January 6, 2015

A. Schulman Reports Fiscal 2015 First-Quarter Results and Reaffirms Full-Year Guidance

- Net income from continuing operations for the first quarter of fiscal 2015 was $13.2 million, or $0.45 per diluted share, compared with $12.4 million, or $0.43 per diluted share, in the fiscal 2014 first quarter
- Adjusted net income from continuing operations for the first quarter of fiscal 2015, excluding certain items, was $18.5 million, or $0.63 per diluted share, a 10.5% improvement over the prior year
- Company reaffirms its fiscal 2015 adjusted net income guidance of $2.60 to $2.65 per diluted share

AKRON, Ohio, Jan. 6, 2015 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today earnings for the fiscal first quarter ended November 30, 2014.

Bernard Rzepka, President and Chief Executive Officer, said, "We are pleased by the good start to fiscal 2015. Our European team was able to maintain relatively flat results in a difficult economic landscape while our Americas and APAC regions more than offset the weakness in Europe. Our seasoned leaders will continue to take proactive steps such as the recently announced restructuring initiatives to drive efficiencies and help mitigate foreign exchange fluctuations. We had solid contributions from our recent acquisitions and continue to execute on our organic initiatives to create a strong and sustainable pipeline of innovative products and seek out value-added markets."

Fiscal First-Quarter Results

Net sales for the fiscal 2015 first quarter were $615.1 million, an increase of 5% compared with $585.4 million in the prior-year quarter. Foreign currency translation negatively impacted net sales by $26.2 million. Excluding the impact of foreign currency translation, revenues would have increased by $55.9 million to $641.3 million for the quarter, up 9.5% over the prior-year period. Gross margin, excluding certain items, in the first quarter as a percent of net sales improved to 14.2% compared with 13.7% in the prior-year period.

Net sales for EMEA in the quarter were $371.2 million, a decrease of $21.3 million, or 5.4%, compared with the prior-year period.  Foreign currency translation negatively impacted net sales by $21.5 million. The benefit from the Company's recent Specialty Plastics acquisition was offset by a decline in organic sales across all product families. EMEA gross profit was $49.7 million, a decrease of $2.2 million compared with the same prior-year period. The decrease in the segment's gross profit was mainly attributed to the unfavorable foreign currency translation impact of $3 million, lower organic volumes and higher pension expense of $0.2 million which were only partially offset by the incremental contribution of the Specialty Plastics acquisition.

Net sales for the Americas were $190.9 million, an increase of 30.3% or $44.4 million in the first quarter compared with the prior-year period. Volume increased 19.8% or 30.7 million pounds during the quarter.  The incremental contribution of the recent acquisitions accounted for virtually all of the change in both net sales and volume during the quarter, which was a direct result of the Company's successful acquisition strategy. Foreign currency translation negatively impacted net sales by $4.2 million. Segment gross profit for the Americas was $30.3 million in the quarter, an increase of $8.8 million or 41% compared with the same period last year.  The increase was primarily attributed to the contributions from recent acquisitions and improved product mix in the Company's Specialty Powders product family.

Net sales for APAC were $53 million, an increase of 14.1% or $6.6 million in the first quarter compared with the prior-year period. Volume increased 19.8% or 7 million pounds during the quarter. During the quarter, the Compco acquisition in Australia contributed net sales and volume of $3.4 million and 2.3 million pounds, respectively. Excluding the Compco acquisition, organic volume increased across nearly all product families but was partially offset by decreased price per pound driven by competitive pricing pressures. Segment gross profit for APAC for the quarter increased $0.6 million or 9.5% compared with the prior-year period.

Working Capital/Cash Flow From Operations

Cash provided from operations was $10.3 million in the first quarter of fiscal 2015 compared with $9.8 million for the first quarter of fiscal 2014. Working capital was flat at 58 days at the end of the fiscal 2015 and 2014 first quarters.

Capital expenditures for the quarter were $10.3 million compared with $9.6 million for the prior-year quarter, and were primarily related to the regular and ongoing investment in the Company's global manufacturing facilities. During the first quarter of fiscal 2015, the Company declared and paid quarterly cash dividends for a total amount of $6.0 million and repurchased shares of common stock for a total cost of $3.3 million.

Business Outlook

Rzepka said, "Despite our double-digit earnings growth in the first quarter, we believe fiscal 2015 will be challenging. We are already seeing the adverse impact related to macro economic conditions and currency fluctuations. However, we will continue to aggressively focus on our acquisition strategy, proactive restructuring actions, and marketing initiatives which are gaining good traction to overcome economic events which are out of our control. We are working hard to realize optimal synergies from our recent acquisitions; evaluating our footprint to match current demand; and efficiently managing our expenses. The focus we have on safety, smart sales and smart savings will help us to offset the slow global economic environment while allowing us to better serve our customers and position us for growth. As a result, we remain confident that our fiscal 2015 adjusted net income will be in the range of $2.60 to $2.65 per diluted share."

Conference Call on the Web

A live Internet broadcast of A. Schulman's conference call regarding fiscal 2015 first-quarter earnings can be accessed at 10:00 a.m. Eastern Time on Wednesday, January 7, 2015, 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 3,900 people and has 43 manufacturing facilities globally.  A. Schulman reported net sales of approximately $2.5 billion for the fiscal year ended August 31, 2014. 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, segment operating income, operating income before 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:

  • 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, 2014. 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

 


A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS




Three months ended November 30,


2014


2013


Unaudited

(In thousands, except per share data)

Net sales

$

615,053


$

585,397

Cost of sales

528,209


506,289

Selling, general and administrative expenses

60,547


57,398

Restructuring expense

5,219


1,778

Operating income

21,078


19,932

Interest expense

2,359


2,191

Interest income

(95)


(62)

Foreign currency transaction (gains) losses

1,099


682

Other (income) expense, net

(159)


(78)

Income from continuing operations before taxes

17,874


17,199

Provision (benefit) for U.S. and foreign income taxes

4,486


4,568

Income from continuing operations

13,388


12,631

Income (loss) from discontinued operations, net of tax

(10)


2,655

Net income

13,378


15,286

Noncontrolling interests

(220)


(215)

Net income attributable to A. Schulman, Inc.

$

13,158


$

15,071







Weighted-average number of shares outstanding:





Basic

29,017


29,017

Diluted

29,468


29,205







Basic earnings per share attributable to A. Schulman, Inc.






Income from continuing operations

$

0.45


$

0.43

Income (loss) from discontinued operations


0.09

Net income attributable to A. Schulman, Inc.

$

0.45


$

0.52







Diluted earnings per share attributable to A. Schulman, Inc.






Income from continuing operations

$

0.45


$

0.43

Income (loss) from discontinued operations


0.09

Net income attributable to A. Schulman, Inc.

$

0.45


$

0.52






Cash dividends per common share

$

0.205


$

0.200

 

 


A. SCHULMAN, INC.

CONSOLIDATED BALANCE SHEETS






November 30,
 2014


August 31,
 2013


Unaudited

(In thousands)

ASSETS






Current assets:




Cash and cash equivalents

$

132,109


$

135,493

Accounts receivable, less allowance for doubtful accounts of $10,674 at November 30, 2014 and $10,844 at August 31, 2014

376,486


384,444

Inventories

296,539


292,141

Prepaid expenses and other current assets

47,591


40,473

Total current assets

852,725


852,551

Property, plant and equipment, at cost:




Land and improvements

27,155


28,439

Buildings and leasehold improvements

154,656


160,858

Machinery and equipment

394,884


398,563

Furniture and fixtures

39,785


41,255

Construction in progress

17,676


16,718

Gross property, plant and equipment

634,156


645,833

Accumulated depreciation

384,143


391,912

Net property, plant and equipment

250,013


253,921

Deferred charges and other noncurrent assets

63,376


65,079

Goodwill

198,649


202,299

Intangible assets, net

131,488


138,634

Total assets

$

1,496,251


$

1,512,484

LIABILITIES AND EQUITY






Current liabilities:




Accounts payable

$

314,315


$

314,957

U.S. and foreign income taxes payable

6,075


6,385

Accrued payroll, taxes and related benefits

47,661


54,199

Other accrued liabilities

52,270


46,054

Short-term debt

32,012


31,748

Total current liabilities

452,333


453,343

Long-term debt

353,262


339,546

Pension plans

123,923


129,949

Deferred income taxes

23,222


23,826

Other long-term liabilities

28,704


29,369

Total liabilities

981,444


976,033

Commitments and contingencies




Stockholders' equity:




Common stock, $1 par value, authorized - 75,000 shares, issued - 48,186 shares at November 30, 2014 and 48,185 shares at August 31, 2014

48,186


48,185

Additional paid-in capital

269,818


268,545

Accumulated other comprehensive income (loss)

(41,946)


(16,691)

Retained earnings

614,094


606,898

Treasury stock, at cost, 19,081 shares at November 30, 2014 and 18,973 shares at August 31, 2014

(383,199)


(379,894)

Total A. Schulman, Inc.'s stockholders' equity

506,953


527,043

Noncontrolling interests

7,854


9,408

Total equity

514,807


536,451

Total liabilities and equity

$

1,496,251


$

1,512,484

 

 

A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS




Three months ended
November 30,


2014


2013


Unaudited

(In thousands)

Operating from continuing and discontinued operations:




Net income

13,378


15,286

Adjustments to reconcile net income to net cash provided from (used in) operating activities:




Depreciation

8,963


7,865

Amortization

4,066


3,244

Deferred tax provision

633


(693)

Pension, postretirement benefits and other compensation

2,452


2,550

Gain on sale of assets from discontinued operations


(3,028)

Changes in assets and liabilities, net of acquisitions:




Accounts receivable

(4,731)


(12,681)

Inventories

(16,341)


(25,936)

Accounts payable

8,200


24,826

Income taxes

463


765

Accrued payroll and other accrued liabilities

2,846


1,239

Other assets and long-term liabilities

(9,670)


(3,618)

Net cash provided from (used in) operating activities

10,259


9,819

Investing from continuing and discontinued operations:




Expenditures for property, plant and equipment

(10,324)


(9,601)

Proceeds from the sale of assets

904


3,087

Business acquisitions, net of cash

(6,698)


(51,322)

Net cash provided from (used in) investing activities

(16,118)


(57,836)

Financing from continuing and discontinued operations:




Cash dividends paid

(5,962)


(5,915)

Increase (decrease) in short-term debt

870


3,294

Borrowings on long-term debt

27,500


457,000

Repayments on long-term debt including current portion

(10,915)


(444,649)

Payment of debt issuance costs


(1,731)

Noncontrolling interests' contributions (distributions)

(1,750)


Issuances of stock, common and treasury

71


211

Purchases of treasury stock

(3,335)


(1,116)

Net cash provided from (used in) financing activities

6,479


7,094

Effect of exchange rate changes on cash

(4,004)


1,672

Net increase (decrease) in cash and cash equivalents

(3,384)


(39,251)

Cash and cash equivalents at beginning of period

135,493


134,054

Cash and cash equivalents at end of period

$

132,109


$

94,803







 

 

A. SCHULMAN, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures





















Three months ended November 30, 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

$

528,209


14.1%


$

60,547


$

5,219


$


$

21,078


$

0.039


$

4,486


$

13,158


$

0.45

Certain items:
























Asset write-downs (1)













Costs related to acquisitions and integrations (2)

(50)




(1,003)




1,053





77


976


0.03

Restructuring and related costs (3)




(360)


(5,219)



5,579





1,483


4,096


0.14

Inventory step-up (4)

(341)







341





102


239


0.01

Tax benefits (charges)













Loss (income) from discontinued operations


















10


Total certain items

(391)


0.1%


(1,363)


(5,219)



6,973


0.013


1,662


5,321


0.18

As Adjusted

$

527,818


14.2%


$

59,184


$


$


$

28,051


$

0.052


$

6,148


$

18,479


$

0.63





























Percentage of Revenue






9.6%







4.6%







3.0%































Three months ended November 30, 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

$

506,289


13.5%


$

57,398


$

1,778


$


$

19,932


$

0.040


$

4,568


$

15,071


$

0.52

Certain items:


























Asset write-downs (1)

(108)








108





1


107


Costs related to acquisitions and integrations (2)





(635)




635





89


546


0.02

Restructuring and related costs (3)

(363)





(1,231)


(1,778)



3,372





322


3,340


0.11

Inventory step-up (4)

(417)








417





98


319


0.01

Loss (income) from discontinued operations




















(2,655)


(0.09)

Total certain items

(888)


0.2%


(1,866)


(1,778)



4,532


0.009


510


1,657


0.05

As Adjusted

$

505,401


13.7%


$

55,532


$


$


$

24,464


$

0.049


$

5,078


$

16,728


$

0.57




























Percentage of Revenue







9.5%






4.2%








2.9%



 


1 - Asset write-downs primarily relate to asset impairments and accelerated depreciation.

2 - Costs related to acquisitions and integrations primarily include third party professional, legal and other expenses associated with successful and unsuccessful full or partial acquisition and divestiture/dissolution transactions. Additionally, costs related to acquisitions include certain employee-related expenses such as acquisition-related travel and integration costs.

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






Net Sales


Pounds Sold


Three months ended November 30,

EMEA

2014


2013


$ Change


% Change


2014


2013


Lbs. Change


% Change


(In thousands, except for %'s)

Custom Performance Color

$

33,459


$

36,073


$

(2,614)


(7.2)

%


11,509


12,331


(822)


(6.7)

 

%

Masterbatch Solutions

116,400


108,901


7,499


6.9

%


97,330


85,340


11,990


14.0

%

Engineered Plastics

109,273


122,216


(12,943)


(10.6)

%


71,690


75,157


(3,467)


(4.6)

 

%

Specialty powders

41,450


47,040


(5,590)


(11.9)

%


43,443


46,998


(3,555)


(7.6)

 

%

Distribution Services

70,609


78,232


(7,623)


(9.7)

 

%


92,486


92,394


92


0.1

%

    Total EMEA

$

371,191


$

392,462


$

(21,271)


(5.4)

 

%


316,458


312,220


4,238


1.4

%

























Net Sales


Pounds Sold


Three months ended November 30,

Americas

2014


2013


$ Change


% Change


2014


2013


Lbs. Change


% Change


(In thousands, except for %'s)

Custom Performance Color

$

11,388


$

8,166


$

3,222


39.5

%


3,869


2,604


1,265


48.6

%

Masterbatch Solutions

65,291


53,476


11,815


22.1

%


73,143


62,528


10,615


17.0

%

Engineered Plastics

59,967


37,084


22,883


61.7

%


38,769


25,605


13,164


51.4

%

Specialty powders

37,135


36,657


478


1.3

%


52,968


52,122


846


1.6

%

Distribution Services

17,107


11,144


5,963


53.5

%


17,159


12,375


4,784


38.7

%

    Total Americas

$

190,888


$

146,527


$

44,361


30.3

%


185,908


155,234


30,674


19.8

%


























Net Sales


Pounds Sold


Three months ended November 30,

APAC

2014


2013


$ Change


% Change


2014


2013


Lbs. Change


% Change


(In thousands, except for %'s)

Custom Performance Color

$

3,231


$

702


$

2,529


360.3

%


2,371


533


1,838


344.8

%

Masterbatch Solutions

20,339


20,526


(187)


(0.9)

 

%


18,853


17,544


1,309


7.5

%

Engineered Plastics

25,276


21,398


3,878


18.1

%


16,905


13,580


3,325


24.5

%

Specialty powders

3,772


3,250


522


16.1

%


3,691


2,962


729


24.6

%

Distribution Services

356


532


(176)


(33.1)

 

%


410


643


(233)


(36.2)

 

%

    Total APAC

$

52,974


$

46,408


$

6,566


14.1

%


42,230


35,262


6,968


19.8

%


























Net Sales


Pounds Sold


Three months ended November 30,

Consolidated

2014


2013


$ Change


% Change


2014


2013


Lbs. Change


% Change


(In thousands, except for %'s)

Custom Performance Color

$

48,078


$

44,941


$

3,137


7.0

%


17,749


15,468


2,281


14.7

%

Masterbatch Solutions

202,030


182,903


19,127


10.5

%


189,326


165,412


23,914


14.5

%

Engineered Plastics

194,516


180,698


13,818


7.6

%


127,364


114,342


13,022


11.4

%

Specialty powders

82,357


86,947


(4,590)


(5.3)

 

%


100,102


102,082


(1,980)


(1.9)

 

%

Distribution Services

88,072


89,908


(1,836)


(2.0)

 

%


110,055


105,412


4,643


4.4

%

    Total Consolidated

$

615,053


$

585,397


$

29,656


5.1

%


544,596


502,716


41,880


8.3

%

 

 

A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION

(continued)





Three months ended November 30,


2014


2013


Unaudited

(In thousands, except for %'s)

Segment gross profit






EMEA

$

49,706



$

51,940


Americas

30,279



21,433


APAC

7,250



6,623


     Total segment gross profit

87,235



79,996


Inventory step-up

(341)



(417)


Accelerated depreciation and restructuring related



(471)


Costs related to acquisitions and integrations

(50)




     Total gross profit

$

86,844



$

79,108








Segment operating income






EMEA

$

20,039



$

20,417


Americas

11,988



7,364


APAC

3,508



3,366


Total segment operating income

35,535



31,147


Corporate

(7,484)



(6,683)


Costs related to acquisitions and integrations

(1,053)



(635)


Restructuring and related costs

(5,579)



(3,372)


Accelerated depreciation



(108)


Inventory step-up

(341)



(417)


Operating income

21,078



19,932


Interest expense, net

(2,264)



(2,129)


Foreign currency transaction gains (losses)

(1,099)



(682)


Other income (expense), net

159



78


Income from continuing operations before taxes

$

17,874



$

17,199








Capacity utilization






EMEA

87

%


87

%

Americas

67

%


67

%

APAC

65

%


67

%

Worldwide

76

%


77

%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/a-schulman-reports-fiscal-2015-first-quarter-results-and-reaffirms-full-year-guidance-300016793.html

SOURCE A. Schulman, Inc.

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