SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
   
þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31,June 30, 2010
OR
   
o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                    to                    
Commission File Number 1-8524
Myers Industries, Inc.
(Exact name of registrant as specified in its charter)
   
Ohio34-0778636

(State or other jurisdiction of
incorporation or organization)		 34-0778636
(IRS Employer Identification
Number)
   
1293 South Main Street
Akron, Ohio		44301

(Address of principal executive offices)		 
44301
(Zip code)
(330) 253-5592
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YesþNoo.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yeso Noo.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitionsdefinition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated fileroAccelerated filerþ Non-accelerated filero
(Do not check if a smaller reporting company)		Smaller reporting companyo
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNoþ.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
   
Class Outstanding as of April 30,July 31, 2010
   
Common Stock, without par value 35,306,33035,311,701 shares
 
 

 

 

Table of Contents
     
Part I — Financial Information
  1 
    
Item 1. Financial Statements
  1 
    
Condensed Statements of Consolidated Financial Position
  11-2 
    
Condensed Statements of Consolidated Income (Loss)
  3 
    
Condensed Statements of Consolidated Cash Flows
  4 
    
Condensed Statement of Consolidated Shareholders’ Equity
  5 
    
Notes to Condensed Consolidated Financial Statements
  66-11 
    
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
  12 
    
Item 3. Quantitative and Qualitative Disclosure About Market Risk
  1417 
    
Item 4. Controls and Procedures
  1517 
    
Part II — Other Information
  1518 
    
Item 1. Legal Proceedings
  1518 
    
Item 6. Exhibits
  1518 
    
Signature
  1618 
    
 Exhibit 21
 Exhibit 31(a)
 Exhibit 31(b)
 Exhibit 32

 

Part I — Financial Information
Item 1. Financial Statements

Myers Industries, Inc.
Condensed Statements of Consolidated Financial Position

As of March 31,June 30, 2010 (Unaudited) and December 31, 2009

(Dollars in thousands)
        
 March 31, 2010 December 31, 2009         
Assets
  June 30, 2010 December 31, 2009 
Current Assets
  
Cash $8,789 $4,728  $6,055 $4,728 
Accounts receivable-less allowances of $3,959 and $4,402 respectively 103,851 86,674 
Accounts receivable-less allowances of $3,451 and $4,402, respectively 88,879 86,674 
  
Inventories  
Finished and in-process products 62,857 65,522  60,360 65,522 
Raw materials and supplies 33,722 34,679  30,823 34,679 
          
 96,579 100,201  91,183 100,201 
  
Prepaid expenses 6,130 8,612  7,782 8,612 
Deferred income taxes 6,341 6,333  6,330 6,333 
          
Total Current Assets
 221,691 206,548  200,229 206,548 
  
Other Assets
  
Goodwill 112,105 111,927  111,864 111,927 
Intangible assets 19,652 20,003  18,601 20,003 
Other 16,080 13,070  16,379 13,070 
          
 147,837 145,000  146,844 145,000 
 
Property, Plant and Equipment, at Cost
  
Land 3,989 3,989  3,990 3,989 
Buildings and leasehold improvements 53,305 53,283  53,158 53,283 
Machinery and equipment 374,535 370,042  372,758 370,042 
          
 431,829 427,314  429,906 427,314 
Less allowances for depreciation and amortization  (275,173)  (268,896)  (277,890)  (268,896)
          
 156,656 158,418  152,016 158,418 
          
 $526,185 $509,966  $499,089 $509,966 
          
See notes to unaudited condensed consolidated financial statements.

 

1

Part I — Financial Information
Myers Industries, Inc.

Condensed Statements of Consolidated Financial Position

As of March 31,June 30, 2010 (Unaudited) and December 31, 2009
(
(Dollars in thousands, except sharedata)
        
 March 31, 2010 December 31, 2009         
Liabilities and Shareholders’ Equity
  June 30, 2010 December 31, 2009 
Current Liabilities
  
Accounts payable $57,837 $63,916  $48,014 $63,916 
Accrued expenses  
Employee compensation 13,768 14,008  14,880 14,008 
Income taxes 7,378 6,405  2,377 6,405 
Taxes, other than income taxes 1,301 1,187  1,135 1,187 
Accrued interest 1,981 397  409 397 
Other 15,977 17,687  13,514 17,687 
Current portion of long-term debt 65,425 65,425  65,425 65,425 
          
  
Total Current Liabilities
 163,667 169,025  145,754 169,025 
  
Long-term Debt, less current portion 54,610 38,890 
Other Liabilities 5,692 5,682 
Deferred Income Taxes 38,578 38,371 
Long-term debt, less current portion 51,410 38,890 
Other liabilities 5,714 5,682 
Deferred income taxes 38,208 38,371 
  
Shareholders’ Equity
  
Serial Preferred Shares (authorized 1,000,000 shares) -0- -0-  -0- -0- 
Common Shares, without par value (authorized 60,000,000 shares; outstanding 35,292,830 and 35,286,129 shares, respectively) 21,478 21,474 
Common Shares, without par value (authorized 60,000,000 shares; outstanding 35,307,873 and 35,286,129 shares, respectively) 21,481 21,474 
Additional paid-in capital 279,468 278,894  280,123 278,894 
Accumulated other comprehensive income 8,618 6,777  5,756 6,777 
Retained deficit  (45,926)  (49,147)  (49,357)  (49,147)
          
  
 263,638 257,998  258,003 257,998 
          
  
 $526,185 $509,966  $499,089 $509,966 
          
See notes to unaudited condensed consolidated financial statements.

 

2

Part I — Financial Information
Myers Industries, Inc.

Condensed Statements of Consolidated Income (Loss) (Unaudited)

For the Three and Six Months Ended March 31,June 30, 2010 and March 31, 2009
(
(Dollars in thousands, except per share data)
                        
 For The Three Months Ended  For The Three Months Ended For The Six Months Ended 
 March 31, March 31,  June 30, June 30, June 30, June 30, 
 2010 2009  2010 2009 2010 2009 
  
Net sales $186,422 $182,689  $175,906 $165,439 $362,329 $348,128 
 
Cost of sales 141,510 127,209  141,955 124,134 283,465 251,343 
         
      
Gross profit 44,912 55,480  33,951 41,305 78,864 96,785 
  
Selling, general and administrative expenses 34,431 41,584  33,960 40,510 68,392 82,094 
Impairment charges -0- 1,271  -0- 891 -0- 2,162 
              
Operating income 10,481 12,625 
 
Operating (loss) income  (9)  (96) 10,472 12,529 
  
Interest expense, net 1,800 2,401  1,851 2,099 3,651 4,500 
              
  
Income from continuing operations before income taxes 8,681 10,224 
Income (loss) from continuing operations before income taxes  (1,860)  (2,195) 6,821 8,029 
  
Income taxes 3,151 3,967 
Income tax (benefit) expense  (761)  (1,470) 2,390 2,497 
              
  
Income from continuing operations 5,530 6,257 
Income (loss) from continuing operations  (1,099)  (725) 4,431 5,532 
  
Loss from discontinued operations, net of tax -0-  (1,155)
Income (loss) from discontinued operations, net of tax -0-  (676) -0-  (1,831)
              
Net income $5,530 $5,102 
 
Net (loss) income $(1,099) $(1,401) $4,431 $3,701 
              
  
Income (loss) per common share  
Basic  
Continuing operations $.16 $.18  $(.03) $(.02) $.13 $.16 
Discontinued operations -0-  (.03)
Discontinued -0-  (.02) -0-  (.05)
              
Net income per common share $.16 $.14 
Net (loss) income $(.03) $(.04) $.13 $.10 
              
  
Diluted  
Continuing operations $.16 $.18  $(.03) $(.02) $.13 $.16 
Discontinued operations -0-  (.03)
Discontinued -0-  (.02) -0-  (.05)
              
Net income per common share $.16 $.14 
Net (loss) income $(.03) $(.04) $.13 $.10 
              
See notes to unaudited condensed consolidated financial statements.

 

3

Part I — Financial Information
Myers Industries, Inc.

Condensed Statements of Consolidated Cash Flows (Unaudited)

For the ThreeSix Months Ended March 31,June 30, 2010 and 2009

(Dollars in thousands)
                
 March 31, 2010 March 31, 2009  June 30, 2010 June 30, 2009 
Cash Flows From Operating Activities
  
Net income $5,530 $5,102  $4,431 $3,701 
Loss from discontinued operations -0-  1,155 
Net loss from discontinued operations -0- 1,831 
Items not affecting use of cash  
Depreciation 7,561 8,477  15,019 17,067 
Impairment charges -0- 1,271  -0- 2,162 
Amortization of intangible assets 752 745 
Amortization of other intangible assets 1,485 1,494 
Non cash stock compensation 517 507  1,133 1,131 
Deferred taxes  (38) 71   (76)  (62)
Gain on sale of property, plant and equipment  (733)  (43)  (733) -0- 
Cash flow provided by (used for) working capital  
Accounts receivable  (16,553)  (21,856)  (2,934) 5,612 
Inventories  (3,318) 12,045  1,154 13,700 
Prepaid expenses 2,539  (1,193) 798  (317)
Accounts payable and accrued expenses  (5,757)  (8,453)  (22,896)  (16,633)
          
 
Net cash used for operating activities of continuing operations  (9,500)  (2,172)
Net cash provided by (used for) operating activities of continuing operations  (2,620) 29,686 
Net cash provided by operating activities of discontinued operations -0-  (193) -0- 643 
          
Net cash used for operating activities  (9,500)  (2,365)
     
Net cash provided by (used for) operating activities  (2,620) 30,329 
      
Cash Flows From Investing Activities
  
Proceeds from sale of property, plant and equipment 5,165 727 
Additions to property, plant and equipment  (5,228)  (1,368)  (9,320)  (3,864)
Proceeds from sale of property, plant and equipment 4,918 -0- 
Other  (14) 182  73 353 
          
Net cash used for investing activities  (324)  (1,186)  (4,082)  (2,784)
          
 
Cash Flows From Financing Activities
  
Net borrowing of credit facility 15,909 11,309 
Net borrowing (repayment) of credit facility 12,552  (11,729)
Cash dividends paid  (2,278)  (2,115)  (4,611)  (4,231)
Proceeds from issuance of common stock 31 108  72 213 
          
Net cash provided by financing activities 13,662 9,303 
     
Net cash (used for) provided by financing activities 8,013  (15,747)
      
Foreign Exchange Rate Effect on Cash 223  (364) 17 603 
          
Net increase in cash 4,061 5,388  1,328 12,401 
 
Cash at January 1 4,728 10,417  4,728 10,417 
          
Cash at March 31 $8,789 $15,805 
      $6,055 $22,818 
     
See notes to unaudited condensed consolidated financial statements.

 

4

Part I — Financial Information
Myers Industries, Inc.

Condensed Statement of Consolidated Shareholders’ Equity (Unaudited)

For the ThreeSix Months Ended March 31,June 30, 2010

(Dollars in thousands)
                                
 Accumulated    Accumulative   
 Additional Other    Additional Other   
 Common Paid-In Comprehensive Retained  Common Paid-In Comprehensive Retained 
 Stock Capital Income Deficit  Stock Capital Income (Loss) Deficit 
December 31, 2009 $21,474 $278,894 $6,777 $(49,147) $21,474 $278,894 $6,777 $(49,147)
 
Net income -0- -0- -0- 5,530  -0- -0- -0- 4,431 
 
Foreign currency translation adjustment -0- -0- 1,841 -0-  -0- -0-  (1,021) -0- 
 
Common stock issued 4 57 -0- -0- 
Common Stock issued 7 96 -0- -0- 
 
Stock based compensation -0- 517 -0- -0-  -0- 1,133 -0- -0- 
 
Dividends — $.065 per share -0- -0- -0-  (2,309)
Dividends — $.13 per share -0- -0- -0-  (4,641)
 
                  
June 30, 2010 $21,481 $280,123 $5,756 $(49,357)
         
March 31, 2010 $21,478 $279,468 $8,618 $(45,926)
         
 
See notes to unaudited condensed consolidated financial statements.

 

5

Part I — Financial Information
Myers Industries, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited
Statement of Accounting Policy
The accompanying financial statements include the accounts of Myers Industries, Inc. and subsidiaries (collectively, the “Company”), and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K.
In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31,June 30, 2010, and the results of operations and cash flows for the threesix months ended March 31,June 30, 2010 and 2009. The results of operations for the threesix months ended March 31,June 30, 2010 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2010.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”)(FASB) issued Accounting Standards Update No. 2010-06,Improving Disclosures about Fair Value Measurements (Topic 820)—Fair Value Measurements and Disclosures, to add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2 and 3. The Company adopted this guidance in January 2010 and adoption did not have a material impact on the Company’s consolidated financial statements. The portion of guidance relating to disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliationreconciliations are not effective until fiscal years beginning after December 15, 2010. The Company does not expect that the portion of this guidance not yet adopted will have a material impact on the Company’s consolidated financial statements.
Fair Value Measurement
In January 2008, the Company adopted guidance included in ASC 820, “FairFair Value Measurements and Disclosures”,Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied to U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. In January 2009, the Company adopted updated guidance included in ASC 820 with respect to non-financial assets and liabilities that are measured at fair value on a non-recurring basis. The adoption of this updated guidance did not have a material impact on the consolidated financial statements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.
Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.
The fair value of the Company’s cash, accounts receivable, accounts payable and accrued expenses are considered to have a fair value which approximates carrying value due to the nature and relative short maturity of these assets and liabilities.
The fair value of debt under the Company’s Credit Agreement approximates carrying value due to the floating interest rates and relative short maturity (less than 90 days) of the revolving borrowings under this agreement. The fair value of the Company’s $100 million fixed rate senior notes was estimated at $102 million at March 31,June 30, 2010 using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered level 2 inputs.

6

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Discontinued Operations
On October 30, 2009, the Company sold substantially all of the assets of its Michigan Rubber Products, Inc. (MRP)(“MRP”) and Buckhorn Rubber Products Inc. (BRP)(“BRP”) businesses to Zhongding Sealing Parts (USA), Inc. In accordance with U.S. generally accepted accounting principles, the operating results related to those businesses have been included in the results of discontinued operations. For the quarterthree months and six months ended March 31,June 30, 2009, the MRP and BRP discontinued operations had salesthe following operating results:
         
  Three months ended  Six months ended 
(Amounts in thousands) June 30, 2009  June 30, 2009 
Net Sales $7,711  $15,122 
Loss before income taxes  (1,134)  (3,047)
Income tax benefit  (458)  (1,216)
Net loss $(676) $(1,831)
Goodwill
The change in goodwill for the six months ended June 30, 2010 was as follows:
(Amount in thousands)
                     
          Foreign        
  Balance at      Currency      Balance at 
Segment January 1, 2010  Acquisitions  Translation  Impairment  June 30, 2010 
Distribution $214  $-0-  $-0-  $-0-  $214 
Material Handling — North America  30,383   -0-   -0-   -0-   30,383 
Lawn and Garden  81,330   -0-   (63)  -0-   81,267 
                
Total $111,927  $-0-  $(63) $-0-  $111,864 
                
Net Income (Loss) Per Share
Net income (loss) per share, as shown on the Condensed Statements of $7.4 million and a net loss from operationsConsolidated Income (Loss), is determined on the basis of $1.2 million.the weighted average number of common shares outstanding during the period as follows:

 

67

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Goodwill
The change in goodwill for the three months ended March 31, 2010 is as follows:
(Amounts in thousands)
                     
  Balance at      Foreign      Balance at 
  January 1,      Currency      March 31, 
Segment 2010  Acquisitions  Translation  Impairment  2010 
Distribution $214   -0-   -0-   -0-  $214 
Material Handling — North America  30,383   -0-   -0-   -0-   30,383 
Lawn and Garden  81,330   -0-   178   -0-   81,508 
                
Total $111,927  $-0-  $178   -0-  $112,105 
                
Net Income Per Share
Net income per share, as shown on the Condensed Statements of Consolidated Income, is determined on the basis of the weighted average number of common shares outstanding during the period as follows:
                        
 Three Months Ended  Three Months Ended Six Months Ended 
 March 31  June 30 June 30 
 2010 2009 
(In thousands) 2010 2009 2010 2009 
Weighted average common shares outstanding  
Basic 35,289,725 35,246,618  35,304 35,266 35,297 35,257 
Dilutive effect of stock options 98,392 -0-  -0- -0- 117 -0- 
              
Weighted average common shares outstanding — diluted 35,388,117 35,246,618  35,304 35,266 35,414 35,257 
              
Options to purchase 1,617,6701,584,830 and 1,177,1461,440,573 shares of common stock that were outstanding at March 31,June 30, 2010 and 2009, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options was greater than the average market price of common shares. In addition, 119,232 dilutive common shares were excluded from the computation of the loss per common share in the three months ended June 30, 2010 due to the Company’s net loss position.
Supplemental Disclosure of Cash Flow Information
The Company made cash payments for interest of approximately $0.1$3.3 million and $1.0$3.7 million for the three months ended March 31,June 30, 2010 and 2009, respectively. Cash payments for interest totaled $3.4 million and $4.6 million for the six months ended June 30, 2010 and 2009, respectively. Cash payments for income taxes were approximately $1.7$6.0 million and $0.3$3.6 million for the three months ended March 31,June 30, 2010 and 2009, respectively. Cash payments for income taxes were $7.6 million and $3.9 million for the six months ended June 30, 2010 and 2009, respectively.
Comprehensive Income (Loss)
A summary of comprehensive income (loss) for the three and six months ended June 30, 2010 and 2009 is as follows:
                 
  Three Months Ended  Six Months Ended 
  June 30  June 30 
(In thousands) 2010  2009  2010  2009 
Net income (loss) $(1,099) $(1,401) $4,431  $3,701 
Other comprehensive income (loss):                
Foreign currency translation adjustment  (2,861)  5,505   (1,021)  3,755 
             
Comprehensive income (loss) $(3,960) $4,104  $3,410  $7,456 
             
Accumulated Other Comprehensive Income
As of June 30, 2010 and December 31, 2009, the balance in the Company’s accumulated other comprehensive income is comprised of the following:
         
(In thousands) June 30, 2010  December 31, 2009 
Foreign currency translation adjustments $7,800  $8,821 
Pension adjustments  (2,044)  (2,044)
       
Total $5,756  $6,777 
       

 

78

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Comprehensive Income
A summary of comprehensive income for the three months ended March 31, 2010 and 2009 was as follows:
         
  Three Months Ended 
  March 31, 
(In thousands) 2010  2009 
         
Net income $5,530  $5,102 
Other comprehensive income (loss):        
Foreign currency translation adjustment  1,841   (1,750)
       
Comprehensive income $7,371  $3,352 
       
Accumulated Other Comprehensive Income
As of March 31, 2010 and December 31, 2009, the balance in the Company’s accumulated other comprehensive income was comprised of the following:
         
  March 31,  December 31, 
(In thousands) 2010  2009 
Foreign currency translation adjustments $10,662  $8,821 
Pension adjustments  (2,044)  (2,044)
       
Total $8,618  $6,777 
       
Restructuring & Impairment Charges
In the fourth quarter of 2008, the Company began implementation of its plan to restructure the businesses in its Lawn and Garden segment. In addition, during 2009 the Company began a restructuring program in its Material Handling segment. These restructuring programs resulted in the closure of 5 manufacturing facilities and the reallocation of certain product lines and machinery and equipment to the remaining facilities. In addition, 2 manufacturing facilities in the Engineered Products segment were also closed in 2009.
In the quarterthree months and six months ended March 31,June 30, 2010, the Company recorded expenses of approximately $0.8$0.9 million and $1.7 million, respectively, related to these restructuring activities,activities. These expenses were primarily for rigging, transportation and transportationinstallation costs in connection with the movement of certain machinery and equipment between facilities.facilities and were recognized as incurred. In addition, during the first quarter of 2010, the Company sold its closed Material Handling plant in Shelbyville, Kentucky for approximately $5.1 million and recorded a gain of $0.7 million.
For the three and six months ended June 30, 2009, the Company recorded impairment charges of $1.1 and $1.4 million, respectively, related to certain property, plant, and equipment at Lawn and Garden manufacturing facilities. In addition, in the quarterthree months ended March 31, 2009, the Company recorded impairment charges of $0.3 million related to certain Lawn and Garden property, plant, and equipment. The Company also incurred severance and personnel related, consulting, and other expenses associated with the Lawn and Garden restructuring of approximately $5.0$1.0 million in the first quarter of 2009. In addition, the Company announcedconnection with the closure of its Fostoria, Ohio facility in the Engineered Products segmentsegment. The Company also incurred expenses of $3.0 and as a result, an impairment charge of approximately $1.0$8.0 million was recordedfor the three and six months ended June 30, 2009, respectively, for severance, consulting, and other costs associated with restructuring activities in the quarter ended March 31, 2009 to adjust the carrying value of real estate at this location to its estimated fair value.Lawn and Garden and Material Handling businesses.
Activity related to the Company’s restructuring accruals for severance and other exit costs in the period ended March 31,reserves as of June 30, 2010 wasis as follows:
                        
 Severance      Severance     
 and Other    and Other   
(Dollars in thousands) Personnel Exit Costs Total  Personnel Exit Costs Total 
Balance at January 1, 2010 $423 $1,651 $2,074  $423 $1,651 $2,074 
Provision -0- -0- -0-  -0- -0- -0- 
Less: Payments  (423)  (506)  (929)  (423)  (614)  (1,037)
              
Balance at March 31, 2010 $-0- $1,145 $1,145 
Balance at June 30, 2010 $-0- $1,037 $1,037 
              
As a result of restructuring activity and plant closures, approximately $7.6 million and $11.9 million of property, plant, and equipment hashave been classified as held for sale as of March 31,at June 30, 2010 and December 31, 2009, respectively and is included in other assets in the condensed statementCondensed Statements of consolidated financial position.

8

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
UnauditedPosition.
Stock Compensation
On April 30, 2009, the shareholders of the Company approved the adoption of the 2008 Incentive Stock Plan (the(“the 2008 Plan)Plan”). Under the 2008 Plan, the Compensation Committee of the Board of Directors is authorized to issue up to 3,000,000 shares of various types of stock based awards including stock options, restricted stock and stock appreciation rights to key employees and Directors. In general, stock options granted and outstanding vest over three years and expire ten years from the date of grant.
Stock compensation expense reduced income before taxes approximately $0.5$0.6 million for the three months ended March 31,June 30, 2010 and 2009. These expenses are2009, respectively. Stock compensation expense reduced income before taxes approximately $1.1 million for the six months ended June 30, 2010 and 2009, respectively. Stock compensation is included in SG&A expensesexpense in the accompanying Condensed Statements of Consolidated Income.Income (Loss). Total unrecognized compensation costs related to non-vested share based compensation arrangements at March 31,June 30, 2010 was approximately $5.0$4.1 million which will be recognized over the next four years.
On March 4, 2010, 345,600 stock option shares were granted with a three year vesting period. The fair value of these option shares was estimated using a Monte Carlo option pricing model based on assumptions set forth in the following table. The Company uses historical data to estimate employee exercise and departure behavior. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and through the expected term. The dividend yield rate is based on the Company’s historical dividend yield and expected volatility is derived from historical volatility of the Company’s shares and those of similar companies measured against the market as a whole.
        
Risk free interest rate  3.09%  3.09%
Expected dividend yield  2.86%  2.86%
Expected life of award (years) 5.18  5.18 years
Expected volatility  48.77%  48.77%
Fair value per option share $3.06  $3.01 

9

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
The following table summarizes the stock option activity for the threesix months ended March 31,June 30, 2010:
                        
 Average Weighted  Average Weighted 
 Exercise Average  Exercise Average 
 Shares Price Life  Shares Price Life 
Outstanding at December 31, 2009 1,681,169 $12.21  1,681,169 $12.21 
Options Granted 345,600 10.56  345,600 10.56 
Options Exercised  (3,780) 8.00   (5,320) 8.00 
Cancelled or Forfeited  (68,525) 13.47   (101,497) 13.34 
              
Outstanding at March 31, 2010 1,954,464 $11.64 7.90 years
Outstanding at June 30, 2010 1,919,952 $11.62 7.67 years
              
 
Exercisable at March 31, 2010 869,630 $12.79 
Exercisable at June 30, 2010 1,035,821 $12.40 
The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The total intrinsic value of thestock options exercised during the threesix months ended March 31,June 30, 2010 was approximately $8,000.$12,995. There were no stock options exercised during the threesix months ended March 31,June 30, 2009.
In addition, at March 31,June 30, 2010 and December 31, 2009, the Company had outstanding 245,900241,450 and 103,000 shares of restricted stock, respectively, with vesting periods through March 2013. The restricted stock awards are rights to receive shares of common stock subject to forfeiture and other restrictions.
Income Taxes
As of December 31, 2009, the total amount of gross unrecognized tax benefits was $6.1 million of which $5.7 million would reduce the Company’s effective tax rate. The amount of accrued interest expense for incomerelated to uncertain tax exposurespositions within the Company’s consolidated financial position at December 31, 2009 was $0.4 million. No material changes have occurred in the liability for unrecognized tax benefits during the threesix months ended March 31,June 30, 2010. The Company does not expect any significant changes to its unrecognized tax benefit balance over the next twelve months.

9

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of its income tax expense within its consolidated statements of income.income (loss).
As of March 31,June 30, 2010, the Company and its significant subsidiaries are subject to examination for the years after 2003 in Brazil, and Canada as well as after 2005 for the United States, Canada, France, and certain states within the United States. The Company is also subject to examinations after 2004 in the remaining states within the United States.
Retirement Plans
During 2009, the Company merged its two frozen defined benefit pension plans into a single plan (“the Pension Plan”) which provides benefits primarily based upon a fixed amount for each year of service as defined. The net periodic benefitpension cost for the defined benefit plan for the three and six months ended March 31,June 30, 2010 and 2009, respectively, was as follows:

10

         
  Three Months Ended 
  March 31, 
(In thousands) 2010  2009 
Service cost $9  $15 
Interest cost  80   81 
Expected return on assets  (74)  (65)
Amortization of prior service cost  -0-   -0- 
Amortization of net loss  15   22 
       
Net periodic pension cost $30  $53 
       
         
Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
                 
  Three Months Ended  Six Months Ended 
  June 30  June 30 
(Dollars in thousands) 2010  2009  2010  2009 
Service cost $9  $15  $18  $30 
Interest cost  80   81   160   162 
Expected return on assets  (74)  (65)  (148)  (130)
Amortization of net loss  15   22   30   44 
             
Net periodic pension cost $30  $53  $60  $106 
             
As of March 31,June 30, 2010, no contributions have been made to the Pension Plan and the Company does not expect to make any contributions in 2010.
Contingencies
The Company is a defendant in various lawsuits and a party to various other legal proceedings, in the ordinary course of business, some of which are covered in whole or in part by insurance. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on our consolidated financial position, results of operations or cash flows.
A number of parties, including the Company and its subsidiary, Buckhorn Inc. (“Buckhorn”), were identified in a planning document adopted in October 2008 by the California Regional Water Quality Control Board, San Francisco Bay Region (RWQCB). The planning document relates to the presence of mercury, including amounts contained in mining wastes, in and around the Guadalupe River Watershed (Watershed) region in Santa Clara County, California. Buckhorn has been alleged to be a successor in interest to an entity that performed mining operations in a portion of the Watershed area. The Company has not been contacted by the RWQCB with respect to Watershed clean-up efforts that may result from the adoption of this planning document. The extent of the mining wastes that may be the subject of future cleanup has yet to be determined, and the actions of the RWQCB have not yet advanced to the stage where a reasonable estimate of remediation cost, if any, is available.

10

Part I — Financial Information
Myers Industries, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Although assertion of a claim by the RWQCB is reasonably possible, it is not possible at this time to estimate the amount of any obligation the Company may incur for these cleanup efforts within the Watershed region, or whether such cost would be material to the Company’s financial statements.
In October 2009, an employee was fatally wounded while performing maintenance at the Company’s manufacturing facility in Springfield, Missouri. No litigation related to this matter is currently pending and, at this time, the likelihood of legal action and the likelihood of exposure resulting from such legal action are not able to be determined. The Company believes that it has adequate insurance to resolve any claims resulting from this incident.
Segment Information
The Company’s business units have separate management teams and offer different products and services. Beginning in 2010, the Company changed the name of its Automotive and Custom segment to Engineered Products. In all other respects, the Engineered Products segment remains the same and still consists of businesses engaged in the manufacture of engineered plastic original equipment and replacement parts, tire repair materials and custom rubber and plastic components and materials. The Company’s business units have been aggregated into four reportable business segments based on management, including the chief operating decision maker for the segment, as well as similarities of products, production processes, distribution methods and other economic characteristics. These include three manufacturing segments encompassing a diverse mix of plastic and rubber products: 1) Lawn and Garden, 2) Material Handling, and 3) Engineered Products. The fourth segment is Distribution of tire, wheel, and undervehicle service products. The aggregation of business units is based on management by the chief operating decision maker for the segment as well as similarities of products, production processes, distribution methods and economic characteristics.
Income (Loss)(loss) before income taxes for each business segment is based on net sales less cost of products sold, and the related selling, administrative and general expenses. In addition, restructuring and other unusual charges are included in the related business segment’s operating income (loss), except for consulting fees which are included in corporate. These consulting fees were $2.9 and $5.3 million for the three and six months ended June 30, 2009, respectively. In computing business segment operating income (loss), general corporate overhead expenses and interest expenses are not included.allocated to other business segments.
        
 Three Months Ended                 
 March 31,  Three Months Ended Six Months Ended 
(In thousands) 2010 2009  June 30, June 30, 
Net Sales  2010 2009 2010 2009 
Lawn & Garden $69,505 $76,407  $45,241 $42,797 $114,746 $119,204 
Material Handling 60,211 58,049  62,729 65,528 122,940 123,578 
Distribution 38,732 36,323  43,955 40,153 82,687 76,476 
Engineered Products 24,409 19,716  29,747 21,339 54,156 41,054 
Intra-segment elimination  (6,435)  (7,806)  (5,766)  (4,378)  (12,200)  (12,184)
              
Sales from continuing operations $186,422 $182,689  $175,906 $165,439 $362,329 $348,128 
              
                        
 Three Months Ended  Three Months Ended Six Months Ended 
 March 31,  June 30, June 30, 
(In thousands) 2010 2009 
Income (Loss) Before Income Taxes
  2010 2009 2010 2009 
 
Lawn and Garden $4,757 $11,654  $(5,479) $1,158 $(722) $12,811 
Material Handling 5,410 6,660  3,452 3,586 8,862 10,246 
Distribution 2,902 2,236  3,628 2,498 6,530 4,735 
Engineered Products 2,553  (1,091) 3,084 698 5,637  (392)
Corporate  (5,141)  (6,834)  (4,694)  (8,037)  (9,835)  (14,871)
Interest expense-net  (1,800)  (2,401)  (1,851)  (2,098)  (3,651)  (4,500)
              
Income from continuing operations before income taxes $8,681 $10,224 
Income (loss) from continuing operations before income taxes $(1,860) $(2,195) $6,821 $8,029 
              

 

11

Part I — Financial Information
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations: FirstOperations
Comparison of the Second Quarter of 2010 versusto the Second Quarter of 2009
(Dollars in millions)
Net Sales from Continuing Operations:Sales:
                
 Quarter Ended   
                 June 30, % 
Segment 2010 2009 Change % Change  2010 2009 Change Change 
Lawn & Garden $69.5 $76.4 $(6.9)  (9)% $45.2 $42.8 $2.4  6%
Material Handling $60.2 $58.0 $2.2  4% $62.7 $65.5 $(2.8)  (4)%
Distribution $38.7 $36.3 $2.4  7% $44.0 $40.2 $3.8  9%
Engineered Products $24.4 $19.7 $4.7  24% $29.8 $21.3 $8.5  40%
Inter-segment elimination $(6.4) $(7.7) $1.3  17%
Intra-segment elimination $(5.8) $(4.4) $(1.4)  (32)%
                  
TOTAL $186.4 $182.7 $3.7  2% $175.9 $165.4 $10.5  6%
         
SalesNet sales in the firstsecond quarter of 2010 increased 2%were $175.9 million, an increase of $10.5 million or 6% compared to the prior year, as the Company experienced increased demand and higher unit volumes in most of its business segments and markets. Theprimarily due to higher sales volumes and an increase in sales of $3.3$3.2 million from the effect of foreign currency translation more than offset the negative impact of competitive pricing pressures in certain markets.translation.
Net sales in the Lawn and Garden segment in the firstsecond quarter of 2010 were down $6.9up $2.4 million or 9%6% compared to the firstsecond quarter of 2009. Lower selling pricesApproximately $1.9 million of approximately $4.8 million and volume declines of approximately $3.6 million more than offset the benefit ofincrease was due to foreign currency translation, fromprimarily the favorable impact of the exchange rates for the Canadian dollar. Excluding the impact of foreign currency translation, sales in this segment improved on volume increases of $1.2 million which were partially offset by the impact of lower selling prices.
In the Material Handling segment, net sales increased $2.2decreased $2.8 million or 4% in the firstsecond quarter of 2010 compared to the same quarter in 2009. HigherSales were down approximately $5.5 million from lower volumes, primarily in pallets, which more than offset the benefits from higher selling prices of approximately $5.9and a $1.0 million offset the impact of volume declines in automotive and other industrial markets.increase from foreign currency translation.
Net sales in the Distribution segment increased $2.4$3.8 million or 7%9% in the firstsecond quarter of 2010 compared to the firstsecond quarter of 2009. Sales were up primarily due toThe sales increase reflected contributions of $2.1 million from higher unit volumes of tire servicevolume and retread consumable supplies. Sales of equipment in the$1.3 million from selling prices. The Distribution segment continued to be weak ashas experienced gradual improvement in demand during 2010 and sales of supplies benefited from stronger replacement tire dealers, auto dealers, fleet and other customers remain cautious regarding capital purchases.sales.
In the Engineered Products segment, net sales in the firstsecond quarter of 2010 increased $4.7$8.5 million, or 24%40% compared to the prior year. The increase is virtually all volume related ashigher sales were primarily due to increased demand increased in the recreational vehicle, marine and transplant automotive markets compared to very weak market conditions in the first quarter of 2009.which increased sales volume approximately $7.4 million.
Cost of Sales & Gross Profit from Continuing Operations:Profit:
        
 Quarter Ended 
         June 30, 
Cost of Sales and Gross Profit 2010 2009  2010 2009 
Cost of sales $141.5 $127.2  $142.0 $124.1 
Gross profit $44.9 $55.5  $34.0 $41.3 
Gross profit as a percentage of sales  24.0%  30.4%  19.3%  25.0%
Gross profit margin decreaseddeclined to 24.0%19.3% in the quarter ended March 31,June 30, 2010 compared with 30.4%25% in the prior year. The decline in gross profit margin wasyear primarily due to significantly higher raw material costs as priceswhich were not recovered through pricing, particularly in the Lawn and Garden segment. Prices for plastic resins increased between 40%were, on average, approximately 79% higher for polypropylene and 95%41% higher for high density polyethylene in the firstsecond quarter of 2010 compared to the firstsecond quarter of 2009. In addition, margins were impactedthe liquidation of inventories valued at LIFO cost reduced cost of sales by lower selling prices due to competitive pressuresapproximately $1.2 million in some markets.the second quarter of 2009. The impact of higher raw material costs and pricing pressure more than offset the favorable impactcurrent year benefit of lower manufacturing costs from an increase in capacity utilization and decreasedreduced unabsorbed overhead as a result ofresulting from the Company’s restructuring programs.

 

12

Part I — Financial Information
Selling, General and Administrative (“SG&A’’&A”) Expenses from Continuing Operations:
            
 Quarter Ended   
             June 30,   
SG&A Expenses 2010 2009 Change  2010 2009 Change 
SG&A expenses $34.4 $41.6 $(7.2) $34.0 $40.5 $(6.5)
SG&A expenses as a percentage of sales  18.5%  22.8%  (4.3)  19.3%  24.5%  (5.2)
Selling, general and administrative expenses for the quarter ended March 31,June 30, 2010 were $34.4$34.0 million, a reduction of $7.2$6.5 million or 16% compared to the same period in the prior year. SG&A expense in the second quarter of 2010 includes restructuring and other unusual charges of $1.6 million compared with charges in the second quarter of 2009 of approximately $6.0 million for consulting, severance, the movement of machinery and equipment, and other restructuring activities. Excluding these unusual charges, other SG&A expenses were down approximately $2.1 million in the second quarter of 2010 compared with the prior year. The reduction in current year SG&A reflects the benefits of restructuring and other cost control initiatives which more than offset an increase in freight and other selling expenses of $1.1 million resulting from higher sales volume in the current year.
Impairment Charges from Continuing Operations:
Impairment charges were $0.9 million for the three months ended June 30, 2009. These charges were primarily related to certain property, plant, and equipment in the Company’s Lawn and Garden segment. The Company had no impairment charges for property, plant and equipment in 2010.
Interest Expense from Continuing Operations:
                 
  Quarter Ended        
  June 30,      % 
Net Interest Expense 2010  2009  Change  Change 
Net interest expense $1.9  $2.1  $(0.2)  (10)%
Outstanding borrowings $116.8  $160.8  $(44)  (27)%
Average borrowing rate  6.05%  5.08%  0.97   19%
Net interest expense was $1.9 million for three months ended June 30, 2010, a decrease of 10% compared to $2.1 million in the prior year. The reduction in 2010 interest expense was the result of a significant reduction in average borrowing levels which more than offset higher interest rates.
Income (Loss) Before Taxes from Continuing Operations:
                 
  Quarter Ended        
  June 30,      % 
Segment 2010  2009  Change  Change 
Lawn & Garden $(5.5) $1.2  $(6.7)  — 
Material Handling $3.5  $3.6  $(0.1)  (3)%
Distribution $3.6  $2.5  $1.1   44%
Engineered Products $3.1  $0.7  $2.4   342%
Corporate and interest $(6.6) $(10.2) $3.6   35%
             
TOTAL $(1.9) $(2.2) $0.3   14%
             
The loss before taxes for the quarter ended June 30, 2010, was primarily due to the impact of significantly higher raw material costs which could not be recovered through selling prices and the resulting decrease in gross profit. This reduction in gross profit was partially offset by the $6.5 million decrease in operating expenses, including restructuring and impairment charges, for the quarter ended June 30, 2010 compared to the prior year.

13

Part I — Financial Information
Income Taxes:
         
  Quarter Ended 
  June 30, 
Consolidated Income Taxes 2010  2009 
Income (loss) before taxes $(1.9) $(2.2)
Income tax (benefit) expense  (0.8) $(1.5)
Effective tax rate  40.9%  67.0%
The effective tax rate for the second quarter of 2010 was 40.9% compared to 67.0% in the prior year. The change in effective tax rate between years reflects differences in the mix of domestic and foreign composition of pretax income, foreign tax rate differences and the impact of credits and other specific adjustments on the effective rate. In the quarter ended June 30, 2010, the income tax benefit was increased by approximately $0.2 million to recognize a previously reserved foreign tax net operating loss carry-forward. The income tax benefit and related effective rate for the quarter ended June 30, 2009 reflects a benefit of approximately $0.1 million from the reduction of FIN 48 liabilities and a benefit of $0.4 million from an adjustment to record previously unrecognized deferred tax assets.
Comparison of the Six Months Ended June 30, 2010 to the Six Months Ended June 30, 2009
Net Sales from Continuing Operations:
                 
  Six Months Ended        
  June 30,      % 
Segment 2010  2009  Change  Change 
Lawn & Garden $114.7  $119.2  $(4.5)  (4)%
Material Handling $122.9  $123.6  $(0.7)  (1)%
Distribution $82.7  $76.5  $6.2   8%
Engineered Products $54.2  $41.0  $13.2   32%
Intra-segment elimination $(12.2) $(12.2)  0   — 
             
TOTAL $362.3  $348.1  $14.2   4%
             
Net sales for the six months ended June 30, 2010 increased $14.2 million from the prior year period and includes an increase of approximately $9.0 million from the impact of foreign currency translation. In addition, sales in 2010 were favorably affected by increasing strength in the general economy which improved demand in most of the Company’s markets and resulted in higher sales volumes, particularly in the Engineered Products segment. Sales also increased approximately $4.0 million from higher selling prices, primarily in the Material Handling and Distribution segments.
Net sales in the Lawn and Garden segment for the six months ended June 30, 2010 were down $4.5 million or 4% compared to the six months ended June 30, 2009. The impact of foreign currency translation increased sales by approximately $6.5 million in the first six months of 2010 compared to the prior year. Excluding the impact of foreign currency translation, sales were down $11.0 million from lower selling prices, which reduced sales by $5.1 million, and reduction in volumes in the current year.
In the Material Handling segment, sales were relatively flat for the six months ended June 30, 2010 compared to the same period in 2009. Sales increased approximately $6.6 million from higher selling prices and $1.9 million from foreign currency translation but were more than offset by the impact of lower volumes, primarily pallets.
Net sales in the Distribution segment increased $6.2 million or 8% for the six months ended June 30, 2010 compared to 2009. Increased demand for the Company’s tire service and retread consumable supplies resulted in higher sales volume of approximately $3.6 million and improved pricing which increased sales by $1.7 million. In addition, foreign currency translation increased 2010 sales by $0.6 million compared to the prior year.
In the Engineered Products segment, net sales for the six months ended June 30, 2009 increased $13.2 million, or 32% compared to the prior year. The increase was primarily due to higher volume in the recreational vehicle, marine and automotive markets in the first six months of 2010 which increased sales by approximately $11.3 million.

14

Part I — Financial Information
Cost of Sales & Gross Profit from Continuing Operations:
         
  Six Months Ended 
  June 30, 
Cost of Sales and Gross Profit 2010  2009 
Cost of sales $283.5  $251.3 
Gross profit $78.9  $96.8 
Gross profit as a percentage of sales  21.8%  27.8%
Gross profit margin decreased to 21.8% for the six months ended June 30, 2010 compared with 27.8% in the prior year primarily due to significantly higher raw material costs in the first six months of 2010 compared to the same period in 2009. Also, in the prior year the liquidation of inventories valued at LIFO cost reduced cost of sales by approximately $2.6 million for the six months ended June 30, 2009. The impact of higher raw material costs in 2010 more than offset the benefit of lower manufacturing costs due to improved capacity utilization and reduced unabsorbed overhead.
Selling, General and Administrative (SG&A) Expenses from Continuing Operations:
             
  Six Months Ended    
  June 30,    
SG&A Expenses 2010  2009  Change 
SG&A expenses $68.4  $82.1  $(13.7)
SG&A expenses as a percentage of sales  18.9%  23.6%  (4.7)
Selling, general and administrative expenses for the six months ended June 30, 2010 were $68.4 million, a reduction of $13.7 million or 17% compared with the prior year. SG&A expenses in the quartersix months ended March 31,June 30, 2010 include restructuring and other expenses of approximately $0.9$3.0 million offset by a gain from the sale of a closed manufacturing facility of $0.7 million. SG&A expensesexpense in the quartersix months ended March 31,June 30, 2009 includedinclude charges of approximately $5.0$11.0 million for consulting fees,severance, the movement of machinery and equipment and other restructuring costsactivities of ourthe Lawn and Garden segment.businesses as well as consulting costs related to manufacturing and productivity programs for the Material Handling businesses. Excluding the impact of restructuring and related charges, other SG&A expenses operating expenses forin the quartersix months ended March 31,June 30, 2010 were approximately 18.4%18.2% of sales compared with 20.0%20.4% in the prior year.year period. The improvementdecrease in operating expense leverage in 2010SG&A costs reflects the benefit ofbenefits from our restructuring activities and ongoing cost control initiatives.
Impairment Charges from Continuing Operations:
InFor the first quarter ofsix months ended June 30, 2009, the Company continued the implementationrecorded impairment charges of $2.2 million in connection with its restructuring plan in the Lawn and Garden segment and announced the closure of its Fostoria, Ohioa manufacturing facility in its Engineered Products segment. In connection with this closure, the Company recorded impairment charges of $1.3 million for certain property, plant, and equipment, primarily related to the estimated fair value of its facility in Fostoria, Ohio. The Company had no impairment charges on property, plant and equipment in the first quarter of 2010.
Interest Expense from Continuing Operations:
                
 Six Months Ended   
                 June 30, % 
Net Interest Expense 2010 2009 Change % Change  2010 2009 Change Change 
Interest expense $1.8 $2.4 $(0.6)  (25)% $3.7 $4.5 $(0.8)  (18)%
Outstanding borrowings $120.0 $182.0 $(62.0)  (34)% $116.8 $160.8 $(44.0)  (27)%
Average borrowing rate  6.12%  5.34%  (0.78)  15%  6.09%  5.21% 0.88  17%
Net interest expense was $3.7 million for the quartersix months ended March 31,June 30, 2010, was $1.8 million, a decrease of 25%18% compared to $2.4$4.5 million in the prior year. The decreasereduction in 2010 interest expense was the result of significantly lower average borrowing levels which more than offset higheran increase in interest rates, due to a higher concentration of fixed rate debt, compared to the prior year.rates.

15

Part I — Financial Information
Income Before Taxes from Continuing Operations:
                
 Six Months Ended   
                 June 30, % 
Segment 2010 2009 Change % Change  2010 2009 Change Change 
Lawn & Garden $4.8 $11.7 $(6.9)  (59)% $(0.7) $12.8 $(13.5)  —%
Material Handling $5.4 $6.7 $(1.3)  (19)% $8.9 $10.2 $(1.3)  (13)%
Distribution $2.9 $2.2 $0.7  32% $6.5 $4.7 $1.8  38%
Engineered Products $2.6 $(1.1) $3.7 —  $5.6 $(0.3) $5.9  —%
Corporate and interest $(7.0) $(9.3) $2.3  24% $(13.5) $(19.4) $5.9  30%
                  
TOTAL $8.7 $10.2 $(1.5)  (15)% $6.8 $8.0 $(1.2)  (15)%
                  
Income before taxes for the quartersix months ended March 31,June 30, 2010, was lower than the prior year primarily due to the impact of significantly higher raw material costs which could not be recovered through selling prices, particularly in the Lawn and competitive pricing pressures on gross profit margins.Garden segment. The negative impact of reduced gross profit more than offset the benefits of lower operating expenses, and interest charges. In addition,including restructuring expenses and related impairment charges, were only $0.8 millionand interest expense in the quartersix months ended March 31,June 30, 2010 compared to $6.2 million in the prior year.
Income Taxes from Continuing Operations:Taxes:
         
Consolidated Income Taxes 2010  2009 
Income before taxes $8.7  $10.2 
Income taxes $3.2  $4.0 
Effective tax rate  36.3%  38.8%

13

Part I — Financial Information
         
  Six Months Ended 
  June 30, 
Consolidated Income Taxes 2010  2009 
Income before taxes $6.8  $8.0 
Income tax expense $2.4  $2.5 
Effective tax rate  35.0%  31.1%
IncomeThe effective tax expense as a percentage of pretax income decreasedrate increased to 36.3%35.0% for the quartersix months ended March 31,June 30, 2010 compared to 38.8%31.1% in the prior year.year period. The decreaseincrease is primarilypartially attributable to changes in the anticipated favorable impactmix of domestic production deduction and other permanent differences onforeign composition of income and the Company’s expectedrelated foreign tax rate indifferences. In the six months ended June 30, 2010, comparedincome tax expense was reduced by approximately $0.2 million to recognize a previously reserved foreign tax net operating loss carry-forward. In the prior year.six months ended June 30, 2009 the Company recognized tax benefits of approximately $0.1 million from the reduction of FIN 48 liabilities and made an adjustment to record previously unrecognized deferred tax assets which increased the income tax benefit and deferred tax assets by approximately $0.4 million.
Liquidity and Capital Resources
Cash used by operating activities from continuing operations was $9.5$2.6 million for the quartersix months ended March 31,June 30, 2010 compared to $2.2cash provided by operating activities of $29.7 million for the six months ended June 30, 2009. The decrease of $32.3 million in cash provided by operations was primarily attributable to a use of $23.9 million for working capital in the six months ended June 30, 2010 compared with cash generated from working capital of $2.4 million in the first quarterprior year. In addition, there was a decline of 2009. The increase in cash used for operations includes an increase of $3.6 million in cash used for working capital and a reduction of $3.7$6.1 million in cash generated from income, excluding depreciation and other non-cash charges.
The increase in cash used for working capital was primarilyIn the resultsix months ended June 30, 2010, a reduction of an increase in inventories that used $3.3inventory generated $1.2 million inof cash in the first quarter of 2010six months compared to $13.7 million for the same period in 2009. The significant reductions in inventory in 2009 resulted from ongoing restructuring programs, particularly in the Lawn and Garden segment, and other working capital initiatives. In addition, accounts receivable used approximately $2.9 million of working capital in 2010 as sales were increasing compared with $5.6 million of cash generated of $12.0in 2009. In addition, the Company used $6.3 million in the prior year. The increase of $15.3 million in cash used for inventories offset reductions of $5.3 million in cash used for accounts receivable and $2.6 million in cash usedmore for accounts payable and other current liabilitiesaccrued expenses in 2010 compared to 2009, primarily due to increased cash payments for income taxes and employee compensation in the current year. Prepaid expenses generated cash of $2.5 million in the first quarter of 2010 compared to cash used of $1.2 million in 2009 as a result of income tax refunds received. The Company typically experiences a use of cash for working capital in the first quarter, in part due to seasonal demands related to its Lawn and Garden segment. In the quarter ended March 31, 2010, the use of cash for inventories was also impacted by the rising cost of raw materials, particularly plastic resins, used in its manufacturing operations.
Capital expenditures were approximately $5.2$9.3 million infor the quartersix months ended March 31,June 30, 2010 and are expected to be in the range of $20 to $25 million for the year. In addition, the Company used cash to pay dividends of $2.3$4.6 million in the first quarter ofsix months ended June 30, 2010.
Total debt at March 31,June 30, 2010 was approximately $120.0$116.8 million compared with $104.3 million at December 31, 2009 with the increase due to seasonal working capital demand.needs in the first quarter. The Company’s Credit Agreement provides available borrowing up to $250 million and, as of March 31,June 30, 2010, the Company had approximately $232$235 million available under this agreement. The Credit Agreement expires in October 2011 and, as of March 31,June 30, 2010 the Company was in compliance with all its debt covenants. The significantmost restrictive financial covenants includefor all of the Company’s debt are an interest coverage ratio and a leverage ratio, defined as earnings before interest, taxes, depreciation, and amortization, as adjusted, compared to total debt. The ratios as of and for the period ended March 31,June 30, 2010 are shown in the following table:

16

Part I — Financial Information
         
  Required Level  Actual Level 
Interest Coverage Ratio  2.5 to 1 (minimum)   3.93.20 
Leverage Ratio  3.5 to 1 (maximum)   1.92.07 
The Company believes that cash flows from operations and available borrowing under its Credit Agreement will be sufficient to meet expected business requirements including capital expenditures, dividends, working capital, and debt service into the foreseeable future.
Item 3.Quantitative and Qualitative Disclosure About Market Risk
The Company has certain financing arrangements that require interest payments based on floating interest rates. TheAs 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 currentvariable rate debt levels at March 31,June 30, 2010, if market interest rates increase one percent, the Company’s interest expense would increase approximately $0.2 million annually.
Some of the Company’s subsidiaries operate in foreign countries and their financial results are subject to exchange rate movements. The Company has operations in Canada with foreign currency exposure, primarily due to sales made from businesses in Canada to customers in the United States. These sales are denominated in US dollars. In addition, the Company’s subsidiary in Brazil has loans denominated in U.S. dollars. The Company hasmaintains a systematic program designed to limit its exposure to fluctuations in exchange rates related to certain assets and liabilities of its operations in Canada and Brazil that are denominated in U.S. dollars. The net foreign currency exposure generally ranges from $5 to $10 million. The foreign currency contracts and arrangements created under this program are not designated as hedged items, under FASB ASC 815, Derivatives and Hedging, and accordingly, the changes in the fair value of the foreign currency arrangements, which have been immaterial, are recorded in the income statement. The Company’s foreign currency arrangements are generally three months or less and, as of March 31,June 30, 2010, the Company had no foreign currency arrangements or contracts in place.

14

Part I — Financial Information
The Company uses certain commodities, primarily plastic resins, in its manufacturing processes. The cost of operations can be affected as the market for these commodities changes. The Company currently has no derivative contracts to hedge this risk,risk; however, the Company also has no significant purchase obligations to purchase fixed quantities of such commodities in future periods.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company carries out a variety of on-going procedures, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
There has been no change in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

17

Part II — Other Information
Item 1. Legal Proceedings
A number of parties, including the Company and its subsidiary, Buckhorn Inc. (“Buckhorn”), were identified in a planning document adopted in October 2008 by the California Regional Water Quality Control Board, San Francisco Bay Region (RWQCB). The planning document relates to the presence of mercury, including amounts contained in mining wastes, in and around the Guadalupe River Watershed (Watershed) region in Santa Clara County, California. Buckhorn has been alleged to be a successor in interest to an entity that performed mining operations in a portion of the Watershed area. The Company has not been contacted by the RWQCB with respect to Watershed clean-up efforts that may result from the adoption of this planning document. The extent of the mining wastes that may be the subject of future cleanup has yet to be determined, and the actions of the RWQCB have not yet advanced to the stage where a reasonable estimate of remediation cost, if any, is available. Although assertion of a claim by the RWQCB is reasonably possible, it is not possible at this time to estimate the amount of any obligation the Company may incur for these cleanup efforts within the Watershed region, or whether such cost would be material to the Company’s financial statements.
Item 6. Exhibits
(a) Exhibits

15

SIGNATURE
Pursuant to the requirements 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.
 		 
Date: May 7,August 6, 2010 By:  /s/ Donald A. Merril   
  Donald A. Merril  
  Vice President and Chief Financial Officer
(Duly (Duly Authorized Officer and Principal Financial and Accounting Officer)		 
 

 

1618

 
   
  EXHIBIT INDEX
 
2(a) Stock Purchase Agreement among Myers Industries, Inc., ITML Holdings Inc. and 2119188 Ontario Inc., dated December 27, 2006. Reference is made to Exhibit 2.1 toForm 8-K filed with the Commission on January 16, 2007.**
2(b) Stock Purchase Agreement among Myers Industries, Inc., ITML Holdings Inc. and 2117458 Ontario Inc., dated December 27, 2006. Reference is made to Exhibit 2.2 toForm 8-K filed with the Commission on January 16, 2007.**
2(c) Sale and Purchase Agreement between Myers Industries, Inc. and LINPAC Material Handling Limited, dated October 20, 2006. Reference is made to Exhibit 1 toForm 8-K filed with the Commission on February 6, 2007.**
2(d) Agreement and Plan of Merger among Myers Industries, Inc., MYEH Corporation and MYEH Acquisition Corporation, dated April 24, 2007. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on April 26, 2007.**
2(e) Letter Agreement among Myers Industries, Inc., Myers Holdings Corporation (f/k/a MYEH Corporation) and Myers Acquisition Corporation (f/k/a MYEH Acquisition Corporation), dated December 10, 2007. Reference is made to Exhibit 99.1 toForm 8-K filed with the Commission on December 10, 2007.
2(f) Letter Agreement among Myers Industries, Inc., Myers Holdings Corporation (f/k/a MYEH Corporation) and Myers Acquisition Corporation (f/k/a MYEH Acquisition Corporation), dated April 3, 2008. Reference is made to Exhibit 99.1 toForm 8-K filed with the Commission on April 4, 2008.
3(a) Myers Industries, Inc. Amended and Restated Articles of Incorporation. Reference is made to Exhibit 3(a) toForm 10-K filed with the Commission on March 16, 2005.
3(b) Myers Industries, Inc. Amended and Restated Code of Regulations. Reference is made to Exhibit 3.1 to Form 10-K filed with the Commission on March 12, 2010.
10(a) Myers Industries, Inc. Amended and Restated Employee Stock Purchase Plan. Reference is made to Exhibit 10(a) toForm 10-K filed with the Commission on March 30, 2001.
10(b) Form of Indemnification Agreement for Directors and Officers. Reference is made to Exhibit 10.1 toForm 10-Q filed with the Commission on May 1, 2009.*
10(c) Myers Industries, Inc. Amended and Restated Dividend Reinvestment and Stock Purchase Plan. Reference is made to Exhibit 10(d) toForm 10-K filed with the Commission on March 19, 2004.
10(d) Myers Industries, Inc. Amended and Restated 1999 Incentive Stock Plan. Reference is made to Exhibit 10(f) toForm 10-Q filed with the Commission on August 9, 2006.*
10(e) 2008 Incentive Stock Plan of Myers Industries, Inc. Reference is made to Exhibit 4.3 toForm S-8 filed with the Commission on March 17, 2009.*
10(f) Myers Industries, Inc. Executive Supplemental Retirement Plan. Reference is made to Exhibit (10)(g) toForm 10-K filed with the Commission on March 26, 2003.*
10(g) Amended and Restated Employment Agreement between Myers Industries, Inc. and John C. Orr effective June 1, 2008. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on June 24, 2008.*
10(h) First Amendment to Amended and Restated Employment Agreement between Myers Industries, Inc. and John C. Orr entered into as of April 21, 2009. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on April 22, 2009.*
10(i) Second Amendment to Amended and Restated Employment Agreement between Myers Industries, Inc. and John C. Orr entered into as of March 8, 2010. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on March 9, 2010.*
10(j) Non-Disclosure and Non-Competition Agreement between Myers Industries, Inc. and John C. Orr dated July 18, 2000. Reference is made to Exhibit 10(j) toForm 10-Q filed with the Commission on May 6, 2003.*
10(k) Amendment to the Myers Industries, Inc. Executive Supplemental Retirement Plan (John C. Orr) effective June 1, 2008. Reference is made to Exhibit 10.2 toForm 8-K filed with the Commission on June 24, 2008.*
10(l) Employment Agreement between Myers Industries, Inc. and David B. Knowles dated June 19, 2009. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on June 22, 2009.*
10(m) Non-Disclosure and Non-Competition Agreement between Myers Industries, Inc. and David B. Knowles dated June 19, 2009. Reference is made to Exhibit 10.2 toForm 8-K filed with the Commission on June 22, 2009.*
10(n) Amendment to Myers Industries, Inc. Executive Supplemental Retirement Plan (David B. Knowles) effective June 19, 2009. Reference is made to Exhibit 10.3 toForm 8-K filed with the Commission on June 22, 2009.*
10(o) Employment Agreement between Myers Industries, Inc. and Donald A. Merril dated January 24, 2006. Reference is made to Exhibit 10(k) toForm 10-K filed with the Commission on March 16, 2006.*
10(p) Amendment to the Myers Industries, Inc. Executive Supplemental Retirement Plan (Donald A. Merril) dated January 24, 2006. Reference is made to Exhibit 10(l) toForm 10-K filed with the Commission on March 16, 2006.*

   
  EXHIBIT INDEX
 
10(q) Non-Disclosure and Non-Competition Agreement between Myers Industries, Inc. and Donald A. Merril dated January 24, 2006. Reference is made to Exhibit 10(m) toForm 10-K filed with the Commission on March 16, 2006.*
10(r) Retirement and Separation Agreement between Myers Industries, Inc. and Stephen E. Myers effective May 1, 2005. Reference is made to Exhibit 10(k) toForm 10-Q filed with the Commission on August 10, 2005.*
10(s) Second Amended and Restated Loan Agreement between Myers Industries, Inc. and JP Morgan Chase Bank, Agent dated as of October 26, 2006. Reference is made to Exhibit 10.1 toForm 8-K filed with the Commission on October 31, 2006.
10(t) Note Purchase Agreement between Myers Industries, Inc. and the Note Purchasers, dated December 12, 2003, regarding the issuance of (i) $65,000,000 of 6.08%Series 2003-A Senior Notes due December 12, 2010, and (ii) $35,000,000 of 6.81%Series 2003-A Senior Notes due December 12, 2013. Reference is made to Exhibit 10(o) toForm 10-K filed with the Commission on March 15, 2004.
10(u) Myers Industries, Inc. Non-Employee Board of Directors Compensation Arrangement. Reference is made to Exhibit 10(w) toForm 10-K filed with the Commission on March 16, 2006.*
14(a) Myers Industries, Inc. Code of Business Conduct and Ethics. Reference is made to Exhibit 14(a) toForm 10-K filed with the Commission on March 16, 2005.
14(b) Myers Industries, Inc. Code of Ethical Conduct for the Finance Officers and Finance Department Personnel. Reference is made to Exhibit 14(b) toForm 10-K filed with the Commission on March 16, 2005.
21 List of Direct and Indirect Subsidiaries, and Operating Divisions, of Myers Industries, Inc.
31(a) Certification of John C. Orr, President and Chief Executive Officer of Myers Industries, Inc, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b) Certification of Donald A. Merril, Vice President, Chief Financial Officer and Corporate Secretary of Myers Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certifications of John C. Orr, President and Chief Executive Officer, and Donald A. Merril, Vice President, Chief Financial Officer and Corporate Secretary, of Myers Industries, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 *Indicates executive compensation plan or arrangement.
 
**Pursuant to Item 601(b)(2) ofRegulation S-K, certain exhibits and schedules have been omitted from this filing. The registrant agrees to furnish the Commission on a supplemental basis a copy of any omitted exhibit or schedule.