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8-K - FORM 8-K - SCHULMAN A INCc07216e8vk.htm
Exhibit 99.1
(A. SCHULMAN INC. LOGO)
FOR IMMEDIATE RELEASE
A. SCHULMAN REPORTS STRONG FISCAL 2010 FOURTH-QUARTER RESULTS
    Net income of $7.9 million for the quarter represents a $15.8 million improvement from the loss of $7.9 million in last year’s fourth quarter
 
    Net income for the quarter was $11.7 million or $0.37 per share excluding certain one-time charges and acquisition-related items, compared with $5.4 million or $0.21 per share for the prior-year period
 
    Net income for the full year was $48.2 million or $1.72 per share excluding certain one-time charges and acquisition-related items, compared with $16.4 million or $0.64 per share in fiscal 2009
 
    Earnings for 2011 expected to reach record levels between $57 million to $62 million
AKRON, Ohio — October 25, 2010 — A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today earnings for the fiscal 2010 fourth quarter ended August 31, 2010. The Company reported net income for the fourth quarter of $7.9 million, or $0.25 per diluted share, a $15.8 million improvement from the net loss of $7.9 million for the comparable period last year. The translation effect of foreign currencies reduced net income by $1.2 million.
The fiscal 2010 fourth quarter included certain after-tax net charges of approximately $3.8 million, which were primarily related to purchase accounting adjustments, asset write-downs, costs related to acquisitions and restructuring-related expenses. Last year’s fourth quarter included $13.3 million of after-tax, non-operating charges related to restructuring expenses and asset write-downs. Excluding these charges, net income for the fiscal 2010 fourth quarter was $11.7 million, or $0.37 per diluted share, compared with $5.4 million, or $0.21 per diluted share, for the prior-year period. The Company’s fiscal 2010 fourth-quarter results contained a full quarter of the acquired ICO, Inc.’s operations, which contributed approximately $2.4 million to adjusted net income in the quarter, including $2.4 million of increased amortization and depreciation expense after tax.
“We are pleased with our strong earnings improvement for both the fourth quarter and the full year of fiscal 2010,” said Joseph M. Gingo, Chairman, President and Chief Executive Officer. “Our performance shows that our strategy is working, and it reflects the strong culture we are developing at A. Schulman — a culture that is committed to shareholder value creation through long-term profitable growth. We saw the restoration of profitability in our legacy U.S. operations in fiscal 2010 as well as the strengthening of our position in key global markets.”
Gingo continued, “During the fiscal year, we successfully completed two acquisitions — ICO, which expanded our global presence in the masterbatch and specialty powders markets, and McCann Color, which increased our capabilities in the North American masterbatch market. We are also excited about our agreement to acquire Mash Compostos Plasticos, which we announced on October 18, 2010, pending customary closing procedures. Based in Brazil, Mash produces masterbatch additives and engineered plastics compounds. Along with ICO, this marks our second acquisition in the past six months in Brazil that will help us expand our presence in this growing market.”

 

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Net sales for the fiscal 2010 fourth quarter were $476.2 million, an increase of 49% compared with $320.6 million for the comparable period last year. Excluding ICO, sales increased 17% compared with net sales in the same period a year ago. Volume reached 525 million pounds, up 60% from last year’s reported 329 million pounds. ICO accounted for 183 million pounds. Excluding ICO, volume increased 4% for the quarter while price and mix accounted for a 20% increase in sales. Currency translation had the effect of reducing sales by 7%.
Reported gross profit for the quarter, excluding ICO, was $46.2 million, a decrease of $6.0 million from the fourth quarter of last year. ICO accounted for $13.3 million of the current period gross profit. Currency translation had the effect of reducing gross profit by $4.2 million. Gross margin, including ICO, was 12.5% compared with 16.3% in the fourth quarter of last year. Excluding certain one-time charges and acquisition-related items, gross profit was $60.9 million compared with $52.3 million last year. ICO contributed $14.7 million to gross profit, excluding these items. In the quarter, the Company’s business in the Americas continued to see improvements in gross profit per pound and gross margin rates while the European business was impacted by higher raw material prices and manufacturing inefficiencies driven by the scarcity of certain raw materials as well as foreign currency translation.
Selling, general and administrative (SG&A) expense for the fiscal 2010 fourth quarter was $45.3 million, an increase of $3.5 million compared with the fiscal 2009 fourth quarter. ICO, excluding certain items, accounted for $11.3 million of SG&A for the quarter while the translation effect of foreign exchange reduced SG&A by $2.6 million. Other items reducing SG&A were bonus accrual adjustments, bad debt accrual reversals and the impact of equity incentive programs.
For fiscal 2010, the Company reported net income of $43.9 million, or $1.57 per diluted share, compared with a net loss of $2.8 million, or $0.11 per share last year. Excluding certain one-time charges and acquisition-related items, net income was $48.2 million, or $1.72 per diluted share, for fiscal 2010, compared with $16.4 million, or $0.64 per diluted share, a year ago. EBITDA, excluding certain items, increased 71% to $92.8 million reflecting the profitability increases experienced during the fiscal year. Sales volume increased 21% for the full year to 1.6 billion pounds. Excluding ICO, which reported 239 million pounds sold, sales volume was up 3%, reflecting the slowly improving economic conditions the Company has recently experienced. The net income improvement was driven by the significant increase in gross profit for the full year reflecting cost reductions, margin improvement initiatives and market improvement.
Results in the following segment discussion exclude the one-time charges and acquisition-related items discussed above.
Europe, Middle East and Africa (“EMEA”) — In the fiscal 2010 fourth quarter, sales were $318.4 million, an increase of $82.4 million or 35% compared with the prior-year period. ICO accounted for $42.7 million of the sales increase while the translation effect of foreign exchange had the effect of reducing sales by $24.8 million. Volume for the quarter, excluding ICO, increased by 8%. Changes in prices and product mix increased sales by almost 20% compared with the same period last year.

 

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Gross profit was reported at $37.6 million for the quarter, up slightly from last year, excluding the negative effect of foreign exchange. ICO contributed $4.4 million to the gross profit. EMEA’s gross profit percentage was down approximately 5.6 percentage points excluding ICO. Despite the strong increase in sales due to price and mix as discussed above, contribution margin per pound in Euros dropped 9% as the Company was not able to fully pass on cost increases during the quarter. Additionally, shortages of a few key raw materials drove an increase in manufacturing inefficiencies. The Company notes that raw material prices have begun to moderate while the Company has been increasing prices.
Operating income for the fiscal 2010 fourth quarter was $12.6 million compared with $14.7 million last year. ICO accounted for $0.5 million of the quarterly result. Foreign exchange had the effect of reducing operating profit by $1.7 million.
“Our EMEA operations had a strong year overall. Margins were good, price and product mix improved, and our strategic realignment initiatives favorably impacted capacity utilization,” Gingo said. “Over this raw material pricing cycle, we received significant benefit from lower raw material prices in our first quarter. However, this was offset in the fourth quarter, as margins were impacted by rising prices for raw materials which were not completely offset by our aggressive pricing actions for our products. We have worked hard to improve margins under current market conditions and have begun to see improved results as we move into fiscal 2011.”
The Americas — Combined operating income for the Americas, including discontinued operations, was $7.0 million during the quarter, compared with last year’s fourth-quarter loss of $1.4 million. ICO accounted for $4.0 million of that operating income. Gross profit for the fourth quarter more than doubled to $19.1 million from $8.3 million for the prior-year period. ICO accounted for $8.7 million of the increase in gross profit, with the remainder coming from margin improvement initiatives and mix. Volume was relatively flat. For the full year, the Americas, including discontinued operations, reported a total operating profit of $12.0 million, compared with a loss of $13.6 million a year ago, primarily driven by the stronger gross profit and, to a lesser extent, the ICO effect.
“The turnaround in our U.S. business, the continuing strength of our Mexican operations and the growth of our South American footprint combined to make fiscal 2010 a profitable one for the Americas,” Gingo said. “We will continue to manage this portion of our business aggressively by pursuing the many opportunities for our high-value products in this region, especially in the masterbatch and specialty powders markets.”
Asia Pacific — Sales were $33.0 million, an increase of approximately 130% for the quarter compared with the same period last year. Excluding ICO, sales were $17.8 million, up 25%. Volume excluding ICO increased almost 15%. Gross profits were $4.2 million compared with $2.5 million in the comparable quarter last year. ICO accounted for $1.6 million of the increase. Operating income was $0.5 million compared with income of $1.4 million for the prior-year quarter. ICO accounted for $0.1 million of the decline with the remainder coming from a realignment of cost allocations to more clearly reflect business practices going forward.

 

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ICO — For the fiscal 2010 fourth quarter, the combined ICO businesses contributed approximately 183 million to pounds, $102 million to sales, $13.3 million to gross profit ($14.7 million excluding certain items) and $1.8 million to operating profit ($3.4 million excluding certain items). For the full year, ICO contributed 239.4 million to pounds, $134.2 million to sales, $15.6 million to gross profit ($19.5 million excluding certain items) and $0.8 million to operating income ($4.8 million excluding certain items). Non-operating purchase accounting adjustments increased the value of inventory, which led to $1.4 million of increased costs in the quarter and $3.9 million of increased costs for the full year, and reduced gross profit. This increase is excluded when the Company discusses results excluding certain adjustments. In addition, the Company has increased the value of ICO’s fixed assets and intangible assets. As a result, incremental non-cash depreciation and amortization expense was approximately $2.7 million during the quarter and $3.4 million for the May through August period. During the fourth quarter, the Company continued to refine its purchase accounting adjustments. As a result, the Company increased its estimated incremental 2011 depreciation and amortization expense from $7.0 million pre-tax estimated at the end of the third quarter to $10 million and from $5.6 million after tax to $8.6 million.
Cash Flow From Operations and Working Capital
The Company’s liquidity position improved during the quarter. Working capital, excluding ICO, dropped to 59 days from 60 days at the end of the third quarter. Including ICO, the Company reported 63 days of working capital. Net debt decreased to $31.9 million from $54.1 million at the end of the third quarter. In recognition of the Company’s strong cash position, the quarterly dividend was increased 3.3% to $0.155 per share. Cash flow from operations was $4.4 million for fiscal 2010, compared with $181.5 million for the previous year.
Fiscal 2011 Guidance and Business Outlook
“Although the long-term prospects for the global economy remain uncertain, we are optimistic that the gradual recovery of our overall markets will continue,” Gingo said. “With a full year of impact from our acquisitions, and the addition of Mash, we expect to see continued strong global growth as we build on the momentum we established in fiscal 2010. Although margin comparisons are likely to be unfavorable in the first quarter of fiscal 2011, due largely to the very favorable raw material pricing we saw in the fiscal 2010 first quarter and the moderating margin squeeze noted in the EMEA discussion above, we expect to make up the shortfall in the subsequent quarters of the year.”
Based on these expectations, the Company is establishing guidance for fiscal 2011 net income to be in the range of $57 million to $62 million. This net income assumes a euro exchange rate of $1.35, and incremental full-year amortization and depreciation, as a result of the ICO acquisition, of $10 million pre-tax or $8.6 million after tax and an incremental $1.0 million after-tax increase in interest expense due to higher rates expected in the Company’s new revolving credit agreement to be finalized early in the second quarter of fiscal 2011. The after-tax amortization and depreciation number, which is non-cash, is $3.0 million higher than the amount reported in the fiscal 2010 third quarter.
Conference Call on the Web
A live Internet broadcast of A. Schulman’s conference call regarding fiscal 2010 fourth-quarter earnings can be accessed at 10 a.m. Eastern time on October 25, 2010, on the Company’s website, www.aschulman.com. An archived replay of the call will also be available on the website.

 

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Use of Non-GAAP Financial Measures
This earnings release includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures are net income excluding certain items, net income per diluted share excluding certain items and EBITDA excluding certain items. The most directly comparable GAAP financial measures are net income and net income per diluted share. Tables included in this news release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure.
A. Schulman uses these financial measures to monitor and evaluate the ongoing performance of the Company and to allocate resources, and believes that the additional non-GAAP measures are useful to investors for financial analysis. In addition, the Company believes that providing this information is in the best interest of our investors so that they can accurately consider the non-GAAP financial information. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures.
While management believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these measures. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company’s competitors and may not be directly comparable to similarly titled measures of the Company’s competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
The Company’s non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.
About A. Schulman, Inc.
Headquartered in Akron, Ohio, A. Schulman is a leading international supplier of high-performance plastic compounds and resins. These materials are used in a variety of consumer, industrial, automotive and packaging applications. The Company employs about 2,900 people and has 36 manufacturing facilities in North America, South America, Europe and Asia. A. Schulman reported net sales of $1.6 billion for the fiscal year ended August 31, 2010. Additional information about A. Schulman can be found at www.aschulman.com.
Cautionary Note on Forward-Looking Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:
    worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company’s major product markets;

 

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    the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
 
    competitive factors, including intense price competition;
 
    fluctuations in the value of currencies in major areas where the Company operates;
 
    volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company’s products, particularly plastic resins derived from oil and natural gas;
 
    changes in customer demand and requirements;
 
    effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions and restructuring initiatives;
 
    escalation in the cost of providing employee health care;
 
    uncertainties regarding the resolution of pending and future litigation and other claims;
 
    the performance of the North American auto market; and
 
    further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products.
The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company’s performance are set forth in the Company’s Annual Report on Form 10-K and the most recent Form 10-Q. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company’s business, financial condition and results of operations. This document contains time-sensitive information that reflects management’s best analysis only as of the date of this document. The Company does not undertake an obligation to publicly update or revise any forward-looking statements to reflect new events, information or circumstances, or otherwise. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company’s periodic filings with the Securities and Exchange Commission.
SHLM_CN, FN
Contact information:
Jennifer K. Beeman
Director of Corporate Communications & Investor Relations
A. Schulman, Inc.
3550 W. Market St.
Akron, Ohio 44333
Tel: 330-668-7346
email: Jennifer_Beeman@us.aschulman.com

 

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A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    Three months ended August 31,     Year ended August 31,  
    2010     2009     2010     2009  
    Unaudited  
    (In thousands, except per share data)  
Net sales
  $ 476,224     $ 320,639     $ 1,590,443     $ 1,279,248  
Cost of sales
    416,736       268,409       1,357,575       1,109,211  
Selling, general and administrative expenses
    46,773       43,038       179,821       148,143  
Interest expense
    1,661       1,198       5,010       4,785  
Interest income
    (693 )     (388 )     (1,345 )     (2,348 )
Foreign currency transaction (gains) losses
    485       573       874       (5,645 )
Other (income) expense
    (271 )     405       (2,425 )     (1,826 )
Restructuring expense
    2,545       2,435       5,054       8,665  
Asset impairment
    37       146       5,668       2,608  
Curtailment (gains) losses
    270       (196 )     270       (2,805 )
 
                       
 
    467,543       315,620       1,550,502       1,260,788  
 
                       
Income from continuing operations before taxes
    8,681       5,019       39,941       18,460  
Provision for (benefit from) U.S. and foreign income taxes
    565       1,607       (4,419 )     6,931  
 
                       
Income from continuing operations
    8,116       3,412       44,360       11,529  
Income (loss) from discontinued operations, net of tax of $0
    (225 )     (11,086 )     (239 )     (13,956 )
 
                       
Net income (loss)
    7,891       (7,674 )     44,121       (2,427 )
Noncontrolling interests
    (10 )     (208 )     (221 )     (349 )
 
                       
Net income (loss) attributable to A. Schulman, Inc.
    7,881       (7,882 )     43,900       (2,776 )
Preferred stock dividends
          (13 )           (53 )
 
                       
Net income (loss) attributable to A. Schulman, Inc. common stockholders
  $ 7,881     $ (7,895 )   $ 43,900     $ (2,829 )
 
                       
 
                               
Weighted-average number of shares outstanding:
                               
Basic
    31,329       25,812       27,746       25,790  
Diluted
    31,490       26,202       27,976       26,070  
 
                               
Earnings (losses) per share of common stock attributable to A. Schulman, Inc. — Basic:
                               
Income from continuing operations
  $ 0.26     $ 0.12     $ 1.59     $ 0.43  
Income (loss) from discontinued operations
    (0.01 )     (0.43 )     (0.01 )     (0.54 )
 
                       
Net income (loss) attributable to common stockholders
  $ 0.25     $ (0.31 )   $ 1.58     $ (0.11 )
 
                       
 
                               
Earnings (losses) per share of common stock attributable to A. Schulman, Inc. — Diluted:
                               
Income from continuing operations
  $ 0.26     $ 0.12     $ 1.58     $ 0.43  
Income (loss) from discontinued operations
    (0.01 )     (0.42 )     (0.01 )     (0.54 )
 
                       
Net income (loss) attributable to common stockholders
  $ 0.25     $ (0.30 )   $ 1.57     $ (0.11 )
 
                       

 

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A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
                 
    August 31, 2010     August 31, 2009  
    Unaudited  
    (In thousands except share data)  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 122,754     $ 228,674  
Accounts receivable, net
    282,953       206,450  
Inventories, average cost or market, whichever is lower
    209,228       133,536  
Prepaid expenses and other current assets
    29,128       20,779  
 
           
Total current assets
    644,063       589,439  
 
           
 
               
Other assets:
               
Deferred charges and other assets
    31,883       26,816  
Goodwill
    84,064       11,577  
Intangible assets
    72,352       217  
 
           
 
    188,299       38,610  
 
           
 
               
Property, plant and equipment, at cost:
               
Land and improvements
    30,891       16,236  
Buildings and leasehold improvements
    158,076       147,121  
Machinery and equipment
    357,270       345,653  
Furniture and fixtures
    37,078       39,581  
Construction in progress
    4,996       4,546  
 
           
 
    588,311       553,137  
Accumulated depreciation and investment grants of $744 in 2010 and $988 in 2009
    349,348       383,697  
 
           
Net property, plant and equipment
    238,963       169,440  
 
           
Total assets
  $ 1,071,325     $ 797,489  
 
           
 
               
LIABILITIES AND EQUITY
               
 
               
Current liabilities:
               
Short-term debt
  $ 60,876     $ 2,851  
Accounts payable
    195,977       147,476  
U.S. and foreign income taxes payable
    6,615       8,858  
Accrued payrolls, taxes and related benefits
    46,492       36,207  
Other accrued liabilities
    41,985       32,230  
 
           
Total current liabilities
    351,945       227,622  
 
           
 
               
Long-term debt
    93,834       102,254  
Pension plans
    86,872       69,888  
Other long-term liabilities
    25,297       22,800  
Deferred income taxes
    20,227       3,954  
Commitments and contingencies
           
Stockholders’ equity:
               
Preferred stock, 5% cumulative, $100 par value, authorized, issued and outstanding — no shares in 2010 and 15 shares in 2009
          2  
Common stock, $1 par value, authorized — 75,000,000 shares, issued — 47,690,024 shares in 2010 and 42,295,492 in August 31, 2009
    47,690       42,295  
Other capital
    249,734       115,358  
Accumulated other comprehensive income (loss)
    (6,278 )     38,714  
Retained earnings
    519,659       492,513  
Treasury stock, at cost, 16,205,230 shares in 2010 and 16,207,011 shares in 2009
    (322,777 )     (322,812 )
 
           
Total A. Schulman, Inc. stockholders’ equity
    488,028       366,070  
Noncontrolling interests
    5,122       4,901  
 
           
Total equity
    493,150       370,971  
 
           
Total liabilities and equity
  $ 1,071,325     $ 797,489  
 
           

 

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A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Year ended August 31,  
    2010     2009  
    Unaudited  
    (In thousands)  
Provided from (used in) operating activities:
               
Net income (loss)
  $ 44,121     $ (2,427 )
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
               
Depreciation and amortization
    27,449       24,958  
Deferred tax provision
    (25,742 )     (2,974 )
Pension, postretirement benefits and other deferred compensation
    10,739       4,728  
Net (gains) losses on asset sales
    96       740  
Curtailment (gains) losses
    270       (2,805 )
Asset impairment
    5,668       12,925  
Changes in assets and liabilities:
               
Accounts receivable
    (27,582 )     91,218  
Inventories
    (43,067 )     78,756  
Accounts payable
    21,621       (17,856 )
Restructuring accrual
    (4,620 )     2,001  
Income taxes
    (4,639 )     3,720  
Accrued payrolls and other accrued liabilities
    2,365       (1,582 )
Changes in other assets and other long-term liabilities
    (2,236 )     (9,905 )
 
           
Net cash provided from (used in) operating activities
    4,443       181,497  
 
           
Provided from (used in) investing activities:
               
Expenditures for property, plant and equipment
    (18,977 )     (24,787 )
Proceeds from the sale of assets
    6,570       950  
Business acquisitions, net of cash acquired
    (99,223 )      
 
           
Net cash used in investing activities
    (111,630 )     (23,837 )
 
           
Provided from (used in) financing activities:
               
Cash dividends paid
    (16,754 )     (15,812 )
Increase (decrease) in notes payable
    3,975       (7,343 )
Borrowings on revolving credit facilities
    86,000       19,000  
Repayments on revolving credit facilities
    (32,500 )     (19,000 )
Repayments on long-term debt
    (25,951 )      
Cash distributions to noncontrolling interest shareholders
          (981 )
Preferred stock redemption
    (2 )     (1,055 )
Common stock issued, net
    3,054       370  
Releases (purchases) of treasury stock
    35       (1,646 )
 
           
Net cash provided from (used in) financing activities
    17,857       (26,467 )
 
           
Effect of exchange rate changes on cash
    (16,590 )     (247 )
 
           
Net increase (decrease) in cash and cash equivalents
    (105,920 )     130,946  
 
           
Cash and cash equivalents at beginning of period
    228,674       97,728  
 
           
Cash and cash equivalents at end of period
  $ 122,754     $ 228,674  
 
           

 

9


 

A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
                                 
    Three Months ended August 31,     Year ended August 31,  
    2010     2009     2010     2009  
    Unaudited     Unaudited  
    (In thousands, except for %)     (In thousands, except for %)  
Net sales to unaffiliated customers
                               
EMEA
  $ 318,416     $ 236,065     $ 1,142,523     $ 935,895  
NAMB
    42,408       30,263       132,276       108,474  
NAEP
    32,104       25,917       127,061       121,701  
NARM
    29,908       14,122       77,550       67,920  
APAC
    32,997       14,272       84,909       45,258  
Bayshore
    20,391             26,124        
 
                       
Total net sales to unaffiliated customers
  $ 476,224     $ 320,639     $ 1,590,443     $ 1,279,248  
 
                       
 
                               
Segment gross profit
                               
EMEA
  $ 37,602     $ 41,545     $ 177,010     $ 141,137  
NAMB
    5,814       3,592       17,204       8,279  
NAEP
    4,357       2,796       15,272       8,849  
NARM
    5,487       1,890       11,267       6,670  
APAC
    4,207       2,482       11,656       6,372  
Bayshore
    3,427             4,470        
 
                       
Total segment gross profit before certain items
    60,894       52,305       236,879       171,307  
Asset write-downs
          (75 )     (69 )     (1,270 )
Inventory step-up
    (1,406 )           (3,942 )      
 
                       
Total gross profit
  $ 59,488     $ 52,230     $ 232,868     $ 170,037  
 
                       
 
                               
Segment operating income (loss) before certain items
                               
EMEA
  $ 12,638     $ 14,684     $ 69,393     $ 50,169  
NAMB
    3,770       1,926       11,232       2,809  
NAEP
    2,225       (713 )     5,202       (4,641 )
NARM
    2,639       1,116       5,260       3,082  
APAC
    538       1,389       2,981       2,807  
Bayshore
    1,476             1,990        
All other North America
    (3,124 )     (3,013 )     (11,648 )     (11,265 )
 
                       
Total segment operating income before certain items
    20,162       15,389       84,410       42,961  
 
                               
Corporate and other
    (4,543 )     (4,859 )     (20,538 )     (18,438 )
Interest expense, net
    (968 )     (810 )     (3,665 )     (2,437 )
Foreign currency transaction gains (losses)
    (485 )     (573 )     (874 )     5,645  
Other income (expense)
    271       (405 )     2,469       1,826  
Asset write-downs
    (37 )     (221 )     (5,737 )     (3,878 )
Costs related to acquisitions
    (1,498 )           (6,814 )      
Restructuring related
    (2,815 )     (3,502 )     (5,368 )     (7,219 )
Inventory step-up
    (1,406 )           (3,942 )      
 
                       
Income from continuing operations before taxes
  $ 8,681     $ 5,019     $ 39,941     $ 18,460  
 
                       
 
                               
Capacity utilization
                               
EMEA
    74 %     82 %     87 %     75 %
NAMB
    79 %     79 %     74 %     67 %
NAEP
    62 %     74 %     65 %     63 %
NARM
    47 %     n/a       46 %     n/a  
APAC
    87 %     81 %     85 %     61 %
Bayshore
    88 %     n/a       88 %     n/a  
Worldwide
    73 %     81 %     81 %     72 %

 

10


 

A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures

Unaudited
(In thousands except per share data)
                                                         
Three Months ended    As     Asset     Costs related to     Restructuring     Inventory     Tax Benefits     Before Certain  
August 31, 2010   Reported     Write-downs     Acquisitions     Related     Step-up     (Charges)     Items  
 
                                                       
Net sales
  $ 476,224     $     $     $     $     $     $ 476,224  
Cost of sales
    416,736                         (1,406 )           415,330  
Selling, general and administrative expenses
    46,773             (1,498 )                       45,275  
Interest expense, net
    968                                     968  
Foreign currency transaction (gains) losses
    485                                     485  
Other (income) expense
    (271 )                                   (271 )
Restructuring expense
    2,545                   (2,545 )                  
Asset impairment
    37       (37 )                              
Curtailment (gains) losses
    270                   (270 )                  
 
                                         
 
    467,543       (37 )     (1,498 )     (2,815 )     (1,406 )           461,787  
 
                                         
Income from continuing operations before taxes
    8,681       37       1,498       2,815       1,406             14,437  
Provision for (benefit from) U.S. and foreign income taxes
    565       11       6       778       415       967       2,742  
 
                                         
Income from continuing operations
    8,116       26       1,492       2,037       991       (967 )     11,695  
Income (loss) from discontinued operations, net of tax of $0
    (225 )     237                               12  
 
                                         
Net income
    7,891       263       1,492       2,037       991       (967 )     11,707  
Noncontrolling interests
    (10 )                                   (10 )
 
                                         
Net income attributable to A. Schulman, Inc.
    7,881       263       1,492       2,037       991       (967 )     11,697  
Preferred stock dividends
                                         
 
                                         
Net income attributable to A. Schulman, Inc. common stockholders
  $ 7,881     $ 263     $ 1,492     $ 2,037     $ 991     $ (967 )   $ 11,697  
 
                                         
 
                                                       
Diluted EPS impact
  $ 0.25                                             $ 0.37  
 
                                                   
 
                                                       
Weighted-average number of shares outstanding — diluted
    31,490                                               31,490  
                                                         
Three Months ended    As     Asset     Costs related to     Restructuring     Inventory     Tax Benefits     Before Certain  
August 31, 2009   Reported     Write-downs     Acquisitions     Related     Step-up     (Charges)     Items  
 
                                                       
Net sales
  $ 320,639     $     $     $     $     $     $ 320,639  
Cost of sales
    268,409       (75 )                             268,334  
Selling, general and administrative expenses
    43,038                   (1,263 )                 41,775  
Interest expense, net
    810                                     810  
Foreign currency transaction (gains) losses
    573                                     573  
Other (income) expense
    405                                     405  
Restructuring expense
    2,435                   (2,435 )                  
Asset impairment
    146       (146 )                              
Curtailment (gains) losses
    (196 )                 196                    
 
                                         
 
    315,620       (221 )           (3,502 )                 311,897  
 
                                         
Income from continuing operations before taxes
    5,019       221             3,502                   8,742  
Provision for U.S. and foreign income taxes
    1,607       70             708                   2,385  
 
                                         
Income from continuing operations
    3,412       151             2,794                   6,357  
Income (loss) from discontinued operations, net of tax of $0
    (11,086 )     10,317             20                   (749 )
 
                                         
Net income (loss)
    (7,674 )     10,468             2,814                   5,608  
Noncontrolling interests
    (208 )                                   (208 )
 
                                         
Net income (loss) attributable to A. Schulman, Inc.
    (7,882 )     10,468             2,814                   5,400  
Preferred stock dividends
    (13 )                                   (13 )
 
                                         
Net income (loss) attributable to A. Schulman, Inc. common stockholders
  $ (7,895 )   $ 10,468     $     $ 2,814     $     $     $ 5,387  
 
                                         
 
                                                       
Diluted EPS impact
  $ (0.30 )                                           $ 0.21  
 
                                                   
 
                                                       
Weighted-average number of shares outstanding — diluted
    26,202                                               26,202  

 

11


 

A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures

Unaudited
(In thousands except per share data)
                                                         
    As     Asset     Costs related to     Restructuring     Inventory     Tax Benefits     Before Certain  
Year ended August 31, 2010   Reported     Write-downs     Acquisitions     Related     Step-up     (Charges)     Items  
 
                                                       
Net sales
  $ 1,590,443     $     $     $     $     $     $ 1,590,443  
Cost of sales
    1,357,575       (69 )                 (3,942 )           1,353,564  
Selling, general and administrative expenses
    179,821             (6,814 )                       173,007  
Interest expense, net
    3,665                                     3,665  
Foreign currency transaction (gains) losses
    874                                     874  
Other (income) expense
    (2,425 )                 (44 )                 (2,469 )
Restructuring expense
    5,054                   (5,054 )                  
Asset impairment
    5,668       (5,668 )                              
Curtailment (gains) losses
    270                       (270 )                      
 
                                         
 
    1,550,502       (5,737 )     (6,814 )     (5,368 )     (3,942 )           1,528,641  
 
                                         
Income from continuing operations before taxes
    39,941       5,737       6,814       5,368       3,942             61,802  
Provision for (benefit from) U.S. and foreign income taxes
    (4,419 )     127       6       1,198       1,036       15,448       13,396  
 
                                         
Income from continuing operations
    44,360       5,610       6,808       4,170       2,906       (15,448 )     48,406  
Income (loss) from discontinued operations, net of tax of $0
    (239 )     237                               (2 )
 
                                         
Net income
    44,121       5,847       6,808       4,170       2,906       (15,448 )     48,404  
Noncontrolling interests
    (221 )                                   (221 )
 
                                         
Net income attributable to A. Schulman, Inc.
    43,900       5,847       6,808       4,170       2,906       (15,448 )     48,183  
Preferred stock dividends
                                         
 
                                         
Net income attributable to A. Schulman, Inc. common stockholders
  $ 43,900     $ 5,847     $ 6,808     $ 4,170     $ 2,906     $ (15,448 )   $ 48,183  
 
                                         
 
                                                       
Diluted EPS impact
  $ 1.57                                             $ 1.72  
 
                                                   
 
                                                       
Weighted-average number of shares outstanding -diluted
    27,976                                               27,976  
                                                         
    As     Asset     Costs related to     Restructuring     Inventory     Tax Benefits     Before Certain  
Year ended August 31, 2009   Reported     Write-downs     Acquisitions     Related     Step-up     (Charges)     Items  
 
                                                       
Net sales
  $ 1,279,248     $     $     $     $     $     $ 1,279,248  
Cost of sales
    1,109,211       (1,270 )                             1,107,941  
Selling, general and administrative expenses
    148,143                   (1,359 )                 146,784  
Interest expense, net
    2,437                                     2,437  
Foreign currency transaction (gains) losses
    (5,645 )                                   (5,645 )
Other (income) expense
    (1,826 )                                   (1,826 )
Restructuring expense
    8,665                   (8,665 )                  
Asset impairment
    2,608       (2,608 )                              
Curtailment (gains) losses
    (2,805 )                 2,805                    
 
                                         
 
    1,260,788       (3,878 )           (7,219 )                 1,249,691  
 
                                         
Income from continuing operations before taxes
    18,460       3,878             7,219                   29,557  
Provision for U.S. and foreign income taxes
    6,931       479             1,724                   9,134  
 
                                         
Income from continuing operations
    11,529       3,399             5,495                   20,423  
Income (loss) from discontinued operations, net of tax of $0
    (13,956 )     10,317             20                   (3,619 )
 
                                         
Net income (loss)
    (2,427 )     13,716             5,515                   16,804  
Noncontrolling interests
    (349 )                                   (349 )
 
                                         
Net income (loss) attributable to A. Schulman, Inc.
    (2,776 )     13,716             5,515                   16,455  
Preferred stock dividends
    (53 )                                   (53 )
 
                                         
Net income (loss) attributable to A. Schulman, Inc. common stockholders
  $ (2,829 )   $ 13,716     $     $ 5,515     $     $     $ 16,402  
 
                                         
 
                                                       
Diluted EPS impact
  $ (0.11 )                                           $ 0.64  
 
                                                   
 
                                                       
Weighted-average number of shares outstanding -diluted
    26,070                                               26,070  

 

12


 

A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
EBITDA Excluding Certain Items Reconciliation

Unaudited
(In thousands except per share data)
                                 
    Three Months     Three Months              
    ended     ended     Year ended     Year ended  
    August 31, 2010     August 31, 2009     August 31, 2010     August 31, 2009  
 
                               
Income from continuing operations before taxes
  $ 8,681     $ 5,019     $ 39,941     $ 18,460  
 
                               
Adjustments (pretax):
                               
Depreciation and amortization
    9,957       5,599       27,380       22,269  
Interest expense, net
    968       810       3,665       2,437  
Asset write-downs
    37       221       5,737       3,878  
Costs related to acquisitions
    1,498             6,814        
Restructuring related
    2,815       3,502       5,368       7,219  
Inventory step-up
    1,406             3,942        
 
                       
EBITDA excluding certain items
  $ 25,362     $ 15,151     $ 92,847     $ 54,263  
 
                       

 

13