1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 1-8524 MYERS INDUSTRIES, INC. (Exact name of registrant as specified in its charter) <TABLE> <S> <C> OHIO 34-0778636 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 1293 S. MAIN STREET, AKRON, OHIO 44301 (330) 253-5592 (Address of Principal Executive (Zip Code) (Telephone Number) Offices) SECURITIES REGISTERED PURSUANT TO NAME OF EACH EXCHANGE SECTION 12(b) OF THE ACT: ON WHICH REGISTERED: Common Stock, Without Par Value American Stock Exchange (Title of Class) </TABLE> SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the approximate aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 1997: $197,586,577. Indicate the number of shares outstanding of registrant's common stock as of February 28, 1997: 16,862,355 Shares of Common Stock, without par value. ================================================================================
2 DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of Registrant's Notice of 1997 Annual Meeting and Proxy Statement, dated March 21, 1997, in Part III (Items 10, 11, 12 and 13) CROSS REFERENCE SHEET PURSUANT TO FORM 10-K GENERAL INSTRUCTION G(4) <TABLE> <CAPTION> PART/ITEM FORM 10-K HEADING REFERENCE MATERIAL - --------- ------------------------------------------------------------ -------------------- <C> <S> <C> III/10 Directors and Executive Officers of the Registrant.......... Proxy Statement(1) pages 3 through 7 III/11 Executive Compensation...................................... Proxy Statement pages 6 through 12 III/12 Security Ownership of Certain Beneficial Owners and Management.............................................. Proxy Statement pages 3 through 6, page 10, and pages 29 and 30 III/13 Certain Relationships and Related Transactions.............. Proxy Statement page 7 </TABLE> - --------------- (1) Registrant's Notice of 1997 Annual Meeting of Shareholders and Proxy Statement
3 PART I ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS Net sales for the fourth quarter were $90,558,374, up 9 percent from the $82,963,267 reported in the same year ago period. Net income for the period was $6,473,096, a 43 percent increase from the $4,529,988 reported in 1995. Net income per share was $.38, up 41 percent from 1995's $.27 per share. For the full year, net sales increased 7 percent, finishing at $320,943,771, up from the $300,699,109 produced in 1995. Net income for the year was $21,003,266, a 32 percent increase from the $15,968,839 reported in 1995. Net income per share was $1.24, a 31 percent increase from the $.95 earned in 1995. Our capital position is excellent. Shareholders' equity increased $17.3 million to $162.4 million. Working capital increased to $69.5 million while total debt remains low at 3% of total capitalization. Cash flow from operating activities was $34.7 million. We invested approximately $21 million to continue modernizing and expanding our manufacturing plants. We expect annual capital expenditures for expansion of physical plant and equipment to continue in the range of $15 to $20 million. 1
4 (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS <TABLE> <CAPTION> 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> NET SALES Distribution of aftermarket repair products and services.............................................. $136,526 $126,902 $121,748 Manufacturing of polymer and metal products.............. 197,319 186,307 163,513 Intra-segment elimination................................ (12,901) (12,510) (11,207) -------- -------- -------- $320,944 $300,699 $274,054 ======== ======== ======== INCOME BEFORE INCOME TAXES Distribution of aftermarket repair products and services.............................................. $ 12,209 $ 11,793 $ 11,387 Manufacturing of polymer and metal products.............. 29,021 23,145 24,418 Corporate................................................ (5,330) (7,098) (5,139) Interest expense -- net.................................. (285) (784) (620) -------- -------- -------- $ 35,615 $ 27,056 $ 30,046 ======== ======== ======== IDENTIFIABLE ASSETS Distribution of aftermarket repair products and services.............................................. $ 49,605 $ 48,416 $ 46,966 Manufacturing of polymer and metal products.............. 148,708 140,291 121,635 Corporate................................................ 9,981 5,622 4,492 Intra-segment elimination................................ (1,172) (725) (1,066) -------- -------- -------- $207,122 $193,604 $172,027 ======== ======== ======== CAPITAL ADDITIONS, NET Distribution of aftermarket repair products and services.............................................. $ 426 $ 227 $ 942 Manufacturing of polymer and metal products.............. 20,433 10,722 11,071 Corporate................................................ 601 1,038 493 -------- -------- -------- $ 21,460 $ 11,987 $ 12,506 ======== ======== ======== DEPRECIATION/AMORTIZATION Distribution of aftermarket repair products and services.............................................. $ 598 $ 689 $ 598 Manufacturing of polymer and metal products.............. 9,352 8,747 7,949 Corporate................................................ 280 283 274 -------- -------- -------- $ 10,230 $ 9,719 $ 8,821 ======== ======== ======== </TABLE> (C) DESCRIPTION OF BUSINESS The Company conducts its business activities in two distinct segments: manufacturing of polymer and metal products ("the Manufacturing business") and distribution of aftermarket repair products ("the Distribution business"). The Company believes it is one of the largest manufacturers of plastic and metal storage systems in the United States and has the only nationwide distribution network supplying the tire servicing and automotive underbody repair industries. The Company's Manufacturing business designs, manufactures and markets reusable plastic storage systems for use in distribution and material handling, and other plastic and metal products for storage, assembly and material handling applications. The Company also manufactures and sells molded rubber products and other materials used primarily in the tire and tire repair industries and for various other uses including OEM automotive and construction applications. In its Distribution business, the Company is engaged in the nationwide distribution of equipment, tools and supplies used for tire servicing and automotive underbody repair. 2
5 MANUFACTURING BUSINESS The Company markets reusable plastic containers under the brand names NesTier(R), Akro-Bins(R) and Buckhorn(R). These reusable plastic containers are utilized in industrial applications including the distribution of food items, such as poultry, meat and baked goods, and the distribution of non-food items such as apparel, electronic, automotive, and industrial components, health and beauty aids and hardware. Reusable containers are also used for storage and handling in manufacturing plants and for agricultural products. Other products sold to the industrial and commercial market include tote boxes, various styles of bins, tubs, straight-walled boxes, and a line of modular cabinets for small parts storage and organization. The Company's products are sold throughout the United States and Canada by a direct sales force, independent dealers and through independent representatives. The Company's consumer products include the Keepbox(R) line of household storage containers, plastic tool boxes and other products to organize the home workshop, plastic containers to facilitate consumer recycling, and a line of plastic pots, planters and urns sold to consumers through lawn and garden retailers and other similar specialty outlets. Consumer products are marketed nationally to a variety of customers including mass-merchandisers, such as Target(R) and Wal-Mart(R), and major department stores and hardware chains, warehouse outlets and specialty shops. Products are mainly marketed under the Akro-Mils(R) name and other registered trade names, and to a lesser extent, under private label arrangements. The Company's products are sold throughout the United States by a direct sales force and independent representatives. The Company designs, manufactures, and markets molded rubber products, such as air intake hoses, rubber boots, mounts, and hood hold-down latches for diesel-powered vehicles and equipment used in the transportation, construction and agricultural industries. It also manufactures molded rubber products, rubber adhesives and materials used primarily in the tire retreading and repair industries, as well as products used in hydroelectric dams, locks and other water works systems. The Company has utilized its manufacturing systems and expertise to custom compound and calendar rubber materials to meet specific customer needs for a growing and diverse customer base. These products are sold nationally and internationally to manufacturers, construction companies and wholesale distributors, including the Distribution business, by a direct sales force and through independent sales representatives. The Company is continuously engaged in the refinement of its existing product lines and the development of new products. A large portion of the current products offered by the Company have been developed in the last five years. The Company's Manufacturing business is dependent upon outside suppliers for raw materials, principally polyethylene, polypropylene, polystyrene and synthetic and natural rubber. The Company believes that the loss of any one supplier or group of suppliers would not materially adversely affect its business, since in most instances identical or similar materials can be obtained readily from other suppliers. DISTRIBUTION BUSINESS The Company's Distribution business is conducted primarily by the Myers Tire Supply division. Products distributed by Myers Tire Supply include air compressors, mechanic's hand tools, tire changers, tire display and storage equipment, valves, tire balancing and wheel alignment equipment, curing rims and presses, retread presses and tire repair materials for the retreading industry. The Company believes it is the only nationwide distributor supplying such products. The Company's customers include independent tire dealers, tire retreaders, tire service centers, automotive supply chains and rubber companies. Myers Tire Supply's domestic distribution system includes 42 owned branch warehouse distributors located in major cities in 31 states. Each branch services customers in an assigned territory, sells all products of the division, and operates like a stand-alone business with the branch manager bearing profit/loss, inventory and credit responsibilities. Internationally, this business has two wholly owned warehouse distributors located in Canada and owns an interest in several other foreign warehouse distributors. Myers Tire Supply supplies its domestic and international distribution facilities from its main distribution center. This distribution center stocks approximately 12,000 items which are purchased from numerous 3
6 suppliers, including certain of the Company's manufacturing businesses. The Company's extensive national distribution network enables it to work closely with manufacturers in the development and distribution of new products. COMPETITION Competition in the Manufacturing business is substantial and varied in form and size from manufacturers of similar products and of other products which can be readily substituted for those produced by the Company. Competition in the Distribution business is generally from local and regional businesses. EMPLOYEES As of December 31, 1996 the Company had a total of 1,882 full-time and part-time employees. Of these employees, 1,341 were engaged in the Manufacturing business and 541 were employed in the Distribution business. Approximately 12% of the Company's employees are members of unions. The Company believes it has a good relationship with its employees. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Company operates principally in two areas of business, the first being the distribution of aftermarket repair products and services. These products are distributed both domestically through branches in the major cities in the United States and in foreign countries where, in some cases, the Company has an interest in companies located in those countries. No single foreign country represents more than 10 percent of the total sales, income or assets of the Company. The second major area of the Company's business is polymer and metal products which are manufactured in Company-owned facilities and distributed through mass merchandisers, warehouse distributors, sales representatives and in-house salesmen, principally in the United States. ITEM 2. PROPERTIES The following table sets forth by segment certain information with respect to properties owned by the Registrant: DISTRIBUTION OF AFTERMARKET REPAIR PRODUCTS AND SERVICES: <TABLE> <CAPTION> APPROXIMATE APPROXIMATE FLOOR SPACE LAND AREA PLANT LOCATION (SQUARE FEET) (ACRES) USE - --------------------------------- ------------- ----------- ----------------------------------- <S> <C> <C> <C> Akron, Ohio...................... 129,000 8 Executive offices and warehousing Akron, Ohio...................... 60,000 5 Warehousing Akron, Ohio...................... 31,000 2 Warehousing Pomona, California............... 17,700 1 Sales and distribution Englewood, Colorado.............. 9,500 1 Sales and distribution Pomona, California............... 9,200 1 Leased to non-affiliated party San Antonio, Texas............... 4,500 1 Sales and distribution Phoenix, Arizona................. 8,200 1 Sales and distribution Akron, Ohio...................... 8,000 1 Leased to non-affiliated party Houston, Texas................... 7,900 1 Sales and distribution Indianapolis, Indiana............ 7,800 2 Sales and distribution Cincinnati, Ohio................. 7,500 1 Sales and distribution </TABLE> 4
7 <TABLE> <CAPTION> APPROXIMATE APPROXIMATE FLOOR SPACE LAND AREA PLANT LOCATION (SQUARE FEET) (ACRES) USE - --------------------------------- ------------- ----------- ----------------------------------- <S> <C> <C> <C> York, Pennsylvania............... 7,400 3 Sales and distribution Atlanta, Georgia................. 7,000 1 Sales and distribution Minneapolis, Minnesota........... 5,500 1 Sales and distribution Charlotte, North Carolina........ 5,100 1 Sales and distribution Syracuse, New York............... 4,800 1 Sales and distribution Franklin Park, Illinois.......... 4,400 1 Sales and distribution POLYMER AND METAL PRODUCTS: Dawson Springs, Kentucky......... 209,000 36 Manufacturing and distribution Wadsworth, Ohio.................. 197,000 23 Manufacturing and distribution Hannibal, Missouri............... 196,000 10 Manufacturing and distribution Bluffton, Indiana................ 175,000 17 Manufacturing and distribution Roanoke Rapids, North Carolina... 172,000 20 Manufacturing and distribution Bristol, Indiana................. 139,000 12 Manufacturing and distribution Akron, Ohio...................... 121,000 17 Manufacturing and distribution Weirton, West Virginia........... 117,000 11 Leased to non-affiliated party Shelbyville, Kentucky............ 105,000 8 Manufacturing and distribution Goddard, Kansas.................. 62,000 7 Manufacturing and distribution Akron, Ohio...................... 49,000 6 Manufacturing and distribution Ontario, California.............. 40,000 2 Distribution and warehousing </TABLE> The following table sets forth by segment certain information with respect to facilities leased by the Registrant: <TABLE> <CAPTION> EXPIRATION DATE OF APPROXIMATE LEASE AND RENEWAL FLOOR SPACE OPTION PERIOD (IF LOCATION (SQUARE FEET) ANY) USE - ---------------------------- ------------- ------------------ --------------------------------------- <S> <C> <C> <C> POLYMER AND METAL PRODUCTS: Brampton, Ontario, Canada... 43,000 September 30, 2005 Sales and distribution Milford, Ohio............... 22,000 August 31, 2001 Sales and administrative Stanton, Harcourt, England................... 12,000 December 31, 2001 Warehousing and distribution </TABLE> - --------------- The Registrant also leases distribution facilities in 32 locations throughout the United States and Canada which, in the aggregate, amount to approximately 167,000 square feet of warehouse and office space. All of these locations are used by the distribution of aftermarket repair products and services segment. The Registrant believes that all of its properties, machinery and equipment generally are well maintained and adequate for the purposes for which they are used. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings other than ordinary routine litigation incidental to the Registrant's business. 5
8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year ended December 31, 1996, there were no matters submitted to a vote of security holders. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below is certain information concerning the executive officers of the Registrant. Executive officers are elected annually by the Board of Directors and serve at the pleasure of the Board. <TABLE> <CAPTION> YEARS AS NAME AGE EXECUTIVE OFFICER TITLE - ----------------------------------- --- ----------------- -------------------------------------- <S> <C> <C> <C> Stephen E. Myers................... 53 24 President and Chief Executive Officer Milton I. Wiskind.................. 71 25 Senior Vice President and Secretary Gregory J. Stodnick................ 54 17 Vice President -- Finance </TABLE> Each executive officer has been principally employed in the capacities shown or similar ones with the Registrant for over the past five years. Years as an Executive Officer is stated as of the time the Company became a public company for reporting purposes. Section 16(a) of the Securities Exchange Act of 1934 requires the Registrant's Directors, certain of its executive officers and persons who own more than ten percent of its Common Stock ("Insiders") to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the American Stock Exchange, Inc., and to furnish the Company with copies of all such forms they file. The Company understands from the information provided to it by the Insiders that they adhered to all filing requirements. 6
9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the American Stock Exchange (ticker symbol MYE). The approximate number of record holders at December 31, 1996 was 1,800. High and low stock prices and dividends for the last two years were: <TABLE> <CAPTION> SALES PRICE 1996 ------------ DIVIDENDS QUARTER ENDED HIGH LOW PAID ---------------------------------------------------- ---- --- --------- <S> <C> <C> <C> MARCH 31............................................ 19 1/2 14 1/2 .04 JUNE 30............................................. 21 1/4 15 1/2 .04 SEPTEMBER 30........................................ 18 3/4 14 3/8 .05 DECEMBER 31......................................... 18 14 3/8 .05 </TABLE> <TABLE> <CAPTION> SALES PRICE 1995 ------------ DIVIDENDS QUARTER ENDED HIGH LOW PAID ---------------------------------------------------- ---- --- --------- <S> <C> <C> <C> March 31............................................ 15 1/8 11 7/8 .036 June 30............................................. 14 1/4 12 3/4 .036 September 30........................................ 15 1/4 12 7/8 .04 December 31......................................... 16 3/4 13 7/8 .04 </TABLE> 7
10 ITEM 6. SELECTED FINANCIAL DATA MYERS INDUSTRIES, INC. AND SUBSIDIARIES FIVE-YEAR SUMMARY <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> <C> OPERATIONS FOR THE YEAR Net sales........................ $ 320,943,771 $ 300,699,109 $ 274,054,163 $ 245,136,189 $ 229,255,085 Cost and expenses Cost of sales.................. 219,152,386 206,050,902 183,890,614 163,794,129 154,007,502 Selling........................ 36,170,478 33,973,656 32,238,245 30,428,260 27,286,626 General and administrative..... 29,720,351 32,834,285 27,258,865 24,373,483 24,782,393 Interest -- net................ 285,290 784,427 620,276 1,091,590 1,341,811 ------------- ------------- ------------- ------------- ------------- 285,328,505 273,643,270 244,008,000 219,687,462 207,418,332 ------------- ------------- ------------- ------------- ------------- Income before income taxes..... 35,615,266 27,055,839 30,046,163 25,448,727 21,836,753 Income taxes................... 14,612,000 11,087,000 12,215,000 10,054,000 8,727,000 ------------- ------------- ------------- ------------- ------------- Net Income..................... $ 21,003,266 $ 15,968,839 $ 17,831,163 $ 15,394,727 $ 13,109,753 ------------- ------------- ------------- ------------- ------------- Net income per share*.......... $ 1.24 $ 0.95 $ 1.06 $ 0.95 $ 0.85 ------------- ------------- ------------- ------------- ------------- FINANCIAL POSITION -- AT YEAR END Total Assets................... $ 207,121,727 $ 193,603,873 $ 172,026,887 $ 152,386,302 $ 142,081,023 ------------- ------------- ------------- ------------- ------------- Current assets................. 106,309,880 101,087,297 94,724,955 78,922,479 74,892,471 Current liabilities............ 36,853,013 32,372,026 34,093,593 24,380,541 31,685,772 ------------- ------------- ------------- ------------- ------------- Working capital................ 69,456,867 68,715,271 60,631,362 54,541,938 43,206,699 Other assets................... 20,151,914 23,086,827 15,923,620 15,769,611 16,525,900 Property, plant and equipment -- net....................... 80,659,933 69,429,749 61,378,312 57,694,212 50,662,652 Less: Long-term debt............... 4,569,396 13,335,191 4,154,646 10,654,650 24,917,426 Deferred income taxes........ 3,254,327 2,713,106 2,869,976 2,064,399 1,594,855 ------------- ------------- ------------- ------------- ------------- SHAREHOLDERS' EQUITY............... $ 162,444,991 $ 145,183,550 $ 130,908,672 $ 115,286,712 $ 83,882,970 ------------- ------------- ------------- ------------- ------------- COMMON SHARES OUTSTANDING*......... 16,854,529 16,906,019 16,830,101 16,806,602 15,502,487 ------------- ------------- ------------- ------------- ------------- BOOK VALUE PER COMMON SHARE*....... $ 9.64 $ 8.59 $ 7.78 $ 6.86 $ 5.41 ------------- ------------- ------------- ------------- ------------- OTHER DATA Dividends paid................. $ 3,049,642 $ 2,577,154 $ 2,326,964 $ 2,058,288 $ 1,746,780 Dividends paid per Common Share*....................... .18 .15 .14 .13 .11 ------------- ------------- ------------- ------------- ------------- Average Common Shares outstanding during the year*........................ 16,926,525 16,871,365 16,830,380 16,197,058 15,469,111 ============ ============ ============ ============ ============ </TABLE> - --------- * Adjusted for the ten percent stock dividend paid in August, 1995; the five-for-four stock split distributed in August, 1994; the ten percent stock dividend paid in August, 1993; and the five-for-four stock split distributed in August, 1992. 8
11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales for the year ended December 31, 1996 increased $20.2 million or 7 percent compared to 1995 as the Company experienced growth in both of its business segments. Sales in the Distribution segment increased $9.6 million or 8 percent primarily resulting from increased unit sales. The Manufacturing segment experienced a sales increase of $10.6 million or 6 percent, principally due to the inclusion of Ameri-Kart's operations for a full year versus six months in 1995. Net sales for the year ended December 31, 1995 increased $26.6 million or 10 percent compared to 1994 based on increases in both business segments. The increase in the Distribution segment of $5.2 million or 4 percent was primarily the result of increased unit sales. Sales in the Manufacturing segment increased $22.8 million or 14 percent due to the inclusion of Ameri-Kart's operations subsequent to the June 30, 1995 acquisition combined with increased unit sales and pricing for existing industrial products. Gross profit, as a percentage of sales, increased to 31.7 percent in 1996 from 31.5 percent in 1995. This increase was primarily achieved in the Manufacturing segment based on increased productivity combined with a better sales mix resulting from the disposition in 1995 of certain lower margin product lines. Cost of sales for the year ended December 31, 1995 increased $22.1 million or 12 percent over 1994 as the result of higher sales volume. Gross profit, expressed as a percentage of sales, decreased to 31.5 percent in 1995 from 32.9 percent in 1994. The decrease in the gross profit percent was primarily attributable to unfavorable raw material costs in the Manufacturing segment. Operating expenses for the year ended December 31, 1996 were reduced by $917,112 or 1 percent compared with 1995. Expressed as a percentage of sales, operating expenses in 1996 were reduced to 20.5 percent from 22.2 percent in the prior year. This improvement reflects better fixed expense coverage from increased sales as well as the elimination of approximately $1.9 million of non-recurring charges in 1995. Operating expenses for the year ended December 31, 1995 increased $7.3 million or 12 percent over 1994. Operating expenses as a percentage of sales, increased to 22.2 percent in 1995 as compared to 21.7 percent in 1994 as a result of certain non-recurring charges related to the disposition of various manufacturing product lines and production facilities. Net interest expense for the year ended December 31, 1996 decreased $499,137 based on lower borrowing levels throughout the year. Net interest expense for the year ended December 31, 1995 increased $164,151 primarily due to higher borrowing levels used to finance the Ameri-Kart acquisition. Income taxes as a percent of income before taxes were 41 percent in 1996 and 1995, up from 40.7 percent in 1994. The higher effective tax rate in 1995 and 1996 was attributable to an increase in non-deductible amortization expense and foreign tax rate differences. FINANCIAL CONDITION The Company generated cash from operating activities of $34.7 million in 1996 and $22.7 million in 1995. Working capital increased to $69.5 million for the year ended December 31, 1996 compared to $68.7 million for 1995 with a current ratio at December 31, 1996 of 2.9 to 1. Total debt expressed as a percent of total capitalization decreased to 3 percent for the year ended December 31, 1996 compared to 9 percent in 1995. This strong capital position provides the Company with the flexibility to finance additional manufacturing capacity, working capital needs, and other corporate requirements. Investments in property, plant and equipment totaled $21.5 million in 1996 and $12.0 million in 1995. During the next five years, the Company anticipates on-going capital expenditures in the range of $15 to $20 million per year, primarily for increased polymer manufacturing capacity. Management believes available credit facilities and anticipated cash flows from operations will be sufficient to meet the needs of its business, both short-term and long-term. 9
12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and accompanying notes and the reports of management and independent accountants follow Item 9 of this Report. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no disagreements with the Registrant's independent accountants on accounting and financial disclosure matters within the two year period ended December 31, 1996, or in any period subsequent to such date. 10
13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA (CONTINUED) COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's Common Stock is traded on the American Stock Exchange (ticker symbol MYE). The approximate number of record holders at December 31, 1996 was 1,800. High and low stock prices and dividends for the last two years were: <TABLE> <CAPTION> SALES PRICE ------------- QUARTER ENDED 1996 HIGH LOW DIVIDENDS PAID ---- --- --------------- <S> <C> <C> <C> MARCH 31......................................... 19 1/2 14 1/2 .04 JUNE 30.......................................... 21 1/4 15 1/2 .04 SEPTEMBER 30..................................... 18 3/4 14 3/8 .05 DECEMBER 31...................................... 18 14 3/8 .05 </TABLE> <TABLE> <CAPTION> SALES PRICE ------------- Quarter Ended 1995 HIGH LOW DIVIDENDS PAID ---- --- --------------- <S> <C> <C> <C> March 31......................................... 15 1/8 11 7/8 .036 June 30.......................................... 14 1/4 12 3/4 .036 September 30..................................... 15 1/4 12 7/8 .04 December 31...................................... 16 3/4 13 7/8 .04 </TABLE> SUMMARIZED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA <TABLE> <CAPTION> QUARTER ENDED 1996 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL -------- ------- -------- ------- -------- <S> <C> <C> <C> <C> <C> NET SALES.................. $72,554 $79,951 $ 77,880 $90,559 $320,944 GROSS PROFIT............... 24,350 25,589 22,672 29,180 101,791 NET INCOME................. 5,215 5,606 3,709 6,473 21,003 PER SHARE.................. .31 .33 .22 .38 1.24 </TABLE> <TABLE> <CAPTION> Quarter Ended 1995 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL -------- ------- -------- ------- -------- <S> <C> <C> <C> <C> <C> Net Sales.................. $67,501 $75,584 $ 74,651 $82,963 $300,699 Gross Profit............... 21,210 22,864 22,127 28,447 94,648 Net Income................. 3,767 4,355 3,317 4,530 15,969 Per Share.................. .22 .26 .20 .27 .95 </TABLE> 11
14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited the accompanying statements of consolidated financial position of Myers Industries, Inc. (an Ohio Corporation) and Subsidiaries as of December 31, 1996 and 1995, and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Myers Industries, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Cleveland, Ohio, February 10, 1997 12
15 MYERS INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 ------------ ------------ ------------ <S> <C> <C> <C> Net sales....................................... $320,943,771 $300,699,109 $274,054,163 Cost of sales................................... 219,152,386 206,050,902 183,890,614 ------------ ------------ ------------ Gross profit.................................. 101,791,385 94,648,207 90,163,549 ------------ ------------ ------------ Operating expenses Selling....................................... 36,170,478 33,973,656 32,238,245 General and administrative.................... 29,720,351 32,834,285 27,258,865 ------------ ------------ ------------ 65,890,829 66,807,941 59,497,110 ------------ ------------ ------------ Operating income........................... 35,900,556 27,840,266 30,666,439 ------------ ------------ ------------ Interest Income........................................ (319,533) (212,708) (170,728) Expense....................................... 604,823 997,135 791,004 ------------ ------------ ------------ 285,290 784,427 620,276 ------------ ------------ ------------ Income before income taxes...................... 35,615,266 27,055,839 30,046,163 Income taxes.................................... 14,612,000 11,087,000 12,215,000 ------------ ------------ ------------ Net income...................................... $ 21,003,266 $ 15,968,839 $ 17,831,163 ------------ ------------ ------------ Net income per share............................ $1.24 $0.95 $1.06 =========== =========== =========== </TABLE> The accompanying notes are an integral part of these statements. 13
16 MYERS INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 1996 AND 1995 <TABLE> <CAPTION> 1996 1995 ------------ ------------ <S> <C> <C> ASSETS CURRENT ASSETS Cash and temporary cash investments.......................... $ 5,600,349 $ 3,387,562 Accounts receivable -- less allowances of $2,213,000 and $1,594,000, respectively.................................. 57,604,506 52,501,016 Inventories Finished and in-process products.......................... 33,042,266 34,614,735 Raw materials and supplies................................ 6,788,086 6,635,012 ------------ ------------ 39,830,352 41,249,747 Prepaid expenses............................................. 3,274,673 3,948,972 ------------ ------------ TOTAL CURRENT ASSETS........................................... 106,309,880 101,087,297 OTHER ASSETS Excess of cost over fair value of net assets of companies acquired.................................................. 14,328,410 17,015,358 Patents and other intangible assets.......................... 2,750,530 2,924,256 Other........................................................ 3,072,974 3,147,213 ------------ ------------ 20,151,914 23,086,827 PROPERTY, PLANT AND EQUIPMENT, AT COST Land......................................................... 2,547,509 1,989,508 Buildings and leasehold improvements......................... 38,918,648 35,325,705 Machinery and equipment...................................... 108,594,273 93,646,662 ------------ ------------ 150,060,430 130,961,875 Less allowances for depreciation and amortization............ 69,400,497 61,532,126 ------------ ------------ 80,659,933 69,429,749 ------------ ------------ $207,121,727 $193,603,873 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable............................................. $ 15,189,488 $ 11,865,636 Employee compensation and related items...................... 10,562,313 9,736,457 Accrued expenses Interest.................................................. 32,329 182,262 Taxes, other than income taxes............................ 1,062,498 1,160,766 Income taxes.............................................. 1,452,107 1,068,474 Other..................................................... 8,034,509 7,382,327 Current portion of long-term debt............................ 519,769 976,104 ------------ ------------ TOTAL CURRENT LIABILITIES...................................... 36,853,013 32,372,026 LONG-TERM DEBT, LESS CURRENT PORTION........................... 4,569,396 13,335,191 DEFERRED INCOME TAXES.......................................... 3,254,327 2,713,106 SHAREHOLDERS' EQUITY Serial Preferred Shares (authorized 1,000,000 shares)........ -0- -0- Common Shares, without par value (authorized 30,000,000 shares; outstanding 16,854,529 and 16,906,019 shares, respectively)............................................. 10,659,714 10,014,186 Additional paid-in capital................................... 109,864,137 111,382,116 Foreign currency translation adjustment...................... (213,572) (393,840) Retained income.............................................. 42,134,712 24,181,088 ------------ ------------ 162,444,991 145,183,550 ------------ ------------ $207,121,727 $193,603,873 =========== =========== </TABLE> The accompanying notes are an integral part of these statements. 14
17 MYERS INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> FOREIGN COMMON SHARES ADDITIONAL CURRENCY ------------------------ PAID-IN TRANSLATION RETAINED NUMBER AMOUNT CAPITAL ADJUSTMENT INCOME ---------- ----------- ------------ ---------- ------------ <S> <C> <C> <C> <C> <C> BALANCE AT JANUARY 1, 1994...... 12,222,983 $ 7,697,032 $ 91,030,715 ($ 412,661) $ 16,971,626 Additions Net income.................... -0- -0- -0- -0- 17,831,163 Sales under option plans...... 25,747 162,552 -0- -0- -0- Employees stock purchase plan....................... 16,358 326,588 -0- -0- -0- Five-for-four stock split..... 3,061,333 -0- -0- -0- -0- Dividend reinvestment plan.... 6,971 135,408 -0- -0- -0- Deductions Foreign currency translation................ -0- -0- -0- (53,530) -0- Purchases for treasury........ (33,300) (17,982) (424,286) -0- (10,989) Dividends -- $.14 per share... -0- -0- -0- -0- (2,326,964) ---------- ----------- ------------ ---------- ------------ BALANCE AT DECEMBER 31, 1994.... 15,300,092 $ 8,303,598 $ 90,606,429 ($ 466,191) $ 32,464,836 ---------- ----------- ------------ ---------- ------------ Additions Net income.................... -0- -0- -0- -0- 15,968,839 Sales under option plans...... 36,986 314,615 -0- -0- -0- Employees stock purchase plan....................... 23,908 344,583 -0- -0- -0- Dividend reinvestment plan.... 11,205 161,770 -0- -0- -0- Foreign currency translation adjustment................. -0- -0- -0- 72,351 -0- Deductions Dividends -- $.15 per share... -0- -0- -0- -0- (2,577,154) 10% stock dividend............ 1,533,828 889,620 20,775,687 -0- (21,675,433) ---------- ----------- ------------ ---------- ------------ BALANCE AT DECEMBER 31, 1995.... 16,906,019 $10,014,186 $111,382,116 ($ 393,840) $ 24,181,088 ---------- ----------- ------------ ---------- ------------ Additions Net income.................... -0- -0- -0- -0- 21,003,266 Sales under option plans...... 25,235 215,857 -0- -0- -0- Employees stock purchase plan....................... 21,111 350,462 -0- -0- -0- Dividend reinvestment plan.... 8,764 145,995 -0- -0- -0- Foreign currency translation................ -0- -0- -0- 180,268 -0- Deductions Purchases for treasury........ (106,600) (66,786) (1,517,979) -0- -0- Dividends -- $.18 per share... -0- -0- -0- -0- (3,049,642) ---------- ----------- ------------ ---------- ------------ BALANCE AT DECEMBER 31, 1996.... 16,854,529 $10,659,714 $109,864,137 ($ 213,572) $ 42,134,712 ========= ========== =========== ========= =========== </TABLE> The accompanying notes are an integral part of these statements. 15
18 MYERS INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 ------------ ------------ ------------ <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income....................................... $ 21,003,266 $ 15,968,839 $ 17,831,163 Items not affecting use of cash Depreciation.................................. 10,229,957 9,718,545 8,821,426 Amortization of excess of cost over fair value of net assets of companies acquired......... 625,687 420,360 285,360 Amortization of deferred financing costs, patents and other intangible assets......... 455,030 311,576 373,551 Deferred income taxes......................... 541,221 (473,870) 805,577 Cash flow provided by (used for) working capital Accounts receivable........................... (5,103,490) 2,159,910 (10,821,847) Inventories................................... 1,419,395 447,254 (4,439,975) Prepaid expenses.............................. 604,299 (1,504,288) (407,734) Accounts payable and accrued expenses......... 4,937,322 (4,376,141) 10,450,114 ------------ ------------ ------------ Net cash provided by operating activities..... 34,712,687 22,672,185 22,897,635 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment, net........................................... (21,460,141) (11,986,974) (12,505,526) Acquisition of business, net of cash............. -0- (14,519,740) -0- Cash dividends paid.............................. (3,049,642) (2,577,154) (2,326,964) Other............................................ 2,104,464 313,685 (866,450) ------------ ------------ ------------ Net cash used for investing activities........ (22,405,319) (28,770,183) (15,698,940) CASH FLOWS FROM FINANCING ACTIVITIES Purchases for treasury........................... (1,584,765) -0- (453,257) Proceeds from issuance of common stock........... 712,314 820,968 624,548 Borrowings (repayments) net...................... (9,222,130) 6,869,889 (7,237,066) ------------ ------------ ------------ Net cash provided by (used for) financing activities.................................. (10,094,581) 7,690,857 (7,065,775) ------------ ------------ ------------ INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS.... 2,212,787 1,592,859 132,920 CASH AND TEMPORARY CASH INVESTMENTS January 1........................................ 3,387,562 1,794,703 1,661,783 ------------ ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS December 31...................................... $ 5,600,349 $ 3,387,562 $ 1,794,703 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for Interest...................................... $ 737,416 $ 874,602 $ 749,540 Income taxes.................................. 15,387,482 10,450,330 11,138,152 </TABLE> The accompanying notes are an integral part of these statements. 16
19 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Myers Industries, Inc. and all wholly owned subsidiaries (Company). Significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. TRANSLATION OF FOREIGN CURRENCIES All balance sheet accounts of consolidated foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period and income statement items are translated at an average currency exchange rate. The resulting translation adjustment is recorded as a separate component of shareholders' equity. FINANCIAL INSTRUMENTS Temporary cash investments, all of which have an original maturity of ninety days or less, are considered cash equivalents. Other financial instruments, consisting of trade and notes receivable, and long-term debt, are considered to have a fair value which approximates carrying value at December 31, 1996. INVENTORIES Inventories are stated at the lower of cost or market. For approximately 74 percent of its inventories, the Company uses the last-in, first-out (LIFO) method of determining cost. All other inventories are valued at the first-in, first-out (FIFO) method of determining cost. If the FIFO method of inventory cost valuation had been used exclusively by the Company, inventories would have been $6,300,000, $5,173,000, and $5,196,000 higher than reported at December 31, 1996, 1995 and 1994, respectively. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization on the basis of annual rates expected to amortize the cost of such assets over their estimated useful lives by the straight-line method. REVENUE RECOGNITION The Company's revenue recognition policy is to recognize revenue from sales when goods are shipped. INCOME TAXES Deferred income taxes are provided to recognize the timing differences between financial statement and income tax reporting, principally for depreciation and certain valuation allowances. Deferred taxes are not provided on the unremitted earnings of foreign subsidiaries as the Company's intention is to permanently reinvest these earnings in the operations of these subsidiaries. If these earnings would be remitted in future years, the taxes due after considering available foreign tax credits would not be material. EXCESS OF COST OVER FAIR VALUE OF NET ASSETS OF COMPANIES ACQUIRED This asset represents the excess of cost over the fair value of net assets of companies acquired and is being amortized on a straight-line basis over periods ranging from 30 to 40 years. Accumulated amortization at December 31, 1996 and 1995 was $3,542,000 and $2,916,000, respectively. Management, which regularly 17
20 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) evaluates its accounting for goodwill, considering primarily such factors as current and historical profitability, along with discounted cash flows, believes that the asset is realizable and the amortization periods are still appropriate. RESEARCH AND DEVELOPMENT Research, engineering, testing and product development costs are charged to current operations as incurred. NET INCOME PER SHARE Income per share is determined on the basis of the weighted average number of Common Shares and common stock equivalents outstanding during the year. During the year ended December 31, 1995 the Company paid a ten percent stock dividend and during the year ended December 31, 1994 the Company distributed a five-for-four stock split. All per share data has been adjusted for the stock dividend and the stock split. The impact of stock options has not been included in the calculation of earnings per share as the effect of their exercise is not material. RETIREMENT PLANS The Company and certain of its subsidiaries have pension and profit sharing plans covering substantially all of their employees. Two plans are defined benefit plans with benefits primarily based upon a fixed amount for each year of service. It is the Company's policy to fund pension costs accrued, which are at least equal to the minimum required contribution as defined by the Employee Retirement Income Security Act of 1974. For the Company's existing defined benefit plans, net periodic pension costs were as follows: <TABLE> <CAPTION> 1996 1995 1994 --------- --------- --------- <S> <C> <C> <C> Service cost-benefit earned during the year..... $ 122,707 $ 92,754 $ 107,451 Interest cost on projected benefit obligation... 187,704 167,255 148,485 Return on plan assets........................... (252,263) (473,801) 10,580 Net amortization................................ 69,795 327,479 (154,358) -------- -------- -------- Net periodic pension cost....................... $ 127,943 $ 113,687 $ 112,158 ======== ======== ======== </TABLE> Assumptions used for these plans were as follows: discount rate, 7.0%; rate of return on plan assets, 8.0%. Future benefit increases were not considered as there is no substantive commitment to increase benefits. The following table sets forth the plans' funded status at December 31, 1996 and 1995 (in thousands): <TABLE> <CAPTION> 1996 1995 ---------------- ---------------- OVER- UNDER- OVER- UNDER- FUNDED FUNDED FUNDED FUNDED PLANS PLANS PLANS PLANS ------ ------ ------ ------ <S> <C> <C> <C> <C> Projected benefit obligation Vested benefits................................. $1,033 $1,800 $ 955 $1,431 Non-vested...................................... 42 40 17 198 ------ ------ ------ ------ Accumulated benefit obligation.................... 1,075 1,840 972 1,629 Fair value of plan assets......................... 1,188 1,703 1,018 1,596 ------ ------ ------ ------ Projected benefit obligation in excess of plan assets.......................................... 113 (137) 46 (33) Unrecognized net (gain)........................... 1 (167) (24) (169) Unrecognized net obligation at date of adoption... 72 170 84 127 ------ ------ ------ ------ Net projected pension (liability) asset........... $ 186 $ (134) $ 106 $ (75) ====== ====== ====== ====== </TABLE> 18
21 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A profit sharing plan is maintained for eligible employees, not covered under defined benefit plans, who meet minimum tenure requirements. The amount to be contributed by the Company under the profit sharing plan is determined at the discretion of the Board of Directors. During 1994, the Company terminated a defined benefit pension plan and covered the employees under the Company's profit sharing plan. As a result, the Company recognized a $90,000 charge for the curtailment of this plan. The aggregate cost of all retirement and profit sharing plans reflected in the accompanying statements of consolidated income is $2,398,000, $1,784,000 and $1,224,000 for the years 1996, 1995 and 1994, respectively. LONG-TERM DEBT AND CREDIT AGREEMENTS Long-term debt at December 31, consisted of the following: <TABLE> <CAPTION> 1996 1995 ---------- ----------- <S> <C> <C> Revolving credit agreement........................................ $ -0- $ 8,000,000 Industrial revenue bonds.......................................... 4,854,166 5,681,166 Other............................................................. 234,999 630,129 ---------- ----------- 5,089,165 14,311,295 Less current portion.............................................. 519,769 976,104 ---------- ----------- $4,569,396 $13,335,191 ========== =========== </TABLE> The Company has a revolving credit agreement with a group of banks which enables the Company to borrow up to $35,000,000 at prime rate on a variable basis, or on a short-term fixed basis at a rate based upon LIBOR or certificate of deposits at the participating banks. In addition, the Company is required to pay a commitment fee of 1/4 percent per annum on the daily unborrowed portion of the revolving credit commitment or 1/5 percent per annum at any time the unused portion of the aggregate revolving credit commitment is equal to or less than $20 million. The agreement is unsecured and expires on June 30, 2000. The industrial revenue bonds are secured by either standby letter of credit or plant and equipment purchased by the Company with the proceeds of the bonds. The bonds mature at various dates through 2010 with variable interest rates ranging from 4.00 percent to 6.77 percent. Two industrial revenue bonds are backed by standby letters of credit totaling $4,943,407 with an associated fee of 3/4 percent per annum. Other includes notes which mature in various amounts through 1998 and bear a weighted average interest rate of 7.96 percent. The maturities of long-term debt for the five years ending December 31, 2001, are $520,000 in 1997; $359,000 in 1998; $261,000 in 1999; and nothing in 2000 and 2001. The revolving credit agreement and certain of the industrial revenue bond issues contain customary covenants which include, among other things, maintenance of minimum tangible net worth and minimum working capital, restrictions on certain additional indebtedness and requirements to maintain certain financial ratios. At December 31, 1996, the Company was in compliance with those covenants. LEASES The Company and certain of its subsidiaries are committed under non-cancelable operating leases involving certain facilities and equipment. Aggregate rental expense for all leased assets was $2,361,000, $2,306,000 and $2,359,000 for the years ended December 31, 1996, 1995 and 1994, respectively. 19
22 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum rental commitments for the next five years are as follows: <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, COMMITMENT - ------------------------- ---------- <S> <C> 1997 $2,164,000 1998 1,830,000 1999 1,411,000 2000 924,000 2001 655,000 </TABLE> INCOME TAXES The effective tax rate was 41.0% in 1996, 41.0% in 1995 and 40.7% in 1994. A reconciliation of the Federal statutory income tax rate to the Company's effective tax rate is as follows: <TABLE> <CAPTION> PERCENT OF PRE-TAX INCOME ------------------------- 1996 1995 1994 ----- ----- ----- <S> <C> <C> <C> Statutory Federal income tax rate......................... 35.0% 35.0% 35.0% State income taxes--net of Federal tax benefit............ 5.0 4.6 4.7 Effect of non-deductible depreciation and amortization.... .6 .7 .6 Other..................................................... .4 .7 .4 ---- ---- ---- Effective tax rate for the year........................... 41.0% 41.0% 40.7% ==== ==== ==== </TABLE> Income taxes consisted of the following: <TABLE> <CAPTION> 1996 1995 1994 ------------------- ------------------- ------------------- CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> Federal..................... $11,258 $ 399 $ 9,133 $ (326) $ 9,015 $812 Foreign..................... 224 1 361 2 225 (3) State and local............. 2,589 141 2,066 (149) 2,169 (3) ------- ---- ------- ----- ------- ---- $14,071 $ 541 $11,560 $ (473) $11,409 $806 ======= ==== ======= ===== ======= ==== </TABLE> 20
23 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INCOME TAXES Significant components of the Company's deferred tax liabilities as of December 31, 1996 and 1995 are as follows: <TABLE> <CAPTION> 1996 1995 ------ ------ (DOLLARS IN THOUSANDS) <S> <C> <C> Deferred income tax liabilities: Property, plant and equipment................................. $8,450 $6,629 Employee benefit trust........................................ 170 578 Other......................................................... -- 46 ------ ------ 8,620 7,253 ------ ------ Deferred income tax assets: Compensation.................................................. 1,575 1,276 Inventory valuation........................................... 648 788 Allowance for uncollectible accounts.......................... 696 528 Non-deductible accruals....................................... 2,243 1,948 Other......................................................... 204 -- ------ ------ 5,366 4,540 ------ ------ Net deferred income tax liability............................... $3,254 $2,713 ====== ====== </TABLE> STOCK OPTIONS In 1992, the Company adopted, and the shareholders approved, the 1992 Stock Option Plan allowing key employees to purchase Common Stock of the Company at the market price on the date of grant. The plan provides that stock options expire five years from date of grant and are exercisable up to 20 percent of the shares granted each year. The activity listed below covers both the 1992 Stock Option Plan and the 1982 Incentive Stock Option Plan which expired in 1992. Stock options granted during the past three years were as follows: during 1996, 80,150 shares at prices from $17.75 to $19.55; during 1995, 25,227 shares at prices from $13.06 to $14.87; during 1994, 107,300 shares at prices from $12.95 to $16.73. Stock options exercised during the past three years were as follows: during 1996, 25,404 shares at prices from $7.73 to $14.81; during 1995, 39,072 shares at prices from $7.23 to $14.81; during 1994, 38,715 shares at prices from $7.23 to $12.97. At December 31, 1996, 1995 and 1994 there were outstanding options for the purchase of 236,729, 185,801 and 205,488 shares respectively, at prices ranging from $11.88 to $19.55 per share in 1996 and $7.73 to $17.54 per share in 1995 and $7.23 to $17.54 in 1994. At December 31, 1996 and 1995, there were options for 123,831 and 101,894 shares, respectively that were exercisable. The Company accounts for stock options under APB Opinion No. 25 and, therefore, does not recognize employee compensation for options granted using the fair value method set forth in FASB Statement No. 123 "Accounting for Stock Based Compensation." If the Company had followed FASB 123 rather than APB 25, net income and earnings per share would not have been materially different from the reported amounts for 1996, 1995 or 1994. INDUSTRY SEGMENTS The Company operates principally in two areas of business, the first being the distribution of aftermarket repair products and services. These products are distributed both domestically through branches in major cities in the United States and in foreign countries where, in some cases, the Company has controlling interest 21
24 MYERS INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in companies located in those countries. No single foreign country represents more than 10 percent of the total sales, income or assets of the Company. The second major area of the Company's business is polymer and metal products which are manufactured in Company-owned facilities and distributed through mass merchandisers, warehouse distributors, sales representatives and in-house salesmen, principally in the United States. Operating income before income taxes is total revenues less total operating expenses. In computing operating income for the major segments of the Company, general corporate overhead expense and interest expense are not included. The identifiable assets of each major segment of the Company include inventories, accounts receivable, net fixed assets, the excess of cost over fair value of net assets acquired, patents, and other intangible assets attributable to each segment. Corporate assets are principally land, buildings, computer equipment, cash and temporary cash investments. The table sets forth information relating to the Company's operations for the years ended December 31, 1996, 1995 and 1994, as required by the Statement of Financial Accounting Standards No. 14. <TABLE> <CAPTION> 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> NET SALES Distribution of aftermarket repair products and services.............................................. $136,526 $126,902 $121,748 Manufacturing of polymer and metal products.............. 197,319 186,307 163,513 Intra-segment elimination................................ (12,901) (12,510) (11,207) -------- -------- -------- $320,944 $300,699 $274,054 ======== ======== ======== INCOME BEFORE INCOME TAXES Distribution of aftermarket repair products and services.............................................. $ 12,209 $ 11,793 $ 11,387 Manufacturing of polymer and metal products.............. 29,021 23,145 24,418 Corporate................................................ (5,330) (7,098) (5,139) Interest expense-net..................................... (285) (784) (620) -------- -------- -------- $ 35,615 $ 27,056 $ 30,046 ======== ======== ======== IDENTIFIABLE ASSETS Distribution of aftermarket repair products and services.............................................. $ 49,605 $ 48,416 $ 46,966 Manufacturing of polymer and metal products.............. 148,708 140,291 121,635 Corporate................................................ 9,981 5,622 4,492 Intra-segment elimination................................ (1,172) (725) (1,066) -------- -------- -------- $207,122 $193,604 $172,027 ======== ======== ======== CAPITAL ADDITIONS, NET Distribution of aftermarket repair products and services.............................................. $ 426 $ 227 $ 942 Manufacturing of polymer and metal products.............. 20,433 10,722 11,071 Corporate................................................ 601 1,038 493 -------- -------- -------- $ 21,460 $ 11,987 $ 12,506 ======== ======== ======== DEPRECIATION/AMORTIZATION Distribution of aftermarket repair products and services.............................................. $ 598 $ 689 $ 598 Manufacturing of polymer and metal products.............. 9,352 8,747 7,949 Corporate................................................ 280 283 274 -------- -------- -------- $ 10,230 $ 9,719 $ 8,821 ======== ======== ======== </TABLE> 22
25 MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN CONTENTS Report of Independent Public Accountants for the Myers Industries, Inc. Employee Stock Purchase Plan Financial Statements for the Myers Industries, Inc. Employee Stock Purchase Plan: (1) Statements of Assets Available for Plan Benefits as of December 31, 1996 and 1995; and (2) Statements of Changes in Assets Available for Plan Benefits for the Years Ended December 31, 1996, 1995 and 1994. Notes to Financial Statements for the Myers Industries, Inc. Employee Stock Purchase Plan 23
26 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Myers Industries, Inc. Employee Stock Purchase Plan Administrator: We have audited the accompanying statements of assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 1996 and 1995, and the related statements of changes in assets available for plan benefits for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Plan Administrator. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for plan benefits of the Myers Industries, Inc. Employee Stock Purchase Plan as of December 31, 1996 and 1995, and the changes in its assets available for plan benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP /s/ Arthur Andersen LLP Cleveland, Ohio, February 10, 1997 24
27 MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1996 AND 1995 <TABLE> <CAPTION> 1996 1995 ------- ------- <S> <C> <C> Receivable from Trustee......................................... $84,687 $77,531 ======= ======= (Myers Industries, Inc.) </TABLE> STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 --------- --------- --------- <S> <C> <C> <C> Contributions: Participants' contributions beginning of period......... $ 77,531 $ 82,563 $ 77,438 Participants' contributions during the period........... 322,503 305,000 299,007 Assets Available for Stock Purchases.................... 400,034 387,563 376,445 Less: Assets Used for Stock Purchases......................... (315,347) (310,032) (293,882) --------- --------- --------- Assets Available for Plan Benefits at End of Period..... $ 84,687 $ 77,531 $ 82,563 ========= ========= ========= </TABLE> See the accompanying notes to financial statements. 25
28 MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1. DESCRIPTION OF PLAN The following description of the Myers Industries, Inc. Employee Stock Purchase Plan ("Stock Plan") provides only general information. Participants should refer to the Plan Agreement and Prospectus for the Stock Plan for a more complete description of the Plan's provisions. (a) GENERAL. The shareholders of the Company approved the adoption of a nonqualified Employee Stock Purchase Plan at the April 28, 1986 Annual Meeting. The Stock Plan is designed to encourage, facilitate and provide employees with an opportunity to share in the favorable performance of the Company through ownership of the Company's Common Stock. The total number of shares of the Common Stock which may be sold under the Stock Plan is currently limited to 188,176 shares. (b) PURPOSE. The purpose of the Stock Plan is to provide employees (including officers) of the Company and its subsidiaries with an opportunity to purchase Common Stock through payroll deductions. (c) ADMINISTRATION. The Stock Plan is administered by a committee appointed by the Board of Directors. All questions of interpretation or application of the Stock Plan are determined by the Board of Directors (or its appointed committee) and its decisions are final, conclusive and binding upon all participants. (d) ELIGIBILITY AND PARTICIPATION. Any permanent employee (including an officer) who has been employed for at least one calendar year by the Company, or its subsidiaries who have adopted the Stock Plan, is eligible to participate in the Stock Plan, provided that such employee is employed by the Company on the date his participation is effective and subject to limitations on stock ownership described in the Stock Plan. Eligible employees become participants in the Stock Plan by delivering to the Company a subscription agreement authorizing payroll deductions prior to the commencement of the applicable offering period. (e) OFFERING DATES. The Stock Plan is generally implemented by one offering during each calendar quarter. Offering periods commence on the last day of each calendar quarter. The Board of Directors has the power to alter the duration of the offering periods without shareholder approval. (f) PURCHASE PRICE. The price at which shares may be purchased in an offering under the Stock Plan is 90% of the fair market value of the Common Stock on the last day of the prior calendar quarter. The fair market value of the Common Stock on a given date is the closing price for that date as listed on the American Stock Exchange. (g) PAYROLL DEDUCTIONS. The purchase price of the shares to be acquired under the Stock Plan will be accumulated by payroll deductions over the offering period. The rate of deductions may not be less than five dollars ($5.00) per week or exceed 10% of a participant's compensation, and the aggregate of all payroll deductions during the offering may not exceed 10% of the participant's aggregate compensation for the offering period. A participant may discontinue his participation in the Stock Plan or may decrease or increase the rate of payroll deductions at any time during the offering period by filing with the Company a new authorization for payroll deductions. All payroll deductions made for a participant are credited to their account under the Stock Plan and are deposited with the general funds of the Company to be used for any corporate purpose. The amount by which an employee's payroll deductions exceed the amount required to purchase whole shares will be placed in a suspense account for the employee with no interest thereon and rolled over into the next offering period. (h) WITHDRAWAL. A participant in the Stock Plan may terminate his interest in a given offering in whole, but not in part, by giving written notice to the Company of his election to withdraw at any time prior to the end of the applicable offering period. Such withdrawal automatically terminates the participant's interest in that offering, but does not have any effect upon such participant's eligibility to participate in subsequent offerings under the Stock Plan. 26
29 MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (i) TERMINATION OF EMPLOYMENT. Termination of a participant's employment for any reason, including retirement or death, cancels his or her participation in the Stock Plan immediately. (j) NONASSIGNABILITY. No rights or accumulated payroll deductions of an employee under the Stock Plan may be pledged, assigned, transferred or otherwise disposed of in any way for any reason, other than on account of death. Any attempt to do so may be treated by the Company as an election to withdraw from the Stock Plan. (k) AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any time amend or terminate the Stock Plan. Except as provided above, no amendment may be made to the Stock Plan without prior approval of the shareholders if such amendment would increase the number of shares reserved under the Stock Plan, permit payroll deductions at a rate in excess of 10% of a participant's compensation, materially modify the eligibility requirements or materially increase the benefits which may accrue to participants under the Stock Plan. (l) TAXATION. Participants in the Stock Plan, which is nonqualified for federal income tax purposes, are taxed currently on the 10% discount in the purchase price granted by the Stock Plan in the year in which stock is purchased. The 10% discount is treated as ordinary income to the participant and that amount is currently deductible by the Company to the extent the participant's total compensation from the Company is within the "reasonable compensation" limits imposed by Section 162 of the Internal Revenue Code of 1986, as amended. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF PRESENTATION. The accompanying statements of assets available for plan benefits and statements of changes in assets available for plan benefits are prepared on the accrual basis of accounting. (b) ADMINISTRATIVE EXPENSES. Administrative costs and expenses are absorbed by the Trustee. 27
30 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information about the directors of the Registrant, see "Election of Directors" on pages 3 through 7 of Registrant's Proxy Statement dated March 21, 1997 ("Proxy Statement"), which is incorporated herein by reference. Information about the Executive Officers of Registrant appears in Part I of this Report. Disclosures by the Registrant with respect to compliance with Section 16(a) appear on page 7 of the Proxy Statement, and are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See "Executive Compensation and Other Information" on pages 8 through 12 of the Proxy Statement, which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See "Principal Shareholders" and "Election of Directors" on pages 29 and 30, and pages 3 through 7, respectively, of the Proxy Statement, which are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See "Certain Relationships and Related Transactions" at page 7 of the Proxy Statement, which is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following consolidated financial statements of the Registrant appear in Part II of this Report: 14. (A)(1) FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS OF MYERS INDUSTRIES, INC. AND SUBSIDIARIES Report of Independent Public Accountants Statements of Consolidated Financial Position As Of December 31, 1996 and 1995 Statements of Consolidated Income For The Years Ended December 31, 1996, 1995 and 1994 Statements of Consolidated Shareholders' Equity For The Years Ended December 31, 1996, 1995 and 1994 Statements of Consolidated Cash Flows For The Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements For The Years Ended December 31, 1996, 1995 and 1994 FINANCIAL STATEMENTS FOR THE MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN Statements of Assets Available for Plan Benefits As Of December 31, 1996 and 1995 Statements of Changes in Assets Available for Plan Benefits For The Years Ended December 31, 1996, 1995 and 1994 14. (A)(2) FINANCIAL STATEMENT SCHEDULES Selected Quarterly Financial Data For The Years Ended December 31, 1996 and 1995 All other schedules are omitted because they are inapplicable, not required, or because the information is included in the consolidated financial statements or notes thereto which appear in Part II of this Report. 28
31 14. (A)(3) EXHIBITS <TABLE> <S> <C> 3(a) MYERS INDUSTRIES, INC. AMENDED AND RESTATED ARTICLES OF INCORPORATION. Reference is made to Exhibit (3)(i) to Form 8-K filed with the Commission on May 14, 1994. 3(b) MYERS INDUSTRIES, INC. AMENDED AND RESTATED CODE OF REGULATIONS. Reference is made to Exhibit (3)(ii) to Form 8-K filed with the Commission on May 14, 1994. 10(a) MYERS INDUSTRIES, INC. AMENDED AND RESTATED 1982 INCENTIVE STOCK OPTION PLAN. Reference is made to Exhibit 10(a) to Form 10-K filed with the Commission on March 24, 1995. 10(b) MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN. Reference is made to Exhibit 10(b) to Form 10-K filed with the Commission on March 24, 1995. 10(c) FORM OF INDEMNIFICATION AGREEMENT FOR DIRECTORS AND OFFICERS. Reference is made to Exhibit 10(c) to Form 10-K filed with the Commission on March 24, 1995. 10(d) MYERS INDUSTRIES, INC. 1992 STOCK OPTION PLAN. Reference is made to Exhibit 10(d) to Form 10-K filed with the Commission on March 24, 1995. 10(e) MYERS INDUSTRIES, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN. Reference is made to Exhibit 10(e) to Form 10-K filed with the Commission on March 24, 1995. 10(f) MYERS INDUSTRIES, INC. 1997 INCENTIVE STOCK PLAN. 21 Subsidiaries of the Registrant 23 Consent of Independent Public Accountants 27 Financial Data Schedule </TABLE> EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS <TABLE> <CAPTION> PLAN OR ARRANGEMENT REFERENCE LOCATION - -------------------------------------------- -------------------------------------------- <S> <C> Myers Industries, Inc. Amended and Restated Exhibit (10)(a) to Form 10-K for fiscal year 1982 Incentive Stock Option Plan ended December 31, 1994 Myers Industries, Inc. 1992 Stock Option Exhibit 10(d) to Form 10-K for fiscal year Plan ended December 31, 1994 Myers Industries, Inc. 1997 Incentive Stock Exhibit 10(f) to Form 10-K for fiscal year Plan ended December 31, 1996 </TABLE> 14.(B) REPORTS ON FORM 8-K: None 14.(C) EXHIBITS: See subparagraph 14(A)(3) above. 29
32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. <TABLE> <S> <C> MYERS INDUSTRIES, INC. Dated: March 21, 1997 /s/ GREGORY J. STODNICK By: ----------------------------------------------- GREGORY J. STODNICK Vice President -- Finance and Chief Financial Officer </TABLE> Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. <TABLE> <CAPTION> SIGNATURE TITLE DATE - ------------------------------------------ --------------------------------- --------------- <S> <C> <C> /s/ GREGORY J. STODNICK Vice President--Finance and Chief March 21, 1997 - ------------------------------------------ Financial Officer (Principal GREGORY J. STODNICK Financial and Accounting Officer) /s/ STEPHEN E. MYERS President, Chief Executive March 21, 1997 - ------------------------------------------ Officer and Director Principal STEPHEN E. MYERS Executive Officer) Director March , 1997 - ------------------------------------------ EDWIN P. SCHRANK /s/ KARL S. HAY Director March 21, 1997 - ------------------------------------------ KARL S. HAY /s/ MILTON I. WISKIND Senior Vice President, Secretary March 21, 1997 - ------------------------------------------ and Director MILTON I. WISKIND /s/ RICHARD L. OSBORNE Director March 21, 1997 - ------------------------------------------ RICHARD L. OSBORNE /s/ SAMUEL SALEM Director March 21, 1997 - ------------------------------------------ SAMUEL SALEM /s/ JON H. OUTCALT Director March 21, 1997 - ------------------------------------------ JON H. OUTCALT Director March , 1997 - ------------------------------------------ RICHARD P. JOHNSTON </TABLE> 30
33 INDEX OF EXHIBITS <TABLE> <CAPTION> EXHIBIT NO. - ----------- <S> <C> 3(a) MYERS INDUSTRIES, INC. AMENDED AND RESTATED ARTICLES OF INCORPORATION. Reference is made to Exhibit (3)(i) to Form 8-K filed with the Commission on May 14, 1994. (b) MYERS INDUSTRIES, INC. AMENDED AND RESTATED CODE OF REGULATIONS. Reference is made to Exhibit (3)(ii) to Form 8-K filed with the Commission on May 14, 1994. 10(a) MYERS INDUSTRIES, INC. AMENDED AND RESTATED 1982 INCENTIVE STOCK OPTION PLAN. Reference is made to Exhibit 10(a) to Form 10-K filed with the Commission on March 24, 1995. (b) MYERS INDUSTRIES, INC. EMPLOYEE STOCK PURCHASE PLAN. Reference is made to Exhibit 10(b) to Form 10-K filed with the Commission on March 24, 1995. (c) FORM OF INDEMNIFICATION AGREEMENT FOR DIRECTORS AND OFFICERS. Reference is made to Exhibit 10(c) to Form 10-K filed with the Commission on March 24, 1995. (d) MYERS INDUSTRIES, INC. 1992 STOCK OPTION PLAN. Reference is made to Exhibit 10(d) to Form 10-K filed with the Commission on March 24, 1995. (e) MYERS INDUSTRIES, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN. Reference is made to Exhibit 10(e) to Form 10-K filed with the Commission on March 24, 1995. (f) MYERS INDUSTRIES, INC. 1997 INCENTIVE STOCK PLAN. 21 Subsidiaries of the Registrant 23 Consent of Independent Public Accountants 27 Financial Data Schedule </TABLE> 31