A SCHULMAN INC 
By AKRON, Ohio, Jan. 6, 2014 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today earnings for the fiscal 2014 first quarter ended November 30, 2013.
Joseph M. Gingo, Chairman, President and Chief Executive Officer, said, "We are extremely encouraged by our strong start to fiscal 2014 and expect to continue the trend of earnings improvement. During the quarter, we successfully capitalized on operational efficiencies in Europe, benefitted from prior restructuring in Europe and Latin America, as well as gained solid contributions from our bolt-on acquisitions globally."
Bernard Rzepka, Chief Operating Officer, stated, "The recovering and more stable automotive market in Europe has bolstered our engineered plastics business, and I am proud of the great strides our teams have made in our custom color business in Asia and Europe."
Summary of 2014 First-Quarter Results
(In Millions, Except EPS and Operating Income Per Pound)
-------------------------------------------------------
Q1 2014 Q1 2013 $ or lbs. %
Change Change
--- ------ ------
Volume (lbs.) 502.7 473.6 29.1 6%
Net Sales $585.4 $532.1 $53.3 10%
Net Income from
Continuing
Operations $12.4 $11.8 $0.6 5%
Adjusted Net
Income from
Continuing
Operations* $16.7 $14.6 $2.1 14%
Operating
Income $19.9 $17.6 $2.3 13%
Adjusted
Operating
Income* $24.5 $21.1 $3.4 16%
Adjusted
Operating
Income Per
lb.* $0.05 $0.04 $0.01 25%
Diluted EPS
from
Continuing
Operations as
Reported $0.43 $0.40 $0.03 8%
Diluted EPS
from
Continuing
Operations as
Adjusted* $0.57 $0.50 $0.07 14%
-------------- ----- ----- ----- ---
*The Company provides operating
results exclusive of certain items
such as costs related to
acquisitions, restructuring related
expenses and asset write-downs, as
these costs are not indicative of
the Company's ongoing core
operations. The operating results
presented in this manner are
considered relevant to aid analysis
and understanding of the Company's
results and business trends. See
note later in this release about the
use of non-GAAP financial measures.
Fiscal First-Quarter Results
In the fiscal 2014 first quarter, net sales in the Europe, Middle East and Africa (EMEA) segment increased 11.7% compared with the same period last year. During the quarter, the incremental contribution of the Perrite acquisition in EMEA was $23 million and 15.5 million pounds in net sales and volume, respectively. Additionally, sales and volume benefited from greater demand as a result of the stabilization in the automotive market as well as strong performance in the Company's color businesses, which successfully executed operational efficiency plans to gain market share within the region. Foreign currency translation positively impacted net sales by $13.7 million. EMEA gross profit was $51.9 million for the quarter, an increase of $7.9 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, product mix and savings from successful purchasing initiatives. Foreign currency translation positively impacted EMEA gross profit by $1.8 million.
Net sales for the Americas decreased by 2% compared with the prior-year period due to reduced volume primarily in the engineered plastics business. The reduction in pounds sold was primarily driven by the Company executing its strategy to increase specialty product sales and reduce less profitable commodity sales. Foreign currency translation negatively impacted net sales by $2.5 million. Gross profit for the Americas was $21.4 million in the quarter, an increase of $0.4 million compared with the same period last year. The benefit of prior restructuring initiatives and improved mix were partially offset by the negative impact of $0.3 million of foreign currency translation.
During the quarter, net sales for the Company's Asia Pacific (APAC) segment increased approximately 50% compared with the same prior-year period. The incremental contribution of the Perrite acquisition in APAC was $11.5 million and 8.5 million pounds in net sales and volume, respectively. Excluding the Perrite acquisition, volumes increased in nearly all businesses but were 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 19% compared with the prior-year period. This increase was primarily attributed to the positive contribution from the Perrite acquisition. Gross profit percentage declined as a result of product mix and competitive pricing pressures.
Working Capital/Cash Flow From Operations
Cash provided from operations was $9.8 million for the first quarter of fiscal 2014. The Company's cash and cash equivalents decreased $39.3 million from August 31, 2013. This decrease was driven primarily by the Perrite acquisition which was only partially offset by net cash provided from operations. Working capital was 58 days at the end of the fiscal 2014 first quarter, a decrease of three days when compared with the same period last year.
Capital expenditures for the quarter were $9.6 million compared with $4.8 million last year. The increase included $3.5 million related to the delayed purchase of land and building associated with our ECM acquisition in fiscal 2013. During the first quarter of fiscal 2014, the Company declared and paid quarterly cash dividends for a total amount of $5.9 million and repurchased shares of common stock for a total cost of $1.1 million.
Business Outlook
"While we are encouraged by the strong fiscal first-quarter performance, we believe it is wise to approach the rest of the year with cautious optimism as our markets remain competitive and the visibility of future demand is limited. In addition, our primary raw materials costs may increase more than currently anticipated and we have not seen a complete rebound in all of our geographies," Gingo said. "However, the positive contributions of our marketing initiatives, cost control efforts and the solid contribution of our recent acquisitions provide us the confidence to raise our expectations for 2014 adjusted net income guidance to a revised range of $2.13 to $2.18 per diluted share."
Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2014 first-quarter earnings can be accessed at 10:00 a.m. Eastern Time on Tuesday, January 7, 2014 on the Company's website, www.aschulman.com. An archived replay of the call will also be available on the website.
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 3,400 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: net income excluding certain items and net income per diluted share excluding certain items. 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 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:
-- 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;
-- the effectiveness of the Company's efforts to improve operating margins
through sales growth, price increases, productivity gains, and improved
purchasing techniques;
-- competitive factors, including intense price competition;
-- fluctuations in the value of currencies in major areas where the Company
operates;
-- volatility of prices and availability of the supply of energy and raw
materials that are critical to the manufacture of the Company's
products, particularly plastic resins derived from oil and natural gas;
-- changes in customer demand and requirements;
-- effectiveness of the Company to achieve the level of cost savings,
productivity improvements, growth and other benefits anticipated from
acquisitions, joint ventures 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 global automotive market as well as other markets
served;
-- further adverse changes in economic or industry conditions, including
global supply and demand conditions and prices for products; and
-- 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
www.aschulman.com
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended November 30,
-------------------------------
2013 2012
---- ----
Unaudited
(In thousands, except per share data)
Net sales $585,397 $532,085
Cost of sales 506,289 461,896
Selling, general and administrative
expenses 57,398 49,838
Restructuring expense 1,778 1,937
Asset impairment - 498
Curtailment (gain) loss - 333
--- ---
Operating income 19,932 17,583
Interest expense 2,191 1,768
Interest income (62) (207)
Foreign currency transaction
(gains) losses 682 579
Other (income) expense, net (78) (136)
--- ----
Income from continuing operations
before taxes 17,199 15,579
Provision (benefit) for U.S. and
foreign income taxes 4,568 3,437
----- -----
Income from continuing operations 12,631 12,142
Income (loss) from discontinued
operations, net of tax 2,655 3
----- ---
Net income 15,286 12,145
Noncontrolling interests (215) (366)
---- ----
Net income attributable to A.
Schulman, Inc. $15,071 $11,779
======= =======
Weighted-average number of shares outstanding:
Basic 29,017 29,217
Diluted 29,205 29,412
Basic earnings per share attributable to A.
Schulman, Inc.
Income from continuing operations $0.43 $0.40
Income (loss) from discontinued
operations 0.09 -
---- ---
Net income attributable to A.
Schulman, Inc. $0.52 $0.40
===== =====
Diluted earnings per share attributable to A.
Schulman, Inc.
Income from continuing operations $0.43 $0.40
Income (loss) from discontinued
operations 0.09 -
Net income attributable to A.
Schulman, Inc. $0.52 $0.40
===== =====
Cash dividends per common share $0.200 $0.195
====== ======
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
November 30, August 31,
2013 2013
---- ----
Unaudited
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $94,803 $134,054
Accounts receivable, less
allowance for doubtful accounts
of $10,760 at November 30, 2013
and $10,434 at August 31, 2013 359,383 310,749
Inventories, lower of average
cost or market 308,593 261,658
Prepaid expenses and other
current assets 42,965 41,224
------ ------
Total current assets 805,744 747,685
------- -------
Property, plant and equipment, at cost:
Land and improvements 29,452 27,954
Buildings and leasehold
improvements 154,077 146,647
Machinery and equipment 382,520 356,144
Furniture and fixtures 40,091 39,065
Construction in progress 11,008 7,149
------ -----
Gross property, plant and
equipment 617,148 576,959
Accumulated depreciation 386,942 366,438
Net property, plant and
equipment 230,206 210,521
------- -------
Deferred charges and other
noncurrent assets 51,610 48,723
Goodwill 154,825 139,526
Intangible assets, net 109,979 91,887
------- ------
Total assets $1,352,364 $1,238,342
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $327,090 $265,477
U.S. and foreign income taxes
payable 7,514 6,423
Accrued payroll, taxes and
related benefits 45,138 43,072
Other accrued liabilities 51,049 48,689
Short-term debt 21,685 8,373
------ -----
Total current liabilities 452,476 372,034
Long-term debt 211,425 207,435
Pension plans 102,553 98,599
Deferred income taxes 23,954 20,873
Other long-term liabilities 25,854 24,657
Total liabilities 816,262 723,598
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value,
authorized -75,000 shares,
issued -48,097 shares at
November 30, 2013 and 48,094
shares at August 31, 2013 48,097 48,094
Additional paid-in capital 264,212 263,158
Accumulated other comprehensive
income (loss) 12,699 682
Retained earnings 583,526 574,370
Treasury stock, at cost, 18,977
shares at November 30, 2013 and
18,940 shares at August 31,
2013 (379,984) (378,927)
-------- --------
Total A. Schulman, Inc.'s
stockholders' equity 528,550 507,377
------- -------
Noncontrolling interests 7,552 7,367
----- -----
Total equity 536,102 514,744
Total liabilities and equity $1,352,364 $1,238,342
========== ==========
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended November 30,
-------------------------------
2013 2012
---- ----
Unaudited
(In thousands)
Operating from continuing and discontinued
operations:
Net income $15,286 $12,145
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation 7,865 7,485
Amortization 3,244 2,871
Deferred tax provision (693) (1,502)
Pension and other postretirement
benefits 2,550 2,068
Asset impairment - 498
Curtailment (gain) loss - 333
Gain on sale of assets from
discontinued operations (3,028) -
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable (12,681) (6,133)
Inventories (25,936) (18,803)
Accounts payable 24,826 11,615
Income taxes 765 1,700
Accrued payroll and other accrued
liabilities 1,239 3,515
Other assets and long-term
liabilities (3,618) (5,449)
------ ------
Net cash provided from (used in)
operating activities 9,819 10,343
----- ------
Investing from continuing and discontinued
operations:
Expenditures for property, plant
and equipment (9,601) (4,811)
Proceeds from the sale of assets 3,087 7,689
Business acquisitions, net of cash (51,322) (36,360)
------- -------
Net cash provided from (used in)
investing activities (57,836) (33,482)
------- -------
Financing from continuing and discontinued
operations:
Cash dividends paid (5,915) (5,781)
Increase (decrease) in short-term
debt 3,294 2,397
Borrowings on long-term debt 457,000 45,046
Repayments on long-term debt (444,649) (35,809)
Payment of debt issuance costs (1,731) -
Issuances of stock, common and
treasury 211 432
Purchases of treasury stock (1,116) (479)
------ ----
Net cash provided from (used in)
financing activities 7,094 5,806
----- -----
Effect of exchange rate changes on
cash 1,672 444
----- ---
Net increase (decrease) in cash and
cash equivalents (39,251) (16,889)
------- -------
Cash and cash equivalents at
beginning of period 134,054 124,031
Cash and cash equivalents at end of
period $94,803 $107,142
======= ========
A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
Three months ended November 30,
-------------------------------
2013 2012
---- ----
Unaudited
(In thousands, except per share
data)
Net income attributable to A. Schulman, Inc.:
GAAP, as reported $15,071 $11,779
Income (loss) from discontinued operations, net of tax 2,655 3
----- ---
Net income from continuing operations $12,416 $11,776
Certain items, net of tax:
Asset write-downs (1) 107 626
Costs related to acquisitions (2) 546 312
Restructuring related (3) 3,340 1,762
Inventory step-up (4) 319 138
--- ---
Total certain items, net of tax $4,312 $2,838
------ ------
Non-GAAP $16,728 $14,614
======= =======
Non-GAAP diluted EPS $0.57 $0.50
===== =====
Weighted-average number of shares outstanding -diluted 29,205 29,412
1 - Asset write-downs primarily relate to asset impairments and accelerated depreciation.
2 - Costs related to acquisitions include those costs incurred to pursue intended targets.
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.
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
Three months ended November 30,
-------------------------------
2013 2012
---- ----
Unaudited
(In thousands, except for %'s)
Pounds sold to
unaffiliated
customers
EMEA 312,220 290,607
Americas 155,234 159,836
APAC 35,262 23,184
------ ------
Total pounds
sold to
unaffiliated
customers 502,716 473,627
======= =======
Net sales to
unaffiliated
customers
EMEA $392,462 $351,488
Americas 146,527 149,574
APAC 46,408 31,023
------ ------
Total net sales
to unaffiliated
customers $585,397 $532,085
======== ========
Segment gross
profit
EMEA $51,940 $44,060
Americas 21,433 20,991
APAC 6,623 5,554
----- -----
Total segment
gross profit 79,996 70,605
Inventory step-
up (417) (138)
Accelerated
depreciation
and
restructuring
related (471) (278)
---- ----
Total gross
profit $79,108 $70,189
======= =======
Segment
operating
income
EMEA $20,417 $16,145
Americas 7,364 7,792
APAC 3,366 3,089
----- -----
Total segment
operating
income 31,147 27,026
Corporate (6,683) (5,947)
Costs related to
acquisitions (635) (312)
Restructuring
related (3,372) (1,937)
Accelerated
depreciation (108) (278)
Asset impairment - (498)
Curtailment gain
(loss) - (333)
Inventory step-
up (417) (138)
---- ----
Operating income 19,932 17,583
Interest
expense, net (2,129) (1,561)
Foreign currency
transaction
gains (losses) (682) (579)
Other income
(expense), net 78 136
--- ---
Income from
continuing
operations
before taxes $17,199 $15,579
======= =======
Capacity
utilization
EMEA 87% 81%
Americas 67% 66%
APAC 67% 75%
Worldwide 77% 74%
SOURCE A. Schulman, Inc.
