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Myers Industries Inc. – ‘10-Q’ for 6/30/22

On:  Tuesday, 8/2/22, at 4:04pm ET   ·   For:  6/30/22   ·   Accession #:  950170-22-13864   ·   File #:  1-08524

Previous ‘10-Q’:  ‘10-Q’ on 5/5/22 for 3/31/22   ·   Next:  ‘10-Q’ on 10/27/22 for 9/30/22   ·   Latest:  ‘10-Q’ on 11/1/23 for 9/30/23   ·   1 Reference:  To:  Myers Industries Inc. – ‘8-K’ on / for 4/29/21

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/02/22  Myers Industries Inc.             10-Q        6/30/22   80:11M                                    Donnelley … Solutions/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   2.71M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     28K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     28K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     26K 
10: R1          Document and Entity Information                     HTML     75K 
11: R2          Condensed Consolidated Statements of Operations     HTML     84K 
12: R3          Condensed Consolidated Statements of Comprehensive  HTML     48K 
                Income (Loss)                                                    
13: R4          Condensed Consolidated Statements of Financial      HTML    140K 
                Position (Unaudited)                                             
14: R5          Condensed Consolidated Statements of Financial      HTML     40K 
                Position (Parenthetical) (Unaudited)                             
15: R6          Condensed Consolidated Statements of Shareholders'  HTML     62K 
                Equity                                                           
16: R7          Condensed Consolidated Statements of Shareholders'  HTML     24K 
                Equity (Parenthetical)                                           
17: R8          Condensed Consolidated Statements of Cash Flows     HTML     97K 
                (Unaudited)                                                      
18: R9          Summary of Significant Accounting Policies          HTML    177K 
19: R10         Revenue Recognition                                 HTML    267K 
20: R11         Acquisitions                                        HTML    128K 
21: R12         Restructuring                                       HTML     33K 
22: R13         Inventories                                         HTML     45K 
23: R14         Other Liabilities                                   HTML     81K 
24: R15         Goodwill and Intangible Assets                      HTML     55K 
25: R16         Net Income per Common Share                         HTML     59K 
26: R17         Stock Compensation                                  HTML     32K 
27: R18         Contingencies                                       HTML     52K 
28: R19         Long-Term Debt and Loan Agreements                  HTML     85K 
29: R20         Income Taxes                                        HTML     33K 
30: R21         Leases                                              HTML    268K 
31: R22         Industry Segments                                   HTML    135K 
32: R23         Summary of Significant Accounting Policies          HTML    178K 
                (Policies)                                                       
33: R24         Summary of Significant Accounting Policies          HTML    166K 
                (Tables)                                                         
34: R25         Revenue Recognition (Tables)                        HTML    256K 
35: R26         Acquisitions (Tables)                               HTML    121K 
36: R27         Inventories (Tables)                                HTML     44K 
37: R28         Other Liabilities (Tables)                          HTML     81K 
38: R29         Goodwill and Intangible Assets (Tables)             HTML     56K 
39: R30         Net Income per Common Share (Tables)                HTML     56K 
40: R31         Long-Term Debt and Loan Agreements (Tables)         HTML     66K 
41: R32         Leases (Tables)                                     HTML    259K 
42: R33         Industry Segments (Tables)                          HTML    124K 
43: R34         Summary of Significant Accounting Policies -        HTML     27K 
                Additional Information (Details)                                 
44: R35         Summary of Significant Accounting Policies - The    HTML     47K 
                Balances in the Company's Accumulated Other                      
                Comprehensive Income (Loss) (Details)                            
45: R36         Summary of Significant Accounting Policies -        HTML     30K 
                Summary of Changes in Allowance for Credit Losses                
                (Details)                                                        
46: R37         Revenue Recognition - Schedule of Revenue by Major  HTML     55K 
                Market (Details)                                                 
47: R38         Revenue Recognition - Schedule of Balances          HTML     37K 
                included in Condensed Consolidated Statements of                 
                Financial Position (Unaudited) Related to Revenue                
                Recognition (Details)                                            
48: R39         Revenue Recognition - Additional Information        HTML     30K 
                (Details)                                                        
49: R40         Acquisitions - Additional Information (Details)     HTML     36K 
50: R41         Acquisitions - Summary of Allocation of Purchase    HTML     74K 
                Price Based on Estimated Fair Value of Assets                    
                Acquired and Liabilities Assumed (Details)                       
51: R42         Acquisitions - Summary of Intangible Assets         HTML     41K 
                (Details)                                                        
52: R43         Restructuring - Additional Information (Details)    HTML     47K 
53: R44         Inventories - Additional Information (Details)      HTML     26K 
54: R45         Inventories - Summary of Determination Cost of      HTML     30K 
                Inventories (Details)                                            
55: R46         Other Liabilities - Schedule of Other Current       HTML     36K 
                Liabilities (Details)                                            
56: R47         Other Liabilities - Schedule of Other Liabilities   HTML     37K 
                (Long-term) (Details)                                            
57: R48         Goodwill and Intangible Assets - Change in          HTML     37K 
                Goodwill (Details)                                               
58: R49         Goodwill and Intangible Assets - Additional         HTML     26K 
                Information (Details)                                            
59: R50         Net Income per Common Share (Details)               HTML     31K 
60: R51         Net Income per Common Share - Additional            HTML     25K 
                Information (Details)                                            
61: R52         Stock Compensation - Additional Information         HTML     37K 
                (Details)                                                        
62: R53         Contingencies - Additional Information (Details)    HTML     61K 
63: R54         Long-Term Debt and Loan Agreements - Schedule of    HTML     45K 
                Long Term Debt (Details)                                         
64: R55         Long-Term Debt and Loan Agreements - Schedule of    HTML     35K 
                Long Term Debt (Parenthetical) (Details)                         
65: R56         Long-Term Debt and Loan Agreements - Additional     HTML     64K 
                Information (Details)                                            
66: R57         Income Taxes - Additional Information (Details)     HTML     36K 
67: R58         Leases - Additional Information (Details)           HTML     58K 
68: R59         Leases - Summary of Amounts Included in the         HTML     46K 
                Condensed Consolidated Statement of Financial                    
                Position (Details)                                               
69: R60         Leases - Summary of Components of Lease Expense     HTML     40K 
                (Details)                                                        
70: R61         Leases - Summary of Supplemental Cash Flow          HTML     36K 
                Information Related to Leases (Details)                          
71: R62         Leases - Summary of Lease Term and Discount Rate    HTML     32K 
                (Details)                                                        
72: R63         Leases - Maturity of Lease Liabilities (Details)    HTML     78K 
73: R64         Industry Segments - Additional Information          HTML     33K 
                (Details)                                                        
74: R65         Industry Segments - Schedule of reporting           HTML     55K 
                information by segment (Details)                                 
75: R66         Industry Segments - Schedule of reporting           HTML     40K 
                information by segment (Parenthetical) (Details)                 
78: XML         IDEA XML File -- Filing Summary                      XML    148K 
76: XML         XBRL Instance -- mye-20220630_htm                    XML   3.21M 
77: EXCEL       IDEA Workbook of Financial Reports                  XLSX    133K 
 6: EX-101.CAL  XBRL Calculations -- mye-20220630_cal                XML    202K 
 8: EX-101.DEF  XBRL Definitions -- mye-20220630_def                 XML    522K 
 7: EX-101.LAB  XBRL Labels -- mye-20220630_lab                      XML   1.22M 
 9: EX-101.PRE  XBRL Presentations -- mye-20220630_pre               XML    914K 
 5: EX-101.SCH  XBRL Schema -- mye-20220630                          XSD    173K 
79: JSON        XBRL Instance as JSON Data -- MetaLinks              408±   639K 
80: ZIP         XBRL Zipped Folder -- 0000950170-22-013864-xbrl      Zip    304K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Part I -- Financial Information
"Item 1. Financial Statements
"Condensed Consolidated Statements of Operations (Unaudited)
"Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
"Condensed Consolidated Statements of Financial Position (Unaudited)
"Condensed Consolidated Statements of Shareholders' Equity (Unaudited)
"Condensed Consolidated Statements of Cash Flows (Unaudited)
"Notes to Unaudited Condensed Consolidated Financial Statements
"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3. Quantitative and Qualitative Disclosures About Market Risk
"Item 4. Controls and Procedures
"Part II -- Other Information
"Item 1. Legal Proceedings
"Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
"Item 6. Exhibits
"Signature

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form  i 10-Q

 

 i 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended  i June 30,  i 2022 / 

OR

 

 i 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number  i 001-08524

 i Myers Industries, Inc.

(Exact name of registrant as specified in its charter)

 

 i Ohio

 i 34-0778636

(State or other jurisdiction of

(IRS Employer Identification

incorporation or organization)

Number)

 

 

 i 1293 South Main Street

 

 i Akron,  i Ohio

 i 44301

(Address of principal executive offices)

(Zip code)

 

( i 330)  i 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

 i Common Stock, without par value

 

 i MYE

 

 i 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.  i Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  i Yes ☑ No ☐

 

Indicate by check mark whether the registrant 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.

 

Large accelerated filer

 i Accelerated filer

Non-Accelerated filer

Smaller reporting company

 i 

 

 

Emerging growth company

 i 

 

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  i  No ☑ .

 

The number of shares outstanding of the issuer’s common stock, without par value, as of July 29, 2022 was  i 36,468,481 shares.

 

 


 

TABLE OF CONTENTS

 

Part I — Financial Information

1

 

 

Item 1. Financial Statements

1

 

 

Condensed Consolidated Statements of Operations (Unaudited)

1

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

2

 

 

Condensed Consolidated Statements of Financial Position (Unaudited)

3

 

 

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

4

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

 

 

Item 4. Controls and Procedures

26

 

 

Part II — Other Information

27

 

 

Item 1. Legal Proceedings

27

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

27

 

 

Item 6. Exhibits

28

 

 

Signature

29

 

 

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

Exhibit 101

 

 

 

 

 


 

Part I — Financial Information

Item 1. Financial Statements

MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

For the Quarter Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

 i 233,156

 

 

$

 i 187,369

 

 

$

 i 458,642

 

 

$

 i 361,798

 

Cost of sales

 

 

 i 158,440

 

 

 

 i 132,375

 

 

 

 i 311,998

 

 

 

 i 256,391

 

Gross profit

 

 

 i 74,716

 

 

 

 i 54,994

 

 

 

 i 146,644

 

 

 

 i 105,407

 

Selling, general and administrative expenses

 

 

 i 52,320

 

 

 

 i 40,121

 

 

 

 i 100,310

 

 

 

 i 79,669

 

Gain on disposal of fixed assets

 

 

( i 221

)

 

 

( i 996

)

 

 

( i 688

)

 

 

( i 996

)

Operating income

 

 

 i 22,617

 

 

 

 i 15,869

 

 

 

 i 47,022

 

 

 

 i 26,734

 

Interest expense, net

 

 

 i 1,211

 

 

 

 i 999

 

 

 

 i 2,358

 

 

 

 i 1,994

 

Income before income taxes

 

 

 i 21,406

 

 

 

 i 14,870

 

 

 

 i 44,664

 

 

 

 i 24,740

 

Income tax expense

 

 

 i 5,575

 

 

 

 i 3,795

 

 

 

 i 11,496

 

 

 

 i 6,360

 

Net income

 

$

 i 15,831

 

 

$

 i 11,075

 

 

$

 i 33,168

 

 

$

 i 18,380

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 i 0.43

 

 

$

 i 0.31

 

 

$

 i 0.91

 

 

$

 i 0.51

 

Diluted

 

$

 i 0.43

 

 

$

 i 0.30

 

 

$

 i 0.91

 

 

$

 i 0.51

 

 

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 Quarter Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

 i 15,831

 

 

$

 i 11,075

 

 

$

 i 33,168

 

 

$

 i 18,380

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

( i 1,179

)

 

 

 i 470

 

 

 

( i 609

)

 

 

 i 881

 

Total other comprehensive income

 

 

( i 1,179

)

 

 

 i 470

 

 

 

( i 609

)

 

 

 i 881

 

Comprehensive income

 

$

 i 14,652

 

 

$

 i 11,545

 

 

$

 i 32,559

 

 

$

 i 19,261

 

 

See notes to unaudited condensed consolidated financial statements.

 

2


 

MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position (Unaudited)

(Dollars in thousands)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$

 i 22,434

 

 

$

 i 17,655

 

Accounts receivable, less allowances of $ i 2,640 and $ i 3,229, respectively

 

 

 i 132,002

 

 

 

 i 100,691

 

Income tax receivable

 

 

 i 

 

 

 

 i 2,517

 

Inventories, net

 

 

 i 108,902

 

 

 

 i 93,551

 

Prepaid expenses and other current assets

 

 

 i 11,301

 

 

 

 i 5,500

 

Total Current Assets

 

 

 i 274,639

 

 

 

 i 219,914

 

Property, plant, and equipment, net

 

 

 i 94,945

 

 

 

 i 92,049

 

Right of use asset - operating leases

 

 

 i 29,052

 

 

 

 i 29,285

 

Goodwill

 

 

 i 96,093

 

 

 

 i 88,778

 

Intangible assets, net

 

 

 i 55,081

 

 

 

 i 50,181

 

Deferred income taxes

 

 

 i 106

 

 

 

 i 106

 

Other

 

 

 i 4,096

 

 

 

 i 4,236

 

Total Assets

 

$

 i 554,012

 

 

$

 i 484,549

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

 i 104,314

 

 

$

 i 81,690

 

Accrued employee compensation

 

 

 i 22,200

 

 

 

 i 21,616

 

Income taxes payable

 

 

 i 3,085

 

 

 

 i 

 

Accrued taxes payable, other than income taxes

 

 

 i 2,482

 

 

 

 i 2,759

 

Accrued interest

 

 

 i 929

 

 

 

 i 966

 

Other current liabilities

 

 

 i 20,758

 

 

 

 i 19,628

 

Operating lease liability - short-term

 

 

 i 5,774

 

 

 

 i 5,341

 

Finance lease liability - short-term

 

 

 i 509

 

 

 

 i 500

 

Total Current Liabilities

 

 

 i 160,051

 

 

 

 i 132,500

 

Long-term debt

 

 

 i 103,956

 

 

 

 i 90,945

 

Operating lease liability - long-term

 

 

 i 23,242

 

 

 

 i 23,815

 

Finance lease liability - long-term

 

 

 i 9,179

 

 

 

 i 9,437

 

Other liabilities

 

 

 i 13,863

 

 

 

 i 13,086

 

Deferred income taxes

 

 

 i 6,463

 

 

 

 i 5,441

 

Total Liabilities

 

 

 i 316,754

 

 

 

 i 275,224

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

Serial Preferred Shares (authorized  i  i 1,000,000 /  shares;  i  i  i  i none /  /  /  issued and outstanding)

 

 

 i 

 

 

 

 i 

 

Common Shares, without par value (authorized  i  i 60,000,000 /  shares;
   outstanding
 i 36,458,306 and  i 36,262,259; net of treasury shares
   of
 i 6,094,151 and  i 6,290,198, respectively)

 

 

 i 22,304

 

 

 

 i 22,172

 

Additional paid-in capital

 

 

 i 311,939

 

 

 

 i 306,720

 

Accumulated other comprehensive loss

 

 

( i 16,010

)

 

 

( i 15,401

)

Retained deficit

 

 

( i 80,975

)

 

 

( i 104,166

)

Total Shareholders’ Equity

 

 

 i 237,258

 

 

 

 i 209,325

 

Total Liabilities and Shareholders’ Equity

 

$

 i 554,012

 

 

$

 i 484,549

 

 

See notes to unaudited condensed consolidated financial statements.

 

 

3


 

MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Quarter Ended June 30, 2022

 

 

 

Common Shares

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Deficit

 

 

Total
Shareholders'
Equity

 

Balance at April 1, 2022

 

$

 i 22,225

 

 

$

 i 308,521

 

 

$

( i 14,831

)

 

$

( i 91,777

)

 

$

 i 224,138

 

Net income

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 15,831

 

 

 

 i 15,831

 

Foreign currency translation
   adjustment

 

 

 i 

 

 

 

 i 

 

 

 

( i 1,179

)

 

 

 i 

 

 

 

( i 1,179

)

Shares issued under incentive plans,
   net of shares withheld for tax

 

 

 i 79

 

 

 

 i 1,285

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 1,364

 

Stock compensation expense

 

 

 i 

 

 

 

 i 2,133

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 2,133

 

Declared dividends - $ i 0.135 per share

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

( i 5,029

)

 

 

( i 5,029

)

Balance at June 30, 2022

 

$

 i 22,304

 

 

$

 i 311,939

 

 

$

( i 16,010

)

 

$

( i 80,975

)

 

$

 i 237,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2021

 

 

 

Common Shares

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Deficit

 

 

Total
Shareholders'
Equity

 

Balance at April 1, 2021

 

$

 i 22,054

 

 

$

 i 303,127

 

 

$

( i 15,362

)

 

$

( i 115,566

)

 

$

 i 194,253

 

Net income

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 11,075

 

 

 

 i 11,075

 

Foreign currency translation
   adjustment

 

 

 i 

 

 

 

 i 

 

 

 

 i 470

 

 

 

 i 

 

 

 

 i 470

 

Shares issued under incentive plans,
   net of shares withheld for tax

 

 

 i 55

 

 

 

 i 380

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 435

 

Stock compensation expense

 

 

 i 

 

 

 

 i 676

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 676

 

Declared dividends - $ i 0.135 per share

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

( i 4,928

)

 

 

( i 4,928

)

Balance at June 30, 2021

 

$

 i 22,109

 

 

$

 i 304,183

 

 

$

( i 14,892

)

 

$

( i 109,419

)

 

$

 i 201,981

 

 

See notes to unaudited condensed consolidated financial statements.

 

4


 

MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Six Months Ended June 30, 2022

 

 

 

Common Shares

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive Income (Loss)

 

 

Retained
Deficit

 

 

Total
Shareholders'
Equity

 

Balance at January 1, 2022

 

$

 i 22,172

 

 

$

 i 306,720

 

 

$

( i 15,401

)

 

$

( i 104,166

)

 

$

 i 209,325

 

Net income

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 33,168

 

 

 

 i 33,168

 

Foreign currency translation
   adjustment

 

 

 i 

 

 

 

 i 

 

 

 

( i 609

)

 

 

 i 

 

 

 

( i 609

)

Shares issued under incentive plans,
   net of shares withheld for tax

 

 

 i 132

 

 

 

 i 1,359

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 1,491

 

Stock compensation expense

 

 

 i 

 

 

 

 i 3,860

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 3,860

 

Declared dividends - $ i 0.27 per share

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

( i 9,977

)

 

 

( i 9,977

)

Balance at June 30, 2022

 

$

 i 22,304

 

 

$

 i 311,939

 

 

$

( i 16,010

)

 

$

( i 80,975

)

 

$

 i 237,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Common Shares

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Deficit

 

 

Total
Shareholders'
Equity

 

Balance at January 1, 2021

 

$

 i 21,939

 

 

$

 i 300,852

 

 

$

( i 15,773

)

 

$

( i 117,918

)

 

$

 i 189,100

 

Net income

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 18,380

 

 

 

 i 18,380

 

Foreign currency translation
   adjustment

 

 

 i 

 

 

 

 i 

 

 

 

 i 881

 

 

 

 i 

 

 

 

 i 881

 

Shares issued under incentive plans,
   net of shares withheld for tax

 

 

 i 170

 

 

 

 i 1,502

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 1,672

 

Stock compensation expense

 

 

 i 

 

 

 

 i 1,829

 

 

 

 i 

 

 

 

 i 

 

 

 

 i 1,829

 

Declared dividends - $ i 0.27 per share

 

 

 i 

 

 

 

 i 

 

 

 

 i 

 

 

 

( i 9,881

)

 

 

( i 9,881

)

Balance at June 30, 2021

 

$

 i 22,109

 

 

$

 i 304,183

 

 

$

( i 14,892

)

 

$

( i 109,419

)

 

$

 i 201,981

 

 

 

 

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 Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net income

 

$

 i 33,168

 

 

$

 i 18,380

 

Adjustments to reconcile net income to net cash provided by (used for) operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

 i 10,683

 

 

 

 i 10,752

 

Non-cash stock-based compensation expense

 

 

 i 3,860

 

 

 

 i 1,829

 

Gain on disposal of fixed assets

 

 

( i 688

)

 

 

( i 996

)

Other

 

 

 i 698

 

 

 

( i 907

)

Cash flows provided by (used for) working capital

 

 

 

 

 

 

Accounts receivable

 

 

( i 21,200

)

 

 

( i 15,250

)

Inventories

 

 

( i 7,259

)

 

 

( i 13,411

)

Prepaid expenses and other current assets

 

 

( i 5,702

)

 

 

( i 4,814

)

Accounts payable and accrued expenses

 

 

 i 20,739

 

 

 

 i 25,718

 

Net cash provided by (used for) operating activities

 

 

 i 34,299

 

 

 

 i 21,301

 

Cash Flows From Investing Activities

 

 

 

 

 

 

Capital expenditures

 

 

( i 10,943

)

 

 

( i 8,220

)

Acquisition of business, net of cash acquired

 

 

( i 24,253

)

 

 

( i 1,223

)

Proceeds from sale of property, plant and equipment

 

 

 i 1,499

 

 

 

 i 2,848

 

Net cash provided by (used for) investing activities

 

 

( i 33,697

)

 

 

( i 6,595

)

Cash Flows From Financing Activities

 

 

 

 

 

 

Net borrowings from revolving credit facility

 

 

 i 13,000

 

 

 

 i 19,900

 

Repayments of long-term debt

 

 

 i 

 

 

 

( i 40,000

)

Payments on finance lease

 

 

( i 249

)

 

 

( i 161

)

Cash dividends paid

 

 

( i 9,934

)

 

 

( i 9,809

)

Proceeds from issuance of common stock

 

 

 i 1,838

 

 

 

 i 2,420

 

Shares withheld for employee taxes on equity awards

 

 

( i 347

)

 

 

( i 748

)

Deferred financing fees

 

 

 i 

 

 

 

( i 1,095

)

Net cash provided by (used for) financing activities

 

 

 i 4,308

 

 

 

( i 29,493

)

Foreign exchange rate effect on cash

 

 

( i 131

)

 

 

 i 29

 

Net increase (decrease) in cash

 

 

 i 4,779

 

 

 

( i 14,758

)

Cash at January 1

 

 

 i 17,655

 

 

 

 i 28,301

 

Cash at June 30

 

$

 i 22,434

 

 

$

 i 13,543

 

 

See notes to unaudited condensed consolidated financial statements.

 

6


 

MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except where otherwise indicated)

 

 i 

1. Summary of Significant Accounting Policies

 i 

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 accounting principles generally accepted in 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, 2021.

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 June 30, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the quarter and six months ended June 30, 2022 are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2022.

Accounting Standards Not Yet Adopted

 i 

In December 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU is intended to improve the accounting for acquired contracts with customers in business combinations by addressing diversity in practice by requiring the acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. For the Company, this ASU is effective January 1, 2023. Early adoption is permitted. The amendments within this ASU are required to be applied prospectively to business combinations occurring on or after the effective date. The effect of adopting this guidance will depend on the contract assets and liabilities associated with any future acquisitions.

 i 

Fair Value Measurement

The Company follows guidance included in ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, as required. 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 approximates carrying value due to the nature and relative short maturity of these assets and liabilities.

The fair value of debt under the Company’s Loan Agreement, as defined in Note 11, approximates carrying value due to the floating rates and relative short maturity (less than 90 days) of any 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 June 30, 2022 and December 31, 2021, the aggregate fair value of the Company's outstanding fixed rate senior unsecured notes was estimated to be $ i 38.3 million and $ i 41.0 million, respectively.

The purchase price allocations associated with the May 31, 2022 acquisition of Mohawk Rubber Sales of New England Inc. ("Mohawk") and the July 30, 2021 acquisition of Trilogy Plastics, Inc. (“Trilogy”), as described in Note 3, required fair value measurements using unobservable inputs which are considered Level 3 inputs. The fair value of the acquired intangible assets was determined using an income approach.

 / 
 / 

7


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 i 

Accumulated Other Comprehensive Income (Loss)

 i 

Changes in accumulated other comprehensive income (loss) are as follows:

 

 

Foreign
Currency

 

 

Defined Benefit
Pension Plans

 

 

Total

 

Balance at April 1, 2022

 

$

( i 13,365

)

 

$

( i 1,466

)

 

$

( i 14,831

)

Other comprehensive income (loss) before reclassifications

 

 

( i 1,179

)

 

 

 

 

 

( i 1,179

)

Net current-period other comprehensive income (loss)

 

 

( i 1,179

)

 

 

 

 

 

( i 1,179

)

Balance at June 30, 2022

 

$

( i 14,544

)

 

$

( i 1,466

)

 

$

( i 16,010

)

 

 

 

Foreign
Currency

 

 

Defined Benefit
Pension Plans

 

 

Total

 

Balance at April 1, 2021

 

$

( i 13,563

)

 

$

( i 1,799

)

 

$

( i 15,362

)

Other comprehensive income (loss) before reclassifications

 

 

 i 470

 

 

 

 

 

 

 i 470

 

Net current-period other comprehensive income (loss)

 

 

 i 470

 

 

 

 

 

 

 i 470

 

Balance at June 30, 2021

 

$

( i 13,093

)

 

$

( i 1,799

)

 

$

( i 14,892

)

 

 

 

Foreign
Currency

 

 

Defined Benefit
Pension Plans

 

 

Total

 

Balance at January 1, 2022

 

$

( i 13,935

)

 

$

( i 1,466

)

 

$

( i 15,401

)

Other comprehensive income (loss) before reclassifications

 

 

( i 609

)

 

 

 i 

 

 

 

( i 609

)

Net current-period other comprehensive income (loss)

 

 

( i 609

)

 

 

 i 

 

 

 

( i 609

)

Balance at June 30, 2022

 

$

( i 14,544

)

 

$

( i 1,466

)

 

$

( i 16,010

)

 

 

 

Foreign
Currency

 

 

Defined Benefit
Pension Plans

 

 

Total

 

Balance at January 1, 2021

 

$

( i 13,974

)

 

$

( i 1,799

)

 

$

( i 15,773

)

Other comprehensive income (loss) before reclassifications

 

 

 i 881

 

 

 

 i 

 

 

 

 i 881

 

Net current-period other comprehensive income (loss)

 

 

 i 881

 

 

 

 i 

 

 

 

 i 881

 

Balance at June 30, 2021

 

$

( i 13,093

)

 

$

( i 1,799

)

 

$

( i 14,892

)

 / 
 / 

 

 i 

Allowance for Credit Losses

Management has established certain requirements that customers must meet before credit is extended. The financial condition of customers is continually monitored and collateral is usually not required. The Company evaluates the collectability 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 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.

 i 

The changes in the allowance for credit losses for the six months ended June 30, 2022 and 2021 were as follows:

 

 

 

2022

 

 

2021

 

Balance at January 1

 

$

 i 2,173

 

 

$

 i 2,335

 

Provision for expected credit loss, net of recoveries

 

 

( i 110

)

 

 

 i 504

 

Write-offs and other

 

 

( i 302

)

 

 

( i 336

)

Balance at June 30

 

$

 i 1,761

 

 

$

 i 2,503

 

 / 

 

8


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 i 

2. Revenue Recognition

 i 

The Company’s revenue by major market is as follows:

 

 

 

For the Quarter Ended June 30, 2022

 

 

 

Material
Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

 i 34,589

 

 

$

 

 

$

 

 

$

 i 34,589

 

Vehicle

 

 

 i 48,101

 

 

 

 

 

 

 

 

 

 i 48,101

 

Food and beverage

 

 

 i 23,154

 

 

 

 

 

 

 

 

 

 i 23,154

 

Industrial

 

 

 i 67,246

 

 

 

 

 

 

( i 9

)

 

 

 i 67,237

 

Auto aftermarket

 

 

 

 

 

 i 60,075

 

 

 

 

 

 

 i 60,075

 

Total net sales

 

$

 i 173,090

 

 

$

 i 60,075

 

 

$

( i 9

)

 

$

 i 233,156

 

 

 

 

For the Quarter Ended June 30, 2021

 

 

 

Material
Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

 i 37,312

 

 

$

 

 

$

 

 

$

 i 37,312

 

Vehicle

 

 

 i 41,437

 

 

 

 

 

 

 

 

 

 i 41,437

 

Food and beverage

 

 

 i 16,399

 

 

 

 

 

 

 

 

 

 i 16,399

 

Industrial

 

 

 i 42,079

 

 

 

 

 

 

( i 14

)

 

 

 i 42,065

 

Auto aftermarket

 

 

 

 

 

 i 50,156

 

 

 

 

 

 

 i 50,156

 

Total net sales

 

$

 i 137,227

 

 

$

 i 50,156

 

 

$

( i 14

)

 

$

 i 187,369

 

 

 

 

For the Six Months Ended June 30, 2022

 

 

 

Material
Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

 i 66,513

 

 

$

 

 

$

 

 

$

 i 66,513

 

Vehicle

 

 

 i 95,878

 

 

 

 

 

 

 

 

 

 i 95,878

 

Food and beverage

 

 

 i 57,834

 

 

 

 

 

 

 

 

 

 i 57,834

 

Industrial

 

 

 i 129,501

 

 

 

 

 

 

( i 20

)

 

 

 i 129,481

 

Auto aftermarket

 

 

 

 

 

 i 108,936

 

 

 

 

 

 

 i 108,936

 

Total net sales

 

$

 i 349,726

 

 

$

 i 108,936

 

 

$

( i 20

)

 

$

 i 458,642

 

 

 

 

For the Six Months Ended June 30, 2021

 

 

 

Material
Handling

 

 

Distribution

 

 

Inter-company

 

 

Consolidated

 

Consumer

 

$

 i 62,707

 

 

$

 

 

$

 

 

$

 i 62,707

 

Vehicle

 

 

 i 83,629

 

 

 

 

 

 

 

 

 

 i 83,629

 

Food and beverage

 

 

 i 37,816

 

 

 

 

 

 

 

 

 

 i 37,816

 

Industrial

 

 

 i 82,968

 

 

 

 

 

 

( i 28

)

 

 

 i 82,940

 

Auto aftermarket

 

 

 

 

 

 i 94,706

 

 

 

 

 

 

 i 94,706

 

Total net sales

 

$

 i 267,120

 

 

$

 i 94,706

 

 

$

( i 28

)

 

$

 i 361,798

 

 / 

 

 i 

Revenue is recognized when obligations under the terms of a 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 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.

9


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

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 normal course of business and as part of the 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.

 i 

Amounts included in the Condensed Consolidated Statements of Financial Position (Unaudited) related to revenue recognition include:

 

 

 

June 30,

 

 

December 31,

 

 

Statement of Financial
Position

 

 

2022

 

 

2021

 

 

Classification

Returns, discounts and other allowances

 

$

( i 879

)

 

$

( i 1,056

)

 

Accounts receivable

Right of return asset

 

$

 i 346

 

 

$

 i 361

 

 

Inventories, net

Customer deposits

 

$

( i 1,295

)

 

$

( i 1,816

)

 

Other current liabilities

Accrued rebates

 

$

( i 3,609

)

 

$

( i 3,378

)

 

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 customer and is classified as Selling, General and Administrative expenses for the Company’s manufacturing business and as Cost of sales for the Company’s distribution business. Costs for shipments to customers in Selling, General and Administrative expenses were approximately $ i 3.9 million and $ i 2.3 million for the quarters ended June 30, 2022 and 2021, respectively, and $ i 7.1 million and $ i 4.8 million for the six months ended June 30, 2022 and 2021, respectively, and in Cost of sales were approximately $ i 2.4 million and $ i 1.9 million for the quarters ended June 30, 2022 and 2021 and $ i 4.0 million and $ i 3.5 million for the six months ended June 30, 2022 and 2021, 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.

 / 
 i 

3. Acquisitions

Mohawk

On May 31, 2022, the Company acquired the assets of Mohawk Rubber Sales of New England, Inc. ("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 $ i 24.3 million, net of $ i 1.1 million of cash acquired. The Company estimated additional consideration payable of approximately $ i 3.4 million, subject to finalization of working capital and other adjustments. The Company funded the acquisition with proceeds from the Loan Agreement described in Note 11.

10


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

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 the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill.  i The following table summarizes the allocation of the purchase price based on the estimated fair value of assets acquired and liabilities assumed based on their preliminary estimated fair values at the acquisition date, which are subject to adjustment. The purchase accounting will be finalized within one year from the acquisition date.

 

Assets acquired:

 

 

Accounts receivable

$

 i 10,137

 

Inventories

 

 i 8,209

 

Prepaid expenses

 

 i 104

 

Other assets - long term

 

 i 30

 

Property, plant and equipment

 

 i 1,432

 

Right of use asset - operating leases

 

 i 1,367

 

Intangible assets

 

 i 7,720

 

Goodwill

 

 i 7,485

 

Assets acquired

$

 i 36,484

 

 

 

 

Liabilities assumed:

 

 

Accounts payable

$

 i 5,996

 

Accrued expenses

 

 i 1,414

 

Operating lease liability - short term

 

 i 399

 

Operating lease liability - long term

 

 i 968

 

Total liabilities assumed

 

 i 8,777

 

 

 

 

Net acquisition cost

$

 i 27,707

 

The goodwill 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.

 i 

The intangible assets included above consist of the following:

 

 

Fair Value

 

 

Weighted Average
Estimated
Useful Life

Customer relationships

 

$

 i 5,400

 

 

 i 12.0 years

Trade name

 

 

 i 2,000

 

 

 i 5.0 years

Non-competition agreements

 

 

 i 320

 

 

 i 5.0 years

Total amortizable intangible assets

 

$

 i 7,720

 

 

 

 / 

Trilogy Plastics

On July 30, 2021, the Company acquired the assets of Trilogy, a custom rotational molder specializing in high quality parts and assemblies, which is included in the Materials Handling Segment. The Trilogy acquisition aligns with the Company’s long-term strategic plan to transform the Company into a high-growth, customer-centric innovator of value-added engineered plastic solutions. The purchase price for the acquisition was $ i 34.5 million, including a working capital adjustment of $ i 0.3 million that was paid in November 2021. The Company funded the acquisition with proceeds from the Loan Agreement described in Note 11.

The acquisition of Trilogy was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill.  i The following table summarizes the allocation of the purchase price based on the estimated fair value of assets acquired and liabilities assumed based on their preliminary estimated fair values at the acquisition date, which are subject to adjustment. There were no measurement period adjustments recorded in the six months ended June 30, 2022. The purchase accounting will be finalized within one year from the acquisition date.

 

11


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

Assets acquired:

 

 

Accounts receivable

$

 i 3,929

 

Inventories

 

 i 2,752

 

Prepaid expenses

 

 i 63

 

Other assets - long term

 

 i 93

 

Property, plant and equipment

 

 i 4,903

 

Right of use asset - operating leases

 

 i 8,685

 

Intangible assets

 

 i 14,333

 

Goodwill

 

 i 10,003

 

Assets acquired

$

 i 44,761

 

 

 

 

Liabilities assumed:

 

 

Accounts payable

$

 i 765

 

Accrued expenses

 

 i 777

 

Operating lease liability - short term

 

 i 576

 

Operating lease liability - long term

 

 i 8,108

 

Total liabilities assumed

 

 i 10,226

 

 

 

 

Net acquisition cost

$

 i 34,535

 

 

The goodwill 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.

 i 

The intangible assets included above consist of the following:

 

 

Fair Value

 

 

Weighted Average
Estimated
Useful Life

Customer relationships

 

$

 i 12,463

 

 

 i 18.0 years

Trade name

 

 

 i 1,870

 

 

 i 10.0 years

Total amortizable intangible assets

 

$

 i 14,333

 

 

 

 / 

Elkhart Plastics

On November 10, 2020, the Company acquired the assets of Elkhart Plastics, Inc. ("Elkhart Plastics"), a manufacturer of engineered products for the RV, marine, agricultural, construction, truck and other industries, which is included in the Company’s Material Handling Segment. The Elkhart Plastics acquisition aligns with the Company’s long-term strategic plan to transform the Company into a high-growth, customer-centric innovator of value-added engineered plastic solutions. The purchase price for the acquisition was $ i 63.8 million, including a working capital adjustment of $ i 1.2 million, which was settled in 2021. The Company funded the acquisition using available cash.

 / 
 i 

4. Restructuring

In March 2019, the Company committed to implementing a restructuring plan 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  i 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  i 5 years. During the second quarter of 2021, the sale of the original facility for net proceeds of $ i 2.8 million was completed, which resulted in a gain of $ i 1.0 million, and the lease back commenced. The Company has taken possession of the new Bristol facility and a portion of it is in service; however, construction remains in process as of June 30, 2022 to complete it for its full intended use, including moving equipment into the new Bristol facility from other locations, such as from the former manufacturing facility in Cassopolis, Michigan that was closed at December 31, 2021.

12


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 / 

The Ameri-Kart Plan is expected to be substantially completed in 2022 and total restructuring costs expected to be incurred are approximately $ i 1.8 million, primarily related to equipment relocation and facility shut down costs, which due to their nature will be expensed when incurred. The Company incurred $ i 0.4 million of restructuring charges classified as Cost of sales for the six months ended June 30, 2022 and $ i 0.3 million related to loss on disposal of fixed assets during the six months ended June 30, 2022. The accrual for unpaid restructuring expenses at December 31, 2021 was $ i 0.5 million and no balance was accrued at June 30, 2022.  i  i  i No /  /  restructuring charges were incurred during the quarter ended June 30, 2022 and the quarter and six months ended June 30, 2021.

 i 

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  i 40 percent of inventories are valued using the LIFO method of determining cost. All other inventories are valued using 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 be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation.  i  i No /  adjustment to the LIFO reserve was recorded for the quarters ended June 30, 2022 or 2021.

 

 i 

Inventories consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Finished and in-process products

 

$

 i 69,584

 

 

$

 i 56,684

 

Raw materials and supplies

 

 

 i 39,318

 

 

 

 i 36,867

 

 

 

$

 i 108,902

 

 

$

 i 93,551

 

 / 
 / 

 

 i 

6. Other Liabilities

 i 

The balance in Other Current Liabilities is comprised of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Customer deposits and accrued rebates

 

$

 i 4,904

 

 

$

 i 5,194

 

Dividends payable

 

 

 i 5,485

 

 

 

 i 5,441

 

Accrued litigation, claims and professional fees

 

 

 i 1,060

 

 

 

 i 777

 

Current portion of environmental reserves

 

 

 i 1,429

 

 

 

 i 1,429

 

Other accrued expenses

 

 

 i 7,880

 

 

 

 i 6,787

 

 

 

$

 i 20,758

 

 

$

 i 19,628

 

 / 

 

 

 i 

The balance in Other Liabilities (long-term) is comprised of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Environmental reserves

 

$

 i 9,238

 

 

$

 i 8,298

 

Supplemental executive retirement plan liability

 

 

 i 1,031

 

 

 

 i 1,176

 

Pension liability

 

 

 i 258

 

 

 

 i 421

 

Other long-term liabilities

 

 

 i 3,336

 

 

 

 i 3,191

 

 

 

$

 i 13,863

 

 

$

 i 13,086

 

 / 
 / 

 

13


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 i 

7. Goodwill and Intangible Assets

 i 

The change in goodwill for the six months ended June 30, 2022 was as follows:

 

 

 

Distribution

 

 

Material
Handling

 

 

Total

 

January 1, 2022

 

$

 i 7,648

 

 

$

 i 81,130

 

 

$

 i 88,778

 

Acquisition

 

 

 i 7,485

 

 

 

 i 

 

 

 

 i 7,485

 

Foreign currency translation

 

 

 i 

 

 

 

( i 170

)

 

 

( i 170

)

June 30, 2022

 

$

 i 15,133

 

 

$

 i 80,960

 

 

$

 i 96,093

 

 / 

 

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 $ i  i 9.8 /  million at both June 30, 2022 and December 31, 2021. Refer to Note 3 for the intangible assets acquired through the Mohawk acquisition in May 2022 and the Trilogy acquisition in July 2021.

 / 
 i 

8. Net Income per Common Share

 i 

Net income 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 Quarter Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Weighted average common shares outstanding basic

 

 

 i 36,397,547

 

 

 

 i 36,122,792

 

 

 

 i 36,338,907

 

 

 

 i 36,058,061

 

Dilutive effect of stock options and restricted stock

 

 

 i 225,948

 

 

 

 i 213,656

 

 

 

 i 238,285

 

 

 

 i 237,942

 

Weighted average common shares outstanding diluted

 

 

 i 36,623,495

 

 

 

 i 36,336,448

 

 

 

 i 36,577,192

 

 

 

 i 36,296,003

 

 / 

Options to purchase  i 114,540 shares of common stock that were outstanding for the six months ended June 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. There were  i  i  i no /  /  options to purchase shares of common stock excluded from the computation of diluted earnings for the quarter ended June 30, 2022 and for the quarter and six months ended June 30, 2021.

 / 
 i 

9. Stock Compensation

The Company’s 2021 Long-Term Incentive Plan (the “2021 Plan”) was adopted by the Board of Directors on March 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 2021 Plan authorizes the Compensation and Management Development Committee of the Board of Directors (“Compensation Committee”) to issue up to  i 2,000,000 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.

Stock compensation expense was approximately $ i 2.1 million and $ i 0.7 million for the quarters ended June 30, 2022 and 2021, respectively and $ i 3.9 million and $ i 1.8 million for the six months ended June 30, 2022 and 2021, respectively. These expenses are included in Selling, General and Administrative expenses. Total unrecognized compensation cost related to non-vested stock-based compensation arrangements at June 30, 2022 was approximately $ i 11.6 million, which will be recognized over the next  i three years, as such compensation is earned. Outstanding options expire, if unexercised,  i ten years from the date of grant.

 / 
 i 

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.

14


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

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”) 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 Company 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.

During the fourth quarter of 2018, Buckhorn and the EPA finalized the AOC and related Statement of Work (“SOW”) with regards to the New Idria Mine. The AOC is effective as of November 27, 2018, the date that it was executed by the EPA. The AOC and accompanying SOW document the terms, conditions and procedures for Buckhorn’s performance of the RI/FS. In addition, the AOC required $ i 2 million of financial assurance to be provided to the EPA to secure Buckhorn's performance during the estimated life of the RI/FS. In January 2019, a letter of credit was provided to satisfy this assurance requirement. The AOC also includes provisions for payment of the EPA’s costs of oversight of the RI/FS. A draft work plan for the RI/FS, in accordance with the AOC and related SOW, was submitted to the EPA for review and approval in July 2019. Upon preparation of the draft work plan for the RI/FS, Buckhorn received preliminary estimates from its environmental consultants for the cost of the execution of the work plan. These preliminary estimates will continue to be refined through the finalization and approval of the draft work plan, which is anticipated to occur in 2022. Buckhorn believes it has insurance coverage that applies to the New Idria Mine and thus may be able to recover a portion of the estimated costs; however, as of June 30, 2022, Buckhorn has not recognized potential recovery in its condensed consolidated financial statements.

As part of the Notice Letter in 2015, the EPA also made a claim for approximately $ i 1.6 million in past costs for actions it claims it has taken in connection with the New Idria Mine from 1993 through February 2014. In December 2020, the EPA updated its claim to include past costs incurred from March 2014 through June 2020, which has been further revised in March 2022 to a total claim of $ i 2.0 million. Buckhorn is continuing to evaluate and negotiate this claim with the EPA.

Since October 2011, when New Idria was added to the Superfund National Priorities List by the EPA, Buckhorn has recognized $ i 12.4 million of costs, of which approximately $ i 3.2 million has been paid through June 30, 2022, net of insurance recoveries. These costs are comprised primarily of estimates to perform the RI/FS, negotiation of the AOC, identification of possible other PRPs, EPA oversight fees, past cost claims made by the EPA, periodic monitoring, and responses to unilateral administrative orders issued by the EPA. Expenses of $ i 0.6 million and $ i 1.3 million were recorded related to the New Idria Mine for the quarter and six months ended June 30, 2022, primarily related to updated estimates of the cost to perform the RI/FS.  i  i No /  expenses were recorded for the quarter and six months ended June 30, 2021. As of June 30, 2022, Buckhorn has a total reserve of $ i 9.2 million related to the New Idria Mine, of which $ i 1.1 million is classified in Other Current Liabilities and $ i 8.1 million in Other Liabilities (long-term).

It is possible that adjustments to the aforementioned reserves will be necessary as new information is obtained, including after finalization and EPA approval of the work plan for the RI/FS. Estimates of Buckhorn’s liability are based on current facts, laws, regulations and technology. Estimates of Buckhorn’s environmental liabilities are further subject to uncertainties regarding 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.

At this time, Buckhorn has not accrued for remediation costs in connection with this site because it is unable to estimate the liability, given the circumstances referred to above, including the fact that the final remediation strategy has not yet been determined.

15


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, whereby Buckhorn and the Company agreed to reimburse one-half of the County’s costs of implementing the project. The latest estimates received in 2016 from the County provided for an expanded scope and revised the estimate of total costs for implementing the project to between $ i 3.3 million and $ i 4.4 million.  i  i No /  costs were incurred related to New Almaden in the quarters ended June 30, 2022 or 2021. As of June 30, 2022, the Company has a total reserve of $ i 1.5 million related to the New Almaden Mine, of which $ i 0.3 million is classified in Other Current Liabilities and $ i 1.2 million in Other Liabilities (long-term).

The project has not yet been implemented though significant work on design and planning has been performed. The Company is currently awaiting notice from Santa Clara County on the expected timing of fieldwork to commence. 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.

Patent Infringement

On December 11, 2018, No Spill Inc. 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. A claim construction hearing was held on May 13, 2021 and the District Court held on June 23, 2021, that the claims of the patents were definite. On December 28, 2019, Scepter Canada, Inc. had filed petitions with the District Court for inter partes review (“IPR”) of the two patents asserted by No Spill, Inc. The U.S. Patent & Trademark Office (“USPTO”) instituted one IPR and denied the other. With respect to the instituted IPR, the USPTO’s Patent Trial and Appeal Board issued a final decision on July 2, 2021, finding the claims of the patent valid, which does not affect Scepter's primary defenses in the matter.

On June 28, 2021, the Scepter companies filed with the District Court a motion for leave to add new parties and assert counterclaims alleging antitrust related violations of certain provisions of the Sherman Act and Clayton Act. The Court granted the motion and the Scepter companies filed a Second Amended Complaint on October 1, 2021. On November 15, 2021, No Spill and the new counterclaim defendants filed a Motion to Dismiss the counterclaims, which was granted by the District Court on April 6, 2022. On January 6, 2022, the District Court bifurcated the patent infringement and invalidity issues from the antitrust and other issues in the case. Initial discovery has concluded. The trial on patent infringement and invalidity is scheduled for March 2023.

The Scepter companies intend to continue defending themselves vigorously in this matter. Based on available information, an unfavorable outcome is not considered to be probable, and any possible losses from an adverse outcome are not reasonably estimable.

 / 
 i 

11. Long-Term Debt and Loan Agreements

 i 

Long-term debt consisted of the following:

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Loan Agreement

 

$

 i 66,000

 

 

$

 i 53,000

 

 i 5.25% Senior Unsecured Notes due  i January 15, 2024

 

 

 i 11,000

 

 

 

 i 11,000

 

 i 5.30% Senior Unsecured Notes due  i January 15, 2024

 

 

 i 15,000

 

 

 

 i 15,000

 

 i 5.45% Senior Unsecured Notes due  i January 15, 2026

 

 

 i 12,000

 

 

 

 i 12,000

 

 

 

 

 i 104,000

 

 

 

 i 91,000

 

Less unamortized deferred financing costs

 

 

 i 44

 

 

 

 i 55

 

 

 

 

 i 103,956

 

 

 

 i 90,945

 

Less current portion long-term debt

 

 

 i 

 

 

 

 i 

 

Long-term debt

 

$

 i 103,956

 

 

$

 i 90,945

 

 

16


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 / 

 

In March 2021, the Company entered into a Sixth Amended and Restated Loan Agreement (the “Sixth Amendment”), which amended the Fifth Amended and Restated Loan Agreement (collectively, the “Loan Agreement”) dated March 2017. The Sixth Amendment increased the senior revolving credit facility’s borrowing limit to $ i 250 million from $ i 200 million, extended the maturity date to  i March 2024 from  i March 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 $ i 1.1 million of deferred financing fees, which are included in Other Assets (long-term).

As of June 30, 2022, the Company had $ i 178.3 million available under the Loan Agreement. The Company had $ i 5.7 million of letters of credit issued related to insurance and other contracts requiring financial assurance in the ordinary course of business. Borrowings under the Loan Agreement bear interest at the LIBOR rate, prime rate, federal funds effective rate, the Canadian deposit offered rate, or the euro currency reference rate depending on the type of loan requested by the Company, plus the applicable margin as set forth in the Loan Agreement.

The Company also holds Senior Unsecured Notes (“Notes”), which range in face value from $ i 11.0 million to $ i 15.0 million, with interest rates ranging from  i 5.25% to  i 5.45%, payable semiannually, and maturing between January 2024 and January 2026. At June 30, 2022, $ i 38.0 million of the Notes were outstanding. In January 2021, the Company repaid a $ i 40.0 million note upon maturity with a combination of cash and proceeds under the Loan Agreement.

The weighted average interest rate on borrowings under the Company’s long-term debt was  i 3.97% and  i 5.13% for the quarters ended June 30, 2022 and 2021, respectively, and  i 4.05% and  i 5.23% for the six months ended June 30, 2022 and 2021, respectively, which includes a quarterly facility fee on the used and unused portion, as well as amortization of deferred financing costs.

As of June 30, 2022, the Company was in compliance with all of its debt covenants associated with its Loan Agreement and Notes. The most restrictive financial covenants for all of the Company’s debt are a leverage ratio (defined as total debt divided by earnings before interest, taxes, depreciation and amortization, as adjusted) and an interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, as adjusted, divided by interest expense).

 / 
 i 

12. Income Taxes

The Company’s effective tax rate was  i 26.0% and  i 25.7% for the quarter and six months ended June 30, 2022 compared to  i 25.5% and  i 25.7% for the quarter and six months ended June 30, 2021. The effective income tax rate for both periods was different than the Company’s statutory rate, primarily due to state taxes and non-deductible expenses.

The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $ i  i 0.8 /  million at June 30, 2022 and December 31, 2021.

 i The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of June 30, 2022, the Company is no longer subject to U.S. Federal examination by tax authorities for tax years before 2015. The Company’s 2017 U.S. Federal tax return is currently under audit by the Internal Revenue Service (“IRS”). The IRS began the examination in 2019 and there have been no changes resulting from this audit as of June 30, 2022. The Company is subject to state and local examinations for tax years of 2017 through 2020. In addition, the Company is subject to non-U.S. income tax examinations for tax years of 2016 through 2021.

 / 
 i 

13. Leases

 i 

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  i fourteen years.  i  i Certain of these leases include  i options to extend the lease for up to  i five years, and some include  i 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 of use asset – operating leases (“ROU assets”), operating lease liability – short term, and operating lease liability – long term and finance leases are included property, plant and equipment, finance lease liability – short term, and finance lease liability – long term in the Condensed Consolidated Statement of Financial Position (Unaudited).

17


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

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.

 / 
 i 

Amounts included in the Condensed Consolidated Statement of Financial Position (Unaudited) related to leases include:

 

 

 

 

June 30,

 

 

December 31,

 

 

Classification

 

2022

 

 

2021

 

Assets:

 

 

 

 

 

 

 

Operating lease assets

Right of use asset - operating leases

 

$

 i 29,052

 

 

$

 i 29,285

 

Finance lease assets

Property, plant and equipment, net

 

 

 i 9,420

 

 

 

 i 9,765

 

Total lease assets

 

 

$

 i 38,472

 

 

$

 i 39,050

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Current

Operating lease liability - short-term

 

$

 i 5,774

 

 

$

 i 5,341

 

Long-term

Operating lease liability - long-term

 

 

 i 23,242

 

 

 

 i 23,815

 

Total operating lease liabilities

 

 

$

 i 29,016

 

 

$

 i 29,156

 

Current

Finance lease liability - short-term

 

$

 i 509

 

 

$

 i 500

 

Long-term

Finance lease liability - long-term

 

 

 i 9,179

 

 

 

 i 9,437

 

Total finance lease liabilities

 

 

 

 i 9,688

 

 

 

 i 9,937

 

Total lease liabilities

 

 

$

 i 38,704

 

 

$

 i 39,093

 

 / 

 

 

 i 

The components of lease expense include:

 

 

 

 

 

For the Quarter Ended June 30,

 

 

For the Six Months Ended June 30,

 

Lease Cost

 

Classification

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating lease cost (1)

 

Cost of sales

 

$

 i 1,376

 

 

$

 i 1,176

 

 

$

 i 2,732

 

 

$

 i 2,246

 

Operating lease cost (1)

 

Selling, general and administrative expenses

 

 

 i 666

 

 

 

 i 544

 

 

 

 i 1,277

 

 

 

 i 1,095

 

Finance lease cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization expense

 

Cost of sales

 

 

 i 173

 

 

 

 i 173

 

 

 

 i 345

 

 

 

 i 230

 

Interest expense on lease liabilities

 

Interest expense, net

 

 

 i 85

 

 

 

 i 89

 

 

 

 i 171

 

 

 

 i 119

 

Total lease cost

 

 

 

$

 i 2,300

 

 

$

 i 1,982

 

 

$

 i 4,525

 

 

$

 i 3,690

 

(1)
Includes short-term leases and variable lease costs, which are immaterial
 / 
 i 

Supplemental cash flow information related to leases was as follows:

 

 

 

For the Six Months Ended June 30,

 

Supplemental Cash Flow Information

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

 i 3,286

 

 

$

 i 2,627

 

Operating cash flows from finance leases

 

$

 i 171

 

 

$

 i 119

 

Financing cash flows from finance leases

 

$

 i 249

 

 

$

 i 161

 

Right-of-use assets obtained in exchange for new lease liabilities:

 

 

 

 

 

 

Operating leases

 

$

 i 1,296

 

 

$

 i 6,753

 

Finance leases

 

$

 i 

 

 

$

 i 10,339

 

 

18


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

 

Lease Term and Discount Rate

 

June 30, 2022

 

 

December 31, 2021

 

Weighted-average remaining lease term (years):

 

 

 

 

 

 

Operating leases

 

 

 i 6.89

 

 

 

 i 7.27

 

Finance leases

 

 

 i 13.68

 

 

 

 i 14.17

 

Weighted-average discount rate:

 

 

 

 

 

 

Operating leases

 

 

 i 3.4

%

 

 

 i 3.4

%

Finance leases

 

 

 i 3.5

%

 

 

 i 3.5

%

 / 

 

 i 

Maturity of Lease Liabilities - As of June 30, 2022

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

2022 (1)

 

$

 i 3,390

 

 

$

 i 420

 

 

$

 i 3,810

 

2023

 

 

 i 6,211

 

 

 

 i 840

 

 

 

 i 7,051

 

2024

 

 

 i 4,594

 

 

 

 i 861

 

 

 

 i 5,455

 

2025

 

 

 i 3,793

 

 

 

 i 865

 

 

 

 i 4,658

 

2026

 

 

 i 3,319

 

 

 

 i 865

 

 

 

 i 4,184

 

After 2026

 

 

 i 11,243

 

 

 

 i 8,408

 

 

 

 i 19,651

 

Total lease payments

 

 

 i 32,550

 

 

 

 i 12,259

 

 

 

 i 44,809

 

Less: interest

 

 

( i 3,534

)

 

 

( i 2,571

)

 

 

( i 6,105

)

Present value of lease liabilities

 

$

 i 29,016

 

 

$

 i 9,688

 

 

$

 i 38,704

 

 / 
(1)
Represents amounts due in 2022 after June 30, 2022

The Company has operating leases for  i four facilities within the Material Handling Segment that are with a related party. Total right of use assets related to these related party leases were $ i 2.8 million and $ i 3.6 million at June 30, 2022 and December 31, 2021, respectively. Total operating lease liabilities related to these related party leases were $ i 2.6 million and $ i 3.4 million at June 30, 2022 and December 31, 2021, respectively. Total lease expense from these related party leases was $ i  i 0.4 /  million in each of the quarters ended June 30, 2022 and June 30, 2021 and was $ i  i 0.9 /  million in both the six months ended June 30, 2022 and June 30, 2021.

 / 
 i 

14. Segments

The Company manages its business under  i two operating segments, Material Handling and Distribution, consistent with the manner in which the 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. Intersegment sales are recorded with a reasonable margin and 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 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 and Canada. Markets served include industrial manufacturing, food processing, retail/wholesale products distribution, agriculture, automotive, recreational vehicles, marine vehicles, healthcare, appliance, bakery, electronics, textiles and consumer, among others. Products are sold both directly to end-users and through distributors. The acquisitions of Trilogy and Elkhart Plastics, described in Note 3, are included in the Material Handling Segment.

The Distribution Segment is engaged in the distribution of equipment, tools, and supplies used for tire servicing and automotive under-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 five 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 re-treaders, and government agencies. The acquisition of Mohawk, described in Note 3, is included in the Distribution Segment.

19


MYERS INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

(Dollars in thousands, except where otherwise indicated)

 

 

Total sales from foreign business units were approximately $ i 13.8 million and $ i 12.1 million for the quarters ended June 30, 2022 and 2021, respectively, and $ i 26.4 million and $ i 23.1 million for the six months ended June 30, 2022 and 2021, respectively.

 i 

Summarized segment detail for the quarters and six months ended June 30, 2022 and 2021 are presented in the following table:

 

 

For the Quarter Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

Material Handling

$

 i 173,090

 

 

$

 i 137,227

 

 

$

 i 349,726

 

 

$

 i 267,120

 

Distribution

 

 i 60,075

 

 

 

 i 50,156

 

 

 

 i 108,936

 

 

 

 i 94,706

 

Inter-company sales

 

( i 9

)

 

 

( i 14

)

 

 

( i 20

)

 

 

( i 28

)

Total net sales

$

 i 233,156

 

 

$

 i 187,369

 

 

$

 i 458,642

 

 

$

 i 361,798

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

Material Handling (1)

$

 i 28,034

 

 

$

 i 17,902

 

 

$

 i 59,254

 

 

$

 i 34,829

 

Distribution (2)

 

 i 4,269

 

 

 

 i 4,214

 

 

 

 i 7,570

 

 

 

 i 5,652

 

Corporate (2)

 

( i 9,686

)

 

 

( i 6,247

)

 

 

( i 19,802

)

 

 

( i 13,747

)

Total operating income

 

 i 22,617

 

 

 

 i 15,869

 

 

 

 i 47,022

 

 

 

 i 26,734

 

Interest expense, net

 

( i 1,211

)

 

 

( i 999

)

 

 

( i 2,358

)

 

 

( i 1,994

)

Income before income taxes

$

 i 21,406

 

 

$

 i 14,870

 

 

$

 i 44,664

 

 

$

 i 24,740

 

 

(1)
In the quarter and six months ended June 30, 2021, the Company recognized a $ i  i 1.0 /  million gain on the sale of a building within the Material Handling Segment as described in Note 4.
(2)
In the six months ended June 30, 2021, the Company recognized $ i 0.8 million of executive severance, of which $ i 0.5 million was recognized in the Distribution Segment and $ i 0.3 million was recognized in Corporate. This executive severance cost includes $ i 0.5 million of severance and benefits and $ i 0.3 million of charges for acceleration of stock compensation.
 / 
 / 

20


 

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 include, without limitation, impacts from the novel coronavirus (“COVID-19”) pandemic on our business, operations, customers and capital position; the impact of COVID-19 on local, national and global economic conditions; the effects of various governmental responses to the COVID-19 pandemic; 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; 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, 2021. 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 six months ended June 30, 2022 are discussed below. The current economic environment includes heightened risks from inflation, 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 has increased volatility in global commodity markets, including oil (a component of many plastic resins), energy and agricultural commodities. While many of the public safety measures in response to the COVID-19 pandemic have been lifted or relaxed, it is possible that new or previously lifted measures could be implemented in the future. Through the date of this report, the Company’s businesses continued to operate during the pandemic. However, some of our businesses have been and may continue to be affected by these broader economic effects, including customer demand for our products, supply chain disruptions, labor availability and inflation. 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.

21


 

Results of Operations:

Comparison of the Quarter Ended June 30, 2022 to the Quarter Ended June 30, 2021

Net Sales:

 

(dollars in millions)

 

Quarter Ended June 30,

 

 

 

 

 

 

 

Segment

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Material Handling

 

$

173,090

 

 

$

137,227

 

 

$

35,863

 

 

 

26.1

%

Distribution

 

 

60,075

 

 

 

50,156

 

 

 

9,919

 

 

 

19.8

%

Inter-company sales

 

 

(9

)

 

 

(14

)

 

 

5

 

 

 

 

Total net sales

 

$

233,156

 

 

$

187,369

 

 

$

45,787

 

 

 

24.4

%

 

Net sales for the quarter ended June 30, 2022 were $233.2 million, an increase of $45.8 million or 24.4% compared to the quarter ended June 30, 2021. Net sales increased due to higher pricing of $31.9 million. Net sales also increased due to $16.4 million of incremental sales from the acquisitions of Mohawk on May 31, 2022, included in the Distribution Segment, and Trilogy on July 30, 2021, included in the Material Handling Segment. Mohawk's annual sales were approximately $65 million and Trilogy’s annual sales were approximately $35 million at the times of their acquisitions. The increase in net sales was partially offset by lower volume/mix of $2.0 million and the effect of unfavorable currency translation of $0.5 million. Beginning in February 2021, the Company began to implement a series of pricing increases across a majority of its portfolio of products in response to rising raw material and other production costs.

Net sales in the Material Handling Segment increased $35.9 million or 26.1% for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021. Net sales increased due to higher pricing of $27.1 million and due to $10.3 million of incremental sales from the acquisition of Trilogy on July 30, 2021. The increase in net sales was partially offset by lower volume/mix of $1.0 million and the effect of unfavorable currency translation of $0.5 million.

Net sales in the Distribution Segment increased $9.9 million or 19.8% for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, primarily due to higher pricing of $4.8 million and due to $6.0 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 $0.9 million.

Cost of Sales & Gross Profit:

 

 

 

Quarter Ended June 30,

 

 

 

 

 

 

 

(dollars in millions)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Cost of sales

 

$

158,440

 

 

$

132,375

 

 

$

26,065

 

 

 

19.7

%

Gross profit

 

$

74,716

 

 

$

54,994

 

 

$

19,722

 

 

 

35.9

%

Gross profit as a percentage of sales

 

 

32.0

%

 

 

29.4

%

 

 

 

 

 

 

 

Gross profit increased $19.7 million, or 35.9%, for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, due to increased contribution from higher pricing as described under Net Sales above and the acquisitions of Mohawk on May 31, 2022 and Trilogy on July 30, 2021. Partially offsetting these contributions were increased labor costs and an unfavorable sales mix. As a result, gross profit margin was 32.0% for the quarter ended June 30, 2022 compared with 29.4% for the quarter ended June 30, 2021.

Selling, General and Administrative Expenses:

 

 

 

Quarter Ended June 30,

 

 

 

 

 

 

 

(dollars in millions)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

SG&A expenses

 

$

52,320

 

 

$

40,121

 

 

$

12,199

 

 

 

30.4

%

SG&A expenses as a percentage of sales

 

 

22.4

%

 

 

21.4

%

 

 

 

 

 

 

 

Selling, general and administrative (“SG&A”) expenses for the quarter ended June 30, 2022 were $52.3 million, an increase of $12.2 million or 30.4% compared to the same period in the prior year. Increases in SG&A expenses in the second quarter 2022 were primarily due to $4.8 million of higher salaries, benefits and incentive compensation, $2.2 million of higher variable selling expenses, $1.0 million of higher facility costs, $0.9 million of increased professional services fees and $2.6 million of incremental SG&A from the acquisitions of Mohawk on May 31, 2022 and Trilogy on July 30, 2021.

22


 

Net Interest Expense:

 

 

 

Quarter Ended June 30,

 

 

 

 

 

 

 

(dollars in millions)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Net interest expense

 

$

1,211

 

 

$

999

 

 

$

212

 

 

 

21.2

%

Average outstanding borrowings, net

 

$

115,110

 

 

$

72,469

 

 

$

42,641

 

 

 

58.8

%

Weighted-average borrowing rate

 

 

3.97

%

 

 

5.13

%

 

 

 

 

 

 

 

Net interest expense for the quarter ended June 30, 2022 was $1.2 million, an increase of $0.2 million, or 21.2%, compared with $1.0 million for the quarter ended June 30, 2021. The higher net interest expense was due to higher average outstanding borrowings in the current year, partially offset by the lower borrowing rate.

Income Taxes:

 

 

 

Quarter Ended June 30,

 

(dollars in millions)

 

2022

 

 

2021

 

Income from continuing operations before income taxes

 

$

21,406

 

 

$

14,870

 

Income tax expense

 

$

5,575

 

 

$

3,795

 

Effective tax rate

 

 

26.0

%

 

 

25.5

%

 

The Company’s effective tax rate was 26.0% for the quarter ended June 30, 2022, compared to 25.5% for the quarter ended June 30, 2021. The increase in the effective tax rate was driven primarily by higher estimated non-deductible expenses.

 

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

Net Sales:

 

(dollars in thousands)

 

Six Months Ended June 30,

 

 

 

 

 

 

 

Segment

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Material Handling

 

$

349,726

 

 

$

267,120

 

 

$

82,606

 

 

 

30.9

%

Distribution

 

 

108,936

 

 

 

94,706

 

 

 

14,230

 

 

 

15.0

%

Inter-company elimination

 

 

(20

)

 

 

(28

)

 

 

8

 

 

 

 

Total net sales

 

$

458,642

 

 

$

361,798

 

 

$

96,844

 

 

 

26.8

%

 

Net sales for the six months ended June 30, 2022 were $458.6 million, an increase of $96.8 million or 26.8% compared to the six months ended June 30, 2021. Net sales increased due to higher pricing of $65.5 million and higher volume/mix of $4.6 million. Net sales also increased due to $27.2 million of incremental sales from the acquisitions of Mohawk on May 31, 2022, included in the Distribution Segment, and Trilogy on July 30, 2021, included in the Material Handling Segment. Mohawk's annual sales were approximately $65 million and Trilogy’s annual sales were approximately $35 million at the times of the acquisitions. The increase in net sales was partially offset by the effect of unfavorable currency translation of $0.5 million. Beginning in February 2021, the Company began to implement a series of pricing increases across a majority of its portfolio of products in response to rising raw material and other production costs.

Net sales in the Material Handling Segment increased $82.6 million or 30.9% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. Net sales increased due to higher pricing of $56.4 million and higher volume/mix of $5.5 million. Net sales also increased due to $21.2 million of incremental sales from the acquisition of Trilogy on July 30, 2021. The increase in net sales was partially offset by the effect of unfavorable currency translation of $0.5 million.

Net sales in the Distribution Segment increased $14.2 million or 15.0% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to higher pricing of $9.1 million and due to $6.0 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 $0.9 million.

23


 

Cost of Sales & Gross Profit:

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

(dollars in thousands)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Cost of sales

 

$

311,998

 

 

$

256,391

 

 

$

55,607

 

 

 

21.7

%

Gross profit

 

$

146,644

 

 

$

105,407

 

 

$

41,237

 

 

 

39.1

%

Gross profit as a percentage of sales

 

 

32.0

%

 

 

29.1

%

 

 

 

 

 

 

 

Gross profit increased $41.2 million, or 39.1%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, due to increased contribution from higher pricing and volume as described under Net Sales above and the acquisitions of Mohawk on May 31, 2022 and Trilogy on July 30, 2021. Partially offsetting these contributions were higher raw material costs, increased labor costs, and unfavorable sales mix. As a result, gross profit margin was 32.0% for the six months ended June 30, 2022 compared with 29.1% for the six months ended June 30, 2021.

Selling, General and Administrative Expenses:

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

(dollars in thousands)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

SG&A expenses

 

$

100,310

 

 

$

79,669

 

 

$

20,641

 

 

 

25.9

%

SG&A expenses as a percentage of sales

 

 

21.9

%

 

 

22.0

%

 

 

 

 

 

 

 

Selling, general and administrative (“SG&A”) expenses for the six months ended June 30, 2022 were $100.3 million, an increase of $20.6 million or 25.9% compared to the same period in the prior year. Increases in SG&A expenses in 2022 were primarily due to $9.5 million of higher salaries, benefits and incentive compensation, $3.4 million of higher variable selling expenses, $2.3 million of higher facility costs, $1.2 million of increased professional services fees and $3.7 million of incremental SG&A from the acquisitions of Mohawk on May 31, 2022 and Trilogy on July 30, 2021.

Net Interest Expense:

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

(dollars in thousands)

 

2022

 

 

2021

 

 

Change

 

 

% Change

 

Net interest expense

 

$

2,358

 

 

$

1,994

 

 

$

364

 

 

 

18.3

%

Average outstanding borrowings, net

 

$

110,507

 

 

$

73,148

 

 

$

37,359

 

 

 

51.1

%

Weighted-average borrowing rate

 

 

4.05

%

 

 

5.23

%

 

 

 

 

 

 

 

Net interest expense for the six months ended June 30, 2022 was $2.4 million, an increase of $0.4 million, or 18.3%, compared with $2.0 million for the six months ended June 30, 2021. The higher net interest expense was due to higher average outstanding borrowings in the current year, partially offset by the lower borrowing rate.

Income Taxes:

 

 

 

Six Months Ended June 30,

 

(dollars in thousands)

 

2022

 

 

2021

 

Income from continuing operations before income taxes

 

$

44,664

 

 

$

24,740

 

Income tax expense

 

$

11,496

 

 

$

6,360

 

Effective tax rate

 

 

25.7

%

 

 

25.7

%

 

The Company’s effective tax rate was 25.7% for both the six months ended June 30, 2022 and 2021.

24


 

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 June 30, 2022, the Company had $22.4 million of cash, $178.3 million available under the Loan Agreement and outstanding debt of $113.6 million, including the finance lease liability of $9.7 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 operating activities was $34.3 million for the six months ended June 30, 2022, compared to $21.3 million in the same period in 2021. The increase was primarily due to higher net income in the current year partially offset by higher working capital driven by increases in accounts receivable and inventory.

Investing Activities

Net cash used by investing activities was $33.7 million for the six months ended June 30, 2022 compared to cash used of $6.6 million for the same period in 2021. In 2022, the Company paid $24.3 million to acquire Mohawk and estimates approximately $3.4 million of working capital and other adjustments to be paid in the balance of 2022 as discussed in Note 3. The Company also received in 2022 proceeds of $1.5 million from the sale of fixed assets. In 2021, the Company paid the working capital adjustment of $1.2 million related to the November 10, 2020 acquisition of Elkhart Plastics as discussed in Note 3 and received proceeds from the sale of a facility of $2.8 million as discussed in Note 4. Capital expenditures were $10.9 million and $8.2 million for the six months ended June 30, 2022 and 2021, respectively, including $1.4 million to purchase the manufacturing assets of a rotational molding facility in Decatur, Georgia. Full year 2022 capital expenditures are expected to be approximately $25 million to $28 million.

Financing Activities

Cash provided by financing activities was $4.3 million for the six months ended June 30, 2022 compared to $29.5 million used for financing activities for the same period in 2021. Net borrowings on the credit facility for the six months ended June 30, 2022 and 2021 were $13.0 million and $19.9 million. In 2021, the Company repaid a $40.0 million Senior Unsecured Note when it matured in January 2021 with a combination of cash and proceeds under the Loan Agreement (defined below). Fees paid for the amendment and extension of the Loan Agreement in March 2021 totaled $1.1 million . Net proceeds from the issuance of common stock in connection with incentive stock option exercises were $1.8 million and $2.4 million for the six months ended June 30, 2022 and 2021, respectively. The Company also used cash to pay dividends of $9.9 million and $9.8 million for the six months ended June 30, 2022 and 2021, respectively.

Credit Sources

In March 2021, the Company entered into a Sixth Amended and Restated Loan Agreement (the “Sixth Amendment”), which amended the Fifth Amended and Restated Loan Agreement (collectively, the “Loan Agreement”) dated March 2017. The Sixth Amendment increased the senior revolving credit facility’s borrowing limit to $250 million from $200 million, extended the maturity date to March 2024 from March 2022, and increased flexibility of the financial and other covenants and provisions.

As of June 30, 2022, $178.3 million was available under the Loan Agreement, after borrowings and $5.7 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business. Borrowings under the Loan Agreement bear interest at the LIBOR rate, prime rate, federal funds effective rate, the Canadian deposit offered rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case plus the applicable margin as set forth in the Loan Agreement.

At June 30, 2022, $38 million 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.

25


 

As of June 30, 2022, 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 June 30, 2022 are shown in the following table:

 

 

 

Required Level

 

Actual Level

 

Interest Coverage Ratio

 

3.00 to 1 (minimum)

 

 

22.31

 

Leverage Ratio

 

3.25 to 1 (maximum)

 

 

1.17

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company has certain financing arrangements that require interest payments based on floating interest rates, 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 LIBOR, prime rate, federal funds effective rate, the Canadian deposit offered rate, or the euro currency reference rate depending on the type of loan requested by the Company, plus the applicable margin as set forth in the Loan Agreement. 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. The Financial Conduct Authority in the United Kingdom has stated that it will not require banks to submit LIBOR beyond June 2023. The Company does not anticipate a significant impact to its financial position as a result of this action. Based on current debt levels at June 30, 2022, if market interest rates increase one percent, the Company’s annual variable interest expense would increase approximately $0.7 million.

Foreign 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. 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 that are denominated in U.S. dollars. The net exposure generally ranges from $1 million to $3 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 Condensed Consolidated Statements of 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 June 30, 2022, the Company had no foreign currency arrangements or contracts in place.

Commodity Price Risk

The Company uses certain commodity raw materials, primarily plastic resins, and other commodities, such as natural gas, in its operations. The cost of operations can be affected by changes in the market for these commodities, particularly plastic resins. The Company currently has no derivative contracts to hedge changes in raw material pricing. The Company may from time to time enter into forward buy positions for certain utility costs, which were not material at June 30, 2022. 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 SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Interim 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 Interim 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 Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2022.

26


 

Changes in Internal Control Over Financial Reporting

On May 31, 2022, the Company acquired the assets of Mohawk. As permitted by SEC rules and regulations, the scope of management’s evaluation of internal control over financial reporting as of June 30, 2022 did not include an evaluation of the internal control over financial reporting of Mohawk. However, we are extending our oversight and monitoring processes that support our review of internal control over financial reporting to include Mohawk’s operations.

On July 30, 2021, the Company acquired the assets of Trilogy. As permitted by SEC rules and regulations, the scope of management’s evaluation of internal control over financial reporting as of June 30, 2022 did not include an evaluation of the internal control over financial reporting of Trilogy. However, we are extending our oversight and monitoring processes that support our review of internal control over financial reporting to include Trilogy’s operations.

During the six months ended June 30, 2022, 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.

 

 

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, 2021. 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 is 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

 

(c) The following table presents information regarding the Company’s stock repurchase plan during the quarter ended June 30, 2022:

 

 

 

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)

 

4/1/2022 to 4/30/2022

 

 

 

 

$

 

 

 

5,547,665

 

 

 

2,452,335

 

5/1/2022 to 5/31/2022

 

 

 

 

 

 

 

 

5,547,665

 

 

 

2,452,335

 

6/1/2022 to 6/30/2022

 

 

 

 

 

 

 

 

5,547,665

 

 

 

2,452,335

 

 

(1)
On July 11, 2013, the Board authorized the repurchase of up to 5.0 million shares of the Company’s common stock. This authorization was in addition to the 2011 Board authorized repurchase of up to 5.0 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.

27


 

Item 6. Exhibits

 

3.1

Myers Industries, Inc. Second Amended and Restated Articles of Incorporation. Reference is made to Exhibit 3.1 to Form 8-K filed with the SEC on April 29, 2021.

3.2

Myers Industries, Inc. Amended and Restated Code of Regulations. Reference is made to Exhibit 3.2 to Form 8-K filed with the SEC on April 29, 2021.

31.1

Certification of Michael P. McGaugh, President and Chief Executive Officer of Myers Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Monica P. Vinay, Interim Chief Financial Officer of Myers Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certifications of Michael P. McGaugh, President and Chief Executive Officer, and Monica P. Vinay, Interim Chief Financial Officer, of Myers Industries, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial information from Myers Industries, Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, formatted in inline XBRL includes: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Financial Position, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

 

28


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

MYERS INDUSTRIES, INC.

 

 

August 2, 2022

/s/ Monica P. Vinay

 

Monica P. Vinay

 

Interim Chief Financial Officer

(Principal Financial and Accounting Officer)

 

29



Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
1/15/26
1/15/24
1/1/23
12/31/22
Filed on:8/2/228-K
7/29/22
For Period end:6/30/22
5/31/228-K
4/6/22
4/1/22
1/6/22
1/1/22
12/31/2110-K,  11-K
11/15/21
10/1/21
7/30/218-K
7/2/21
6/30/2110-Q
6/28/21
6/23/21
5/13/21
4/29/214,  8-K,  DEF 14A,  PRE 14A,  S-8
4/20/218-K,  DEFA14A
4/1/21
3/4/21
1/1/21
11/10/208-K
12/28/19
12/11/184,  8-K,  8-K/A
11/27/18
7/11/13
 List all Filings 


1 Previous Filing that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/29/21  Myers Industries Inc.             8-K:5,9     4/29/21   13:686K                                   ActiveDisclosure/FA
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