April 5, 2016

A. Schulman Reports Fiscal 2016 Second Quarter Results

- Fiscal second quarter 2016 reported earnings per share from continuing operations were a loss of $0.02, compared with a loss of $0.03 in the prior year period; adjusted earnings were $0.31 per share, compared with $0.39 per share in the fiscal 2015 second quarter.
- Net sales were $591.8 million, an increase of 9.1% compared with the prior-year quarter.
- Adjusted EBITDA rose 60% compared with the prior year period; debt was reduced by $41.9 million from the prior year end.
- Adjusted operating income rose 52%, compared with the prior year quarter; adjusted gross margin expanded to 15.9%, up 140 basis points.

AKRON, Ohio, April 5, 2016 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq: SHLM), a leading international supplier of high-performance plastic compounds, composites, powders, and resins, today announced earnings for the fiscal second quarter ended February 29, 2016.

"Without question, we are disappointed with our fiscal second-quarter adjusted earnings results and reduced outlook for fiscal 2016," said Bernard Rzepka, president and chief executive officer.  "As the quarter progressed, we experienced lower volumes across our legacy businesses and our recent Citadel acquisition. While the deepest contractions have been in the oil & gas markets, there also has been a slowdown in some of our other markets in both Europe and North America. Additionally, costs continued to be incurred to resolve the Lucent issues involving falsified test results which we uncovered last year as we implemented our Citadel integration plans." 

Rzepka continued, "Despite the slowdown in volume, we showed significant improvements in operating margins in nearly all of our reportable segments. This is evidence of our progress towards our strategic vision of moving beyond plastic compounding, to transform A. Schulman into a specialty plastics solutions company. We have devoted additional resources toward accelerating the recognition of synergy and restructuring benefits, cost savings initiatives as well as broadening the scope of the 'Manufacturing for Success' productivity program. These programs will yield further benefits in the second half of the fiscal year and beyond."

Fiscal Second-Quarter Results
Net sales for the fiscal 2016 second quarter were $591.8 million, an increase of 9.1% compared with the prior-year quarter. Foreign currency translation negatively impacted net sales by $35.6 million. Net sales from the Citadel acquisition contributed $102.0 million during the quarter. Excluding the incremental sales from the Citadel acquisition and negative foreign currency impact, net sales declined 3.1% as the Company continued to experience lower volume in its U.S. and Canada ("USCAN") segment, and slightly negative volumes in the Europe, Middle East and Africa ("EMEA") segment. 

Adjusted gross margin in the second quarter as a percent of net sales increased to 15.9% compared with 14.5% in the prior-year period as the Company continues to move its portfolio towards specialty products. 

The Company reported a loss from continuing operations of $0.02 per diluted share, compared with a loss of $0.03 per diluted share in the prior-year period. On an adjusted basis, excluding certain Lucent, restructuring and acquisitions-related costs, the Company generated net income of $0.31 per diluted share compared to $0.39 per diluted share in the prior-year period.

EMEA net sales were $290.3 million compared with $315.1 million in the same prior-year period. Excluding the unfavorable impact of foreign currency translation of $21 million, revenues fell 1.2% primarily related to Distribution Services. Adjusted gross profit margin fell 70 basis points to 13.4%, after excluding the negative impact of foreign currency translation of $2.8 million.

Net sales for USCAN were $170.8 million in the quarter, compared with $133.4 million in the prior-year period. Excluding the $54.6 million of acquired Citadel revenue, legacy revenues fell 12.9%.

"The revenue and volume weakness primarily affected our Masterbatch Solutions, Specialty Powders and Engineered Plastics businesses. We experienced lower customer demand both from the impact of market slowdowns, as well as declines from customer destocking related to lower oil prices," said Rzepka. "Despite the softness in these businesses, USCAN delivered adjusted gross margin of 15.9%, up 110 basis points, as the impact of the Citadel integration and our strategic actions such as 'Manufacturing for Success' and cost savings initiatives accelerated."

Latin America's ("LATAM") net sales for the quarter were $38.2 million. Excluding the unfavorable impact of foreign currency translation of $9.3 million, revenues increased over 15%, the third successive quarter of double-digit growth. This increase was primarily a result of strong volume growth in Masterbatch Solutions due to our continued successful strategic focus in the packaging and agricultural markets in the region. LATAM adjusted gross profit of 22.2% was a record for the segment, up 490 basis points from the prior year driven by improved product mix.

Asia Pacific ("APAC") net sales were $45.1 million. Adjusting for a negative foreign exchange impact of $5.0 million, revenues fell 4.8% primarily related to weaker regional demand and customer destocking. APAC adjusted gross profit margin was 18.2%, up 420 basis points from the prior period due to improved product mix.

Engineered Composites ("EC") net sales for the quarter were $47.4 million. While EC was acquired on June 1, 2015, for comparison purposes, the legacy revenues declined 8.6% from the year-ago period results, after adjusting for foreign currency. Organic volumes in the legacy EC business improved by 1% but continued to be offset by domestic weakness in products sold into the fracking industry.

Citadel Integration
"As we stated on March 14, 2016, we now expect this acquisition to be accretive in fiscal 2017. In the meantime, we remain focused on capturing our stated Citadel integration synergy savings of $20 million by the end of fiscal 2016 and expect to achieve the full run rate of $25 million during fiscal 2017," said Rzepka. "These integration efforts are underway, and are contributing as expected in the current quarter results. Despite a weaker global economic environment and the attention to resolving the Lucent matter, we are committed to our integration efforts, attaining revenue synergies and generating additional savings in order to achieve our accretion goal."

Lucent Update
As previously reported by the Company including its filings with the SEC, Lucent falsified test results on documents provided to customers and other parties pertaining to the physical properties of Lucent products.

Rzepka said, "At this juncture, we have completed the majority of our internal investigation. We have reviewed our legal position in connection with the purchase agreement of Citadel and we believe that the sellers are responsible to compensate A. Schulman for the Lucent losses that we have and may incur. Therefore, we intend to take full advantage of our contractual rights to pursue remedy.  The Company has provided a written claim notice to this effect to the sellers and to the escrow agent with respect to the $31 million indemnity escrow established.  Further, we believe that appropriate compensation of this matter exceeds the escrow amount.  The Company has engaged Skadden Arps as special litigation counsel for this matter."

The Company incurred a total of $2.1 million of costs related to this matter in the second quarter, including increased product and manufacturing operational costs, additional legal and investigative costs and other costs associated with remediation. On a year-to-date basis, these costs totaled $7 million.

Rzepka noted that no customers or other parties have yet to initiate recalls or have made material claims against the Company or have sought to terminate their relationships with A. Schulman.

Working Capital/Cash Flow
Net cash provided from operations was $30.6 million in the six months ending February 29, 2016, compared to $1.1 million in the year-ago period. Working capital days were 71 days in the current quarter, compared to 64 days in the first quarter of fiscal 2016, primarily due to an increase in accounts receivable days.

Year-to-date capital expenditures were $20.4 million, compared with $21.2 million in the prior year period. During the fiscal 2016 second quarter the Company reduced debt by $11.8 million and continues to focus on deleveraging the balance sheet as quickly as possible. Net leverage on an adjusted basis has increased to 4.22x. The Company made prepayments of €50.0 million on its Euro Term Loan B debt during the six months ended February 29, 2016, in addition to normal required payments of $7.5 million on all term debt.

During the second quarter of fiscal 2016, the Company declared and paid quarterly cash dividends of $0.205 per common share, for a total of $6.0 million. In addition, a quarterly cash dividend of $15.00 per share was declared and paid on the 125,000 shares of the Company's convertible special stock, representing a $1.9 million cash outflow.

Business Outlook
Rzepka said, "Thus far, market demand in fiscal 2016 has slowed from our initial outlook initiated in November 2015.  In particular, the steep contractions in oil & gas capital spending and operational activity have rippled out into many other sectors of industrial activity. Despite the additional company-wide cost reduction actions we implemented after the first quarter shortfall, we concluded that we will not achieve our initial earnings target and, on March 14, 2016, we issued new full-year fiscal 2016 adjusted earnings guidance of $2.40 to $2.45 per diluted share.

"As we move past the Lucent matter from an operational perspective, we are focused on delivering on our strategic transformation, and realizing the value that we clearly see in Citadel," he said.

Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2016 second quarter results will be held on Wednesday, April 6, 2016 at 11 a.m. Eastern time.  The conference call will be available via a live webcast and a replay will be archived for 90 days. To access the webcast or replay, visit the Company's website, www.aschulman.com.

Investor Presentation Materials
Senior executives of the Company participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which are being 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 5,000 people and has 58 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.4 billion for the fiscal year ended August 31, 2015. Additional information about A. Schulman can be found at www.aschulman.com.

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 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 could 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 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 and unanticipated developments regarding contingencies, such as pending and future litigation and other claims, including developments that would require increases in our costs and/or reserves for such contingencies;
  • 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;
  • operating problems with our information systems as a result of system security failures such as viruses, cyber-attacks or other causes;
  • our current debt position could adversely affect our financial health and prevent us from fulfilling our financial obligations;
  • integration of acquisitions, including most recently Citadel, with our existing business, including the risk that the integration will be more costly or more time consuming and complex or simply less effective than anticipated;
  • our ability to achieve the anticipated synergies, cost savings and other benefits from the Citadel acquisition;
  • substantial time devoted by management to the integration of the Citadel acquisition; and
  • failure of counterparties to perform under the terms and conditions of contractual arrangements, including suppliers, customers, buyers and sellers of a business and other third parties with which the Company contracts.

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, 2015. 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


(Unaudited)

Three months ended


Six months ended


February 29,
2016


February 28,
2015


February 29,
2016


February 28,
2015


(In thousands, except per share data)

Net sales

$

591,761



$

542,295



$

1,240,980



$

1,157,348



Cost of sales

501,937



464,221



1,046,227



992,430



Selling, general and administrative expenses

71,604



70,093



148,841



130,640



Restructuring expense

2,214



2,662



3,760



7,881



Operating income

16,006



5,319



42,152



26,397



Interest expense

13,790



2,311



27,408



4,670



Foreign currency transaction (gains) losses

950



1,141



1,679



2,240



Other (income) expense, net

(88)



(311)



(17)



(565)



Gain on early extinguishment of debt



(1,290)





(1,290)



Income (loss) from continuing operations before taxes

1,354



3,468



13,082



21,342



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

(487)



3,971



3,764



8,457



Income (loss) from continuing operations

1,841



(503)



9,318



12,885



Income (loss) from discontinued operations, net of tax

181



(58)



201



(68)



Net income (loss)

2,022



(561)



9,519



12,817



Noncontrolling interests

(430)



(327)



(834)



(547)



Net income (loss) attributable to A. Schulman, Inc.

1,592



(888)



8,685



12,270



Convertible special stock dividends

1,875





3,750





Net income (loss) available to A. Schulman, Inc. common stockholders

$

(283)



$

(888)



$

4,935



$

12,270











Weighted-average number of shares outstanding:








Basic

29,292



29,138



29,257



29,078



Diluted

29,292



29,138



29,455



29,538











Basic earnings per share available to A. Schulman, Inc. common stockholders








Income (loss) from continuing operations

$

(0.02)



$

(0.03)



$

0.16



$

0.42



Income (loss) from discontinued operations

0.01





0.01





Net income (loss) available to A. Schulman, Inc. common stockholders

$

(0.01)



$

(0.03)



$

0.17



$

0.42











Diluted earnings per share available to A. Schulman, Inc. common stockholders








Income (loss) from continuing operations

$

(0.02)



$

(0.03)



$

0.16



$

0.42



Income (loss) from discontinued operations

0.01





0.01





Net income (loss) available to A. Schulman, Inc. common stockholders

$

(0.01)



$

(0.03)



$

0.17



$

0.42











Cash dividends per common share

$

0.205



$

0.205



$

0.410



$

0.410



Cash dividends per share of convertible Special Stock

$

15.00



$



$

30.00



$



 

 

 


A. SCHULMAN, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



February 29,
 2016


August 31,
 2015


(In thousands)

ASSETS

Current assets:




Cash and cash equivalents

$

46,878



$

96,872


Accounts receivable, less allowance for doubtful accounts of $11,052 at February 29, 2016 and $10,777 at August 31, 2015

390,372



413,943


Inventories

299,726



317,328


Prepaid expenses and other current assets

61,134



60,205


Total current assets

798,110



888,348


Property, plant and equipment, at cost:




Land and improvements

32,754



31,674


Buildings and leasehold improvements

171,463



164,759


Machinery and equipment

427,870



427,183


Furniture and fixtures

34,694



34,393


Construction in progress

24,718



23,866


Gross property, plant and equipment

691,499



681,875


Accumulated depreciation

379,157



367,381


Net property, plant and equipment

312,342



314,494


Deferred charges and other noncurrent assets

87,955



90,749


Goodwill

622,801



623,583


Intangible assets, net

413,862



434,537


Total assets

$

2,235,070



$

2,351,711


LIABILITIES AND EQUITY

Current liabilities:




Accounts payable

$

271,198



$

305,385


U.S. and foreign income taxes payable

910



4,205


Accrued payroll, taxes and related benefits

42,770



56,192


Other accrued liabilities

76,019



70,824


Short-term debt

25,170



20,710


Total current liabilities

416,067



457,316


Long-term debt

999,013



1,045,349


Pension plans

114,638



117,889


Deferred income taxes

113,636



115,537


Other long-term liabilities

22,632



22,885


Total liabilities

1,665,986



1,758,976


Commitments and contingencies




Stockholders' equity:




Convertible special stock, no par value

120,289



120,289


Common stock, $1 par value, authorized - 75,000 shares, issued - 48,503 shares at February 29, 2016 and 48,369 shares at August 31, 2015

48,503



48,369


Additional paid-in capital

275,588



274,319


Accumulated other comprehensive income (loss)

(101,591)



(83,460)


Retained earnings

600,582



607,690


Treasury stock, at cost, 19,073 shares at February 29, 2016 and 19,077 shares at August 31, 2015

(383,047)



(383,121)


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

560,324



584,086


Noncontrolling interests

8,760



8,649


Total equity

569,084



592,735


Total liabilities and equity

$

2,235,070



$

2,351,711


 

 

 


A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Six months ended


February 29,
2016


February 28,
2015


(In thousands)

Operating from continuing and discontinued operations:




Net income

$

9,519



$

12,817


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




Depreciation

25,053



17,990


Amortization

20,032



8,271


Deferred tax provision (benefit)

(2,360)



(96)


Pension, postretirement benefits and other compensation

2,621



6,173


Restricted stock compensation - CEO transition costs, net of cash



4,789


Changes in assets and liabilities, net of acquisitions:




Accounts receivable

10,822



(4,197)


Inventories

4,772



3,838


Accounts payable

(30,846)



(38,126)


Income taxes

(1,491)



(1,210)


Accrued payroll and other accrued liabilities

(5,773)



(3,159)


Other assets and long-term liabilities

(1,712)



(6,003)


Net cash provided from (used in) operating activities

30,637



1,087


Investing from continuing and discontinued operations:




Expenditures for property, plant and equipment

(20,365)



(21,238)


Investment in equity investees



(12,456)


Proceeds from the sale of assets

843



1,366


Business acquisitions, net of cash



(6,698)


Net cash provided from (used in) investing activities

(19,522)



(39,026)


Financing from continuing and discontinued operations:




Cash dividends paid to special stockholders

(3,750)




Cash dividends paid to common stockholders

(12,043)



(12,006)


Increase (decrease) in short-term debt

4,275



(3,415)


Borrowings on long-term debt

45,655



122,330


Repayments on long-term debt including current portion

(91,350)



(91,381)


Noncontrolling interests' contributions (distributions)



(1,750)


Issuances of stock, common and treasury

148



132


Redemptions of common stock

(900)



(4,999)


Purchases of treasury stock



(3,335)


Net cash provided from (used in) financing activities

(57,965)



5,576


Effect of exchange rate changes on cash

(3,144)



(11,258)


Net increase (decrease) in cash and cash equivalents

(49,994)



(43,621)


Cash and cash equivalents at beginning of period

96,872



135,493


Cash and cash equivalents at end of period

$

46,878



$

91,872






 

 

 


A. SCHULMAN, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures

Unaudited


Three months ended February 29, 2016


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income Tax Expense (Benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

501,937



15.2

%


$

71,604



$

2,214



$

16,006



$

0.027



$

14,652



$

(487)



$

(283)



$

(0.01)


Certain items:





















Accelerated depreciation (1)


(2,049)





(8)





2,057







479



1,578



0.05


Costs related to acquisitions and integrations (2)


(1,970)





(2,291)





4,261







1,022



3,239



0.11


Restructuring and related costs (3)


(455)





(3,100)



(2,214)



5,769





(265)



1,381



4,653



0.17


Lucent costs (4)


452





(1,063)





611







51



560



0.02


Accelerated amortization of deferred financing fees (5)














(164)



38



126




Tax benefits (charges) (6)
















498



(498)



(0.02)


Loss (income) from discontinued operations


















(181)



(0.01)


Total certain items


(4,022)



0.7

%


(6,462)



(2,214)



12,698



0.021



(429)



3,469



9,477



0.32


As Adjusted


$

497,915



15.9

%


$

65,142



$



$

28,704



$

0.048



$

14,223



$

2,982



$

9,194



$

0.31























Percentage of Revenue






11.0

%




4.9

%








1.6

%
























Effective Tax Rate
















20.6

%


























Three months ended February 28, 2015


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income Tax Expense (Benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS



(In thousands, except for %'s, per pound and per share data)

As reported


$

464,221



14.4

%


$

70,093



$

2,662



$

5,319



$

0.010



$

1,851



$

3,971



$

(888)



$

(0.03)


Certain items:





















Costs related to acquisitions and integrations (2)


(65)





(3,272)





3,337







202



3,135



0.11


Restructuring and related costs (3)


(298)





(819)



(2,662)



3,779







519



3,260



0.11


CEO transition costs (8)






(6,167)





6,167









6,167



0.21


Asset write-downs (9)


(298)









298









298



0.01


Gain on early extinguishment of debt (10)














1,290



(427)



(863)



(0.03)


Tax benefits (charges) (6)
















(283)



283



0.01


Loss (income) from discontinued operations


















58




Total certain items


(661)



0.1

%


(10,258)



(2,662)



13,581



0.027



1,290



11



12,338



0.42


As Adjusted


$

463,560



14.5

%


$

59,835



$



$

18,900



$

0.037



$

3,141



$

3,982



$

11,450



$

0.39























Percentage of Revenue






11.0

%




3.5

%








2.1

%
























Effective Tax Rate
















25.3

%


























Six months ended February 29, 2016


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income Tax Expense (Benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

1,046,227



15.7

%


$

148,841



$

3,760



$

42,152



$

0.034



$

29,070



$

3,764



$

4,935



$

0.17


Certain items:





















Accelerated depreciation (1)


(3,496)





(14)





3,510







885



2,625



0.09


Costs related to acquisitions and integrations (2)


(2,099)





(4,028)





6,127







1,544



4,583



0.15


Restructuring and related costs (3)


(885)





(5,794)



(3,760)



10,439





(562)



2,772



8,229



0.28


Lucent costs (4)


(1,378)





(2,939)





4,317







1,088



3,229



0.11


Accelerated amortization of deferred financing fees (5)














(274)



69



205



0.01


Tax benefits (charges) (6)
















(467)



467



0.02


Loss (income) from discontinued operations


















(201)



(0.01)


Total certain items


(7,858)



0.6

%


(12,775)



(3,760)



24,393



0.020



(836)



5,891



19,137



0.65


As Adjusted


$

1,038,369



16.3

%


$

136,066



$



$

66,545



$

0.054



$

28,234



$

9,655



$

24,072



$

0.82























Percentage of Revenue






11.0

%




5.4

%








1.9

%
























Effective Tax Rate
















25.2

%


























Six months ended February 28, 2015


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income Tax Expense (Benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS



(In thousands, except for %'s, per pound and per share data)

As reported


$

992,430



14.2

%


$

130,640



$

7,881



$

26,397



$

0.025



$

5,055



$

8,457



$

12,270



$

0.42


Certain items:





















Costs related to acquisitions and integrations (2)


(115)





(4,274)





4,389







278



4,111



0.14


Restructuring and related costs (3)


(298)





(1,180)



(7,881)



9,359







2,002



7,357



0.24


CEO transition costs (8)






(6,167)





6,167









6,167



0.21


Asset write-downs (9)


(298)









298









298



0.01


Inventory step-up (7)


(341)









341







102



239



0.01


Gain on early extinguishment of debt (10)














1,290



(427)



(863)



(0.03)


Tax benefits (charges) (6)
















(282)



282



0.01


Loss (income) from discontinued operations


















68




Total certain items


(1,052)



0.1

%


(11,621)



(7,881)



20,554



0.019



1,290



1,673



17,659



0.59


As Adjusted


$

991,378



14.3

%


$

119,019



$



$

46,951



$

0.044



$

6,345



$

10,130



$

29,929



$

1.01























Percentage of Revenue






10.3

%




4.1

%








2.6

%
























Effective Tax Rate
















24.9

%
















































1 - Accelerated depreciation is related to restructuring plans in the Company's USCAN and EMEA segments. Refer to Note 14 in the Company's Quarterly Report on Form 10-Q for further discussion.


2 - Costs related to acquisitions and integrations primarily include third party professional, legal, IT 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, bonuses and post-acquisition severance separate from a formal restructuring plan.


3 - Restructuring and 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 - Lucent costs primarily represent legal and investigation costs related to resolving the Lucent matter, product manufacturing costs for reworking existing Lucent inventory, obsolete Lucent inventory reserve costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations.


5 - Write off of deferred financing costs related to the €50.0 million prepayment of the Euro Term Loan B.


6 - Tax benefits (charges) represent the Company's quarterly non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.


7 - Inventory step-up costs represent the amortization of adjustments to fair value of inventory acquired for acquisition purchase accounting.


8 - CEO transition costs represent a charge for the modification and accelerated vesting upon retirement of the outstanding equity compensation awards granted to Joseph M. Gingo in 2013 and 2014.


9 - Asset write-downs primarily relate to asset impairments.


10 - Represents a pre-tax net gain of $1.3 million on the early extinguishment of debt.

 

 

 


A. SCHULMAN, INC.

ADJUSTED EBITDA RECONCILIATION

(Unaudited)



Three months ended


Six months ended


February 29, 2016


February 28, 2015


February 29, 2016


February 28, 2015


(In thousands)









Net income available to A. Schulman, Inc. common stockholders, as adjusted (1)

$

9,194



$

11,450



$

24,072



$

29,929


Interest expense, as adjusted (2)

13,628



2,311



27,135



4,670


Provision for U.S. and foreign income taxes, as adjusted (1)

2,982



3,982



9,655



10,130


Depreciation, as adjusted (3)

10,983



8,728



21,531



17,691


Amortization

9,993



4,033



20,032



7,994


Minority Interest

430



327



834



547


Special Stock Dividends

1,875





3,750




EBITDA, as adjusted

$

49,085



$

30,831



$

107,009



$

70,961











(1) - For a list of certain items to reconcile between "net income available to A. Schulman, Inc. common stockholders" and "net income available to A. Schulman, Inc. common stockholders, as adjusted", refer to the reconciliation of GAAP and non-GAAP financial measures.


(2) - Adjusted interest expense excludes the accelerated amortization of deferred financing costs related to the prepayment of €50.0 million  the Euro Term Loan B as they are already included (1).


(3) - Adjusted depreciation excludes accelerated depreciation charges as they are already included in (1).

 

 

 

A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION

(Unaudited)




Net Sales


Pounds Sold



Three months ended

EMEA


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

30,354



$

31,834



$

(1,480)



(4.6)

%


12,357



11,811



546



4.6

%

Masterbatch solutions


92,635



96,798



(4,163)



(4.3)

%


93,915



92,027



1,888



2.1

%

Engineered plastics


86,094



90,077



(3,983)



(4.4)

%


67,269



63,491



3,778



6.0

%

Specialty powders


31,793



35,286



(3,493)



(9.9)

%


37,930



43,603



(5,673)



(13.0)

%

Distribution services


49,454



61,151



(11,697)



(19.1)

%


76,879



97,926



(21,047)



(21.5)

%

Total EMEA


$

290,330



$

315,146



$

(24,816)



(7.9)

%


288,350



308,858



(20,508)



(6.6)

%




















Net Sales


Pounds Sold



Three months ended

USCAN


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

9,556



$

10,093



$

(537)



(5.3)

%


3,477



3,395



82



2.4

%

Masterbatch solutions


32,556



39,101



(6,545)



(16.7)

%


46,693



50,533



(3,840)



(7.6)

%

Engineered plastics


92,907



44,894



48,013



106.9

%


91,530



27,972



63,558



227.2

%

Specialty powders


21,048



22,390



(1,342)



(6.0)

%


28,083



33,678



(5,595)



(16.6)

%

Distribution services


14,750



16,956



(2,206)



(13.0)

%


19,682



17,891



1,791



10.0

%

Total USCAN


$

170,817



$

133,434



$

37,383



28.0

%


189,465



133,469



55,996



42.0

%





































Net Sales


Pounds Sold



Three months ended

LATAM


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

1,029



$

1,236



$

(207)



(16.7)

%


391



504



(113)



(22.4)

%

Masterbatch solutions


20,933



20,247



686



3.4

%


16,859



14,544



2,315



15.9

%

Engineered plastics


9,759



10,775



(1,016)



(9.4)

%


7,945



7,892



53



0.7

%

Specialty powders


6,437



8,875



(2,438)



(27.5)

%


7,513



7,453



60



0.8

%

Distribution services








N/A








N/A

Total LATAM


$

38,158



$

41,133



$

(2,975)



(7.2)

%


32,708



30,393



2,315



7.6

%




















Net Sales


Pounds Sold



Three months ended

APAC


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

2,904



$

2,702



$

202



7.5

%


2,462



1,823



639



35.1

%

Masterbatch solutions


18,494



19,324



(830)



(4.3)

%


20,792



19,715



1,077



5.5

%

Engineered plastics


22,654



27,466



(4,812)



(17.5)

%


19,366



19,426



(60)



(0.3)

%

Specialty powders


720



2,682



(1,962)



(73.2)

%


773



2,776



(2,003)



(72.2)

 

%

Distribution services


291



408



(117)



(28.7)

%


447



517



(70)



(13.5)

 

%

Total APAC


$

45,063



$

52,582



$

(7,519)



(14.3)

%


43,840



44,257



(417)



(0.9)

%





































Net Sales


Pounds Sold



Six months ended

EMEA


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

63,194



$

68,513



$

(5,319)



(7.8)

%


25,522



24,395



1,127



4.6

%

Masterbatch solutions


197,915



209,526



(11,611)



(5.5)

%


196,602



188,249



8,353



4.4

%

Engineered plastics


186,874



199,802



(12,928)



(6.5)

%


142,316



135,215



7,101



5.3

%

Specialty powders


67,802



76,735



(8,933)



(11.6)

%


80,772



87,045



(6,273)



(7.2)

%

Distribution services


102,641



131,761



(29,120)



(22.1)

%


158,064



190,412



(32,348)



(17.0)

%

Total EMEA


$

618,426



$

686,337



$

(67,911)



(9.9)

%


603,276



625,316



(22,040)



(3.5)

%




















Net Sales


Pounds Sold



Six months ended

USCAN


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

19,172



$

20,315



$

(1,143)



(5.6)

%


6,919



6,817



102



1.5

%

Masterbatch solutions


65,071



82,437



(17,366)



(21.1)

%


94,665



108,693



(14,028)



(12.9)

%

Engineered plastics


193,084



92,668



100,416



108.4

%


189,482



58,053



131,429



226.4

%

Specialty powders


43,070



48,659



(5,589)



(11.5)

%


58,321



77,820



(19,499)



(25.1)

%

Distribution services


28,702



34,062



(5,360)



(15.7)

%


38,523



35,050



3,473



9.9

%

Total USCAN


$

349,099



$

278,141



$

70,958



25.5

%


387,910



286,433



101,477



35.4

%




















Net Sales


Pounds Sold



Six months ended

LATAM


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

2,458



$

2,403



$

55



2.3

%


914



951



(37)



(3.9)

%

Masterbatch solutions


45,045



42,202



2,843



6.7

%


35,301



29,527



5,774



19.6

%

Engineered plastics


20,949



22,968



(2,019)



(8.8)

%


17,405



16,579



826



5.0

%

Specialty powders


14,909



19,741



(4,832)



(24.5)

%


16,446



16,280



166



1.0

%

Distribution services








N/A








N/A

Total LATAM


$

83,361



$

87,314



$

(3,953)



(4.5)

%


70,066



63,337



6,729



10.6

%




















Net Sales


Pounds Sold



Six months ended

APAC


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

5,539



$

5,932



$

(393)



(6.6)

%


4,553



4,194



359



8.6

%

Masterbatch solutions


38,483



39,663



(1,180)



(3.0)

%


42,565



38,568



3,997



10.4

%

Engineered plastics


44,724



52,742



(8,018)



(15.2)

%


37,389



36,331



1,058



2.9

%

Specialty powders


1,638



6,455



(4,817)



(74.6)

%


1,817



6,467



(4,650)



(71.9)

%

Distribution services


371



764



(393)



(51.4)

%


559



927



(368)



(39.7)

%

Total APAC


$

90,755



$

105,556



$

(14,801)



(14.0)

%


86,883



86,487



396



0.5

%


















 

 




Net Sales


Pounds Sold



Three months ended February 29,

Consolidated


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

43,843



$

45,865



$

(2,022)



(4.4)

%


18,687



17,533



1,154



6.6

%

Engineered composites


47,393





47,393



N/A


40,825





40,825



N/A

Masterbatch solutions


164,618



175,470



(10,852)



(6.2)

%


178,259



176,819



1,440



0.8

%

Engineered plastics


211,414



173,212



38,202



22.1

%


186,110



118,781



67,329



56.7

%

Specialty powders


59,998



69,233



(9,235)



(13.3)

%


74,299



87,510



(13,211)



(15.1)

%

Distribution services


64,495



78,515



(14,020)



(17.9)

%


97,008



116,334



(19,326)



(16.6)

%

Total Consolidated


$

591,761



$

542,295



$

49,466



9.1

%


595,188



516,977



78,211



15.1

%




















Net Sales


Pounds Sold



Six months ended

Consolidated


February 29, 2016


February 28, 2015


$ Change


% Change


February 29, 2016


February 28, 2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom performance colors


$

90,363



$

97,163



$

(6,800)



(7.0)

%


37,908



36,357



1,551



4.3

%

Engineered composites


99,339





99,339



N/A


84,921





84,921



N/A

Masterbatch solutions


346,514



373,828



(27,314)



(7.3)

%


369,133



365,037



4,096



1.1

%

Engineered plastics


445,631



368,180



77,451



21.0

%


386,592



246,178



140,414



57.0

%

Specialty powders


127,419



151,590



(24,171)



(15.9)

%


157,356



187,612



(30,256)



(16.1)

%

Distribution services


131,714



166,587



(34,873)



(20.9)

%


197,146



226,389



(29,243)



(12.9)

%

Total Consolidated


$

1,240,980



$

1,157,348



$

83,632



7.2

%


1,233,056



1,061,573



171,483



16.2

%


















 

 


A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION


(Unaudited)

Three months ended


Six months ended


February 29, 2016


February 28, 2015


February 29, 2016


February 28, 2015


(In thousands, except for %'s)

Segment gross profit








EMEA

$

38,953



$

44,507



$

86,637



$

94,213


USCAN

27,241



19,745



57,535



44,374


LATAM

8,466



7,101



18,171



12,751


APAC

8,199



7,382



16,073



14,632


EC

10,987





24,195




     Total segment gross profit

93,846



78,735



202,611



165,970


Inventory step-up







(341)


Accelerated depreciation and restructuring related costs

(2,504)



(596)



(4,381)



(596)


Costs related to acquisitions and integrations

(1,970)



(65)



(2,099)



(115)


Lucent costs

452





(1,378)




     Total gross profit

$

89,824



$

78,074



$

194,753



$

164,918










Segment operating income








EMEA

$

15,612



$

16,277



$

35,765



$

36,316


USCAN

10,427



5,925



22,590



17,317


LATAM

4,229



2,281



9,833



2,877


APAC

4,670



3,423



8,977



6,931


EC

1,450





5,552




Total segment operating income

36,388



27,906



82,717



63,441


Corporate

(7,684)



(9,006)



(16,172)



(16,490)


Costs related to acquisitions and integrations

(4,261)



(3,337)



(6,127)



(4,389)


Restructuring and related costs

(5,769)



(3,779)



(10,439)



(9,359)


Accelerated depreciation

(2,057)



(298)



(3,510)



(298)


Lucent costs

(611)





(4,317)




Inventory step-up







(341)


CEO transition costs



(6,167)





(6,167)


Operating income

16,006



5,319



42,152



26,397


Interest expense

(13,790)



(2,311)



(27,408)



(4,670)


Foreign currency transaction gains (losses)

(950)



(1,141)



(1,679)



(2,240)


Other income (expense), net

88



311



17



565


Gain on early extinguishment of debt



1,290





1,290


Income from continuing operations before taxes

$

1,354



$

3,468



$

13,082



$

21,342










Capacity utilization








EMEA

71

%


78

%


79

%


85

%

USCAN

64

%


60

%


67

%


64

%

LATAM

66

%


64

%


72

%


68

%

APAC

64

%


62

%


65

%


64

%

EC

64

%


%


67

%


%

Worldwide

67

%


69

%


71

%


73

%

 

 

 

A. SCHULMAN, INC.

Sales by Geographical Region

(Unaudited)




Three months ended February 29, 2016



(In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

170,817



31.4

%


$

33,848



71.4

%


$

204,665



34.6

%

Europe


290,330



53.3

%


5,452



11.5

%


295,782



50.0

%

Mexico / South America


38,158



7.0

%


8,093



17.1

%


46,251



7.8

%

Asia Pacific


45,063



8.3

%




%


45,063



7.6

%

Total


$

544,368



100.0

%


$

47,393



100.0

%


$

591,761



100.0

%
















Three months ended February 28, 2015



(In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

133,434



24.6

%


$



%


$

133,434



24.6

%

Europe


315,146



58.1

%




%


315,146



58.1

%

Mexico / South America


41,133



7.6

%




%


41,133



7.6

%

Asia Pacific


52,582



9.7

%




%


52,582



9.7

%

Total


$

542,295



100.0

%


$



%


$

542,295



100.0

%
















Six months ended February 29, 2016



(In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

349,099



30.6

%


$

71,169



71.6

%


$

420,268



33.9

%

Europe


618,426



54.2

%


11,448



11.5

%


629,874



50.8

%

Mexico / South America


83,361



7.3

%


16,722



16.9

%


100,083



8.0

%

Asia Pacific


90,755



7.9

%




%


90,755



7.3

%

Total


$

1,141,641



100.0

%


$

99,339



100.0

%


$

1,240,980



100.0

%
















Six months ended February 28, 2015



(In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

278,141



24.0

%


$



%


$

278,141



24.0

%

Europe


686,337



59.3

%




%


686,337



59.3

%

Mexico / South America


87,314



7.5

%




%


87,314



7.5

%

Asia Pacific


105,556



9.2

%




%


105,556



9.2

%

Total


$

1,157,348



100.0

%


$



%


$

1,157,348



100.0

%














 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/a-schulman-reports-fiscal-2016-second-quarter-results-300246637.html

SOURCE A. Schulman, Inc.

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