales | ||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 154,028 | $ | 150,932 | $ | 158,151 | |||||||||||||||||||
Manufacturing of polymer products | 468,633 | 470,387 | 508,070 | ||||||||||||||||||||||
Intra-segment elimination | (14,670 | ) | (13,369 | ) | (13,561 | ) | |||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 150,932 | $ | 158,151 | $ | 161,827 | |||||||||||||||||||
Manufacturing of polymer products | 470,387 | 508,070 | 432,462 | $ | 607,991 | $ | 607,950 | $ | 652,660 | ||||||||||||||||
Intra-segment elimination | (13,369 | ) | (13,561 | ) | (13,528 | ) | |||||||||||||||||||
$ | 607,950 | $ | 652,660 | $ | 580,761 | ||||||||||||||||||||
Income before Income Taxes | |||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 14,733 | $ | 15,431 | $ | 17,580 | |||||||||||||||||||
Manufacturing of polymer products | 40,597 | 56,562 | 60,742 | ||||||||||||||||||||||
Corporate | (9,391 | ) | (8,723 | ) | (8,815 | ) | |||||||||||||||||||
Interest expense-net | (18,699 | ) | (22,360 | ) | (15,206 | ) | |||||||||||||||||||
Income Before Income Taxes | |||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 16,970 | $ | 14,733 | $ | 15,431 | |||||||||||||||||||
Manufacturing of polymer products | 45,091 | 40,597 | 56,562 | ||||||||||||||||||||||
Corporate | (9,890 | ) | (9,391 | ) | (8,723 | ) | |||||||||||||||||||
Interest expense-net | (11,810 | ) | (18,699 | ) | (22,360 | ) | |||||||||||||||||||
$ | 27,240 | $ | 40,910 | $ | 54,301 | $ | 40,361 | $ | 27,240 | $ | 40,910 | ||||||||||||||
Identifiable Assets | Identifiable Assets | ||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 50,934 | $ | 48,993 | $ | 57,136 | |||||||||||||||||||
Manufacturing of polymer products | 545,970 | 528,775 | 563,637 | ||||||||||||||||||||||
Corporate | 6,008 | 4,558 | 2,787 | ||||||||||||||||||||||
Intra-segment elimination | (430 | ) | (160 | ) | (1,456 | ) | |||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 48,993 | $ | 57,136 | $ | 61,726 | |||||||||||||||||||
Manufacturing of polymer products | 528,775 | 563,637 | 537,722 | $ | 602,482 | $ | 582,166 | $ | 622,104 | ||||||||||||||||
Corporate | 4,558 | 2,787 | 3,561 | ||||||||||||||||||||||
Intra-segment elimination | (160 | ) | (1,456 | ) | (2,599 | ) | |||||||||||||||||||
$ | 582,166 | $ | 622,104 | $ | 600,410 | ||||||||||||||||||||
Capital additions, net | |||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 29 | $ | 344 | $ | 384 | |||||||||||||||||||
Manufacturing of polymer products | 24,950 | 42,787 | 26,728 | ||||||||||||||||||||||
Corporate | 206 | 475 | 415 | ||||||||||||||||||||||
Capital Additions, Net | |||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 52 | $ | 29 | $ | 344 | |||||||||||||||||||
Manufacturing of polymer products | 27,895 | 24,950 | 42,787 | ||||||||||||||||||||||
Corporate | 442 | 206 | 475 | ||||||||||||||||||||||
$ | 25,185 | $ | 43,606 | $ | 27,527 | $ | 28,389 | $ | 25,185 | $ | 43,606 | ||||||||||||||
Depreciation | Depreciation | ||||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 433 | $ | 483 | $ | 496 | |||||||||||||||||||
Manufacturing of polymer products | 33,390 | 32,172 | 31,965 | ||||||||||||||||||||||
Corporate | 727 | 706 | 615 | ||||||||||||||||||||||
Distribution of aftermarket repair products and services | $ | 483 | $ | 496 | $ | 399 | |||||||||||||||||||
Manufacturing of polymer products | 32,172 | 31,965 | 29,212 | $ | 34,550 | $ | 33,361 | $ | 33,076 | ||||||||||||||||
Corporate | 706 | 615 | 720 | ||||||||||||||||||||||
$ | 33,361 | $ | 33,076 | $ | 30,331 | ||||||||||||||||||||
2628
MYERS INDUSTRIES, INC.
Employee Stock Purchase Plan
Contents
Report of Ernst & Young, LLP, Independent PublicAuditors for the Myers Industries, Inc. Employee Stock Purchase Plan
Report of Independent Accountants, Arthur Anderson LLP for the Myers Industries, Inc. Employee Stock Purchase Plan
Financial Statements for the Myers Industries, Inc. Employee Stock Purchase Plan:
(1) | Statements of Assets Available for Plan Benefits as of December 31, | |
(2) | Statements of Changes in Assets Available for Plan Benefits for the Years Ended December 31, 2002, 2001 |
Notes to Financial Statements for the Myers Industries, Inc. Employee Stock Purchase Plan
2729
REPORT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
To the Myers Industries, Inc. Employee
Stock Purchase Plan Administrator:
We have audited the accompanying statement of assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 2002, and the related statement of changes in assets available for plan benefits for the period then ended. These financial statements are the responsibility of the Plan Administrator. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 2001 and for each of the two years in the period then ended, were audited by other auditors, who have ceased operations, and whose report dated February 15, 2002, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 2002, and the changes in its assets available for plan benefits for the year then ended, in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Akron, Ohio,
30
This report is a copy and has not been reissued by Arthur Andersen, LLP.
This report references the Myers Industries, Inc. Employee Stock Purchase Plan Statement of Assets available for plan benefits as of December 31, 2000 and the related statement of changes in assets available for plan for the year ended December 31, 1999, which are not presented herein.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Myers Industries, Inc. Employee
We have audited the accompanying statements of assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 2001 and 2000, and the related statements of changes in assets available for plan benefits for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Plan Administrator. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 2001 and 2000, and the changes in its assets available for plan benefits for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Cleveland, Ohio,
2831
MYERS INDUSTRIES, INC.
Employee Stock Purchase Plan
Statements ofOf Assets Available forFor Plan Benefits
2002 | 2001 | |||||||
Receivable from Trustee (Myers Industries, Inc.) | $ | 113,348 | $ | 105,837 | ||||
Statements Of Changes In Assets Available For Plan Benefits
2001 | 2000 | |||||||
Receivable from Trustee (Myers Industries, Inc.) | $ | 105,837 | $ | 103,928 | ||||
Statements of Changes in Assets Available for Plan Benefits
2001 | 2000 | 1999 | 2002 | 2001 | 2000 | |||||||||||||||||||||
Contributions: | Contributions: | Contributions: | ||||||||||||||||||||||||
Participants’ contributions beginning of period | Participants’ contributions beginning of period | $ | 103,928 | $ | 135,691 | $ | 108,088 | Participants’ contributions beginning of period | $ | 105,837 | $ | 103,928 | $ | 135,691 | ||||||||||||
Participants’ contributions during the period | Participants’ contributions during the period | 433,602 | 443,391 | 463,903 | Participants’ contributions during the period | 456,979 | 433,602 | 443,391 | ||||||||||||||||||
Assets Available for Stock Purchase | 537,530 | 579,082 | 571,991 | |||||||||||||||||||||||
Assets Available for Stock Purchases | Assets Available for Stock Purchases | 562,816 | 537,530 | 579,082 | ||||||||||||||||||||||
Less: | Less: | |||||||||||||||||||||||||
Assets Used for Stock Purchase | (431,693 | ) | (475,154 | ) | (436,300 | ) | ||||||||||||||||||||
Assets Used for Stock Purchases | Assets Used for Stock Purchases | (449,468 | ) | (431,693 | ) | (475,154 | ) | |||||||||||||||||||
Assets Available for Plan Benefits at End of Period | Assets Available for Plan Benefits at End of Period | $ | 105,837 | $ | 103,928 | $ | 135,691 | Assets Available for Plan Benefits at End of Period | $ | 113,348 | $ | 105,837 | $ | 103,928 | ||||||||||||
See the accompanying notes to financial statements.
2932
MYERS INDUSTRIES, INC.
Employee Stock Purchase Plan
Notes toTo Financial Statements
1. Description of Plan |
The following description of the Myers Industries, Inc. (Company) Employee Stock Purchase Plan (“Stock Plan”) provides only general information. Participants should refer to the Plan Agreement and Prospectus for the Stock Plan for a more complete description of the Plan’s provisions.
(a) General.General. The shareholders of the Company approved the adoption of a nonqualified and a qualified Employee Stock Purchase Plan. The Stock Plan is designed to encourage, facilitate and provide employees with an opportunity to share in the favorable performance of the Company through ownership of the Company’s Common Stock. The total number of shares of the Common Stock remaining at December 31, 2002 which may be sold under the Stock Plan is currently limited to 188,176237,089 shares.
(b) Purpose.Purpose. The purpose of the Stock Plan is to provide employees (including officers) of the Company and its subsidiaries with an opportunity to purchase Common Stock through payroll deductions.
(c) Administration.Administration. The Stock Plan is administered by a committee appointed by the Board of Directors. All questions of interpretation or application of the Stock Plan are determined by the Board of Directors (or its appointed committee) and its decisions are final, conclusive and binding upon all participants.
(d) Eligibility and Participation.Participation. Any permanent employee (including an officer) who has been employed for at least one calendar year by the Company, or its subsidiaries who have adopted the Stock Plan, is eligible to participate in the Stock Plan, provided that such employee is employed by the Company on the date histheir participation is effective and subject to limitations on stock ownership described in the Stock Plan. Eligible employees become participants in the Stock Plan by delivering to the Company a subscription agreement authorizing payroll deductions prior to the commencement of the applicable offering period.
(e) Offering Dates.Dates. The Stock Plan is implemented by one offering during each calendar quarter. Offering periods commence on the last day of each calendar quarter. The Board of Directors has the power to alter the duration of the offering periods without shareholder approval.
(f) Purchase Price.Price. The price at which shares may be purchased in an offering under the Stock Plan is 90% of the fair market value of the Common Stock on the last day of the prior calendar quarter. The fair market value of the Common Stock on a given date is the closing price for that date as listed on the New York Stock Exchange.
(g) Payroll Deductions.Deductions. The purchase price of the shares to be acquired under the Stock Plan are accumulated by payroll deductions over the offering period. The rate of deductions may not be less than five dollars ($5.00) per week or exceed 10% of a participant’s compensation, and the aggregate of all payroll deductions during the offering may not exceed 10% of the participant’s aggregate compensation for the offering period. A participant may discontinue histheir participation in the Stock Plan or may decrease or increase the rate of payroll deductions at any time during the offering period by filing with the Company a new authorization for payroll deductions.
All payroll deductions made for a participant are credited to their account under the Stock Plan and are deposited with the general funds of the Company to be used for any corporate purpose. The amount by which an employee’s payroll deductions exceed the amount required to purchase whole shares will be placed in a suspense account for the employee with no interest thereon and rolled over into the next offering period.
(h) Withdrawal.Withdrawal. A participant in the Stock Plan may terminate histheir interest in a given offering in whole, but not in part, by giving written notice to the Company of histheir election to withdraw at any time prior to the end of the applicable offering period. Such withdrawal automatically terminates the participant’s interest in that
3033
Employee Stock Purchase Plan
Notes toTo Financial Statements — (Continued)
offering, but does not have any effect upon such participant’s eligibility to participate in subsequent offerings under the Stock Plan.
(i) Termination of Employment.Employment. Termination of a participant’s employment for any reason, including retirement or death, cancels his or hertheir participation in the Stock Plan immediately.
(j) Nonassignability.Nonassignability. No rights or accumulated payroll deductions of an employee under the Stock Plan may be pledged, assigned, transferred or otherwise disposed of in any way for any reason, other than on account of death. Any attempt to do so may be treated by the Company as an election to withdraw from the Stock Plan.
(k) Amendment and Termination of The Plan.Plan. The Board of Directors may at any time amend or terminate the Stock Plan. Except as provided above, no amendment may be made to the Stock Plan without prior approval of the shareholders if such amendment would increase the number of shares reserved under the Stock Plan, permit payroll deductions at a rate in excess of 10% of a participant’s compensation, materially modify the eligibility requirements or materially increase the benefits which may accrue to participants under the Stock Plan.
(l) Taxation.Participants in the Stock Plan, which is nonqualified for federal income tax purposes, are taxed currently on the 10% discount in the purchase price granted by the Stock Plan in the year in which stock is purchased. The 10% discount is treated as ordinary income to the participant and that amount is currently deductible by the Company to the extent the participant’s total compensation from the Company is within the “reasonable compensation” limits imposed by Section 162 of the Internal Revenue Code of 1986, as amended.
2. | Summary of Significant Accounting Policies |
(a) Basis of Presentation.Presentation. The accompanying statements of assets available for plan benefits and statements of changes in assets available for plan benefits are prepared on the accrual basis of accounting.
(b) Administrative Expenses.Expenses. Administrative costs and expenses are absorbedpaid by the Trustee.Company.
31(c) Use of Estimates. The preparation of Financial Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
34
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
On June 13, 2002, the Company filed a Current Report on Form 8-K reporting that the Company’s Audit Committee of the Board of Directors terminated Arthur Andersen LLP and appointed Ernst & Young LLP as the Company’s independent auditors for the Company’s fiscal year ended December 31, 2002.
The Audit Committee of the Board of Directors selects the Company’s independent accountants. On June 13, 2002 the Audit Committee terminated Arthur Andersen LLP as its independent auditors. Simultaneously with the termination of Arthur Andersen LLP, the Audit Committee appointed Ernst & Young LLP as the Company’s independent auditors. The appointment of Ernst & Young LLP was made after significant consideration and review by the Audit Committee, and concluded a thorough and deliberate evaluation including discussions with the Board of Directors and management.
The reports of Arthur Andersen LLP on the Company’s financial statements for the fiscal years ended December 31, 2000 and 2001 did not contain an adverse opinion, disclaimer of opinion or qualification or modification as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2000 and 2001 and during the subsequent interim period, there were no disagreements with Arthur Andersen LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures. During the fiscal years ended December 31, 2000 and 2001 and during the subsequent interim period, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).
Simultaneously with the dismissal of Arthur Andersen LLP, the Audit Committee appointed Ernst & Young LLP as the Company’s independent auditors. During the years ended December 31, 2000 and 2001 and through the date of the Audit Committee’s decision, the Company did not consult Ernst & Young LLP regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, or any matter that was either the subject of disagreement on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures or a reportable event as defined in Item 304 (a)(1)(v) of Regulation S-K.
PART III
ITEM 10. | Directors and Executive Officers of the Registrant |
For information about the directors of the Registrant, see “Election of Directors” on pages 43 through 6 of Registrant’s Proxy Statement dated March 18, 200217, 2003 (“Proxy Statement”), which is incorporated herein by reference.
Information about the Executive Officers of Registrant appears in Part I of this Report.
Disclosures by the Registrant with respect to compliance with Section 16(a) appear on page 8 of the Proxy Statement, and are incorporated herein by reference.
ITEM 11. | Executive Compensation |
See “Executive Compensation and Other Information” on pages 9 through 1312 of the Proxy Statement, which is incorporated herein by reference.
35
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management |
See “Principal Shareholders” and “Election of Directors” on page 17,22, and pages 3 through 7, respectively, of the Proxy Statement, which are incorporated herein by reference.
(C) | ||||||||||||
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
(A) | (B) | Future Issuance Under | ||||||||||
Number of Securities to | Weighted-average | Equity Compensation | ||||||||||
be Issued Upon Exercise | Exercise Price of | Plans (Excluding | ||||||||||
of Outstanding Options, | Outstanding Options, | Securities Reflected in | ||||||||||
Plan Category | Warrants or Rights | Warrants or Rights | Column (A)) | |||||||||
Equity Compensation Plans Approved by Security Holders(1) | 911,871 | $ | 11.14 | 2,688,923 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | -0- | -0- | -0- | |||||||||
Total | 911,871 | $ | 11.14 | 2,688,923 | ||||||||
(1) | This information is as January 30, 2003 and includes the 1992, 1997 and 1999 Stock Plans, and the Employee Stock Purchase Plan. |
ITEM 13. | Certain Relationships and Related Transactions |
See “Certain Relationships and Related Transactions” on page 8 of the Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. | Controls and Procedures |
Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2002. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2002.
ITEM | Exhibits, Financial Statement Schedules and Reports on Form 8-K |
The following consolidated financial statements of the Registrant appear in Part II of this Report:
14.15. (A)(1) Financial Statements
Consolidated Financial Statements of Myers Industries, Inc. and Subsidiaries
Report of Independent Public Accountants
Statements of Consolidated Financial Position As Of December 31, 2002 and 2001
Statements of Consolidated Income For The Years Ended December 31, 2002, 2001 and 2000
Statements of Consolidated Shareholders’ Equity and Comprehensive Income For The Years Ended December 31, 2002, 2001 | |
Statements of Consolidated Cash Flows For The Years Ended December 31, 2002, 2001 | |
Notes to Consolidated Financial Statements For The Years Ended December 31, 2002, 2001 |
36
Financial Statements for the Myers Industries, Inc. Employee Stock Purchase Plan
Statements of Assets Available for Plan Benefits As Of December 31, | |
Statements of Changes in Assets Available for Plan Benefits For The Years Ended December 31, 2002, 2001 |
14.15. (A)(2) Financial Statement Schedules
Selected Quarterly Financial Data For The Years Ended December 31, | |
All other schedules are omitted because they are inapplicable, not required, or because the information is included in the consolidated financial statements or notes thereto which appear in Part II of this Report. |
3215. (A)(3) Management Contracts or Compensatory Plans or Arrangements
All other schedules are omitted because they are inapplicable, not required, or because the information is included in the consolidated financial statements or notes thereto which appear in Part II of this Report.
See those documents listed under ITEM 15 (c) which are marked as such. |
14. (A)(3)15. (B) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of 2002. |
15. (C) Exhibits
3 | (a) | Myers Industries, Inc. Amended and Restated Articles of Incorporation. Reference is made to Exhibit (3)(a) to Form 10-Q filed with the Commission on May 17, 1999. | ||
3 | (b) | Myers Industries, Inc. Amended and Restated Code of Regulations. | ||
10 | (a) | Myers Industries, Inc. Amended and Restated Employee Stock Purchase Plan. Reference is made to Exhibit 10(a) to Form 10-K filed with the Commission on March 30, 2001. | ||
10 | (b) | Form of Indemnification Agreement for Directors and Officers. | ||
10 | (c) | Myers Industries, Inc. Amended and Restated 1992 Stock Option Plan. | ||
10 | (d) | Myers Industries, Inc. Amended and Restated Dividend Reinvestment and Stock Purchase Plan. Reference is made to Exhibit 10(d) to Form 10-K filed with the Commission on March 30, 2001. | ||
10 | (e) | Myers Industries, Inc. 1997 Incentive Stock Plan. Reference is made to Exhibit 10.2 to Form S-8 (Registration Statement No. 333-90367) filed with the Commission on November 5, 1999.* | ||
10 | (f) | Myers Industries, Inc. Amended and Restated 1999 Incentive Stock Plan. Reference is made to Exhibit | ||
10 | Myers Industries, Inc. Executive Supplemental Retirement Plan. | |||
10 | (h) | Supplemental Compensation Agreement for Milton I. Wiskind dated April 25, 1996.* | ||
10 | (i) | Employment Contract between Myers Europe, SA (fka Myers AE, SA) and Jean-Paul Lesage dated February 1, 1999.* | ||
10 | (j) | Description of the terms of employment between Myers Industries, Inc. and Kevin C. O’Neil dated June 10, 2003.* | ||
10 | (k) | Loan Agreement | ||
10 | First Amendment to Loan Agreement among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of August 2, 1999. Reference is made to Exhibit 10(b) to Form 8-K filed with the Commission on August 13, 1999. |
37
10 | Annex 1 to First Amendment Loan Agreement, Being the Loan Agreement, as Amended, among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of August 2, 1999. Reference is made to Exhibit 10(c) to Form 8-K filed with the Commission on August 13, 1999. | |||
10 | Second Amendment to Loan Agreement among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of August 2, 2000. Reference is made to Exhibit 10(l) to Form 10-K filed with the Commission on March 30, 2001. | |||
10 | Third Amendment to Loan Agreement among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of October 6, 2000. Reference is made to Exhibit 10(m) to Form 10-K filed with the Commission on March 30, 2001. | |||
10 | Fourth Amendment to Loan Agreement among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of December 31, 2000. Reference is made to Exhibit 10(n) to Form 10-K filed with the Commission on March 30, 2001. |
33
10 | Fifth Amendment to Loan Agreement among Myers Industries, Inc., the Foreign Subsidiary Borrowers and Bank One, Michigan, as Agent for the Lenders, Dated as of August 7, 2001. Reference is made to Exhibit 10(n) to Form 10-Q filed with the Commission on November 13, 2001. | |||
16.1 | Reference is made to exhibit 16.1 included in Form 8-K filed with the Commission on June 13, 2002. | |||
21 | Subsidiaries of | |||
Myers Industries, Inc. | ||||
23 | (a) | Consent of Ernst & Young, LLP, Independent | ||
23 | (b) | Statement regarding consent of Arthur Andersen, LLP | ||
23 | (c) | Consent of Ernst & Young, LLP, Independent Auditors – Myers Industries, Inc. Employee Stock Purchase Plan. | ||
99 | Certifications of Stephen E. Myers, Chief Executive Officer, and Gregory J. Stodnick, Vice President – Finance (Chief Financial Officer), of Myers Industries, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Indicates executive compensation plan or arrangement. |
14. (B) Reports on Form 8-K.15.(D) Financial StatementsNone
14. (C) Exhibits.See subparagraph 14(A)(3)15(A)(1) above.
3438
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MYERS INDUSTRIES, INC. |
By: | /s/ GREGORY J. STODNICK |
Gregory J. Stodnick | |
Vice President — Finance and | |
Chief Financial Officer |
March 27, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ GREGORY J. STODNICK Gregory J. Stodnick | Vice President — Finance and Chief Financial Officer (Principal Financial and Accounting Officer) | March | ||
/s/ KEITH A. BROWN Keith A. Brown | Director | March | ||
| Director | March | ||
/s/ RICHARD P. JOHNSTON Richard P. Johnston | Director | March 26, 2003 | ||
Michael W. Kane | Director | March | ||
/s/ EDWARD W. KISSEL Edward W. Kissel | Director | March | ||
/s/ STEPHEN E. MYERS Stephen E. Myers | President, Chief Executive Officer and Director (Principal Executive Officer) | March | ||
/s/ RICHARD L. OSBORNE Richard L. Osborne | Director | March | ||
/s/ JON H. OUTCALT Jon H. Outcalt | Director | March | ||
/s/ MILTON I. WISKIND Milton I. Wiskind | Senior Vice President, Secretary and Director | March |
3539
CERTIFICATION PER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen E. Myers, Chief Executive Officer of Myers Industries, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Myers Industries, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrants’ other certifying officers and I have indicated in this annual report whether or not there were significant changes internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 | /s/ STEPHEN E. MYERS ------------------------------------------------ Stephen E. Myers, Chief Executive Officer |
40
CERTIFICATION PER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory J. Stodnick, Chief Financial Officer of Myers Industries, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Myers Industries, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |
(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrants’ other certifying officers and I have indicated in this annual report whether or not there were significant changes internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 | /s/ GREGORY J. STODNICK ------------------------------------------------ Gregory J Stodnick, Chief Financial Officer |
41