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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended August 31, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to _____________.
Commission File No. 0-7459
A. SCHULMAN, INC.
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- - - ------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3550 West Market Street, Akron, Ohio 44333
- - - ------------------------------------------ ----------------
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (216)666-3751
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Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
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(Title of Class)
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 at least the past 90 days. Yes X No
-- --
[Cover continued on following page]
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[Cover Continued From Previous Page]
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. [ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
on October 24, 1994: $1,050,204,452
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Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practical date:
37,467,120 Common Shares, $1.00 Par Value, at October 24, 1994.
- - - ---------------------------------------------------------------
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DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document in Which Incorporated
- - - -------- ---------------------
Portions of the Registrant's Notice
of Annual Meeting and Proxy Statement
Dated November 11, 1994 III and IV
Portions of the Registrant's 1994
Annual Report to Stockholders I and II
Neither the Report of the Compensation Committee on Executive Compensation nor
the Performance Graph contained in the Registrant's Notice of Annual Meeting
and Proxy Statement dated November 11, 1994 shall be deemed incorporated by
reference herein.
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PART I
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ITEM I. BUSINESS
- - - ------ --------
A. Schulman, Inc. (the "Company") was organized as an Ohio corporation in
1928 and changed its state of incorporation to Delaware in 1969.
The Company operates in one industry segment which is the sale of plastic
resins to customers who use the products as raw materials in their
manufacturing operations. For informative reasons, the Company classifies its
activities within its only industry segment as manufacturing, merchant or
distribution. These activities are carried on in all markets and geographic
areas in which the Company operates. The Company purchases plastic resins and
other materials which either can be sold directly to customers or used by the
Company in the manufacture of other products for sale to customers. Because of
their interchangeable nature, inventories are not segregated as to
manufacturing, merchant or distribution activities. All of the products
which the Company sells are used for the same purpose--as raw material to be
molded or extruded by the Company's customers. The Company has one sales force
and it utilizes the same warehouses for all of its products and materials.
The first classification, manufacturing, involves primarily the
formulation and manufacture of proprietary plastic compounds
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engineered to fulfill the application requirements of the Company's customers.
These compounds, also known as engineered products, are formulated in the
Company's laboratories and are manufactured in the Company's nine plastics
compounding plants in North America and Europe. The Company combines basic
resins purchased from plastic resin producers with various additives in
accordance with formulae and specifications developed in the Company's
laboratories. Customers for the Company's proprietary plastic compounds
include manufacturers, custom molders and extruders of a wide variety of
plastic products and parts. Proprietary compounds are produced by the Company
generally on the basis of customer commitments. When necessary, compounds are
produced for future delivery and are stored in Company and public warehouses.
The Company's proprietary plastic compounds are sold to manufacturers and
suppliers in various markets such as consumer products, electrical/electronics,
packaging, office equipment, automotive and agriculture. For example, these
compounds are used in the consumer products industry for such items as writing
instruments, shelving, soft drink coolers, video tape cassettes, batteries,
outdoor furniture, lawn sprinklers, artificial turf, skateboards, toys, games
and plastic parts for various household appliances; the electrical/electronics
industry for such products as outdoor lighting, parts for telephones, connector
blocks, transformers, capacitor housings and wire and cable insulation for
power generation, distribution and control systems; the
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packaging industry for such products as plastic bags and labels and packaging
materials for food, soap, fragrances, flowers, gardening supplies and various
household necessities; the office equipment industry for such products as cases
and housings for computers, folders and binders, stack trays and panels and
drawers for copying machines; the automotive industry for such products as
grills, body side moldings, bumper protective strips, window seals, valance
panels, bumper guards, air ducts, steering wheels, fan shrouds and other
interior and exterior components; and the agriculture industry for such
products as greenhouse coverings, protective film for plants and agricultural
mulch.
On March 31, 1994, the Company, through a wholly-owned subsidiary,
acquired the assets of ComAlloy International Corporation, a subsidiary of
Exxon Chemical. This acquisition expanded the Company's product line of
engineered plastics to include alloys designed for demanding high-strength
applications. These materials are used in the automotive market and in
applications for specialty construction materials, plumbing devices, hand and
power tools, farm equipment, and recreational products such as exercise
equipment, and commercial food handling items.
The Company manufactures various flame retardant engineered compounds,
including Polyman(R), Polyflam(R) and Polyvin(R). These compounds are used in
applications such as telephone system terminal blocks, parts for color
televisions, electrical components and housings for household appliances and
outdoor
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products.
Schulamid(R), a nylon compound, can be unfilled, reinforced or
impact-modified and is used in applications which require good impact strength
and resistance to high temperatures and chemicals. Typical applications
include under-the-hood automotive components and various building and consumer
products.
The Company manufactures Superohm(R), a specialized elastomer-based
compound for use as insulation for high and medium voltage wire and cable which
may be either flame retardant or resistant to high temperatures. The Company
also manufactures Formion(R), a specialized compound which has good impact
strength, is resistant to abrasion and has performance characteristics which do
not decrease in low temperatures. This product is sold principally to the
transportation industry for use in bumper blocks and protective rub strips.
In addition, the Company manufactures Polytrope(R), a thermoplastic
elastomer which has high resiliency and good impact resistance. Presently, the
principal market is the domestic automotive industry. Typical applications are
valance panels, body side moldings, grills and bumper rub strips. Parts molded
from Polytrope(R) weigh less than equivalent metal parts, are impact-resistant
and may be painted to match adjoining exterior body parts.
Polypur(R), a polyurethane-based compound manufactured by the Company,
has good thermal stability, is easy to mold and can be finished with only one
coat of paint. It presently is used for
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automotive exterior body components and trim parts such as body side moldings.
The Company also manufactures Polyfort(R), a reinforced polypropylene
compound for applications which require stiffness and resistance to heat
distortion. Examples of such applications are coffee makers, binders for
computer printouts, seatbacks and under-the-hood products for automobiles.
Schulink(R), a crosslink polyethylene-based compound, is used in rotational
molding applications requiring high strength and chemical resistance.
The Company's plastics compounding operations include the manufacture of
Polybatch(R), an additive or color concentrate used for modifying various
plastic resins. An additive concentrate provides various physical properties
required by customers. These properties include slip, anti-slip, UV
stabilizers, etc. A color concentrate is a clear or natural plastic resin into
which a substantial amount of color pigment is incorporated or dispersed. The
Company manufactures its proprietary concentrates using its formulae and
purchased prime natural resins. These concentrates are sold to manufacturers
of plastic products. The Company also manufactures Polyblak(R), a line of
black concentrates. In addition, the Company manufactures custom concentrates
using resins and formulae supplied by customers.
Concentrates provide specific color and/or other physical properties used
in the manufacture of film for packaging, household goods, toys, automotive
parts, mechanical goods and other plastic items. Black concentrates, which are
resistant to
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weather and sunlight, are used by wire and cable manufacturers for insulation
coating and in the production of plastic pipe, black film and other black
plastic items.
Custom plastics compounding, or tolling, which accounted for less than 5%
of the Company's revenues from manufacturing in its latest fiscal year,
involves the use of resins and formulae provided by customers. Custom
compounding is done principally for major plastic resin producers. The Company
is compensated on the basis of an agreed price per pound plus an additional
charge for any additives and packaging supplied by the Company.
The Company also is engaged in the manufacture of rubber shims and tie
pads. A rubber shim is placed between two metals to prevent direct abrasive
contact. The principal market for rubber shims is the automotive industry. A
tie pad is a rubber pad generally inserted between the metal rail and the wood
tie in railroad trackage to reduce heat on the tie. The activities described
in this paragraph constitute a minor portion of the Company's business.
In the second classification within its plastics industry segment, the
Company, through its sales offices in North America and Europe, acts as a
merchant which buys prime and off-grade plastic resins and resells these
commodities, without further processing, to a variety of users. The plastic
resins generally are purchased from major producers. Prime resins are
purchased from these producers and usually are sold to small and medium-sized
customers. In addition to prime resins, the Company
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also purchases supplies of resins resulting from overruns, changes in
customers' specifications and failure to meet rigid prime specifications.
Historically, these materials have been in continuous supply generally in
proportion to the total industry production of plastic resins.
In the third classification within its plastics industry segment, the
Company, in its European operations, acts as a distributor for several major
resin producers which include Huels AG, BASF, Dow Chemical, Exxon Chemical, and
ATOCHEM.
The Company is the exclusive third-party United States distributor for
Enichem America, Inc. of prime polychloroprene (neoprene), nitrile and EPDM
rubber. These products are purchased by the Company and are sold principally
to the adhesive industry and to manufacturers of wire and cable products,
automotive oil-resistant products, footwear heels and soles and heavy duty
conveyor belting. Further, the Company is the exclusive third-party United
States, Canada and Mexico distributor of nylon 11 and 12 for Elf Atochem North
America, Inc. Nylon 11 and 12 are used in the rotational molding business and
the extrusion and injection molding markets. The Company also acts as the
exclusive United States distributor for Vestolit, a polyvinyl chloride
dispersion resin manufactured by Huels AG of Marl, Germany.
In addition, the Company acts as United States distributor of Escorene(R)
polypropylene resins and Escorene(R) roto molding resins, both manufactured by
Exxon Chemical. In 1994, the Company became
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the exclusive distributor in the United States for Exxon Chemical of
polyethylene used in injection molding, EMA and EVA. The Company also acts as
a distributor in Canada of K-Resin(R) for Phillips Petroleum and polypropylene
for Epsilon Products Company.
Supplemental information regarding net sales and gross profit of the
Company's three classifications within its only industry segment is set forth
on page 28 of the Company's 1994 Annual Report to Stockholders, which
information is incorporated herein by reference.
The Company's operations outside the United States are an important part
of its business. The Company's foreign subsidiaries manufacture additives,
concentrates, flame retardants and other proprietary and custom plastic
compounds, act as merchants of plastic resins, and distribute certain plastic
resins for foreign prime producers.
Information regarding the amount of sales, operating income and
identifiable assets attributable to each of the Company's geographic areas and
the amount of inter-geographic area sales for the last three years is set forth
in Note 10 of the Notes to Consolidated Financial Statements in the Company's
1994 Annual Report to Stockholders, which information is incorporated herein by
reference.
N.V. A. Schulman Plastics, S.A., a Belgian subsidiary located in Bornem,
manufactures proprietary and custom concentrates and compounds. These products
principally are sold in Germany,
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France, the Benelux countries, Italy and the Far East.
A. Schulman, Inc., Limited, a United Kingdom subsidiary located in South
Wales, manufactures proprietary and custom plastic concentrates which are sold
primarily in the United Kingdom.
A. Schulman GmbH, a German subsidiary located in Sindorf, operates seven
sales offices and manufactures proprietary and custom plastic compounds. In
addition, a major portion of the sales volume of this subsidiary is derived
from the purchase and sale of prime and off-grade plastic resins from major
European producers. During the fiscal year ended August 31, 1994, this
subsidiary purchased approximately 34% of the compounds manufactured in the
Bornem, Belgium plant. Approximately 22% of the sales volume of A. Schulman
GmbH during the same period was derived from its distribution activity of
selling plastic resins and compounds of Huels AG. This subsidiary also
distributes products for Dow Chemical and Exxon Chemical.
A. Schulman Canada Ltd., a Canadian subsidiary located in St. Thomas,
Ontario, manufactures proprietary and custom plastic compounds, acts as a
merchant of prime and off-grade plastic resins and distributes K-Resin(R) for
Phillips Petroleum and polypropylene for Epsilon Products Company. These
products are sold primarily in Canada. Its principal sales office is located
in Toronto.
A. Schulman AG, a Swiss subsidiary located in Zurich, is engaged as a
merchant of plastic resins and sells plastic
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compounds and concentrates manufactured by other European subsidiaries of the
Company.
A. Schulman, S.A., a French subsidiary, has four sales offices
in France and is a distributor in France for ATOCHEM, a merchant of
plastic resins, and sells compounds manufactured by the Company's subsidiaries
in Bornem, Belgium, Sindorf, Germany and Givet, France.
Diffusion Plastique is a Paris-based distributor of plastic materials.
A. Schulman Plastics, S.A., another French subsidiary, is located in Givet,
France. This subsidiary produces plastic concentrates for the Company's
European market. Both A. Schulman, S.A. and Diffusion Plastique are
distributors in France for BASF.
A. Schulman de Mexico, S.A. de C.V., ASI Employment, S.A. de C.V., and AS
Mex Hold, S.A. de C.V., each a Mexican subsidiary, have been formed in
connection with the Company's investment in a new production facility in
Mexico.
The Company has a 70% partnership interest in The Sunprene Company, which
manufactures a line of PVC thermoplastic elastomers and compounds primarily for
the North American automotive market. The other partner is an indirect
wholly-owned subsidiary of Mitsubishi Chemical Corporation, one of the largest
chemical companies in Japan. This partnership has a manufacturing line at the
Company's Bellevue, Ohio facility. The Company's partner provides technical
and manufacturing expertise.
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As of August 31, 1994, the Company had approximately 797 employees in the
United States and approximately 966 employees in its foreign operations.
Substantially all of the Company's hourly production employees are represented
by various unions under collective bargaining agreements.
The Company has laboratory facilities at each of its plastics compounding
plants staffed by approximately 208 technical personnel. The Company's plastic
compounding business is to a degree dependent on its ability to hire and retain
qualified technical personnel. These personnel are involved in activities
relating to the development of new compounds and the testing and sampling of
material for conformity with product specifications. The Company has
experienced no difficulty in hiring or retaining such personnel.
A large part of the Company's technical activities relates to the
development of compounds for specific applications of customers. Research
activities relating to the development of new products and the improvement of
existing products are important to the Company; however, the amounts spent
during the last three fiscal years have not been material.
Management believes that compliance with Federal, state and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have not had a
material effect upon the capital expenditures, earnings or competitive position
of the Company.
During the year ended August 31, 1994, the Company's five
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largest customers accounted in the aggregate for less than 10% of total sales.
In management's opinion, the Company is not dependent upon any single customer
and the loss of any one customer would not have a materially adverse effect on
the Company's business other than on a temporary basis.
The raw materials required by the Company readily are available from
major plastic resin producers or other suppliers. The principal types of
plastic resins used in the manufacture of the Company's proprietary plastic
compounds are polypropylene, ABS (acrylontrile butadiene styrene), PVC
(polyvinyl chloride), polyethylene and polystyrene.
The Company's business is highly competitive. In its manufacturing
classification, the Company competes with producers of the basic plastic
resins, many of which also operate compounding plants, and also competes with
other independent plastic compounders. The producers of basic plastic resins
generally are large producers of petroleum and chemicals, which are much larger
than the Company and have greater financial resources. Although no industry
statistics are available, the Company believes that it is one of the largest of
the ten to fifteen manufacturers of plastic compounds in the United States and
Europe which is not also engaged in the petrochemical industry or a basic
producer of plastic resins. Each of these ten to fifteen competitors competes
with the Company generally in its own local market area.
The Company also competes with others as a merchant and
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distributor of plastic resins, synthetic rubber and other products. No
accurate information is available to the Company as to the extent of its
competitors' sales and earnings in these classifications, but management
believes that the Company has only a small fraction of the total market.
The principal methods of competition in plastics manufacturing and
distribution are innovation, quality, service and price. In the Company's
merchant classification, the principal methods of competition are service and
price. The primary competitive advantages of the Company arise from its
financial capabilities, its excellent supplier relationships and its ability to
provide quality plastic compounds at competitive prices.
The Company uses various trademarks and trade names in its business.
These trademarks and trade names protect certain names in respect of the
Company's products and are significant to the extent they provide a certain
amount of goodwill and name recognition in the industry. Although these
trademarks and trade names contribute to profitability, the Company does not
consider a material part of its business to be dependent on such trademarks and
trade names. The Company also has some patents in various parts of the world
for certain of its products. The products covered by these patents do not
constitute a material part of the Company's business.
ITEM 2. PROPERTIES
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The Company owns and operates five plastics compounding plants in North
America and four in Europe. The following Table
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indicates the location of each plastics compounding plant and the approximate
annual plastics compounding capacity and approximate floor area, including
warehouse space:
Approximate Approximate
Capacity Floor Area
Location (lbs.) (Square Feet)
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Akron, Ohio 73,000,000 104,000
Bellevue, Ohio 80,000,000(1) 141,000
Orange, Texas 72,000,000 122,000
Nashville, Tennessee 60,000,000 90,000
Bornem, Belgium 130,000,000 356,000
Crumlin Gwent, South Wales (2)(a) 47,000,000 85,000
Givet, France(2)(b) 40,000,000 50,000
St. Thomas, Ontario, Canada(2)(c) 50,000,000 104,000
Sindorf, Germany 90,000,000 320,000(3)
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642,000,000 (2)(a),(b),(c),
=========== (d),(e)
(1) Includes capacity of approximately 12 million pounds from a
manufacturing line owned by The Sunprene Company, a
partnertship in which the Company has a 70% partnership
interest.
(2) Excludes the following capital projects:
(a) A new manufacturing line having a capacity of
approximately 12 million pounds is being installed.
This line will commence operations in fiscal 1995.
A new warehouse facility consisting of approximately
11,000 square feet is being constructed and is
scheduled for completion in fiscal 1995.
(b) A new manufacturing line having a capacity of
approximately 12 million pounds is being installed.
This line will commence operations in fiscal 1995.
Also, approximately 20,000 square feet of space
is being constructed and is scheduled for completion
in fiscal 1995.
(c) A new manufacturing line having a capacity of 12 million
pounds is being installed. This new line will replace an
existing manufacturing line having a capacity of 5 million
pounds and will commence operations in fiscal 1995.
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(d) The Company recently commenced construction in central Mexico of
a new production facility. The total investment including land,
building, equipment and working capital, will be approximately
$15 million. This facility is expected to have an initial annual
capacity of approximately 40 million pounds and is scheduled to
commence operations in late fiscal 1995.
(e) The Company plans to invest $6 million in a new manufacturing
facility in Indonesia. This facility is expected to have an
initial annual capacity of approximately 13 million pounds and is
scheduled to commence operations in fiscal 1996.
(3) Includes approximately 28,000 square feet of sales and
administrative office space, 196,000 square feet of warehouse
space, and 96,000 square feet for manufacturing.
The approximate annual plastics compounding capacity set forth in the
preceding Table is based upon several factors, including the weekly five-day,
three-shift basis on which the Company customarily operates. Another factor is
the approximate historical mix of specific types of plastic compounds
manufactured at each plant, as a plant operating at full capacity will produce
a greater or lesser quantity (in pounds) depending upon the specific plastic
compound then being manufactured. The annual pounds of plastic compounds
manufactured does not, in itself, reflect the extent of utilization of the
Company's plants or the profitability of the plastic compounds produced.
The Company also owns and operates a rubber shim and tie pad plant in
East St. Louis, Illinois having a floor area of approximately 65,000 square
feet.
The Company considers each of the foregoing facilities to be in good
condition and suitable for its purposes.
Public warehouses are used wherever needed to store the
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Company's products conveniently for shipment to customers. The number of
public warehouses in use varies from time to time, but a yearly average
approximates 35. The Company also leases approximately 100,000 square feet of
warehouse space located in Sindorf and Horrem, Germany.
The Company owns its corporate headquarters which is located in Akron,
Ohio and which contains approximately 48,000 square feet of usable floor space.
The Company leases sales offices in various locations in the United States,
Canada, the United Kingdom, Mexico and Europe.
ITEM 3. PENDING LEGAL PROCEEDINGS
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The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended August 31, 1994.
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
The age (as of October 24, 1994), business experience during the past
five years and offices presently held by each of the Company's Executive
Officers are reported below. The Company's By-Laws provide that officers shall
hold office until their successors are elected and qualified.
Terry L. Haines: Age 48; President and Chief Executive Officer of the
Company since January, 1991; formerly Chief Operating Officer, 1990-1991 and
Vice President--North American Sales, 1989-1990; and prior to that time General
Manager of A. Schulman
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Canada Ltd. since 1986.
Robert A. Stefanko: Age 51; Chairman of the Board since January, 1991;
Executive Vice President--Finance and Administration of the Company since 1989;
Chief Financial Officer of the Company since 1979; and formerly Vice
President--Finance since 1979.
Larry A. Kushkin: Age 54; Executive Vice President--International
Automotive Operations of the Company since 1989 and prior to that time Vice
President--Automotive Sales of the Company since 1977.
Brian R. Colbow: Age 47; Treasurer of the Company since 1984.
Alain C. Adam: Age 46; Vice President--Automotive Marketing since 1990;
formerly General Manager--Automotive Marketing since 1989 and prior to that
time Manager--Automotive Marketing since 1985.
Leonard E. Emge: Age 64; Vice President--Manufacturing since 1993 and
prior to that time General Plant Manager--North America since 1985.
James H. Berick: Age 61; Secretary of the Company since 1979 and
Chairman, Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).
PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
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STOCKHOLDER MATTERS
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The Company's Common Stock is traded in the over-the-counter market and
is quoted through the NASDAQ National Market System.
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Additional information in response to this Item is set forth on
page 1 of the Company's 1994 Annual Report to Stockholders, which information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
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Information in response to this Item is set forth on pages 28 and 29 of
the Company's 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - - ------ ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Information in response to this Item is set forth on pages 26 and 27 of
the Company's 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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(a) Financial Statements
--------------------
The financial statements, together with the report thereon of Price
Waterhouse dated October 14, 1994, appearing on pages 14 through 25 of the
Company's 1994 Annual Report to Stockholders, are incorporated herein by
reference.
(b) Supplementary Data
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Information in response to this Item is set forth in the financial
statement schedules set forth on pages F-1 through F-6 of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
- - - ------ -----------------------------------------------------
None.
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PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
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The information required in response to this Item in respect of Directors
is set forth under the captions "Election of Directors" and "Compliance with
Section 16(a) of The Securities Exchange Act of 1934" in the Company's proxy
statement dated November 11, 1994, previously filed with the Commission, which
information is incorporated herein by reference. The information required by
this Item in respect of Executive Officers is set forth on pages 19 and 20 of
this Form 10-K and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
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Information in response to this Item is set forth under the caption
"Compensation of Executive Officers" in the Company's proxy statement dated
November 11, 1994, previously filed with the Commission, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
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OWNERS AND MANAGEMENT
---------------------
Information in response to this Item is set forth under the caption
"Election of Directors" in the Company's proxy statement dated November 11,
1994, previously filed with the Commission, which information is incorporated
herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Information in response to this Item is set forth under the caption
"Compensation Committee Interlocks and Insider Participation" in the Company's
proxy statement dated November 11, 1994, previously filed with the Commission,
which information is incorporated herein by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
- - - ------- ---------------------------------------------------
ON FORM 8-K
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(a) The following documents are filed as part of this report:
Page
----
(1) Financial Statements:
---------------------
Report of Independent Accountants 25*
Consolidated Statement of Income for
the three years ended August 31, 1994 14*
Consolidated Balance Sheet at August 31,
1994 and 1993 16*
Consolidated Statement of Cash Flows for
the three years ended August 31, 1994 18*
Consolidated Statement of Stockholders'
Equity for the three years ended August 31,
1994 15*
Notes to Consolidated Financial
Statements 19*
___________
*Incorporated by reference from the indicated page of the
Company's 1994 Annual Report to Stockholders. With the exception of this
information and the information incorporated in Items 1, 5, 6, 7 and 8, the
1994 Annual Report to Stockholders is not deemed filed as part of this report.
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(2) Financial Statement Schedules:
------------------------------
Report of Independent Accountants
on Financial Statement Schedules F-1
V-Property, Plant and Equipment F-2
VI-Reserves for Depreciation of
Property, Plant and Equipment F-3
VIII-Valuation and Qualifying Accounts F-4
IX-Short-Term Borrowings F-5
X-Supplementary Income Statement
Information F-6
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits:
---------
Exhibit
Number
------
3(a) Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(a)
of the Company's Form 10-K for fiscal year
ended August 31, 1990).
3(b) Certificate of Amendment of Certificate
of Incorporation filed January 14, 1987
(incorporated by reference to Exhibit 3(b)
of the Company's Form 10-K for fiscal year
ended August 31, 1991).
3(c) Certificate of Amendment of Certificate of
Incorporation filed December 14, 1987.
3(d) Certificate of Amendment of Certificate of
Incorporation filed December 12, 1990
(incorporated by reference to Exhibit 3(d)
of the Company's Form 10-K for fiscal year
ended August 31, 1991).
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3(e) By-Laws (incorporated by reference to Exhibit 3(c) of the
Company's Form 10-K for fiscal year ended August 31, 1990).
3(f) Amendment to By-Laws dated October 20, 1986 (incorporated by
reference to Exhibit 3(f) of the Company's Form 10-K for fiscal
year ended August 31, 1991).
10(a)* 1981 Incentive Stock Option Plan (incorporated by reference to
Exhibit 10(b) of the Company's Form 10-K for fiscal year
ended August 31, 1990).
10(b)* A. Schulman, Inc. 1991 Stock Incentive Plan (incorporated by
reference to Exhibit 10(b) of the Company's Form 10-K for fiscal
year ended August 31, 1991).
10(c)* A. Schulman, Inc. 1992 Non-Employee Directors' Stock Option
Plan (incorporated by reference to Exhibit A of the Company's
Proxy Statement dated November 12, 1992 filed as Exhibit 28 of
the Company's Form 10-K for fiscal year ended August 31, 1992).
10(d)* Employment Agreement between the Company and Robert A. Stefanko
dated December 28, 1990 (incorporated by reference to Exhibit
10(c) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(e)* Employment Agreement between the Company and Terry L. Haines
dated December 28, 1990 (incorporated by reference to Exhibit
10(d) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(f)* Employment Agreement between the Company and Larry A. Kushkin
dated December 28, 1990 (incorporated by reference to Exhibit
10(e) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(g)* Employment Agreement between the Company and Brian R. Colbow
dated December 28, 1990 (incorporated by reference to Exhibit
10(f) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(h)* Employment Agreement between the Company and Alain C. Adam
dated December 28, 1990 (incorporated by reference to Exhibit
10(g) of the Company's Form 10-K for fiscal year ended August
31, 1991).
25
26
10(i)* Agreement between the Company and Robert A. Stefanko dated as of
August 1, 1985 (incorporated by reference to Exhibit 10(h) of the
Company's Form 10-K for fiscal year ended August 31, 1991).
10(j)* Agreement between the Company and Larry A. Kushkin dated as of
August 1, 1985 (incorporated by reference to Exhibit 10(i) of the
Company's Form 10-K for fiscal year ended August 31, 1991).
10(k)* Agreement between the Company and Robert A. Stefanko dated as of
March 21, 1991 (incorporated by reference to Exhibit 10(l) of the
Company's Form 10-K for fiscal year ended August 31, 1992).
10(l)* Agreement between the Company and Terry L. Haines dated as of
March 21, 1991 (incorporated by reference to Exhibit 10(m) of the
Company's Form 10-K for fiscal year ended August 31, 1992).
10(m)* Agreement between the Company and Larry A. Kushkin dated as of
August 31, 1993 (incorporated by reference to Exhibit 10(n) of
the Company's Form 10-K for fiscal year ended August 31, 1993).
10(n) Credit Agreement between the Company, Society National Bank,
First National Bank of Ohio and Union Bank of Switzerland dated
as of June 30, 1993 (incorporated by reference to Exhibit 10(o)
of the Company's Form 10-K for fiscal year ended August 31,
1993).
10(o) Amendment Agreement between the Company, Society National Bank,
First National Bank of Ohio and Union Bank of Switzerland dated
as of May 31, 1994.
11 Computation of Earnings Per Common Share
13 Company's 1994 Annual Report to Stockholders
21 Subsidiaries of the Company
23 Consent of Independent Accountants
24 Powers of Attorney
27 Financial Data Schedule
99 Notice of Annual Meeting and Proxy Statement
Dated November 11, 1994
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
26
27
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the Company's
fiscal year ended August 31, 1994.
27
28
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
A. SCHULMAN, INC.
By: /s/ Robert A. Stefanko
-------------------------------
Robert A. Stefanko
Chairman of the Board of
Directors and Executive Vice
President - Finance and
Administration
Dated: November 23, 1994
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 date indicated.
Signature Title Date
- - - --------- ----- ----
/s/ Terry L. Haines Director and Principal November 23, 1994
- - - ---------------------- Executive Officer
Terry L. Haines
/s/ Robert A. Stefanko Director, Principal November 23, 1994
- - - ---------------------- Financial Officer and
Robert A. Stefanko Principal Accounting Officer
James H. Berick* Director
Lucille G. Ford* Director
Gordon E. Heffern* Director
Larry A. Kushkin* Director
Franz A. Loehr* Director
Alan L. Ockene* Director
Charles J. Pilliod* Director
Paul Craig Roberts* Director
Rene C. Rombouts* Director
Robert G. Wallace* Director
Peggy Gordon Elliott* Director
*By: /s/ Robert A. Stefanko November 23, 1994
----------------------
Robert A. Stefanko
Attorney-in-Fact
*Powers of attorney authorizing Robert A. Stefanko to sign this annual
report on Form 10-K on behalf of certain Directors of the Company are being
filed with the Securities and Exchange Commission herewith.
28
29
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors of A. Schulman, Inc.
Our audits of the consolidated financial statements referred to in our report
dated October 14, 1994 appearing on page 25 of the 1994 Annual Report to the
Stockholders of A. Schulman, Inc. (which report and consolidated financial
statements are incorported by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes and its method of accounting
for postretirement health care benefits and life insurance, effective September
1, 1992.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
October 14, 1994
F-1
30
SCHEDULE V
A. SCHULMAN, INC.
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Balance at Balance at
beginning Additions Retirements Translation close of
Classification of period at cost or sales Transfers adjustment Other period
-------------- ---------- --------- ----------- --------- ----------- ----- ----------
Year ended August 31, 1994:
Land and improvements $ 4,674,000 $ 630,000 $ (140,000) $ 442,000 $ 207,000 $ 5,813,000
Buildings and leasehold
improvements 47,441,000 $ 2,050,000 2,608,000 2,042,000 $(17,000)(1) 54,124,000
Machinery and equipment 118,302,000 6,992,000 (2,157,000) 13,420,000 4,808,000 141,365,000
Furniture and fixtures 13,001,000 1,514,000 (64,000) 102,000 674,000 15,227,000
Construction in progress 7,648,000 14,116,000 (16,572,000) 188,000 5,380,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$191,066,000 $25,302,000 $(2,361,000) $ - $ 7,919,000 $(17,000) $221,909,000
============ =========== =========== =========== =========== ======== ============
Year ended August 31, 1993:
Land and improvements $ 5,213,000 $ 91,000 $ (630,000) $ 4,674,000
Buildings and leasehold
improvements 52,242,000 $ 19,000 1,473,000 (6,276,000) $(17,000)(1) 47,441,000
Machinery and equipment 125,356,000 2,296,000 $(3,619,000) 8,123,000 (13,854,000) 118,302,000
Furniture and fixtures 13,059,000 1,047,000 (250,000) 885,000 (1,740,000) 13,001,000
Construction in progress 3,935,000 14,796,000 (10,572,000) (511,000) 7,648,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$199,805,000 $18,158,000 $(3,869,000) $ - $(23,011,000) $(17,000) $191,066,000
============ =========== =========== =========== =========== ======== ============
Year ended August 31, 1992:
Land and improvements $ 4,163,000 $ 351,000 $ 699,000 $ 5,213,000
Buildings and leasehold
improvements 43,095,000 $ 423,000 2,459,000 6,282,000 $(17,000)(1) 52,242,000
Machinery and equipment 95,686,000 4,544,000 $(1,725,000) 14,291,000 12,560,000 125,356,000
Furniture and fixtures 10,026,000 1,476,000 (962,000) 736,000 1,783,000 13,059,000
Construction in progress 11,871,000 9,384,000 (17,837,000) 517,000 3,935,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$164,841,000 $15,827,000 $(2,687,000) $ - $21,841,000 $(17,000) $199,805,000
============ =========== =========== =========== =========== ======== ============
Note:
(1) Amortization of leasehold improvements credited directly to asset accounts.
F-2
31
SCHEDULE VI
A. SCHULMAN, INC.
CONSOLIDATED RESERVES FOR DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Provision for
Balance at depreciation Retirements Balance at
beginning charged to renewals and Translation close of
Description of period income replacements adjustment Other period
----------- ---------- ------------- ------------ ----------- ----- ----------
Year ended August 31, 1994:
Land improvements $ 201,000 $ 63,000 $ 264,000
Buildings 17,983,000 1,878,000 $ 883,000 20,744,000
Machinery and equipment 79,396,000 11,170,000 $(2,071,000) 3,468,000 91,963,000
Furniture and fixtures 7,989,000 1,787,000 (58,000) 483,000 10,201,000
Investment grant 541,000 (187,000) 39,000 $241,000(1) 634,000
------------ ----------- ----------- ------------ -------- ------------
$106,110,000 $14,711,000 $(2,129,000) $ 4,873,000 $241,000 $123,806,000
============ =========== =========== ============ ======== ============
Year ended August 31, 1993:
Land improvements $ 155,000 $ 46,000 $ 201,000
Buildings 18,595,000 1,875,000 $ (2,487,000) 17,983,000
Machinery and equipment 81,278,000 11,222,000 $(3,397,000) (9,707,000) 79,396,000
Furniture and fixtures 7,549,000 1,705,000 (175,000) (1,090,000) 7,989,000
Investment grant 838,000 (148,000) (149,000) 541,000
------------ ----------- ----------- ------------ -------- ------------
$108,415,000 $14,700,000 $(3,572,000) $(13,433,000) - $106,110,000
============ =========== =========== ============ ======== ============
Year ended August 31, 1992:
Land improvements $ 118,000 $ 37,000 $ 155,000
Buildings 13,980,000 2,253,000 $ 2,362,000 18,595,000
Machinery and equipment 62,678,000 10,946,000 $ (943,000) 8,597,000 81,278,000
Furniture and fixtures 5,888,000 1,490,000 (851,000) 1,022,000 7,549,000
Investment grant 852,000 (193,000) 179,000 838,000
------------ ----------- ----------- ------------ -------- ------------
$83,516,000 $14,533,000 $(1,794,000) $12,160,000 - $108,415,000
============ =========== =========== ============ ======== ============
Note:
(1) Received from various European countries as investment grants. See Note 2 of Notes to Consolidated Financial Statements.
F-3
32
SCHEDULE VIII
A. SCHULMAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to Net Balance at
beginning of cost and write Translation close of
period expenses offs adjustment Other period
----------- ---------- ----- ----------- ----- ----------
Reserve for doubtful accounts
Year ended August 31, 1994 $3,974,000 $298,000 $(450,000) $ 139,000 $150,000(1) $4,111,000
Year ended August 31, 1993 4,433,000 655,000 (576,000) (538,000) - 3,974,000
Year ended August 31, 1992 4,335,000 1,846,000 (2,240,000) 492,000 - 4,433,000
Valuation allowance - deferred tax assets
Year ended August 31, 1994 5,557,000 - - - (1,360,000)(2) 4,197,000
Year ended August 31, 1993 - 5,557,000 - - - 5,557,000
Note:
(1) Acquisition of assets of ComAlloy International.
(2) Represents current year change in valuation allowance for foreign tax credit
carryforward benefits which are not likely to be utilized.
F-4
33
SCHEDULE IX
A. SCHULMAN, INC.
SHORT-TERM BORROWINGS
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
at end of interest during the during the during the
period rate period period period
--------- -------- ----------- ----------- -------------
Year ended August 31, 1994:
Payable to U.S. banks $12,300,000 5.49% $12,300,000 $3,359,000 4.52%
Payable to foreign banks -0- - 11,501,000 191,000 8.60%
Year ended August 31, 1993:
Payable to U.S. banks -0- - 11,300,000 2,859,000 3.80%
Payable to foreign banks -0- - 12,832,000 183,000 10.78%
Year ended August 31, 1992:
Payable to U.S. banks 4,800,000 4.13% 12,400,000 5,123,000 5.18%
Payable to foreign banks -0- - 15,612,000 625,000 11.71%
F-5
34
SCHEDULE X
A. SCHULMAN, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year ended August 31,
---------------------
1994 1993 1992
---- ---- ----
Maintenance and repairs $ 9,326,000 $ 8,724,000 $ 8,973,000
Depreciation and amortization 14,728,000 14,717,000 14,550,000
Taxes other than income taxes:
Payroll 7,720,000 7,565,000 6,845,000
Property and other taxes 3,270,000 2,786,000 2,797,000
Rents 2,606,000 2,391,000 2,444,000
Advertising (a) (a) (a)
Research and development (a) (a) (a)
(a) Expenditures were less than 1% of total revenues.
F-6