þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 34-0514850 | |
(State or Other Jurisdiction | (I.R.S. Employer Identification No.) | |
of Incorporation or Organization) | ||
3550 West Market Street, Akron, Ohio | 44333 | |
(Address of Principal Executive Offices) | (ZIP Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Unaudited | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Net sales |
$ | 508,343 | $ | 331,023 | $ | 1,003,726 | $ | 693,883 | ||||||||
Cost of sales |
441,731 | 279,686 | 868,113 | 579,389 | ||||||||||||
Selling, general and administrative expenses |
49,430 | 48,764 | 102,335 | 89,515 | ||||||||||||
Interest expense |
1,642 | 1,136 | 2,927 | 2,190 | ||||||||||||
Interest income |
(191 | ) | (198 | ) | (391 | ) | (451 | ) | ||||||||
Foreign currency transaction (gains) losses |
667 | (180 | ) | 1,338 | (77 | ) | ||||||||||
Other (income) expense |
(433 | ) | (659 | ) | (437 | ) | (1,886 | ) | ||||||||
Asset impairment |
1,800 | 5,281 | 1,800 | 5,331 | ||||||||||||
Restructuring expense |
3,385 | 1,218 | 3,936 | 1,647 | ||||||||||||
498,031 | 335,048 | 979,621 | 675,658 | |||||||||||||
Income (loss) from continuing operations before taxes |
10,312 | (4,025 | ) | 24,105 | 18,225 | |||||||||||
Provision for U.S. and foreign income taxes |
3,033 | 2,794 | 7,450 | 7,906 | ||||||||||||
Income (loss) from continuing operations |
7,279 | (6,819 | ) | 16,655 | 10,319 | |||||||||||
Income (loss) from discontinued operations, net of tax of $0 |
| 12 | | 9 | ||||||||||||
Net income (loss) |
7,279 | (6,807 | ) | 16,655 | 10,328 | |||||||||||
Noncontrolling interests |
(138 | ) | 32 | (271 | ) | (70 | ) | |||||||||
Net income (loss) attributable to A. Schulman, Inc. |
$ | 7,141 | $ | (6,775 | ) | $ | 16,384 | $ | 10,258 | |||||||
Weighted-average number of shares outstanding: |
||||||||||||||||
Basic |
31,091 | 25,916 | 31,212 | 25,880 | ||||||||||||
Diluted |
31,181 | 25,916 | 31,245 | 26,346 | ||||||||||||
Earnings (losses) per share of
common stock attributable to A. Schulman, Inc. Basic: |
||||||||||||||||
Income (loss) from continuing operations |
$ | 0.23 | $ | (0.26 | ) | $ | 0.52 | $ | 0.40 | |||||||
Income (loss) from discontinued operations |
| | | | ||||||||||||
Net income (loss) attributable to common
stockholders |
$ | 0.23 | $ | (0.26 | ) | $ | 0.52 | $ | 0.40 | |||||||
Earnings (losses) per share of
common stock attributable to A. Schulman, Inc. Diluted: |
||||||||||||||||
Income (loss) from continuing operations |
$ | 0.23 | $ | (0.26 | ) | $ | 0.52 | $ | 0.39 | |||||||
Income (loss) from discontinued operations |
| | | | ||||||||||||
Net income (loss) attributable to common
stockholders |
$ | 0.23 | $ | (0.26 | ) | $ | 0.52 | $ | 0.39 | |||||||
- 2 -
February 28, 2011 | August 31, 2010 | |||||||
Unaudited | ||||||||
(In thousands, except share data) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 96,350 | $ | 122,754 | ||||
Accounts receivable, less allowance for doubtful accounts of $10,922 at
February 28, 2011 and $13,205 at August 31, 2010 |
342,405 | 282,953 | ||||||
Inventories, average cost or market, whichever is lower |
268,217 | 209,228 | ||||||
Prepaid expenses and other current assets |
32,860 | 29,128 | ||||||
Total current assets |
739,832 | 644,063 | ||||||
Other assets: |
||||||||
Deferred charges and other assets |
38,922 | 31,873 | ||||||
Goodwill |
93,400 | 84,064 | ||||||
Intangible assets |
78,459 | 72,352 | ||||||
210,781 | 188,289 | |||||||
Property, plant and equipment, at cost: |
||||||||
Land and improvements |
32,879 | 30,891 | ||||||
Buildings and leasehold improvements |
167,223 | 158,076 | ||||||
Machinery and equipment |
383,064 | 357,270 | ||||||
Furniture and fixtures |
40,389 | 37,078 | ||||||
Construction in progress |
7,286 | 4,996 | ||||||
630,841 | 588,311 | |||||||
Accumulated depreciation and investment grants of $869 at February 28, 2011
and $744 at August 31, 2010 |
386,502 | 349,348 | ||||||
Net property, plant and equipment |
244,339 | 238,963 | ||||||
Total assets |
$ | 1,194,952 | $ | 1,071,315 | ||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Short-term debt |
$ | 5,880 | $ | 60,876 | ||||
Accounts payable |
238,303 | 195,977 | ||||||
U.S. and foreign income taxes payable |
8,837 | 6,615 | ||||||
Accrued payrolls, taxes and related benefits |
38,952 | 46,492 | ||||||
Other accrued liabilities |
46,717 | 41,985 | ||||||
Total current liabilities |
338,689 | 351,945 | ||||||
Long-term debt |
192,928 | 93,834 | ||||||
Pension plans |
95,408 | 86,872 | ||||||
Other long-term liabilities |
27,620 | 25,297 | ||||||
Deferred income taxes |
23,495 | 20,227 | ||||||
Commitments and contingencies |
| | ||||||
Stockholders equity: |
||||||||
Common stock, $1 par value, authorized - 75,000,000 shares, issued -
47,786,892
shares at February 28, 2011 and 47,690,024 shares at August 31, 2010 |
47,787 | 47,690 | ||||||
Other capital |
251,292 | 249,734 | ||||||
Accumulated other comprehensive income |
23,017 | (6,278 | ) | |||||
Retained earnings |
526,300 | 519,649 | ||||||
Treasury stock, at cost, 16,825,652 shares at February 28, 2011 and
16,205,230 at
August 31, 2010 |
(336,277 | ) | (322,777 | ) | ||||
Total A. Schulman, Inc. stockholders equity |
512,119 | 488,018 | ||||||
Noncontrolling interests |
4,693 | 5,122 | ||||||
Total equity |
516,812 | 493,140 | ||||||
Total liabilities and equity |
$ | 1,194,952 | $ | 1,071,315 | ||||
- 3 -
Six months ended February 28, | ||||||||
2011 | 2010 | |||||||
Unaudited | ||||||||
(In thousands) | ||||||||
Provided from (used in) operating activities: |
||||||||
Net income |
$ | 16,655 | $ | 10,328 | ||||
Adjustments to reconcile net income to net cash
provided from (used in) operating activities: |
||||||||
Depreciation and amortization |
19,703 | 11,281 | ||||||
Deferred tax provision |
(1,923 | ) | (379 | ) | ||||
Pension, postretirement benefits and other deferred compensation |
3,597 | 3,305 | ||||||
Net losses (gains) on asset sales |
262 | (298 | ) | |||||
Asset impairment |
1,800 | 5,331 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
(34,077 | ) | (11,495 | ) | ||||
Inventories |
(39,331 | ) | (33,281 | ) | ||||
Accounts payable |
25,958 | 11,457 | ||||||
Income taxes |
3,130 | 3,681 | ||||||
Accrued payrolls and other accrued liabilities |
(7,963 | ) | 4,748 | |||||
Changes in other assets and other long-term liabilities |
(4,333 | ) | 3,427 | |||||
Net cash provided from (used in) operating activities |
(16,522 | ) | 8,105 | |||||
Provided from (used in) investing activities: |
||||||||
Expenditures for property, plant and equipment |
(11,060 | ) | (8,608 | ) | ||||
Proceeds from the sale of assets |
1,139 | 1,415 | ||||||
Business acquisitions, net of cash acquired |
(15,071 | ) | | |||||
Net cash used in investing activities |
(24,992 | ) | (7,193 | ) | ||||
Provided from (used in) financing activities: |
||||||||
Cash dividends paid |
(9,733 | ) | (7,954 | ) | ||||
Increase (decrease) in notes payable and long-term debt |
(3,204 | ) | (48 | ) | ||||
Borrowings on revolving credit facilities |
181,000 | 10,000 | ||||||
Repayments on revolving credit facilities |
(141,500 | ) | (5,000 | ) | ||||
Payment of debt issuance costs |
(2,220 | ) | | |||||
Cash distributions to noncontrolling interests |
(700 | ) | | |||||
Common stock issued (redeemed), net |
(780 | ) | 252 | |||||
Issuance (purchase) of treasury stock, net |
(13,500 | ) | | |||||
Net cash provided from (used in) financing activities |
9,363 | (2,750 | ) | |||||
Effect of exchange rate changes on cash |
5,747 | (11,233 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
(26,404 | ) | (13,071 | ) | ||||
Cash and cash equivalents at beginning of period |
122,754 | 228,674 | ||||||
Cash and cash equivalents at end of period |
$ | 96,350 | $ | 215,603 | ||||
- 4 -
(1) | GENERAL |
The unaudited interim consolidated financial statements included for A. Schulman, Inc. (the
Company) reflect all adjustments, which are, in the opinion of management, necessary for a
fair presentation of the results of the interim period presented. All such adjustments are
of a normal recurring nature. The year-end consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America (U.S. GAAP). The unaudited
consolidated financial information should be read in conjunction with the consolidated
financial statements and notes thereto incorporated in the Companys Annual Report on Form
10-K for the year ended August 31, 2010. |
The results of operations for the three and six months ended February 28, 2011 are not
necessarily indicative of the results expected for the year ending August 31, 2011. |
The accounting policies for the periods presented are the same as described in Note 1
Summary of Significant Accounting Policies to the consolidated financial statements
contained in the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2010, except for the adoption of new accounting pronouncements related to fair value
disclosures. The adoption of this accounting pronouncement is discussed in Note 18. |
Certain items previously reported in specific financial statement captions have been
reclassified to conform to the fiscal 2011 presentation. |
(2) | CASH AND CASH EQUIVALENTS |
All highly liquid investments purchased with an original maturity of three months or less
are considered to be cash equivalents. Such investments amounted to $9.8 million as of
February 28, 2011 and $18.4 million as of August 31, 2010. The Companys cash equivalents
and investments are diversified with numerous financial institutions which management
believes to have acceptable credit ratings. These investments are primarily money-market
funds and short-term time deposits. The money-market funds are primarily AAA rated by third
parties. Management continues to monitor the placement of its cash given the current credit
market. The recorded amount of these investments approximates fair value. Investments with
maturities between three and twelve months are considered to be short-term investments. As
of February 28, 2011 and August 31, 2010, the Company did not hold any short-term
investments. |
(3) | BUSINESS ACQUISITIONS |
McCann Color, Inc. |
On March 1, 2010, the Company completed the purchase of McCann Color, Inc. (McCann Color),
a producer of high-quality color concentrates, based in North Canton, Ohio, for $8.8 million
in cash. The business provides specially formulated color concentrates to match precise
customer specifications. Its products are used in end markets such as packaging, lawn and
garden, furniture, consumer products and appliances. The operations serve customers from its
48,000-square-foot, expandable North Canton facility, which was built in 1998 exclusively to
manufacture color concentrates. The facility complements the Companys existing North
American masterbatch manufacturing and product development facilities in Akron, Ohio, San
Luis Potosi, Mexico, and La Porte, Texas. The results of operations from the McCann Color
acquisition are included in the accompanying consolidated financial statements for the
period from the acquisition date, March 1, 2010, and are reported in the Americas segment. |
The acquisition was accounted for in accordance with the Financial Accounting Standards
Board (FASB) revised accounting standard for business combinations. The accounting
guidance for business combinations results in a new basis of accounting reflecting the
estimated fair values for assets acquired and liabilities assumed. The transaction was
financed with available cash. Tangible assets acquired and liabilities assumed were recorded
at their estimated fair values of $2.0 million and $0.5 million, respectively. The estimated
fair values of finite-lived intangible assets acquired of $4.0 million related to
intellectual property and customer relationships are being amortized over their estimated
useful lives of 15 years. Goodwill of $3.4 million
represents the excess of cost over the estimated fair value of net tangible and intangible
assets acquired. The information included herein has been prepared based on the allocation
of the purchase price using estimates of the fair value and useful lives of assets acquired
and liabilities assumed which were determined with the assistance of independent valuations,
quoted market prices and estimates made by management. |
- 5 -
ICO, Inc. |
On April 30, 2010, the Company acquired ICO, Inc. (ICO) through a merger by and among the
Company, ICO and Wildcat Spider, LLC, a wholly-owned subsidiary of the Company, and which is
now known as ICO-Schulman, LLC, pursuant to the terms of the December 2, 2009 Agreement and
Plan of Merger (Merger Agreement). The results of ICOs operations have been included in
the consolidated financial statements since the date of acquisition, April 30, 2010. |
The acquisition of ICO presented the Company with an opportunity to expand its presence
substantially, especially in the global specialty powders and U.S. masterbatch markets.
ICOs business is complementary to the Companys business across markets, product lines and
geographies. The acquisition of ICOs operations increased the Companys presence in the
U.S. masterbatch market, gained plants in the high-growth market of Brazil and expanded the
Companys presence in Asia with the addition of several ICO facilities in that region. In
Europe, the acquisition added rotomold compounding and size reduction to the Companys
capabilities. It also enables growth in countries where the Company had a limited presence,
such as France, Italy and Holland, as well as leverages its existing facilities serving
high-growth markets such as Poland, Hungary and Sweden. |
Under the terms of the Merger Agreement, each share of ICO common stock outstanding
immediately prior to the merger was converted into the right to receive a pro rata portion
of the total consideration of $105.0 million in cash and 5.1 million shares of the Companys
common stock. All unvested stock options and shares of restricted stock of ICO became fully
vested immediately prior to the merger. Unexercised stock options were exchanged for cash
equal to their in the money value, which reduced the cash pool available to ICOs
stockholders. The following table summarizes the calculation of the estimated fair value of
the total consideration transferred (in thousands, except share price): |
Estimated fair value of consideration transferred: |
||||
A. Schulman, Inc. common shares issued |
5,100 | |||
Closing price per share of A. Schulman, Inc.
common stock, as of April
30, 2010 |
$ | 26.01 | ||
Consideration attributable to common stock |
$ | 132,651 | ||
Cash paid, including cash paid to settle ICO, Inc.s
outstanding equity awards |
$ | 105,000 | ||
Total consideration transferred |
$ | 237,651 | ||
The merger was accounted for in accordance with the FASB revised accounting standard
for business combinations. The accounting guidance for business combinations results in a
new basis of accounting reflecting the estimated fair values for assets acquired and
liabilities assumed. The information included herein has been prepared based on the
preliminary allocation of the purchase price using estimates of the fair value and useful
lives of assets acquired and liabilities assumed which were determined with the assistance
of independent valuations, quoted market prices and estimates made by management. The
purchase price allocations are subject to further adjustment until all pertinent information
regarding the property, plant and equipment, intangible assets, goodwill and deferred income
tax assets and liabilities acquired are fully evaluated by the Company and independent
valuations are complete. |
- 6 -
The following table presents the preliminary estimated fair value of the assets acquired and
liabilities assumed at the date of acquisition (in thousands): |
Assets acquired and liabilities assumed: |
||||
Cash and cash equivalents |
$ | 14,577 | ||
Accounts receivable |
66,935 | |||
Inventories |
46,363 | |||
Prepaid expenses and other current assets |
10,716 | |||
Property, plant and equipment |
96,941 | |||
Intangible assets |
71,126 | |||
Other long-term assets |
4,712 | |||
Total assets acquired |
$ | 311,370 | ||
Current maturites of long-term debt and notes
payable |
$ | 12,776 | ||
Accounts payable |
39,423 | |||
Other accrued liabilities |
28,656 | |||
Long-term debt |
14,494 | |||
Deferred income taxes |
42,827 | |||
Pension plans |
3,285 | |||
Other long-term liabilities |
2,510 | |||
Total liabilities assumed |
$ | 143,971 | ||
Net identifiable assets acquired |
$ | 167,399 | ||
Goodwill |
70,252 | |||
Net assets acquired |
$ | 237,651 | ||
The Company preliminarily recorded acquired intangible assets of $71.1 million. These
intangible assets include customer related intangibles of $48.5 million with estimated
useful lives of 19 years, developed technology of $10.1 million with estimated useful lives
of 11 years, and trademarks and trade names of $12.5 million with estimated useful lives
ranging between 5 and 20 years. |
Goodwill represents the excess of the purchase price over the estimated fair values of the
assets acquired and the liabilities assumed in the acquisition. Goodwill largely consists of
expected synergies resulting from the acquisition. The Company anticipates that the
transaction will produce run-rate synergies by the end of fiscal 2011, resulting from the
consolidation and centralization of global purchasing activities, tax benefits, and
elimination of duplicate corporate administrative costs. Goodwill as of April 30, 2010 was
provisionally allocated by segment as follows (in thousands): |
Europe, Middle East and Africa |
$ | 17,491 | ||
Americas |
52,761 | |||
Total goodwill |
$ | 70,252 | ||
None of the goodwill associated with this transaction will be deductible for income tax
purposes. |
The estimated fair value of accounts receivables acquired was $66.9 million with the gross
contractual amount being $70.3 million. |
||
Mash Indústria e Comércio de Compostos Plásticos LTDA |
On November 3, 2010, the Company completed the purchase of all the capital stock of Mash
Indústria e Comércio de Compostos Plásticos LTDA (Mash), a masterbatch additive
producer and engineered plastics compounder based in Sao Paulo, Brazil, for $15.2 million.
Mashs products are used in end markets such as
film and packaging, automotive and appliances. The acquisition expanded the Companys
presence in the growing Brazilian market, which is a large, diversified market with strong
macroeconomic fundamentals. The Company believes the Brazilian plastics industry holds
significant growth potential because per-capita consumption of plastic is still much lower
than in other countries. With this acquisition and the acquisition of ICO, which included
two facilities in Brazil, the Company is aggressively expanding its presence in that market
and enhancing its ability to serve customers. The results of operations from the Mash
acquisition are included in the accompanying consolidated financial statements for the
period from the closing date, November 3, 2010, and are reported in the Americas segment. |
- 7 -
The acquisition was accounted for in accordance with the FASB revised accounting standard
for business combinations. The accounting guidance for business combinations results in a
new basis of accounting reflecting the estimated fair values for assets acquired and
liabilities assumed. The transaction was financed with available cash. Tangible assets
acquired and liabilities assumed were preliminarily recorded at their estimated fair values
of $8.4 million and $6.5 million, respectively. The estimated fair values of finite-lived
intangible assets acquired of $7.2 million related to a trade name and customer
relationships are being amortized over their estimated useful lives of 3 and 15 years,
respectively. Goodwill of $6.1 million represents the excess of cost over the estimated fair
value of net tangible and intangible assets acquired. Goodwill largely consists of expected
synergies resulting from the acquisition. None of the goodwill associated with this
transaction will be deductible for income tax purposes. The information included herein has
been prepared based on the allocation of the purchase price using estimates of the fair
value and useful lives of assets acquired and liabilities assumed which were determined with
the assistance of independent valuations, quoted market prices and estimates made by
management. The purchase price allocations are subject to further adjustment until all
pertinent information regarding the property, plant and equipment, intangible assets, other
long-term assets, goodwill, contingent consideration liabilities, long-term debt, other
long-term liabilities and deferred income tax assets and liabilities acquired are fully
evaluated by the Company and independent valuations are complete. |
(4) | GOODWILL AND OTHER INTANGIBLE ASSETS |
The Company is required to review goodwill and indefinite-lived intangible assets at least
annually for impairment. Goodwill impairment is tested at the reporting unit level on an
annual basis in the fourth quarter and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting
unit below its carrying value. The Company is not aware of any triggers which would require
a goodwill impairment test as of February 28, 2011. The carrying amount of goodwill by
segment for the Company was as follows: |
Europe, Middle | ||||||||||||
East and Africa | Americas | Total | ||||||||||
(In thousands) | ||||||||||||
Balance as of August 31, 2010 |
$ | 28,130 | $ | 55,934 | $ | 84,064 | ||||||
Acquisition |
| 6,174 | 6,174 | |||||||||
Adjustments to fair value of
net assets acquired |
319 | 234 | 553 | |||||||||
Translation effect |
2,201 | 408 | 2,609 | |||||||||
Balance as of February 28, 2011 |
$ | 30,650 | $ | 62,750 | $ | 93,400 | ||||||
- 8 -
The following table summarizes intangible assets with determinable useful lives by
major category: |
February 28, 2011 | August 31, 2010 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Customer related
intangibles |
$ | 58,625 | $ | (4,491 | ) | $ | 54,134 | $ | 50,035 | $ | (1,742 | ) | $ | 48,293 | ||||||||||
Developed technology |
14,659 | (2,892 | ) | 11,767 | 14,018 | (1,925 | ) | 12,093 | ||||||||||||||||
Registered trademarks |
13,404 | (846 | ) | 12,558 | 12,271 | (305 | ) | 11,966 | ||||||||||||||||
Total finite-lived
intangible
assets |
$ | 86,688 | $ | (8,229 | ) | $ | 78,459 | $ | 76,324 | $ | (3,972 | ) | $ | 72,352 | ||||||||||
(5) | DISCONTINUED OPERATIONS |
During fiscal 2010, the Company completed the closure of the Invision sheet manufacturing
operation at its Sharon Center, Ohio manufacturing facility. The operating results of
Invision were previously included in the Companys former Invision segment and are now
reflected as discontinued operations for the periods presented. The remaining assets of
Invision, primarily machinery and equipment, are considered held for sale as of February 28,
2011. These assets are included in the Companys consolidated balance sheet in property,
plant and equipment. The Company expects minimal charges related to the disposal of the
equipment in fiscal 2011. |
The following summarizes the results for discontinued operations for the three and six
months ended February 28, 2011 and 2010. The income (loss) from discontinued operations does
not include any income tax effect as the Company was not in a taxable position due to its
continued U.S. losses and a full valuation allowance. |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales |
$ | | $ | | $ | | $ | 9 | ||||||||
Income (loss) from operations |
$ | | $ | 12 | $ | | $ | 8 | ||||||||
Other income (expense) |
| | | 1 | ||||||||||||
Income (loss) from
discontinued operations |
$ | | $ | 12 | $ | | $ | 9 | ||||||||
- 9 -
(6) | PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS |
The components of the Companys net periodic benefit cost (income) for defined benefit
pension plans and other postretirement benefits are shown below. |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Net periodic pension cost (income)
recognized included the following
components: |
||||||||||||||||
Service cost |
$ | 860 | $ | 531 | $ | 1,705 | $ | 1,081 | ||||||||
Interest cost |
1,182 | 1,118 | 2,343 | 2,276 | ||||||||||||
Expected return on plan assets |
(302 | ) | (235 | ) | (599 | ) | (475 | ) | ||||||||
Net actuarial loss and net amortization of
prior service cost and transition
obligation |
420 | 93 | 832 | 188 | ||||||||||||
Net periodic benefit cost |
$ | 2,160 | $ | 1,507 | $ | 4,281 | $ | 3,070 | ||||||||
Postretirement benefit cost (income)
included the following components: |
||||||||||||||||
Service cost |
$ | 7 | $ | 7 | $ | 15 | $ | 15 | ||||||||
Interest cost |
187 | 191 | 373 | 382 | ||||||||||||
Net amortization of prior service cost
(credit) and unrecognized loss |
(86 | ) | (139 | ) | (172 | ) | (278 | ) | ||||||||
Net periodic benefit cost |
$ | 108 | $ | 59 | $ | 216 | $ | 119 | ||||||||
(7) | CONTINGENCIES |
The Company is engaged in various legal proceedings arising in the ordinary course of
business. The ultimate outcome of these proceedings is not expected to have a material
adverse effect on the Companys financial condition, results of operations or cash flows. |
- 10 -
(8) | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY |
A summary of the changes in stockholders equity for the six months ended February 28, 2011
is as follows: |
Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Common | Other | Comprehensive | Retained | Treasury | Noncontrolling | Total | ||||||||||||||||||||||
Stock | Capital | Income (Loss) | Earnings | Stock | Interests | Equity | ||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Balance at September 1, 2010 |
$ | 47,690 | $ | 249,734 | $ | (6,278 | ) | $ | 519,649 | $ | (322,777 | ) | $ | 5,122 | $ | 493,140 | ||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||
Net income (loss) |
16,384 | 271 | ||||||||||||||||||||||||||
Foreign currency translation gain (loss) |
28,402 | |||||||||||||||||||||||||||
Amortization of unrecognized transition
obligations, actuarial losses and prior
service costs (credits), net |
893 | |||||||||||||||||||||||||||
Total comprehensive income (loss) |
45,950 | |||||||||||||||||||||||||||
Cash dividends paid or accrued: |
||||||||||||||||||||||||||||
Common stock, $0.31 per share |
(9,733 | ) | (9,733 | ) | ||||||||||||||||||||||||
Cash distributions to noncontrolling
interests |
(700 | ) | (700 | ) | ||||||||||||||||||||||||
Purchase of treasury stock |
(13,591 | ) | (13,591 | ) | ||||||||||||||||||||||||
Issuance of treasury stock |
6 | 91 | 97 | |||||||||||||||||||||||||
Stock options exercised |
12 | 202 | 214 | |||||||||||||||||||||||||
Restricted stock issued, net of forfeitures |
130 | (130 | ) | | ||||||||||||||||||||||||
Redemption of common stock to cover tax withholdings |
(45 | ) | (955 | ) | (1,000 | ) | ||||||||||||||||||||||
Amortization of restricted stock |
2,435 | 2,435 | ||||||||||||||||||||||||||
Balance at February 28, 2011 |
$ | 47,787 | $ | 251,292 | $ | 23,017 | $ | 526,300 | $ | (336,277 | ) | $ | 4,693 | $ | 516,812 | |||||||||||||
(9) | COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME |
Comprehensive income (loss) for the three and six months ended February 28, 2011 and 2010
was as follows: |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||
Net income (loss) |
$ | 7,279 | $ | (6,807 | ) | $ | 16,655 | $ | 10,328 | |||||||
Foreign currency translation gain (loss) |
21,145 | (26,323 | ) | 28,402 | (13,448 | ) | ||||||||||
Amortization of unrecognized transition
obligations, actuarial losses and prior
services costs (credits), net |
187 | (45 | ) | 893 | (89 | ) | ||||||||||
Total comprehensive income (loss) |
28,611 | (33,175 | ) | 45,950 | (3,209 | ) | ||||||||||
Comprehensive (income) loss attributable
to noncontrolling interests |
(138 | ) | 32 | (271 | ) | (70 | ) | |||||||||
Comprehensive income (loss) attributable
to A. Schulman, Inc. |
$ | 28,473 | $ | (33,143 | ) | $ | 45,679 | $ | (3,279 | ) | ||||||
- 11 -
The assets and liabilities of the Companys foreign subsidiaries are translated into
U.S. dollars using current exchange rates. Income statement items are translated at average
exchange rates prevailing during the period. The resulting translation gains or losses are
recorded as other comprehensive income (loss) and accumulated in the Companys stockholders
equity. The foreign currency translation gains in comprehensive income (loss) totaled $21.1
million and $28.4 million for the three and six months ended February 28, 2011,
respectively, and were due primarily to the significant increase in the value of the euro as
well as increases in other currencies against the U.S. dollar. Foreign currency translation
gains or losses do not have a tax effect, as such gains or losses are considered permanently
reinvested. Other comprehensive income adjustments related to pensions and other
postretirement benefit plans are recorded net of tax using the applicable effective tax
rate. |
(10) | FAIR VALUE MEASUREMENT |
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measure
date. The FASB provides accounting rules that establish a fair value hierarchy to prioritize
the inputs used in valuation techniques into three levels as follows: |
| Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical
assets or liabilities in active markets; |
| Level 2: Inputs other than quoted prices included in Level 1 that are observable
for the asset or liability either directly or indirectly; and |
| Level 3: Unobservable inputs which reflect an entitys own assumptions. |
The following table presents information about the Companys assets and liabilities recorded
at fair value as of February 28, 2011 in the Companys consolidated balance sheet: |
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
Total Measured | for Identical | Observable Inputs | Unobservable | |||||||||||||
at Fair Value | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
(In thousands) | ||||||||||||||||
Assets: |
||||||||||||||||
Cash |
$ | 86,565 | $ | 86,565 | $ | | $ | | ||||||||
Cash equivalents |
9,785 | 9,785 | | | ||||||||||||
Derivative assets, net |
3 | | 3 | | ||||||||||||
Total assets at fair value |
$ | 96,353 | $ | 96,350 | $ | 3 | $ | | ||||||||
Liabilities: |
||||||||||||||||
None |
$ | | $ | | $ | | $ | | ||||||||
Total liabilities at fair
value |
$ | | $ | | $ | | $ | | ||||||||
The fair value of cash and cash equivalents, by their nature, is determined utilizing
Level 1 inputs. The Company measures the fair value of forward foreign exchange contracts
using Level 2 inputs through observable market transactions in active markets provided by
banks. |
The Company enters into forward foreign exchange contracts to reduce its exposure for
amounts due or payable in foreign currencies. These contracts limit the Companys exposure
to fluctuations in foreign currency exchange rates. The total contract value of forward
foreign exchange contracts outstanding as of February 28, 2011 was $17.7 million. Any gains
or losses associated with these contracts as well as the offsetting gains or losses from the
underlying assets or liabilities are included in the foreign currency transaction line in
the Companys consolidated statements of operations. The Company does not hold or issue
forward foreign exchange contracts for trading purposes. There were no foreign currency
contracts designated as hedging instruments as of February 28, 2011. The forward foreign
exchange contracts are entered into with creditworthy multinational banks. The fair value of
the Companys forward foreign exchange contracts was
less than $0.1 million as of February 28, 2011 and August 31, 2010 and was recognized in
other accrued liabilities. |
- 12 -
The following information presents the supplemental fair value information about long-term
fixed-rate debt as of February 28, 2011. The Companys long-term fixed-rate debt was
primarily issued in euros. |
February 28, 2011 | August 31, 2010 | |||||||
(In millions) | ||||||||
Carrying value of long-term fixed-rate
debt |
$ | 69.6 | $ | 63.8 | ||||
Fair value of long-term fixed-rate debt |
$ | 70.7 | $ | 67.2 |
The fair value was calculated using discounted future cash flows. The increase in fair
value is primarily related to an increase in foreign currency translation offset by an
increase in quoted market interest rates. The carrying value of the Companys variable-rate
debt approximates fair value. |
(11) | INCENTIVE STOCK PLANS |
Effective in December 2002, the Company adopted the 2002 Equity Incentive Plan, which
provided for the grant of incentive stock options, nonqualified stock options, restricted
stock awards and director deferred units for employees and non-employee directors. The
option price of incentive stock options is the fair market value of the shares of common
stock on the date of the grant. In the case of nonqualified options, the Company grants
options at 100% of the fair market value of the shares of common stock on the date of the
grant. All options become exercisable at the rate of 33% per year, commencing on the first
anniversary date of the grant. Each option expires ten years from the date of the grant.
Restricted stock awards under the 2002 Equity Incentive Plan vest ratably over four years
following the date of grant. |
On December 7, 2006, the Company adopted the 2006 Incentive Plan, which provides for the
grant of incentive stock options, nonqualified stock options, whole shares, restricted stock
awards, restricted stock units, stock appreciation rights, performance shares, performance
units, cash-based awards, dividend equivalents and performance-based awards. Upon adoption
of the 2006 Incentive Plan, all remaining shares eligible for award under the 2002 Equity
Incentive Plan were added to the 2006 Incentive Plan and no further awards could be made
from the 2002 Equity Incentive Plan. It has been the Companys practice to issue new shares
of common stock upon stock option exercise and other equity grants. On February 28, 2011,
there were approximately 0.4 million shares available for grant pursuant to the Companys
2006 Incentive Plan. |
On December 9, 2010, the Companys stockholders approved the adoption of the A. Schulman,
Inc. 2010 Value Creations Rewards Plan (2010 Rewards Plan). The 2010 Rewards Plan became
effective upon approval from the Companys stockholders and a total of 1,375,000 shares of
common stock may be issued under the 2010 Rewards Plan. There have been no grants made from
the 2010 Rewards Plan. |
A summary of stock options is as follows: |
Outstanding Shares | Weighted-Average | |||||||
Under Option | Exercise Price | |||||||
Outstanding at August 31, 2010 |
265,262 | $ | 19.77 | |||||
Granted |
| $ | | |||||
Exercised |
(12,334 | ) | $ | 17.38 | ||||
Forfeited and expired |
(9,000 | ) | $ | 16.09 | ||||
Outstanding at February 28,
2011 |
243,928 | $ | 20.03 | |||||
Exercisable at February 28,
2011 |
243,928 | $ | 20.03 | |||||
The intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option. The intrinsic value for stock
options exercisable as of February 28, 2011 was $0.7 million with a remaining term for
options exercisable of approximately 2.5 years. For stock options
outstanding as of February 28, 2011, exercise prices range from $13.99 to $24.69. The
weighted-average remaining contractual life for options outstanding as of February 28, 2011
was approximately 2.5 years. All 243,928 outstanding and exercisable stock options are fully
vested as of February 28, 2011. There were no grants of stock options during the six months
ended February 28, 2011 and 2010. |
- 13 -
Restricted stock awards under the 2006 Incentive Plan can vest over various periods. The
restricted stock awards outstanding under the 2006 Incentive Plan have service vesting
periods of three years following the date of grant. The following table summarizes the
outstanding time-based restricted stock awards and time-based stock-settled restricted stock
units (combined referred to as restricted shares) and weighted-average fair market value: |
Weighted-Average | ||||||||
Outstanding | Fair Market Value | |||||||
Restricted Shares | (per share) | |||||||
Outstanding at August 31, 2010 |
153,849 | $ | 20.12 | |||||
Granted |
60,847 | $ | 21.28 | |||||
Vested |
(70,672 | ) | $ | 19.86 | ||||
Forfeited |
(11,743 | ) | $ | 18.83 | ||||
Outstanding at February 28,
2011 |
132,281 | $ | 20.90 | |||||
During the six months ended February 28, 2011 and 2010, the Company granted 60,847 and
83,176 time-based restricted shares, respectively. Restrictions on these restricted shares
lapse ratably over a three-year period and were valued at the fair market value on the date
of grant. Restricted shares earn dividends throughout the vesting period which are subject
to the same vesting terms as the underlying restricted stock award. |
The Company also grants awards with market and performance vesting conditions. In the table
below, the Company summarizes all awards which include market-based and performance-based
restricted stock awards and performance shares. |
Weighted-Average | ||||||||
Outstanding | Fair Market Value | |||||||
Performance-Based Awards | (per share) | |||||||
Outstanding at August 31, 2010 |
705,154 | $ | 13.91 | |||||
Granted |
364,998 | $ | 14.84 | |||||
Vested |
(61,232 | ) | $ | 13.25 | ||||
Forfeited |
(134,152 | ) | $ | 13.28 | ||||
Outstanding at February 28,
2011 |
874,768 | $ | 14.44 | |||||
The Company granted 364,998 and 272,568 performance shares during six months ended
February 28, 2011 and 2010, respectively. Performance shares are awards for which the
vesting will occur based on market or performance conditions and do not have voting rights.
Included in the outstanding performance-based awards as of February 28, 2011 are 477,566
performance shares which earn dividends throughout the vesting period and 397,202
performance shares which do not earn dividends. Earned dividends are subject to the same
vesting terms as the underlying performance share award. Performance shares granted during
fiscal 2008 which would have vested during the six months ended February 28, 2011 that did
not meet the performance vesting conditions were forfeited. |
The performance-based awards in the table above include 618,820 shares which are valued
based upon a Monte Carlo simulation, which is a valuation model that represents the
characteristics of these grants. Vesting of the ultimate number of shares underlying
performance-based awards, if any, will be dependent upon the Companys total stockholder
return in relation to the total stockholder return of a select group of peer companies over
a three-year period. The probability of meeting the market criteria was considered when
calculating the estimated fair market value on the date of grant using a Monte Carlo
simulation. These awards were accounted for as awards with market conditions, which are
recognized over the service period, regardless of whether the market conditions are achieved
and the awards ultimately vest. The fair value of the remaining
255,948 performance shares in the table above is based on the closing price of the Companys
common stock on the date of the grant. |
- 14 -
The fair value of the performance shares granted during the six months ended February 28,
2011 using a Monte Carlo simulation used the following weighted-average assumptions: |
Weighted-average Assumption | ||||
Dividend yield |
2.91 | % | ||
Expected volatility |
47.00 | % | ||
Risk-free interest rate |
1.05 | % | ||
Correlation |
60.00 | % |
Total unrecognized compensation cost, including a provision for forfeitures, related to
nonvested share-based compensation arrangements as of February 28, 2011 was approximately
$10.9 million. This cost is expected to be recognized over a weighted-average period of
approximately 1.9 years. |
As of February 28, 2011, the Company had 20,000 stock-settled restricted stock units
outstanding which were fully vested as of the grant date. There are no service requirements
for vesting for this grant. These restricted stock units will be settled in shares of the
Companys common stock, on a one-to-one basis, no later than 60 days after the third
anniversary of the award grant date. These awards do earn dividends during the restriction
period; however, they do not have voting rights until released from restriction. These
awards are treated as equity awards and have a grant date fair value based on the award
grant date of $13.61 per award. There were no grants of fully vested stock-settled
restricted stock units during the six months ended February 28, 2011 or 2010. |
The Company had approximately 113,000 and 184,000 cash-settled restricted stock units
outstanding with various vesting periods and criteria as of February 28, 2011 and 2010,
respectively. There were no cash-settled restricted stock units granted during the three
months ended February 28, 2011 and 2010. The cash-settled restricted stock units outstanding
have either time-based vesting or performance-based vesting, similar to the Companys
restricted stock awards and performance shares. Each cash-settled restricted stock unit is
equivalent to one share of the Companys common stock on the vesting date. Certain
cash-settled restricted stock units earn dividends during the vesting period. Cash-settled
restricted stock units are settled only in cash at the vesting date and therefore are
treated as a liability award. The Company records a liability for these restricted stock
units in an amount equal to the total of (a) the mark-to-market adjustment of the units
vested to date; and (b) accrued dividends on the units. In addition, the liability is
adjusted for the estimated payout factor for the performance-based cash-settled restricted
stock units. As a result of these mark-to-market adjustments, these restricted stock units
introduce volatility into the Companys consolidated statements of operations. |
The Company had approximately $3.6 million cash-based awards, which are treated as liability
awards, outstanding as of February 28, 2011. These awards were granted to foreign employees.
Such awards include approximately $0.4 million which have service vesting periods of three
years following the date of grant and the remaining $3.2 million are performance-based. The
performance-based awards are based on the same conditions utilized for the performance shares. The Company records a liability for these cash-based awards equal to the amount of
the award vested to date and adjusts the performance-based awards based on expected payout. |
In fiscal 2010, the Companys board of directors and stockholders approved the adoption of
an Employee Stock Purchase Plan (ESPP) whereby employees may purchase Company stock
through a payroll deduction plan. Purchases are made from the ESPP and credited to each
participants account at the end of each calendar quarter, the Investment Date. The
purchase price of the stock is 85% of the fair market value on the Investment Date. The ESPP
is compensatory and the 15% discount is expensed ratably over the three month offering
period. All employees, including officers, are eligible to participate in the ESPP. An
employee whose stock ownership of the Company exceeds five percent of the outstanding common
stock is not eligible to participate in the ESPP. The Company recorded minimal expense
related to the ESPP during the first six
months of fiscal 2011. It is the Companys current practice to use treasury shares for the
share settlement on the Investment Date. |
- 15 -
In January 2011, the Company granted non-employee directors 35,000 shares of unrestricted
common stock. The Company recorded compensation expense for this grant of approximately
$0.8 million for the three and six months ended February 28, 2011. |
The following table summarizes the impact to the Companys consolidated statements of
operations from stock-based compensation, which is primarily included in selling, general
and administrative expenses in the accompanying consolidated statements of operations: |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Restricted stock awards,
unrestricted stock
awards and performance-based awards |
$ | 1,532 | $ | 1,677 | $ | 2,435 | $ | 2,335 | ||||||||
Cash-settled restricted stock units |
290 | 1,390 | 665 | 810 | ||||||||||||
Cash-based awards |
60 | 486 | 148 | 288 | ||||||||||||
Total stock-based compensation |
$ | 1,882 | $ | 3,553 | $ | 3,248 | $ | 3,433 | ||||||||
(12) | EARNINGS PER SHARE |
Basic earnings per share is computed by dividing income available to common stockholders by
the weighted-average number of shares of common stock outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if common stock
equivalents were exercised, and the impact of restricted stock and performance-based awards
expected to vest, which would then share in the earnings of the Company. |
The difference between basic and diluted weighted-average shares of common stock results
from the assumed exercise of outstanding stock options and grants of restricted stock,
calculated using the treasury stock method. The following presents the number of incremental
weighted-average shares used in computing diluted per share amounts: |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted-average shares outstanding: |
||||||||||||||||
Basic |
31,091 | 25,916 | 31,212 | 25,880 | ||||||||||||
Incremental shares from stock options |
32 | | 27 | 32 | ||||||||||||
Incremental shares from restricted
stock |
58 | | 6 | 434 | ||||||||||||
Diluted |
31,181 | 25,916 | 31,245 | 26,346 | ||||||||||||
For the three months ended February 28, 2011 and 2010, respectively, there were
approximately 0.1 million and 0.7 million equivalent shares related to stock options and
restricted stock that were excluded from diluted weighted-average shares outstanding because
inclusion would have been anti-dilutive. Additionally, there were approximately 0.1 million
equivalent shares related to stock options and restricted stock that were excluded from
diluted weighted-average shares outstanding for the six months ended February 28, 2011 and
2010 because inclusion would have been anti-dilutive. |
(13) | SEGMENT INFORMATION |
The Company considers its operating structure and the types of information subject to
regular review by its President and Chief Executive Officer (CEO), who is the Chief
Operating Decision Maker (CODM), to identify reportable segments. |
- 16 -
The Companys reportable segments prior to fiscal 2011 were Europe, Middle East and Africa
(EMEA), North America Masterbatch (NAMB), North America Engineered Plastics (NAEP),
North America Rotomolding (NARM), Bayshore and Asia Pacific (APAC). As a result of
certain management changes and reporting structures within the Company effective in fiscal
2011, the CODM makes decisions, assesses performance and allocates resources by the
following regions: EMEA, the Americas (which includes North America and South America), and
APAC. As a result of the changes, the reportable segments are now based on the regions in
which the Company operates: EMEA, the Americas, and APAC. The Americas segment comprises the
former NAMB, NAEP, NARM and Bayshore segments. Each reportable segment has a Chief
Operating Officer who reports to the CEO. |
The CODM uses net sales to unaffiliated customers, gross profit and operating income in
order to make decisions, assess performance and allocate resources to each segment.
Operating income does not include interest income or expense, other income or expense,
restructuring related expenses, asset write-downs or foreign currency transaction gains or
losses. In some cases, the Company may choose to exclude from a segments results certain
non-recurring items as determined by management. These items are included in the Corporate
and Other section in the table below. Corporate expenses include the compensation of certain
personnel, certain audit expenses, board of directors related costs, certain insurance costs
and other miscellaneous legal and professional fees. |
Below is a presentation of net sales to unaffiliated customers, gross profit and operating
income by segment. Also included is a reconciliation of operating income by segment to
consolidated income from continuing operations before taxes. |
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales to unaffiliated customers |
||||||||||||||||
EMEA |
$ | 356,533 | $ | 247,374 | $ | 703,215 | $ | 519,317 | ||||||||
Americas |
118,550 | 69,228 | 233,671 | 145,557 | ||||||||||||
APAC |
33,260 | 14,421 | 66,840 | 29,009 | ||||||||||||
Total net sales to unaffiliated
customers |
$ | 508,343 | $ | 331,023 | $ | 1,003,726 | $ | 693,883 | ||||||||
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Segment gross profit |
||||||||||||||||
EMEA |
$ | 47,487 | $ | 41,525 | $ | 95,572 | $ | 92,126 | ||||||||
Americas |
15,911 | 7,694 | 32,386 | 17,656 | ||||||||||||
APAC |
3,376 | 2,118 | 7,938 | 4,781 | ||||||||||||
Total segment
gross profit |
66,774 | 51,337 | 135,896 | 114,563 | ||||||||||||
Asset write-downs |
| | | (69 | ) | |||||||||||
Inventory step-up |
(162 | ) | | (283 | ) | | ||||||||||
Total gross profit |
$ | 66,612 | $ | 51,337 | $ | 135,613 | $ | 114,494 | ||||||||
- 17 -
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Segment operating income |
||||||||||||||||
EMEA |
$ | 21,722 | $ | 9,235 | $ | 41,124 | $ | 34,459 | ||||||||
Americas |
3,340 | 216 | 7,199 | 3,088 | ||||||||||||
APAC |
384 | 564 | 2,192 | 1,678 | ||||||||||||
Total segment operating income |
25,446 | 10,015 | 50,515 | 39,225 | ||||||||||||
Corporate and other |
(7,788 | ) | (6,021 | ) | (15,759 | ) | (10,490 | ) | ||||||||
Interest expense, net |
(1,451 | ) | (938 | ) | (2,536 | ) | (1,739 | ) | ||||||||
Foreign currency transaction
gains (losses) |
(667 | ) | 180 | (1,338 | ) | 77 | ||||||||||
Other income (expense) |
433 | 659 | 437 | 1,886 | ||||||||||||
Asset write-downs |
(1,800 | ) | (5,281 | ) | (1,800 | ) | (5,400 | ) | ||||||||
Costs related to acquisitions |
(314 | ) | (1,421 | ) | (1,195 | ) | (3,687 | ) | ||||||||
Restructuring related |
(3,385 | ) | (1,218 | ) | (3,936 | ) | (1,647 | ) | ||||||||
Inventory step-up |
(162 | ) | | (283 | ) | | ||||||||||
Income (loss) from continuing
operations
before taxes |
$ | 10,312 | $ | (4,025 | ) | $ | 24,105 | $ | 18,225 | |||||||
Globally, the Company operates primarily in four lines of business or product
families: (1) masterbatch, (2) engineered plastics, (3) specialty powders (formerly the
rotomolding product family), and (4) distribution. The amount and percentage of
consolidated sales for these product families for the three and six months ended February
28, 2011 and 2010 are as follows: |
Three months ended February 28, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Masterbatch |
$ | 204,078 | 40 | % | $ | 145,708 | 44 | % | ||||||||
Engineered plastics |
123,015 | 24 | 103,536 | 31 | ||||||||||||
Specialty powders |
86,286 | 17 | 6,031 | 2 | ||||||||||||
Distribution |
94,964 | 19 | 75,748 | 23 | ||||||||||||
$ | 508,343 | 100 | % | $ | 331,023 | 100 | % | |||||||||
Six months ended February 28, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Masterbatch |
$ | 404,377 | 40 | % | $ | 306,003 | 44 | % | ||||||||
Engineered plastics |
247,053 | 25 | 226,188 | 33 | ||||||||||||
Specialty powders |
176,362 | 18 | 12,369 | 2 | ||||||||||||
Distribution |
175,934 | 17 | 149,323 | 21 | ||||||||||||
$ | 1,003,726 | 100 | % | $ | 693,883 | 100 | % | |||||||||
(14) | INCOME TAXES |
At February 28, 2011, the Companys gross unrecognized tax benefits totaled $3.9 million. If
recognized, approximately $2.8 million of the total unrecognized tax benefits would
favorably affect the Companys effective tax rate. The Company reports interest and
penalties related to income tax matters in income tax expense. At February 28, 2011, the
Company had $0.6 million of accrued interest and penalties on unrecognized tax benefits. |
- 18 -
The Company is open to potential income tax examinations in Germany from fiscal 2005 onward,
in the U.S. from fiscal 2007 onward and in Belgium from fiscal 2008 onward. The Company is
open to potential examinations from fiscal 2005 onward for most other foreign jurisdictions. |
The amount of unrecognized tax benefits is expected to change in the next 12 months;
however, the change is not expected to have a significant impact on the financial position
of the Company. |
The income (loss) from discontinued operations in fiscal 2010 does not include any income
tax effect as the Company was not in a taxable position due to its continued U.S. losses and
a full valuation allowance. |
A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates
for the three months ended February 28, 2011 and 2010 is as follows: |
Three months ended | Three months ended | |||||||||||||||
February 28, 2011 | February 28, 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Statutory U.S. tax rate |
$ | 3,609 | 35.0 | % | $ | (1,409 | ) | 35.0 | % | |||||||
Amount of foreign taxes at less than U.S.
statutory tax rate |
(4,044 | ) | (39.2 | ) | (3,300 | ) | 82.0 | |||||||||
U.S. and foreign losses with no tax
benefit |
2,338 | 22.7 | 3,813 | (94.7 | ) | |||||||||||
U.S. restructuring and other U.S. unusual
charges with no benefit |
833 | 8.1 | 2,529 | (62.8 | ) | |||||||||||
Italy valuation allowance |
| | 984 | (24.5 | ) | |||||||||||
Establishment (resolution) of uncertain
tax
positions |
(25 | ) | (0.2 | ) | 23 | (0.6 | ) | |||||||||
Other |
322 | 3.0 | 154 | (3.8 | ) | |||||||||||
Total income tax expense (benefit) |
$ | 3,033 | 29.4 | % | $ | 2,794 | (69.4 | )% | ||||||||
A reconciliation of the statutory U.S. federal income tax rate with the effective
tax rates for the six months ended February 28, 2011 and 2010 is as follows: |
Six months ended | Six months ended | |||||||||||||||
February 28, 2011 | February 28, 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Statutory U.S. tax rate |
$ | 8,437 | 35.0 | % | $ | 6,379 | 35.0 | % | ||||||||
Amount of foreign taxes at less than U.S.
statutory tax rate |
(7,030 | ) | (29.2 | ) | (8,639 | ) | (47.4 | ) | ||||||||
U.S. and foreign losses with no tax
benefit |
4,335 | 18.0 | 5,532 | 30.4 | ||||||||||||
U.S. restructuring and other U.S. unusual
charges with no benefit |
1,208 | 5.0 | 3,351 | 18.4 | ||||||||||||
Italy valuation allowance |
| | 984 | 5.4 | ||||||||||||
Establishment (resolution) of uncertain
tax
positions |
(13 | ) | (0.1 | ) | 23 | 0.1 | ||||||||||
Other |
513 | 2.2 | 276 | 1.5 | ||||||||||||
Total income tax expense (benefit) |
$ | 7,450 | 30.9 | % | $ | 7,906 | 43.4 | % | ||||||||
The effective tax rate for the three months ended February 28, 2011 is less than the
U.S. statutory rate primarily because of the Companys overall foreign rate being less than
the U.S. statutory rate. This favorable effect on the Companys tax rate was partially
offset by no tax benefits being recognized for U.S. and certain foreign losses from
continuing operations and other U.S. charges. As compared with the effective rate for the
three months ended February 28, 2010, the current quarters effective rate is driven by a
decrease in the effective tax rate impact of U.S. and certain foreign losses from continuing
operations and other U.S. charges with no tax benefits. |
- 19 -
The effective tax rate for the six months ended February 28, 2011 is less than the U.S.
statutory rate primarily because of the Companys overall foreign rate being less than the
U.S. statutory rate. This favorable effect on the Companys tax rate was partially offset by
no tax benefits being recognized for U.S. and certain foreign losses from continuing
operations and other U.S. charges. As compared with the effective rate for the six months
ended February 28, 2010, the effective rate for the six months ended February 28, 2011 is
driven by a decrease in the effective tax rate impact of U.S. and certain foreign losses
from continuing operations and other U.S. charges with no tax benefit. |
(15) | RESTRUCTURING |
Italy and Australia Plans |
On February 8, 2011, the Company announced that it is relocating its operations from its
manufacturing facility in Verolanuova, Italy to its existing facility in Gorla Maggiore,
Italy. Production lines at the Verolanuova, Italy facility are expected to be relocated by
early calendar 2012. Also on February 8, 2011, the Company announced plans to consolidate
operations in Australia by moving production from its Braeside, Australia specialty powders
facility to its Brisbane, Australia facility. In Australia, approximately 30 to 40 jobs will
be eliminated. The region will continue to be served by the Companys Brisbane, Australia
facility and Asian facilities in Malaysia, Indonesia, China and a soon-to-be constructed
India plant. The consolidation in Braeside resulted, primarily, from the ongoing
deterioration of the Australian rotomolding business. |
The Company recorded pretax restructuring expense of $3.1 million during the three and six
months ended February 28, 2011 primarily for employee-related costs and other restructuring
charges related to the Australia and Italy restructuring plans. As of February 28, 2011, the
Company has $2.1 million accrued for employee-related costs. The Company anticipates
additional pretax cash charges of approximately $2.0 million to $3.0 million and
approximately $7.0 million to $8.0 million of non-cash pre-tax charges over the next several
quarters into fiscal 2012. |
ASI United Kingdom Plan |
On August 31, 2010, management announced restructuring plans for its operations at its
Crumlin, South Wales (U.K.) plant. The plans include moving part of the plants capacity to
two other, larger plants in Europe, and several production lines will be shut down. As a
result, the Company will reduce headcount at this location by approximately 30. The Company
will continue to enhance the capabilities of the Crumlin plant to produce smaller lots of
colors and other specialty compounds for the local market. The Company recorded $0.1 million
of pretax restructuring costs for employee-related costs for the three and six months ended
February 28, 2011. As of February 28, 2011, the Company has $0.2 million accrued for
employee-related costs. The Company expects minimal charges related to this plan into fiscal
2012 as the realignment of capacity is finalized. |
ICO Merger Plan |
In conjunction with the merger with ICO, the Company reduced the workforce in the Houston,
Texas office by 17. ICO had preexisting arrangements regarding change-in-control payments
and severance pay which were based on pre-merger service. The Company assumed $2.1 million
in liabilities as a result of the merger related to these agreements, of which $2.0 million
was paid by the Company during fiscal 2010. Since the merger, the Company announced the exit
of certain senior managers in Europe in connection with the Companys ongoing integration of
ICO operations. The Company recorded $0.1 million and $0.4 million primarily in pretax
employee-related costs during the three and six months ended February 28, 2011,
respectively, related to the integration of the ICO merger. The Company has less than $0.1
million remaining accrued for the ICO merger plan as of February 28, 2011, to be paid in the
third quarter of fiscal 2011. The Company expects minimal remaining charges to be incurred
into late fiscal 2011. |
North America Masterbatch Fiscal 2010 Plan |
On March 1, 2010, the Company announced the closure of its Polybatch Color Center located in
Sharon Center, Ohio, which was a plant in the Americas segment. The Company recorded pretax
restructuring expenses of $0.3 million and $0.4 million during the three and six months
ended February 28, 2011, respectively, primarily for employee-related costs associated with
the closure. As of February 28, 2011, less than $0.1 million remains accrued which the
Company expects to pay during the third quarter of fiscal 2011. The Company ceased
production at the Polybatch Color Center on August 31, 2010. The Company expects
minimal additional charges related to this initiative to be recognized primarily during
fiscal 2011 as it completes the shutdown procedures. |
- 20 -
Fiscal 2009 Plan |
During fiscal 2009, the Company announced various plans to realign its domestic and
international operations to strengthen the Companys performance and financial position. The
Company initiated these proactive actions to address the then weak global economic
conditions and improve the Companys competitive position. The actions included a reduction
in capacity and workforce reductions in manufacturing, selling and administrative positions
throughout Europe and North America. In addition, in fiscal 2010, the Company completed the
previously announced consolidation of its back-office operations in Europe, which include
finance and accounting functions, to a shared service center located in Belgium. |
The Company reduced its workforce by approximately 190 positions worldwide during fiscal
2009, primarily as a result of the actions taken in early fiscal 2009 to realign the
Companys operations and back-office functions. In addition, to further manage costs during
a period of significant declines in demand primarily in the second quarter of fiscal 2009,
the Companys major European locations implemented a short work schedule when necessary
and the Americas segment reduced shifts from seven to five days at its Nashville, Tennessee
plant. Also in the Americas segment, the Company reduced production capacity by temporarily
idling one manufacturing line, while permanently shutting down another line at its plant in
Bellevue, Ohio. The Company completed the right-sizing and redesign of its Gorla Maggiore,
Italy plant, which resulted in less than $0.1 million of accelerated depreciation on certain
fixed assets during the first quarter of fiscal 2010. |
The Company recorded minimal charges related to the fiscal 2009 initiatives during the three
months ended February 28, 2011. The Company recorded employee-related costs of $0.3 million
and contract termination and other restructuring costs of $0.1 million related to the fiscal
2009 initiatives during the three months ended February 28, 2010. The Company recorded
employee-related costs of $0.5 million and contract termination and other restructuring
costs of $0.3 million related to the fiscal 2009 initiatives during the six months ended
February 28, 2010. All restructuring charges recorded for the fiscal 2009 Plan during fiscal
2010 were related to the EMEA segment. |
The Company has no remaining accrual as of February 28, 2011 related to the fiscal 2009
initiatives and does not expect any future payments or charges. The Companys charges
related to the plans initiated in fiscal 2009 to reduce capacity and headcount at certain
international locations were substantially complete as of the end of fiscal 2010. |
Fiscal 2008 Plan |
In January 2008, the Company announced two steps in its continuing effort to improve the
profitability of its North American operations. The Company announced it would shut down its
manufacturing facility in St. Thomas, Ontario, Canada and would pursue a sale of its
manufacturing facility in Orange, Texas. All the restructuring costs related to the sale of
the Orange, Texas and the St. Thomas, Ontario, Canada facilities are related to the Americas
segment. The Company completed the sales of the Orange, Texas facility in March 2008 and the
St. Thomas, Ontario facility in June 2010. |
The St. Thomas, Ontario, Canada facility primarily produced engineered plastics for the
automotive market, with a capacity of approximately 74 million pounds per year and employed
approximately 120 individuals. The facility was shutdown at the end of June 2008 and the
Company finalized closing procedures in fiscal 2010. |
The Company recorded minimal charges related to the fiscal 2008 initiatives during the three
and six months ended February 28, 2011 and 2010. The Company has less than $0.1 million
remaining accrued for employee-related costs as of February 28, 2011 related to the fiscal
2008 initiatives, which is expected to be paid during fiscal 2011. |
- 21 -
The following table summarizes the liabilities as of February 28, 2011 related to the
Companys restructuring plans. |
Accrual Balance | Fiscal 2011 | Fiscal 2011 | Accrual Balance | |||||||||||||
August 31, 2010 | Charges | Paid | February 28, 2011 | |||||||||||||
(In thousands) | ||||||||||||||||
Employee-related
costs |
$ | 2,011 | $ | 3,718 | $ | (3,283 | ) | $ | 2,446 | |||||||
Other costs |
267 | 218 | (452 | ) | 33 | |||||||||||
Translation effect |
(47 | ) | | | 15 | |||||||||||
Restructuring charges |
$ | 2,231 | $ | 3,936 | $ | (3,735 | ) | $ | 2,494 | |||||||
(16) | ASSET IMPAIRMENT |
The Company recorded asset impairment charges of $1.8 million for the three and six months
ended February 28, 2011. A long-lived asset held for sale was written down to its estimated
fair value of $2.0 million resulting in an asset impairment charge of $1.8 million, which
was recorded in the second quarter of fiscal 2011. The assets estimated fair value was
determined as the estimated sales value of the asset less associated costs to sell the asset
and was determined based on Level 3 inputs obtained from a third-party purchase offer. |
During the three months and six months ended February 28, 2010, the Company recorded $5.3
million of asset impairment charges related to assets held and used associated with the
closure of the Companys Polybatch Color Center located in Sharon Center, Ohio. The impaired
assets include real estate and certain machinery and equipment. The fair value of the real
estate, which includes land, building and related improvements, was determined as the
estimated sales value of the assets less the costs to sell and was determined using Level 3
inputs based on information provided by a third-party real estate valuation source. The fair
value of the machinery and equipment was determined using Level 3 inputs based on projected
cash flows from operations and estimated salvage value. |
(17) | DEBT REFINANCING |
The Company entered into a Credit Agreement as of January 7, 2011 to replace the $260
million credit facility, which would have matured on February 28, 2011. The Credit Agreement
provides for an aggregate revolving loan facility (the Revolving Facility) in the
principal amount of $300 million comprised of a U.S. tranche revolving loan of up to $250
million, a foreign tranche revolving loan of up to $45 million, and a Malaysian tranche
revolving loan of up to $5 million. The Credit Agreement contains certain covenants that,
among other things, restrict the Companys ability to incur indebtedness and grant liens
other than certain types of permitted indebtedness and permitted liens. The Company must
also maintain a minimum interest coverage ratio and may not exceed a maximum net debt
leverage ratio. As of February 28, 2011, the Company was not in violation of any of its
covenants relating to the Revolving Facility. The Company was well within compliance with
these covenants and does not believe a covenant violation is reasonably possible as of
February 28, 2011. The Revolving Facility matures on January 7, 2016. Outstanding borrowings
under the credit facility were reclassified from short-term debt to long-term debt under the
Revolving Facility upon execution of the credit agreement. As of February 28, 2011, the
Company had a balance of $93.0 million under the Revolving Facility |
(18) | ACCOUNTING PRONOUNCEMENTS |
In January 2010, the FASB issued amended accounting rules to require disclosure of transfers
into and out of Level 1 and Level 2 fair value measurements, and also require more detailed
disclosure about the activity within Level 3 fair value measurements. The new rules also
require a more detailed level of disaggregation of the assets and liabilities being measured
as well as increased disclosures regarding inputs and valuation techniques of the fair value
measurements. The changes are effective for annual and interim reporting periods beginning
after December 15, 2009, except for requirements related to Level 3 disclosures, which are
effective for annual and interim reporting periods beginning after December 15, 2010.
Adoption of this guidance in fiscal 2011 did not impact the Companys consolidated financial
statements. |
- 22 -
In December 2010, the FASB issued updated accounting guidance to clarify that pro forma
disclosures should be presented as if a business combination occurred at the beginning of
the prior annual period for purposes of preparing both the current reporting period and the
prior reporting period pro forma financial information. These disclosures should be
accompanied by a narrative description about the nature and amount of material, nonrecurring
pro forma adjustments. The amendments in the update are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010. Early adoption is permitted. The
Company will adopt the new disclosures effective September 1, 2011. Adoption of this
guidance is not expected to have a material impact on the Companys consolidated financial
statements. The impact on the Companys disclosures will be dependent on the size of the
business combinations consummated subsequent to the adoption of the standard. |
In December 2010, the FASB issued updated accounting guidance related to the calculation of
the carrying amount of a reporting unit when performing the first step of a goodwill
impairment test. More specifically, this update requires the Company to use an equity
premise when performing the first step of a goodwill impairment test and if a reporting unit
has a zero or negative carrying amount, the Company must assess and consider qualitative
factors and whether it is more likely than not that a goodwill impairment exists. The new
accounting guidance is effective for impairment tests performed during entities fiscal
years (and interim periods within those years) that begin after December 15, 2010. The
Company will adopt the amended guidance effective September 1, 2011. Adoption of this
guidance is not expected to have a material impact on the Companys consolidated financial
statements. |
(19) | SHARE REPURCHASE PROGRAM |
The Company has approximately 2.3 million shares authorized by the board of directors to be
repurchased under the Companys current share repurchase program. During the three and six
months ended February 28, 2011, the Company repurchased 625,000 shares of its common stock
at an average price of $21.75 per share. The Company did not repurchase any shares of its
common stock during the three and six months ended February 28, 2010. |
- 23 -
- 24 -
Three months ended February 28, | Six months ended February 28, | |||||||||||||||||||||||||||||||
EMEA | 2011 | 2010 | Increase (decrease) | 2011 | 2010 | Increase (decrease) | ||||||||||||||||||||||||||
(In thousands, except for %s and per pound data) | ||||||||||||||||||||||||||||||||
Net sales |
$ | 356,533 | $ | 247,374 | $ | 109,159 | 44.1 | % | $ | 703,215 | $ | 519,317 | $ | 183,898 | 35.4 | % | ||||||||||||||||
Gross profit |
$ | 47,487 | $ | 41,525 | $ | 5,962 | 14.4 | % | $ | 95,572 | $ | 92,126 | $ | 3,446 | 3.7 | % | ||||||||||||||||
Operating income |
$ | 21,722 | $ | 9,235 | $ | 12,487 | 135.2 | % | $ | 41,124 | $ | 34,459 | $ | 6,665 | 19.3 | % | ||||||||||||||||
Pounds sold |
314,359 | 244,241 | 70,118 | 28.7 | % | 630,840 | 495,045 | 135,795 | 27.4 | % | ||||||||||||||||||||||
Price per pound |
$ | 1.134 | $ | 1.013 | $ | 0.121 | 11.9 | % | $ | 1.115 | $ | 1.049 | $ | 0.066 | 6.3 | % | ||||||||||||||||
Gross profit per pound |
$ | 0.151 | $ | 0.170 | $ | (0.019 | ) | -11.2 | % | $ | 0.151 | $ | 0.186 | $ | (0.035 | ) | -18.8 | % | ||||||||||||||
Gross profit
percentage |
13.3 | % | 16.8 | % | 13.6 | % | 17.7 | % |
- 25 -
Three months ended February 28, | Six months ended February 28, | |||||||||||||||||||||||||||||||
Americas | 2011 | 2010 | Increase (decrease) | 2011 | 2010 | Increase (decrease) | ||||||||||||||||||||||||||
(In thousands, except for %s and per pound data) | ||||||||||||||||||||||||||||||||
Net sales |
$ | 118,550 | $ | 69,228 | $ | 49,322 | 71.2 | % | $ | 233,671 | $ | 145,557 | $ | 88,114 | 60.5 | % | ||||||||||||||||
Gross profit |
$ | 15,911 | $ | 7,694 | $ | 8,217 | 106.8 | % | $ | 32,386 | $ | 17,656 | $ | 14,730 | 83.4 | % | ||||||||||||||||
Operating income |
$ | 3,340 | $ | 216 | $ | 3,124 | 1446.3 | % | $ | 7,199 | $ | 3,088 | $ | 4,111 | 133.1 | % | ||||||||||||||||
Pounds sold |
150,550 | 58,397 | 92,153 | 157.8 | % | 304,130 | 124,196 | 179,934 | 144.9 | % | ||||||||||||||||||||||
Price per pound |
$ | 0.787 | $ | 1.185 | $ | (0.398 | ) | -33.6 | % | $ | 0.768 | $ | 1.172 | $ | (0.404 | ) | -34.5 | % | ||||||||||||||
Gross profit per
pound |
$ | 0.106 | $ | 0.132 | $ | (0.026 | ) | -19.7 | % | $ | 0.106 | $ | 0.142 | $ | (0.036 | ) | -25.4 | % | ||||||||||||||
Gross profit
percentage |
13.4 | % | 11.1 | % | 13.9 | % | 12.1 | % |
- 26 -
Three months ended February 28, | Six months ended February 28, | |||||||||||||||||||||||||||||||
APAC | 2011 | 2010 | Increase (decrease) | 2011 | 2010 | Increase (decrease) | ||||||||||||||||||||||||||
(In thousands, except for %s and per pound data) | ||||||||||||||||||||||||||||||||
Net sales |
$ | 33,260 | $ | 14,421 | $ | 18,839 | 130.6 | % | $ | 66,840 | $ | 29,009 | $ | 37,831 | 130.4 | % | ||||||||||||||||
Gross profit |
$ | 3,376 | $ | 2,118 | $ | 1,258 | 59.4 | % | $ | 7,938 | $ | 4,781 | $ | 3,157 | 66.0 | % | ||||||||||||||||
Operating income |
$ | 384 | $ | 564 | $ | (180 | ) | -31.9 | % | $ | 2,192 | $ | 1,678 | $ | 514 | 30.6 | % | |||||||||||||||
Pounds sold |
32,353 | 12,397 | 19,956 | 161.0 | % | 66,250 | 24,987 | 41,263 | 165.1 | % | ||||||||||||||||||||||
Price per pound |
$ | 1.028 | $ | 1.163 | $ | (0.135 | ) | -11.6 | % | $ | 1.009 | $ | 1.161 | $ | (0.152 | ) | -13.1 | % | ||||||||||||||
Gross profit per
pound |
$ | 0.104 | $ | 0.171 | $ | (0.067 | ) | -39.2 | % | $ | 0.120 | $ | 0.191 | $ | (0.071 | ) | -37.2 | % | ||||||||||||||
Gross profit
percentage |
10.2 | % | 14.7 | % | 11.9 | % | 16.5 | % |
- 27 -
Three months ended February 28, | Six months ended February 28, | |||||||||||||||||||||||||||||||
Consolidated | 2011 | 2010 | Increase (decrease) | 2011 | 2010 | Increase (decrease) | ||||||||||||||||||||||||||
(In thousands, except for %s and per pound data) | ||||||||||||||||||||||||||||||||
Net sales |
$ | 508,343 | $ | 331,023 | $ | 177,320 | 53.6 | % | $ | 1,003,726 | $ | 693,883 | $ | 309,843 | 44.7 | % | ||||||||||||||||
Total segment gross
profit |
$ | 66,774 | $ | 51,337 | $ | 15,437 | 30.1 | % | $ | 135,896 | $ | 114,563 | $ | 21,333 | 18.6 | % | ||||||||||||||||
Pounds sold |
497,262 | 315,035 | 182,227 | 57.8 | % | 1,001,220 | 644,228 | 356,992 | 55.4 | % | ||||||||||||||||||||||
Price per pound |
$ | 1.022 | $ | 1.051 | $ | (0.029 | ) | -2.8 | % | $ | 1.003 | $ | 1.077 | $ | (0.074 | ) | -6.9 | % | ||||||||||||||
Gross profit per pound |
$ | 0.134 | $ | 0.163 | $ | (0.029 | ) | -17.8 | % | $ | 0.136 | $ | 0.178 | $ | (0.042 | ) | -23.6 | % | ||||||||||||||
Gross profit percentage |
13.1 | % | 15.5 | % | 13.5 | % | 16.5 | % |
- 28 -
Three months ended | Six months ended | |||||||||||||||
February 28, 2011 | February 28, 2011 | |||||||||||||||
$ Increase | % Increase | $ Increase | % Increase | |||||||||||||
(decrease) | (decrease) | (decrease) | (decrease) | |||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Total change in selling, general and
administrative expenses |
$ | 666 | 1.4 | % | $ | 12,820 | 14.3 | % | ||||||||
Less the effect of foreign currency
translation |
(393 | ) | (2,860 | ) | ||||||||||||
Total change in selling, general and
administrative expenses, excluding the
effect of foreign currency translation |
$ | 1,059 | 2.2 | % | $ | 15,680 | 17.5 | % | ||||||||
- 29 -
Three months ended February 28, 2011 | Three months ended February 28, 2010 | |||||||||||||||||||||||
Packaging | Automotive | Other | Packaging | Automotive | Other | |||||||||||||||||||
EMEA |
32 | % | 10 | % | 58 | % | 44 | % | 8 | % | 48 | % | ||||||||||||
Americas |
21 | % | 18 | % | 61 | % | 33 | % | 31 | % | 36 | % | ||||||||||||
APAC |
46 | % | 0 | % | 54 | % | 77 | % | 0 | % | 23 | % | ||||||||||||
Worldwide |
30 | % | 11 | % | 59 | % | 43 | % | 13 | % | 44 | % |
Six months ended February 28, 2011 | Six months ended February 28, 2010 | |||||||||||||||||||||||
Packaging | Automotive | Other | Packaging | Automotive | Other | |||||||||||||||||||
EMEA |
32 | % | 9 | % | 59 | % | 43 | % | 8 | % | 49 | % | ||||||||||||
Americas |
20 | % | 19 | % | 61 | % | 32 | % | 32 | % | 36 | % | ||||||||||||
APAC |
45 | % | 0 | % | 55 | % | 78 | % | 0 | % | 22 | % | ||||||||||||
Worldwide |
30 | % | 11 | % | 59 | % | 42 | % | 13 | % | 45 | % |
- 30 -
Three months ended February 28, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Masterbatch |
$ | 204,078 | 40 | % | $ | 145,708 | 44 | % | ||||||||
Engineered plastics |
123,015 | 24 | 103,536 | 31 | ||||||||||||
Specialty powders |
86,286 | 17 | 6,031 | 2 | ||||||||||||
Distribution |
94,964 | 19 | 75,748 | 23 | ||||||||||||
$ | 508,343 | 100 | % | $ | 331,023 | 100 | % | |||||||||
Six months ended February 28, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Masterbatch |
$ | 404,377 | 40 | % | $ | 306,003 | 44 | % | ||||||||
Engineered plastics |
247,053 | 25 | 226,188 | 33 | ||||||||||||
Specialty powders |
176,362 | 18 | 12,369 | 2 | ||||||||||||
Distribution |
175,934 | 17 | 149,323 | 21 | ||||||||||||
$ | 1,003,726 | 100 | % | $ | 693,883 | 100 | % | |||||||||
Three months ended | Six months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
EMEA |
73 | % | 87 | % | 77 | % | 92 | % | ||||||||
Americas |
62 | % | 66 | % | 63 | % | 71 | % | ||||||||
APAC |
90 | % | 74 | % | 89 | % | 80 | % | ||||||||
Worldwide |
70 | % | 82 | % | 72 | % | 86 | % |
- 31 -
- 32 -
Accrual Balance | Fiscal 2011 | Fiscal 2011 | Accrual Balance | |||||||||||||
August 31, 2010 | Charges | Paid | February 28, 2011 | |||||||||||||
(In thousands) | ||||||||||||||||
Employee-related
costs |
$ | 2,011 | $ | 3,718 | $ | (3,283 | ) | $ | 2,446 | |||||||
Other costs |
267 | 218 | (452 | ) | 33 | |||||||||||
Translation effect |
(47 | ) | | | 15 | |||||||||||
Restructuring charges |
$ | 2,231 | $ | 3,936 | $ | (3,735 | ) | $ | 2,494 | |||||||
- 33 -
Three months ended | Three months ended | |||||||||||||||
February 28, 2011 | February 28, 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Statutory U.S. tax rate |
$ | 3,609 | 35.0 | % | $ | (1,409 | ) | 35.0 | % | |||||||
Amount of foreign taxes at less than U.S.
statutory tax rate |
(4,044 | ) | (39.2 | ) | (3,300 | ) | 82.0 | |||||||||
U.S. and foreign losses with no tax
benefit |
2,338 | 22.7 | 3,813 | (94.7 | ) | |||||||||||
U.S. restructuring and other U.S. unusual
charges with no benefit |
833 | 8.1 | 2,529 | (62.8 | ) | |||||||||||
Italy valuation allowance |
| | 984 | (24.5 | ) | |||||||||||
Establishment (resolution) of uncertain
tax
positions |
(25 | ) | (0.2 | ) | 23 | (0.6 | ) | |||||||||
Other |
322 | 3.0 | 154 | (3.8 | ) | |||||||||||
Total income tax expense (benefit) |
$ | 3,033 | 29.4 | % | $ | 2,794 | (69.4) | % | ||||||||
Six months ended | Six months ended | |||||||||||||||
February 28, 2011 | February 28, 2010 | |||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Statutory U.S. tax rate |
$ | 8,437 | 35.0 | % | $ | 6,379 | 35.0 | % | ||||||||
Amount of foreign taxes at less than U.S.
statutory tax rate |
(7,030 | ) | (29.2 | ) | (8,639 | ) | (47.4 | ) | ||||||||
U.S. and foreign losses with no tax
benefit |
4,335 | 18.0 | 5,532 | 30.4 | ||||||||||||
U.S. restructuring and other U.S. unusual
charges with no benefit |
1,208 | 5.0 | 3,351 | 18.4 | ||||||||||||
Italy valuation allowance |
| | 984 | 5.4 | ||||||||||||
Establishment (resolution) of uncertain
tax
positions |
(13 | ) | (0.1 | ) | 23 | 0.1 | ||||||||||
Other |
513 | 2.2 | 276 | 1.5 | ||||||||||||
Total income tax expense (benefit) |
$ | 7,450 | 30.9 | % | $ | 7,906 | 43.4 | % | ||||||||
- 34 -
Three months ended | Asset Write- | Costs Related | Restructuring | Inventory Step- | Tax Benefits | Before Certain | ||||||||||||||||||||||
February 28, 2011 | As Reported | downs | to Acquisitions | Related | up | (Charges) | Items | |||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||
Net sales |
$ | 508,343 | $ | | $ | | $ | | $ | | $ | | $ | 508,343 | ||||||||||||||
Cost of sales |
441,731 | | | | (162 | ) | | 441,569 | ||||||||||||||||||||
Selling, general and
administrative expenses |
49,430 | | (314 | ) | | | | 49,116 | ||||||||||||||||||||
Interest expense, net |
1,451 | | | | | | 1,451 | |||||||||||||||||||||
Foreign currency transaction
(gains) losses |
667 | | | | | | 667 | |||||||||||||||||||||
Other (income) expense |
(433 | ) | | | | | | (433 | ) | |||||||||||||||||||
Asset impairment |
1,800 | (1,800 | ) | | | | | | ||||||||||||||||||||
Restructuring expense |
3,385 | | | (3,385 | ) | | | | ||||||||||||||||||||
498,031 | (1,800 | ) | (314 | ) | (3,385 | ) | (162 | ) | | 492,370 | ||||||||||||||||||
Income from continuing
operations before taxes |
10,312 | 1,800 | 314 | 3,385 | 162 | | 15,973 | |||||||||||||||||||||
Provision for U.S. and foreign
income taxes |
3,033 | | | 613 | 58 | | 3,704 | |||||||||||||||||||||
Income from continuing
operations |
7,279 | 1,800 | 314 | 2,772 | 104 | | 12,269 | |||||||||||||||||||||
Income (loss) from
discontinued
operations, net of tax of $0 |
| | | | | | | |||||||||||||||||||||
Net income |
7,279 | 1,800 | 314 | 2,772 | 104 | | 12,269 | |||||||||||||||||||||
Noncontrolling interests |
(138 | ) | | | | | | (138 | ) | |||||||||||||||||||
Net income attributable to
A. Schulman, Inc. |
$ | 7,141 | $ | 1,800 | $ | 314 | $ | 2,772 | $ | 104 | $ | | $ | 12,131 | ||||||||||||||
Diluted EPS |
$ | 0.23 | $ | 0.39 | ||||||||||||||||||||||||
Weighted-average number of
shares outstanding -diluted |
31,181 | 31,181 |
- 35 -
Three months ended | Asset Write- | Costs Related | Restructuring | Inventory Step- | Tax Benefits | Before Certain | ||||||||||||||||||||||
February 28, 2010 | As Reported | downs | to Acquisitions | Related | up | (Charges) | Items | |||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||
Net sales |
$ | 331,023 | $ | | $ | | $ | | $ | | $ | | $ | 331,023 | ||||||||||||||
Cost of sales |
279,686 | | | | | | 279,686 | |||||||||||||||||||||
Selling, general and
administrative expenses |
48,764 | | (1,421 | ) | | | | 47,343 | ||||||||||||||||||||
Interest expense, net |
938 | | | | | | 938 | |||||||||||||||||||||
Foreign currency transaction
(gains) losses |
(180 | ) | | | | | | (180 | ) | |||||||||||||||||||
Other (income) expense |
(659 | ) | | | | | | (659 | ) | |||||||||||||||||||
Asset impairment |
5,281 | (5,281 | ) | | | | | | ||||||||||||||||||||
Restructuring expense |
1,218 | | | (1,218 | ) | | | | ||||||||||||||||||||
335,048 | (5,281 | ) | (1,421 | ) | (1,218 | ) | | | 327,128 | |||||||||||||||||||
Income (loss) from continuing
operations before taxes |
(4,025 | ) | 5,281 | 1,421 | 1,218 | | | 3,895 | ||||||||||||||||||||
Provision for U.S. and foreign
income taxes |
2,794 | 94 | | 135 | | (2,252 | ) | 771 | ||||||||||||||||||||
Income (loss) from continuing
operations |
(6,819 | ) | 5,187 | 1,421 | 1,083 | | 2,252 | 3,124 | ||||||||||||||||||||
Income (loss) from discontinued
operations, net of tax of $0 |
12 | | | | | | 12 | |||||||||||||||||||||
Net income (loss) |
(6,807 | ) | 5,187 | 1,421 | 1,083 | | 2,252 | 3,136 | ||||||||||||||||||||
Noncontrolling interests |
32 | | | | | | 32 | |||||||||||||||||||||
Net income (loss) attributable to
A. Schulman, Inc. |
$ | (6,775 | ) | $ | 5,187 | $ | 1,421 | $ | 1,083 | $ | | $ | 2,252 | $ | 3,168 | |||||||||||||
Diluted EPS |
$ | (0.26 | ) | $ | 0.12 | |||||||||||||||||||||||
Weighted-average number of
shares outstanding -diluted |
25,916 | 25,916 |
Six months ended | Asset Write- | Costs Related | Restructuring | Inventory Step- | Tax Benefits | Before Certain | ||||||||||||||||||||||
February 28, 2011 | As Reported | downs | to Acquisitions | Related | up | (Charges) | Items | |||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||
Net sales |
$ | 1,003,726 | $ | | $ | | $ | | $ | | $ | | $ | 1,003,726 | ||||||||||||||
Cost of sales |
868,113 | | | | (283 | ) | | 867,830 | ||||||||||||||||||||
Selling, general and
administrative expenses |
102,335 | | (1,195 | ) | | | | 101,140 | ||||||||||||||||||||
Interest expense, net |
2,536 | | | | | | 2,536 | |||||||||||||||||||||
Foreign currency transaction
(gains) losses |
1,338 | | | | | | 1,338 | |||||||||||||||||||||
Other (income) expense |
(437 | ) | | | | | | (437 | ) | |||||||||||||||||||
Asset impairment |
1,800 | (1,800 | ) | | | | | | ||||||||||||||||||||
Restructuring expense |
3,936 | | | (3,936 | ) | | | | ||||||||||||||||||||
979,621 | (1,800 | ) | (1,195 | ) | (3,936 | ) | (283 | ) | | 972,407 | ||||||||||||||||||
Income from continuing
operations before taxes |
24,105 | 1,800 | 1,195 | 3,936 | 283 | | 31,319 | |||||||||||||||||||||
Provision for U.S. and
foreign
income taxes |
7,450 | | | 729 | 99 | 65 | 8,343 | |||||||||||||||||||||
Income from continuing
operations |
16,655 | 1,800 | 1,195 | 3,207 | 184 | (65 | ) | 22,976 | ||||||||||||||||||||
Income (loss) from
discontinued
operations, net of tax of $0 |
| | | | | | | |||||||||||||||||||||
Net income |
16,655 | 1,800 | 1,195 | 3,207 | 184 | (65 | ) | 22,976 | ||||||||||||||||||||
Noncontrolling interests |
(271 | ) | | | | | | (271 | ) | |||||||||||||||||||
Net income attributable to
A. Schulman, Inc. |
$ | 16,384 | $ | 1,800 | $ | 1,195 | $ | 3,207 | $ | 184 | $ | (65 | ) | $ | 22,705 | |||||||||||||
Diluted EPS |
$ | 0.52 | $ | 0.73 | ||||||||||||||||||||||||
Weighted-average number of
shares outstanding -diluted |
31,245 | 31,245 |
- 36 -
Six months ended | Asset Write- | Costs Related | Restructuring | Inventory Step | Tax Benefits | Before Certain | ||||||||||||||||||||||
February 28, 2010 | As Reported | downs | to Acquisitions | Related | -up | (Charges) | Items | |||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||
Net sales |
$ | 693,883 | $ | | $ | | $ | | $ | | $ | | $ | 693,883 | ||||||||||||||
Cost of sales |
579,389 | (69 | ) | | | | | 579,320 | ||||||||||||||||||||
Selling, general and
administrative expenses |
89,515 | | (3,687 | ) | | | | 85,828 | ||||||||||||||||||||
Interest expense, net |
1,739 | | | | | | 1,739 | |||||||||||||||||||||
Foreign currency transaction
(gains) losses |
(77 | ) | | | | | | (77 | ) | |||||||||||||||||||
Other (income) expense |
(1,886 | ) | | | | | | (1,886 | ) | |||||||||||||||||||
Asset impairment |
5,331 | (5,331 | ) | | | | | | ||||||||||||||||||||
Restructuring expense |
1,647 | | | (1,647 | ) | | | | ||||||||||||||||||||
675,658 | (5,400 | ) | (3,687 | ) | (1,647 | ) | | | 664,924 | |||||||||||||||||||
Income from continuing
operations before taxes |
18,225 | 5,400 | 3,687 | 1,647 | | | 28,959 | |||||||||||||||||||||
Provision for U.S. and foreign
income taxes |
7,906 | 115 | | 265 | | (2,252 | ) | 6,034 | ||||||||||||||||||||
Income from continuing
operations |
10,319 | 5,285 | 3,687 | 1,382 | | 2,252 | 22,925 | |||||||||||||||||||||
Income (loss) from
discontinued
operations, net of tax of $0 |
9 | | | | | | 9 | |||||||||||||||||||||
Net income |
10,328 | 5,285 | 3,687 | 1,382 | | 2,252 | 22,934 | |||||||||||||||||||||
Noncontrolling interests |
(70 | ) | | | | | | (70 | ) | |||||||||||||||||||
Net income attributable to
A. Schulman, Inc. |
$ | 10,258 | $ | 5,285 | $ | 3,687 | $ | 1,382 | $ | | $ | 2,252 | $ | 22,864 | ||||||||||||||
Diluted EPS |
$ | 0.39 | $ | 0.87 | ||||||||||||||||||||||||
Weighted-average number of
shares outstanding -diluted |
26,346 | 26,346 |
- 37 -
February 28, 2011 | August 31, 2010 | February 28, 2010 | ||||||||||
Days in receivables |
61 | 53 | 57 | |||||||||
Days in inventory |
56 | 47 | 53 | |||||||||
Days in payables |
45 | 39 | 43 | |||||||||
Total working capital days |
72 | 61 | 67 |
February 28, 2011 | August 31, 2010 | $ Change | % Change | |||||||||||||
(In millions, except for %s) | ||||||||||||||||
Cash and cash equivalents |
$ | 96.4 | $ | 122.8 | $ | (26.4 | ) | -21 | % | |||||||
Working capital, excluding cash |
$ | 304.8 | $ | 169.4 | $ | 135.4 | 80 | % | ||||||||
Long-term debt |
$ | 192.9 | $ | 93.8 | $ | 99.1 | 106 | % | ||||||||
Total debt |
$ | 198.8 | $ | 154.7 | $ | 44.1 | 29 | % | ||||||||
Net debt (net cash)* |
$ | 102.4 | $ | 31.9 | $ | 70.5 | 221 | % | ||||||||
Total A. Schulman, Inc.
stockholders equity |
$ | 512.1 | $ | 488.0 | $ | 24.1 | 5 | % |
* | Total debt less cash and cash equivalents |
- 38 -
| $30.0 million of Senior Notes in the United States, maturing on March 1, 2013, with a
variable interest rate of LIBOR plus 80 bps (Dollar Notes). Although there are no plans
to do so, the Company may, at its option, prepay all or part of the Dollar Notes. |
| 50.3 million of Senior Notes in Germany, maturing on March 1, 2016, with a fixed
interest rate of 4.485% (Euro Notes). The carrying value of the Euro Notes was $69.6
million as of February 28, 2011. The fair market value of the Euro Notes was $70.7 million
as of February 28, 2011. |
- 39 -
February 28, 2011 | August 31, 2010 | |||||||
(In millions) | ||||||||
Revolving/Credit Facility |
$ | 300.0 | $ | 260.0 | ||||
Uncollateralized short-term lines of credit U.S. |
$ | | $ | | ||||
Uncollateralized short-term lines of credit
Foreign |
$ | 77.2 | $ | 37.2 | ||||
Total gross available funds from credit lines |
$ | 377.2 | $ | 297.2 | ||||
Revolving/Credit Facility |
$ | 205.1 | $ | 204.1 | ||||
Uncollateralized short-term lines of credit U.S. |
$ | | $ | | ||||
Uncollateralized short-term lines of credit
Foreign |
$ | 71.2 | $ | 29.9 | ||||
Total net available funds from credit lines |
$ | 276.3 | $ | 234.0 | ||||
| Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets
or liabilities in active markets; |
| Level 2: Inputs other than quoted prices included in Level 1 that are observable for the
asset or liability either directly or indirectly; and |
| Level 3: Unobservable inputs which reflect an entitys own assumptions. |
- 40 -
- 41 -
| worldwide and regional economic, business and political conditions, including continuing
economic uncertainties in some or all of the Companys major product markets; |
| the effectiveness of the Companys 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 Companys 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. |
- 42 -
- 43 -
Total number of shares | Maximum number of | |||||||||||||||
Total number of shares | Average price paid | purchased as part of a | shares that may yet be | |||||||||||||
repurchased | per share | publicly announced plan | purchased under the plan | |||||||||||||
Beginning shares available |
2,906,966 | |||||||||||||||
December 1-31, 2010 |
| $ | | | 2,906,966 | |||||||||||
January 1-31, 2011 |
325,000 | $ | 21.34 | 325,000 | 2,581,966 | |||||||||||
February 1-28, 2011 |
300,000 | $ | 22.19 | 300,000 | 2,281,966 | |||||||||||
Total |
625,000 | $ | 21.75 | 625,000 | 2,281,966 | |||||||||||
- 44 -
Exhibit Number | Exhibit | |||
3.1 | Amended and Restated Certificate of Incorporation of the Company (for purposes of
Commission reporting compliance only) (incorporated by reference from Exhibit 3(a)
to the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2009). |
|||
3.2 | Amended and Restated By-laws of the Company (incorporated by reference from
Exhibit 3.2 to the Companys Current Report on Form 8-K filed with the Commission
on October 19, 2009). |
|||
10.1 | A. Schulman, Inc. 2010 Value Creation Rewards Plan (incorporated by reference from
Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Commission
on December 10, 2010). |
|||
10.2 | Credit Agreement, dated January 7, 2011 by and among A. Schulman, Inc., Courtenay
Polymers Pty. Limited, ICO Polymers (Malaysia) Sdn. Bhd., and A. Schulman
International Services BVBA and JPMorgan Chase Bank, N.A., as Administrative
agent, J.P. Morgan Europe Limited, and J.P. Morgan Chase Bank Berhad, each as
Global Agent, and other lenders named in the Credit Agreement (incorporated by
reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed with
the Commission on January 13, 2011). |
|||
10.3 | Form of Time-Based Restricted Stock Award Agreement for Employees (filed herewith). |
|||
10.4 | Form of Time-Based Restricted Stock Unit Agreement for Foreign Employees (filed
herewith). |
|||
10.5 | Form of 2011 Whole Share Award Agreement for Non-Employee Directors (filed
herewith). |
|||
10.6 | Form of 2011 Performance Share Award Agreement (ROIC) for Employees (filed
herewith). |
|||
10.7 | Form of 2011 Performance Share Award Agreement (TSR) for Employees (filed
herewith). |
|||
10.8 | Form of 2011 Performance Unit Award Agreement (ROIC) for Foreign Employees (filed
herewith). |
|||
10.9 | Form of 2011 Performance Unit Award Agreement (TSR) for Foreign Employees (filed
herewith). |
|||
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
|||
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
|||
32 | Certifications of Principal Executive and Principal Financial Officers pursuant to
18 U.S.C. 1350. |
- 45 -
Date: April 4, 2011
|
A. Schulman, Inc. (Registrant) | |||
/s/ Donald B. McMillan
|
||||
Donald B. McMillan, Chief Accounting Officer and Corporate Controller of A. Schulman, Inc. (Signing on behalf of Registrant as a duly authorized officer of Registrant and signing as the Principal Financial Officer of Registrant) |
- 46 -