10-K 1 mye-10k_20161231.htm MYE-10K-20161231 mye-10k_20161231.htm

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED December 31, 2016

COMMISSION FILE NUMBER 001-08524

MYERS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

OHIO

34-0778636

(State or other jurisdiction of

incorporation or organization)

(IRS Employer Identification Number)

 

1293 S. MAIN STREET, AKRON, OHIO

(Address of Principal Executive Offices)

44301

(Zip Code)

(330) 253-5592

(Telephone Number)

 

Securities Registered Pursuant to

Section 12(b) of the Act:

Name of Each Exchange

On which registered:

Common Stock, Without Par Value

(Title of Class)

New York Stock Exchange

 

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing sale price on the New York Stock Exchange as of June 30, 2016: $427,319,986

Indicate the number of shares outstanding of registrant’s common stock as of February 28, 2017: 30,022,022 Shares of Common Stock, without par value.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant’s Definitive Proxy Statement for its 2017 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

 

 

 

 

 


TABLE OF CONTENTS

 

PART I

 

 

 

ITEM 1. Business

1

 

ITEM 1A. Risk Factors

7

 

ITEM 1B. Unresolved Staff Comments

12

 

ITEM 2. Properties

13

 

ITEM 3. Legal Proceedings

14

 

 

 

PART II

 

 

 

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

17

 

ITEM 6. Selected Financial Data

19

 

ITEM 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition

20

 

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

26

 

ITEM 8. Financial Statements and Supplementary Data

28

 

Report of Independent Registered Public Accounting Firm

28

 

Consolidated Statements of Operations

29

 

Consolidated Statements of Comprehensive Income (Loss)

30

 

Consolidated Statements of Financial Position

31

 

Consolidated Statements of Shareholders’ Equity

33

 

Consolidated Statements of Cash Flows

34

 

Notes to Consolidated Financial Statements

35

 

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

56

 

ITEM 9A. Controls and Procedures

56

 

ITEM 9B. Other Information

59

 

 

 

Part III

 

 

 

ITEM 10. Directors and Executive Officers of the Registrant

59

 

ITEM 11. Executive Compensation

59

 

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

59

 

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

60

 

ITEM 14. Principal Accounting Fees and Services

60

 

 

 

PART IV

 

 

 

ITEM 15. Exhibits, Financial Statement Schedules

61

 

 

SIGNATURES

65

 

Exhibit 21

 

 

Exhibit 23

 

 

Exhibit 31(a)

 

 

Exhibit 31(b)

 

 

Exhibit 32

 

 

Exhibit 101

 

 

 

 

 


PART I

ITEM 1.

Business

 

(a)

General Development of Business

Myers Industries, Inc. (the “Company”) was founded in Akron, Ohio, in 1933. The terms “Myers Industries,” “Company,” “we,” “us,” or “our” wherever used herein refer to the Company, unless the context indicates to the contrary. Since then, the Company has grown from a small storefront distributing tire service supplies into an international manufacturing and distribution enterprise. In 1971, the Company went public, and the stock is traded on the New York Stock Exchange under the ticker symbol MYE.

Headquartered in Akron, Ohio, the Company manufactures a diverse range of polymer products for industrial, agricultural, automotive, commercial and consumer markets. Myers Industries is a leader in the manufacturing of plastic reusable material handling containers and pallets, and plastic fuel tanks. Other principal product lines include plastic storage and organization containers, rubber tire repair products and custom plastic and rubber products.

The Company is also the largest wholesale distributor of tools, equipment and supplies for the tire, wheel and undervehicle service industry in the United States. The distribution products range from tire balancers and alignment systems to valve caps, tire repair tools and other consumable service supplies.

As of December 31, 2016, the Company operated 15 manufacturing facilities, 20 sales offices, four distribution centers and three distribution branches located throughout North, Central and South America; had approximately 15,000 manufactured products and over 13,500 distributed products; and had approximately 2,200 employees.

Serving customers around the world, Myers Industries’ brands provide safety and efficiency solutions to a wide variety of customers in diverse niche markets. Myers Industries diverse products and solutions help customers improve shop productivity with point of use inventory, store and transport products more safely and efficiently, improve sustainability through reuse, lower overall material handling costs, improve ergonomics for their labor force, eliminate waste and ultimately increase profitability.  Myers Industries’ employees think and act like owners, implementing long term improvements both internally and at their customers.

The Company’s business strategy is guided by the following key operating principles: 1) Niche Market Focus, 2) Flexible Operations, and 3) Strong Cash Flow Growth. Applying these principles to our business, management emphasizes:

 

Customer intimacy - #1 or #2 in each served market;

 

Strong brands;

 

Process driven, simplified, lean operating principles;

 

Manufacture only high value-added components and products;

 

Asset light business model; and

 

Cash return on investment.

The Company continually reviews its segments and brands for strategic fit and growth potential. The review process is dedicated to furthering innovation and brand leadership in niche markets, building strong customer relationships and positioning the Company for strong financial performance.

 

(b)

Financial Information About Segments

The response to this section of Item 1 is contained in the Industry Segments footnote of the Notes to Consolidated Financial Statements under Item 8 of this report.

 

(c)

Description of Business

The Company conducts its business activities in two distinct business segments, Material Handling and Distribution, consistent with the manner in which the Chief Operating Decision Maker evaluates performance and makes resource allocation decisions.

During the second quarter of 2014, the Company's Board of Directors approved the commencement of the sale process to divest its Lawn and Garden business to allow it to focus resources on core growth platforms. The divestiture of the Lawn and Garden business was completed in February 2015. The Lawn and Garden business served the North American horticulture market with plastic products

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such as seedling trays, nursery products, hanging baskets, custom print containers as well as decorative resin planters. The operating results for the Lawn and Garden business are classified as discontinued operations in the Consolidated Statements of Operations under Item 8 of this report.

In our Material Handling Segment, we design, manufacture, and market a variety of plastic and metal products. These range from plastic reusable material handling containers and small parts storage bins to plastic RV tanks and parts, marine tanks and parts, portable plastic fuel tanks and water containers, portable marine fuel containers, ammunition containers, storage totes, bulk shipping containers, beverage crates and metal carts and cabinets. The Material Handling Segment conducts operations in the United States, but also operates in Brazil and Canada. Markets served encompass various niches of industrial manufacturing, food processing, retail/wholesale products distribution, agriculture, automotive, recreational vehicles, marine vehicles, healthcare, appliance, bakery, electronics, textiles, consumer, and others. Products are sold both directly to end-users and through distributors.

The Distribution Segment is engaged in the distribution of tools, equipment and supplies used for tire, wheel and undervehicle service on passenger, heavy truck and off-road vehicles and the manufacturing of tire repair materials and custom rubber products. The product line includes categories such as tire valves and accessories, lifts and alignment equipment, service equipment and tools, and tire repair/retread supplies. The Distribution Segment operates domestically through sales offices, and four regional distribution centers in the United States and in 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, auto dealers, general service and repair centers, tire retreaders, and government agencies.

Information regarding the revenues of each segment classified as continuing operations is contained in the Industry Segments footnote of the Notes to Consolidated Financial Statements under Item 8 of this report.

 

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The following table summarizes the key attributes of the business segments for the year ended December 31, 2016:

 

Material Handling Segment

 

Net Sales

 

Key Product Areas

 

Product Brands

 

Key Capabilities & Services

 

Representative Markets

 

$387.5

Plastic Reusable Containers &

Akro-Mils™

Product Design

Agriculture

 

69%

 

Pallets

Jamco Products

Prototyping

Automotive

 

 

Plastic Storage &

Buckhorn®

Product Testing

Commercial

 

 

 

Organizational Products

Novel do Nordeste S.A.

Material Formulation

Food Processing

 

 

Plastic Carts

Myers do Brasil™

Injection Molding

Food Distribution

 

 

Metal Carts

Ameri-Kart®

Structural Foam Molding

Healthcare

 

 

Metal Cabinets

Scepter

Metal Forming

Industrial

 

 

Wooden Dollies

 

 

Stainless Steel Forming

Manufacturing

 

 

Custom Products

 

 

Wood Fabrication

Retail Distribution

 

 

 

 

 

 

Powder Coating

Wholesale Distribution

 

 

 

 

 

 

Material Regrind & Recycling

Consumer

 

 

 

 

 

 

Plastic Blow Molding

Recreational Vehicle

 

 

 

 

 

 

Plastic Rotational Molding

Marine

 

 

 

 

 

 

Thermoforming

Military

 

 

 

 

 

 

Infrared Welding

Food & Beverage

 

 

 

 

 

 

 

 

Custom

 

 

 

 

 

 

 

 

 

 

 

Distribution Segment

 

Net Sales

 

Key Product Areas

 

Product Brands

 

Key Capabilities & Services

 

Representative Markets

 

$170.7

Tire Valves & Accessories

Myers Tire Supply®

Broad Sales Coverage

Retail Tire Dealers

 

31%

Tire Changing &

Myers Tire Supply

Local Sales

Truck Tire Dealers

 

 

 

Balancing Equipment

 

International™

Four Strategically Placed

Auto Dealers

 

 

Lifts & Alignment Equipment

Patch Rubber Company®

 

Distribution Centers

Commercial Auto & Truck

 

 

Service Equipment

Elrick

International Distribution

 

Fleets

 

 

Hand Tools

Fleetline

Personalized Service

General Repair & Services

 

 

Tire Repair & Retread

MTS

 

 

 

National Accounts

 

Facilities

 

 

 

Equipment & Supplies

Phoenix

Product Training

Tire Retreaders

 

 

Brake, Transmission & Allied

Seymoure

 

Repair/Service Training

Tire Repair

 

 

 

Service Equipment & Supplies

 

 

New Products/Services

Governmental Agencies

 

 

Highway Markings

 

 

 

"Speed to Market"

Telecommunications

 

 

Industrial Rubber

 

 

Rubber Mixing

Industrial

 

 

General Shop Supplies

 

 

 

Rubber Compounding

Road Construction

 

 

Tire Pressure Monitoring System

 

 

 

Rubber Calendaring

Mining

 

 

 

 

 

 

Tiered Product Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments Overview

Material Handling Segment

The Material Handling Segment manufactures highly engineered polymer packaging containers, storage and safety products, and specialty molded parts. The brands within this segment include Buckhorn®, Akro-Mils, Jamco Products, Ameri-Kart®, Scepter, Myers do Brasil and Novel®.

Buckhorn’s reusable containers and pallets are used in closed-loop supply chain systems to help customers improve product protection, increase handling efficiencies, reduce freight costs and eliminate solid waste and disposal costs.  Buckhorn offers products to replace costly single use cardboard boxes, wooden pallets, and steel containers. The product line is among the broadest in the industry and includes injection-molded and structural foam-molded constructions.  Buckhorn’s product lines include hand-held

3


containers used for inventory control, order management and transportation of retail goods; collapsible and fixed-wall bulk transport containers for light and heavy-duty tasks; intermediate bulk containers for the storage and transport of food, liquid, powder, and granular products; plastic pallets; and specialty boxes designed for storage of items such as seed. Buckhorn also produces a wide variety of specialty products designed for niche applications and custom products designed according to exact customer specifications.

Akro-Mils material handling products provide customers everything they need to store, organize and transport a wide range of goods while increasing overall productivity and profitability.  Serving industrial and commercial markets, Akro-Mils products range from AkroBins® — the industry’s leading small parts bins — to Super-Size AkroBins, metal panel and bin hanging systems, metal storage cabinet and bin systems, wire shelving systems, plastic and metal transport carts and a wide variety of custom storage and transport products. Akro-Mils products deliver storage and organization solutions in a wide variety of applications, from creating assembly line workstations to organizing medical supplies and retail displays. Emphasis is placed on product bundling and customizing systems to create specific storage and organization configurations for customers’ operations.

Jamco Products is well established in industrial and commercial markets with its wide selection of welded steel service carts, platform trucks, mobile work centers, racks and cabinets for plastic bins, safety cabinets, medical cylinder carts and more. Jamco Products strong product offering, relationships with industrial distributors and reputation for quality and service complements Myers Industries' existing Material Handling businesses.

Ameri-Kart is an industry leading manufacturer and thermoformer of rotational-molded water, fuel and waste handling tanks, plastic trim and interior parts used in the production of seat components, consoles, and other applications throughout the recreational vehicle, marine, and industrial markets.  In addition to standard marine parts, Ameri-Kart is well respected within the marine market for its patented Enviro-Fill® overfill prevention system (“OPS”) technology and is the industry’s only turnkey provider of an integrated, Environmental Protection Agency (“EPA”)-compliant marine fuel tank and patented Enviro-Fill diurnal system.

Scepter is a leading producer of portable plastic fuel containers, portable marine fuel tanks and water containers, ammunition containers and storage totes.  Scepter was the first provider of Jerry Cans to North America which offer safe, reliable transportation and storage of fuel for the consumer market.  Scepter also manufactures a variety of molded products for military applications from high quality containers to safely store and transport large caliber ammunition, to military specified portable fuel and water canisters. Scepter's in-house product engineering and state of the art mold capabilities complements Myers Industries' Material Handling Segment through an increased product offering and global reach.

Myers do Brazil and Novel are leading designers and manufacturers of reusable plastic shipping containers, plastic pallets, crates and totes used for closed-loop shipping and storage in Brazil’s automotive, distribution, food, beverage and agriculture industries. With manufacturing facilities strategically located throughout Brazil, Myers is uniquely positioned to support customers throughout Latin America.  

Distribution Segment

Our Distribution Segment includes the Myers Tire Supply® and Myers Tire Supply International and Patch Rubber Company® brands.  Within the Distribution Segment we source and manufacture top of the line products for the tire, wheel and undervehicle service industry.

Myers Tire Supply is the largest U.S. distributor and single source for tire, wheel and undervehicle service tools, equipment and supplies. We buy and sell approximately 13,500 different items — everything that professionals need to service passenger, truck and off-road tires, wheels and related components. Independent tire dealers, mass merchandisers, commercial auto and truck fleets, auto dealerships, tire retreaders and general repair facilities rely on our broad product selection, rapid availability and personal service to be more productive and profitably grow their business.

While the needs and composition of our distribution markets constantly change, we adapt and deliver new products and services that are crucial to our customers’ success. The new product pipeline is driven by a thorough understanding of the market and its customers' needs. Myers Tire Supply in turn works closely with its suppliers to develop innovative products and services to meet these needs.

Patch Rubber Company manufactures one of the most comprehensive lines of tire repair and retreading products in the United States. Service professionals rely on our extensive product selection and quality for safe, cost-effective repairs to passenger, truck and off-road tires. Products include the plug that fills a puncture, the cement that seals the plug, the tire innerliner patch and the final sealing compound. Patch brand repair products maintain a strong position in the tire service markets including sales through our Distribution Segment’s sales network.  Patch Rubber also employs its rubber calendering and compounding expertise to create a diverse portfolio of products outside of the tire repair market, such as reflective highway marking tapes. Our rubber-based tape and symbols provide the

4


durability and brightness that construction professionals demand to replace paint for marking road repair, intersections and hazardous areas. Compared with traditional highway paint, the tape stock is easier to apply, more reflective and longer lasting.

Raw Materials & Suppliers — Manufacturing and Distribution Segments

The Company purchases substantially all of its raw materials from a wide range of third-party suppliers. These materials are primarily polyethylene, polypropylene, and polystyrene plastic resins, as well as synthetic and natural rubber. Most raw materials are commodity products and available from several domestic suppliers. We believe that the loss of any one supplier or group of suppliers would not have a material adverse effect on our business.

Our Distribution Segment purchases substantially all of its components from third-party suppliers and has multiple sources for its products.

Competition

Competition in our Material Handling Segment is substantial and varied in form and size from manufacturers of similar products and of other products which can be substituted for those produced by the Company. In general, most direct competitors with the Company’s brands are private entities. Myers Industries maintains strong brand presence and market positions in the niche sectors of the markets it serves. The Company does not command substantial, overall market presence in the broad market sectors.

Competition in our Distribution Segment is generally comprised of small companies, regional players and national auto parts chains where product offerings may overlap. Within the overall tire, wheel and undervehicle service market, Myers Industries is the largest U.S. distributor of tools, equipment and supplies offered based on national coverage.

Customer Dependence

In 2016, 2015, and 2014, there were no customers that accounted for more than five percent of total net sales. Myers Industries serves thousands of customers who demand value through product selection, innovation, quality, delivery and responsive personal service. Our brands foster satisfied, loyal customers who have recognized our performance through numerous supplier quality awards.

Employees

As of December 31, 2016, Myers Industries had a total of approximately 2,200 full-time and part-time employees. Of these, approximately 1,600 were employed in the Company’s Material Handling Segment and the Distribution Segment employed approximately 555. The Company’s corporate offices had approximately 45 employees.

As of December 31, 2016, the Company had approximately 385 employees represented by labor unions. Collective bargaining agreements between us and these labor unions expire March 2017, June 2017 and November 2019 representing approximately 50, 140 and 195 employees, respectively. We consider our relationship with our employees generally to be satisfactory.

Backlog

The backlog of orders for our operations is estimated to have been approximately $31 million at December 31, 2016 and approximately $44 million at December 31, 2015. Our backlog is scheduled for delivery within the succeeding 12 months. During periods of shorter lead times, backlog may not be a meaningful indicator of future sales. Accordingly, we do not believe our backlog data and comparisons thereof, as of different dates, reliably indicate future sales or shipments.

 

(d)

Financial Information About Geographic Areas

The response to this section of Item 1 is contained in the Industry Segments footnote of the Notes to Consolidated Financial Statements under Item 8 of this report.

5


 

(e)

Available Information

Filings with the SEC.    As a public company, we regularly file reports and proxy statements with the Securities and Exchange Commission ("SEC"), such as:

* annual reports on Form 10-K;

* quarterly reports on Form 10-Q;

* current reports on Form 8-K; and

* proxy statements on Schedule 14A.

Anyone may read and copy any of the materials we file with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information regarding operations of the Public Reference Room may also be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website that contains our reports, proxy and information statements, and our other SEC filings; the address of that site is http://www.sec.gov.

Also, we make our SEC filings available free of charge on our own internet site as soon as reasonably practicable after we have filed with the SEC. Our internet address is http://www.myersindustries.com. The content on the Company’s website is available for informational purposes only and is not incorporated by reference into this Form 10-K.

Corporate Governance.     We have a Code of Business Conduct for our employees and members of our Board of Directors. A copy of this Code is posted on our website in the section titled “Investor Relations”. We will satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, any provision of this Code with respect to our executive officers or directors by disclosing the nature of that amendment or waiver.

Our website also contains additional information about our corporate governance policies, including the charters of our standing board committees. Any of these items are available in print to any shareholder who requests them. Requests should be sent to Corporate Secretary, Myers Industries, Inc., 1293 S. Main Street, Akron, Ohio 44301.

6


ITEM 1A.

Risk Factors  

This Form 10-K and the information we are incorporating by reference contain forward-looking statements within the meaning of federal securities laws, including information regarding the Company’s financial outlook, future plans, objectives, business prospects and anticipated financial performance. You can identify these statements by the fact that they include words such as “will,” “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” or variations of these words, or similar expressions. These forward-looking statements are not statements of historical facts and represent only our current expectations regarding such matters. These statements inherently involve a wide range of known and unknown uncertainties. The Company’s actual actions and results could differ materially from what is expressed or implied by these statements. Specific factors that could cause such a difference include those set forth below and other important factors disclosed previously and from time to time in our other filings with the Securities and Exchange Commission. Given these factors, as well as other variables that may affect our operating results, you 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. We expressly disclaim any obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions associated with them.

Risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements include:

Any significant increase in the cost of raw materials or disruption in the availability of raw materials could adversely affect our performance.

Our ability to manage our cost structure can be adversely affected by movements in commodity and other raw material prices. Our primary raw materials include plastic resins, colorants and natural and synthetic rubbers. Plastic resins in particular are subject to substantial short term price fluctuations, including those arising from supply shortages and changes in the price of natural gas, crude oil and other petrochemical intermediates from which resins are produced, as well as other factors. Over the past several years, we have at times experienced rapidly increasing resin prices. The Company’s revenue and profitability may be materially and adversely affected by these price fluctuations.

Market conditions may limit our ability to raise selling prices to offset increases in our raw material input costs. If we are unsuccessful in developing ways to mitigate raw material cost increases, we may not be able to improve productivity or realize our ongoing cost reduction programs sufficiently to help offset the impact of these increased raw material costs. As a result, higher raw material costs could result in declining margins and operating results.

Changes in raw material availability may also occur due to events beyond our control, including natural disasters such as floods, tornadoes and hurricanes. Our specific molding technologies and/or product specifications can limit our ability to locate alternative suppliers to produce certain products.

We may incur inherent risks and may not achieve anticipated benefits associated with our strategic growth initiatives.

Our growth initiatives include internal growth driven by strong brands and new product innovation; development of new, high-growth markets and expansion in existing niche markets; strengthened customer relationships through value-added initiatives and key product partnerships; investments in new technology and processes to reinforce market strength and capabilities in key business groups; consolidation and rationalization activities to further reduce costs and improve productivity within our manufacturing and distribution footprint; an opportunistic and disciplined approach to strategic acquisitions to accelerate growth in our market positions; and potential divestitures of businesses with non-strategic products or markets.

While this is a continuous process, all of these activities and initiatives have inherent risks and there remain significant challenges and uncertainties, including economic and general business conditions that could limit our ability to achieve anticipated benefits associated with announced strategic initiatives and affect our financial results. We may not achieve any or all of these goals and are unable to predict whether these initiatives will produce significant revenues or profits.

7


We may not realize the improved operating results that we anticipate from past and recent acquisitions or from acquisitions we may make in the future and we may experience difficulties in integrating the acquired businesses or may inherit significant liabilities related to such businesses.  

We explore opportunities to acquire businesses that we believe are related to our core competencies from time to time, some of which may be material to us. We expect such acquisitions will produce operating results consistent with our other operations; however, we may be unable to achieve the benefits expected to be realized from our acquisitions. In addition, we may incur additional costs and our management’s attention may be diverted because of unforeseen expenses, difficulties, complications, delays and other risks inherent in acquiring businesses, including the following:

 

we may have difficulty integrating the acquired businesses as planned, which may include integration of systems of internal controls over financial reporting and other financial and administrative functions;

 

we may have delays in realizing the benefits of our strategies for an acquired business;

 

we may not be able to retain key employees necessary to continue the operations of an acquired business;

 

acquisition costs may be met with cash or debt, increasing the risk that we will be unable to satisfy current financial obligations; and

 

acquired companies may have unknown liabilities that could require us to spend significant amounts of additional capital.

Our results of operations and financial condition could be adversely affected by a downturn in the general markets or the general economic environment.

We operate in a wide range of geographies, primarily North America, Central America and South America. Additionally, some of our end markets are cyclical, and some of our products are a capital expense for our customers. Worldwide and regional economic, business and political conditions, including changes in the economic conditions of the broader markets and in our individual niche markets, could have an adverse effect on one or both of our operating segments.

We operate in a very competitive business environment.

Both of our segments participate in markets that are highly competitive. We compete primarily on the basis of product quality, product performance, value, and supply chain competency. Our competitive success also depends on our ability to maintain strong brands, customer relationships and the belief that customers will need our products and services to meet their growth requirements. The development and maintenance of such brands requires continuous investment in brand building, marketing initiatives and advertising. The competition that we face in all of our markets — which varies depending on the particular business segment, product lines and customers — may prevent us from achieving sales, product pricing and income goals, which could affect our financial condition and results of operations.

Our operations depend on our ability to maintain continuous, uninterrupted production at our manufacturing facilities, which are subject to physical and other risks that could disrupt production.

We are subject to inherent risks in our diverse manufacturing and distribution activities, including, but not limited to: product quality, safety, licensing requirements and other regulatory issues, environmental events, loss or impairment of key manufacturing or distribution sites, disruptions in logistics and transportation services, labor disputes and industrial accidents. While we maintain insurance covering our manufacturing and production facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of our facilities due to accident, fire, explosion, or natural disaster, whether short or long-term, could have a material adverse effect on our business, financial condition and results of operations.

Unexpected failures of our equipment and machinery may also result in production delays, revenue loss and significant repair costs, as well as injuries to our employees. Any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative impact on our profitability and cash flows. Our business interruption insurance may not be sufficient to offset the lost revenues or increased costs that we may experience during a disruption of our operations. A temporary or long-term business disruption could result in a permanent loss of customers. If this were to occur, our future sales levels, and therefore our profitability, could be materially adversely affected.

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We derive a portion of our revenues from direct and indirect sales outside the United States and are subject to the risks of doing business in foreign countries.

We currently operate manufacturing, sales and service facilities outside of the United States, particularly in Canada and Brazil. For the year ended December 31, 2016, international net sales accounted for approximately 14% of our total net sales from continuing operations. Accordingly, we are subject to risks associated with operations in foreign countries, including:

 

fluctuations in currency exchange rates;

 

limitations on the remittance of dividends and other payments by foreign subsidiaries;

 

limitations on foreign investment;

 

additional costs of compliance with local regulations; and

 

in certain countries, higher rates of inflation than in the United States.

In addition, our operations outside the United States are subject to the risk of new and different legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations and potentially adverse tax consequences. The costs related to our international operations could adversely affect our operations and financial results in the future.

Our future performance depends in part on our ability to develop and market new products if there are changes in technology, regulatory requirements or competitive processes.

Changes in technology, regulatory requirements and competitive processes may render certain products obsolete or less attractive. Our performance in the future will depend in part on our ability to develop and market new products that will gain customer acceptance and loyalty, as well as our ability to adapt our product offerings and control our costs to meet changing market conditions. Our operating performance would be adversely affected if we were to incur delays in developing new products or if such products did not gain market acceptance. There can be no assurance that existing or future products will be sufficiently successful to enable us to effectively compete in our markets or, should new product offerings meet with significant customer acceptance, that one or more current or future competitors will not introduce products that render our products noncompetitive.

We may not be successful in protecting our intellectual property rights, including our unpatented proprietary know-how and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others.

In addition to relying on patent and trademark rights, we rely on unpatented proprietary know-how and trade secrets and employ various methods, including confidentiality agreements with employees and consultants, to protect our know-how and trade secrets. However, these methods and our patents and trademarks may not afford complete protection and there can be no assurance that others will not independently develop the know-how and trade secrets or develop better production methods than us. Further, we may not be able to deter current and former employees, contractors and other parties from breaching confidentiality agreements and misappropriating proprietary information and it is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. Additionally, in the future we may license patents, trademarks, trade secrets and similar proprietary rights to third parties. While we attempt to ensure that our intellectual property and similar proprietary rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect our rights or the value of our intellectual property, similar proprietary rights or reputation. In the future, we may also rely on litigation to enforce our intellectual property rights and contractual rights and, if not successful, we may not be able to protect the value of our intellectual property. Furthermore, no assurance can be given that we will not be subject to claims asserting the infringement of the intellectual property rights of third parties seeking damages, the payment of royalties or licensing fees and/or injunctions against the sale of our products. Any litigation could be protracted and costly and could have a material adverse effect on our business and results of operations regardless of its outcome.

If we are unable to maintain access to credit financing, our business may be adversely affected.

The Company’s ability to make payments and to refinance our indebtedness, fund planned capital expenditures and acquisitions and pay dividends will depend on our ability to generate cash in the future and retain access to credit financing. This, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot provide assurance that our business will generate sufficient cash flow from operating activities or that future borrowings will be available to us under our credit facilities in amounts sufficient to enable us to service debt, make necessary capital expenditures or fund other liquidity needs. We may need to refinance all or a portion of our indebtedness, on or before maturity. We cannot be sure that we would be able to refinance any of our indebtedness on commercially reasonable terms or at all.

9


The credit facilities contain restrictive covenants and cross default provisions that require us to maintain specified financial ratios. The Company’s ability to satisfy those financial ratios can be affected by events beyond our control, and we cannot be assured we will satisfy those ratios. A breach of any of those financial ratio covenants or other covenants could result in a default. Upon the occurrence of an event of default, the lenders could elect to declare the applicable outstanding indebtedness due immediately and payable and terminate all commitments to extend further credit. We cannot be sure that our lenders would waive a default or that we could pay the indebtedness in full if it were accelerated.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.

Internal control systems are intended to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Any failure to maintain effective controls or implement required new or improved controls could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our Consolidated Financial Statements, and substantial costs and resources may be required to rectify these internal control deficiencies. If we have an internal control deficiency and our remedial measures are insufficient, material weaknesses or significant deficiencies in our internal control over financial reporting could be discovered or occur in the future, and our consolidated financial statements may contain material misstatements. See Item 9A – Controls and Procedures for further discussion.

Future claims, litigation and regulatory actions could adversely affect our financial condition and our ability to conduct our business.

While we strive to ensure that our products comply with applicable government regulatory standards and internal requirements and that our products perform effectively and safely, customers from time to time could claim that our products do not meet contractual requirements, and users could be harmed by use or misuse of our products. This could give rise to breach of contract, warranty or recall claims, or claims for negligence, product liability, strict liability, personal injury or property damage. Product liability insurance coverage may not be available or adequate in all circumstances. In addition, claims may arise related to patent infringement, environmental liabilities, distributor terminations, commercial contracts, antitrust or competition law, employment law and employee benefits issues and other regulatory matters. While we have in place processes and policies to mitigate these risks and to investigate and address such claims as they arise, we cannot predict the underlying costs to defend or resolve such claims.

Current and future environmental and other governmental laws and requirements could adversely affect our financial condition and our ability to conduct our business.

Our operations are subject to federal, state, local and foreign environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the handling, use, treatment, storage and disposal of, or exposure to, hazardous wastes and other materials and require clean-up of contaminated sites. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and periodically may be subject to modification, renewal and revocation by issuing authorities. Fines, penalties and other civil or criminal sanctions may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have or to comply with the terms and conditions of required permits. Certain environmental laws in the United States, such as the federal Superfund law and similar state laws, impose liability for the cost of investigation or remediation of contaminated sites upon the current or, in some cases, the former site owners or operators (or their predecessor entities) and upon parties who arranged for the disposal of wastes or transported or sent those wastes to an off-site facility for treatment or disposal, regardless of when the release of hazardous substances occurred or the lawfulness of the activities giving rise to the release. Such liability can be imposed without regard to fault and, under certain circumstances, can be joint and several, resulting in one party being held responsible for the entire obligation.

While we have not been required historically to make significant capital expenditures in order to comply with applicable environmental laws and regulations, we cannot predict with any certainty our future capital expenditure requirements because of continually changing compliance standards and environmental technology. Furthermore, violations or contaminated sites that we do not know about, including contamination caused by prior owners and operators of such sites, or at sites formerly owned or operated by us or our predecessors in connection with discontinued operations, could result in additional compliance or remediation costs or other liabilities, which could be material.

In that we have been formally notified by the U.S. Environmental Protection Agency (“EPA”) that we are considered to be a potentially responsible party (“PRP”) of the New Idria Mercury Mine, the Company accrued costs related to the EPA claim. As negotiations with the EPA proceed with respect to the Remedial Investigation/Feasibility Study, it is possible that adjustments to the reserved expense will be necessary to reflect new information. Estimates of our liability are based on current facts, laws, regulations and technology. Estimates of our environmental liabilities are further subject to uncertainties regarding the negotiations with EPA, the

10


nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluation and cost estimates, the extent of remedial actions that may be required, the number and financial condition of other PRPs that may be named as well as the extent of their responsibility for the remediation, and the availability of insurance coverage for these expenses. At this time, we have not accrued for remediation costs in connection with this site as we are unable to estimate the liability, given the circumstances referred to above, including the fact the final remediation strategy has not yet been determined.

We have limited insurance coverage for potential environmental liabilities associated with historic and current operations and we do not anticipate increasing such coverage in the future. We may also assume significant environmental liabilities in acquisitions. Such costs or liabilities could adversely affect our financial situation and our ability to conduct our business.

Environmental regulations specific to plastic products and containers could adversely affect our ability to conduct our business.

Federal, state, local and foreign governments could enact laws or regulations concerning environmental matters that increase the cost of producing, or otherwise adversely affect the demand for, plastic products. Legislation that would prohibit, tax or restrict the sale or use of certain types of plastic and other containers, and would require diversion of solid wastes such as packaging materials from disposal in landfills, has been or may be introduced in the U.S. Congress, in state legislatures and other legislative bodies. While container legislation has been adopted in a few jurisdictions, similar legislation has been defeated in public referenda in several states, local elections and many state and local legislative sessions. There can be no assurance that future legislation or regulation would not have a material adverse effect on us. Furthermore, a decline in consumer preference for plastic products due to environmental considerations could have a negative effect on our business.

Our insurance coverage may be inadequate to protect against potential hazardous incidents to our business.

We maintain property, business interruption, product liability and casualty insurance coverage, but such insurance may not provide adequate coverage against potential claims, including losses resulting from war risks, terrorist acts or product liability claims relating to products we manufacture. Consistent with market conditions in the insurance industry, premiums and deductibles for some of our insurance policies have been increasing and may continue to increase in the future. In some instances, some types of insurance may become available only for reduced amounts of coverage, if at all. In addition, there can be no assurance that our insurers would not challenge coverage for certain claims. If we were to incur a significant liability for which we were not fully insured or that our insurers disputed, it could have a material adverse effect on our financial position, results of operations or cash flows.

Our business operations could be significantly disrupted if members of our senior management team were to leave.

Our success depends to a significant degree upon the continued contributions of our senior management team. Our senior management team has extensive marketing, sales, manufacturing, finance and engineering experience, and we believe that the depth of our management team is instrumental to our continued success. The loss of any of our key executive officers in the future could significantly impede our ability to successfully implement our business strategy, financial plans, expansion of services, marketing and other objectives.

We may be subject to risks relating to our information technology systems.

We rely on information technology systems to process, transmit and store electronic information and manage and operate our business. While we have implemented security measures designed to prevent and mitigate the risk of such breaches, a breach in security could expose us and our customers and suppliers to risks of misuse of confidential information, manipulation and destruction of data, production downtimes and operations disruptions, which in turn could negatively affect our reputation, competitive position, business, results of operations or cash flows.

Unforeseen future events may negatively impact our economic condition.

Future events may occur that would adversely affect the reported value of our assets. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our customer base, or a material adverse change in our relationship with significant customers.

Equity Ownership Concentration

Based solely on the Schedule 13D filed on March 21, 2016, by Gabelli Funds, LLC, GAMCO Asset Management Inc., MJG Associates, Inc., Gabelli Securities, Inc., Teton Advisors, Inc., Gabelli Foundation, Inc., GGCP, Inc., and GAMCO Investors, Inc., (collectively, the “Gamco Group”), for which the Company disclaims any responsibility, beneficially owned 6,967,064 shares of our

11


common stock which represented approximately 23% of the 29,919,381 shares outstanding as reported in our Form 10-Q for the quarterly period ended September 30, 2016. Combined, these parties may have sufficient voting power to influence actions requiring the approval of our shareholders.

Changes in laws and regulations may have an adverse impact on our operations.

Changes in laws and regulations and approvals and decisions of courts, regulators, and governmental bodies on any legal claims known or unknown, could have an adverse effect on the Company’s financial results.

 

 

ITEM 1B.

Unresolved Staff Comments

None.

12


ITEM 2.

Properties

The following table sets forth certain information with respect to properties owned by the Company:

 

 

 

Distribution

 

 

 

Location

 

Approximate

Floor Space

(Square Feet)

 

 

Approximate

Land Area

(Acres)

 

 

Use

Akron, Ohio

 

 

129,000

 

 

 

8

 

 

Executive offices and warehousing

Akron, Ohio

 

 

67,000

 

 

 

5

 

 

Distribution center

Wadsworth, Ohio

 

 

125,000

 

 

 

12

 

 

Distribution center

Pomona, California

 

 

18,000

 

 

 

1

 

 

Sales and distribution center

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

 

 

Miami, Oklahoma

 

 

330,000

 

 

 

16

 

 

Manufacturing and distribution

Sandusky, Ohio

 

 

305,000

 

 

 

8

 

 

Manufacturing and distribution

Springfield, Missouri

 

 

227,000

 

 

 

19

 

 

Manufacturing and distribution

Wadsworth, Ohio

 

 

197,000

 

 

 

23

 

 

Manufacturing and distribution

Bristol, Indiana

 

 

185,000

 

 

 

12

 

 

Manufacturing and distribution

Bluffton, Indiana

 

 

175,000

 

 

 

17

 

 

Manufacturing and distribution

Roanoke Rapids, North Carolina

 

 

172,000

 

 

 

20

 

 

Manufacturing and distribution

Scarborough, Ontario

 

 

170,000

 

 

 

8

 

 

Manufacturing and distribution

 

The following table sets forth certain information with respect to facilities leased by the Company:

 

 

 

Manufacturing & Distribution

 

 

Location

 

Approximate

Floor Space

(Square Feet)

 

 

Expiration Date

of Lease

 

Use

Cassopolis, Michigan

 

 

210,000

 

 

October 31, 2018

 

Manufacturing and distribution

South Beloit, Illinois

 

 

160,000

 

 

September 30, 2017

 

Manufacturing and distribution

Springfield, Missouri

 

 

70,000

 

 

October 31, 2019

 

Manufacturing and distribution

Lauro de Freitas City, Bahia, Brazil

 

 

90,000

 

 

June 30, 2017

 

Manufacturing and distribution

Ibipora, Parana, Brazil

 

 

55,000

 

 

June 30, 2017

 

Manufacturing and distribution

Southaven, Mississippi

 

 

56,000

 

 

September 30, 2023

 

Distribution center

Jaguariuna, Brazil

 

 

54,000

 

 

April 30, 2017

 

Manufacturing and distribution

Salt Lake City, Utah

 

 

30,000

 

 

October 31, 2023

 

Distribution center

Milford, Ohio

 

 

22,000

 

 

November 30, 2018

 

Administration and sales

 

The Company also leases facilities for its sales offices and sales branches in the United States and Central America which, in the aggregate, amount to approximately 50,000 square feet of warehouse and office space. All of these locations are used by the Distribution Segment.

The Company believes that all of its properties, machinery and equipment generally are well maintained and adequate for the purposes for which they are used.

13


ITEM 3.

Legal Proceedings

The Company is a defendant in various lawsuits and a party to various other legal proceedings, in the ordinary course of business, some of which are covered in whole or in part by insurance. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a future material adverse effect on our consolidated financial position, results of operations or cash flows.

New Idria Mercury Mine

In September 2015, the U.S. Environmental Protection Agency (“EPA”) formally informed a subsidiary of the Company, Buckhorn, Inc. (“Buckhorn”) via a notice letter and related documents (the “Notice Letter”) that it considers Buckhorn to be a potentially responsible party (“PRP”) in connection with the New Idria Mercury Mine 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 in 1987.  As a result of the EPA Notice Letter, Buckhorn and the Company are engaged in negotiations with the EPA with respect to a draft Administrative Order 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 New Idria Mine is located near Hollister, California and was added to the Superfund National Priorities List by the EPA in October 2011, at which time the Company recognized expense of $1.9 million related to performing the RI/FS.   Based on discussions with the EPA in mid-2016, the Company determined that the RI/FS will begin in 2017 and therefore obtained updated estimated costs to perform the RI/FS.  As a result of the updated estimated costs, the Company recognized additional expense of $1.0 million during the year ended December 31, 2016.  As part of the Notice Letter, the EPA also made a claim for approximately $1.6 million in past costs for actions it claims it has taken in connection with the New Idria Mine since 1993.  While the Company is challenging these past cost claims, in 2015 the Company recognized expense of $1.3 million related to these past claims.   As of December 31, 2016, the Company has a total reserve of $2.5 million related to the New Idria Mine.

As negotiations with the EPA proceed, it is possible that adjustments to the aforementioned reserves will be necessary to reflect new information. Estimates of the Company’s liability are based on current facts, laws, regulations and technology. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the negotiations with EPA, the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluation and cost estimates, the extent of remedial actions that may be required, the number and financial condition of other PRPs that may be named as well as the extent of their responsibility for the remediation, and the availability of insurance coverage for these expenses.

At this time, we have not accrued for remediation costs in connection with this site as we are unable to estimate the liability, given the circumstances referred to above, including the fact the final remediation strategy has not yet been determined.

New Almaden Mine (formerly referred to as Guadelupe River Watershed)

A number of parties, including the Company and its subsidiary, Buckhorn (as successor to NIMCC), were alleged by trustee agencies of the United States and the State of California to be responsible for natural resource damages due to environmental contamination of areas comprising the historical New Almaden mercury mines located in the Guadalupe River Watershed region in Santa Clara County, California (“County”). In 2005, Buckhorn and the Company, without admitting liability or chain of ownership of NIMCC, resolved the trustees’ claim against them through a consent decree that required them to contribute financially to the implementation by the County of an environmentally beneficial project within the impacted area.  Buckhorn and the Company negotiated an agreement with the County, whereby Buckhorn and the Company agreed to reimburse one-half of the County’s original cost estimate of $1.6 million of implementing the project. As a result, in 2005, the Company recognized expense of $0.8 million representing its share of the initial estimated project costs, of which approximately $0.5 million has been paid to date. In April 2016, the Company was notified by the County that the original cost estimate may no longer be appropriate due to expanded scope and increased costs of construction and provided a revised estimate of between $3.3 million and $4.4 million.  The Company completed a detailed review of the support provided by the County for their revised estimate and as a result, recognized additional expense of $1.2 million during the year ended December 31, 2016.  As of December 31, 2016, the Company has a total reserve of $1.5 million related to the New Almaden Mine.    

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 2017.  As work on the project occurs, 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.

14


Lawn and Garden Indemnification Claim

In connection with the sale of the Lawn and Garden business, as described in Note 10, the Company received a Notice of Indemnification Claims in April 2015, and 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. The Company believes these Claims are without merit and intends to vigorously defend its position. Approximately $8.6 million of the sale proceeds were placed in escrow and due to be settled in August 2016, but have been extended until the Claims are resolved.  

Other

Buckhorn and Schoeller Arca Systems, Inc. (“SAS”) were plaintiffs in a patent infringement lawsuit against Orbis Corp. and Orbis Material Handling, Inc. (“Orbis”) for alleged breach by Orbis of an exclusive patent license agreement from SAS to Buckhorn. SAS is an affiliate of Schoeller Arca Systems Services B.V. (“SASS B.V.”), a Dutch company. SAS manufactures and sells plastic returnable packaging systems for material handling. In the course of the litigation, it was discovered that SAS had given a patent license agreement to a predecessor of Orbis that pre-dated the one that SAS sold to Buckhorn. As a result, judgment was entered in favor of Orbis, and the court awarded attorney fees and costs to Orbis in the amount of $3.1 million, plus interest and costs.

In May 2014, Orbis made demand to SAS that SAS pay the judgment in full, and subsequently in July 2014, Orbis made the same demand to Buckhorn. Buckhorn believed it was not responsible for any of the judgment because it was not a party to the Orbis license. Despite this belief, the Company recorded expense of $3.0 million in 2014 for the entire amount of the unpaid judgment. The United States Court of Appeals for the Federal Circuit reversed the judgment against Buckhorn on July 2, 2015, and found that Buckhorn was not liable to Orbis for any portion of the judgment entered in favor of Orbis. Accordingly, Myers reversed the accrual of $3.0 million in 2015, which was reflected as a reduction of general and administrative expenses. The Federal Circuit Court of Appeals rejected Orbis' petition for rehearing and rehearing en banc. All opportunities for Orbis to appeal have expired. The United States District Court for the Southern District of Ohio has now released Buckhorn’s appellate bond. Buckhorn was also pursuing legal action against SAS and SASS B.V. for fraudulently selling an exclusive patent license they could not sell and related claims. In 2016, the Company settled with SAS and SASS B.V. in return for a payment to the Company of $0.2 million, which was recorded as a reduction in general and administrative expenses. 

When a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the estimated loss, 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.

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.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information concerning the executive officers of the Registrant as of December 31, 2016. Executive officers are appointed annually by the Board of Directors.

 

Name

 

Age

 

Title

R. David Banyard

 

48

 

President and Chief Executive Officer

Matteo Anversa

 

45

 

Executive Vice President, Chief Financial Officer and Corporate Secretary

 

Mr. Banyard, President and Chief Executive Officer, was appointed to his current position on December 7, 2015. Formerly, Mr. Banyard served as the Group President, Fluid Handling Technologies at Roper Technologies where he led a diverse portfolio of companies serving a wide array of end markets. Prior to that, Mr. Banyard was with Danaher Corporation where he held successive leadership roles during his six year tenure culminating with his leadership of the Vehicle Systems business unit of Kollmorgen, based in Stockholm, Sweden.

15


Mr. Anversa, Executive Vice President, Chief Financial Officer and Corporate Secretary, was appointed to his current position on December 1, 2016. Prior to that, he was with Fiat Chrysler Automobiles N.V., where he served as Vice President, Group Financial Planning and Analysis. Prior to that, Mr. Anversa was with General Electric Corporation where he held successive leadership roles during his sixteen year tenure.  

Section 16(a) of the Securities Exchange Act of 1934 requires the Registrant’s Directors, certain of its executive officers and persons who own more than ten percent of its Common Stock (“Insiders”) to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange, and to furnish the Company with copies of all such forms they file. The Company understands from the information provided to it by insiders that they adhered to all filing requirements applicable to Section 16 filers in 2016.

 

 

 

16


PART II

 

ITEM 5.

Market for Registrant’s Common Stock and Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock is traded on the New York Stock Exchange (ticker symbol MYE). The approximate number of shareholders of record at December 31, 2016 was 1,135. High and low stock prices and dividends for the last two years were:

 

2016

 

Sales Price

 

 

 

 

 

Quarter Ended

 

High

 

 

Low

 

 

Dividends

 

March 31

 

$

13.22

 

 

$

10.12

 

 

$

0.135

 

June 30

 

 

15.76

 

 

 

12.23

 

 

 

0.135

 

September 30

 

 

15.86

 

 

 

12.84

 

 

 

0.135

 

December 31

 

 

15.55

 

 

 

11.35

 

 

 

0.135

 

 

2015

 

Sales Price

 

 

 

 

 

Quarter Ended

 

High

 

 

Low

 

 

Dividends

 

March 31

 

$

19.95

 

 

$

16.21

 

 

$

0.135

 

June 30

 

 

19.42

 

 

 

16.16

 

 

 

0.135

 

September 30

 

 

19.11

 

 

 

12.91

 

 

 

0.135

 

December 31

 

 

15.61

 

 

 

13.32

 

 

 

0.135

 

 

Purchases of equity securities by the issuer

The following table presents information regarding the Company’s stock purchase plan during the three months ended December 31, 2016.

 

 

 

Total Number of

Shares Purchased

 

 

Average Price Paid

per Share

 

 

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)

 

10/1/16 to 10/31/16

 

 

 

 

$

 

 

 

5,547,665

 

 

 

2,452,335

 

11/1/16 to 11/30/16

 

 

 

 

 

 

 

 

5,547,665

 

 

 

2,452,335

 

12/1/16 to 12/31/16

 

 

 

 

 

 

 

 

5,547,665

 

 

 

2,452,335

 

 

(1)

On July 11, 2013, the Board authorized the repurchase of up to an additional five million shares of the Company’s common stock. This authorization was in addition to the 2011 Board authorized repurchase of up to five million shares. The Company completed the repurchase of approximately 2.0 million shares in 2011 pursuant to Rule 10b5-1 plans, which were adopted pursuant to the 2011 authorized share repurchase.

17


See Item 12 of this Form 10-K for the Equity Compensation Plan Information Table which is incorporated herein by reference.      

Comparison of 5 Year Cumulative Total Return

Assumes Initial Investment of $100

December 31, 2016

 

 

 

2011

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

Myers Industries Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Return %

 

 

 

 

 

25.42

 

 

 

42.35

 

 

 

(14.36

)

 

 

(21.65

)

 

 

11.74

 

Cum $

 

100.00

 

 

 

125.42

 

 

 

178.54

 

 

 

152.89

 

 

 

119.80

 

 

 

133.86

 

S&P 500 Index - Total Return

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Return %

 

 

 

 

 

16.00

 

 

 

32.39

 

 

 

13.69

 

 

 

1.38

 

 

 

11.96

 

Cum $

 

100.00

 

 

 

116.00

 

 

 

153.57

 

 

 

174.60

 

 

 

177.01

 

 

 

198.18

 

S&P 600 Index - Total Return

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Return %

 

 

 

 

 

14.08

 

 

 

41.31

 

 

 

5.76

 

 

 

(1.97

)

 

 

26.56

 

Cum $

 

100.00

 

 

 

114.08

 

 

 

161.21

 

 

 

170.49

 

 

 

167.13

 

 

 

211.51

 

Russell 2000 Index - Total Return

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Return %

 

 

 

 

 

16.35

 

 

 

38.82

 

 

 

4.89

 

 

 

(4.41

)

 

 

21.31

 

Cum $

 

100.00

 

 

 

116.35

 

 

 

161.52

 

 

 

169.42

 

 

 

161.95

 

 

 

196.45

 

 

 

18


ITEM 6.

Selected Financial Data

Thousands of Dollars, Except Per Share Data

 

  

 

2016

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

Operations for the Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

558,062

 

 

$

601,538

 

 

$

623,649

 

 

$

584,733

 

 

$

545,572

 

Cost of sales

 

 

393,422

 

 

 

423,260

 

 

 

462,370

 

 

 

415,179

 

 

 

381,673

 

Selling expenses

 

 

60,440

 

 

 

60,752

 

 

 

60,261

 

 

 

55,398

 

 

 

51,227

 

General and administrative expenses

 

 

78,158

 

 

 

86,665

 

 

 

78,400

 

 

 

69,840

 

 

 

66,146

 

Impairment charges

 

 

9,874

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

8,173

 

 

 

8,999

 

 

 

8,535

 

 

 

4,531

 

 

 

4,330

 

Total costs and expenses

 

 

550,067

 

 

 

579,676

 

 

 

609,566

 

 

 

544,948

 

 

 

503,376

 

Income from continuing operations before income taxes

 

 

7,995

 

 

 

21,862

 

 

 

14,083

 

 

 

39,785

 

 

 

42,196

 

Income tax expense

 

 

6,470

 

 

 

7,809

 

 

 

5,122

 

 

 

13,343

 

 

 

15,689

 

Income from continuing operations

 

$

1,525

 

 

$

14,053

 

 

$

8,961

 

 

$

26,442

 

 

$

26,507

 

Income (loss) from discontinued operations, net of tax

 

$

(468

)

 

$

3,709

 

 

$

(17,642

)

 

$

(440

)

 

$

3,455

 

Net income (loss)

 

$

1,057

 

 

$

17,762

 

 

$

(8,681

)

 

$

26,002

 

 

$

29,962

 

Net income per basic share from continuing operations

 

$

0.05

 

 

$

0.46

 

 

$

0.28

 

 

$

0.78

 

 

$

0.79

 

Net income per diluted share from continuing

   operations

 

$

0.05

 

 

$

0.45

 

 

$

0.27

 

 

$

0.77

 

 

$

0.78

 

Net income (loss) per basic share from discontinued

   operations

 

$

(0.02

)

 

$

0.12

 

 

$

(0.55

)

 

$

(0.01

)

 

$

0.10

 

Net income (loss) per diluted share from discontinued

   operations

 

$

(0.02

)

 

$

0.12

 

 

$

(0.54

)

 

$

(0.01

)

 

$

0.10

 

Net income (loss) per basic share

 

$

0.03

 

 

$

0.58

 

 

$

(0.27

)

 

$

0.77

 

 

$

0.89

 

Net income (loss) per diluted share

 

$

0.03

 

 

$

0.57

 

 

$

(0.27

)

 

$

0.76

 

 

$

0.88

 

Financial Position — At Year End

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets(1)

 

$

381,684

 

 

$

428,791

 

 

$

563,433

 

 

$

468,344

 

 

$

484,020

 

Current assets

 

 

141,151

 

 

 

154,308

 

 

 

285,441

 

 

 

234,910

 

 

 

239,596

 

Current liabilities

 

 

79,312

 

 

 

116,812

 

 

 

153,814

 

 

 

150,583

 

 

 

114,477

 

Working capital

 

 

61,839

 

 

 

37,496

 

 

 

131,627

 

 

 

84,327

 

 

 

125,119

 

Other assets(1)

 

 

129,051

 

 

 

143,710

 

 

 

141,226

 

 

 

134,984

 

 

 

150,596

 

Property, plant and equipment, net

 

 

111,482

 

 

 

130,773

 

 

 

136,766

 

 

 

98,450

 

 

 

93,828

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion(1)

 

 

189,522

 

 

 

191,881

 

 

 

235,029

 

 

 

43,234

 

 

 

89,661

 

Other long-term liabilities

 

 

9,235

 

 

 

12,354

 

 

 

13,738

 

 

 

22,512

 

 

 

29,155

 

Deferred income taxes(2)

 

 

10,582

 

 

 

10,041

 

 

 

14,281

 

 

 

16,508

 

 

 

20,705

 

Shareholders’ Equity

 

 

93,033

 

 

 

97,703

 

 

 

146,571

 

 

 

235,507

 

 

 

230,022

 

Common Shares Outstanding

 

 

30,019,561

 

 

 

29,521,566

 

 

 

31,162,962

 

 

 

33,572,778

 

 

 

33,480,189

 

Book Value Per Common Share

 

$

3.10

 

 

$

3.31

 

 

$

4.70

 

 

$

7.01

 

 

$

6.87

 

Other Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid(3)

 

$

16,221

 

 

$

16,675

 

 

$

15,707

 

 

$

9,103

 

 

$

13,006

 

Dividends declared per Common Share

 

$

0.54

 

 

$

0.54

 

 

$

0.52

 

 

$

0.36

 

 

$

0.32

 

Average Basic Common Shares Outstanding during

   the year

 

 

29,750,378

 

 

 

30,616,485

 

 

 

32,232,965

 

 

 

33,588,720

 

 

 

33,597,020

 

 

(1)

Balances for 2012-2015 reflect the retrospective change to the balance sheet presentation of unamortized debt issuance costs in conjunction with the adoption of ASU 2015-03 in 2016. Under this guidance, unamortized debt issuance costs are to be presented as a reduction of the corresponding debt liability rather than a separate asset.

(2)

Balances as of December 31, 2015 reflect the prospective change to the balance sheet presentation of deferred taxes in conjunction with the adoption of ASU 2015-17. Under this guidance, all deferred tax assets and liabilities are classified as long-term.

(3)

Dividends in 2012 reflect the fourth quarter dividend paid in 2012, for a total of five dividend payments in calendar year 2012.

19


ITEM 7.

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Executive Overview

The Company conducts its business activities in two distinct segments: The Material Handling Segment and the Distribution Segment. The Lawn and Garden business, which was sold in February 2015, is classified as discontinued operations in all periods presented.

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 $156.6 million in cash. The operating results of Scepter have been included within our Consolidated Statements of Operations and within the Company's Material Handling Segment since the date of acquisition.

The Company designs, manufactures, and markets a variety of plastic and rubber products. Our Material Handling Segment manufactures products that range from plastic reusable material handling containers and small parts storage bins to plastic OEM parts, custom plastic products, consumer fuel containers, military water containers as well as ammunition packaging and shipping containers. Our 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.

Results of Operations: 2016 versus 2015

Net Sales:

 

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment

 

2016

 

 

2015

 

 

Change

 

 

% Change

 

Material Handling

 

$

387.5

 

 

$

414.0

 

 

$

(26.5

)

 

 

(6

)%

Distribution

 

 

170.7

 

 

 

187.6

 

 

 

(16.9

)

 

 

(9

)%

Inter-company elimination

 

 

(0.1

)

 

 

(0.1

)

 

 

 

 

 

 

 

Total net sales

 

$

558.1

 

 

$

601.5

 

 

$

(43.4

)

 

 

(7

)%

 

Net sales for the year ended December 31, 2016 were $558.1 million, a decrease of $43.4 million or 7% compared to the prior year. Net sales were negatively impacted by lower sales volumes of approximately $30.7 million, lower indexed pricing of $9.5 million and the effect of unfavorable foreign currency translation of approximately $3.2 million.

Net sales in the Material Handling Segment decreased $26.5 million or 6% for the year ended December 31, 2016 compared to the prior year. The decrease in net sales was due to lower sales volume of $13.0 million, mainly in the food & beverage end market, partially offset by favorable sales volume in the vehicle end market, unfavorable pricing of $10.2 million described above and the effect of unfavorable foreign currency translation of $3.3 million.  

Net sales in the Distribution Segment decreased $16.9 million or 9% in the year ended December 31, 2016 compared to the prior year. The decrease in net sales was primarily due to lower equipment sales and lower sales volume in the retread market segment, partially offset by higher pricing. Additionally, the Company implemented a sales force improvement initiative in 2016 that in some territories had a negative impact on sales.  The initiative is designed to broaden market coverage, upgrade the talent of our sales team and improve the overall sales process.  It resulted in some sales force turnover and territory gaps during the year with resulting reductions in sales from those territories.

Cost of Sales & Gross Profit:

 

(dollars in millions)

 

2016

 

 

2015

 

 

Cost of sales

 

$

393.4

 

 

$

423.3

 

 

Gross profit

 

$

164.6

 

 

$

178.3

 

 

Gross profit as a percentage of sales

 

 

29.5

%

 

 

29.6

%

 

 

Gross profit margin decreased slightly to 29.5% in the year ended December 31, 2016 compared to 29.6% for the same period in 2015, primarily due to lower pricing and lower sales volume, partially offset by lower input costs for plastic resins.

20


Selling, General and Administrative Expenses:

 

(dollars in millions)

 

2016

 

 

2015

 

 

Change

 

 

% Change

 

SG&A expenses

 

$

138.6

 

 

$

147.4

 

 

$

(8.8

)

 

 

(6

)%

SG&A expenses as a percentage of sales

 

 

24.8

%

 

 

24.5

%

 

 

 

 

 

 

 

 

 

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2016 were $138.6 million, a decrease of $8.8 million or 6% compared to the same period in the prior year. SG&A expenses were favorably impacted by lower compensation expense and other employee-related costs of approximately $11.5 million, lower legal and professional costs of $1.5 million associated with the Brazilian investigation completed in the first quarter of 2015 and the non-recurring reversal of a long-term liability of approximately $2.3 million recognized in 2016, partially offset by additional environmental contingency expense of $0.9 million and the absence of a $3.0 million benefit recognized in 2015 related to the reversal of the legal reserve associated with the Orbis litigation, each described in Note 10 to the consolidated financial statements.

Impairment Charges:

The Company recorded $9.9 million of non-cash impairment charges, primarily related to its Plasticos Novel do Nordeste S.A. (“Novel”) reporting unit during the year ended December 31, 2016, as discussed in Note 3 to the consolidated financial statements. No impairment charges were recorded in during the same period in 2015.

Net Interest Expense:

 

(dollars in millions)

 

2016

 

 

2015

 

 

Change

 

 

% Change

 

Net interest expense

 

$

8.2

 

 

$

9.0

 

 

$

(0.8

)

 

 

(9

)%

Outstanding borrowings, net of deferred financing costs

 

$

189.5

 

 

$

191.9

 

 

$

(2.4

)

 

 

(1

)%

Average borrowing rate

 

 

4.69

%

 

 

4.59

%

 

 

 

 

 

 

 

 

 

Net interest expense for the year ended December 31, 2016 was $8.2 million compared to $9.0 million during 2015. The decrease in net interest expense is due to a decrease in average borrowings during the year ended December 31, 2016 compared to the prior year, and higher interest income on the note receivable from the sale of the Lawn and Garden business described in Note 5 to the consolidated financial statements.

Income Taxes:

 

(dollars in millions)

 

2016

 

 

2015

 

 

Income from continuing operations before income taxes

 

$

8.0

 

 

$

21.9

 

 

Income tax expense

 

$

6.5