Acquisition

On July 2, 2014, CA Acquisition Inc., now known as Scepter Canada Inc., and a wholly-owned subsidiary of Myers Industries, Inc., completed the purchase of substantially all of the assets and assumption of certain liabilities of Scepter Corporation and certain real property of SHI Properties Inc., both located in Scarborough, Ontario, Canada. Contemporaneously with the asset acquisition, Crown US Acquisition Company, now known as Scepter US Holding Company, and another wholly-owned subsidiary of Myers Industries, Inc., completed the purchase of all of the issued and outstanding membership interests of Eco One Leasing, LLC and Scepter Manufacturing, LLC, both located in Miami, Oklahoma. Eco One Leasing, LLC was subsequently merged into Scepter Manufacturing, LLC. The total purchase price for these acquisitions (collectively, “Scepter”) was approximately $157.8 million in cash, which includes an estimated working capital adjustment of $0.8 million subject to further adjustment based on the final working capital and other specified items. The acquisition of Scepter was funded from net proceeds from additional borrowings of approximately $135.3 million under the Fourth Amended and Restated Loan Agreement and cash on hand of $22.5 million.

The acquisition of Scepter strengthens and expands the Company's position as an industry leading producer of portable marine fuel containers, portable fuel and water containers and accessories, ammunition containers, storage totes and environmental bins for the marine, military, consumer and industrial markets. The acquisition of Scepter is consistent with the Company's business strategy and the products fit well with the Company's overall portfolio. The operating results of Scepter have been included within our Condensed Consolidated Statement of Income (Unaudited) and within the Company's Material Handling Segment since the date of acquisition. The Condensed Consolidated Statements of Income (Unaudited) for the Company for the three and nine months ended September 30, 2014 include net sales of $21.6 million and an operating loss of $5.2 million related to Scepter. Included in Scepter's operating results for the three months ended September 30, 2014 were approximately $3.0 million in transactional costs and $2.3 million of inventory purchase accounting fair value adjustments charged to cost of sales as the inventory was sold. Total transactional costs incurred relating to the Scepter acquisition were approximately $3.6 million for the nine months ended September 30, 2014 and are included in general and administrative expenses in the Condensed Consolidated Statements of Income (Unaudited).

The Company accounted for the acquisition of Scepter using the acquisition method of accounting, which requires among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date. As of September 30, 2014, the entire purchase price allocation is preliminary. The Company has received a preliminary third-party valuation of certain tangible and intangible assets of Scepter and, therefore, the values attributed to those acquired assets in the condensed consolidated financial statements are subject to adjustment. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional adjustments will be recorded during the measurement period.

Scepters assets and liabilities are recorded at fair value as of the date of acquisition using primarily level 3 fair value inputs. The purchase consideration, related preliminary estimated allocations, and resulting excess over fair value of net assets acquired are as follows:



Assets acquired:
Current assets	$	34,572
Property, plant and equipment	44,613
Intangible assets	66,500
Assets acquired	$	145,685

Liabilities assumed:
Current liabilities	$	8,877
Total liabilities assumed	8,877

Goodwill	21,003
Total consideration	$	157,811

Goodwill is calculated as the excess of the consideration transferred over the assets acquired and liabilities assumed and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The Company expects that approximately $21.0 million of goodwill recognized for the acquisition will be deductible for tax purposes.

Identifiable intangible assets acquired in connection with the acquisition of Scepter are as follows:



			Estimated
	Fair Value		Useful Life	Valuation Method
Intangible assets not subject to amortization:
Trademarks and trade names	$	8,900		Relief from royalty

Intangible assets subject to amortization:
Technology	22,300		10 years	Relief from royalty
Customer relationships	35,300		6 years	Multi-period excess earnings
	57,600
Total	$	66,500

The following unaudited pro forma information presents a summary of the consolidated results of operations for the Company as if the acquisition of Scepter had occurred on January 1, 2013.



	For the Three Months Ended				For the Nine Months Ended
	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
Net sales	$	162,109	$	165,642	$	516,774	$	515,605

Income from continuing operations	$	357	$	7,688	$	14,717	$	19,679

Income per share from continuing operations:
Basic	$	0.01	$	0.23	$	0.45	$	0.59
Diluted	$	0.01	$	0.22	$	0.45	$	0.58

The unaudited pro forma consolidated results are based on the Company’s historical financial statements and those of Scepter and do not necessarily indicate the results of operations that would have resulted had the acquisition actually been completed at the beginning of the applicable period presented. The pro forma financial information assumes that the companies were combined as of January 1, 2013. The pro forma results reflect the business combination accounting effects from the acquisition including amortization charges from the acquired intangible assets, inventory purchase accounting adjustments charged to cost of sales as the inventory is sold and increased interest expense associated with debt incurred to fund the acquisition. The unaudited pro forma consolidated results do not give effect to the synergies of the acquisition and are not indicative of the results of operations in future periods.