UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
☑ | ||
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period endedSeptember 30, 20172023
OR
☐ | ||
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period fromto
Commission File Number 1-8524001-08524
Myers Industries, Inc.
(Exact name of registrant as specified in its charter)
Ohio | 34-0778636 |
(State or other jurisdiction of | (IRS Employer Identification |
incorporation or organization) | Number) |
1293 South Main Street | |
Akron, Ohio | 44301 |
(Address of principal executive offices) | (Zip code) |
(330) (330) 253-5592
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Exchange on Which Registered | ||
Common Stock, without par value | MYE | New York Stock Exchange |
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 such filing requirements for the past 90 days. Yes☑ No ☐ .
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑ No ☐
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☑ |
Non-Accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ .
Indicate the
The number of shares outstanding of each of the issuer’s classes of common stock, without par value, as of the latest practicable date.October 27, 2023 was 36,838,466 shares.
TABLE OF CONTENTS
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PartPart I — Financial Information
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
|
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net sales |
| $ | 144,075 |
|
| $ | 132,676 |
|
| $ | 428,081 |
|
| $ | 427,998 |
|
| $ | 197,798 |
|
| $ | 228,065 |
|
| $ | 621,990 |
|
| $ | 686,707 |
|
Cost of sales |
|
| 103,336 |
|
|
| 96,758 |
|
|
| 306,056 |
|
|
| 299,373 |
|
|
| 135,419 |
|
|
| 156,417 |
|
|
| 420,136 |
|
|
| 468,415 |
|
Gross profit |
|
| 40,739 |
|
|
| 35,918 |
|
|
| 122,025 |
|
|
| 128,625 |
|
|
| 62,379 |
|
|
| 71,648 |
|
|
| 201,854 |
|
|
| 218,292 |
|
Selling, general and administrative expenses |
|
| 36,391 |
|
|
| 32,617 |
|
|
| 105,560 |
|
|
| 103,087 |
|
|
| 43,698 |
|
|
| 51,756 |
|
|
| 148,130 |
|
|
| 152,066 |
|
(Gain) loss on disposal of fixed assets |
|
| (2,763 | ) |
|
| 315 |
|
|
| (4,128 | ) |
|
| 383 |
|
|
| (22 | ) |
|
| (5 | ) |
|
| (78 | ) |
|
| (693 | ) |
Impairment charges |
|
| — |
|
|
| — |
|
|
| 544 |
|
|
| 9,874 |
| ||||||||||||||||
Operating income |
|
| 7,111 |
|
|
| 2,986 |
|
|
| 20,049 |
|
|
| 15,281 |
|
|
| 18,703 |
|
|
| 19,897 |
|
|
| 53,802 |
|
|
| 66,919 |
|
Interest expense, net |
|
| 1,785 |
|
|
| 2,015 |
|
|
| 5,545 |
|
|
| 6,087 |
|
|
| 1,539 |
|
|
| 1,719 |
|
|
| 4,975 |
|
|
| 4,077 |
|
Income from continuing operations before income taxes |
|
| 5,326 |
|
|
| 971 |
|
|
| 14,504 |
|
|
| 9,194 |
| ||||||||||||||||
Income before income taxes |
|
| 17,164 |
|
|
| 18,178 |
|
|
| 48,827 |
|
|
| 62,842 |
| ||||||||||||||||
Income tax expense |
|
| 2,050 |
|
|
| 547 |
|
|
| 6,088 |
|
|
| 6,422 |
|
|
| 4,417 |
|
|
| 4,507 |
|
|
| 12,499 |
|
|
| 16,003 |
|
Income from continuing operations |
|
| 3,276 |
|
|
| 424 |
|
|
| 8,416 |
|
|
| 2,772 |
| ||||||||||||||||
Income (loss) from discontinued operations, net of income tax |
|
| (19 | ) |
|
| (10 | ) |
|
| (52 | ) |
|
| (257 | ) | ||||||||||||||||
Net income |
| $ | 3,257 |
|
| $ | 414 |
|
| $ | 8,364 |
|
| $ | 2,515 |
|
| $ | 12,747 |
|
| $ | 13,671 |
|
| $ | 36,328 |
|
| $ | 46,839 |
|
Income per common share from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income per common share: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Basic |
| $ | 0.11 |
|
| $ | 0.01 |
|
| $ | 0.28 |
|
| $ | 0.09 |
|
| $ | 0.35 |
|
| $ | 0.37 |
|
| $ | 0.99 |
|
| $ | 1.29 |
|
Diluted |
| $ | 0.11 |
|
| $ | 0.01 |
|
| $ | 0.28 |
|
| $ | 0.09 |
|
| $ | 0.34 |
|
| $ | 0.37 |
|
| $ | 0.98 |
|
| $ | 1.28 |
|
Income (loss) per common share from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.01 | ) | ||||||||||||||||
Diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.01 | ) | ||||||||||||||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic |
| $ | 0.11 |
|
| $ | 0.01 |
|
| $ | 0.28 |
|
| $ | 0.08 |
| ||||||||||||||||
Diluted |
| $ | 0.11 |
|
| $ | 0.01 |
|
| $ | 0.28 |
|
| $ | 0.08 |
| ||||||||||||||||
Dividends declared per share |
| $ | 0.14 |
|
| $ | 0.14 |
|
| $ | 0.41 |
|
| $ | 0.41 |
|
See notes to unaudited condensed consolidated financial statements.
1
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in thousands)
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income |
| $ | 3,257 |
|
| $ | 414 |
|
| $ | 8,364 |
|
| $ | 2,515 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| 2,380 |
|
|
| (823 | ) |
|
| 3,491 |
|
|
| 6,009 |
|
Total other comprehensive income (loss) |
|
| 2,380 |
|
|
| (823 | ) |
|
| 3,491 |
|
|
| 6,009 |
|
Comprehensive income (loss) |
| $ | 5,637 |
|
| $ | (409 | ) |
| $ | 11,855 |
|
| $ | 8,524 |
|
|
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 12,747 |
|
| $ | 13,671 |
|
| $ | 36,328 |
|
| $ | 46,839 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation adjustment |
|
| (948 | ) |
|
| (2,376 | ) |
|
| (141 | ) |
|
| (2,985 | ) |
Total other comprehensive income |
|
| (948 | ) |
|
| (2,376 | ) |
|
| (141 | ) |
|
| (2,985 | ) |
Comprehensive income |
| $ | 11,799 |
|
| $ | 11,295 |
|
| $ | 36,187 |
|
| $ | 43,854 |
|
See notes to unaudited condensed consolidated financial statements.
2
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Position (Unaudited)
(Dollars in thousands)
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash |
| $ | 4,511 |
|
| $ | 7,888 |
|
Restricted cash |
|
| 8,650 |
|
|
| 8,635 |
|
Accounts receivable, less allowances of $1,375 and $1,563, respectively |
|
| 88,278 |
|
|
| 73,818 |
|
Inventories |
|
|
|
|
|
|
|
|
Finished and in-process products |
|
| 31,254 |
|
|
| 31,826 |
|
Raw materials and supplies |
|
| 17,718 |
|
|
| 14,197 |
|
|
|
| 48,972 |
|
|
| 46,023 |
|
Prepaid expenses and other current assets |
|
| 2,881 |
|
|
| 4,787 |
|
Total Current Assets |
|
| 153,292 |
|
|
| 141,151 |
|
Other Assets |
|
|
|
|
|
|
|
|
Goodwill |
|
| 60,048 |
|
|
| 59,219 |
|
Intangible assets, net |
|
| 42,377 |
|
|
| 47,994 |
|
Deferred income taxes |
|
| 253 |
|
|
| 216 |
|
Notes receivable |
|
| 18,632 |
|
|
| 18,275 |
|
Other |
|
| 6,871 |
|
|
| 3,347 |
|
|
|
| 128,181 |
|
|
| 129,051 |
|
Property, Plant and Equipment, at Cost |
|
|
|
|
|
|
|
|
Land |
|
| 7,973 |
|
|
| 8,916 |
|
Buildings and leasehold improvements |
|
| 59,925 |
|
|
| 65,566 |
|
Machinery and equipment |
|
| 285,189 |
|
|
| 319,606 |
|
|
|
| 353,087 |
|
|
| 394,088 |
|
Less allowances for depreciation and amortization |
|
| (261,153 | ) |
|
| (282,606 | ) |
Property, plant and equipment, net |
|
| 91,934 |
|
|
| 111,482 |
|
Total Assets |
| $ | 373,407 |
|
| $ | 381,684 |
|
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 24,768 |
|
| $ | 23,139 |
|
Accounts receivable, less allowances of $3,896 and $3,259, respectively |
|
| 117,362 |
|
|
| 133,716 |
|
Inventories, net |
|
| 96,230 |
|
|
| 93,351 |
|
Prepaid expenses and other current assets |
|
| 9,051 |
|
|
| 7,001 |
|
Total Current Assets |
|
| 247,411 |
|
|
| 257,207 |
|
Property, plant, and equipment, net |
|
| 106,936 |
|
|
| 101,566 |
|
Right of use asset - operating leases |
|
| 27,384 |
|
|
| 28,908 |
|
Goodwill |
|
| 95,129 |
|
|
| 95,157 |
|
Intangible assets, net |
|
| 46,785 |
|
|
| 51,752 |
|
Deferred income taxes |
|
| 129 |
|
|
| 129 |
|
Other |
|
| 7,347 |
|
|
| 7,915 |
|
Total Assets |
| $ | 531,121 |
|
| $ | 542,634 |
|
|
|
|
|
|
|
| ||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 80,760 |
|
| $ | 73,536 |
|
Accrued employee compensation |
|
| 18,008 |
|
|
| 24,664 |
|
Income taxes payable |
|
| 324 |
|
|
| 2,054 |
|
Accrued taxes payable, other than income taxes |
|
| 3,016 |
|
|
| 3,169 |
|
Accrued interest |
|
| 454 |
|
|
| 1,264 |
|
Other current liabilities |
|
| 29,138 |
|
|
| 26,380 |
|
Operating lease liability - short-term |
|
| 5,604 |
|
|
| 6,177 |
|
Finance lease liability - short-term |
|
| 581 |
|
|
| 518 |
|
Long-term debt - current portion |
|
| 25,994 |
|
|
| — |
|
Total Current Liabilities |
|
| 163,879 |
|
|
| 137,762 |
|
Long-term debt |
|
| 33,987 |
|
|
| 93,962 |
|
Operating lease liability - long-term |
|
| 22,023 |
|
|
| 22,786 |
|
Finance lease liability - long-term |
|
| 8,766 |
|
|
| 8,919 |
|
Other liabilities |
|
| 10,284 |
|
|
| 15,270 |
|
Deferred income taxes |
|
| 9,961 |
|
|
| 7,508 |
|
Total Liabilities |
|
| 248,900 |
|
|
| 286,207 |
|
|
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
|
| ||
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding) |
|
| — |
|
|
| — |
|
Common Shares, without par value (authorized 60,000,000 shares; |
|
| 22,590 |
|
|
| 22,332 |
|
Additional paid-in capital |
|
| 320,578 |
|
|
| 315,865 |
|
Accumulated other comprehensive loss |
|
| (17,934 | ) |
|
| (17,793 | ) |
Retained deficit |
|
| (43,013 | ) |
|
| (63,977 | ) |
Total Shareholders’ Equity |
|
| 282,221 |
|
|
| 256,427 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 531,121 |
|
| $ | 542,634 |
|
See notes to unaudited condensed consolidated financial statements.
3
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
(Dollars in thousands)thousands, except per share data)
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 61,990 |
|
| $ | 48,988 |
|
Accrued expenses |
|
|
|
|
|
|
|
|
Employee compensation |
|
| 17,921 |
|
|
| 11,861 |
|
Taxes, other than income taxes |
|
| 2,185 |
|
|
| 2,178 |
|
Accrued interest |
|
| 1,731 |
|
|
| 3,202 |
|
Other current liabilities |
|
| 14,493 |
|
|
| 13,083 |
|
Total Current Liabilities |
|
| 98,320 |
|
|
| 79,312 |
|
Long-term debt |
|
| 158,010 |
|
|
| 189,522 |
|
Other liabilities |
|
| 7,616 |
|
|
| 9,235 |
|
Deferred income taxes |
|
| 11,729 |
|
|
| 10,582 |
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
Serial Preferred Shares (authorized 1,000,000 shares; none issued and outstanding) |
|
| — |
|
|
| — |
|
Common Shares, without par value (authorized 60,000,000 shares; outstanding 30,301,721 and 30,019,561; net of treasury shares of 7,650,736 and 7,932,896, respectively) |
|
| 18,418 |
|
|
| 18,234 |
|
Additional paid-in capital |
|
| 207,118 |
|
|
| 202,033 |
|
Accumulated other comprehensive loss |
|
| (30,683 | ) |
|
| (34,174 | ) |
Retained deficit |
|
| (97,121 | ) |
|
| (93,060 | ) |
Total Shareholders’ Equity |
|
| 97,732 |
|
|
| 93,033 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 373,407 |
|
| $ | 381,684 |
|
|
| Quarter Ended September 30, 2023 |
| |||||||||||||||||
|
| Common Shares |
|
| Additional |
|
| Accumulated |
|
| Retained |
|
| Total |
| |||||
Balance at July 1, 2023 |
| $ | 22,572 |
|
| $ | 319,553 |
|
| $ | (16,986 | ) |
| $ | (50,717 | ) |
| $ | 274,422 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,747 |
|
|
| 12,747 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| (948 | ) |
|
| — |
|
|
| (948 | ) |
Shares issued under incentive plans, |
|
| 18 |
|
|
| 339 |
|
|
| — |
|
|
| — |
|
|
| 357 |
|
Stock compensation expense |
|
| — |
|
|
| 686 |
|
|
| — |
|
|
| — |
|
|
| 686 |
|
Declared dividends - $0.135 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,043 | ) |
|
| (5,043 | ) |
Balance at September 30, 2023 |
| $ | 22,590 |
|
| $ | 320,578 |
|
| $ | (17,934 | ) |
| $ | (43,013 | ) |
| $ | 282,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Quarter Ended September 30, 2022 |
| |||||||||||||||||
|
| Common Shares |
|
| Additional |
|
| Accumulated |
|
| Retained |
|
| Total |
| |||||
Balance at July 1, 2022 |
| $ | 22,304 |
|
| $ | 311,939 |
|
| $ | (16,010 | ) |
| $ | (80,975 | ) |
| $ | 237,258 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,671 |
|
|
| 13,671 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| (2,376 | ) |
|
| — |
|
|
| (2,376 | ) |
Shares issued under incentive plans, |
|
| 17 |
|
|
| 101 |
|
|
| — |
|
|
| — |
|
|
| 118 |
|
Stock compensation expense |
|
| — |
|
|
| 1,308 |
|
|
| — |
|
|
| — |
|
|
| 1,308 |
|
Declared dividends - $0.135 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,002 | ) |
|
| (5,002 | ) |
Balance at September 30, 2022 |
| $ | 22,321 |
|
| $ | 313,348 |
|
| $ | (18,386 | ) |
| $ | (72,306 | ) |
| $ | 244,977 |
|
See notes to unaudited condensed consolidated financial statements.
4
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated StatementStatements of Shareholders’ Equity (Unaudited)
(Dollars in thousands, except per share data)
|
| Common Shares |
|
| Additional Paid-In Capital |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Retained Deficit |
|
| Total Shareholders' Equity |
| |||||
Balance at January 1, 2017 |
| $ | 18,234 |
|
| $ | 202,033 |
|
| $ | (34,174 | ) |
| $ | (93,060 | ) |
| $ | 93,033 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,364 |
|
|
| 8,364 |
|
Foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| 3,491 |
|
|
| — |
|
|
| 3,491 |
|
Shares issued under incentive plans, net of shares withheld for tax |
|
| 184 |
|
|
| 2,067 |
|
|
| — |
|
|
| — |
|
|
| 2,251 |
|
Stock compensation expense |
|
| — |
|
|
| 3,018 |
|
|
| — |
|
|
| — |
|
|
| 3,018 |
|
Declared dividends - $0.41 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,425 | ) |
|
| (12,425 | ) |
Balance at September 30, 2017 |
| $ | 18,418 |
|
| $ | 207,118 |
|
| $ | (30,683 | ) |
| $ | (97,121 | ) |
| $ | 97,732 |
|
|
| Nine Months Ended September 30, 2023 |
| |||||||||||||||||
|
| Common Shares |
|
| Additional |
|
| Accumulated |
|
| Retained |
|
| Total |
| |||||
Balance at January 1, 2023 |
| $ | 22,332 |
|
| $ | 315,865 |
|
| $ | (17,793 | ) |
| $ | (63,977 | ) |
| $ | 256,427 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,328 |
|
|
| 36,328 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| (141 | ) |
|
| — |
|
|
| (141 | ) |
Shares issued under incentive plans, |
|
| 258 |
|
|
| (365 | ) |
|
| — |
|
|
| — |
|
|
| (107 | ) |
Stock compensation expense |
|
| — |
|
|
| 5,078 |
|
|
| — |
|
|
| — |
|
|
| 5,078 |
|
Declared dividends - $0.405 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,364 | ) |
|
| (15,364 | ) |
Balance at September 30, 2023 |
| $ | 22,590 |
|
| $ | 320,578 |
|
| $ | (17,934 | ) |
| $ | (43,013 | ) |
| $ | 282,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||
|
| Common Shares |
|
| Additional |
|
| Accumulated |
|
| Retained |
|
| Total |
| |||||
Balance at January 1, 2022 |
| $ | 22,172 |
|
| $ | 306,720 |
|
| $ | (15,401 | ) |
| $ | (104,166 | ) |
| $ | 209,325 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46,839 |
|
|
| 46,839 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| (2,985 | ) |
|
| — |
|
|
| (2,985 | ) |
Shares issued under incentive plans, |
|
| 149 |
|
|
| 1,460 |
|
|
| — |
|
|
| — |
|
|
| 1,609 |
|
Stock compensation expense |
|
| — |
|
|
| 5,168 |
|
|
| — |
|
|
| — |
|
|
| 5,168 |
|
Declared dividends - $0.405 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,979 | ) |
|
| (14,979 | ) |
Balance at September 30, 2022 |
| $ | 22,321 |
|
| $ | 313,348 |
|
| $ | (18,386 | ) |
| $ | (72,306 | ) |
| $ | 244,977 |
|
See notes to unaudited condensed consolidated financial statements.
5
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
| For the Nine Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
| ||||
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income |
| $ | 8,364 |
|
| $ | 2,515 |
|
| $ | 36,328 |
|
| $ | 46,839 |
|
Income (loss) from discontinued operations, net of income taxes |
|
| (52 | ) |
|
| (257 | ) | ||||||||
Income from continuing operations |
|
| 8,416 |
|
|
| 2,772 |
| ||||||||
Adjustments to reconcile income from continuing operations to net cash provided by (used for) operating activities |
|
|
|
|
|
|
|
| ||||||||
Depreciation |
|
| 16,758 |
|
|
| 18,465 |
| ||||||||
Amortization |
|
| 6,764 |
|
|
| 7,428 |
| ||||||||
Accelerated depreciation associated with restructuring activities |
|
| 2,018 |
|
|
| — |
| ||||||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities |
|
|
|
|
|
| ||||||||||
Depreciation and amortization |
|
| 16,904 |
|
|
| 15,600 |
| ||||||||
Amortization of deferred financing costs |
|
| 234 |
|
|
| 363 |
| ||||||||
Non-cash stock-based compensation expense |
|
| 2,873 |
|
|
| 2,804 |
|
|
| 5,078 |
|
|
| 5,168 |
|
(Gain) loss on disposal of fixed assets |
|
| (4,128 | ) |
|
| 383 |
|
|
| (78 | ) |
|
| (693 | ) |
Deferred taxes |
|
| 101 |
|
|
| (1,985 | ) | ||||||||
Accrued interest income on note receivable |
|
| (983 | ) |
|
| (948 | ) | ||||||||
Impairment charges |
|
| 544 |
|
|
| 9,874 |
| ||||||||
Other |
|
| 29 |
|
|
| (338 | ) |
|
| 2,473 |
|
|
| 292 |
|
Payments on performance based compensation |
|
| (1,010 | ) |
|
| (1,794 | ) | ||||||||
Other long-term liabilities |
|
| (140 | ) |
|
| (431 | ) | ||||||||
Cash flows provided by (used for) working capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| (12,754 | ) |
|
| 1,057 |
|
|
| 13,764 |
|
|
| (18,751 | ) |
Inventories |
|
| (2,490 | ) |
|
| 7,349 |
|
|
| (2,905 | ) |
|
| (7,016 | ) |
Prepaid expenses and other current assets |
|
| 1,696 |
|
|
| 484 |
|
|
| (2,053 | ) |
|
| (4,912 | ) |
Accounts payable and accrued expenses |
|
| 18,416 |
|
|
| (26,520 | ) |
|
| 1,027 |
|
|
| 13,869 |
|
Net cash provided by (used for) operating activities - continuing operations |
|
| 36,110 |
|
|
| 18,600 |
| ||||||||
Net cash provided by (used for) operating activities - discontinued operations |
|
| — |
|
|
| — |
| ||||||||
Net cash provided by (used for) operating activities |
|
| 36,110 |
|
|
| 18,600 |
|
|
| 70,772 |
|
|
| 50,759 |
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Capital expenditures |
|
| (5,128 | ) |
|
| (11,490 | ) |
|
| (19,292 | ) |
|
| (17,615 | ) |
Acquisition of business, net of cash acquired |
|
| (160 | ) |
|
| (24,253 | ) | ||||||||
Proceeds from sale of property, plant and equipment |
|
| 8,075 |
|
|
| 194 |
|
|
| 142 |
|
|
| 1,525 |
|
Proceeds (payments) related to sale of business |
|
| — |
|
|
| (4,034 | ) | ||||||||
Net cash provided by (used for) investing activities - continuing operations |
|
| 2,947 |
|
|
| (15,330 | ) | ||||||||
Net cash provided by (used for) investing activities - discontinued operations |
|
| — |
|
|
| — |
| ||||||||
Net cash provided by (used for) investing activities |
|
| 2,947 |
|
|
| (15,330 | ) |
|
| (19,310 | ) |
|
| (40,343 | ) |
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net borrowings (repayments) on credit facility |
|
| (31,397 | ) |
|
| 4,440 |
| ||||||||
Net borrowings (repayments) from revolving credit facility |
|
| (34,000 | ) |
|
| 7,000 |
| ||||||||
Payments on finance lease |
|
| (403 | ) |
|
| (374 | ) | ||||||||
Cash dividends paid |
|
| (12,230 | ) |
|
| (12,143 | ) |
|
| (15,266 | ) |
|
| (14,872 | ) |
Proceeds from issuance of common stock |
|
| 2,524 |
|
|
| 2,582 |
|
|
| 1,948 |
|
|
| 2,059 |
|
Excess tax benefit from stock-based compensation |
|
| — |
|
|
| 139 |
| ||||||||
Shares withheld for employee taxes on equity awards |
|
| (273 | ) |
|
| (925 | ) |
|
| (2,055 | ) |
|
| (450 | ) |
Deferred financing costs |
|
| (1,030 | ) |
|
| — |
| ||||||||
Net cash provided by (used for) financing activities - continuing operations |
|
| (42,406 | ) |
|
| (5,907 | ) | ||||||||
Net cash provided by (used for) financing activities - discontinued operations |
|
| — |
|
|
| — |
| ||||||||
Deferred financing fees |
|
| — |
|
|
| (718 | ) | ||||||||
Net cash provided by (used for) financing activities |
|
| (42,406 | ) |
|
| (5,907 | ) |
|
| (49,776 | ) |
|
| (7,355 | ) |
Foreign exchange rate effect on cash |
|
| (28 | ) |
|
| 831 |
|
|
| (57 | ) |
|
| (292 | ) |
Net increase (decrease) in cash |
|
| (3,377 | ) |
|
| (1,806 | ) |
|
| 1,629 |
|
|
| 2,769 |
|
Cash at January 1 |
|
| 7,888 |
|
|
| 7,344 |
|
|
| 23,139 |
|
|
| 17,655 |
|
Cash at September 30 |
| $ | 4,511 |
|
| $ | 5,538 |
|
| $ | 24,768 |
|
| $ | 20,424 |
|
See notes to unaudited condensed consolidated financial statements.
6
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollar amountsDollars in thousands, except where otherwise indicated)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (collectively, the “Company”), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.accounting principles generally accepted accounting principlesin the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.2022.
Certain reclassifications have been made to prior year’s reported amounts in order to conform to the current year presentation.
In the opinion of the Company, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2017,2023, and the results of operations and cash flows for the periods presented. The results of operations for the threequarter and nine months ended September 30, 20172023 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2017.2023.
Accounting Standards Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company adopted this ASU effective January 1, 2017 and elected to recognize forfeitures as they occur. The cash flow classification requirements of ASU 2016-09 were applied prospectively. The adoption of this ASU did not have a material impact on the Company’s results of operations, cash flows or financial position.
Accounting Standards Not Yet Adopted
In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires that an employer report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The ASU also allows only the service cost component to be eligible for capitalization when applicable. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The Company does not anticipate that adoption of this standard will have a material impact on its consolidated financial statements as the pension plan is frozen.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The guidance allows for early adoption for impairment testing dates after January 1, 2017. While the Company has elected not to early adopt this guidance for fiscal year 2017 and will continue to evaluate the timing of adoption, it does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.
7
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amounts in thousands, except where otherwise indicated)
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash. This ASU requires that companies include amounts generally described as restricted cash and restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. The ASU should be applied using a retrospective transition method to each period presented and is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. To the extent there are changes in the Company’s restricted cash balances, adoption of this standard will impact the statement of cash flows.
In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). This ASU requires immediate recognition of the income tax consequences of intercompany asset transfers other than inventory. The ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The Company does not anticipate that adoption of this standard will have a material impact on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company does not anticipate that adoption of this standard will have a significant impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which introduces new guidance for the accounting for credit losses on instruments. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2019 including interim periods within that reporting period, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The new standard is effective for the Company beginning January 1, 2019 and requires a modified retrospective approach. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. Additional disclosures will also be required to help users of financial statements understand the nature, amount, and timing of revenue and cash flows arising from contracts. The new guidance is effective January 1, 2018, with early adoption permitted for January 1, 2017. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Statements of Shareholders’ Equity. The Company plans to adopt the new guidance effective January 1, 2018 under the modified retrospective approach and has developed an implementation plan. As part of this plan, the Company has identified its revenue streams and substantially completed its contract review for each of these revenue streams to assess the impact of the new guidance on its consolidated financial statements. This assessment included the potential impact of whether revenue from certain product lines would be required to be recognized over time rather than at a point in time. Based on the reviews completed to date, the Company does not currently anticipate any material changes to the timing of revenue recognition from point in time, and will continue to evaluate this contract review through the date of adoption. The Company is currently designing and implementing changes to processes and controls, where necessary, to address the requirements of the new standard upon adoption. In addition, the Company is assessing what incremental disaggregated revenue disclosures will be required in the consolidated financial statements.
8
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amounts in thousands, except where otherwise indicated)
Translation of Foreign Currencies
All asset and liability accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated monthly at an average currency exchange rate for the period. The resulting translation adjustment is recorded in other comprehensive income (loss) as a separate component of shareholders' equity.
Fair Value Measurement
The Company follows guidance included in the Accounting Standards Codification (“ASC”)ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. The guidance established a common definition for fair value to be applied under U.S. GAAP requiring the use of fair value, established a framework for measuring fair value, and expanded disclosure requirements about such fair value measurements. The guidance did not require any new fair value measurements, but rather applied to all other accounting pronouncements that require or permit fair value measurements. Under ASC 820, the hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
|
|
|
|
|
|
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable either directly or indirectly.
Level 3: Unobservable inputs for which there is little or no market data or which reflect the entity’s own assumptions.
The Company has financial instruments, including cash, accounts receivable, accounts payable and accrued expenses. The fair value of these financial instruments approximateapproximates carrying value due to the nature and relative short maturity of these assets and liabilities.
The fair value of debt under the Company’s Loan Agreement, as defined in Note 11, approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of theany revolving borrowings under this agreement. The fair value of the Company’s fixed rate senior unsecured notes was estimated using market observable inputs for the Company’s comparable peers with public debt, including quoted prices in active markets and interest rate measurements which are considered Level 2 inputs. At September 30, 20172023 and December 31, 2016,2022, the aggregate fair value of the Company's $100.0 millionoutstanding fixed rate senior unsecured notes was estimated at $101.0to be $37.5 million and $98.0$37.4 million, respectively.
Factoring
The Company's wholly-owned subsidiaries Plasticos Novel Do Nordeste S.A. and Plasticos Novel Do Parana S.A. (collectively, "Novel") entered into a factoring agreement to sell, without recourse, certainpurchase price allocations associated with the May 31, 2022 acquisition of their Brazilian Real-based trade accounts receivables to unrelated third party financial institutionsMohawk Rubber Sales of New England Inc. ("Mohawk"), as part of its working capital management.described in Note 3, required fair value measurements using unobservable inputs which are considered Level 3 inputs. The sale of these receivables accelerated the collection of cash and reduced credit exposure. Under the terms of the factoring agreements, the Company retains no rights or interest and has no obligations with respect to the sold receivables. As such, the factoring of trade receivables under these agreements are accounted for as a sale. The Company accounts for its trade receivable factoring program as required under ASC 860, Transfers and Servicing. During the nine months ended September 30, 2017, approximately $1.3 million of trade accounts receivables had been sold under the terms of the factoring agreement for cash proceeds of $1.2 million. During the nine months ended September 30, 2016, approximately $0.9 million of trade accounts receivables had been sold under the terms of the factoring agreement for cash proceeds of $0.8 million. The receivables sold pursuant to the factoring agreements have been recorded as a reduction of trade accounts receivable and as cash provided by operating activities in the accompanying Condensed Consolidated Statements of Cash Flows (Unaudited). The Company pays an administrative fee based on the dollarfair value of the receivables sold. Administrative fees related to the program for both the nine months ended September 30, 2017 and 2016 were approximately $0.1 million. These fees are included in Selling, General and Administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited).acquired intangible assets was determined using an income approach.
Revenue Recognition
The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title and risk of loss, which is generally at time of shipment, and collectability of the fixed or determinable sales price is reasonably assured.
9
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amounts in thousands, except where otherwise indicated)
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) are as follows:
|
| Foreign |
|
| Defined Benefit |
|
| Total |
| |||
Balance at July 1, 2023 |
| $ | (15,603 | ) |
| $ | (1,383 | ) |
| $ | (16,986 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (948 | ) |
|
| — |
|
|
| (948 | ) |
Net current-period other comprehensive income (loss) |
|
| (948 | ) |
|
| — |
|
|
| (948 | ) |
Balance at September 30, 2023 |
| $ | (16,551 | ) |
| $ | (1,383 | ) |
| $ | (17,934 | ) |
|
| Foreign Currency |
|
| Defined Benefit Pension Plans |
|
| Total |
| |||
Balance at January 1, 2017 |
| $ | (32,342 | ) |
| $ | (1,832 | ) |
| $ | (34,174 | ) |
Other comprehensive income before reclassifications |
|
| 3,491 |
|
|
| — |
|
|
| 3,491 |
|
Net current-period other comprehensive income |
|
| 3,491 |
|
|
| — |
|
|
| 3,491 |
|
Balance at September 30, 2017 |
| $ | (28,851 | ) |
| $ | (1,832 | ) |
| $ | (30,683 | ) |
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Cash and Cash EquivalentsNotes to Unaudited Condensed Consolidated Financial Statements – (Continued)
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company maintains operating cash and reserves(Dollars in thousands, except where otherwise indicated)
|
| Foreign |
|
| Defined Benefit |
|
| Total |
| |||
Balance at July 1, 2022 |
| $ | (14,544 | ) |
| $ | (1,466 | ) |
| $ | (16,010 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (2,376 | ) |
|
| — |
|
|
| (2,376 | ) |
Net current-period other comprehensive income (loss) |
|
| (2,376 | ) |
|
| — |
|
|
| (2,376 | ) |
Balance at September 30, 2022 |
| $ | (16,920 | ) |
| $ | (1,466 | ) |
| $ | (18,386 | ) |
|
| Foreign |
|
| Defined Benefit |
|
| Total |
| |||
Balance at January 1, 2023 |
| $ | (16,410 | ) |
| $ | (1,383 | ) |
| $ | (17,793 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (141 | ) |
|
| — |
|
|
| (141 | ) |
Net current-period other comprehensive income (loss) |
|
| (141 | ) |
|
| — |
|
|
| (141 | ) |
Balance at September 30, 2023 |
| $ | (16,551 | ) |
| $ | (1,383 | ) |
| $ | (17,934 | ) |
|
| Foreign |
|
| Defined Benefit |
|
| Total |
| |||
Balance at January 1, 2022 |
| $ | (13,935 | ) |
| $ | (1,466 | ) |
| $ | (15,401 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (2,985 | ) |
|
| — |
|
|
| (2,985 | ) |
Net current-period other comprehensive income (loss) |
|
| (2,985 | ) |
|
| — |
|
|
| (2,985 | ) |
Balance at September 30, 2022 |
| $ | (16,920 | ) |
| $ | (1,466 | ) |
| $ | (18,386 | ) |
Allowance for replacement balances in financial institutions which, from time to time, may exceed federally insured limits.Credit Losses
Management has established certain requirements that customers must meet before credit is extended. The Company periodically assesses the financial condition of these institutionscustomers is continually monitored and believes thatcollateral is usually not required. The Company evaluates the riskcollectability of accounts receivable based on a combination of factors. The Company reviews historical trends for credit loss as well as current economic conditions in determining an estimate for its allowance for credit losses. Additionally, in circumstances where the Company is minimal.aware of a specific customer’s inability to meet its financial obligations, a specific allowance for credit losses is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably expects will be collected.
The changes in the allowance for credit losses for the nine months ended September 30, 2023 and 2022 were as follows:
|
| 2023 |
|
| 2022 |
| ||
Balance at January 1 |
| $ | 2,273 |
|
| $ | 2,173 |
|
Provision for expected credit loss, net of recoveries |
|
| 1,224 |
|
|
| 218 |
|
Write-offs and other |
|
| (739 | ) |
|
| (469 | ) |
Balance at September 30 |
| $ | 2,758 |
|
| $ | 1,922 |
|
2. Impairment ChargesRevenue Recognition
The Company’s revenue by major market is as follows:
During
|
| For the Quarter Ended September 30, 2023 |
| |||||||||||||
|
| Material |
|
| Distribution |
|
| Inter-company |
|
| Consolidated |
| ||||
Consumer |
| $ | 21,740 |
|
| $ | — |
|
| $ | — |
|
| $ | 21,740 |
|
Vehicle |
|
| 29,770 |
|
|
| — |
|
|
| — |
|
|
| 29,770 |
|
Food and beverage |
|
| 26,770 |
|
|
| — |
|
|
| — |
|
|
| 26,770 |
|
Industrial |
|
| 54,204 |
|
|
| — |
|
|
| (21 | ) |
|
| 54,183 |
|
Auto aftermarket |
|
| — |
|
|
| 65,335 |
|
|
| — |
|
|
| 65,335 |
|
Total net sales |
| $ | 132,484 |
|
| $ | 65,335 |
|
| $ | (21 | ) |
| $ | 197,798 |
|
8
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
|
| For the Quarter Ended September 30, 2022 |
| |||||||||||||
|
| Material |
|
| Distribution |
|
| Inter-company |
|
| Consolidated |
| ||||
Consumer |
| $ | 24,476 |
|
| $ | — |
|
| $ | — |
|
| $ | 24,476 |
|
Vehicle |
|
| 38,158 |
|
|
| — |
|
|
| — |
|
|
| 38,158 |
|
Food and beverage |
|
| 31,126 |
|
|
| — |
|
|
| — |
|
|
| 31,126 |
|
Industrial |
|
| 61,898 |
|
|
| — |
|
|
| (9 | ) |
|
| 61,889 |
|
Auto aftermarket |
|
| — |
|
|
| 72,416 |
|
|
| — |
|
|
| 72,416 |
|
Total net sales |
| $ | 155,658 |
|
| $ | 72,416 |
|
| $ | (9 | ) |
| $ | 228,065 |
|
|
| For the Nine Months Ended September 30, 2023 |
| |||||||||||||
|
| Material |
|
| Distribution |
|
| Inter-company |
|
| Consolidated |
| ||||
Consumer |
| $ | 75,900 |
|
| $ | — |
|
| $ | — |
|
| $ | 75,900 |
|
Vehicle |
|
| 97,983 |
|
|
| — |
|
|
| — |
|
|
| 97,983 |
|
Food and beverage |
|
| 86,915 |
|
|
| — |
|
|
| — |
|
|
| 86,915 |
|
Industrial |
|
| 167,543 |
|
|
| — |
|
|
| (44 | ) |
|
| 167,499 |
|
Auto aftermarket |
|
| — |
|
|
| 193,693 |
|
|
| — |
|
|
| 193,693 |
|
Total net sales |
| $ | 428,341 |
|
| $ | 193,693 |
|
| $ | (44 | ) |
| $ | 621,990 |
|
|
| For the Nine Months Ended September 30, 2022 |
| |||||||||||||
|
| Material |
|
| Distribution |
|
| Inter-company |
|
| Consolidated |
| ||||
Consumer |
| $ | 90,989 |
|
| $ | — |
|
| $ | — |
|
| $ | 90,989 |
|
Vehicle |
|
| 134,036 |
|
|
| — |
|
|
| — |
|
|
| 134,036 |
|
Food and beverage |
|
| 88,960 |
|
|
| — |
|
|
| — |
|
|
| 88,960 |
|
Industrial |
|
| 191,399 |
|
|
| — |
|
|
| (29 | ) |
|
| 191,370 |
|
Auto aftermarket |
|
| — |
|
|
| 181,352 |
|
|
| — |
|
|
| 181,352 |
|
Total net sales |
| $ | 505,384 |
|
| $ | 181,352 |
|
| $ | (29 | ) |
| $ | 686,707 |
|
Revenue is recognized when obligations under the second quarterterms of 2017, an underutilized buildinga contract with customers are satisfied. In both the Distribution and Material Handling segments, this generally occurs with the transfer of control of the products. This transfer of control may occur at either the time of shipment from a Company facility, or at the time of delivery to a designated customer location. Obligations under contracts with customers are typically fulfilled within 90 days of receiving a purchase order from a customer, and generally no other future obligations are required to be performed. The Company generally does not enter into any long-term contracts with customers greater than one year. Based on the nature of the Company’s Scarborough, Ontario, Canada location,products and customer contracts, no deferred revenue has been recorded, with the exception of cash advances or deposits received from customers prior to transfer of control of the product. These advances are typically fulfilled within the 90-day time frame mentioned above.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products. Certain contracts with customers include variable consideration, such as rebates or discounts. The Company recognizes estimates of this variable consideration each period, primarily based on the most likely level of consideration to be paid to the customer under the specific terms of the underlying programs. While the Company’s contracts with customers do not generally include explicit rights to return product, the Company will in practice allow returns in the Material Handling Segment, was identified for closurenormal course of business and classified as held for sale aspart of June 30, 2017, in Other Assetsthe customer relationship. Expected returns allowances are recognized each period based on an analysis of historical experience, and when physical recovery of the product from returns occurs, an estimated right to return asset is also recorded based on the approximate cost of the product.
Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited). This building has been recorded at its fair value, less estimated costs to sell, of $3.2 million (based primarily on a third party offer considered to be a Level 2 input), which resulted in an impairment charge of approximately $0.5 million recognized in the second quarter of 2017. No changes in the estimated fair value were recorded in the quarter ended September 30, 2017.
During the first quarter of 2016, the Company reviewed its long-lived assets, intangible assets and goodwill at Plasticos Novel do Nordeste S.A. (“Novel”), a reporting unit within the Material Handling Segment for impairment. The testing for impairment was performed as a result of the presence of impairment indictors resulting from the communication of a reduction in capital spending in the near-term from a significant customer in March 2016, which resulted in a significant reduction in Novel’s forecasted revenue and income.
The Company first conducted a review for impairment of indefinite-lived intangibles and other long-lived assets related to Novel, including amortizable intangible assets and fixed assets which indicated that the carrying amounts of such assets may not be recoverable and required an assessment of fair value of the assets for purposes of measuring an impairment charge. The estimated fair value of indefinite-lived intangibles was determined using a relief from royalty payments income approach and the other long-lived assets was determined, in part, using an analysis of projected cash flows, a market approach and a cost approach. These valuation methods use Level 3 inputs under the fair value hierarchy discussed in Note 1.revenue recognition include:
To test for potential impairment for goodwill, the Company performed an interim impairment test as of March 31, 2016. The step one goodwill impairment test was performed using a discounted cash flow (“DCF”) valuation model. The significant assumptions in the DCF model are the annual revenue growth rate, the annual operating income margin and the discount rate used to determine the present value of the cash flow projections. The discount rate was based on the estimated weighted average cost of capital as of the testing date for market participants in the industry in which the Novel reporting unit operates. Based on the estimated fair value generated by the DCF model, the Novel reporting unit’s fair value did not exceed its carrying value as of March 31, 2016 and therefore a step two analysis was required to be performed. The decline in fair value of the reporting unit resulted primarily from lower projected operating results and cash flows than those utilized from the 2015 annual impairment test, directly related to the triggering event outlined above. During the first quarter of 2016, a step two analysis was performed to allocate estimated fair value to assets and liabilities in order to estimate an implied value of goodwill. As a result of these impairment reviews, the Company concluded that the goodwill, intangibles and other long-lived assets related to Novel were impaired and recorded a non-cash impairment charge of $8.5 million, which was reported in Impairment Charges in the Condensed Consolidated Statements of Operations (Unaudited) in the first half of 2016.
109
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
|
| September 30, |
|
| December 31, |
|
| Statement of Financial | ||
|
| 2023 |
|
| 2022 |
|
| Classification | ||
Returns, discounts and other allowances |
| $ | (1,138 | ) |
| $ | (986 | ) |
| Accounts receivable |
Right of return asset |
| $ | 386 |
|
| $ | 350 |
|
| Inventories, net |
Customer deposits |
| $ | (4,013 | ) |
| $ | (5,896 | ) |
| Other current liabilities |
Accrued rebates |
| $ | (4,093 | ) |
| $ | (4,711 | ) |
| Other current liabilities |
Sales, value added, and other taxes collected with revenue from customers are excluded from net sales. The cost for shipments to customers is recognized when control over products has transferred to the second quartercustomer and is classified as Selling, General and Administrative expenses for the Company’s manufacturing business and as Cost of 2016,sales for the Company recorded impairment charges of $1.3Company’s distribution business. Costs for shipments to customers in Selling, General and Administrative expenses were approximately $3.0 million primarily related to long-lived assets associated withand $2.9 million for the exit of a non-strategic product line in the Material Handling Segment.
3. Discontinued Operations
On February 17, 2015, the Company sold its Lawn and Garden business to an entity controlled by Wingate Partners V, L.P., a private equity firm, for $110.0 million, subject to a working capital adjustment. The terms of the agreement include a $90.0 million cash payment, promissory notes totaling $20.0 million that mature in August 2020 with a 6% interest rate, and approximately $8.6 million placed in escrow that was due to be settled by August 2016, but has been extended until indemnification claims are resolved, as described in Note 10. The fair market value of the notes at the date of the sale was $17.8 million. The carrying value of the notes as ofquarters ended September 30, 2017 was $18.62023 and 2022, respectively, and $8.6 million which representsand $10.1 million for the fair value at the date of sale plus accretion and is included in Notes Receivable in the accompanying Condensed Consolidated Statements of Financial Position (Unaudited). The fair value of the notes receivable was calculated using Level 2 inputs as defined in Note 1. The final working capital adjustment resulted in a cash payment to the buyer of approximately $4.0 million in the first half of 2016.
4. Restructuring
On March 9, 2017, the Company announced a restructuring plan (the “Plan”) to improve the Company’s organizational structure and operational efficiency within the Material Handling Segment, which related primarily to anticipated facility shutdowns and associated activities. Total restructuring costs expected to be incurred are approximately $7.9 million, which includes employee severance and other employee-related costs of approximately $3.2 million, $2.6 million related to equipment relocation and facility shut down costs and non-cash charges, primarily accelerated depreciation charges on property, plant and equipment, of approximately $2.1 million. The Company expects to incur approximately $0.8 million during the remainder of 2017 under the Plan, as all remaining actions under the Plan are expected to be substantially completed by the end of the year.
During the three and nine months ended September 30, 2017, the Company incurred restructuring charges2023 and 2022, respectively, and in Cost of $1.0sales were approximately $2.7 million and $5.2 million, respectively, related to closing a manufacturing plant in Bluffton, Indiana. In the third quarter of 2017, the Bluffton facility and certain related equipment, previously classified as held for sale, were sold for approximately $6.0 million, which resulted in a gain of $2.6 million. Additional gains of $0.2 million and $1.5$3.1 million for the threequarters ended September 30, 2023 and 2022, respectively, and $9.9 million and $7.0 million for the nine months ended September 30, 2017, respectively,2023 and 2022, respectively.
Based on the short-term nature of contracts described above, contract acquisition costs are not significant. These costs, as well as other incidental items that are immaterial in the context of the contract, are recognized as expense as incurred.
3. Acquisitions
Mohawk
On May 31, 2022, the Company acquired the assets of Mohawk, a leading auto aftermarket distributor, which is included in the Distribution Segment. The Mohawk acquisition aligns with the Company's long-term objective to optimize and grow its Distribution business. Cash consideration was $27.8 million, net of $1.1 million of cash acquired. Total cash consideration also includes a $3.5 million working capital adjustment, of which $3.3 million was settled in November 2022 and $0.2 million was settled in February 2023. The Company funded the acquisition with proceeds from the Loan Agreement described in Note 11.
The acquisition of Mohawk was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on other asset dispositions in connectionthe acquisition date, with closing this plant.
Inany excess of the second quarterpurchase price over the estimated fair value recorded as goodwill. The following table summarizes the allocation of 2017, the Company finalizedpurchase price based on the specific actions to be taken under the Plan to reduce headcount in its Scarborough, Ontario, Canada location. These actions resulted in the recognitionestimated fair value of $0.9 millionassets acquired and $1.6 million of severance and related costs for the three and nine months ended September 30, 2017, respectively.
During the three and nine months ended September 30, 2017, the Company recognized $0.2 million and $0.3 million of restructuring charges related to the planned closure of a manufacturing plant in Sandusky, Ohio.
The restructuring charges noted above are presented in the Condensed Consolidated Statement of Operations (Unaudited) as follows:liabilities assumed, including measurement period adjustments.
|
| For the Three Months Ended September 30, 2017 |
|
| For the Nine Months Ended September 30, 2017 |
| ||
Cost of sales |
| $ | 1,908 |
|
| $ | 6,968 |
|
Selling, general and administrative expenses |
|
| 164 |
|
|
| 164 |
|
|
| $ | 2,072 |
|
| $ | 7,132 |
|
| Initial Allocation of Consideration |
| Measurement Period Adjustments(1) |
| Final Allocation |
| |||
Assets acquired: |
|
|
|
|
|
| |||
Accounts receivable | $ | 10,137 |
| $ | 458 |
| $ | 10,595 |
|
Inventories |
| 8,209 |
|
| (16 | ) |
| 8,193 |
|
Prepaid expenses |
| 104 |
|
| — |
|
| 104 |
|
Other assets - long term |
| 30 |
|
| — |
|
| 30 |
|
Property, plant and equipment |
| 1,432 |
|
| (261 | ) |
| 1,171 |
|
Right of use asset - operating leases |
| 1,367 |
|
| — |
|
| 1,367 |
|
Intangible assets |
| 7,720 |
|
| 90 |
|
| 7,810 |
|
Goodwill |
| 7,485 |
|
| (403 | ) |
| 7,082 |
|
Assets acquired | $ | 36,484 |
| $ | (132 | ) | $ | 36,352 |
|
|
|
|
|
|
|
| |||
Liabilities assumed: |
|
|
|
|
|
| |||
Accounts payable | $ | 5,996 |
| $ | (191 | ) | $ | 5,805 |
|
Accrued expenses |
| 1,414 |
|
| (70 | ) |
| 1,344 |
|
Operating lease liability - short term |
| 399 |
|
| — |
|
| 399 |
|
Operating lease liability - long term |
| 968 |
|
| — |
|
| 968 |
|
Total liabilities assumed |
| 8,777 |
|
| (261 | ) |
| 8,516 |
|
|
|
|
|
|
|
| |||
Net acquisition cost | $ | 27,707 |
| $ | 129 |
| $ | 27,836 |
|
(1) The Company's preliminary purchase price allocation changed due to additional information and further analysis.
1110
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
The table below summarizesgoodwill represents the future economic benefits arising from other assets acquired that could not be individually and separately recognized, and the Company expects that the goodwill recognized for the acquisition will be deductible for tax purposes.
The intangible assets included above consist of the following:
|
| Fair Value |
|
| Weighted Average | |
Customer relationships |
| $ | 5,500 |
|
| 12.0 years |
Trade name |
|
| 2,000 |
|
| 5.0 years |
Non-competition agreements |
|
| 310 |
|
| 5.0 years |
Total amortizable intangible assets |
| $ | 7,810 |
|
|
|
4. Restructuring
Ameri-Kart Plan
In March 2019, the Company committed to implementing a restructuring activityplan involving its Ameri-Kart Corp. subsidiary (“Ameri-Kart”), a rotational molding business within the Material Handling Segment. The Company is consolidating certain manufacturing operations into a new facility in Bristol, Indiana (the “Ameri-Kart Plan”). In December 2019, as amended in March 2021, Ameri-Kart entered into a lease agreement for a newly constructed manufacturing and distribution facility in Bristol, Indiana. The building became substantially complete in March 2021 as defined in the lease agreement, and the 15-year finance lease of the new Bristol facility commenced. In connection with the lease agreement, Ameri-Kart agreed to sell its original Bristol facility and lease it back for a period of 5 years. During the second quarter of 2021, the sale of the original facility for net proceeds of $2.8 million was completed, which resulted in a gain of $1.0 million, and the lease back commenced. The new Bristol facility is in service and the original facility has been closed. Remaining costs to complete this consolidation are expected to be approximately $2.5 million, including approximately $0.3 million in 2023 related to remaining equipment moves and $2.2 million to be incurred through 2026 related to remaining lease and maintenance costs for the idled facility.
The Company incurred $0.2 million and $0.7 million of restructuring charges related to the initiatives discussed above during the quarter and nine months ended September 30, 2023, respectively, and $0.3 million and $0.7 million of restructuring charges during the quarter and nine months ended September 30, 2022, respectively, which were recorded withinboth Cost of sales and Selling, General and Administrative. The Company also incurred $0.3 million related to loss on disposal of fixed assets during the nine months ended September 30, 2017:2022. Accrued and unpaid restructuring expenses were not significant at September 30, 2023 or December 31, 2022.
|
| Employee Reduction |
|
| Accelerated Depreciation |
|
| Other Exit Costs |
|
| Total |
| ||||
Balance at January 1, 2017 |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Charges to expense |
|
| 2,868 |
|
|
| 2,018 |
|
|
| 2,246 |
|
|
| 7,132 |
|
Cash payments |
|
| (773 | ) |
|
| — |
|
|
| (1,929 | ) |
|
| (2,702 | ) |
Non-cash utilization |
|
| — |
|
|
| (2,018 | ) |
|
| — |
|
|
| (2,018 | ) |
Balance at September 30, 2017 |
| $ | 2,095 |
|
| $ | — |
|
| $ | 317 |
|
| $ | 2,412 |
|
Other Initiatives
In additionSeverance charges from other restructuring initiatives to reduce and streamline overhead costs during the restructuring costs noted above, the Company has also incurred other associated costs of the Plan of $0.3 million and $1.0 million for the threequarter and nine months ended September 30, 2017,2023 totaled $1.1 million and $1.5 million, respectively which are included in were recorded within Selling, General and Administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited),Administrative. Accrued and are primarily related to third party consulting costs. Additional estimatedunpaid costs of $0.2for these initiatives totaled $0.2 million at September 30, 2023 and remaining costs associated with these other restructuring initiatives are expected to be incurred throughout the remainder of 2017.approximately $0.1 million, related primarily to employee severance.
5. Inventories
Inventories are valued at the lower of cost or market for last-in, first-out (“LIFO”) inventory and lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. Approximately 4035 percent of our inventories are valued using the LIFO method of determining cost. All other inventories are valued atusing the FIFO method of determining cost. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of expected year-end inventory levels and costs. Because these are based on estimates, interim resultscalculations are subject to change inmany factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation. InNo adjustment to the currentLIFO reserve was recorded for the quarter one inventory pool had an increase in commodity costs that is expected to hold through year-end, and therefore,ended September 30, 2023. During 2022, the Company incurred an adjustment of $0.4$1.1 million was made to increase the LIFO reserve and cost of sales for the threequarter and nine months ended September 30, 2017. No adjustment was recorded during prior interim reporting periods as interim results in those periods were immaterial.2022.
11
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
Inventories consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Finished and in-process products |
| $ | 57,194 |
|
| $ | 54,991 |
|
Raw materials and supplies |
|
| 39,036 |
|
|
| 38,360 |
|
|
| $ | 96,230 |
|
| $ | 93,351 |
|
6. Other Current Liabilities
The balance in other current liabilitiesOther Current Liabilities is comprised of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Customer deposits and accrued rebates |
| $ | 8,106 |
|
| $ | 10,607 |
|
Dividends payable |
|
| 5,828 |
|
|
| 5,722 |
|
Accrued litigation, claims and professional fees |
|
| 656 |
|
|
| 596 |
|
Current portion of environmental reserves |
|
| 8,005 |
|
|
| 3,284 |
|
Other accrued expenses |
|
| 6,543 |
|
|
| 6,171 |
|
|
| $ | 29,138 |
|
| $ | 26,380 |
|
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Deposits and amounts due to customers |
| $ | 4,048 |
|
| $ | 2,688 |
|
Dividends payable |
|
| 4,455 |
|
|
| 4,260 |
|
Accrued litigation and professional fees |
|
| 606 |
|
|
| 452 |
|
Current portion of environmental reserves |
|
| 1,022 |
|
|
| 605 |
|
Other accrued expenses |
|
| 4,362 |
|
|
| 5,078 |
|
|
| $ | 14,493 |
|
| $ | 13,083 |
|
The balance in Other Liabilities (long-term) is comprised of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Environmental reserves |
| $ | 7,581 |
|
| $ | 13,078 |
|
Supplemental executive retirement plan liability |
|
| 618 |
|
|
| 824 |
|
Pension liability |
|
| 253 |
|
|
| 184 |
|
Other long-term liabilities |
|
| 1,832 |
|
|
| 1,184 |
|
|
| $ | 10,284 |
|
| $ | 15,270 |
|
7. Goodwill and Intangible Assets
The change in goodwill for the nine months ended September 30, 20172023 was as follows:
|
| Distribution |
|
| Material Handling |
|
| Total |
| |||
January 1, 2017 |
| $ | 505 |
|
| $ | 58,714 |
|
| $ | 59,219 |
|
Foreign currency translation |
|
| — |
|
|
| 829 |
|
|
| 829 |
|
September 30, 2017 |
| $ | 505 |
|
| $ | 59,543 |
|
| $ | 60,048 |
|
|
| Distribution |
|
| Material |
|
| Total |
| |||
January 1, 2023 |
| $ | 14,730 |
|
| $ | 80,427 |
|
| $ | 95,157 |
|
Foreign currency translation |
|
| — |
|
|
| (28 | ) |
|
| (28 | ) |
September 30, 2023 |
| $ | 14,730 |
|
| $ | 80,399 |
|
| $ | 95,129 |
|
Intangible assets other than goodwill primarily consist of trade names, customer relationships, patents, non-competition agreements and technology assets established in connection with acquisitions. These intangible assets, other than certain trade names, are amortized over their estimated useful lives. Indefinite-lived trade names had a carrying value of $9.8 million at both September 30, 2023 and December 31, 2022. Refer to Note 3 for the intangible assets acquired through the Mohawk acquisition in May 2022.
12
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
useful lives. The Company has indefinite-lived trade names which had a carrying value of $10.9 million at both September 30, 2017 and December 31, 2016.
See Note 2 for discussion of goodwill, trade names and other long-lived asset impairment charges in the first half of 2016.
8. Net Income (Loss) per Common Share
Net income (loss) per common share, as shown on the accompanying Condensed Consolidated Statements of Operations (Unaudited), is determined on the basis of the weighted average number of common shares outstanding during the periods as follows:
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
|
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Weighted average common shares outstanding basic |
|
| 30,266,838 |
|
|
| 29,849,005 |
|
|
| 30,149,818 |
|
|
| 29,682,798 |
|
|
| 36,811,296 |
|
|
| 36,472,378 |
|
|
| 36,712,662 |
|
|
| 36,383,398 |
|
Dilutive effect of stock options and restricted stock |
|
| 385,105 |
|
|
| 226,473 |
|
|
| 374,343 |
|
|
| 266,913 |
|
|
| 168,584 |
|
|
| 244,775 |
|
|
| 259,722 |
|
|
| 295,557 |
|
Weighted average common shares outstanding diluted |
|
| 30,651,943 |
|
|
| 30,075,478 |
|
|
| 30,524,161 |
|
|
| 29,949,711 |
|
|
| 36,979,880 |
|
|
| 36,717,153 |
|
|
| 36,972,384 |
|
|
| 36,678,955 |
|
Options to purchase 256,600 and 261,100104,409 shares of common stock that were outstanding for the three and nine months ended September 30, 2017, respectively, and 569,050 for the threequarter and nine months ended September 30, 2016,2023 and 114,540 shares of common stock that were outstanding for the quarter and nine months ended September 30, 2022 were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of common shares, and were therefore anti-dilutive.
9. Stock Compensation
Subject to shareholder approval, whichThe Company’s 2021 Long-Term Incentive Plan (the “2021 Plan”) was received on April 26, 2017,adopted by the Board of Directors approved the Company’s Amended and Restated 2017 Incentive Stock Plan (the “2017 Plan”) on March 2, 2017.4, 2021, amended by the Board of Directors on April 20, 2021, and approved by shareholders in the annual shareholder meeting on April 29, 2021. The 20172021 Plan authorizes the Compensation and Management Development Committee of the Board of Directors (“Compensation Committee”) to issue up to 5,126,950 shares of2,000,000 additional various stock awards including stock options, performance stock units, restricted stock units and other forms of equity-based awards to key employees and directors. Options granted and outstanding vest over the requisite service period and expire ten years from the date of grant.
In March 2017, the Company granted 397,759 stock options with a weighted average exercise price of $14.30 and a weighted average fair value of $4.47. The fair value of options granted is estimated using a binomial lattice option pricing model. Also in March 2017, the Company granted 87,887 and 140,746 time-based and performance-based restricted stock units, respectively, with a weighted average fair value of $14.30. There were no stock-based awards granted in the second or third quarters of 2017.
Stock compensation expense was approximately $1.1$0.7 million and $0.7$1.3 million for the three monthsquarters ended September 30, 20172023 and 2016,2022, respectively, and $2.9$5.1 million and $2.8$5.2 million for the nine months ended September 30, 20172023 and 2016,2022, respectively. These expenses are included in Selling, General and Administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited). expenses. Total unrecognized compensation cost related to non-vested stock-based compensation arrangements at September 30, 20172023 was approximately $6.5$8.9 million, which will be recognized over the next three years, as such compensation is earned. Outstanding options expire, if unexercised, ten years from the date of grant.
10. Contingencies
The Company is a defendant in various lawsuits and a party to various other legal proceedings arising in the ordinary course of business, some of which are covered in whole or in part by insurance. When a loss arising from these matters is probable and can reasonably be estimated, the most likely amount of the estimated probable loss is recorded, or if a range of probable loss can be estimated and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary.
Based on current available information, management believes that the ultimate outcome of these matters, including those described below, will not have a material adverse effect on our financial position, cash flows or overall trends in our results of operations. However, these matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or in future periods.
New Idria Mercury Mine
In September 2015, the U.S. Environmental Protection Agency (“EPA”) formally informed a subsidiary of the Company, Buckhorn, Inc. (“Buckhorn”) via a notice letter and related documents (the “Notice Letter”) that it considers Buckhorn to be a potentially responsible party (“PRP”) in connection with the New Idria Mercury Mine site (“New Idria Mine”). New Idria Mining & Chemical Company (“NIMCC”), which owned and/or operated the New Idria Mine through 1976, was merged into Buckhorn Metal Products Inc. in 1981, which was subsequently acquired by Myers Industries, Inc. in 1987. As a result of the EPA Notice Letter, Buckhorn and the
13
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amounts in thousands, except where otherwise indicated)
Company are engaged in negotiations with the EPA with respect to a draft Administrative Order of Consent (“AOC”) proposed by the EPA for the Remedial Investigation/Feasibility Study (“RI/FS”) to determine the extent of remediation necessary and the screening of alternatives.
The Buckhorn and the EPA finalized the AOC and related Statement of Work (“SOW”) with regards to the New Idria Mine, is located near Hollister, California andeffective as of
13
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
November 27, 2018, the date that it was addedexecuted by the EPA. The AOC requires a $2 million letter of credit to be provided for the duration of the RI/FS as assurance of Buckhorn's performance obligations.
All reasonably estimable costs related to the Superfund National Priorities List by the EPA in October 2011, at which time the Company recognized expenseenvironmental remediation are accrued. These costs are comprised primarily of $1.9 million related to performing the RI/FS. In the second quarter of 2016, the Company, based on discussions with the EPA, determined that the RI/FS would begin in 2017 and therefore obtained updated estimated costs to perform the RI/FS. As a result of the updated estimated costs, the Company recorded additional expense of $1.0 million in the second quarter of 2016. In the second quarter of 2017, the Company, based on the status of its discussions with the EPA, determined that field work on the RI/FS will likely begin in 2018 with no changes to the cost estimates to perform the RI/FS. In the third quarter of 2017, the Company recorded an additional reserve of $0.3 million for this project, as a result of additional professional fees and other project costs expected to be incurred as part of the implementationFS, negotiation of the AOC, and site preparation and stabilization, in advanceidentification of starting the RI/FS field work in 2018. As part of the Notice Letter, thepossible other PRPs, EPA also made a claim for approximately $1.6 million in past costs for actions it claims it has taken in connection with the New Idria Mine since 1993. While the Company is challenging theseoversight fees, past cost claims in 2015 the Company recognized expense of $1.3 million related to the portion of these costs alleged to have been incurred after the site was added to the Superfund list in 2011.
As of September 30, 2017, the Company has a total reserve of $2.7 million related to the New Idria Mine, of which $0.7 million is classified in Other Current Liabilities and $2.0 million is classified in Other Liabilities on the Condensed Consolidated Statements of Financial Position (Unaudited).
As negotiations withmade by the EPA, proceed itperiodic monitoring, and responses to demands issued by the EPA under the AOC. It is possible that adjustments to the aforementioned reserves will be necessary to reflectas new information.information is obtained, including after finalization and EPA approval of the work plan for the RI/FS. Estimates of the Company’sBuckhorn’s liability are based on current facts, laws, regulations and technology. Estimates of the Company’sBuckhorn’s environmental liabilities are further subject to uncertainties regarding the negotiations with EPA, the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluation and cost estimates, the extent of remedial actions that may be required, the extent of oversight by the EPA and the number and financial condition of other PRPs that may be named, as well as the extent of their responsibility for the remediation,remediation. Beginning in late 2021 and continuing through the current period, Buckhorn and the availabilityEPA continue to actively discuss the scope of the activities in the work plan for the RI/FS, resulting in changes to the estimated costs to perform the RI/FS work plan from time to time. Cost estimates will continue to be refined as the work plans for the RI/FS and the ultimate remediation are finalized and as the activities are performed over a period expected to last several years.
In the fourth quarter of 2022, Buckhorn reached an agreement with respect to certain insurance coverage related to defense costs, which is expected to apply to a substantial portion of the estimated RI/FS costs. Recovery of accrued costs are recorded as a receivable to the extent such recovery is determined to be probable under this agreement. Estimates of cost recoveries will continue to be refined as the RI/FS work plan is finalized and the activities are performed over a period expected to last several years. Buckhorn may also have opportunity for these expenses.cost recovery under other insurance policies.
At this time, we have not accrued for remediation costsSince October 2011, when the New Idria Mine was added to the Superfund National Priorities List by the EPA, Buckhorn has recognized $19.3 million of cumulative charges, made cumulative payments of $10.1 million and received insurance recoveries of $3.4 million through September 30, 2023. For the three and nine months ended September 30, 2023 the following activity was recorded in connection with the New Idria Mercury Mine:
|
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Beginning reserve balance |
| $ | 12,082 |
|
| $ | 9,153 |
|
| $ | 11,855 |
|
| $ | 8,213 |
|
Changes in estimated environmental liability |
|
| 300 |
|
|
| 1,500 |
|
|
| 3,800 |
|
|
| 2,800 |
|
Payments made(1) (4) |
|
| (1,182 | ) |
|
| (123 | ) |
|
| (4,455 | ) |
|
| (483 | ) |
Ending reserve balance(2) |
| $ | 11,200 |
|
| $ | 10,530 |
|
| $ | 11,200 |
|
| $ | 10,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning receivable balance |
| $ | 6,162 |
|
| $ | — |
|
| $ | 6,000 |
|
| $ | — |
|
Changes in estimated probable insurance recovery |
|
| 400 |
|
|
| — |
|
|
| 1,600 |
|
|
| — |
|
Insurance recovery reimbursements |
|
| (394 | ) |
|
| — |
|
|
| (1,432 | ) |
|
| — |
|
Ending receivable balance(3) |
| $ | 6,168 |
|
| $ | — |
|
| $ | 6,168 |
|
| $ | — |
|
(1) Payments made in 2022 were offset by insurance refunds of $0.3 million and $0.4 million in the three and nine months ended September 30, 2022, respectively. In the fourth quarter of 2022, Buckhorn reached an agreement with respect to certain insurance coverage related to defense costs for which recovery of accrued costs are recorded as a receivable to the extent such recovery is determined to be probable under this site as we are unableagreement.
(2) As of September 30, 2023, Buckhorn has a total ending reserve balance of $11.2 million related to estimate the liability, givenNew Idria Mine, of which $7.7 million is classified in Other current liabilities and $3.5 million in Other liabilities (long-term).
(3) As of September 30, 2023, Buckhorn has a total receivable balance related to the probable insurance recovery of $6.2 million, of which $3.2 million
is classified in Accounts receivable and $3.0 million is classified in Other (long-term).
(4) Payments made for the nine months ended September 30, 2023 include a $1.9 million payment related to a settlement agreement with the EPA to resolve the past costs claim, which Buckhorn paid in the first quarter of 2023.
Given the circumstances referred to above, including the fact that the final remediation strategy has not yet been determined.determined, Buckhorn has not accrued for remediation costs in connection with this site as it is unable to estimate the range of a reasonably possible liability for remediation costs.
14
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
New Almaden Mine
A number of parties, including the Company and its subsidiary, Buckhorn (as successor to NIMCC), were alleged by trustee agencies of the United States and the State of California to be responsible for natural resource damages due to environmental contamination of areas comprising the historical New Almaden mercury mines located in the Guadalupe River Watershed region in Santa Clara County, California (“County”). In 2005, Buckhorn and the Company, without admitting liability or chain of ownership of NIMCC, resolved the trustees’ claim against them through a consent decree that required them to contribute financially to the implementation by the County of an environmentally beneficial project within the impacted area. Buckhorn and the Company negotiated an agreement with the County ("Cost Sharing Agreement"), whereby Buckhorn and the Company agreed to reimburse one-half of the County’s costs of implementing the project. A detailed estimate was received from the County in 2016, and estimated costs for implementing the project originally estimatedto range between $3.3 million and $4.4 million. In 2022, the County informed the Company that it may begin implementation of the project in 2023 and that costs were expected to be higher. In January 2023, the County informed Buckhorn that the project will commence in 2023 and that it had accepted a bid to complete the project for approximately $1.6$9.0 million. As a result, in 2005,The Company and Buckhorn intend to vigorously challenge, under the Company recognized expense of $0.8 million representing its shareterms of the initial estimated project costs, of which approximately $0.5 million has been paidCost Sharing Agreement, their responsibility to date. In April 2016,share in the Company was notified by the County that the original cost estimate may no longer be appropriate due to expanded scope and increased costs of construction and provided a revised estimate of between $3.3 million and $4.4 million. The Company completed a detailed reviewentirety of the support provided by the County for the revised estimate, and as a result, recognizedproject cost increases. No additional expense of $1.2 millioncosts were incurred related to New Almaden in the secondquarter and third quartersnine months ended September 30, 2023 or 2022, respectively and payments of 2016.$0.1 million were made in the quarter and nine months ended September 30, 2023. As of September 30, 2017,2023, the Company has a total reserve of $1.54.4 million related to the New Almaden Mine, of which $0.3$0.3 million is classified in Other Current Liabilities and $1.2$4.1 million is classified in Other Liabilities on the Condensed Consolidated Statements of Financial Position (Unaudited) (long-term).
The project has not yet been implemented though significant work on design and planning has been performed. Field work on the project is expected to commence in 2018. As work on the project occurs and dispute resolution proceeds, it is possible that adjustments to the aforementioned reserves will be necessary to reflect new information. In addition, the Company may have claims against and defenses to claims by the County under the 2005 agreement that could reduce or offset its obligation for reimbursement of some of these potential additional costs. With the assistance of environmental consultants, the Company will closely monitor this matter and will continue to assess its reserves as additional information becomes available.
No Spill Matter
On December 11, 2018, No Spill Inc. ("No Spill") filed suit against Scepter Manufacturing LLC in the United States District Court for the District of Kansas asserting infringement of two patents, breach of contract, and trade dress claims in relation to plastic gasoline containers Scepter manufactures and sells in the United States. Scepter Canada, Inc. was later added in a second amended complaint. On January 6, 2022, the District Court bifurcated the patent infringement and invalidity issues from the antitrust and other issues in the case. The trial on patent infringement and invalidity was held in early March 2023, resulting in a unanimous jury verdict on March 14, 2023 in favor of the defendant Scepter entities on each of the alleged claims of infringement. On April 24, 2023, the Court issued an Order dismissing all remaining claims in the case with prejudice and entered final Judgment of the jury verdict in favor of Scepter. On April 24, 2023, the parties dismissed the remaining claims and phase two of the bifurcated trial will not proceed.
Both parties filed post-trial motions with the District Court to preserve the issues for appeal. The District Court denied No Spill's motion for judgment as a matter of law and for a new trial. No Spill did not file an appeal. The underlying case is now concluded.
The Company has maintained insurance policies, which it believes may cover a substantial portion of the defense costs incurred in this matter. To date, Scepter has incurred $13.3 million of defense costs in this matter, of which $0.1 million and $0.6 million were incurred in the quarters ended September 30, 2023 and 2022, respectively, and $3.6 million and $2.5 million were incurred in the nine months ended September 30, 2023 and 2022, respectively. The Company and Scepter are in active discussions with the insurer to recover these defense costs. In the third quarter of 2023 while discussions with the insurer were in progress, the Company received a preliminary $0.5 million payment from the insurer, which was recorded as a reduction to legal costs within Selling, General and Administrative expenses. The Company believes it is entitled to additional insurance proceeds and will continue to pursue recovery with the insurer.
Other Matters
On February 14, 2023, a lawsuit was filed by Nan Morgan McCartney in the Circuit Court of Escambia County, Florida against the Company, Scepter US Holding Company, Scepter Manufacturing, LLC, Scepter Canada Inc., Walmart Inc., and Wal-Mart Stores East, LP. The complaint seeks compensatory damages and court costs for harm caused to Ms. McCartney allegedly arising from use of a 5-gallon portable fuel container manufactured by a Scepter company and alleges amounts in controversy in excess of $30 thousand exclusive of costs. The case has been removed to the Northern District of Florida, Pensacola Division. The Myers' defendants filed their Answer to the Complaint on April 25, 2023. On May 19, 2023 the Court filed a Final Scheduling Order. Defendants have served written discovery on Plaintiff. Plaintiff was deposed on September 6, 2023. We are scheduling depositions for other fact witnesses. No other
15
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
Lawn and Garden Indemnification Claim
In connection with the saleproceedings have occurred in this litigation matter as of the Lawndate of this filing and Garden business, as described in Note 3, the Company receivedcannot assess with any meaningful probability the outcome or the potential damages.
On October 18, 2023, Tank Holding Corp. served a Notice of Indemnification Claims in April 2015, andComplaint against Myers Industries, Inc. (“Myers”), asserting patent infringement with regard to a Second Notice of Indemnification Claims in July 2016 (collectively, the “Claims”), alleging breaches of certain representations and warranties under the agreement resulting in losses in the amount of approximately $10 million. As described in Note 3, approximately $8.6 millionsingle product manufactured by Elkhart Plastics LLC. Myers has conducted a preliminary assessment of the sale proceeds were placedallegations and believes it has strong defenses. No other proceedings or discovery have occurred in escrow and due to be settled in August 2016, but have been extended until the Claims are resolved. The Company believes these Claims are without merit and intends to vigorously defend its position.
When a loss arising from these matters is probable and can reasonably be estimated, we record the amountthis matter as of the estimated loss,date of this filing and the Company cannot assess with any meaningful probability the outcome or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable of occurrence than another. As additional information becomes available, any potential liability related to these matters will be assessed and the estimates will be revised, if necessary.damages.
Based on current available information, management believes that the ultimate outcome of these matters will not have a material adverse effect on our financial position, cash flows or overall trends in our results of operations. However, these matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or in future periods.
11. Long-Term Debt and Loan Agreements
Long-term debt consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Loan Agreement |
| $ | 22,000 |
|
| $ | 56,000 |
|
5.25% Senior Unsecured Notes due January 15, 2024 |
|
| 11,000 |
|
|
| 11,000 |
|
5.30% Senior Unsecured Notes due January 15, 2024 |
|
| 15,000 |
|
|
| 15,000 |
|
5.45% Senior Unsecured Notes due January 15, 2026 |
|
| 12,000 |
|
|
| 12,000 |
|
|
|
| 60,000 |
|
|
| 94,000 |
|
Less unamortized deferred financing costs |
|
| 19 |
|
|
| 38 |
|
|
|
| 59,981 |
|
|
| 93,962 |
|
Less current portion long-term debt |
|
| 25,994 |
|
|
| — |
|
Long-term debt |
| $ | 33,987 |
|
| $ | 93,962 |
|
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Loan Agreement |
| $ | 59,795 |
|
| $ | 90,686 |
|
4.67% Senior Unsecured Notes due 2021 |
|
| 40,000 |
|
|
| 40,000 |
|
5.25% Senior Unsecured Notes due 2024 |
|
| 11,000 |
|
|
| 11,000 |
|
5.30% Senior Unsecured Notes due 2024 |
|
| 29,000 |
|
|
| 29,000 |
|
5.45% Senior Unsecured Notes due 2026 |
|
| 20,000 |
|
|
| 20,000 |
|
|
|
| 159,795 |
|
|
| 190,686 |
|
Less unamortized deferred financing costs |
|
| 1,785 |
|
|
| 1,164 |
|
|
| $ | 158,010 |
|
| $ | 189,522 |
|
In March 2017,On September 29, 2022, the Company entered into a Seventh Amended and Restated Loan Agreement (the “Seventh Amendment”), which amended the Sixth Amended and Restated Loan Agreement (the "Sixth Amendment"), dated March 12, 2021. The Seventh Amendment, among other things, extended the maturity date to September 2027 from March 2024. The Seventh Amendment did not change the senior revolving credit facility's $250 million borrowing limit, which includes a letter of credit subfacility and swingline subfacility, or the outstanding letters of credit. In connection with the Seventh Amendment, the Company incurred $0.9 million of deferred financing fees, which are included in Other Assets (long-term). Together with unamortized fees from the Sixth Amendment remaining deferred financing fees under the Company's Loan Agreement were $1.2 million and $1.4 million as of September 30, 2023 and December 31, 2022, respectively, which will be amortized to Interest expense over the term of the Loan Agreement (defined below).
In March 2021, the Company entered into the Sixth Amendment, which amended the Fifth Amended and Restated Loan Agreement (the(collectively with the Sixth and Seventh Amendments, the “Loan Agreement”). dated March 2017. The Loan Agreement replacedSixth Amendment increased the pre-existing $300 million senior revolving credit facility with a $200facility’s borrowing limit to $250 million facility andfrom $200 million, extended the termmaturity date to March 2024 from December 2018March 2022, and increased flexibility of the financial and other covenants and provisions. Amounts borrowed under the credit facility are secured by pledges of stock of certain of the Company’s foreign subsidiaries and guaranties of certain of its domestic subsidiaries. In connection with the Sixth Amendment, the Company incurred $1.1 million of deferred financing fees, which are included in Other Assets (long-term) and being amortized to March 2022. In addition,Interest expense over the Loan Agreement provides for a maximum Leverage Ratio of 3.75 for the first and second quarters of 2017, stepping down to 3.5 in the third quarter of 2017, and 3.25 thereafter.
Under the termsterm of the Loan Agreement, the Company may borrow up to $200.0 million, reduced for letters of credit issued. Agreement.
As of September 30, 2017,2023, the Company had $135.8$222.3 million available under the Loan Agreement.Agreement, which is available for the ongoing working capital requirements of the Company and its subsidiaries and for general corporate purposes. The Company had $4.4$5.7 million of letters of credit issued related to insurance and other financing contracts requiring financial assurance in the ordinary course of business at September 30, 2017. business. Borrowings under the Loan Agreement bear interest at the LIBOR rate, prime rate, federal funds effective rate,Term SOFR, RFR, EURIBOR and CDOR-based borrowing rates. Amounts borrowed under the Canadian deposit offered rate, orcredit facility are secured by pledges of stock of certain of the euro currency reference rate depending onCompany’s foreign subsidiaries and guaranties of certain of its domestic subsidiaries.
The Company also holds Senior Unsecured Notes (“Notes”), which range in face value from $11.0 million to $15.0 million, with interest rates ranging from 5.25% to 5.45%, payable semiannually, and maturing between January 2024 and January 2026. At September 30, 2023, $38.0 million of the typeNotes were outstanding, of loan requested by the Company, plus the applicable marginwhich $26.0 million are classified as set forth in the Loan Agreement. current.
The weighted average interest rate on borrowings under our loan agreements were 5.18%the Company’s long-term debt was 7.09% and 4.65%5.50% for the three monthsquarters ended September 30, 20172023 and 2016,2022, respectively, and 5.05%6.74% and 4.61%4.55% for the nine months ended September 30, 20172023 and 2016,2022, respectively, which includes a quarterly facility fee on the used and unused portion.portion, as well as amortization of deferred financing costs.
In September 2017, the Company made an offer to all holders of the $100 million Senior Unsecured Notes (“Notes”) to purchase all or a portion of the Notes prior to their maturity dates. In October 2017, one note holder accepted the offer and elected to tender $22 million in Notes. The Company purchased the Notes from the holder on October 31, 2017 and a loss on extinguishment of debt of approximately $1.9 million was recorded during the fourth quarter of 2017.
1516
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
TheAs of September 30, 2023, the Company and certainwas in compliance with all of its subsidiaries have pensiondebt covenants associated with its Loan Agreement and profit sharing plans covering substantiallyNotes. The most restrictive financial covenants for all of their employees. Thethe Company’s defined benefit pension plan, The Pension Agreement between Akro-Milsdebt are a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and United Steelworkers of America Local No. 1761-02, provides benefits primarily based upon a fixed amount for each year of service. The plan was frozen in 2007,amortization, as adjusted) and thus benefits for service were no longer accumulated after this date.
Net periodic pension cost isan interest coverage ratio (defined as follows:earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense).
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Interest cost |
| $ | 63 |
|
| $ | 68 |
|
| $ | 189 |
|
| $ | 204 |
|
Expected return on assets |
|
| (74 | ) |
|
| (80 | ) |
|
| (222 | ) |
|
| (240 | ) |
Amortization of net loss |
|
| 24 |
|
|
| 20 |
|
|
| 72 |
|
|
| 61 |
|
Net periodic pension cost |
| $ | 13 |
|
| $ | 8 |
|
| $ | 39 |
|
| $ | 25 |
|
Company contributions |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
The Company does not expect to make a contribution to the plan in 2017.
13.12. Income Taxes
The Company’s effective tax rate was 38.5%25.7% and 42.0%25.6% for the threequarter and nine months ended September 30, 2017,2023, respectively compared to 56.3%24.8% and 69.8%25.5% for the threequarter and nine months ended September 30, 2016, respectively.2022. The effective income tax rate for the first nine months of 2017 and 2016both periods was different than the Company’s statutory rate, primarily due to losses in jurisdictions where the tax benefits are not recognized. non-deductible expenses and state taxes.
The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $0.3 million and $0.5 million at September 30, 2017 and December 31, 2016, respectively.
The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of September 30, 2017,2023, the Company is no longer subject to U.S. Federal examination by tax authorities for tax years before 2014.2019. The Company is subject to state and local examinations for tax years of 20122018 through 2016.2021. In addition, the Company is subject to non-U.S. income tax examinations for tax years of 20122017 through 2016.2021.
13. Leases
The Company determines if an arrangement is a lease at inception. The Company has leases for manufacturing facilities, distribution centers, warehouses, office space and equipment, with remaining lease terms of one to twelve years. Certain of these leases include options to extend the lease for up to five years, and some include options to terminate the lease early. Leases with an initial term of 12 months or less are not recorded on the statement of financial position; the Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Operating leases with an initial term greater than 12 months are included in Right ofuse asset – operating leases (“ROU assets”), Operating lease liability – short term, and Operating lease liability – long term and finance leases are included in Property, plant and equipment, Finance lease liability – short term, and Finance lease liability – long term in the Condensed Consolidated Statements of Financial Position (Unaudited).
The ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the obligation to make lease payments. ROU assets and lease liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. When leases do not provide an implicit rate, the Company’s incremental borrowing rate is used, which is then applied at the portfolio level, based on the information available at commencement date in determining the present value of lease payments. The Company has also elected not to separate lease and non-lease components. The lease terms include options to extend or terminate the lease when it is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.
Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited) related to leases include:
16
|
|
| September 30, |
|
| December 31, |
| ||
| Classification |
| 2023 |
|
| 2022 |
| ||
Assets: |
|
|
|
|
|
|
| ||
Operating lease assets | Right of use asset - operating leases |
| $ | 27,384 |
|
| $ | 28,908 |
|
Finance lease assets | Property, plant and equipment, net |
|
| 8,854 |
|
|
| 9,075 |
|
Total lease assets |
|
| $ | 36,238 |
|
| $ | 37,983 |
|
|
|
|
|
|
|
|
| ||
Liabilities: |
|
|
|
|
|
|
| ||
Current | Operating lease liability - short-term |
| $ | 5,604 |
|
| $ | 6,177 |
|
Long-term | Operating lease liability - long-term |
|
| 22,023 |
|
|
| 22,786 |
|
Total operating lease liabilities |
|
|
| 27,627 |
|
|
| 28,963 |
|
Current | Finance lease liability - short-term |
|
| 581 |
|
|
| 518 |
|
Long-term | Finance lease liability - long-term |
|
| 8,766 |
|
|
| 8,919 |
|
Total finance lease liabilities |
|
|
| 9,347 |
|
|
| 9,437 |
|
Total lease liabilities |
|
| $ | 36,974 |
|
| $ | 38,400 |
|
17
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollar amountsDollars in thousands, except where otherwise indicated)
The components of lease expense include:
|
|
|
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
Lease Cost |
| Classification |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Operating lease cost (1) |
| Cost of sales |
| $ | 1,493 |
|
| $ | 1,440 |
|
| $ | 4,664 |
|
| $ | 4,172 |
|
Operating lease cost (1) |
| Selling, general and administrative expenses |
|
| 856 |
|
|
| 803 |
|
|
| 2,493 |
|
|
| 2,081 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization expense |
| Cost of sales |
|
| 190 |
|
|
| 172 |
|
|
| 535 |
|
|
| 517 |
|
Interest expense on lease liabilities |
| Interest expense, net |
|
| 89 |
|
|
| 85 |
|
|
| 251 |
|
|
| 256 |
|
Total lease cost |
|
|
| $ | 2,628 |
|
| $ | 2,500 |
|
| $ | 7,943 |
|
| $ | 7,026 |
|
Supplemental cash flow information related to leases was as follows:
|
| For the Nine Months Ended September 30, |
| |||||
Supplemental Cash Flow Information |
| 2023 |
|
| 2022 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash flows from operating leases |
| $ | 5,649 |
|
| $ | 5,074 |
|
Operating cash flows from finance leases |
| $ | 251 |
|
| $ | 256 |
|
Financing cash flows from finance leases |
| $ | 403 |
|
| $ | 374 |
|
Right-of-use assets obtained in exchange for new lease liabilities: |
|
|
|
|
|
| ||
Operating leases |
| $ | 3,756 |
|
| $ | 3,638 |
|
Finance leases |
| $ | 313 |
|
| $ | — |
|
Lease Term and Discount Rate |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Weighted-average remaining lease term (years): |
|
|
|
|
|
| ||
Operating leases |
|
| 5.93 |
|
|
| 6.44 |
|
Finance leases |
|
| 12.24 |
|
|
| 13.17 |
|
Weighted-average discount rate: |
|
|
|
|
|
| ||
Operating leases |
|
| 4.4 | % |
|
| 3.6 | % |
Finance leases |
|
| 3.7 | % |
|
| 3.5 | % |
Maturity of Lease Liabilities - As of September 30, 2023 |
| Operating Leases |
|
| Finance Leases |
|
| Total |
| |||
2023(1) |
| $ | 1,783 |
|
| $ | 225 |
|
| $ | 2,008 |
|
2024 |
|
| 6,415 |
|
|
| 920 |
|
|
| 7,335 |
|
2025 |
|
| 5,506 |
|
|
| 924 |
|
|
| 6,430 |
|
2026 |
|
| 4,838 |
|
|
| 924 |
|
|
| 5,762 |
|
2027 |
|
| 3,948 |
|
|
| 945 |
|
|
| 4,893 |
|
After 2027 |
|
| 8,749 |
|
|
| 7,658 |
|
|
| 16,407 |
|
Total lease payments |
|
| 31,239 |
|
|
| 11,596 |
|
|
| 42,835 |
|
Less: interest |
|
| (3,612 | ) |
|
| (2,249 | ) |
|
| (5,861 | ) |
Present value of lease liabilities |
| $ | 27,627 |
|
| $ | 9,347 |
|
| $ | 36,974 |
|
MYERS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
(Dollars in thousands, except where otherwise indicated)
14. Industry Segments
Using the criteria of ASC 280, Segment Reporting, theThe Company manages its business under two operating segments, Material Handling and Distribution, consistent with the manner in which ourthe Chief Operating Decision Maker (“CODM”) evaluates performance and makes resource allocation decisions. None of the reportable segments include operating segments that have been aggregated. These segments contain individual business components that have been combined on the basis of common management, customers, products, production processes and other economic characteristics. The Company accounts for intersegmentIntersegment sales are recorded with a reasonable margin and transfers at cost plus a specified mark-up.are eliminated in consolidation.
The Material Handling Segment manufactures a broad selection of durable plastic reusable containers that are used repeatedly during the course of their service life. At the end of their service life, these highly sustainable products can be recovered, recycled, and reprocessed into new products. The Material Handling Segment’s products include pallets, small parts bins, bulk shipping containers, storage and organization products, OEM parts, custom plastic products, consumer fuel containers and rotationally-molded plastic tanks for water, fuel and waste handling. Products in the Material Handling Segment are primarily injection molded, rotationally molded or blow molded. This segment conducts its primary operations in the United States but also operates in Brazil and Canada. Markets served encompass various niches ofinclude industrial manufacturing, food processing, retail/wholesale products distribution, agriculture, automotive, recreational vehicles, marine vehicles, healthcare, appliance, bakery, electronics, textiles and consumer, andamong others. Products are sold both directly to end-users and through distributors.
The Distribution Segment is engaged in the distribution of equipment, tools, and supplies used for tire servicing and automotive undervehicleunder-vehicle repair and the manufacture of tire repair and retreading products. The product line includes categories such as tire valves and accessories, tire changing and balancing equipment, lifts and alignment equipment, service equipment and tools, and tire repair/retread supplies. The Distribution Segment also manufactures and sells certain traffic markings, including reflective highway marking tape. The Distribution Segment operates domestically through its sales offices and foureight regional distribution centers in the United States, and in certain foreign countries through export sales. In addition, the Distribution Segment operates directly in certain foreign markets, principally Central America, through foreign branch operations. Markets served include retail and truck tire dealers, commercial auto and truck fleets, truck stop operations, auto dealers, general service and repair centers, tire retreaders, and government agencies. The acquisition of Mohawk, described in Note 3, is included in the Distribution Segment.
Total sales from foreign business units were approximately $10.2 million and $13.9 million for the quarters ended September 30, 2023 and 2022, respectively, and $33.9 million and $40.4 million for the nine months ended September 30, 2023 and 2022, respectively.
Summarized segment detail for the threequarters and nine months ended September 30, 20172023 and 20162022 are presented in the following table:
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| For the Quarter Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Material Handling |
| $ | 104,089 |
|
| $ | 89,911 |
|
| $ | 310,343 |
|
| $ | 299,842 |
| $ | 132,484 |
|
| $ | 155,658 |
|
| $ | 428,341 |
|
| $ | 505,384 |
|
Distribution |
|
| 40,004 |
|
|
| 42,793 |
|
|
| 117,836 |
|
|
| 128,248 |
|
| 65,335 |
|
|
| 72,416 |
|
|
| 193,693 |
|
|
| 181,352 |
|
Inter-company sales |
|
| (18 | ) |
|
| (28 | ) |
|
| (98 | ) |
|
| (92 | ) |
| (21 | ) |
|
| (9 | ) |
|
| (44 | ) |
|
| (29 | ) |
Total net sales |
| $ | 144,075 |
|
| $ | 132,676 |
|
| $ | 428,081 |
|
| $ | 427,998 |
| $ | 197,798 |
|
| $ | 228,065 |
|
| $ | 621,990 |
|
| $ | 686,707 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Operating income |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Material Handling | $ | 19,978 |
|
| $ | 23,962 |
|
| $ | 70,157 |
|
| $ | 83,216 |
| ||||||||||||||||
Distribution (1) |
| 4,993 |
|
|
| 4,899 |
|
|
| 10,628 |
|
|
| 12,469 |
| ||||||||||||||||
Corporate (1) (2) (3) |
| (6,268 | ) |
|
| (8,964 | ) |
|
| (26,983 | ) |
|
| (28,766 | ) | ||||||||||||||||
Total operating income |
| 18,703 |
|
|
| 19,897 |
|
|
| 53,802 |
|
|
| 66,919 |
| ||||||||||||||||
Interest expense, net |
| (1,539 | ) |
|
| (1,719 | ) |
|
| (4,975 | ) |
|
| (4,077 | ) | ||||||||||||||||
Income before income taxes | $ | 17,164 |
|
| $ | 18,178 |
|
| $ | 48,827 |
|
| $ | 62,842 |
|
(1) In the nine months ended September 30, 2023, the company recognized $0.7 million of executive severance, of which $0.4 million was recognized in the Distribution Segment related to severance and $0.3 million was recognized in Corporate related to charges for the acceleration of stock compensation.
(2) The company recognized $(0.1) million and $1.5 million of expense (income) from changes to the estimated environmental reserve, net of probable insurance recoveries for the quarters ended September 30, 2023 and 2022, respectively, and $2.2 million and $2.8 million for the nine months ended September 30, 2023 and 2022, respectively, as described in Note 10. Environmental charges are not included in segment results and are shown with Corporate.
(3) Corporate includes $1.3 million of consulting costs to improve the Company's capabilities to screen and execute large acquisitions in the nine months ended September 30, 2023.
19
Income (loss) from continuing operations before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling |
| $ | 10,325 |
|
| $ | 4,378 |
|
| $ | 29,839 |
|
| $ | 26,152 |
|
Distribution |
|
| 3,179 |
|
|
| 3,301 |
|
|
| 7,742 |
|
|
| 9,803 |
|
Corporate |
|
| (6,393 | ) |
|
| (4,693 | ) |
|
| (17,532 | ) |
|
| (20,674 | ) |
Total operating income |
|
| 7,111 |
|
|
| 2,986 |
|
|
| 20,049 |
|
|
| 15,281 |
|
Interest expense, net |
|
| (1,785 | ) |
|
| (2,015 | ) |
|
| (5,545 | ) |
|
| (6,087 | ) |
Income from continuing operations before income taxes |
| $ | 5,326 |
|
| $ | 971 |
|
| $ | 14,504 |
|
| $ | 9,194 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the information incorporated by reference contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including information regarding the Company’s financial outlook, future plans, objectives, business prospects and anticipated financial performance. Forward-looking statements can be identified by words such as “will,” “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” or variations of these words, or similar expressions. These forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, these statements inherently involve a wide range of inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. The Company’s actual actions, results, and financial condition may differ materially from what is expressed or implied by the forward-looking statements.
Specific factors that could cause such a difference on our business, financial position, results of operations and/or liquidity include, without limitation, raw material availability, increases in raw material costs, or other production costs; risks associated with our strategic growth initiatives or the failure to achieve the anticipated benefits of such initiatives; unanticipated downturn in business relationships with customers or their purchases; competitive pressures on sales and pricing; changes in the markets for the Company’s business segments; changes in trends and demands in the markets in which the Company competes; operational problems at our manufacturing facilities or unexpected failures at those facilities; future economic and financial conditions in the United States and around the world; inability of the Company to meet future capital requirements; claims, litigation and regulatory actions against the Company; changes in laws and regulations affecting the Company; impacts from the novel coronavirus (“COVID-19”) pandemic; and other risks and uncertainties detailed from time to time in the Company’s filings with the SEC, including without limitation, the risk factors disclosed in Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Given these factors, as well as other variables that may affect our operating results, readers should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance, nor use historical trends to anticipate results or trends in future periods. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company expressly disclaims any obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions associated with them.
Executive Overview
The Company conducts its business activities in two reportable segments: The Material Handling Segment and the Distribution Segment.
The Company designs, manufactures, and markets a variety of plastic, metal and rubber products. The Material Handling Segment manufactures a broad selection of plastic reusable containers, pallets, small parts bins, bulk shipping containers, storage and organization products, OEM parts, custom plastic products, consumer fuel containers and tanks for water, fuel and waste handling. Products in the Material Handling Segment are primarily injection molded, rotationally molded or blow molded. The Distribution Segment is engaged in the distribution of tools, equipment and supplies used for tire, wheel and under vehicle service on passenger, heavy truck and off-road vehicles, as well as the manufacturing of tire repair and retreading products.
The Company’s results of operations for the quarter and nine months ended September 30, 2023 are discussed below. The current economic environment includes heightened risks from inflation, interest rates, banking liquidity, volatile commodity costs, supply chain disruptions and labor availability stemming from the broader economic effects of the international geopolitical climate, including the conflict between Russia and Ukraine, and the COVID-19 pandemic. Russia’s invasion of Ukraine in the first quarter of 2022 in addition to other geopolitical events has increased volatility in global commodity markets, including oil (a component of many plastic resins), energy and agricultural commodities. The Company believes it is well-positioned to manage through this uncertainty as it has a strong balance sheet with sufficient liquidity and borrowing capacity as well as a diverse product offering and customer base.
20
Results of Operations:
Comparison of the Three MonthsQuarter Ended September 30, 20172023 to the Three MonthsQuarter Ended September 30, 20162022
Net Sales:
(dollars in millions) |
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(dollars in thousands) |
| Quarter Ended September 30, |
|
|
|
|
|
|
| |||||||||||||||||||||||
Segment |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Material Handling |
| $ | 104.1 |
|
| $ | 89.9 |
|
| $ | 14.2 |
|
|
| 16 | % |
| $ | 132,484 |
|
| $ | 155,658 |
|
| $ | (23,174 | ) |
|
| (14.9 | )% |
Distribution |
|
| 40.0 |
|
|
| 42.8 |
|
|
| (2.8 | ) |
|
| (7 | )% |
|
| 65,335 |
|
|
| 72,416 |
|
|
| (7,081 | ) |
|
| (9.8 | )% |
Inter-company sales |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| (21 | ) |
|
| (9 | ) |
|
| (12 | ) |
|
|
| |
Total net sales |
| $ | 144.1 |
|
| $ | 132.7 |
|
| $ | 11.4 |
|
|
| 9 | % |
| $ | 197,798 |
|
| $ | 228,065 |
|
| $ | (30,267 | ) |
|
| (13.3 | )% |
Net sales for the three monthsquarter ended September 30, 20172023 were $144.1$197.8 million, an increasea decrease of $11.4$30.3 million or 9%13.3% compared to the three monthsquarter ended September 30, 2016.2022. Net sales were positively impacted by higher sales volumedecreased due to lower volume/mix of approximately $9.5$24.9 million, higher pricing of $1.2 million, and the effect of favorableunfavorable currency translation of $0.7$0.3 million and lower pricing of $5.1 million. The Company continues to pursue further pricing initiatives, and beginning in February 2023, the Company began to implement a series of additional pricing increases across a majority of its portfolio of products within its Distribution segment.
Net sales in the Material Handling Segment increased $14.2decreased $23.2 million or 16%14.9% for the three monthsquarter ended September 30, 20172023 compared to the three monthsquarter ended September 30, 2016. The increase in net2022. Net sales was primarilydecreased due to higher sales volume of approximately $12.8lower volume/mix $16.5 million, mainly due to increased demand in the Company’s consumer and food and beverage markets, higherlower pricing of $0.7$6.4 million and the effect of favorable foreignunfavorable currency translation of $0.7$0.3 million.
Net sales in the Distribution Segment decreased $2.8$7.1 million or 7%9.8% for the three monthsquarter ended September 30, 20172023 compared to the three monthsquarter ended September 30, 2016,2022, primarily the result ofdue to lower sales volume of approximately $3.3 million$8.4 million. The decrease in net sales was partially offset by higher pricing of $0.5$1.3 million.
Cost of Sales & Gross Profit:
|
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
|
| Quarter Ended September 30, |
|
|
|
|
|
| ||||||||||||||||||||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
Cost of sales |
| $ | 103.3 |
|
| $ | 96.8 |
|
| $ | 6.5 |
|
|
| 7 | % |
| $ | 135,419 |
|
| $ | 156,417 |
|
| $ | (20,998 | ) |
|
| (13.4 | )% |
Gross profit |
| $ | 40.7 |
|
| $ | 35.9 |
|
| $ | 4.8 |
|
|
| 13 | % |
| $ | 62,379 |
|
| $ | 71,648 |
|
| $ | (9,269 | ) |
|
| (12.9 | )% |
Gross profit as a percentage of sales |
|
| 28.3 | % |
|
| 27.1 | % |
|
|
|
|
|
|
|
|
|
| 31.5 | % |
|
| 31.4 | % |
|
|
|
|
|
Gross profit margin increased to 28.3% indecreased $9.3 million, or 12.9%, for the three monthsquarter ended September 30, 20172023 compared to 27.1% for the three monthsquarter ended September 30, 2016, primarily2022, due to improved lower volume/mix withinand pricing as described under Net Sales above and increased labor and productivity costs. Gross margin expanded to 31.5% for the higher sales volumes noted above, mainly inquarter ended September 30, 2023 compared with 31.4% for the food and beverage and consumer end markets, as wellquarter ended September 30, 2022 as the higher pricing of $1.2 million. These effects werebenefits from lower material costs partially offset by restructuring costs of $1.9 million within the Material Handling Segment, as well as higher raw material costs.decrease in gross profit for the quarter ended September 30, 2023.
Selling, General and Administrative Expenses:
|
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
|
| Quarter Ended September 30, |
|
|
|
|
|
| ||||||||||||||||||||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
SG&A expenses |
| $ | 36.4 |
|
| $ | 32.6 |
|
| $ | 3.8 |
|
|
| 12 | % |
| $ | 43,698 |
|
| $ | 51,756 |
|
| $ | (8,058 | ) |
|
| (15.6 | )% |
SG&A expenses as a percentage of sales |
|
| 25.3 | % |
|
| 24.6 | % |
|
|
|
|
|
|
|
|
|
| 22.1 | % |
|
| 22.7 | % |
|
|
|
|
|
|
Selling, general and administrative (“SG&A”) expenses for the three monthsquarter ended September 30, 20172023 were $36.4$43.7 million, an increasea decrease of $3.8 million or 12%15.6% compared to the same period in the prior year. Decreases in SG&A expenses in the third quarter 20172023 were impacted by higherprimarily due to $5.3 million of lower incentive compensation, $1.2 million of $3.9 million.
As further discussedlower facility costs and $0.9 million of lower variable selling expenses, partially offset by other professional fees and $0.3 million of higher salaries and benefits. Environmental matters, as described in Note 4,10 resulted in a net $0.1 million recovery for the Company continued to execute on the restructuring plan within the Material Handling Segment initiated in the first quarter of 2017. The Company incurred a total of $2.1 million of restructuring costs in connection with the Plan during the three months ended September 30, 2017, as well as recognized $2.82023, which compared to $1.5 million in gains on sales of assets related tocharges for the closure and sale of the Bluffton, Indiana facility and certain related equipment.quarter ended September 30, 2022.
As previously announced, the Company expects to save approximately $10 million on an annual basis as a result of the actions under the Plan, a portion of which began being realized starting in the third quarter of 2017. The Plan is expected to be substantially completed by the end of 2017.21
Net Interest Expense:
|
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||
Net interest expense |
| $ | 1.8 |
|
| $ | 2.0 |
|
| $ | (0.2 | ) |
|
| (10 | )% |
Outstanding borrowings, net of deferred financing costs |
| $ | 158.0 |
|
| $ | 197.9 |
|
| $ | (39.9 | ) |
|
| (20 | )% |
Average borrowing rate |
|
| 5.18 | % |
|
| 4.65 | % |
|
|
|
|
|
|
|
|
|
| Quarter Ended September 30, |
|
|
|
|
|
|
| |||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||
Net interest expense |
| $ | 1,539 |
|
| $ | 1,719 |
|
| $ | (180 | ) |
|
| (10.5 | )% |
Average outstanding borrowings, net |
| $ | 84,220 |
|
| $ | 120,315 |
|
| $ | (36,095 | ) |
|
| (30.0 | )% |
Weighted-average borrowing rate |
|
| 7.09 | % |
|
| 5.50 | % |
|
|
|
|
|
|
Net interest expense for the three monthsquarter ended September 30, 20172023 was $1.5 million, a decrease of $1.8$0.2 million, decreased 10%or 10.5%, compared with $2.0$1.7 million for the three monthsquarter ended September 30, 2016. Lower2022. The lower net interest expense was due to lower average outstanding borrowings forin the period werecurrent quarter, partially offset withby a higher averageweighted-average borrowing rate.
Income Taxes:
|
| Three Months Ended September 30, |
| |||||||||||||
(dollars in millions) |
| 2017 |
|
| 2016 |
| ||||||||||
Income from continuing operations before income taxes |
| $ | 5.3 |
|
| $ | 1.0 |
| ||||||||
|
| Quarter Ended September 30, |
| |||||||||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
| ||||||||||
Income before income taxes |
| $ | 17,164 |
|
| $ | 18,178 |
| ||||||||
Income tax expense |
| $ | 2.1 |
|
| $ | 0.5 |
|
| $ | 4,417 |
|
| $ | 4,507 |
|
Effective tax rate |
|
| 38.5 | % |
|
| 56.3 | % |
|
| 25.7 | % |
|
| 24.8 | % |
The Company’s effective tax rate of 38.5%was 25.7% for the three monthsquarter ended September 30, 2017, decreased when2023, compared with 56.3%to 24.8% for the three monthsquarter ended September 30, 2016,2022. The increase in the effective tax rate was driven primarily due to the mix of income by jurisdiction between periods, including those where no benefits are recognized on losses.non-deductible expenses.
Comparison of the Nine Months Ended September 30, 20172023 to the Nine Months Ended September 30, 20162022
Net Sales:
(dollars in millions) |
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(dollars in thousands) |
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||||||||||||||||||
Segment |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Material Handling |
| $ | 310.3 |
|
| $ | 299.8 |
|
| $ | 10.5 |
|
|
| 4 | % |
| $ | 428,341 |
|
| $ | 505,384 |
|
| $ | (77,043 | ) |
|
| (15.2 | )% |
Distribution |
|
| 117.9 |
|
|
| 128.3 |
|
|
| (10.4 | ) |
|
| (8 | )% |
|
| 193,693 |
|
|
| 181,352 |
|
|
| 12,341 |
|
|
| 6.8 | % |
Inter-company elimination |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| — |
|
|
|
|
| ||||||||||||||||
Inter-company sales |
|
| (44 | ) |
|
| (29 | ) |
|
| (15 | ) |
|
|
| |||||||||||||||||
Total net sales |
| $ | 428.1 |
|
| $ | 428.0 |
|
| $ | 0.1 |
|
|
| 0 | % |
| $ | 621,990 |
|
| $ | 686,707 |
|
| $ | (64,717 | ) |
|
| (9.4 | )% |
Net sales for the nine months ended September 30, 20172023 were $428.1$622.0 million, and were relatively flat with the nine months ended September 30, 2016. Net sales were negatively impacted by lower sales volumea decrease of approximately $4.0 million, offset by the effect of favorable foreign currency translation of approximately $2.2 million and higher pricing of $1.9 million.
Net sales in the Material Handling Segment increased $10.5$64.7 million or 4% for the nine months ended September 30, 20179.4% compared to the nine months ended September 30, 2016.2022. Net sales decreased due to lower volume/mix of $83.1 million, following high volume of certain products focused on outdoor activities, which were especially strong due to a surge in COVID-19 induced consumer discretionary spending in the prior period. Net sales also decreased due to the effect of unfavorable currency translation of $1.5 million and lower pricing of $3.2 million. The increasedecrease in net sales was due to higherpartially offset by $23.1 million of incremental sales volumefrom the acquisition of $6.7 million, mainlyMohawk on May 31, 2022, included in the consumerDistribution Segment. Mohawk's annual sales were approximately $65 million at the time of the acquisition. The Company continues to pursue further pricing initiatives, and food and beverage markets, higherbeginning in February 2023, the Company began to implement a series of additional pricing increases across a majority of $1.6 million, and the effectits portfolio of favorable foreign currency translation of $2.2 million.products within its Distribution segment.
Net sales in the DistributionMaterial Handling Segment decreased $10.4$77.0 million or 8%15.2% for the nine months ended September 30, 20172023 compared to the nine months ended September 30, 2016, primarily2022. Net sales decreased due to lower volume. The decrease in volume was across all product linesvolume/mix of $65.9 million, lower pricing of $9.6 million and regions, including our export and international channels. the effect of unfavorable currency translation of $1.5 million.
Cost of Sales & Gross Profit:
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||
Cost of sales |
| $ | 306.1 |
|
| $ | 299.4 |
|
| $ | 6.7 |
|
|
| 2 | % |
Gross profit |
| $ | 122.0 |
|
| $ | 128.6 |
|
| $ | (6.6 | ) |
|
| (5 | )% |
Gross profit as a percentage of sales |
|
| 28.5 | % |
|
| 30.1 | % |
|
|
|
|
|
|
|
|
Gross profit margin decreased to 28.5%Net sales in the nine months ended September 30, 2017 compared to 30.1%Distribution Segment increased $12.3 million or 6.8% for the nine months ended September 30, 2016,2023 compared to the nine months ended September 30, 2022, primarily due to higher rawpricing of $6.4 million and $23.1 million of incremental sales from the acquisition of Mohawk on May 31, 2022. The increase in net sales was partially offset by lower volume/mix of $17.2 million.
22
Cost of Sales & Gross Profit:
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||
Cost of sales |
| $ | 420,136 |
|
| $ | 468,415 |
|
| $ | (48,279 | ) |
|
| (10.3 | )% |
Gross profit |
| $ | 201,854 |
|
| $ | 218,292 |
|
| $ | (16,438 | ) |
|
| (7.5 | )% |
Gross profit as a percentage of sales |
|
| 32.5 | % |
|
| 31.8 | % |
|
|
|
|
|
|
Gross profit decreased $16.4 million, or 7.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to lower volume/mix as described under Net Sales above and increased labor and productivity costs. Gross margin expanded to 32.5% for the nine months ended September 30, 2023 compared with 31.8% for the nine months ended September 30, 2022 as the benefits from lower material costs and operating inefficiencies, as well as restructuring coststhe acquisition of $7.0 million within the Material Handling Segment. These impacts wereMohawk on May 31, 2022 both partially offset by higher pricing and a favorable sales mix.the decrease in gross profit for the nine months ended September 30, 2023.
Selling, General and Administrative Expenses:
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
|
| Nine Months Ended September 30, |
|
|
|
|
|
| ||||||||||||||||||||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||||||||||||||
SG&A expenses |
| $ | 105.6 |
|
| $ | 103.1 |
|
| $ | 2.5 |
|
|
| 2 | % |
| $ | 148,130 |
|
| $ | 152,066 |
|
| $ | (3,936 | ) |
|
| (2.6 | )% |
SG&A expenses as a percentage of sales |
|
| 24.7 | % |
|
| 24.1 | % |
|
|
|
|
|
|
|
|
|
| 23.8 | % |
|
| 22.1 | % |
|
|
|
|
|
|
Selling, general and administrative (“SG&A”) expenses for the nine months ended September 30, 2023 were $148.1 million, a decrease of $3.9 million or 2.6% compared to the same period in the prior year. Decreases in SG&A expenses for the nine months ended September 30, 20172023 were $105.6primarily due to $8.2 million an increase of $2.5lower incentive compensation, $2.6 million or 2% comparedof lower variable selling expenses and $2.3 million of lower facility costs. The decrease to the same period in the prior year. SG&A expenses in the first nine months of 2017 were primarily impacted by higher severance, compensation and benefits of approximately $1.2 million and higher legal and professional fees of $1.3 million.
Impairment Charges:
Duringfor the nine months ended September 30, 2017, the Company recorded an impairment charge of $0.5 million related to assets held for sale at its Scarborough, Ontario, Canada location, as discussed in Note 2.
The Company recorded $9.92023 was partially offset by $5.0 million of non-cash impairment charges,incremental SG&A from the acquisition of Mohawk on May 31, 2022, $1.9 million of higher salaries and benefits and $2.3 million of higher legal and other professional fees, primarily related to its Plasticos Novel do Nordeste S.A. (“Novel”) reporting unit duringa success fees payable in conjunction with the favorable patent trial result, offset by insurance recoveries, as described in Note 10. Environmental matters, as described in Note 10 resulted in a net $2.2 million expense for the nine months ended September 30, 2016, as discussed in Note 2.
As further discussed in Note 4, the Company initiated a restructuring plan in the first quarter of 20172023, which compared to improve the Company’s organizational structure and operational efficiency within the Material Handling Segment. The Company has incurred a total of $7.1$2.8 million of restructuring costs in connection with the Plan duringcharges for the nine months ended September 30, 2017, with additional costs under the Plan of approximately $0.8 million expected through the end of 2017. The Company also recorded $4.1 million in gains on sales of assets in the nine months ended September 30, 2017 related to the closure and sale of the Bluffton, Indiana facility and certain related equipment. 2022.
As previously announced, the Company expects to save approximately $10 million on an annual basis as a result of the actions under the Plan, a portion of which began being realized starting in the third quarter of 2017. The Plan is to be substantially completed by the end of 2017.
Net Interest Expense:
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||
(dollars in millions) |
| 2017 |
|
| 2016 |
|
| Change |
|
| % Change |
| ||||
Net interest expense |
| $ | 5.5 |
|
| $ | 6.1 |
|
| $ | (0.6 | ) |
|
| (10 | )% |
Outstanding borrowings, net of deferred financing costs |
| $ | 158.0 |
|
| $ | 197.9 |
|
| $ | (39.9 | ) |
|
| (20 | )% |
Average borrowing rate |
|
| 5.05 | % |
|
| 4.61 | % |
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||
Net interest expense |
| $ | 4,975 |
|
| $ | 4,077 |
|
| $ | 898 |
|
|
| 22.0 | % |
Average outstanding borrowings, net |
| $ | 96,112 |
|
| $ | 113,812 |
|
| $ | (17,700 | ) |
|
| (15.6 | )% |
Weighted-average borrowing rate |
|
| 6.74 | % |
|
| 4.55 | % |
|
|
|
|
|
|
Net interest expense for the nine months ended September 30, 20172023 was $5.5$5.0 million, an increase of $0.9 million, or 22.0%, compared to $6.1 million during the nine months ended September 30, 2016. The decrease in net interest expense is due to lower average outstanding borrowings during the nine months ended September 30, 2017 as compared to the same period in 2016, partially offset by a slightly higher borrowing rate.
Income Taxes:
|
| Nine Months Ended September 30, |
| |||||
(dollars in millions) |
| 2017 |
|
| 2016 |
| ||
Income from continuing operations before income taxes |
| $ | 14.5 |
|
| $ | 9.2 |
|
Income tax expense |
| $ | 6.1 |
|
| $ | 6.4 |
|
Effective tax rate |
|
| 42.0 | % |
|
| 69.8 | % |
The effective income tax rate for the nine months ended September 30, 2017 was different than the Company’s effective tax rate for the same period in 2016, primarily due to losses in jurisdictions where the tax benefits are not recognized, which included the impairment charges in Brazil in 2016.
Financial Condition & Liquidity and Capital Resources:
Operating Activities
Cash provided by operating activities from continuing operations was $36.1with $4.1 million for the nine months ended September 30, 2017, compared to $18.6 million in the same period in 2016.2022. The improvementhigher net interest expense was due to ana higher weighted-average borrowing rate, partially offset by lower average outstanding borrowings for the nine months ended September 30, 2023.
Income Taxes:
|
| Nine Months Ended September 30, |
| |||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
| ||
Income before income taxes |
| $ | 48,827 |
|
| $ | 62,842 |
|
Income tax expense |
| $ | 12,499 |
|
| $ | 16,003 |
|
Effective tax rate |
|
| 25.6 | % |
|
| 25.5 | % |
The Company’s effective tax rate was 25.6% and 25.5% for the nine months ended September 30, 2023 and 2022, respectively. The increase in the effective tax rate was driven primarily by non-deductible expenses.
23
Liquidity and Capital Resources:
The Company’s primary sources of liquidity are cash on hand, cash generated from operations and availability under the Loan Agreement (defined below). At September 30, 2023, the Company had $24.8 million of cash, $222.3 million available under the Loan Agreement and outstanding debt of $69.3 million, including the finance lease liability of $9.3 million. Based on this liquidity and borrowing capacity, the Company believes it is well-positioned to manage through the working capital demands and the heightened uncertainty in the current macroeconomic environment. The Company believes that cash on hand, cash flows from operations and available capacity under its Loan Agreement will be sufficient to meet expected business requirements including capital expenditures, dividends, working capital, debt service, and to fund future growth, including selective acquisitions.
Operating Activities
Net cash provided by working capital of $22.5 million, which resulted from a swing in the cash provided by (used for) accounts payable and accrued expenses.
Investing Activities
Cash provided by investingoperating activities from continuing operations was $2.9$70.8 million for the nine months ended September 30, 20172023, compared to $50.8 million in the same period in 2022. The increase was primarily due to lower working capital driven by decreases in accounts receivable.
Investing Activities
Net cash used of $15.3by investing activities was $19.3 million for the nine months ended September 30, 2016. The2023 compared to cash used of $40.3 million for the same period in 2022. In 2022, the Company paid a final$24.3 million to acquire Mohawk, before working capital adjustment to the buyer of the Lawn and Garden business of approximately $4.0 million in the first quarter of 2016,adjustments, as describeddiscussed in Note 3. The Company3 and received proceeds of $8.1$1.5 million in the first nine months of 2017 from the sale of fixed assets, a significant portion of which was derived from the sale of the Company’s Bluffton, Indiana facility and related equipment as part of the Material Handling restructuring plan.assets. Capital expenditures were $5.1$19.3 million and $11.5$17.6 million for the nine months ended September 30, 20172023 and 2016,2022, respectively. Full year 2023 capital expenditures in 2017 are expected to be approximately $7$25 million to $9$30 million.
Net payments on the credit facility were $31.4Cash used by financing activities was $49.8 million for the nine months ended September 30, 20172023 compared to cash used by financing activities of $7.4 million for the same period in 2022. Net repayments of the credit facility for the nine months ended September 30, 2023 were $34.0 million compared to net borrowings of $4.4$7.0 million in the nine months ended September 30, 2022. Net proceeds from the issuance of common stock in connection with incentive stock option exercises were $1.9 million and $2.1 million for the nine months ended September 30, 2016.2023 and 2022, respectively. Cash paid for tax withholdings on vesting of stock compensation totaled $2.1 million and $0.5 million in the nine months ended September 30, 2023 and 2022 respectively, primarily due to improved vesting of performance-based awards in the current year. Fees paid for the amendment and extension of the Loan Agreement in September 2022 totaled $0.7 million. The Company also used cash to pay dividends of $12.2$15.3 million and $12.1$14.9 million for the nine months ended September 30, 20172023 and 2016,2022, respectively.
Credit Sources
In March 2017,On September 29, 2022, the Company entered into a Seventh Amended and Restated Loan Agreement (the “Seventh Amendment”), which amended the Sixth Amended and Restated Loan Agreement (the "Sixth Amendment"), dated March 12, 2021. The Seventh Amendment, among other things, extended the maturity date to September 2027 from March 2024. There was no change to the credit facility's borrowing limit of $250 million.
In March 2021, the Company entered into the Sixth Amendment, which amended the Fifth Amended and Restated Loan Agreement (the(collectively with the Sixth and Seventh Amendments, the “Loan Agreement”). dated March 2017. The Loan Agreement replacedSixth Amendment increased the pre-existing $300 million senior revolving credit facility with afacility’s borrowing limit to $250 million from $200 million, facility and extended the term from December 2018maturity date to March 2022. In addition,2024 from March 2022, and increased flexibility of the Loan Agreement provides for a maximum Leverage Ratio of 3.75 for the firstfinancial and second quarters of 2017, stepping down to 3.5 in the third quarter of 2017,other covenants and 3.25 thereafter.provisions.
Total debt outstanding at September 30, 2017 was $158.0 million, net of $1.8 million of deferred financing costs, compared with $189.5 million at December 31, 2016. The Company’s Loan Agreement provides available borrowing up to $200 million, reduced for letters of credit issued. As of September 30, 2017,2023, $222.3 million was available under the Loan Agreement, after borrowings and the Company had $4.4$5.7 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of businessbusiness. Borrowings under the Loan Agreement bear interest at the Term SOFR, RFR, EURIBOR and there was $135.8CDOR-based borrowing rates.
At September 30, 2023, $38 million available under our Loan Agreement.face value of Senior Unsecured Notes are outstanding. The series of notes range in face value from $11 million to $15 million, with interest rates ranging from 5.25% to 5.45%, payable semiannually. As described in Note 11, $26.0 million of the Senior Unsecured Notes mature on January 15, 2024 and $12.0 million mature on January 15, 2026.
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As of September 30, 2017,2023, the Company was in compliance with all of its debt covenants. The most restrictive financial covenants for all of the Company’s debt are an interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense) and a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and amortization, as adjusted). The ratios as of and for the period ended September 30, 20172023 are shown in the following table:
Required Level | Actual Level | |||||
Interest Coverage Ratio | 3.00 to 1(minimum) |
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Leverage Ratio |
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Off-Balance Sheet Arrangements
In September 2017, the Company made an offer to all holders of the $100 million Senior Unsecured Notes (“Notes”) to purchase all or a portion of the Notes prior to their maturity dates. In October 2017, one note holder accepted the offer and elected to tender $22 million in Notes. The Company purchased the Notes from the holderdoes not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on October 31, 2017 and a loss on extinguishmentits financial condition, results of debt of approximately $1.9 million was recorded during the fourth quarter of 2017.
The Company believes that cash flows from operations, and available borrowing under its Loan Agreement will be sufficient to meet expected business requirements includingliquidity, capital expenditures dividends, workingor capital and debt service.resources at September 30, 2023.
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Item 3. Quantitative and QualitativeQualitative Disclosures About Market Risk
Interest Rate Risk
The Company has certain financing arrangements that require interest payments based on floating interest rates. Therates, and to that extent, the Company’s financial results are subject to changes in the market rate of interest. Borrowings under the Loan Agreement bear interest at the Term SOFR, RFR, EURIBOR and CDOR-based borrowing rates. 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, basedBased on current debt levels at September 30, 2017,2023, if market interest rates increase one percent, the Company’s annual variable interest expense would increase approximately $0.6 million annually.$0.2 million.
SomeForeign Currency Exchange Risk
Certain 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 U.S. dollar sales made from businesses in Canada to customers in the United States (“U.S.”). These sales are denominated in U.S. dollars.States. The Company has a systematic program 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 exposure is generally ranges from $2 million to $7less than $1 million. The foreign currency contracts and arrangements created under this program are not designated as hedged items under 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 statementsCondensed Consolidated Statements of operations.Operations (Unaudited). The Company’s foreign currency arrangements are typically three months or less and are settled before the end of a reporting period. At September 30, 2017,2023, the Company had no foreign currency arrangements or contracts in place.
Commodity Price Risk
The Company uses certain commodities,commodity raw materials, primarily plastic resins, and other commodities, such as natural gas, in its manufacturing processes.operations. The cost of operations can be affected asby changes in the market for these commodities, changes.particularly plastic resins. The Company currently has no derivative contracts to hedge this risk; however, thechanges in raw material pricing. The Company also has no significant purchase obligationsmay from time to purchase fixed quantities of such commodities in future periods.time enter into forward buy positions for certain utility costs, which were not material at September 30, 2023. Significant future increases in the cost of plastic resin or other adverse changes in the general economic environment could have a material adverse impact on the Company’s financial position, results of operations or cash flows.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’sSEC’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.
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 as of September 30, 2017.2023.
Changes in Internal Control Over Financial Reporting
During the nine months ended September 30, 2017,2023, there have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – Other Information
Certain legal proceedings in which the Company is involved are discussed in Note 10, Contingencies, in the Unaudited Condensed Consolidated Financial Statements in Part I of this report, and Part I, Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2016.2022. The Company’s disclosures relating to legal proceedings in Note 10, Contingencies, in the Unaudited Condensed Consolidated Financial Statements in Part I of this report are incorporated into Part II of this report by reference. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information regarding the Company’s stock repurchase plan during the quarter ended September 30, 2023:
|
| Total Number of |
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| Average Price Paid |
|
| Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs |
|
| Maximum number of Shares that may yet be Purchased Under the Plans or Programs (1) |
| ||||
7/1/2023 to 7/31/2023 |
|
| — |
|
| $ | — |
|
|
| 5,547,665 |
|
|
| 2,452,335 |
|
8/1/2023 to 8/30/2023 |
|
| — |
|
|
| — |
|
|
| 5,547,665 |
|
|
| 2,452,335 |
|
9/1/2023 to 9/30/2023 |
|
| — |
|
|
| — |
|
|
| 5,547,665 |
|
|
| 2,452,335 |
|
Item 5. Other Information
Securities Trading Plans of 5,547,665 shares of its common stock under this programDirectors and as of September 30, 2017, 2,452,335 shares of common stock remain available for repurchase underExecutive Officers
During the Board authorization. The Company did not repurchase any shares of its common stock during the three or nine months ended September 30, 2017.2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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| Form of Non-Competition, Non-Solicitation and Confidentiality Agreement for Executive Officers.* |
31.1 | |
31.2 | |
32.1 | |
101 | The following financial information from Myers Industries, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* | Indicates executive compensation plan or |
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SIGNATURE
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. | |
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November 1, 2023 |
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Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |
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