AKRON—As a result of completing a fraud investigation of its Brazilian unit, Myers Industries Inc. has revised its previously released financial results for the fourth quarter and year ended Dec. 31.
The revision, as compared to the Akron-based company's earnings release issued Feb. 25, reflects adjustments that led to an increase in cost of sales of $2.4 million and an increase in selling, general and administrative expenses of $100,000 for both the fourth quarter and full year of 2014, Myers said.
The total adjustments reduced income from continuing operations by $2.5 million, net income from continuing operations by $2.3 million and earnings per diluted share from continuing operations by 7 cents for both the fourth quarter and full year while, according to the company, there were no changes to results from discontinued operations. Therefore, net income and earnings per diluted share also changed by $2.3 million and 7 cents, respectively, for both the fourth quarter and full year. Previously reported financial results for prior periods were not affected by the adjustments.
Because of the adjustments, Myers said its previously released cash flow provided by continuing operations was reduced by $300,000 to $51.8 million for the year ended Dec. 31.
The revision to the financial results is primarily related to adjustments that were recorded as a result of Myers' investigation of its Brazilian operations. The company determined that certain accounts were not properly reconciled and amounts were not substantiated by people responsible in the Brazilian location who “knew or should have known they were not proper.”
As a result of this investigation, Myers said management “identified deficiencies in both the design and operating effectiveness of the company's internal control over financial reporting, which when aggregated, represent two material weaknesses in internal control over the inventory process at the Brazilian operations and the financial statement close process at the Brazilian operations” as of Dec. 31.
Myers said a detailed explanation of management's annual assessment of and report on internal control over financial reporting is included in Item 9A, the Controls and Procedures section, of its annual report on Form 10-K for 2014. It noted that further discussion of the “material weaknesses” is available in the company's Form 10-K, filed March 31 with the U.S. Securities and Exchange Commission.
The company said it has taken preliminary steps to address the underlying causes of the process deficiencies at the Brazilian operations and plans to enhance its finance personnel at its Brazilian operations with accounting and internal control knowledge. The firm will also provide training to implement and perform additional controls over the preparation and review of account reconciliations and approval of manual journal entries.
Myers said it will develop revised policies and procedures associated with the preparation and retention of supporting documentation for account reconciliations as well as the review and approval of manual journal entries prior to posting to the general ledger. Finally, it will implement additional controls to enhance monitoring and oversight of the financial function at the Brazilian operations.
The company plans to remediate all of the control deficiencies underlying these material weaknesses during 2015 and vowed to “continue to monitor the effectiveness of these and other processes, procedures and controls at its Brazilian operations and will make any further changes management determines appropriate.”
Myers is an international manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets. The company's Myers Tire Supply subsidiary is a wholesale distributor of tools, equipment and supplies for the tire, wheel and under-vehicle service industry in the U.S.