Exhibit 99.1
FOR IMMEDIATE RELEASE
A. SCHULMAN REPORTS STRONG FISCAL 2014 SECOND QUARTER
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• | Net income from continuing operations for the second quarter of fiscal 2014 was $6.5 million, or $0.22 per diluted share; adjusted net income from continuing operations for the second quarter of fiscal 2014, excluding certain items, was $11.3 million, or $0.39 per diluted share, a 39% improvement over the prior-year quarter |
| |
• | Company raises full-year fiscal 2014 adjusted net income guidance to a range of $2.23 to $2.28 per diluted share |
AKRON, Ohio - April 7, 2014 - A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today earnings for the fiscal 2014 second quarter ended February 28, 2014.
Joseph M. Gingo, Chairman, President and Chief Executive Officer, said, “Our strong second-quarter financial results reflect sustained operational improvements combined with the benefits of our acquisition strategy. The dedicated work of our European associates related to operational efficiencies and restructuring initiatives took full advantage of the modest volume improvements over the past two quarters to drive stronger profits. At the same time, we continue to benefit from our aggressive acquisition strategy and gained solid contributions from our bolt-on acquisitions this quarter, which exceeded our expectations. This combination is adding excitement to what we believe will be a strong 2014 for A. Schulman.”
Bernard Rzepka, Chief Operating Officer, stated, “I am very pleased that our European team has been able to capitalize on strengthening demand, especially in the automotive and electronics & electrical markets. In the Americas, I am encouraged that organic net sales in the region remained consistent with the prior year despite an 8.2% drop in organic volume and negative foreign currency headwinds in Latin America. Volume was, of course, impacted by the severe winter weather in the United States, but also by the Company’s continuous strategy to reduce less-profitable commodity sales. In Asia Pacific (APAC), the addition of our Perrite Group’s Malaysian facility has led to significant growth and provides us with solid engineered plastics operations in Southeast Asia. Additionally, we are seeing organic growth across all product families in the region, as well as a stabilization of gross margins on a sequential basis. APAC is a key strategic market for us, and we are pleased with our progress in the region.”
Fiscal Second-Quarter Results
In the fiscal 2014 second quarter, net sales in the Europe, Middle East and Africa (EMEA) segment increased 11.9% compared with the same period last year. During the quarter, the incremental contribution of the Perrite acquisition in EMEA was $21.4 million and 13.6 million pounds in net sales and volume, respectively. Additionally, sales and volume benefited from greater demand as a result of continued strengthening in the automotive market as well as strong performance in the Company’s engineered plastics business associated with the electronics & electrical markets. Foreign currency translation positively impacted net sales by $8.1 million. EMEA gross profit was $47.5 million for the quarter, an increase of $7.6 million compared with the same three-month period last year. The increase in gross profit was primarily attributed to the incremental contribution of the Perrite acquisition; favorable product mix; savings from successful purchasing initiatives and prior restructuring initiatives; and overall higher volumes. Foreign currency translation positively impacted EMEA gross profit by $0.9 million.
Net sales for the Americas increased by 8.9% compared with the prior-year period. This increase was primarily driven by the incremental contribution of the Network Polymers and Prime Colorants acquisitions which totaled $17.3 million and 12.2 million pounds in net sales and volume, respectively. Driven primarily by the devaluation of the Argentine peso, foreign currency translation negatively impacted net sales by $4.4 million. Gross profit for the Americas was $21.2 million in the quarter, an
increase of $2.5 million compared with the same period last year. Gross profit benefitted from recent acquisitions, and improved mix, which was partially offset by the negative impacts of lower volume and unfavorable $0.5 million of foreign currency translation.
During the quarter, net sales for the Company’s APAC segment increased approximately 67% compared with the same prior-year period. The incremental contribution of the Perrite acquisition in APAC was $13.7 million and 10.7 million pounds in net sales and volume, respectively. Excluding the Perrite acquisition, volume increased by 26% but was partially offset by decreased price per pound driven by competitive pricing pressures primarily in the masterbatch business. Gross profit for APAC for the quarter increased approximately 32.2% compared with the prior-year period. This increase was primarily attributed to the positive contribution from the Perrite acquisition and increased volume. Gross profit percentage declined as a result of competitive pricing pressures and the broadening of the Company’s product portfolio within the APAC region.
Year-to-Date Results
Net sales for the six months ended February 28, 2014 were $1.2 billion, an increase of 12.1% compared with the same period last year. Incremental net sales and volume from the Company’s recent acquisitions contributed $86.9 million and 60.5 million pounds, respectively. Excluding the impact of recent acquisitions, net sales were positively impacted by a 2.7% increase in price per pound and a 1% increase in volume. Foreign currency translation favorably impacted net sales by $14.9 million.
The Company’s SG&A expenses increased $12.8 million compared with the same period in the prior year. The increase was primarily attributable to incremental SG&A expense of $4.6 million from recent acquisitions, higher incentive compensation expense of $3.4 million and unfavorable foreign currency translation of $1.3 million. SG&A expense, excluding certain items, was 9.5% of net sales for the six-month period. Operating income increased $6.6 million for the six months ended February 28, 2014, compared with the same prior-year period. Total operating income, before certain items, for the six months ended February 28, 2014, was $43.7 million, an increase of $10.4 million compared with a year ago.
Working Capital/Cash Flow From Operations
Cash used in operations was $8.7 million and $8.1 million for the six months ended February 28, 2014 and 2013, respectively. The Company’s cash and cash equivalents decreased $44 million from August 31, 2013. This decrease was driven primarily by fiscal 2014 acquisitions which were only partially offset by an increase in net borrowings. Working capital was 66 days at the end of the fiscal 2014 second quarter, a decrease of two days when compared with the same period last year.
Capital expenditures for the six months were $16.5 million compared with $12.9 million last year. The increase in capital expenditures principally relates to a $3.5 million purchase of a previously leased manufacturing facility in the United States as well as regular and ongoing investments in the Company's global manufacturing facilities.
During the three- and six-month periods ended February 28, 2014, the Company declared and paid quarterly cash dividends of $0.20 and $0.40 per common share, respectively. The total amount of these dividends was $5.9 million and $11.8 million, respectively.
Business Outlook
“Driven by the trend of our positive European results, the continuation of relatively stable raw material pricing and modest global economic growth, we have raised our expectations for 2014 adjusted net income to a range of $2.23 to $2.28 per diluted share, which would represent an approximately 25% increase over the prior-year results using the high-end of this range,” Gingo said.
Conference Call on the Web
A live Internet broadcast of A. Schulman’s conference call regarding fiscal 2014 second-quarter earnings can be accessed at 10:00 a.m. Eastern Time on Tuesday, April 8, 2014 on the Company’s website, www.aschulman.com. An archived replay of the call will also be available on the website.
Investor Day on April 10, 2014
A. Schulman will host an Investor Day on Thursday, April 10 at the Waldorf-Astoria in New York City. The event will begin at 8:00 a.m. EDT and is expected to last until 1 p.m. EDT. Participants may pre-register by contacting Jennifer Beeman at (330) 668-7346 or by email at Jennifer_beeman@us.aschulman.com. Participants may also register in person the morning of the event. In-person registration and continental breakfast will begin at 7:30 a.m. EDT.
Investor Presentation Materials
Senior executives of the Company may participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which may be used during such meetings, in the Investors section of its website at www.aschulman.com. The presentation will remain on the website as long as it is in use.
About A. Schulman, Inc.
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. Since 1928, the Company has been providing innovative solutions to meet its customers' demanding requirements. The Company's customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, sports, leisure & home, custom services and others. The Company employs approximately 3,500 people and has 38 manufacturing facilities globally. A. Schulman reported net sales of $2.1 billion for the fiscal year ended August 31, 2013. Additional information about A. Schulman can be found at www.aschulman.com.
Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures include segment gross profit, SG&A expenses excluding certain items, operating income excluding certain items, net income excluding certain items and net income per diluted share excluding certain items, as discussed further in the Reconciliation of GAAP and Non-GAAP Financial Measures below. These non-GAAP financial measures are considered relevant to aid analysis and understanding of the Company’s results and business trends. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.
While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company’s competitors and may not be directly comparable to similarly titled measures of the Company’s competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:
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• | worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company’s major product markets or countries where the Company has operations; |
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• | the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques; |
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• | competitive factors, including intense price competition; |
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• | fluctuations in the value of currencies in areas where the Company operates; |
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• | volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company’s products, particularly plastic resins derived from oil and natural gas; |
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• | changes in customer demand and requirements; |
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• | effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions, joint ventures and restructuring initiatives; |
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• | escalation in the cost of providing employee health care; |
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• | uncertainties regarding the resolution of pending and future litigation and other claims; |
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• | the performance of the global automotive market as well as other markets served; |
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• | further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products; and |
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• | operating problems with our information systems as a result of system security failures such as viruses, computer "hackers" or other causes. |
The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company’s performance are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2013. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company’s business, financial condition and results of operations.
SHLM_ALL
Contact information:
Jennifer K. Beeman
Director of Corporate Communications & Investor Relations
A. Schulman, Inc.
3637 Ridgewood Road
Fairlawn, Ohio 44333
Tel: 330-668-7346
email: Jennifer_Beeman@us.aschulman.com
www.aschulman.com
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| | | | | | | | | | | | | | | |
| Three months ended February 28, | | Six months ended February 28, |
| 2014 | | 2013 | | 2014 | | 2013 |
| Unaudited (In thousands, except per share data) |
Net sales | $ | 588,508 |
| | $ | 515,440 |
| | $ | 1,173,905 |
| | $ | 1,047,525 |
|
Cost of sales | 514,209 |
| | 452,241 |
| | 1,020,498 |
| | 912,659 |
|
Selling, general and administrative expenses | 58,713 |
| | 52,019 |
| | 116,111 |
| | 103,335 |
|
Restructuring expense | 1,727 |
| | 1,669 |
| | 3,505 |
| | 3,606 |
|
Asset impairment | 104 |
| | — |
| | 104 |
| | 498 |
|
Curtailment (gain) loss | — |
| | — |
| | — |
| | 333 |
|
Operating income | 13,755 |
| | 9,511 |
| | 33,687 |
| | 27,094 |
|
Interest expense | 2,488 |
| | 1,925 |
| | 4,679 |
| | 3,693 |
|
Interest income | (81 | ) | | (119 | ) | | (143 | ) | | (326 | ) |
Foreign currency transaction (gains) losses | 1,466 |
| | (40 | ) | | 2,148 |
| | 539 |
|
Other (income) expense, net | (193 | ) | | (211 | ) | | (271 | ) | | (347 | ) |
Income from continuing operations before taxes | 10,075 |
| | 7,956 |
| | 27,274 |
| | 23,535 |
|
Provision (benefit) for U.S. and foreign income taxes | 3,427 |
| | (4,350 | ) | | 7,995 |
| | (913 | ) |
Income from continuing operations | 6,648 |
| | 12,306 |
| | 19,279 |
| | 24,448 |
|
Income (loss) from discontinued operations, net of tax | 347 |
| | (282 | ) | | 3,002 |
| | (279 | ) |
Net income | 6,995 |
| | 12,024 |
| | 22,281 |
| | 24,169 |
|
Noncontrolling interests | (136 | ) | | (239 | ) | | (351 | ) | | (605 | ) |
Net income attributable to A. Schulman, Inc. | $ | 6,859 |
| | $ | 11,785 |
| | $ | 21,930 |
| | $ | 23,564 |
|
| | | | | | | |
Weighted-average number of shares outstanding: | | | | | | | |
Basic | 29,059 |
| | 29,293 |
| | 29,038 |
| | 29,255 |
|
Diluted | 29,277 |
| | 29,725 |
| | 29,240 |
| | 29,668 |
|
| | | | | | | |
Basic earnings per share attributable to A. Schulman, Inc. | | | | | | | |
Income from continuing operations | $ | 0.23 |
| | $ | 0.41 |
| | $ | 0.65 |
| | $ | 0.82 |
|
Income (loss) from discontinued operations | 0.01 |
| | (0.01 | ) | | 0.11 |
| | (0.01 | ) |
Net income attributable to A. Schulman, Inc. | $ | 0.24 |
| | $ | 0.40 |
| | $ | 0.76 |
| | $ | 0.81 |
|
| | | | | | | |
Diluted earnings per share attributable to A. Schulman, Inc. | | | | | | | |
Income from continuing operations | $ | 0.22 |
| | $ | 0.41 |
| | $ | 0.65 |
| | $ | 0.80 |
|
Income (loss) from discontinued operations | 0.01 |
| | (0.01 | ) | | 0.10 |
| | (0.01 | ) |
Net income attributable to A. Schulman, Inc. | $ | 0.23 |
| | $ | 0.40 |
| | $ | 0.75 |
| | $ | 0.79 |
|
| | | | | | | |
Cash dividends per common share | $ | 0.200 |
| | $ | 0.195 |
| | $ | 0.400 |
| | $ | 0.390 |
|
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
|
| | | | | | | |
| February 28, 2014 | | August 31, 2013 |
| Unaudited (In thousands) |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 90,053 |
| | $ | 134,054 |
|
Accounts receivable, less allowance for doubtful accounts of $10,955 at February 28, 2014 and $10,434 at August 31, 2013 | 381,872 |
| | 310,749 |
|
Inventories, lower of average cost or market | 307,122 |
| | 261,658 |
|
Prepaid expenses and other current assets | 44,015 |
| | 41,224 |
|
Total current assets | 823,062 |
| | 747,685 |
|
Property, plant and equipment, at cost: | | | |
Land and improvements | 26,892 |
| | 27,954 |
|
Buildings and leasehold improvements | 158,841 |
| | 146,647 |
|
Machinery and equipment | 389,424 |
| | 356,144 |
|
Furniture and fixtures | 41,399 |
| | 39,065 |
|
Construction in progress | 9,877 |
| | 7,149 |
|
Gross property, plant and equipment | 626,433 |
| | 576,959 |
|
Accumulated depreciation | 392,325 |
| | 366,438 |
|
Net property, plant and equipment | 234,108 |
| | 210,521 |
|
Deferred charges and other noncurrent assets | 54,853 |
| | 48,723 |
|
Goodwill | 185,379 |
| | 139,526 |
|
Intangible assets, net | 119,539 |
| | 91,887 |
|
Total assets | $ | 1,416,941 |
| | $ | 1,238,342 |
|
LIABILITIES AND EQUITY |
Current liabilities: | | | |
Accounts payable | $ | 292,693 |
| | $ | 265,477 |
|
U.S. and foreign income taxes payable | 7,782 |
| | 6,423 |
|
Accrued payroll, taxes and related benefits | 42,926 |
| | 43,072 |
|
Other accrued liabilities | 52,661 |
| | 48,689 |
|
Short-term debt | 20,572 |
| | 8,373 |
|
Total current liabilities | 416,634 |
| | 372,034 |
|
Long-term debt | 302,981 |
| | 207,435 |
|
Pension plans | 104,247 |
| | 98,599 |
|
Deferred income taxes | 23,865 |
| | 20,873 |
|
Other long-term liabilities | 26,174 |
| | 24,657 |
|
Total liabilities | 873,901 |
| | 723,598 |
|
Commitments and contingencies | | | |
Stockholders’ equity: | | | |
Common stock, $1 par value, authorized - 75,000 shares, issued - 48,179 shares at February 28, 2014 and 48,094 shares at August 31, 2013 | 48,179 |
| | 48,094 |
|
Additional paid-in capital | 265,285 |
| | 263,158 |
|
Accumulated other comprehensive income (loss) | 17,396 |
| | 682 |
|
Retained earnings | 584,523 |
| | 574,370 |
|
Treasury stock, at cost, 18,975 shares at February 28, 2014 and 18,940 shares at August 31, 2013 | (379,947 | ) | | (378,927 | ) |
Total A. Schulman, Inc.’s stockholders’ equity | 535,436 |
| | 507,377 |
|
Noncontrolling interests | 7,604 |
| | 7,367 |
|
Total equity | 543,040 |
| | 514,744 |
|
Total liabilities and equity | $ | 1,416,941 |
| | $ | 1,238,342 |
|
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | | | | |
| Six months ended February 28, |
| 2014 | | 2013 |
| Unaudited (In thousands) |
Operating from continuing and discontinued operations: | | | |
Net income | $ | 22,281 |
| | $ | 24,169 |
|
Adjustments to reconcile net income to net cash provided from (used in) operating activities: | | | |
Depreciation | 16,419 |
| | 15,023 |
|
Amortization | 6,669 |
| | 5,782 |
|
Deferred tax provision | (2,895 | ) | | (8,413 | ) |
Pension, postretirement benefits and other deferred compensation | 4,494 |
| | 4,398 |
|
Asset impairment | 104 |
| | 498 |
|
Curtailment (gain) loss | — |
| | 333 |
|
Gain on sale of assets from discontinued operations | (3,331 | ) | | — |
|
Changes in assets and liabilities, net of acquisitions: | | | |
Accounts receivable | (21,283 | ) | | (14,306 | ) |
Inventories | (13,107 | ) | | (19,199 | ) |
Accounts payable | (15,534 | ) | | (6,324 | ) |
Income taxes | 229 |
| | (930 | ) |
Accrued payroll and other accrued liabilities | 375 |
| | 804 |
|
Other assets and long-term liabilities | (3,100 | ) | | (9,887 | ) |
Net cash provided from (used in) operating activities | (8,679 | ) | | (8,052 | ) |
Investing from continuing and discontinued operations: | | | |
Expenditures for property, plant and equipment | (16,541 | ) | | (12,889 | ) |
Proceeds from the sale of assets | 4,738 |
| | 8,008 |
|
Business acquisitions, net of cash | (115,624 | ) | | (36,360 | ) |
Net cash provided from (used in) investing activities | (127,427 | ) | | (41,241 | ) |
Financing from continuing and discontinued operations: | | | |
Cash dividends paid | (11,777 | ) | | (11,713 | ) |
Increase (decrease) in short-term debt | 2,469 |
| | 2,081 |
|
Borrowings on long-term debt | 686,955 |
| | 70,696 |
|
Repayments on long-term debt | (583,914 | ) | | (56,565 | ) |
Payment of debt issuance costs | (1,782 | ) | | — |
|
Issuances of stock, common and treasury | 276 |
| | 1,394 |
|
Redemptions of common stock | (361 | ) | | (397 | ) |
Purchases of treasury stock | (1,116 | ) | | (479 | ) |
Net cash provided from (used in) financing activities | 90,750 |
| | 5,017 |
|
Effect of exchange rate changes on cash | 1,355 |
| | (59 | ) |
Net increase (decrease) in cash and cash equivalents | (44,001 | ) | | (44,335 | ) |
Cash and cash equivalents at beginning of period | 134,054 |
| | 124,031 |
|
Cash and cash equivalents at end of period | $ | 90,053 |
| | $ | 79,696 |
|
A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended February 28, 2014 | | Cost of Sales | | Gross margin | | SG&A | | Restructuring expense | | Asset impairment | | Operating income | | Operating income per pound | | Income tax expense (benefit) | | Net income attributable to A. Schulman, Inc. | | Diluted EPS |
| | (In thousands, except for %'s, per pound and per share data) |
As reported | | $ | 514,209 |
| | 12.6 | % | | $ | 58,713 |
| | $ | 1,727 |
| | $ | 104 |
| | $ | 13,755 |
| | $ | 0.027 |
| | $ | 3,427 |
| | $ | 6,859 |
| | $ | 0.23 |
|
Certain items: | | | | | | | | | | | | | | | | | | | | |
Asset write-downs (1) | | — |
| | | | — |
| | — |
| | (104 | ) | | 104 |
| | | | 34 |
| | 70 |
| | — |
|
Costs related to acquisitions (2) | | (34 | ) | | | | (1,818 | ) | | — |
| | — |
| | 1,852 |
| | | | 30 |
| | 1,822 |
| | 0.06 |
|
Restructuring and related costs (3) | | (137 | ) | | | | (928 | ) | | (1,727 | ) | | — |
| | 2,792 |
| | | | 279 |
| | 2,513 |
| | 0.09 |
|
Inventory step-up (4) | | (782 | ) | | | | — |
| | — |
| | — |
| | 782 |
| | | | — |
| | 782 |
| | 0.03 |
|
Tax benefits (charges) (5) | | — |
| | | | — |
| | — |
| | — |
| | — |
| | | | 426 |
| | (426 | ) | | (0.01 | ) |
Loss (income) from discontinued operations | | | | | | | | | | | | | | | | | | (347 | ) | | (0.01 | ) |
Total certain items | | $ | (953 | ) | | 0.2 | % | | $ | (2,746 | ) | | $ | (1,727 | ) | | $ | (104 | ) | | $ | 5,530 |
| | $ | 0.012 |
| | $ | 769 |
| | $ | 4,414 |
| | $ | 0.16 |
|
As Adjusted | | $ | 513,256 |
| | 12.8 | % | | $ | 55,967 |
| | $ | — |
| | $ | — |
| | $ | 19,285 |
| | $ | 0.039 |
| | $ | 4,196 |
| | $ | 11,273 |
| | $ | 0.39 |
|
| | | | | | | | | | | | | | | | | | | | |
Percentage of Revenue | | | | | | 9.5 | % | | | | | | 3.3 | % | | | | | | 1.9 | % | | |
| | | | | | | | | | | | | | | | | | | | |
Three months ended February 28, 2013 | | Cost of Sales | | Gross margin | | SG&A | | Restructuring expense | | Asset impairment | | Operating income | | Operating income per pound | | Income tax expense (benefit) | | Net income attributable to A. Schulman, Inc. | | Diluted EPS |
| | (In thousands, except for %'s, per pound and per share data) |
As reported | | $ | 452,241 |
| | 12.3 | % | | $ | 52,019 |
| | $ | 1,669 |
| | $ | — |
| | $ | 9,511 |
| | $ | 0.021 |
| | $ | (4,350 | ) | | $ | 11,785 |
| | $ | 0.40 |
|
Certain items: | | | | | | | | | | | | | | | | | | | | |
Asset write-downs (1) | | (404 | ) | | | | — |
| | — |
| | — |
| | 404 |
| | | | — |
| | 404 |
| | 0.01 |
|
Costs related to acquisitions (2) | | — |
| | | | (675 | ) | | — |
| | — |
| | 675 |
| | | | 79 |
| | 596 |
| | 0.02 |
|
Restructuring and related costs (3) | | — |
| | | | — |
| | (1,669 | ) | | — |
| | 1,669 |
| | | | 349 |
| | 1,320 |
| | 0.04 |
|
Inventory step-up (4) | | — |
| | | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | — |
|
Tax benefits (charges) (5) | | — |
| | | | — |
| | — |
| | — |
| | — |
| | | | 6,160 |
| | (6,160 | ) | | (0.20 | ) |
Loss (income) from discontinued operations | | | | | | | | | | | | | | | | | | 282 |
| | 0.01 |
|
Total certain items | | $ | (404 | ) | | 0.1 | % | | $ | (675 | ) | | $ | (1,669 | ) | | $ | — |
| | $ | 2,748 |
| | $ | 0.006 |
| | $ | 6,588 |
| | $ | (3,558 | ) | | $ | (0.12 | ) |
As Adjusted | | $ | 451,837 |
| | 12.4 | % | | $ | 51,344 |
| | $ | — |
| | $ | — |
| | $ | 12,259 |
| | $ | 0.027 |
| | $ | 2,238 |
| | $ | 8,227 |
| | $ | 0.28 |
|
| | | | | | | | | | | | | | | | | | | | |
Percentage of Revenue | | | | | | 10.0 | % | | | | | | 2.4 | % | | | | | | 1.6 | % | | |
A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
(continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six months ended February 28, 2014 | | Cost of Sales | | Gross margin | | SG&A | | Restructuring expense | | Asset impairment | | Operating income | | Operating income per pound | | Income tax expense (benefit) | | Net income attributable to A. Schulman, Inc. | | Diluted EPS |
| | (In thousands, except for %'s, per pound and per share data) |
As reported | | $ | 1,020,498 |
| | 13.1 | % | | $ | 116,111 |
| | $ | 3,505 |
| | $ | 104 |
| | $ | 33,687 |
| | $ | 0.034 |
| | $ | 7,995 |
| | $ | 21,930 |
| | $ | 0.75 |
|
Certain items: | | | | | | | | | | | | | | | | | | | | |
Asset write-downs (1) | | (108 | ) | | | | — |
| | — |
| | (104 | ) | | 212 |
| | | | 34 |
| | 178 |
| | 0.01 |
|
Costs related to acquisitions (2) | | (34 | ) | | | | (2,453 | ) | | — |
| | — |
| | 2,487 |
| | | | 125 |
| | 2,370 |
| | 0.08 |
|
Restructuring and related costs (3) | | (500 | ) | | | | (2,159 | ) | | (3,505 | ) | | — |
| | 6,164 |
| | | | 601 |
| | 5,852 |
| | 0.20 |
|
Inventory step-up (4) | | (1,199 | ) | | | | — |
| | — |
| | — |
| | 1,199 |
| | | | 98 |
| | 1,101 |
| | 0.04 |
|
Tax benefits (charges) (5) | | — |
| | | | — |
| | — |
| | — |
| | — |
| | | | 427 |
| | (427 | ) | | (0.02 | ) |
Loss (income) from discontinued operations | | | | | | | | | | | | | | | | | | (3,002 | ) | | (0.10 | ) |
Total certain items | | $ | (1,841 | ) | | 0.1 | % | | $ | (4,612 | ) | | $ | (3,505 | ) | | $ | (104 | ) | | $ | 10,062 |
| | $ | 0.010 |
| | $ | 1,285 |
| | $ | 6,072 |
| | $ | 0.21 |
|
As Adjusted | | $ | 1,018,657 |
| | 13.2 | % | | $ | 111,499 |
| | $ | — |
| | $ | — |
| | $ | 43,749 |
| | $ | 0.044 |
| | $ | 9,280 |
| | $ | 28,002 |
| | $ | 0.96 |
|
| | | | | | | | | | | | | | | | | | | | |
Percentage of Revenue | | | | | | 9.5 | % | | | | | | 3.7 | % | | | | | | 2.4 | % | | |
| | | | | | | | | | | | | | | | | | | | |
Six months ended February 28, 2013 | | Cost of Sales | | Gross margin | | SG&A | | Restructuring expense | | Asset impairment | | Operating income | | Operating income per pound | | Income tax expense (benefit) | | Net income attributable to A. Schulman, Inc. | | Diluted EPS |
| | (In thousands, except for %'s, per pound and per share data) |
As reported | | $ | 912,659 |
| | 12.9 | % | | $ | 103,335 |
| | $ | 3,606 |
| | $ | 498 |
| | $ | 27,094 |
| | $ | 0.029 |
| | $ | (913 | ) | | $ | 23,564 |
| | $ | 0.79 |
|
Certain items: | | | | | | | | | | | | | | | | | | | | |
Asset write-downs (1) | | (682 | ) | | | | — |
| | — |
| | (498 | ) | | 1,180 |
| | | | 149 |
| | 1,031 |
| | 0.04 |
|
Costs related to acquisitions (2) | | — |
| | | | (987 | ) | | — |
| | — |
| | 987 |
| | | | 79 |
| | 908 |
| | 0.03 |
|
Restructuring and related costs (3) | | — |
| | | | — |
| | (3,606 | ) | | — |
| | 3,939 |
| | | | 857 |
| | 3,082 |
| | 0.10 |
|
Inventory step-up (4) | | (138 | ) | | | | — |
| | — |
| | — |
| | 138 |
| | | | — |
| | 138 |
| | — |
|
Tax benefits (charges) (5) | | — |
| | | | — |
| | — |
| | — |
| | — |
| | | | 6,160 |
| | (6,160 | ) | | (0.20 | ) |
Loss (income) from discontinued operations | | | | | | | | | | | | | | | | | | 279 |
| | 0.01 |
|
Total certain items | | $ | (820 | ) | | 0.1 | % | | $ | (987 | ) | | $ | (3,606 | ) | | $ | (498 | ) | | $ | 6,244 |
| | $ | 0.007 |
| | $ | 7,245 |
| | $ | (722 | ) | | $ | (0.02 | ) |
As Adjusted | | $ | 911,839 |
| | 13.0 | % | | $ | 102,348 |
| | $ | — |
| | $ | — |
| | $ | 33,338 |
| | $ | 0.036 |
| | $ | 6,332 |
| | $ | 22,842 |
| | $ | 0.77 |
|
| | | | | | | | | | | | | | | | | | | | |
Percentage of Revenue | | | | | | 9.8 | % | | | | | | 3.2 | % | | | | | | 2.2 | % | | |
| | | | | | | | | | | | | | | | | | | | |
1 - Asset write-downs primarily relate to asset impairments and accelerated depreciation. | | | | | | | | |
2 - Costs related to acquisitions include third party professional, legal and other expenses associated with successful and unsuccessful full or partial acquisition and divestiture/dissolution transactions, as well as certain employee-related expenses such as travel, one-time bonuses and post-acquisition severance separate from a formal restructuring plan. |
3 - Restructuring related costs include items such as employee severance charges, lease termination charges, curtailment gains/losses, other employee termination costs and charges related to the reorganization of the legal entity structure. |
4 - Inventory step-up costs include the adjustment for fair value of inventory acquired as a result of acquisition purchase accounting. |
5 - Tax benefits (charges) include the effect of the adjustments to the Germany and Brazil valuation allowances in fiscal 2013. |
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Three months ended February 28, |
EMEA | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 105,626 |
| | $ | 106,343 |
| | $ | (717 | ) | | (0.7 | )% | | 83,217 |
| | 82,658 |
| | 559 |
| | 0.7 | % |
Engineered plastics | | 115,133 |
| | 83,887 |
| | 31,246 |
| | 37.2 | % | | 69,605 |
| | 51,575 |
| | 18,030 |
| | 35.0 | % |
Distribution services | | 82,985 |
| | 83,874 |
| | (889 | ) | | (1.1 | )% | | 99,284 |
| | 98,892 |
| | 392 |
| | 0.4 | % |
Specialty powders | | 43,367 |
| | 35,380 |
| | 7,987 |
| | 22.6 | % | | 42,469 |
| | 37,467 |
| | 5,002 |
| | 13.4 | % |
Custom performance colors | | 35,913 |
| | 32,714 |
| | 3,199 |
| | 9.8 | % | | 11,641 |
| | 11,107 |
| | 534 |
| | 4.8 | % |
Total EMEA | | $ | 383,024 |
| | $ | 342,198 |
| | $ | 40,826 |
| | 11.9 | % | | 306,216 |
| | 281,699 |
| | 24,517 |
| | 8.7 | % |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Three months ended February 28, |
Americas | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 63,460 |
| | $ | 64,557 |
| | $ | (1,097 | ) | | (1.7 | )% | | 67,705 |
| | 72,642 |
| | (4,937 | ) | | (6.8 | )% |
Engineered plastics | | 43,873 |
| | 32,774 |
| | 11,099 |
| | 33.9 | % | | 28,585 |
| | 20,046 |
| | 8,539 |
| | 42.6 | % |
Distribution services | | 11,150 |
| | 10,734 |
| | 416 |
| | 3.9 | % | | 12,096 |
| | 12,888 |
| | (792 | ) | | (6.1 | )% |
Specialty powders | | 32,720 |
| | 31,452 |
| | 1,268 |
| | 4.0 | % | | 45,569 |
| | 49,470 |
| | (3,901 | ) | | (7.9 | )% |
Custom performance colors | | 5,896 |
| | 4,688 |
| | 1,208 |
| | 25.8 | % | | 2,279 |
| | 1,766 |
| | 513 |
| | 29.0 | % |
Total Americas | | $ | 157,099 |
| | $ | 144,205 |
| | $ | 12,894 |
| | 8.9 | % | | 156,234 |
| | 156,812 |
| | (578 | ) | | (0.4 | )% |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Three months ended February 28, |
APAC | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 19,883 |
| | $ | 18,644 |
| | $ | 1,239 |
| | 6.6 | % | | 17,929 |
| | 14,771 |
| | 3,158 |
| | 21.4 | % |
Engineered plastics | | 23,884 |
| | 7,247 |
| | 16,637 |
| | 229.6 | % | | 16,013 |
| | 4,004 |
| | 12,009 |
| | n/a |
|
Distribution services | | 271 |
| | — |
| | 271 |
| | 100.0 | % | | 361 |
| | — |
| | 361 |
| | 100.0 | % |
Specialty powders | | 3,776 |
| | 2,909 |
| | 867 |
| | 29.8 | % | | 3,462 |
| | 2,935 |
| | 527 |
| | 18.0 | % |
Custom performance colors | | 571 |
| | 237 |
| | 334 |
| | 140.9 | % | | 429 |
| | 80 |
| | 349 |
| | n/a |
|
Total APAC | | $ | 48,385 |
| | $ | 29,037 |
| | $ | 19,348 |
| | 66.6 | % | | 38,194 |
| | 21,790 |
| | 16,404 |
| | 75.3 | % |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Three months ended February 28, |
Consolidated | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 188,969 |
| | $ | 189,544 |
| | $ | (575 | ) | | (0.3 | )% | | 168,851 |
| | 170,071 |
| | (1,220 | ) | | (0.7 | )% |
Engineered plastics | | 182,890 |
| | 123,908 |
| | 58,982 |
| | 47.6 | % | | 114,203 |
| | 75,625 |
| | 38,578 |
| | 51.0 | % |
Distribution services | | 94,406 |
| | 94,608 |
| | (202 | ) | | (0.2 | )% | | 111,741 |
| | 111,780 |
| | (39 | ) | | — | % |
Specialty powders | | 79,863 |
| | 69,741 |
| | 10,122 |
| | 14.5 | % | | 91,500 |
| | 89,872 |
| | 1,628 |
| | 1.8 | % |
Custom performance colors | | 42,380 |
| | 37,639 |
| | 4,741 |
| | 12.6 | % | | 14,349 |
| | 12,953 |
| | 1,396 |
| | 10.8 | % |
Total Consolidated | | $ | 588,508 |
| | $ | 515,440 |
| | $ | 73,068 |
| | 14.2 | % | | 500,644 |
| | 460,301 |
| | 40,343 |
| | 8.8 | % |
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Six months ended February 28, |
EMEA | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 214,526 |
| | $ | 221,746 |
| | $ | (7,220 | ) | | (3.3 | )% | | 168,557 |
| | 170,646 |
| | (2,089 | ) | | (1.2 | )% |
Engineered plastics | | 237,349 |
| | 173,360 |
| | 63,989 |
| | 36.9 | % | | 144,762 |
| | 106,726 |
| | 38,036 |
| | 35.6 | % |
Distribution services | | 161,218 |
| | 160,491 |
| | 727 |
| | 0.5 | % | | 191,678 |
| | 192,530 |
| | (852 | ) | | (0.4 | )% |
Specialty powders | | 90,408 |
| | 73,129 |
| | 17,279 |
| | 23.6 | % | | 89,467 |
| | 79,647 |
| | 9,820 |
| | 12.3 | % |
Custom performance colors | | 71,985 |
| | 64,960 |
| | 7,025 |
| | 10.8 | % | | 23,972 |
| | 22,181 |
| | 1,791 |
| | 8.1 | % |
Total EMEA | | $ | 775,486 |
| | $ | 693,686 |
| | $ | 81,800 |
| | 11.8 | % | | 618,436 |
| | 571,730 |
| | 46,706 |
| | 8.2 | % |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Six months ended February 28, |
Americas | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 126,426 |
| | $ | 128,743 |
| | $ | (2,317 | ) | | (1.8 | )% | | 138,529 |
| | 143,272 |
| | (4,743 | ) | | (3.3 | )% |
Engineered plastics | | 74,970 |
| | 69,971 |
| | 4,999 |
| | 7.1 | % | | 46,742 |
| | 43,319 |
| | 3,423 |
| | 7.9 | % |
Distribution services | | 22,293 |
| | 21,745 |
| | 548 |
| | 2.5 | % | | 24,472 |
| | 26,296 |
| | (1,824 | ) | | (6.9 | )% |
Specialty powders | | 69,376 |
| | 64,007 |
| | 5,369 |
| | 8.4 | % | | 97,692 |
| | 100,345 |
| | (2,653 | ) | | (2.6 | )% |
Custom performance colors | | 10,561 |
| | 9,313 |
| | 1,248 |
| | 13.4 | % | | 4,033 |
| | 3,416 |
| | 617 |
| | 18.1 | % |
Total Americas | | $ | 303,626 |
| | $ | 293,779 |
| | $ | 9,847 |
| | 3.4 | % | | 311,468 |
| | 316,648 |
| | (5,180 | ) | | (1.6 | )% |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Six months ended February 28, |
APAC | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 40,409 |
| | $ | 37,981 |
| | $ | 2,428 |
| | 6.4 | % | | 35,474 |
| | 30,209 |
| | 5,265 |
| | 17.4 | % |
Engineered plastics | | 45,282 |
| | 15,395 |
| | 29,887 |
| | 194.1 | % | | 29,593 |
| | 8,231 |
| | 21,362 |
| | 259.5 | % |
Distribution services | | 803 |
| | 19 |
| | 784 |
| | n/a |
| | 1,004 |
| | 14 |
| | 990 |
| | n/a |
|
Specialty powders | | 7,026 |
| | 6,428 |
| | 598 |
| | 9.3 | % | | 6,423 |
| | 6,440 |
| | (17 | ) | | (0.3 | )% |
Custom performance colors | | 1,273 |
| | 237 |
| | 1,036 |
| | n/a |
| | 962 |
| | 80 |
| | 882 |
| | n/a |
|
Total APAC | | $ | 94,793 |
| | $ | 60,060 |
| | $ | 34,733 |
| | 57.8 | % | | 73,456 |
| | 44,974 |
| | 28,482 |
| | 63.3 | % |
| | | | | | | | | | | | | | | | |
| | Net Sales | | Pounds Sold |
| | Six months ended February 28, |
Consolidated | | 2014 | | 2013 | | $ Change | | % Change | | 2014 | | 2013 | | Lbs. Change | | % Change |
| | (In thousands, except for %'s) |
Masterbatch Solutions | | $ | 381,361 |
| | $ | 388,470 |
| | $ | (7,109 | ) | | (1.8 | )% | | 342,560 |
| | 344,127 |
| | (1,567 | ) | | (0.5 | )% |
Engineered plastics | | 357,601 |
| | 258,726 |
| | 98,875 |
| | 38.2 | % | | 221,097 |
| | 158,276 |
| | 62,821 |
| | 39.7 | % |
Distribution services | | 184,314 |
| | 182,255 |
| | 2,059 |
| | 1.1 | % | | 217,154 |
| | 218,840 |
| | (1,686 | ) | | (0.8 | )% |
Specialty powders | | 166,810 |
| | 143,564 |
| | 23,246 |
| | 16.2 | % | | 193,582 |
| | 186,432 |
| | 7,150 |
| | 3.8 | % |
Custom performance colors | | 83,819 |
| | 74,510 |
| | 9,309 |
| | 12.5 | % | | 28,967 |
| | 25,677 |
| | 3,290 |
| | 12.8 | % |
Total Consolidated | | $ | 1,173,905 |
| | $ | 1,047,525 |
| | $ | 126,380 |
| | 12.1 | % | | 1,003,360 |
| | 933,352 |
| | 70,008 |
| | 7.5 | % |
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(continued)
|
| | | | | | | | | | | | | | | | |
| | Three months ended February 28, | | Six months ended February 28, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| | Unaudited (In thousands, except for %'s) |
Segment gross profit | | | | | | | | |
EMEA | | $ | 47,499 |
| | $ | 39,930 |
| | $ | 99,439 |
| | $ | 85,033 |
|
Americas | | 21,226 |
| | 18,735 |
| | 42,659 |
| | 40,161 |
|
APAC | | 6,527 |
| | 4,938 |
| | 13,150 |
| | 10,492 |
|
Total segment gross profit | | 75,252 |
| | 63,603 |
| | 155,248 |
| | 135,686 |
|
Inventory step-up | | (782 | ) | | — |
| | (1,199 | ) | | (138 | ) |
Accelerated depreciation and restructuring related | | (171 | ) | | (404 | ) | | (642 | ) | | (682 | ) |
Total gross profit | | $ | 74,299 |
| | $ | 63,199 |
| | $ | 153,407 |
| | $ | 134,866 |
|
| | | | | | | | |
Segment operating income | | | | | | | | |
EMEA | | $ | 17,553 |
| | $ | 11,521 |
| | $ | 37,972 |
| | $ | 27,666 |
|
Americas | | 6,269 |
| | 5,845 |
| | 13,632 |
| | 13,637 |
|
APAC | | 3,176 |
| | 2,405 |
| | 6,542 |
| | 5,494 |
|
Total segment operating income | | 26,998 |
| | 19,771 |
| | 58,146 |
| | 46,797 |
|
Corporate | | (7,714 | ) | | (7,512 | ) | | (14,397 | ) | | (13,459 | ) |
Costs related to acquisitions | | (1,851 | ) | | (675 | ) | | (2,487 | ) | | (987 | ) |
Restructuring and related costs | | (2,792 | ) | | (1,669 | ) | | (6,164 | ) | | (3,606 | ) |
Accelerated depreciation | | — |
| | (404 | ) | | (108 | ) | | (682 | ) |
Asset impairment | | (104 | ) | | — |
| | (104 | ) | | (498 | ) |
Curtailment gain (loss) | | — |
| | — |
| | — |
| | (333 | ) |
Inventory step-up | | (782 | ) | | — |
| | (1,199 | ) | | (138 | ) |
Operating income | | 13,755 |
| | 9,511 |
| | 33,687 |
| | 27,094 |
|
Interest expense, net | | (2,407 | ) | | (1,806 | ) | | (4,536 | ) | | (3,367 | ) |
Foreign currency transaction gains (losses) | | (1,466 | ) | | 40 |
| | (2,148 | ) | | (539 | ) |
Other income (expense), net | | 193 |
| | 211 |
| | 271 |
| | 347 |
|
Income from continuing operations before taxes | | $ | 10,075 |
| | $ | 7,956 |
| | $ | 27,274 |
| | $ | 23,535 |
|
| | | | | | | | |
Capacity utilization | | | | | | | | |
EMEA | | 77 | % | | 70 | % | | 82 | % | | 75 | % |
Americas | | 60 | % | | 61 | % | | 64 | % | | 64 | % |
APAC | | 72 | % | | 65 | % | | 70 | % | | 70 | % |
Worldwide | | 69 | % | | 66 | % | | 73 | % | | 70 | % |