Myers Industries Inc.MYE has amended its fourth quarter and 2014 financial results, released in February, following the completion of its Brazilian investigation. During the investigation, the company identified reconciliation errors in certain accounts due to negligence of the Brazilian management.
This investigation also brought to light two primary deficiencies relating to the design and operating effectiveness of the company's internal control over financial reporting, mainly resulting from weakness in internal control over the inventory process and financial closing process of the Brazilian operations as of Dec 31, 2014.
The investigation reflected a $2.4 million increase in cost of sales and $0.1 million increase in selling, general & administrative expenses (SG&A) for both fourth quarter and full year 2014, compared to what was reported in February. These adjustments in turn reduced income from continuing operations by $2.5 million, net income from continuing operations by $2.3 million and earnings per share by $0.07 for both fourth quarter and 2014. However, the adjustments did not impact discontinued operations and financial results reported for the prior periods.
Further, the company noted that its cash flow from operations lowered by $0.3 million to $51.8 million for the year ended Dec 31, 2014, as a result of the adjustments.
Earlier, the company had reported net income from continuing operations of $2.4 million for the fourth quarter and $20.2 million for 2014. Meanwhile, earnings per share were 13 cents for the fourth quarter and 60 cents for 2014.
Regarding the errors, the company stated that it has taken all necessary steps to resolve the deficiencies in the accounting process of the Brazilian operations. Finance personnel of this region will be educated on the importance of accounting as well as internal control. Further, the company will also implement and carry out control in the preparation and review of accounts and approval of journal entries. Moreover, the company is implementing additional controls to look over the financial operations in Brazil and make necessary arrangements to monitor the effectiveness of these controls and procedures.
We believe this Zacks Rank #3 (Hold) company has promptly identified its errors and is moving in the right direction to overcome the situation and avoid such errors in the future.
A better-ranked stock in the same industry is Proto Labs Inc. PRLB , sporting a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the broader retail sector include Tractor Supply Company TSCO and Office Depot Inc. ODP , both carrying a Zacks Rank #2 (Buy).