Back to GetFilings.com
1
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, 1997 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: (330)666-3751
---------------
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
-----------------------------
(Title of Class)
Special Stock Purchase Rights
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or l5(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]
2
[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 17, 1997: $837,767,212.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practical date:
36,135,193 SHARES OF COMMON STOCK, $1.00 PAR VALUE, AT OCTOBER 17, 1997.
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 10, 1997 III and IV
Portions of the Registrant's 1997
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 10, 1997 shall be deemed incorporated by
reference herein.
3
PART I
------
ITEM 1. 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 purposes, 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 for all of
its products and materials.
The first classification, manufacturing, involves primarily the
formulation and manufacture of proprietary plastic compounds engineered to
fulfill the application requirements of the
-1-
4
Company's customers. These compounds, also known as engineered products, are
formulated in the Company's laboratories and are manufactured in the Company's
thirteen plastics compounding plants in North America, Europe and Asia. 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; in
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; in the
packaging industry for such products as plastic
-2-
5
bags and labels and packaging materials for food, soap, fragrances, flowers,
gardening supplies and various household necessities; in 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; in 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 in
the agriculture industry for such products as greenhouse coverings, protective
film for plants and agricultural mulch.
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 products.
Papermatch(R), one of the Company's newer product lines, is a plastic
alternative to paper used for packaging, menus, maps and other products.
Papermatch(R) is printable and resistant to tearing, moisture and chemicals.
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.
-3-
6
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 for this product 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 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
-4-
7
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 performs tolling of plastic compounds and
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 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.
Tolling, which accounted for less than 5% of the Company's revenues
from manufacturing in its latest fiscal year, involves
-5-
8
the use of resins and formulae provided by customers. Tolling 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.
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 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, through its European operations, acts as a distributor for several
major resin producers which include Huels AG, Vestolen GmbH, BASF, Dow Chemical,
Exxon Chemical, and ATOCHEM.
The Company is the exclusive third-party United States, Canada and
Mexico distributor of rotational molding grades of nylon 11 and 12 for Elf
Atochem North America, Inc. Nylon 11 and
-6-
9
12 are used in the rotational molding business and the extrusion and injection
molding markets. The Company acts as a distributor of polyvinyl chloride
dispersion resin manufactured by Kaneka Delaware Corporation of the United
States.
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. The Company also is a distributor in the United
States for Exxon Chemical of polyethylene used in injection molding, EMA and
EVA. The Company also acts as a distributor of K-Resin(R) in the United States
for Phillips Petroleum and of polypropylene in Canada for Epsilon Products
Company.
Supplemental information regarding net sales and gross profit of the
Company's three classifications within its sole industry segment is set forth on
page 30 of the Company's 1997 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 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
-7-
10
for the last three years is set forth in Note 11 of the Notes to Consolidated
Financial Statements in the Company's 1997 Annual Report to Stockholders, which
information is incorporated herein by reference.
The Company's foreign subsidiaries are as follows:
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, 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, manufactures
proprietary and custom plastic compounds. In addition, a major portion of the
sales volume of this subsidiary is derived from merchant activities consisting
of the purchase and sale of prime and off-grade plastic resins from major
European producers. During the fiscal year ended August 31, 1997, this
subsidiary purchased approximately 25% of the compounds manufactured in the
Bornem, Belgium plant. Approximately 29% 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 and Vestolen GmbH, both members of the
Veba AG group of companies. This
-8-
11
subsidiary also distributes products for Dow Chemical, Exxon Chemical, Hoechst
and Solvay.
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 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 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 also a
Paris-based distributor of plastic materials. Both A. Schulman, S.A. and
Diffusion Plastique are distributors in France for BASF and Solvay.
A. Schulman Plastics, S.A., another French subsidiary, is located in
Givet, France. This subsidiary produces plastic concentrates for the Company's
European market.
Through its Mexican subsidiary, A. Schulman de Mexico, S.A. de C.V.,
the Company manufactures concentrates for the packaging industry and compounds
for the automotive, construction,
-9-
12
appliance and consumer products markets.
A. Schulman Polska Sp. z 0.0., located in Warsaw, Poland, is
a wholly-owned subsidiary of A. Schulman GmbH. This Company acts
as distributor and merchant of plastic resins and compounds in
Poland.
The Company owns 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 MKV Co., one of the
largest chemical companies in Japan. This partnership has two manufacturing
lines at the Company's Bellevue, Ohio facility. The Company's partner provides
technical and manufacturing expertise.
The Company owns a 65% interest in PTA. Schulman Plastics, Indonesia,
an Indonesian joint venture. This joint venture is building a manufacturing
facility with one production line in Surabaya, Indonesia. The other partner is
P.T. Prima Polycon Indah.
As of August 31, 1997, the Company had approximately 1,067 employees in
the United States and approximately 1,114 employees in its foreign operations.
More than 90% 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 260
-10-
13
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, 1997, the Company's five 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.
-11-
14
The principal types of plastic resins used in the manufacture of the Company's
proprietary plastic compounds are polypropylene, ABS (acrylonitrile butadiene
styrene), PVC (polyvinyl chloride), polyethylene, polystyrene and polyurethane.
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 as a basic producer of
plastic resins. Certain of these competitors compete with the Company generally
in each such competitor's own local market area, while other competitors compete
with the Company on a global basis.
The Company also competes with other merchants and distributors of
plastic resins 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
-12-
15
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 names of certain 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 holds 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
- ------- ----------
The Company owns and operates eight plastics compounding plants in
North America, four in Europe and one in Asia. The following Table indicates the
location of each plastics compounding plant and the approximate annual plastics
compounding capacity and approximate floor area, including warehouse space:
-13-
16
Approximate Approximate
Capacity Floor Area
Location (lbs.)(1) (Square Feet)
- --------------------------------------------------------------------------------
Akron, Ohio 73,000,000 164,000
Bellevue, Ohio 80,000,000(2) 160,000
Sharon Center, Ohio 14,000,000 43,000
Orange, Texas 72,000,000 145,000
Orange, Texas--Texas
Polymer Services, Inc. 145,000,000 182,000
Nashville, Tennessee 70,000,000 131,000
San Luis Potosi, Mexico(3)(a) 25,000,000 78,000
Bornem, Belgium 130,000,000 371,000
Crumlin Gwent, South Wales (3)(b) 54,000,000 99,000
Givet, France(3)(c) 52,000,000 74,000
St. Thomas, Ontario, Canada 62,000,000 111,000
Kerpen, Germany 90,000,000 325,000
Surabaya, Indonesia (4) 12,000,000 68,000
----------- -----------
879,000,000
===========
(1) The approximate annual plastics compounding capacity set forth in this
Table is based upon several factors, including the daily and shift
operating schedules which are customary in the area where each facility
is located. Another factor is the approximate historical mix of
specific types of plastic compounds manufactured at each plant. 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 poundage 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.
(2) Includes capacity of approximately 29 million pounds from two
manufacturing lines owned by The Sunprene Company, a partnership in
which the Company has a 70% partnership interest.
(3) Excludes the following capital projects:
(a) A new manufacturing line is being added to the facility in
Mexico. This line will have an annual capacity of
approximately 15 million pounds, is projected to cost $5.8
million and is scheduled to commence operations in fiscal year
1998.
(b) The Company is replacing an existing manufacturing line which
will increase capacity by approximately 8 million pounds. This
line will cost approximately $4 million and is scheduled to
commence operations in fiscal 1998.
(c) A new manufacturing line will be added to the facility in
Givet. This line will have an annual capacity of approximately
30 million pounds, is projected to cost $11 million and is
scheduled to commence operations in fiscal year 1999.
(4) Scheduled to commence operations December, 1997.
-14-
17
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 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 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, Mexico, the United Kingdom, Europe and Asia.
ITEM 3. PENDING LEGAL PROCEEDINGS
- ------- -------------------------
The Company is not a party to any material pending legal proceedings.
-15-
18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended August 31, 1997.
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
The age (as of October 17, 1997), 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 51; 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.
Robert A. Stefanko: Age 54; Chairman of the Board since January, 1991;
Executive Vice President--Finance and Administration of the Company since 1989;
and Chief Financial Officer of the Company since 1979.
Larry A. Kushkin: Age 57; Executive Vice President--International
Automotive Operations of the Company since 1989.
Brian R. Colbow: Age 50; Treasurer of the Company since 1984.
Alain C. Adam: Age 49; Vice President--Automotive Marketing since 1990.
Leonard E. Emge: Age 67; Vice President--Manufacturing since 1993 and
prior to that time General Plant Manager--North America
-16-
19
since 1985.
Gordon L. Trimmer: Age 53; Vice President--North American Sales and
Marketing since April 1997 and prior to that time Managing Director of A.
Schulman.
James H. Berick: Age 64; Secretary of the Company since 1979 and
Chairman, Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).
John M. Myles: Age 54; Vice President--North American Purchasing since
October 1997 and prior to that time General Manager-Operations of Laurel
Industries since 1992.
PART II
-------
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- ------- ---------------------------------------------------------------------
The Company's Common Stock is traded in the over-the-counter market and
is quoted through the NASDAQ National Market System.
Additional information in response to this Item is set forth on page 1
of the Company's 1997 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
Information in response to this Item is set forth on pages 30 and 31 of
the Company's 1997 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 28 and 29 of
the Company's 1997 Annual Report to Stockholders,
-17-
20
which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
(a) Financial Statements
--------------------
The financial statements, together with the report thereon of Price
Waterhouse LLP dated October 14, 1997, appearing on pages 16 through 27 of the
Company's 1997 Annual Report to Stockholders, are incorporated herein by
reference.
(b) Supplementary Data
------------------
Information in response to this Item is set forth in the financial
statement schedules set forth on pages F-1 through F-2 of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
- ------- -----------------------------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- -------- -----------------------------------------------
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 10, 1997, 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 16 and 17 of this Form 10-K and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Information in response to this Item is set forth under the
-18-
21
caption "Compensation of Executive Officers" in the Company's proxy statement
dated November 10, 1997, previously filed with the Commission, which information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 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 10, 1997, previously filed with the Commission,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
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 10, 1997, previously filed with the Commission,
which information is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ------------------------------------------- -------------------
(a) The following documents are filed as part of this report:
Page
(1) Financial Statements:
---------------------
Report of Independent Accountants 27*
Consolidated Statement of Income for
the three years ended August 31, 1997 16*
Consolidated Balance Sheet at August 31, 18*
1997 and 1996
-19-
22
Consolidated Statement of Cash Flows for
the three years ended August 31, 1997 20*
Consolidated Statement of Stockholders'
Equity for the three years ended
August 31, 1997 17*
Notes to Consolidated Financial
Statements 21*
- --------------------
*Incorporated by reference from the indicated page of the Company's
1997 Annual Report to Stockholders. With the exception of this information and
the information incorporated in Items 1, 5, 6, 7 and 8, the 1997 Annual Report
to Stockholders is not deemed filed as part of this report.
(2) Financial Statement Schedules:
------------------------------
Report of Independent Accountants
on Financial Statement Schedule F-1
II-Valuation and Qualifying Accounts F-2
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) to the Company's Form
10-K for fiscal year ended August 31, 1990).
3(b) Certificate of Amendment of Certificate of
Incorporation dated December 12, 1985 (incorporated
by reference to Exhibit 2(b) of the Company's
Registration Statement on Form 8-A dated
January 15, 1996).
3(c) Certificate of Amendment of Certificate of
Incorporation dated January 9, 1987 (incorporated by
reference to Exhibit 3(b) to the Company's Form 10-K
for fiscal year ended August 31, 1994).
3(d) Certificate of Amendment of Certificate of
Incorporation dated December 10, 1987
-20-
23
(incorporated by reference to Exhibit 3(c) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
3(e) Certificate of Amendment of Certificate of
Incorporation dated December 6, 1990 (incorporated by
reference to Exhibit 3(d) to the Company's Form 10-K
for fiscal year ended August 31, 1991).
3(f) Certificate of Amendment of Certificate of
Incorporation dated December 9, 1993 (incorporated by
reference to Exhibit 2(f) to the Company's
Registration Statement on Form 8-A dated January 15,
1996).
3(g) By-Laws dated December 8, 1983 (incorporated by
reference to Exhibit 3(c) to the Company's Form 10-K
for fiscal year ended August 31, 1990).
3(h) Amendment to By-Laws dated October 20, 1986
(incorporated by reference to Exhibit 3(f) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
3(i) Amendment to By-Laws dated January 11, 1996
(incorporated by reference to Exhibit 3.3 to the
Company's Report on Form 8-K dated January 15, 1996).
4(a) Rights Agreement dated as of January 12, 1996,
between the Company and Society National Bank, as
Rights Agent, which includes as Exhibit B thereto the
Form of Rights Certificate (incorporated by reference
to Exhibit 1 to the Company's Registration Statement
on Form 8-A, dated January 15, 1996).
4(b) Amendment No. 1 to Rights Agreement dated as of
November 21, 1997 between the Company, KeyBank
National Association (as successor by merger to
Society National Bank) and First Chicago Trust
Company of New York as successor Rights Agent
(incorporated by reference to Exhibit 1(b) to the
Company's Amendment No. 1 to Registration Statement
on Form 8-A/A).
10(a)* A. Schulman, Inc. 1991 Stock Incentive Plan
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
10(b)* Amendment to A. Schulman, Inc. 1991 Stock Incentive
Plan (incorporated by reference to Exhibit 10.9 to
-21-
24
the Company's Form 10-Q for the fiscal quarter ended
February 29, 1996).
10(c)* A. Schulman, Inc. 1992 Non-Employee Directors' Stock
Option Plan (incorporated by reference to Exhibit A
to the Company's Proxy Statement dated November 12,
1992 filed as Exhibit 28 to the Company's Form 10-K
for fiscal year ended August 31, 1992).
10(d)* Amendment to A. Schulman, Inc. 1992 Non-Employee
Directors' Stock Option Plan (incorporated by
reference to Exhibit 10.10 to the Company's Form 10-Q
for the fiscal quarter ended February 29, 1996).
10(e)* Non-Qualified Profit Sharing Plan (incorporated by
reference to Exhibit 10(d) to the Company's Form 10-K
for the fiscal year ended August 31, 1995).
10(f)* Amendment to A. Schulman, Inc. Nonqualified Profit
Sharing Plan (incorporated by reference to Exhibit
10.8 to the Company's Form 10-Q for the fiscal
quarter ended February 29, 1996).
10(g)* Employment Agreement between the Company and Robert
A. Stefanko dated January 31, 1996 (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(h)* Employment Agreement between the Company and Terry L.
Haines dated January 31, 1996 (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(i)* Employment Agreement between the Company and Larry A.
Kushkin dated January 31, 1996 (incorporated by
reference to Exhibit 10.4 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(j)* Employment Agreement between the Company and Leonard
E. Emge dated January 31, 1996 (incorporated by
reference to Exhibit 10.5 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(k)* Employment Agreement between the Company and Brian R.
Colbow, effective as of May 14, 1997.
10(l)* Employment Agreement between the Company and Alain C.
Adam dated January 31, 1996 (incorporated by
reference to Exhibit 10.6 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(m)* Agreement between the Company and Robert A. Stefanko
dated as of August 1, 1985 (incorporated by reference
-22-
25
to Exhibit 10(h) to the Company's Form 10-K for
fiscal year ended August 31, 1991).
10(n)* Agreement between the Company and Larry A. Kushkin
dated as of August 31, 1985 (incorporated by
reference to Exhibit 10(i) of the Company's Form 10-K
for fiscal year ended August 31, 1991).
10(o)* Agreement between the Company and Robert A. Stefanko
dated as of March 21, 1991 (incorporated by reference
to Exhibit 10(l) to the Company's Form 10-K for
fiscal year ended August 31, 1992).
10(p*) Agreement between the Company and Terry L. Haines
dated as of March 21, 1991 (incorporated by reference
to Exhibit 10(m) to the Company's Form 10-K for
fiscal year ended August 31, 1992).
10(q)* Agreement between the Company and Larry A. Kushkin
dated as of August 31, 1993 (incorporated by
reference to Exhibit 10(n) to the Company's Form 10-K
for fiscal year ended August 31, 1993).
10(r)* Form of Amendment to Deferred Compensation Agreements
between the Company and Robert A. Stefanko, Terry L.
Haines and Larry A. Kushkin (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q
for the fiscal quarter ended February 29, 1996).
10(s)* Agreement between the Company and Franz A. Loehr
dated as of August 31, 1994 (incorporated by
reference to Exhibit 10(o) to the Company's Form 10-K
for the fiscal year ended August 31, 1995).
10(t)* Agreement between the Company and Franz A. Loehr
dated as of August 31, 1996 (incorporated by
reference to Exhibit 10(t) to the Company's Form 10-K
for the fiscal year ended August 31, 1996).
10(u)* Employment Agreement between the Company and Gordon
L. Trimmer dated May 14, 1997.
10(v) Credit Agreement between the Company, The Banks and
Society National Bank, individually and as Agent,
dated as of March 13, 1995 (incorporated by reference
to Exhibit 10 of the Company's Form 10-Q for fiscal
quarter ended February 28, 1995).
10(w) First Amendment to Credit Agreement dated February
26, 1996, among the Company and Society National
Bank, individually and as Agent, First National Bank
of Ohio, Union Bank of Switzerland and The First
National Bank of Chicago (incorporated by reference
-23-
26
to Exhibit 10.11 to the Company's Form 10-Q for the
fiscal quarter ended February 29, 1996).
10(x) Second Amendment to Credit Agreement dated as of
August 14, 1997, among the Company, KeyBank National
Association, individually and as Agent, The First
National Bank of Chicago, National City Bank,
Northeast and Morgan Guaranty Trust Company of New
York.
11 Computation of Earnings Per Common Share
13 Company's 1997 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 10, 1997
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item 601(b)(27)
of Regulation S-K.
(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, 1997.
-24-
27
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 26, 1997
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 26, 1997
- ------------------ Executive Officer
Terry L. Haines
/s/Robert A. Stefanko Director, Principal November 26, 1997
- --------------------- Financial Officer and
Robert A. Stefanko Principal Accounting Officer
James H. Berick* Director
Gordon E. Heffern* Director
Larry A. Kushkin* Director
Franz A. Loehr* Director
Alan L. Ockene* Director
Paul Craig Roberts* Director
Rene C. Rombouts* Director
Robert G. Wallace* Director
Peggy Gordon Elliott* Director
Willard R. Holland* Director
James A. Karman* Director
James S. Marlen* Director
*By: /s/ Robert A. Stefanko November 26, 1997
---------------------
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.
-25-
28
REPORT OF INDEPENDENT ACCOUNTANTS
October 14, 1997
To the Board of Directors
of A. Schulman, Inc.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of A. Schulman, Inc. ("the Company") as of August 31,
1997 and the related consolidated statements of income, shareholders' equity
and cash flows for the year then ended, and have issued our report thereon dated
October 14, 1997.
In conducting our audit, nothing came to our attention that caused us to believe
that the Company was not in compliance with any of the provisions of Articles VI
and VII of the Credit Agreement dated March 13, 1995 and amended February 26,
1996, and August 14, 1997, with Keybank N.A., First National Bank of Chicago,
National City Bank, Northeast, and Morgan Guaranty Trust Company of New York,
insofar as they relate to accounting matters. It should be noted, however, that
our audit was not directed primarily toward obtaining knowledge of such
noncompliance.
This report is intended solely for the information and use of the Board of
Directors and management of A. Schulman, Inc. and the banks participating in the
Credit Agreement.
/s/ Price Waterhouse LLP
F-1
29
SCHEDULE II
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, 1997 $5,903,000 $1,098,000 $(1,357,000) $(340,000) $ - $5,304,000
Year ended August 31, 1996 4,859,000 2,490,000 (1,425,000) (21,000) - 5,903,000
Year ended August 31, 1995 4,111,000 1,134,000 (565,000) 163,000 16,000(1) 4,859,000
Valuation allowance - deferred tax assets
Year ended August 31, 1997 3,155,000 - - - 2,782,000 (2) 5,937,000
Year ended August 31, 1996 4,820,000 - - - (1,665,000)(2) 3,155,000
Year ended August 31, 1995 4,197,000 - - - 623,000 (2) 4,820,000
Note:
(1) Acquisition of assets of Texas Polymer Services.
(2) Represents current year change in valuation allowance for foreign tax
credit carryforward benefits which are not likely to be utilized.
F-2