Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 0-7459
A. SCHULMAN, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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34-0514850 |
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(State or Other Jurisdiction
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(I.R.S. Employer Identification No.) |
of Incorporation or Organization) |
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3550 West Market Street, Akron, Ohio
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44333 |
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(Address of Principal Executive Offices)
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(ZIP Code) |
Registrants telephone number, including area code: (330) 666-3751
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Number of shares of common stock, $1.00 par value, outstanding as of December 31, 2010
31,492,062
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF INCOME
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Three months ended November 30, |
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2010 |
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2009 |
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Unaudited |
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(In thousands, except per share data) |
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Net sales |
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$ |
495,383 |
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$ |
362,861 |
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Cost of sales |
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426,382 |
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299,703 |
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Selling, general and administrative expenses |
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52,905 |
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40,752 |
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Interest expense |
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1,285 |
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1,054 |
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Interest income |
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(200 |
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(253 |
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Foreign currency transaction (gains) losses |
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670 |
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103 |
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Other (income) expense |
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(4 |
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(1,177 |
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Restructuring expense |
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551 |
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429 |
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481,589 |
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340,611 |
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Income from continuing operations before taxes |
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13,794 |
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22,250 |
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Provision for U.S. and foreign income taxes |
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4,418 |
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5,112 |
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Income from continuing operations |
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9,376 |
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17,138 |
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Loss from discontinued operations, net of tax of $0 |
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(3 |
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Net income |
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9,376 |
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17,135 |
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Noncontrolling interests |
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(133 |
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(102 |
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Net income attributable to A. Schulman, Inc. |
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$ |
9,243 |
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$ |
17,033 |
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Weighted-average number of shares outstanding: |
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Basic |
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31,333 |
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25,843 |
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Diluted |
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31,530 |
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26,056 |
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Earnings (losses) per share of common stock
attributable to A. Schulman, Inc. Basic: |
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Income from continuing operations |
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$ |
0.29 |
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$ |
0.66 |
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Loss from discontinued operations |
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Net income attributable to common stockholders |
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$ |
0.29 |
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$ |
0.66 |
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Earnings (losses) per share of common stock
attributable to A. Schulman, Inc. Diluted: |
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Income from continuing operations |
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$ |
0.29 |
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$ |
0.65 |
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Loss from discontinued operations |
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Net income attributable to common stockholders |
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$ |
0.29 |
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$ |
0.65 |
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The accompanying notes are an integral part of the consolidated financial statements.
- 2 -
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
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November 30, 2010 |
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August 31, 2010 |
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Unaudited |
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(In thousands, except share data) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
99,030 |
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$ |
122,754 |
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Accounts receivable, less allowance for doubtful accounts of $13,953 at November 30, 2010 and $13,205 at August 31, 2010 |
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307,641 |
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282,953 |
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Inventories, average cost or market, whichever is lower |
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244,188 |
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209,228 |
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Prepaid expenses and other current assets |
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30,330 |
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29,128 |
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Total current assets |
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681,189 |
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644,063 |
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Other assets: |
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Deferred charges and other assets |
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33,747 |
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31,873 |
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Goodwill |
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91,465 |
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84,064 |
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Intangible assets |
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78,801 |
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72,352 |
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204,013 |
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188,289 |
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Property, plant and equipment, at cost: |
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Land and improvements |
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31,679 |
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30,891 |
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Buildings and leasehold improvements |
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161,148 |
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158,076 |
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Machinery and equipment |
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366,509 |
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357,270 |
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Furniture and fixtures |
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38,218 |
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37,078 |
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Construction in progress |
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7,348 |
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4,996 |
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604,902 |
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588,311 |
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Accumulated depreciation and investment grants of $727 at November 30, 2010 and $744 at August 31, 2010 |
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364,398 |
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349,348 |
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Net property, plant and equipment |
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240,504 |
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238,963 |
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Total assets |
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$ |
1,125,706 |
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$ |
1,071,315 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Short-term debt |
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$ |
86,978 |
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$ |
60,876 |
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Accounts payable |
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195,732 |
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195,977 |
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U.S. and foreign income taxes payable |
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7,890 |
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6,615 |
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Accrued payrolls, taxes and related benefits |
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47,868 |
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46,492 |
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Other accrued liabilities |
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46,540 |
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41,985 |
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Total current liabilities |
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385,008 |
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351,945 |
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Long-term debt |
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95,602 |
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93,834 |
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Pension plans |
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89,764 |
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86,872 |
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Other long-term liabilities |
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27,068 |
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25,297 |
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Deferred income taxes |
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22,474 |
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20,227 |
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Commitments and contingencies |
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Stockholders equity: |
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Common stock, $1 par value, authorized 75,000,000 shares, issued 47,689,857 shares at November 30, 2010 and
47,690,024 shares at August 31, 2010 |
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47,690 |
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47,690 |
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Other capital |
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250,638 |
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249,734 |
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Accumulated other comprehensive income |
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1,685 |
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(6,278 |
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Retained earnings |
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523,950 |
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519,649 |
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Treasury stock, at cost, 16,202,795 shares at November 30, 2010 and 16,205,230 at August 31, 2010 |
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(322,728 |
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(322,777 |
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Total A. Schulman, Inc. stockholders equity |
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501,235 |
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488,018 |
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Noncontrolling interests |
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4,555 |
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5,122 |
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Total equity |
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505,790 |
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493,140 |
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Total liabilities and equity |
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$ |
1,125,706 |
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$ |
1,071,315 |
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The accompanying notes are an integral part of the consolidated financial statements.
- 3 -
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three months ended November 30, |
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2010 |
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2009 |
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Unaudited |
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(In thousands) |
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Provided from (used in) operating activities: |
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Net income |
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$ |
9,376 |
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$ |
17,135 |
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Adjustments to reconcile net income to net cash provided from (used in) operating activities: |
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Depreciation and amortization |
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9,654 |
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5,750 |
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Deferred tax provision |
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(711 |
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(1,262 |
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Pension, postretirement benefits and other deferred compensation |
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2,153 |
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572 |
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Net losses (gains) on asset sales |
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88 |
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(39 |
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Changes in assets and liabilities: |
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Accounts receivable |
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(15,431 |
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(15,467 |
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Inventories |
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(27,579 |
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(25,945 |
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Accounts payable |
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(6,454 |
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17,617 |
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Restructuring accrual |
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(570 |
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(316 |
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Income taxes |
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1,622 |
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2,755 |
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Accrued payrolls and other accrued liabilities |
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4,884 |
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4,908 |
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Changes in other assets and other long-term liabilities |
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(2,084 |
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1,503 |
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Net cash provided from (used in) operating activities |
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(25,052 |
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7,211 |
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Provided from (used in) investing activities: |
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Expenditures for property, plant and equipment |
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(5,000 |
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(4,367 |
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Proceeds from the sale of assets |
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300 |
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435 |
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Business acquisitions, net of cash acquired |
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(15,071 |
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Net cash used in investing activities |
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(19,771 |
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(3,932 |
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Provided from (used in) financing activities: |
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Cash dividends paid |
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(4,942 |
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(3,958 |
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Increase (decrease) in notes payable and long-term debt |
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(4,013 |
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(33 |
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Borrowings on revolving credit facilities |
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53,500 |
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Repayments on revolving credit facilities |
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(25,000 |
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Cash distributions to noncontrolling interests |
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(700 |
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Common stock issued, net |
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(50 |
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Releases of treasury stock |
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49 |
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Net cash provided from (used in) financing activities |
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18,894 |
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(4,041 |
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Effect of exchange rate changes on cash |
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2,205 |
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9,109 |
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Net increase (decrease) in cash and cash equivalents |
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(23,724 |
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8,347 |
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Cash and cash equivalents at beginning of period |
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122,754 |
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228,674 |
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Cash and cash equivalents at end of period |
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$ |
99,030 |
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$ |
237,021 |
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The accompanying notes are an integral part of the consolidated financial statements.
- 4 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The unaudited interim consolidated financial statements included for A. Schulman, Inc. (the
Company) reflect all adjustments, which are, in the opinion of management, necessary for a
fair presentation of the results of the interim period presented. All such adjustments are
of a normal recurring nature. The year-end consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America (U.S. GAAP). The unaudited
consolidated financial information should be read in conjunction with the consolidated
financial statements and notes thereto incorporated in the Companys Annual Report on Form
10-K for the year ended August 31, 2010. |
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The results of operations for the three months ended November 30, 2010 are not necessarily
indicative of the results expected for the year ending August 31, 2011. |
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The accounting policies for the periods presented are the same as described in Note 1
Summary of Significant Accounting Policies to the consolidated financial statements
contained in the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2010, except for the adoption of new accounting pronouncements related to fair value
disclosures. The adoption of this accounting pronouncement is discussed in Note 16. |
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Certain items previously reported in specific financial statement captions have been
reclassified to conform to the fiscal 2011 presentation. |
(2) |
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CASH AND CASH EQUIVALENTS |
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All highly liquid investments purchased with an original maturity of three months or less
are considered to be cash equivalents. Such investments amounted to $20.1 million as of
November 30, 2010 and $18.4 million as of August 31, 2010. The Companys cash equivalents
and investments are diversified with numerous financial institutions which management
believes to have acceptable credit ratings. These investments are primarily money-market
funds and short-term time deposits. The money-market funds are primarily AAA rated by third
parties. Management continues to monitor the placement of its cash given the current credit
market. The recorded amount of these investments approximates fair value. Investments with
maturities between three and twelve months are considered to be short-term investments. As
of November 30, 2010 and August 31, 2010, the Company did not hold any short-term
investments. |
(3) |
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BUSINESS ACQUISITIONS |
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On March 1, 2010, the Company completed the purchase of McCann Color, Inc. (McCann Color),
a producer of high-quality color concentrates, based in North Canton, Ohio, for $8.8 million
in cash. The business provides specially formulated color concentrates to match precise
customer specifications. Its products are used in end markets such as packaging, lawn and
garden, furniture, consumer products and appliances. The operations serve customers from its
48,000-square-foot, expandable North Canton facility, which was built in 1998 exclusively to
manufacture color concentrates. The facility complements the Companys existing North
American masterbatch manufacturing and product development facilities in Akron, Ohio, San
Luis Potosi, Mexico, and La Porte, Texas. The results of operations from the McCann Color
acquisition are included in the accompanying consolidated financial statements for the
period from the acquisition date, March 1, 2010, and are reported in the Americas segment. |
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The acquisition was accounted for in accordance with the Financial Accounting Standards
Board (FASB) revised accounting standard for business combinations. The accounting
guidance for business combinations results in a new basis of accounting reflecting the
estimated fair values for assets acquired and liabilities assumed. The transaction was
financed with available cash. Tangible assets acquired and liabilities assumed were recorded
at their estimated fair values of $2.0 million and $0.5 million, respectively. The estimated
fair
values of finite-lived intangible assets acquired of $4.0 million related to intellectual
property and customer relationships are being amortized over their estimated useful lives of
15 years. Goodwill of $3.4 million represents the excess of cost over the estimated fair
value of net tangible and intangible assets acquired. The information included herein has
been prepared based on the allocation of the purchase price using estimates of the fair
value and useful lives of assets acquired and liabilities assumed which were determined with
the assistance of independent valuations, quoted market prices and estimates made by
management. |
- 5 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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On April 30, 2010, the Company acquired ICO, Inc. (ICO) through a merger by and among the
Company, ICO and Wildcat Spider, LLC, a wholly-owned subsidiary of the Company, and which is
now known as ICO-Schulman, LLC, pursuant to the terms of the December 2, 2009 Agreement and
Plan of Merger (Merger Agreement). The results of ICOs operations have been included in
the consolidated financial statements since the date of acquisition, April 30, 2010. |
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The acquisition of ICO presents the Company with an opportunity to expand its presence
substantially, especially in the global rotomolding and U.S. masterbatch markets. ICOs
business is complementary to the Companys business across markets, product lines and
geographies. The acquisition of ICOs operations increases the Companys presence in the
U.S. masterbatch market, gains plants in the high-growth market of Brazil and expands the
Companys presence in Asia with the addition of several ICO facilities in that region. In
Europe, the acquisition allows the Company to add rotomold compounding and size reduction to
the Companys capabilities. It also enables growth in countries where the Company currently
has a limited presence, such as France, Italy and Holland, as well as leverages its existing
facilities serving high-growth markets such as Poland, Hungary and Sweden. |
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Under the terms of the Merger Agreement, each share of ICO common stock outstanding
immediately prior to the merger was converted into the right to receive a pro rata portion
of the total consideration of $105.0 million in cash and 5.1 million shares of the Companys
common stock. All unvested stock options and shares of restricted stock of ICO became fully
vested immediately prior to the merger. Unexercised stock options were exchanged for cash
equal to their in the money value, which reduced the cash pool available to ICOs
stockholders. The following table summarizes the calculation of the estimated fair value of
the total consideration transferred (in thousands, except share price): |
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Estimated fair value of consideration transferred: |
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A. Schulman, Inc. common shares issued |
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5,100 |
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Closing price per share of A. Schulman, Inc.
common stock, as of April 30, 2010 |
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$ |
26.01 |
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Consideration attributable to common stock |
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$ |
132,651 |
|
Cash paid, including cash paid to settle ICO, Inc.s
outstanding equity awards |
|
$ |
105,000 |
|
|
|
|
|
Total consideration transferred |
|
$ |
237,651 |
|
|
|
|
|
|
|
The merger was accounted for in accordance with the FASB revised accounting standard for
business combinations. The accounting guidance for business combinations results in a new
basis of accounting reflecting the estimated fair values for assets acquired and liabilities
assumed. The information included herein has been prepared based on the preliminary
allocation of the purchase price using estimates of the fair value and useful lives of
assets acquired and liabilities assumed which were determined with the assistance of
independent valuations, quoted market prices and estimates made by management. The purchase
price allocations are subject to further adjustment until all pertinent information
regarding the property, plant and equipment, intangible assets, other long-term assets,
goodwill, contingent consideration liabilities, other long-term liabilities and deferred
income tax assets and liabilities acquired are fully evaluated by the Company and
independent valuations are complete. |
- 6 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
The following table presents the preliminary estimated fair value of the assets acquired and
liabilities assumed at the date of acquisition (in thousands): |
|
|
|
|
|
Assets acquired and liabilities assumed: |
|
|
|
|
Cash and cash equivalents |
|
$ |
14,577 |
|
Accounts receivable |
|
|
66,935 |
|
Inventories |
|
|
46,363 |
|
Prepaid expenses and other current assets |
|
|
10,716 |
|
Property, plant and equipment |
|
|
96,941 |
|
Intangible assets |
|
|
71,126 |
|
Other long-term assets |
|
|
4,712 |
|
|
|
|
|
Total assets acquired |
|
$ |
311,370 |
|
|
|
|
|
|
Current maturites of long-term debt and notes
payable |
|
$ |
12,776 |
|
Accounts payable |
|
|
39,423 |
|
Other accrued liabilities |
|
|
28,656 |
|
Long-term debt |
|
|
14,494 |
|
Deferred income taxes |
|
|
42,827 |
|
Pension plans |
|
|
3,285 |
|
Other long-term liabilities |
|
|
2,510 |
|
|
|
|
|
Total liabilities assumed |
|
$ |
143,971 |
|
|
|
|
|
Net identifiable assets acquired |
|
$ |
167,399 |
|
Goodwill |
|
|
70,252 |
|
|
|
|
|
Net assets acquired |
|
$ |
237,651 |
|
|
|
|
|
|
|
The Company preliminarily recorded acquired intangible assets of $71.1 million. These
intangible assets include customer related intangibles of $48.5 million with estimated
useful lives of 19 years, developed technology of $10.1 million with estimated useful lives
of 11 years, and trademarks and trade names of $12.5 million with estimated useful lives
ranging between 5 and 20 years. |
|
|
Goodwill represents the excess of the purchase price over the estimated fair values of the
assets acquired and the liabilities assumed in the acquisition. Goodwill largely consists of
expected synergies resulting from the acquisition. The Company anticipates that the
transaction will produce run-rate synergies by the end of fiscal 2011, resulting from the
consolidation and centralization of global purchasing activities, tax benefits, and
elimination of duplicate corporate administrative costs. Goodwill as of April 30, 2010 was
provisionally allocated by segment as follows (in thousands): |
|
|
|
|
|
Europe, Middle East and Africa |
|
$ |
17,491 |
|
Americas |
|
|
52,761 |
|
|
|
|
|
Total goodwill |
|
$ |
70,252 |
|
|
|
|
|
|
|
None of the goodwill associated with this transaction will be deductible for income tax
purposes. |
|
|
The estimated fair value of accounts receivables acquired was $66.9 million with the gross
contractual amount being $70.3 million. |
|
|
Mash Indústria e Comércio de Compostos Plásticos LTDA |
|
|
On November 3, 2010, the Company completed the purchase of all the capital stock of Mash
Indústria e Comércio de Compostos Plásticos LTDA (Mash), a masterbatch additive
producer and engineered plastics compounder based in Sao Paulo, Brazil, for approximately
$15.2 million. Mashs products are used in end markets such as film and packaging,
automotive and appliances. The acquisition will expand the Companys presence in the
expanding Brazilian market, which is a large, diversified market with strong macroeconomic
fundamentals. The Company believes the Brazilian plastics industry holds significant growth
potential because
per-capita consumption of plastic is still much lower than in other countries. With this
acquisition and the April 30, 2010 acquisition of ICO, which includes two facilities in
Brazil, the Company is aggressively expanding its presence in that market and enhancing its
ability to serve customers. The results of operations from the Mash acquisition are
included in the accompanying consolidated financial statements for the period from the
closing date, November 3, 2010, and are reported in the Americas segment. |
- 7 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
The acquisition was accounted for in accordance with the FASB revised accounting standard
for business combinations. The accounting guidance for business combinations results in a
new basis of accounting reflecting the estimated fair values for assets acquired and
liabilities assumed. The transaction was financed with available cash. Tangible assets
acquired and liabilities assumed were preliminarily recorded at their estimated fair values
of approximately $8.4 million and $6.5 million, respectively. The estimated fair values of
finite-lived intangible assets acquired of approximately $7.2 million related to a trade
name and customer relationships are being amortized over their estimated useful lives of 3
and 15 years, respectively. Goodwill of approximately $6.1 million represents the excess of
cost over the estimated fair value of net tangible and intangible assets acquired. None of
the goodwill associated with this transaction will be deductible for income tax purposes.
The information included herein has been prepared based on the allocation of the purchase
price using estimates of the fair value and useful lives of assets acquired and liabilities
assumed which were determined with the assistance of independent valuations, quoted market
prices and estimates made by management. The purchase price allocations are subject to
further adjustment until all pertinent information regarding the property, plant and
equipment, intangible assets, other long-term assets, goodwill, contingent consideration
liabilities, long-term debt, other long-term liabilities and deferred income tax assets and
liabilities acquired are fully evaluated by the Company and independent valuations are
complete. |
(4) |
|
GOODWILL AND OTHER INTANGIBLE ASSETS |
|
|
The Company is required to review goodwill and indefinite-lived intangible assets at least
annually for impairment. Goodwill impairment is tested at the reporting unit level on an
annual basis in the fourth quarter and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting
unit below its carrying value. The Company is not aware of any triggers which would require
a goodwill impairment test as of November 30, 2010. The carrying amount of goodwill by
segment for the Company was as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle |
|
|
|
|
|
|
|
|
|
East and Africa |
|
|
Americas |
|
|
Total |
|
|
|
(In thousands) |
|
Balance as of August 31, 2010 |
|
$ |
28,130 |
|
|
$ |
55,934 |
|
|
$ |
84,064 |
|
Acquisition |
|
|
|
|
|
|
6,174 |
|
|
|
6,174 |
|
Adjustments to fair value of net assets acquired |
|
|
319 |
|
|
|
234 |
|
|
|
553 |
|
Translation effect |
|
|
509 |
|
|
|
165 |
|
|
|
674 |
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 30, 2010 |
|
$ |
28,958 |
|
|
$ |
62,507 |
|
|
$ |
91,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes intangible assets with determinable useful lives by major
category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2010 |
|
|
August 31, 2010 |
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
(In thousands) |
|
Customer related intangibles |
|
$ |
57,435 |
|
|
$ |
(3,015 |
) |
|
$ |
54,420 |
|
|
$ |
50,035 |
|
|
$ |
(1,742 |
) |
|
$ |
48,293 |
|
Developed technology |
|
|
14,443 |
|
|
|
(2,426 |
) |
|
|
12,017 |
|
|
|
14,018 |
|
|
|
(1,925 |
) |
|
|
12,093 |
|
Registered trademarks |
|
|
12,911 |
|
|
|
(547 |
) |
|
|
12,364 |
|
|
|
12,271 |
|
|
|
(305 |
) |
|
|
11,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-lived intangible assets |
|
$ |
84,789 |
|
|
$ |
(5,988 |
) |
|
$ |
78,801 |
|
|
$ |
76,324 |
|
|
$ |
(3,972 |
) |
|
$ |
72,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 8 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) |
|
DISCONTINUED OPERATIONS |
|
|
During fiscal 2010, the Company completed the closure of the Invision manufacturing
operation at its Sharon Center, Ohio manufacturing facility. The operating results of
Invision were previously included in the Companys former Invision segment and are now
reflected as discontinued operations for the periods
presented. The remaining assets of Invision, primarily machinery and equipment, are
considered held for sale as of November 30, 2010. These assets are included in the Companys
consolidated balance sheet in property, plant and equipment. The Company expects minimal
charges related to the disposal of the equipment in fiscal 2011. |
|
|
The following summarizes the results for discontinued operations for the three months ended
November 30, 2010 and 2009. The income (loss) from discontinued operations does not include
any income tax effect as the Company was not in a taxable position due to its continued U.S.
losses and a full valuation allowance. |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net sales |
|
$ |
|
|
|
$ |
9 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
|
|
|
$ |
(2 |
) |
Other income (expense) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
$ |
|
|
|
$ |
(3 |
) |
|
|
|
|
|
|
|
(6) |
|
PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS |
|
|
The components of the Companys net periodic benefit cost (income) for defined benefit
pension plans and other postretirement benefits are shown below. |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net periodic pension cost (income) recognized
included the following components: |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
845 |
|
|
$ |
550 |
|
Interest cost |
|
|
1,161 |
|
|
|
1,157 |
|
Expected return on plan assets |
|
|
(297 |
) |
|
|
(240 |
) |
Net actuarial loss and net amortization of
prior service cost and transition obligation |
|
|
412 |
|
|
|
95 |
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
2,121 |
|
|
$ |
1,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefit cost (income) included
the following components: |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
8 |
|
|
$ |
7 |
|
Interest cost |
|
|
186 |
|
|
|
191 |
|
Net amortization of prior service
cost (credit) and unrecognized loss |
|
|
(86 |
) |
|
|
(139 |
) |
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
108 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
- 9 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
The Company is engaged in various legal proceedings arising in the ordinary course of
business. The ultimate outcome of these proceedings is not expected to have a material
adverse effect on the Companys financial condition, results of operations or cash flows. |
(8) |
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY |
|
|
A summary of the changes in stockholders equity for the three months ended November 30,
2010 is as follows: |
(In thousands, except per share data)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Other |
|
|
Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Noncontrolling |
|
|
|
|
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Stock |
|
|
Interests |
|
|
Total Equity |
|
Balance at September 1, 2010 |
|
$ |
47,690 |
|
|
$ |
249,734 |
|
|
$ |
(6,278 |
) |
|
$ |
519,649 |
|
|
$ |
(322,777 |
) |
|
$ |
5,122 |
|
|
$ |
493,140 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,243 |
|
|
|
|
|
|
|
133 |
|
|
|
|
|
Foreign currency translation gain (loss) |
|
|
|
|
|
|
|
|
|
|
7,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized transition
obligations, actuarial losses and prior
service costs (credits), net |
|
|
|
|
|
|
|
|
|
|
706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,339 |
|
Cash dividends paid or accrued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.155 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,942 |
) |
|
|
|
|
|
|
|
|
|
|
(4,942 |
) |
Cash distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(700 |
) |
|
|
(700 |
) |
Releases of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Amortization of restricted stock |
|
|
|
|
|
|
904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 30, 2010 |
|
$ |
47,690 |
|
|
$ |
250,638 |
|
|
$ |
1,685 |
|
|
$ |
523,950 |
|
|
$ |
(322,728 |
) |
|
$ |
4,555 |
|
|
$ |
505,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
|
COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME |
|
|
Comprehensive income (loss) for the three months ended November 30, 2010 and 2009 was as
follows: |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,376 |
|
|
$ |
17,135 |
|
Foreign currency translation gain (loss) |
|
|
7,257 |
|
|
|
12,875 |
|
Amortization of unrecognized transition obligations, actuarial losses and prior services costs (credits), net |
|
|
706 |
|
|
|
(44 |
) |
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
17,339 |
|
|
|
29,966 |
|
Comprehensive (income) loss attributable to
noncontrolling interests |
|
|
(133 |
) |
|
|
(102 |
) |
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to
A. Schulman, Inc. |
|
$ |
17,206 |
|
|
$ |
29,864 |
|
|
|
|
|
|
|
|
|
|
The assets and liabilities of the Companys foreign subsidiaries are translated into U.S.
dollars using current exchange rates. Income statement items are translated at average
exchange rates prevailing during the period. The resulting translation gains or losses are
recorded as other comprehensive income (loss) and accumulated in the Companys stockholders
equity. Foreign currency translation gain totaled $7.3 million and $12.9 million for the
three months ended November 30, 2010, and November 30, 2009, respectively, and were due
primarily to the significant decrease in the value of the euro as well as decreases in other
currencies against the U.S. dollar. Foreign currency translation gains or losses do not have
a tax effect, as such gains or losses are considered permanently reinvested. Other
comprehensive income adjustments related to pensions and other postretirement benefit plans
are recorded net of tax using the applicable effective tax rate. |
- 10 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) |
|
FAIR VALUE MEASUREMENT |
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measure
date. The FASB provides accounting rules that establish a fair value hierarchy to prioritize
the inputs used in valuation techniques into three levels as follows:
|
|
|
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical
assets or liabilities in active markets; |
|
|
|
|
Level 2: Inputs other than quoted prices included in Level 1 that are observable
for the asset or liability either directly or indirectly; and |
|
|
|
|
Level 3: Unobservable inputs which reflect an entitys own assumptions. |
The following table presents information about the Companys assets and liabilities recorded
at fair value as of November 30, 2010 in the Companys consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets |
|
|
Significant Other |
|
|
Significant |
|
|
|
Total Measured |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
at Fair Value |
|
|
Assets (Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
78,975 |
|
|
$ |
78,975 |
|
|
$ |
|
|
|
$ |
|
|
Cash equivalents |
|
|
20,055 |
|
|
|
20,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
99,030 |
|
|
$ |
99,030 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities, net |
|
$ |
75 |
|
|
$ |
|
|
|
$ |
75 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
75 |
|
|
$ |
|
|
|
$ |
75 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of cash and cash equivalents, by their nature, is determined utilizing Level
1 inputs. The Company measures the fair value of forward foreign exchange contracts using
Level 2 inputs through observable market transactions in active markets provided by banks.
The Company enters into forward foreign exchange contracts to reduce its exposure for
amounts due or payable in foreign currencies. These contracts limit the Companys exposure
to fluctuations in foreign currency exchange rates. The total contract value of forward
foreign exchange contracts outstanding as of November 30, 2010 was $50.1 million. Any gains
or losses associated with these contracts as well as the offsetting gains or losses from the
underlying assets or liabilities are included in the foreign currency transaction line in
the Companys consolidated statements of income. The Company does not hold or issue forward
foreign exchange contracts for trading purposes. There were no foreign currency contracts
designated as hedging instruments as of November 30, 2010. The forward foreign exchange
contracts are entered into with creditworthy multinational banks. The fair value of the
Companys forward foreign exchange contracts was $0.1 million as of November 30, 2010 and
less than $0.1 million as of August 31, 2010 and was recognized in other accrued
liabilities.
- 11 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following information presents the supplemental fair value information about long-term
fixed-rate debt as of November 30, 2010. The Companys long-term fixed-rate debt was
primarily issued in euros.
|
|
|
|
|
|
|
|
|
|
|
November 30, 2010 |
|
|
August 31, 2010 |
|
|
|
(In millions) |
|
Carrying value of long-term fixed-rate debt |
|
$ |
65.4 |
|
|
$ |
63.8 |
|
Fair value of long-term fixed-rate debt |
|
$ |
68.1 |
|
|
$ |
67.2 |
|
The fair value was calculated using discounted future cash flows. The increase in fair value
is primarily related to the decrease in quoted market interest rates and foreign currency
translation.
(11) |
|
INCENTIVE STOCK PLANS |
Effective in December 2002, the Company adopted the 2002 Equity Incentive Plan, which
provided for the grant of incentive stock options, nonqualified stock options, restricted
stock awards and director deferred units for employees and non-employee directors. The
option price of incentive stock options is the fair market value of the shares of common
stock on the date of the grant. In the case of nonqualified options, the Company grants
options at 100% of the fair market value of the shares of common stock on the date of the
grant. All options become exercisable at the rate of 33% per year, commencing on the first
anniversary date of the grant. Each option expires ten years from the date of the grant.
Restricted stock awards under the 2002 Equity Incentive Plan vest ratably over four years
following the date of grant.
On December 7, 2006, the Company adopted the 2006 Incentive Plan, which provides for the
grant of incentive stock options, nonqualified stock options, whole shares, restricted stock
awards, restricted stock units, stock appreciation rights, performance shares, performance
units, cash-based awards, dividend equivalents and performance-based awards. Upon adoption
of the 2006 Incentive Plan, all remaining shares eligible for award under the 2002 Equity
Incentive Plan were added to the 2006 Incentive Plan and no further awards could be made
from the 2002 Equity Incentive Plan. It has been the Companys practice to issue new shares
of common stock upon stock option exercise and other equity grants. On November 30, 2010,
there were approximately 1.0 million shares available for grant pursuant to the Companys
2006 Incentive Plan.
On December 9, 2010, the Companys stockholders approved the adoption of the A. Schulman,
Inc. 2010 Value Creations Rewards Plan (2010 Rewards Plan). The 2010 Rewards Plan became
effective upon approval from the Companys stockholders and a total of 1,375,000 shares of
common stock may be issued under the 2010 Rewards Plan.
A summary of stock options is as follows:
|
|
|
|
|
|
|
|
|
|
|
Outstanding Shares |
|
|
Weighted-Average |
|
|
|
Under Option |
|
|
Exercise Price |
|
Outstanding at August 31, 2010 |
|
|
265,262 |
|
|
$ |
19.77 |
|
Granted |
|
|
|
|
|
$ |
|
|
Exercised |
|
|
|
|
|
$ |
|
|
Forfeited and expired |
|
|
(9,000 |
) |
|
$ |
16.09 |
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2010 |
|
|
256,262 |
|
|
$ |
19.90 |
|
|
|
|
|
|
|
|
|
Exercisable at November 30, 2010 |
|
|
256,262 |
|
|
$ |
19.90 |
|
|
|
|
|
|
|
|
|
The intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option. The intrinsic value for stock
options exercisable as of November 30, 2010 was $0.4 million with a remaining term for
options exercisable of approximately 4.0 years. For stock options outstanding as of November
30, 2010, exercise prices range from $11.62 to $24.69. The weighted-average remaining
contractual life for options outstanding as of November 30, 2010 was approximately 4.0
years. All 256,262 outstanding and exercisable stock options are fully vested as of November
30, 2010. There were no grants of stock options during the three months ended November 30,
2010 and 2009.
- 12 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted stock awards under the 2002 Equity Incentive Plan vest over four years following
the date of grant. Restricted stock awards under the 2006 Incentive Plan can vest over
various periods. The restricted stock grants outstanding under the 2006 Incentive Plan have
service vesting periods of three years following the date of grant. The following table
summarizes the outstanding time-based restricted stock awards and weighted-average fair
market value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Outstanding Restricted |
|
|
Fair Market Value |
|
|
|
Stock Awards |
|
|
(per share) |
|
Outstanding at August 31, 2010 |
|
|
153,849 |
|
|
$ |
20.12 |
|
Granted |
|
|
|
|
|
$ |
|
|
Vested |
|
|
|
|
|
$ |
|
|
Forfeited |
|
|
(167 |
) |
|
$ |
20.44 |
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2010 |
|
|
153,682 |
|
|
$ |
20.12 |
|
|
|
|
|
|
|
|
|
There were no grants of time-based restricted shares during the three months ended November
30, 2010. During the three months ended November 30, 2009, the Company granted 15,000
time-based restricted shares. Restrictions on these stock awards lapse ratably over a
three-year period and were valued at the fair market value on the date of grant.
The Company also grants awards with market and performance vesting conditions. In the table
below, the Company summarizes all awards which include market-based and performance-based
restricted stock awards and performance shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Outstanding |
|
|
Fair Market Value |
|
|
|
Performance-Based Awards |
|
|
(per share) |
|
Outstanding at August 31, 2010 |
|
|
705,154 |
|
|
$ |
13.91 |
|
Granted |
|
|
|
|
|
$ |
|
|
Vested |
|
|
|
|
|
$ |
|
|
Forfeited |
|
|
(750 |
) |
|
$ |
13.13 |
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2010 |
|
|
704,404 |
|
|
$ |
13.92 |
|
|
|
|
|
|
|
|
|
There were no grants of performance shares during the three months ended November 30, 2010
and 2009. Performance shares are awards for which the vesting will occur based on market or
performance conditions and do not have voting rights. Included in the outstanding
performance-based awards as of November 30, 2010 are 383,228 performance shares which earn
dividends throughout the vesting period and approximately 321,176 performance shares which
do not earn dividends.
The performance-based awards in the table above include 568,120 shares which are valued
based upon a Monte Carlo simulation, which is a valuation model that represents the
characteristics of these grants. Vesting of the ultimate number of shares underlying
performance-based awards, if any, will be dependent upon the Companys total stockholder
return in relation to the total stockholder return of a select group of peer companies over
a three-year period. The probability of meeting the market criteria was considered when
calculating the estimated fair market value on the date of grant using a Monte Carlo
simulation. These awards were accounted for as awards with market conditions, which are
recognized over the service period, regardless of whether the market conditions are achieved
and the awards ultimately vest. The fair value of the remaining 136,284 performance shares
in the table above is based on the closing price of the Companys common stock on the date
of the grant.
Total unrecognized compensation cost, including a provision for forfeitures, related to
nonvested share-based compensation arrangements as of November 30, 2010 was approximately
$6.0 million. This cost is expected to be recognized over a weighted-average period of
approximately 1.2 years.
- 13 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of November 30, 2010, the Company had 25,000 stock-settled restricted stock units
outstanding which were fully vested as of the grant date. There are no service requirements
for vesting for this grant. These restricted stock units will be settled in shares of the
Companys common stock, on a one-to-one basis, no later than 60 days after the third
anniversary of the award grant date. These awards do earn dividends during the restriction
period; however, they do not have voting rights until released from restriction. These
awards are treated as equity awards and have a grant date fair value based on the award
grant date of $13.61 per award. There were no grants of stock-settled restricted stock units
during the three months ended November 30, 2010 or 2009.
The Company had approximately 113,000 and 115,000 cash-settled restricted stock units
outstanding with various vesting periods and criteria as of November 30, 2010 and 2009,
respectively. There were no cash-settled restricted stock units granted during the three
months ended November 30, 2010 and 2009. The cash-settled restricted stock units outstanding
have either time-based vesting or performance-based vesting, similar to the Companys
restricted stock awards and performance shares. Each cash-settled restricted stock unit is
equivalent to one share of the Companys common stock on the vesting date. Certain
cash-settled restricted stock units earn dividends during the vesting period. Cash-settled
restricted stock units are settled only in cash at the vesting date and therefore are
treated as a liability award. The Company records a liability for these restricted stock
units in an amount equal to the total of (a) the mark-to-market adjustment of the units
vested to date; and (b) accrued dividends on the units. In addition, the liability is
adjusted for the estimated payout factor for the performance-based cash-settled restricted
stock units. As a result of these mark-to-market adjustments, these restricted stock units
introduce volatility into the Companys consolidated statements of income.
The Company had approximately $3.9 million cash-based awards, which are treated as liability
awards, outstanding as of November 30, 2010. These awards were granted to foreign employees.
Such awards include approximately $0.7 million which have service vesting periods of three
years following the date of grant and the remaining $3.2 million are performance-based. The
performance-based awards are based on the same conditions utilized for the performance
shares. The Company records a liability for these cash-based awards equal to the amount of
the award vested to date and adjusts the performance-based awards based on expected payout.
In fiscal 2010, the Companys board of directors and stockholders approved the adoption of
an Employee Stock Purchase Plan (ESPP) whereby employees may purchase Company stock
through a payroll deduction plan. Purchases are made from the ESPP and credited to each
participants account at the end of each calendar quarter, the Investment Date. The
purchase price of the stock is 85% of the fair market value on the Investment Date. The ESPP
is compensatory and the 15% discount is expensed ratably over the three month offering
period. All employees, including officers, are eligible to participate in the ESPP. An
employee whose stock ownership of the Company exceeds five percent of the outstanding common
stock is not eligible to participate in the ESPP. The Company recorded minimal expense
related to the ESPP during the first three months of fiscal 2011. It is the Companys
current practice to use treasury shares for the share settlement on the Investment Date.
The following table summarizes the impact to the Companys consolidated statements of income
from stock-based compensation, which is primarily included in selling, general and
administrative expenses in the accompanying consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Restricted stock awards, unrestricted stock awards and
performance-based awards |
|
$ |
904 |
|
|
$ |
658 |
|
Cash-settled restricted stock units |
|
|
375 |
|
|
|
(580 |
) |
Cash-based awards |
|
|
88 |
|
|
|
(198 |
) |
|
|
|
|
|
|
|
Total stock-based compensation |
|
$ |
1,367 |
|
|
$ |
(120 |
) |
|
|
|
|
|
|
|
- 14 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share is computed by dividing income available to common stockholders by
the weighted-average number of shares of common stock outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if common stock
equivalents were exercised, and the impact of restricted stock and performance-based awards
expected to vest, which would then share in the earnings of the Company.
The difference between basic and diluted weighted-average shares of common stock results
from the assumed exercise of outstanding stock options and grants of restricted stock,
calculated using the treasury stock method. The following presents the number of incremental
weighted-average shares used in computing diluted per share amounts:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
31,333 |
|
|
|
25,843 |
|
Incremental shares from stock options |
|
|
22 |
|
|
|
18 |
|
Incremental shares from restricted stock |
|
|
175 |
|
|
|
195 |
|
|
|
|
|
|
|
|
Diluted |
|
|
31,530 |
|
|
|
26,056 |
|
|
|
|
|
|
|
|
For the three months ended November 30, 2010 and 2009, respectively, there were
approximately 0.1 million and 0.4 million equivalent shares related to stock options and
restricted stock that were excluded from diluted weighted-average shares outstanding because
inclusion would have been anti-dilutive.
The Company considers its operating structure and the types of information subject to
regular review by its President and Chief Executive Officer (CEO), who is the Chief
Operating Decision Maker (CODM), to identify reportable segments.
The Companys reportable segments prior to fiscal 2011 were Europe, Middle East and Africa
(EMEA), North America Masterbatch (NAMB), North America Engineered Plastics (NAEP),
North America Rotomolding (NARM), Bayshore and Asia Pacific (APAC). As a result of
certain management changes
and reporting structures within the Company effective in fiscal 2011, the CODM makes
decisions, assesses performance and allocates resources by the following regions: EMEA, the
Americas (which includes North America and South America), and APAC. As a result of the
changes, the reportable segments are now based on the regions in which the Company operates:
EMEA, the Americas, and APAC. The Americas segment comprises the former NAMB, NAEP, NARM and
Bayshore segments. Each reportable segment has a Chief Operating Officer who reports to the
CEO.
The CODM uses net sales to unaffiliated customers, gross profit and operating income in
order to make decisions, assess performance and allocate resources to each segment.
Operating income does not include interest income or expense, other income or expense,
restructuring related expenses, asset write-downs or foreign currency transaction gains or
losses. In some cases, the Company may choose to exclude from a segments results certain
non-recurring items as determined by management. These items are included in the Corporate
and Other section in the table below. Corporate expenses include the compensation of certain
personnel, certain audit expenses, board of directors related costs, certain insurance costs
and other miscellaneous legal and professional fees.
- 15 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below is a presentation of net sales to unaffiliated customers, gross profit and operating
income by segment. Also included is a reconciliation of operating income by segment to
consolidated income from continuing operations before taxes.
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
EMEA |
|
$ |
346,683 |
|
|
$ |
271,943 |
|
Americas |
|
|
115,120 |
|
|
|
76,331 |
|
APAC |
|
|
33,580 |
|
|
|
14,587 |
|
|
|
|
|
|
|
|
Total net sales to unaffiliated customers |
|
$ |
495,383 |
|
|
$ |
362,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Segment gross profit |
|
|
|
|
|
|
|
|
EMEA |
|
$ |
48,086 |
|
|
$ |
50,602 |
|
Americas |
|
|
16,474 |
|
|
|
9,961 |
|
APAC |
|
|
4,562 |
|
|
|
2,664 |
|
|
|
|
|
|
|
|
Total segment gross profit |
|
|
69,122 |
|
|
|
63,227 |
|
|
|
|
|
|
|
|
|
|
Asset write-downs |
|
|
|
|
|
|
(69 |
) |
Inventory step-up |
|
|
(121 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
69,001 |
|
|
$ |
63,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Segment operating income (loss) |
|
|
|
|
|
|
|
|
EMEA |
|
$ |
19,402 |
|
|
$ |
25,224 |
|
Americas |
|
|
3,859 |
|
|
|
2,871 |
|
APAC |
|
|
1,808 |
|
|
|
1,114 |
|
|
|
|
|
|
|
|
Total segment operating income |
|
|
25,069 |
|
|
|
29,209 |
|
Corporate and other |
|
|
(7,971 |
) |
|
|
(4,468 |
) |
Interest expense, net |
|
|
(1,085 |
) |
|
|
(801 |
) |
Foreign currency transaction gains (losses) |
|
|
(670 |
) |
|
|
(103 |
) |
Other income (expense) |
|
|
4 |
|
|
|
1,227 |
|
Asset write-downs |
|
|
|
|
|
|
(119 |
) |
Costs related to acquisitions |
|
|
(881 |
) |
|
|
(2,266 |
) |
Restructuring related |
|
|
(551 |
) |
|
|
(429 |
) |
Inventory step-up |
|
|
(121 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before taxes |
|
$ |
13,794 |
|
|
$ |
22,250 |
|
|
|
|
|
|
|
|
- 16 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Globally, the Company operates primarily in four lines of business or product families:
(1) masterbatch, (2) engineered plastics, (3) specialty powders (formerly the rotomolding
product family), and (4) distribution. The amount and percentage of consolidated sales for
these product families for the three months ended November 30, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands, except for %s) |
|
Masterbatch |
|
$ |
200,299 |
|
|
|
41 |
% |
|
$ |
160,294 |
|
|
|
44 |
% |
Engineered plastics |
|
|
124,038 |
|
|
|
25 |
|
|
|
122,653 |
|
|
|
34 |
|
Specialty powders |
|
|
90,076 |
|
|
|
18 |
|
|
|
6,339 |
|
|
|
2 |
|
Distribution |
|
|
80,970 |
|
|
|
16 |
|
|
|
73,575 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
495,383 |
|
|
|
100 |
% |
|
$ |
362,861 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
At November 30, 2010, the Companys gross unrecognized tax benefits totaled $2.8 million.
If recognized, approximately $1.9 million of the total unrecognized tax benefits would
favorably affect the Companys effective tax rate. The Company reports interest and
penalties related to income tax matters in income tax expense. At November 30, 2010, the
Company had $0.6 million of accrued interest and penalties on unrecognized tax benefits.
The Company is open to potential income tax examinations in Germany from fiscal 2005 onward,
in the U.S. from fiscal 2007 onward and in Belgium from fiscal 2008 onward. The Company is
open to potential examinations from fiscal 2004 onward for most other foreign jurisdictions.
The amount of unrecognized tax benefits is expected to change in the next 12 months;
however, the change is not expected to have a significant impact on the financial position
of the Company.
The loss from discontinued operations does not include any income tax effect as the Company
was not in a taxable position due to its continued U.S. losses and a full valuation
allowance.
A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates
for the three months ended November 30, 2010 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
November 30, 2010 |
|
|
November 30, 2009 |
|
|
|
|
|
|
|
(In thousands, except for %s) |
|
|
|
|
|
Statutory U.S. tax rate |
|
$ |
4,828 |
|
|
|
35.0 |
% |
|
$ |
7,788 |
|
|
|
35.0 |
% |
Amount of foreign taxes at less
than U.S.
statutory tax rate |
|
|
(2,956 |
) |
|
|
(21.4 |
) |
|
|
(5,339 |
) |
|
|
(24.0 |
) |
U.S. and foreign losses with no
tax benefit |
|
|
1,967 |
|
|
|
14.2 |
|
|
|
1,718 |
|
|
|
7.7 |
|
U.S. restructuring and other U.S.
unusual
charges with no benefit |
|
|
375 |
|
|
|
2.7 |
|
|
|
822 |
|
|
|
3.7 |
|
Establishment (resolution) of
uncertain tax
positions |
|
|
11 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Other |
|
|
193 |
|
|
|
1.4 |
|
|
|
123 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) |
|
$ |
4,418 |
|
|
|
32.0 |
% |
|
$ |
5,112 |
|
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate for the three months ended November 30, 2010 is less than the U.S.
statutory rate primarily because of the Companys overall foreign rate being less than the
U.S. statutory rate. This favorable effect on the Companys tax rate was partially offset by
no tax benefits being recognized for U.S. and certain foreign losses from continuing
operations and other U.S. charges. As compared with the effective rate of 23.0% for the
three months ended November 30, 2009, the current quarters effective rate is driven by an
increase in the U.S. losses with no tax benefit.
- 17 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASI United Kingdom Plan
On August 31, 2010, management announced restructuring plans for its operations at its
Crumlin, South Wales (U.K.) plant. The plans include moving part of the plants capacity to
two other, larger plants in Europe, and several production lines will be shut down. As a
result, the Company will reduce headcount at this location by approximately 30. The Company
will continue to enhance the capabilities of the Crumlin plant to produce smaller lots of
colors and other specialty compounds for the local market. The Company recorded no pretax
restructuring costs for employee-related costs for the three months ended November 30, 2010.
The Company anticipates approximately $0.2 million in accelerated depreciation to be
recorded during the remainder of fiscal 2011.
ICO Merger Plan
In conjunction with the merger with ICO, the Company reduced the workforce in the Houston,
Texas office by approximately 17. ICO had preexisting arrangements regarding
change-in-control payments and severance pay which were based on pre-merger service. The
Company assumed $2.1 million in liabilities as a result of the merger related to these
agreements, of which $2.0 million was paid by the Company during fiscal 2010. Since the
merger, the Company announced the exit of certain senior managers in Europe in connection
with the Companys ongoing integration of ICO operations. The Company recorded approximately
$0.3 million primarily in pretax employee-related costs during the three months ended
November 30, 2010 related to the
integration of the ICO merger. The Company has approximately $0.5 million remaining accrued
for the ICO merger plan as of November 30, 2010, to be paid in the second and third quarters
of fiscal 2011. The Company expects minimal remaining charges to be incurred into late
fiscal 2011.
North America Masterbatch Fiscal 2010 Plan
On March 1, 2010, the Company announced the closure of its Polybatch Color Center located in
Sharon Center, Ohio, which was a plant in the Americas segment. The Company recorded pretax
restructuring expenses of $0.1 million during the three months ended November 30, 2010
primarily for employee-related costs associated with the closure. As of November 30, 2010,
approximately $0.1 million remains accrued which the Company expects to pay during the
second quarter of fiscal 2011. The Company ceased production at the Polybatch Color Center
on August 31, 2010. The Company expects minimal additional charges related to this
initiative to be recognized primarily during fiscal 2011 as it completes the shutdown
procedures.
Fiscal 2009 Plan
During fiscal 2009, the Company announced various plans to realign its domestic and
international operations to strengthen the Companys performance and financial position. The
Company initiated these proactive actions to address the then weak global economic
conditions and improve the Companys competitive position. The actions included a reduction
in capacity and workforce reductions in manufacturing, selling and administrative positions
throughout Europe and North America. In addition, in fiscal 2010, the Company completed the
previously announced consolidation of its back-office operations in Europe, which include
finance and accounting functions, to a shared service center located in Belgium.
The Company reduced its workforce by approximately 190 positions worldwide during fiscal
2009, primarily as a result of the actions taken in early fiscal 2009 to realign the
Companys operations and back-office functions. In addition, to further manage costs during
a period of significant declines in demand primarily in the second quarter of fiscal 2009,
the Companys major European locations implemented a short work schedule when necessary
and the Americas segment reduced shifts from seven to five days at its Nashville, Tennessee
plant. Also in the Americas segment, the Company reduced production capacity by temporarily
idling one manufacturing line, while permanently shutting down another line at its plant in
Bellevue, Ohio. The Company completed the right-sizing and redesign of its Italian plant,
which resulted in less than $0.1 million of accelerated depreciation on certain fixed assets
during the first quarter of fiscal 2010.
The Company recorded employee-related costs of $0.2 million and contract termination and
other restructuring costs of $0.2 million related to the fiscal 2009 initiatives during the
three months ended November 30, 2009. All restructuring charges recorded for the fiscal 2009
Plan during fiscal 2010 were related to the EMEA segment. The Company recorded minimal
charges related to the fiscal 2009 initiatives during the three months ended November 30,
2010.
- 18 -
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of November 30, 2010, approximately $0.2 million remains accrued for employee-related
costs, including estimated severance payments and medical insurance, and contract
termination costs related to the fiscal 2009 initiatives. The Company anticipates the
majority of the remaining accrued balance for restructuring charges will be paid during the
second quarter of fiscal 2011. The Company charges related to the plans initiated in fiscal
2009 to reduce capacity and headcount at certain international locations were substantially
complete as of the end of fiscal 2010.
Fiscal 2008 Plan
In January 2008, the Company announced two steps in its continuing effort to improve the
profitability of its North American operations. The Company announced it would shut down its
manufacturing facility in St. Thomas, Ontario, Canada and would pursue a sale of its
manufacturing facility in Orange, Texas. All the restructuring costs related to the sale of
the Orange, Texas and the St. Thomas, Ontario, Canada facilities are related to the Americas
segment. The Company completed the sale of the Orange, Texas facility in March 2008.
The St. Thomas, Ontario, Canada facility primarily produced engineered plastics for the
automotive market, with a capacity of approximately 74 million pounds per year and employed
approximately 120 individuals. The facility was shutdown at the end of June 2008 and the
Company finalized closing procedures in fiscal 2010.
The Company recorded minimal charges related to the fiscal 2008 initiatives during the three
months ended November 30, 2010 and 2009. Approximately $0.4 million remains accrued for
employee-related costs as of November 30, 2010 related to the fiscal 2008 initiatives.
The following table summarizes the liabilities as of November 30, 2010 related to the
Companys restructuring plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual Balance |
|
|
Fiscal 2011 |
|
|
Fiscal 2011 |
|
|
Accrual Balance |
|
|
|
August 31, 2010 |
|
|
Charges |
|
|
Paid |
|
|
November 30, 2010 |
|
|
|
(In thousands) |
|
Employee-related costs |
|
$ |
2,011 |
|
|
$ |
487 |
|
|
$ |
(990 |
) |
|
$ |
1,508 |
|
Other costs |
|
|
267 |
|
|
|
64 |
|
|
|
(131 |
) |
|
|
200 |
|
Translation effect |
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
$ |
2,231 |
|
|
$ |
551 |
|
|
$ |
(1,121 |
) |
|
$ |
1,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16) |
|
ACCOUNTING PRONOUNCEMENTS |
In January 2010, the FASB issued amended accounting rules to require disclosure of transfers
into and out of Level 1 and Level 2 fair value measurements, and also require more detailed
disclosure about the activity within Level 3 fair value measurements. The new rules also
require a more detailed level of disaggregation of the assets and liabilities being measured
as well as increased disclosures regarding inputs and valuation techniques of the fair value
measurements. The changes are effective for annual and interim reporting periods beginning
after December 15, 2009, except for requirements related to Level 3 disclosures, which are
effective for annual and interim reporting periods beginning after December 15, 2010. This
guidance requires new disclosures only, and is not expected to impact the Companys
consolidated financial statements.
(17) |
|
SHARE REPURCHASE PROGRAM |
The Company has approximately 2.9 million shares authorized by the board of directors to be
repurchased under the Companys current share repurchase program. The Company did not
repurchase any shares of its common stock during the three months ended November 30, 2010
and 2009.
- 19 -
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview of the Business and Recent Developments
A. Schulman, Inc. (the Company, we, our, ours and us) is a leading international supplier
of high-performance plastic compounds and resins headquartered in Akron, Ohio. The Companys
customers span a wide range of markets including consumer products, industrial, automotive and
packaging. As a result of certain management changes and reporting structures within the Company
effective in fiscal 2011, the CODM makes decisions, assesses performance and allocates resources by
the following regions: EMEA, the Americas (which includes North America and South America), and
APAC. As a result of the changes, the reportable segments are now based on the regions in which the
Company operates: EMEA, the Americas, and APAC. The Americas segment comprises the former NAMB,
NAEP, NARM and Bayshore segments. The Company has approximately 2,900 employees and 34 plants in
countries in Europe, North America, Asia, South America and Australia. Globally, the Company
operates primarily in four lines of business or product families: (1) masterbatch, (2) engineered
plastics, (3) specialty powders (formerly the rotomolding product family), and (4) distribution.
The Company also offers tolling services to customers through its operations in Europe and North
America.
On November 3, 2010, the Company completed the purchase of all the capital stock of Mash Indústria
e Comércio de Compostos Plásticos LTDA (Mash), a masterbatch additive producer and engineered
plastics compounder based in Sao Paulo, Brazil, for approximately $15.2 million. Mashs
products are used in end markets such as film and packaging, automotive and appliances. The
acquisition will expand the Companys presence in the expanding Brazilian market, which is a large,
diversified market with strong macroeconomic fundamentals. The Company believes the Brazilian
plastics industry holds significant growth potential because per-capita consumption of plastic is
still much lower than in other countries. With this acquisition and the April 30, 2010 acquisition
of ICO, Inc. (ICO), which includes two facilities in Brazil, the Company is aggressively
expanding its presence in that market and enhancing its ability to serve customers. The results of
operations from the Mash acquisition are included in the accompanying consolidated financial
statements for the period from the closing date, November 3, 2010, and are reported in the Americas
segment.
On April 30, 2010, the Company acquired ICO through a merger by and among the Company, ICO and
Wildcat Spider, LLC, a wholly-owned subsidiary of the Company, and which is now known as
ICO-Schulman, LLC, pursuant to the terms of the December 2, 2009 Agreement and Plan of Merger. The
results of ICOs operations have been included in the consolidated financial statements since the
date of acquisition, April 30, 2010, accordingly, the results for the first quarter of fiscal 2010
do not include results for the ICO business.
Throughout managements discussion and analysis, the Company provides operating results by segment
exclusive of certain charges such as costs related to acquisitions, inventory step-up,
restructuring related expenses and asset write-downs, which are considered relevant to aid analysis
and understanding of the Companys results. Aside from the material impact of these charges, these
measures are utilized by management to understand business trends. The following discussion
regarding the Companys performance may refer to the ICO effect. The Company defines the ICO
effect as the results of operations as if the Company owned ICO at the beginning of the first
quarter of fiscal 2010. These results exclude one-time charges and acquisition related items
discussed above and include an estimate of purchase accounting-related depreciation and
amortization expense for each period.
- 20 -
Segment Information
Europe, Middle East and Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
|
EMEA |
|
2010 |
|
|
2009 |
|
|
Increase (decrease) |
|
|
|
(In thousands, except for %s and per pound data) |
|
Net sales |
|
$ |
346,683 |
|
|
$ |
271,943 |
|
|
$ |
74,740 |
|
|
|
27.5 |
% |
Gross profit |
|
$ |
48,086 |
|
|
$ |
50,602 |
|
|
$ |
(2,516 |
) |
|
|
(5.0 |
)% |
Operating income |
|
$ |
19,402 |
|
|
$ |
25,224 |
|
|
$ |
(5,822 |
) |
|
|
(23.1 |
)% |
Pounds sold |
|
|
316,481 |
|
|
|
250,804 |
|
|
|
65,677 |
|
|
|
26.2 |
% |
Price per pound |
|
$ |
1.095 |
|
|
$ |
1.084 |
|
|
$ |
0.011 |
|
|
|
1.0 |
% |
Gross profit per pound |
|
$ |
0.152 |
|
|
$ |
0.202 |
|
|
$ |
(0.050 |
) |
|
|
(24.7 |
)% |
Gross profit percentage |
|
|
13.9 |
% |
|
|
18.6 |
% |
|
|
|
|
|
|
|
|
EMEA sales for the three months ended November 30, 2010 were $346.7 million, an increase of $74.7
million or 27.5% compared with the prior-year period. The foreign currency translation effect
negatively impacted sales by $27.6 million. Including the ICO effect, sales increased
approximately 11%. Volume for the first quarter of fiscal 2011 was 316.5 million pounds, up 26.2%
over last year, and up 4.0% including the ICO effect.
EMEA gross profit was $48.1 million for the three months ended November 30, 2010, down $2.5 million
from last year. Foreign currency translation negatively impacted EMEA gross profit by $4.0 million.
Including the ICO effect, gross profit decreased $8.0 million or 14.2%. Although average selling
prices increased approximately 7% compared with the prior year including the ICO effect, the
Company was not able to fully pass along cost increases during the first quarter. On a sequential
basis, gross profit per pound improved approximately 30% compared with 11.7 cents per pound during
the fourth quarter of fiscal 2010.
EMEA operating income for the three months ended November 30, 2010 was $19.4 million compared with
$25.2 million last year. Including the ICO effect, operating income decreased $7.6 million. The
decline in operating income in fiscal 2011 was primarily due to lower gross profit per pound
compared with last years exceptionally high first quarter results as EMEA selling, general and
administrative expenses declined slightly. Although the EMEA business segments performance was
below the Companys exceptional first quarter in fiscal 2010, the segment operating income improved
$6.8 million sequentially over the prior quarter.
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
|
Americas |
|
2010 |
|
|
2009 |
|
|
Increase (decrease) |
|
|
|
(In thousands, except for %s and per pound data) |
|
Net sales |
|
$ |
115,120 |
|
|
$ |
76,331 |
|
|
$ |
38,789 |
|
|
|
50.8 |
% |
Gross profit |
|
$ |
16,474 |
|
|
$ |
9,961 |
|
|
$ |
6,513 |
|
|
|
65.4 |
% |
Operating income |
|
$ |
3,859 |
|
|
$ |
2,871 |
|
|
$ |
988 |
|
|
|
34.4 |
% |
Pounds sold |
|
|
152,223 |
|
|
|
65,799 |
|
|
|
86,424 |
|
|
|
131.3 |
% |
Price per pound |
|
$ |
0.756 |
|
|
$ |
1.160 |
|
|
$ |
(0.404 |
) |
|
|
(34.8 |
)% |
Gross profit per pound |
|
$ |
0.108 |
|
|
$ |
0.151 |
|
|
$ |
(0.043 |
) |
|
|
(28.5 |
)% |
Gross profit percentage |
|
|
14.3 |
% |
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
Sales for the Americas for the three months ended November 30, 2010 were $115.1 million, an
increase of $38.8 million or 50.8% compared with the prior-year period. Including the ICO effect,
sales increased approximately 7%.
Foreign currency translation increased sales by $1.3 million. Volume for the quarter
reached 152.2 million pounds, up slightly including the ICO effect.
- 21 -
Gross
profit was $16.5 million for the three months ended
November 30, 2010, an increase of $6.5 million from last year.
Including the ICO effect, gross profits increased $0.6 million
or 3.5%. Gross profit per pound was
10.8 cents for the three months ended November 30, 2010, down 28.5% from last year, and up
approximately 3%, including the ICO effect. On a sequential basis, gross profit per pound was down
approximately 4% from the 2010 fourth quarter.
Operating income for the three months ended November 30, 2010 was $3.9 million compared with $2.9
million last year. The $1.0 million increase in profitability was primarily due to the increase in
gross profit. Including the ICO effect, operating income decreased $0.8 million.
The decrease was largely related to incremental expense for
stock-based compensation as well as the establishment of the
Companys Americas management team.
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
|
APAC |
|
2010 |
|
|
2009 |
|
|
Increase (decrease) |
|
|
|
(In thousands, except for %s and per pound data) |
|
Net sales |
|
$ |
33,580 |
|
|
$ |
14,587 |
|
|
$ |
18,993 |
|
|
|
130.2 |
% |
Gross profit |
|
$ |
4,562 |
|
|
$ |
2,664 |
|
|
$ |
1,898 |
|
|
|
71.2 |
% |
Operating income |
|
$ |
1,808 |
|
|
$ |
1,114 |
|
|
$ |
694 |
|
|
|
62.3 |
% |
Pounds sold |
|
|
33,897 |
|
|
|
12,590 |
|
|
|
21,307 |
|
|
|
169.2 |
% |
Price per pound |
|
$ |
0.991 |
|
|
$ |
1.159 |
|
|
$ |
(0.168 |
) |
|
|
(14.5 |
)% |
Gross profit per pound |
|
$ |
0.135 |
|
|
$ |
0.212 |
|
|
$ |
(0.077 |
) |
|
|
(36.4 |
)% |
Gross profit percentage |
|
|
13.6 |
% |
|
|
18.3 |
% |
|
|
|
|
|
|
|
|
Sales for APAC for the three months ended November 30, 2010 were $33.6 million, an increase of
$19.0 million or 130.2% compared with the prior-year period. Including the ICO effect, sales were
about flat with the prior year and pounds sold decreased approximately 9%.
Gross profit for APAC for the three months ended November 30, 2010 was $4.6 million, or 13.5 cents
per pound, for the quarter, up $1.9 million compared with last year. Including the ICO effect,
gross profit was up $0.5 million and gross profit per pound increased 22.5%. The reduction in
volume was from exiting unprofitable business, primarily in Australia, resulting in higher overall
gross profit and higher gross profit per pound.
APAC operating income for the three months ended November 30, 2010 was $1.8 million compared with
$1.1 million last year. Including the ICO effect, operating profit increased by $0.8 million. The
increase in profitability was primarily due to the increase in gross profit per pound.
Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
|
Consolidated |
|
2010 |
|
|
2009 |
|
|
Increase (decrease) |
|
|
|
(In thousands, except for %s and per pound data) |
|
Net sales |
|
$ |
495,383 |
|
|
$ |
362,861 |
|
|
$ |
132,522 |
|
|
|
36.5 |
% |
Total segment gross profit |
|
$ |
69,122 |
|
|
$ |
63,227 |
|
|
$ |
5,895 |
|
|
|
9.3 |
% |
Pounds sold |
|
|
502,601 |
|
|
|
329,193 |
|
|
|
173,408 |
|
|
|
52.7 |
% |
Price per pound |
|
$ |
0.986 |
|
|
$ |
1.102 |
|
|
$ |
(0.117 |
) |
|
|
(10.6 |
)% |
Gross profit per pound |
|
$ |
0.138 |
|
|
$ |
0.192 |
|
|
$ |
(0.055 |
) |
|
|
(28.4 |
)% |
Gross profit percentage |
|
|
14.0 |
% |
|
|
17.4 |
% |
|
|
|
|
|
|
|
|
The majority of the increase in consolidated sales for the three months ended November 30, 2010
compared with the prior-year period was due to the impact of the ICO
acquisition. The foreign currency translation effect negatively
impacted sales by 7.2%.
Volume reached 502.6 million pounds, up 52.7% from 329.2 million pounds reported last year, of which the ICO
acquisition attributed the majority of the increase. Including the ICO effect, sales increased
approximately 9%, and volume increased approximately 2%.
- 22 -
Total segment gross profit excluding asset write-downs and inventory step-up for the three months
ended November 30, 2010 was $69.1 million, compared with $63.2 million last year. The foreign
currency translation effect negatively impacted gross profit by $3.8 million. Including the ICO
effect, gross profit for the three months ended November 30, 2010 decreased $6.9 million as
discussed in the segment sections above. Overall gross profit per pound was 13.8 cents; lower than
the 15.4 cents in last years first quarter including the ICO effect but significantly higher than
the 11.6 cents per pound in the fourth quarter of 2010.
The change in selling, general and administrative expenses for the three months ended November 30,
2010 compared with the three months ended November 30, 2009 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, 2010 |
|
|
|
$ Increase (decrease) |
|
|
% Increase (decrease) |
|
|
|
(In thousands, except for %s) |
|
Total change in selling, general and
administrative expenses |
|
$ |
12,153 |
|
|
|
29.8 |
% |
Less the effect of foreign currency translation |
|
|
(2,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total change in selling, general and
administrative
expenses, excluding the effect of foreign
currency translation |
|
$ |
14,621 |
|
|
|
35.9 |
% |
|
|
|
|
|
|
|
The Companys selling, general and administrative expenses, excluding the effect of foreign
currency translation, increased $14.6 million. Including the ICO effect and excluding costs
related to acquisitions, the increase in selling, general and administrative expenses was $2.4 million.
The increase includes $1.8 million of costs for various
consultants to aid the Company with certain global initiatives. These
initiatives include the review of the Companys long-term
business strategy, capital structure, process improvements and growth
initiatives including continued merger and acquisition activities. In
addition, the increase includes $1.5 million of incremental expense for stock-based compensation
primarily as a result of mark-to-market adjustments which had declined significantly in the first
quarter of fiscal 2010.
Offsetting these increases are $1.2 million of favorable
bad debt expense as well as synergies from the ICO acquisition.
Interest expense increased $0.2 million for the three months ended November 30, 2010, as compared
with the same period in the prior year due primarily to increases in average outstanding principal
balances.
The decrease in interest income for the three months ended November 30, 2010 as compared to the
same period in fiscal 2010 was due primarily to lower average balances for the Companys cash and
cash equivalent accounts.
Foreign currency transaction gains or losses represent changes in the value of currencies in major
areas where the Company operates. The Company experienced foreign currency transaction losses of
$0.7 million for the three months ended November 30, 2010 compared with foreign currency
transaction losses of $0.1 million during the three months ended November 30, 2009. Generally, the
foreign currency transaction gains or losses relate to the changes in the value of the U.S. dollar
compared with the Brazilian real, the Canadian dollar and the Mexican peso and changes between the
euro and other non-euro European currencies. The Company enters into forward foreign exchange
contracts to reduce the impact of changes in foreign exchange rates on the consolidated statements
of income. These contracts reduce exposure to currency movements affecting existing foreign
currency denominated assets and liabilities resulting primarily from trade receivables and
payables. Any gains or losses associated with these contracts, as well as the
offsetting gains or losses from the underlying assets or liabilities, are recognized on the foreign
currency transaction line in the consolidated statements of income.
Other income for the three months ended November 30, 2010 was minimal. Other income for the three
months ended November 30, 2009 of $1.2 million includes $1.0 million of income from the
cancellation of European supplier distribution agreements.
- 23 -
Noncontrolling interests represent a 30% equity position of Mitsubishi Chemical MKV Company in a
partnership with the Company and a 35% equity position of P.T. Prima Polycon Indah in an Indonesian
joint venture with the Company.
Discontinued operations reflect the operating results for the former Invision segment of the
Companys business. During fiscal 2010, the Company completed the closing of its Invision sheet
manufacturing operation at its Sharon Center, Ohio manufacturing facility.
Net income attributable to the Companys stockholders was $9.2 million and $17.0 million for the
three months ended November 30, 2010 and 2009, respectively, a decline of $7.8 million. Net income
was negatively impacted by foreign currency translation of $0.9 million for the three months ended
November 30, 2010.
Product Markets
The largest market served by the Company is the packaging market. Other markets include automotive,
appliances, construction, medical, consumer products, electrical/electronics, office equipment and
agriculture. The approximate percentage of net consolidated sales by market for the three months
ended November 30, 2010 as compared with the same period last year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, 2010 |
|
|
|
Packaging |
|
|
Automotive |
|
|
Other |
|
EMEA |
|
|
32 |
% |
|
|
9 |
% |
|
|
59 |
% |
Americas |
|
|
19 |
% |
|
|
20 |
% |
|
|
61 |
% |
APAC |
|
|
43 |
% |
|
|
0 |
% |
|
|
57 |
% |
Worldwide |
|
|
30 |
% |
|
|
11 |
% |
|
|
59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, 2009 |
|
|
|
Packaging |
|
|
Automotive |
|
|
Other |
|
EMEA |
|
|
42 |
% |
|
|
9 |
% |
|
|
49 |
% |
Americas |
|
|
32 |
% |
|
|
33 |
% |
|
|
35 |
% |
APAC |
|
|
79 |
% |
|
|
0 |
% |
|
|
21 |
% |
Worldwide |
|
|
42 |
% |
|
|
13 |
% |
|
|
45 |
% |
Product Family
Globally, the Company operates primarily in four lines of business or product families: (1)
masterbatch, (2) engineered plastics, (3) specialty powders (formerly the rotomolding product
family), and (4) distribution. The amount and percentage of consolidated sales for these product
families for the three months ended November 30, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands, except for %s) |
|
Masterbatch |
|
$ |
200,299 |
|
|
|
41 |
% |
|
$ |
160,294 |
|
|
|
44 |
% |
Engineered plastics |
|
|
124,038 |
|
|
|
25 |
|
|
|
122,653 |
|
|
|
34 |
|
Specialty powders |
|
|
90,076 |
|
|
|
18 |
|
|
|
6,339 |
|
|
|
2 |
|
Distribution |
|
|
80,970 |
|
|
|
16 |
|
|
|
73,575 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
495,383 |
|
|
|
100 |
% |
|
$ |
362,861 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
- 24 -
Capacity
The Companys practical capacity is not based on a theoretical 24-hour, seven-day operation, rather
it is determined as the production level at which the manufacturing facilities can operate with an
acceptable degree of efficiency, taking into consideration factors such as longer term customer
demand, permanent staffing levels, operating shifts, holidays, scheduled maintenance and mix of
product. Capacity utilization is calculated by dividing actual production pounds by practical
capacity at each plant. A comparison of capacity utilization levels for the three months ended
November 30, 2010 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
November 30, |
|
|
|
2010 |
|
|
2009 |
|
EMEA |
|
|
80 |
% |
|
|
96 |
% |
Americas |
|
|
63 |
% |
|
|
76 |
% |
APAC |
|
|
88 |
% |
|
|
86 |
% |
Worldwide |
|
|
74 |
% |
|
|
91 |
% |
Capacity utilization for the ICO specialty powders operations acquired, specifically in EMEA and
the Americas, are generally lower than the Companys legacy operations; therefore, causing a
negative impact on the utilization rates. In the Americas, the decrease in capacity utilization due
to ICO was slightly offset by the closing of the Sharon Center, Ohio plant and continued
improvement in the utilization of the Akron, Ohio plant. The Companys APAC segment experienced
significantly higher capacity utilization as a result of a rebound in the local Asian markets
offset by the inclusion of ICO APAC operations which generally has a higher utilization rate.
Overall worldwide utilization declined primarily due to the addition of ICO operations offset by
utilization improvements as a result of a stable marketplace and successful capacity right-sizing
actions taken during fiscal 2009.
Restructurings
ASI United Kingdom Plan
On August 31, 2010, management announced restructuring plans for its operations at its Crumlin,
South Wales (U.K.) plant. The plans include moving part of the plants capacity to two other,
larger plants in Europe, and several production lines will be shut down. As a result, the Company
will reduce headcount at this location by approximately 30. The Company will continue to enhance
the capabilities of the Crumlin plant to produce smaller lots of colors and other specialty
compounds for the local market. The Company recorded no pretax restructuring costs for
employee-related costs for the three months ended November 30, 2010. The Company anticipates
approximately $0.2 million in accelerated depreciation to be recorded during the remainder of
fiscal 2011.
ICO Merger Plan
In conjunction with the merger with ICO, the Company reduced the workforce in the Houston, Texas
office by approximately 17. ICO had preexisting arrangements regarding change-in-control payments
and severance pay which were based on pre-merger service. The Company assumed $2.1 million in
liabilities as a result of the merger related to these agreements, of which $2.0 million was paid
by the Company during fiscal 2010. Since the merger, the Company announced the exit of certain
senior managers in Europe in connection with the Companys ongoing integration of ICO operations.
The Company recorded approximately $0.3 million primarily in pretax employee-related costs during
the three months ended November 30, 2010 related to the integration of the ICO merger. The Company
has approximately $0.5 million remaining accrued for the ICO merger plan as of November 30, 2010,
to be paid in the second and third quarters of fiscal 2011. The Company expects minimal remaining
charges to be incurred into late fiscal 2011.
North America Masterbatch Fiscal 2010 Plan
On March 1, 2010, the Company announced the closure of its Polybatch Color Center located in Sharon
Center, Ohio, which was a plant in the Americas segment. The Company recorded pretax restructuring
expenses of $0.1 million during the three months ended November 30, 2010 primarily for
employee-related costs associated with the closure. As
of November 30, 2010, approximately $0.1 million remains accrued which the Company expects to pay
during the second quarter of fiscal 2011. The Company ceased production at the Polybatch Color
Center on August 31, 2010. The Company expects minimal additional charges related to this
initiative to be recognized primarily during fiscal 2011 as it completes the shutdown procedures.
- 25 -
Fiscal 2009 Plan
During fiscal 2009, the Company announced various plans to realign its domestic and international
operations to strengthen the Companys performance and financial position. The Company initiated
these proactive actions to address the then weak global economic conditions and improve the
Companys competitive position. The actions included a reduction in capacity and workforce
reductions in manufacturing, selling and administrative positions throughout Europe and North
America. In addition, in fiscal 2010, the Company completed the previously announced consolidation
of its back-office operations in Europe, which include finance and accounting functions, to a
shared service center located in Belgium.
The Company reduced its workforce by approximately 190 positions worldwide during fiscal 2009,
primarily as a result of the actions taken in early fiscal 2009 to realign the Companys operations
and back-office functions. In addition, to further manage costs during a period of significant
declines in demand primarily in the second quarter of fiscal 2009, the Companys major European
locations implemented a short work schedule when necessary and the Americas segment reduced
shifts from seven to five days at its Nashville, Tennessee plant. Also in the Americas segment, the
Company reduced production capacity by temporarily idling one manufacturing line, while permanently
shutting down another line at its plant in Bellevue, Ohio. The Company completed the right-sizing
and redesign of its Italian plant, which resulted in less than $0.1 million of accelerated
depreciation on certain fixed assets during the first quarter of fiscal 2010.
The Company recorded employee-related costs of $0.2 million and contract termination and other
restructuring costs of $0.2 million related to the fiscal 2009 initiatives during the three months
ended November 30, 2009. All restructuring charges recorded for the fiscal 2009 Plan during fiscal
2010 were related to the EMEA segment. The Company recorded minimal charges related to the fiscal
2009 initiatives during the three months ended November 30, 2010.
As of November 30, 2010, approximately $0.2 million remains accrued for employee-related costs,
including estimated severance payments and medical insurance, and contract termination costs
related to the fiscal 2009 initiatives. The Company anticipates the majority of the remaining
accrued balance for restructuring charges will be paid during the second quarter of fiscal 2011.
The Company charges related to the plans initiated in fiscal 2009 to reduce capacity and headcount
at certain international locations were substantially complete as of the end of fiscal 2010.
Fiscal 2008 Plan
In January 2008, the Company announced two steps in its continuing effort to improve the
profitability of its North American operations. The Company announced it would shut down its
manufacturing facility in St. Thomas, Ontario, Canada and would pursue a sale of its manufacturing
facility in Orange, Texas. All the restructuring costs related to the sale of the Orange, Texas and
the St. Thomas, Ontario, Canada facilities are related to the Americas segment. The Company
completed the sale of the Orange, Texas facility in March 2008.
The St. Thomas, Ontario, Canada facility primarily produced engineered plastics for the automotive
market, with a capacity of approximately 74 million pounds per year and employed approximately 120
individuals. The facility was shutdown at the end of June 2008 and the Company finalized closing
procedures in fiscal 2010.
The Company recorded minimal charges related to the fiscal 2008 initiatives during the three months
ended November 30, 2010 and 2011. Approximately $0.4 million remains accrued for employee-related
costs as of November 30, 2010 related to the fiscal 2008 initiatives.
The following table summarizes the liabilities as of November 30, 2010 related to the Companys
restructuring plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual Balance |
|
|
|
Accrual Balance |
|
|
Fiscal 2011 |
|
|
Fiscal 2011 |
|
|
November 30, |
|
|
|
August 31, 2010 |
|
|
Charges |
|
|
Paid |
|
|
2010 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
Employee-related costs |
|
$ |
2,011 |
|
|
$ |
487 |
|
|
$ |
(990 |
) |
|
$ |
1,508 |
|
Other costs |
|
|
267 |
|
|
|
64 |
|
|
|
(131 |
) |
|
|
200 |
|
Translation effect |
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
$ |
2,231 |
|
|
$ |
551 |
|
|
$ |
(1,121 |
) |
|
$ |
1,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 26 -
Income Tax
A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates for the
three months ended November 30, 2010 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
November 30, 2010 |
|
|
November 30, 2009 |
|
|
|
(In thousands, except for %s) |
|
Statutory U.S. tax rate |
|
$ |
4,828 |
|
|
|
35.0 |
% |
|
$ |
7,788 |
|
|
|
35.0 |
% |
Amount of foreign taxes at less than U.S.
statutory tax rate |
|
|
(2,956 |
) |
|
|
(21.4 |
) |
|
|
(5,339 |
) |
|
|
(24.0 |
) |
U.S. and foreign losses with no tax benefit |
|
|
1,967 |
|
|
|
14.2 |
|
|
|
1,718 |
|
|
|
7.7 |
|
U.S. restructuring and other U.S. unusual
charges with no benefit |
|
|
375 |
|
|
|
2.7 |
|
|
|
822 |
|
|
|
3.7 |
|
Establishment (resolution) of uncertain tax
positions |
|
|
11 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Other |
|
|
193 |
|
|
|
1.4 |
|
|
|
123 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) |
|
$ |
4,418 |
|
|
|
32.0 |
% |
|
$ |
5,112 |
|
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate for the three months ended November 30, 2010 is less than the U.S. statutory
rate primarily because of the Companys overall foreign rate being less than the U.S. statutory
rate. This favorable effect on the Companys tax rate was partially offset by no tax benefits being
recognized for U.S. and certain foreign losses from continuing operations and other U.S. charges.
As compared with the effective rate of 23.0% for the three months ended November 30, 2009, the
current quarters effective rate is driven by an increase in the U.S. losses with no tax benefit.
Reconciliation of GAAP and Non-GAAP Financial Measures
The Company uses the following non-GAAP financial measures of net income excluding certain items
and net income per diluted share excluding certain items. These financial measures are used by
management to monitor and evaluate the ongoing performance of the Company and to allocate
resources. The Company believes that the additional measures are useful to investors for financial
analysis. However, non-GAAP measures are not in accordance with, nor are they a substitute for,
GAAP measures.
- 27 -
The tables below reconcile net income excluding certain items and net income per diluted share
excluding certain items to net income and net income per diluted share for the three months ended
November 30, 2010 and 2009. Asset write-downs include asset impairments and accelerated
depreciation. Restructuring related costs include restructuring charges, lease termination charges,
curtailment gains and other employee termination costs. Inventory step-up costs are related to
adjusting the fair value of inventory acquired as a result of acquisition purchase accounting. Tax
benefits (charges) include realization of certain deferred tax assets as a result of the ICO
acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Related |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Asset Write- |
|
|
to |
|
|
Restructuring |
|
|
Inventory |
|
|
Tax Benefits |
|
|
Before |
|
November 30, 2010 |
|
As Reported |
|
|
downs |
|
|
Acquisitions |
|
|
Related |
|
|
Step-up |
|
|
(Charges) |
|
|
Certain Items |
|
|
|
(in thousands, except per share data) |
|
Net sales |
|
$ |
495,383 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
495,383 |
|
Cost of sales |
|
|
426,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121 |
) |
|
|
|
|
|
|
426,261 |
|
Selling, general and
administrative expenses |
|
|
52,905 |
|
|
|
|
|
|
|
(881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,024 |
|
Interest expense, net |
|
|
1,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,085 |
|
Foreign currency transaction
(gains) losses |
|
|
670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
670 |
|
Other (income) expense |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
Restructuring expense |
|
|
551 |
|
|
|
|
|
|
|
|
|
|
|
(551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481,589 |
|
|
|
|
|
|
|
(881 |
) |
|
|
(551 |
) |
|
|
(121 |
) |
|
|
|
|
|
|
480,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before taxes |
|
|
13,794 |
|
|
|
|
|
|
|
881 |
|
|
|
551 |
|
|
|
121 |
|
|
|
|
|
|
|
15,347 |
|
Provision for U.S.
and foreign income taxes |
|
|
4,418 |
|
|
|
|
|
|
|
|
|
|
|
113 |
|
|
|
43 |
|
|
|
65 |
|
|
|
4,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
|
|
9,376 |
|
|
|
|
|
|
|
881 |
|
|
|
438 |
|
|
|
78 |
|
|
|
(65 |
) |
|
|
10,708 |
|
Income (loss) from discontinued
operations, net of tax of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
9,376 |
|
|
|
|
|
|
|
881 |
|
|
|
438 |
|
|
|
78 |
|
|
|
(65 |
) |
|
|
10,708 |
|
Noncontrolling interests |
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
A. Schulman, Inc. |
|
$ |
9,243 |
|
|
$ |
|
|
|
$ |
881 |
|
|
$ |
438 |
|
|
$ |
78 |
|
|
$ |
(65 |
) |
|
$ |
10,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS impact |
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares outstanding -diluted |
|
|
31,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Related |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Asset Write- |
|
|
to |
|
|
Restructuring |
|
|
Inventory |
|
|
Tax Benefits |
|
|
Before |
|
November 30, 2009 |
|
As Reported |
|
|
downs |
|
|
Acquisitions |
|
|
Related |
|
|
Step-up |
|
|
(Charges) |
|
|
Certain Items |
|
|
|
(in thousands, except per share data) |
|
Net sales |
|
$ |
362,861 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
362,861 |
|
Cost of sales |
|
|
299,703 |
|
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
299,634 |
|
Selling, general and
administrative expenses |
|
|
40,752 |
|
|
|
|
|
|
|
(2,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,486 |
|
Interest expense, net |
|
|
801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801 |
|
Foreign currency transaction
(gains) losses |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
Other (income) expense |
|
|
(1,177 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,227 |
) |
Restructuring expense |
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
(429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340,611 |
|
|
|
(119 |
) |
|
|
(2,266 |
) |
|
|
(429 |
) |
|
|
|
|
|
|
|
|
|
|
337,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before taxes |
|
|
22,250 |
|
|
|
119 |
|
|
|
2,266 |
|
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
25,064 |
|
Provision for U.S.
and foreign income taxes |
|
|
5,112 |
|
|
|
21 |
|
|
|
|
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
5,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
|
|
17,138 |
|
|
|
98 |
|
|
|
2,266 |
|
|
|
299 |
|
|
|
|
|
|
|
|
|
|
|
19,801 |
|
Income (loss) from discontinued
operations, net of tax of $0 |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
17,135 |
|
|
|
98 |
|
|
|
2,266 |
|
|
|
299 |
|
|
|
|
|
|
|
|
|
|
|
19,798 |
|
Noncontrolling interests |
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
A. Schulman, Inc. |
|
$ |
17,033 |
|
|
$ |
98 |
|
|
$ |
2,266 |
|
|
$ |
299 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
19,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS impact |
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares outstanding -diluted |
|
|
26,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,056 |
|
- 28 -
Liquidity and Capital Resources
Net cash used in operations for the three months ended November 30, 2010 was $25.1 million. Net
cash provided by operations was $7.2 million for the three months ended November 30, 2009. The
decrease from last year was primarily due to the earlier payment of accounts payables to benefit
from favorable payment terms offered by certain vendors which reduced the days in payables to 38
days compared with 46 days as of November 30, 2009. The decrease in net
income also contributed to the decline in cash provided from operations.
The Companys approximate working capital days are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2010 |
|
|
August 31, 2010 |
|
|
November 30, 2009 |
|
Days in receivables |
|
|
56 |
|
|
|
53 |
|
|
|
57 |
|
Days in inventory |
|
|
53 |
|
|
|
47 |
|
|
|
51 |
|
Days in payables |
|
|
38 |
|
|
|
39 |
|
|
|
46 |
|
Total working capital days |
|
|
71 |
|
|
|
61 |
|
|
|
62 |
|
The following table summarizes certain key balances on the Companys consolidated balance sheets
and related metrics.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2010 |
|
|
August 31, 2010 |
|
|
$ Change |
|
|
% Change |
|
|
|
(In millions, except for %s) |
|
Cash and cash equivalents |
|
$ |
99.0 |
|
|
$ |
122.8 |
|
|
$ |
(23.8 |
) |
|
|
-19 |
% |
Working capital, excluding cash |
|
$ |
197.2 |
|
|
$ |
169.4 |
|
|
$ |
27.8 |
|
|
|
16 |
% |
Long-term debt |
|
$ |
95.6 |
|
|
$ |
93.8 |
|
|
$ |
1.8 |
|
|
|
2 |
% |
Total debt |
|
$ |
182.6 |
|
|
$ |
154.7 |
|
|
$ |
27.9 |
|
|
|
18 |
% |
Net debt (net cash)* |
|
$ |
83.6 |
|
|
$ |
31.9 |
|
|
$ |
51.7 |
|
|
|
162 |
% |
Total A. Schulman, Inc.
stockholders equity |
|
$ |
501.2 |
|
|
$ |
488.0 |
|
|
$ |
13.2 |
|
|
|
3 |
% |
|
|
|
* |
|
Total debt less cash and cash equivalents |
The Companys cash and cash equivalents decreased approximately $23.8 million from August 31, 2010.
The decrease in cash and cash equivalents during the first quarter was driven primarily by the
acquisition of Mash for $15.1 million, expenditures for capital projects of $5.0 million, dividends
of $4.9 million and increases in working capital.
Working capital, excluding cash, was $197.2 million as of November 30, 2010, an increase of $27.8
million from August 31, 2010. The primary reason for the increase in working capital was the
increase in accounts receivable of $24.7 million and the increase in inventory of $35.0 million
offset by an increase of $26.1 million in short-term debt since August 31, 2010. Accounts payable
declined $0.2 million during the first quarter of fiscal 2011. The translation effect of foreign
currencies, primarily the euro, increased accounts receivable by $6.8 million and inventory by $5.1
million. Excluding the impact of translation of foreign currencies, accounts
receivable increased $17.9 million, or 6.3%, and inventory increased $29.9 million, or 14.3%. The
increase in accounts receivable is primarily due to increased sales volume. The increase in
inventory is primarily a result of inventory pre-buying in anticipation of increasing costs and
tightening of supply in certain raw materials. Accounts payable decreased $4.3 million, excluding
the impact of foreign currency, as the Company took advantage of favorable payment terms offered by
certain vendors. Short-term debt increased as the Company utilized available facilities with
favorable rates to fund working capital needs as well the acquisition of Mash.
Capital expenditures for the three months ended November 30, 2010 were $5.0 million compared with
$4.4 million last year. Capital expenditures for both fiscal 2011 and fiscal 2010 relate primarily
to various projects in Europe and the Americas.
- 29 -
The Company has a $260.0 million credit facility (Credit Facility) which consists of credit lines
of which the U.S. dollar equivalent of $160.0 million is available to certain of the Companys
foreign subsidiaries for borrowings in euros or other currencies. The Credit Facility, which
matures on February 28, 2011, contains certain covenants that, among other things, limit the
Companys ability to incur indebtedness and enter into certain transactions beyond specified
limits. The Company must also maintain a minimum interest coverage ratio and may not exceed a
maximum net debt leverage ratio. As of November 30, 2010, the Company was not in violation of any
of its covenants relating to the Credit Facility. The Company was well within compliance with these
covenants and does not believe a covenant violation is reasonably possible as of November 30, 2010.
Interest rates on the Credit Facility are based on LIBOR or EURIBOR (depending on the borrowing
currency) plus a spread determined by the Companys total leverage ratio. The Company also pays a
facility fee on the commitments whether used or unused. The Credit Facility allows for a provision
which provides a portion of the funds available as a short-term swing-line loan. The swing-line
loan interest rate varies based on a mutually agreed upon rate between the bank and the Company. As
of November 30, 2010, the amount available under the credit facility was reduced by outstanding
letters of credit of $1.9 million and borrowings of $82.0 million which is included in short-term
debt in the Companys consolidated balance sheet due to the short-term maturity of the Credit
Facility as of November 30, 2010.
The Company has senior guaranteed notes outstanding (Senior Notes) in the private placement
market consisting of the following:
|
|
|
$30.0 million of Senior Notes in the United States, maturing on March 1, 2013, with a
variable interest rate of LIBOR plus 80 bps (Dollar Notes). Although there are no plans
to do so, the Company may, at its option, prepay all or part of the Dollar Notes. |
|
|
|
|
50.3 million of Senior Notes in Germany, maturing on March 1, 2016, with a fixed
interest rate of 4.485% (Euro Notes). The carrying value of the Euro Notes approximately
$65.4 million as of November 30, 2010. The fair market value of the Euro Notes is
approximately $68.1 million as of November 30, 2010. |
The Senior Notes are guaranteed by the Companys wholly-owned domestic subsidiaries and contain
covenants substantially identical to those in the $260.0 million revolving Credit Facility. As of
November 30, 2010, the Company was not in violation of any of its covenants relating to the Senior
Notes. The Company was well within compliance with these covenants and does not believe a covenant
violation is reasonably possible as of November 30, 2010.
Both the Credit Facility and the Senior Notes are supported by up to 65% of the capital stock of
certain of the Companys directly owned foreign subsidiaries.
The Company had approximately $35.1 million of uncollateralized short-term foreign lines of credit
available to its subsidiaries as of November 30, 2010. There was approximately $30.0 million
available under these lines of credit as of November 30, 2010. The Company had no uncollateralized
short-term lines of credit from domestic banks as of November 30, 2010.
Below summarizes the Companys available funds as of November 30, 2010 and August 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
November 30, 2010 |
|
|
August 31, 2010 |
|
|
|
(In millions) |
|
|
|
|
|
Credit Facility |
|
$ |
260.0 |
|
|
$ |
260.0 |
|
Uncollateralized short-term lines of credit U.S. |
|
$ |
|
|
|
$ |
|
|
Uncollateralized short-term lines of credit Foreign |
|
$ |
35.1 |
|
|
$ |
37.2 |
|
|
|
|
|
|
|
|
Total gross available funds from credit lines |
|
$ |
295.1 |
|
|
$ |
297.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility |
|
$ |
176.1 |
|
|
$ |
204.1 |
|
Uncollateralized short-term lines of credit U.S. |
|
$ |
|
|
|
$ |
|
|
Uncollateralized short-term lines of credit Foreign |
|
$ |
30.0 |
|
|
$ |
29.9 |
|
|
|
|
|
|
|
|
Total net available funds from credit lines |
|
$ |
206.1 |
|
|
$ |
234.0 |
|
|
|
|
|
|
|
|
- 30 -
Total net available funds from credit lines represents the total gross available funds from credit
lines less outstanding borrowings of $87.1 million and $60.8 million as of November 30, 2010 and
August 31, 2010, respectively and issued letters of credit of $1.9 million and $2.4 million as of
November 30, 2010 and August 31, 2010, respectively. The Companys availability under its primary
credit facility is reduced by these amounts.
The Companys net debt, defined as debt minus cash, was in a net debt position of $83.6 million and
$31.9 million as of November 30, 2010 and August 31, 2010, respectively. The change of $51.7
million was a result of a decrease in cash and cash equivalents of $23.8 million due to the Mash
acquisition, dividend payments and working capital needs and an increase in total debt of $27.9
million. The increase in total debt was primarily due to a $26.1 million increase in short-term
debt as the Company utilized available facilities with favorable rates to fund working capital
needs as well the acquisition of Mash.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measure date. The FASB
provides accounting rules that establishes a fair value hierarchy to prioritize the inputs used in
valuation techniques into three levels as follows:
|
|
|
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets
or liabilities in active markets; |
|
|
|
|
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the
asset or liability either directly or indirectly; and |
|
|
|
|
Level 3: Unobservable inputs which reflect an entitys own assumptions. |
The fair value of cash equivalents, by their nature, is determined utilizing Level 1 inputs. The
Company measures the fair value of forward foreign exchange contracts using Level 2 inputs through
observable market transactions in active markets provided by banks. The forward foreign exchange
contracts are entered into with creditworthy multinational banks.
During the three months ended November 30, 2010, the Company declared and paid quarterly cash
dividends of $0.155 per common share. The total amount of these dividends was $4.9 million. Cash
has been sufficient to fund the payment of these dividends. On January 4, 2011, the Companys board
of directors declared a regular cash dividend of $0.155 per common share payable February 1, 2011
to stockholders of record on January 19, 2011.
No shares were repurchased during the three months ended November 30, 2010 and 2009. The Company
may continue repurchasing common stock under the Companys current repurchase program through open
market repurchases from time to time, subject to market conditions, capital considerations of the
Company and compliance with applicable laws. Approximately 2.9 million shares remain available to
be repurchased under the Companys repurchase program.
The Company has foreign currency exposures primarily related to the euro, U.K. pound sterling,
Canadian dollar, Mexican peso, Australian dollar, Indian rupee, Malaysian ringgit, Chinese yuan,
Polish zloty, Hungarian forint, Brazilian real and Indonesian rupiah. The assets and liabilities of
the Companys foreign subsidiaries are translated into U.S. dollars using current exchange rates.
Income statement items are translated at average exchange rates prevailing during the period. The
resulting translation adjustments are recorded in the accumulated other comprehensive income (loss)
account in stockholders equity. A significant portion of the Companys operations uses the euro as
its functional currency. The change in the value of the U.S. dollar during the three months ended
November 30, 2010 increased this account by $7.3 million which was primarily the result of a 2.5%
increase in the value of the euro since August 31, 2010 to a spot rate of 1.300 euros to 1 U.S.
dollar as of November 30, 2010.
Cash flow from operations, borrowing capacity under the credit facilities and current cash and cash
equivalents are expected to provide sufficient liquidity to maintain the Companys current
operations and capital expenditure requirements, pay dividends, repurchase shares, pursue
acquisitions and service outstanding debt.
- 31 -
Contractual Obligations
As of November 30, 2010, there were no material changes to the Companys future contractual
obligations as
previously reported in the Companys 2010 Annual Report.
Operating lease information is provided in Footnote 12 to the consolidated financial statements in
the Companys 2010 Annual Report on Form 10-K as there has been no significant changes.
The Companys outstanding commercial commitments at November 30, 2010 are not material to the
Companys financial position, liquidity or results of operations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements as of November 30, 2010.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. Management bases its estimates on historical experience and
other factors it believes to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ from those estimates. The Companys
critical accounting policies are the same as discussed in the Companys 2010 Annual Report on Form
10-K.
New Accounting Pronouncements
In January 2010, the FASB issued amended accounting rules to require disclosure of transfers into
and out of Level 1 and Level 2 fair value measurements, and also require more detailed disclosure
about the activity within Level 3 fair value measurements. The new rules also require a more
detailed level of disaggregation of the assets and liabilities being measured as well as increased
disclosures regarding inputs and valuation techniques of the fair value measurements. The changes
are effective for annual and interim reporting periods beginning after December 15, 2009, except
for requirements related to Level 3 disclosures, which are effective for annual and interim
reporting periods beginning after December 15, 2010. This guidance requires new disclosures only,
and is not expected to impact the Companys consolidated financial statements.
- 32 -
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 managements 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 Companys 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 Companys major product markets; |
|
|
|
|
the effectiveness of the Companys efforts to improve operating margins through sales
growth, price increases, productivity gains, and improved purchasing techniques; |
|
|
|
|
competitive factors, including intense price competition; |
|
|
|
|
fluctuations in the value of currencies in major areas where the Company operates; |
|
|
|
|
volatility of prices and availability of the supply of energy and raw materials that are
critical to the manufacture of the Companys products, particularly plastic resins derived
from oil and natural gas; |
|
|
|
|
changes in customer demand and requirements; |
|
|
|
|
effectiveness of the Company to achieve the level of cost savings, productivity
improvements, growth and other benefits anticipated from acquisitions and restructuring
initiatives; |
|
|
|
|
escalation in the cost of providing employee health care; |
|
|
|
|
uncertainties regarding the resolution of pending and future litigation and other
claims; |
|
|
|
|
the performance of the North American auto market; and |
|
|
|
|
further adverse changes in economic or industry conditions, including global supply and
demand conditions and prices for products. |
The risks and uncertainties identified above are not the only risks the Company faces. Additional
risk factors that could affect the Companys performance are set forth in the Companys Annual
Report on Form 10-K. 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 Companys business,
financial condition and results of operations.
Item 3 Quantitative and Qualitative Disclosure about Market Risk
In the ordinary course of business, the Company is subject to interest rate, foreign currency, and
commodity risks. Information related to these risks and management of these exposures is included
in Part II, ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, in the Companys
Annual Report on Form 10-K for the year ended August 31, 2010, filed with the Securities and
Exchange Commission (the Commission) on October 26, 2010. Exposures to market risks have not
changed materially since August 31, 2010.
Item 4 Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys reports under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the time periods specified
in the Commissions rules and forms and that such information is accumulated and communicated to
the Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
- 33 -
The Company carries out a variety of on-going procedures, under the supervision and with the
participation of the Companys management, including the Companys Chief Executive Officer and
Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on the foregoing, the Companys Chief Executive Officer
and Chief Financial Officer concluded that the Companys disclosure controls and procedures were
effective at a reasonable assurance level as of the end of the period covered by this report.
The Company acquired ICO and McCann Color during the third quarter of fiscal 2010. The scope of the
Companys assessment of the effectiveness of internal control over financial reporting as of August
31, 2010 does not include the acquired operations of ICO or McCann Color, as permitted by Section
404 of the Sarbanes-Oxley Act and SEC rules for recently acquired businesses.
There has been no change in the Companys internal controls over financial reporting during the
Companys most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal controls over financial reporting.
PART II OTHER INFORMATION
Items 1, 3, 4 and 5 are not applicable or the answer to such items is negative; therefore, the
items have been omitted and no reference is required in this Report.
Item 1A Risk Factors
There are certain risks and uncertainties in our business that could cause our actual results to
differ materially from those anticipated. In ITEM 1A. RISK FACTORS of Part I of the Companys the
Companys 2010 Form 10-K, we included a detailed discussion of our risk factors. There are no
changes from the risk factors previously disclosed.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
During fiscal 2008, the board of directors agreed to increase to five million the remaining number
of shares authorized for repurchase under the Companys 2006 share repurchase program, under which
the board of directors had previously authorized the repurchase of up to 6.75 million shares of
common stock.
The Companys purchases of its common stock under the 2008 repurchase program during the first
quarter of fiscal 2011 were as follows:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of shares |
|
|
Maximum number of |
|
|
|
Total number of shares |
|
|
Average price paid |
|
|
purchased as part of a |
|
|
shares that may yet be |
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|
repurchased |
|
|
per share |
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publicly announced plan |
|
|
purchased under the plan |
|
Beginning shares available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,906,966 |
|
September 1-30, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,906,966 |
|
October 1-31, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,906,966 |
|
November 1-30, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,906,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,906,966 |
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- 34 -
Item 6 Exhibits
(a) Exhibits
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Exhibit Number |
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Exhibit |
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3.1 |
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Amended and Restated Certificate of Incorporation of the Company (for purposes of
Commission reporting compliance only) (incorporated by reference from Exhibit
3(a) to the Companys Annual Report on Form 10-K for the fiscal year ended August
31, 2009). |
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3.2 |
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Amended and Restated By-laws of the Company (incorporated by reference from
Exhibit 3.2 to the Companys Current Report on Form 8-K filed with the Commission
on October 19, 2009). |
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10.1 |
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Quota Purchase and Sale Agreement, dated October 15, 2010, by and among the
Company, ICO Polymers do Brasil Ltda., a direct wholly-owned subsidiary of the
Company, and Henri and Elie Hara (filed herewith). |
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31.1 |
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Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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31.2 |
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Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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32 |
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Certifications of Principal Executive and Principal Financial Officers pursuant
to 18 U.S.C. 1350. |
- 35 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: January 5, 2011 |
A. Schulman, Inc. (Registrant)
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/s/ Paul F. DeSantis
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Paul F. DeSantis, Chief Financial Officer, Vice President and
Treasurer of A. Schulman, Inc. (Signing on behalf of Registrant as a
duly authorized officer of Registrant and signing as the Principal
Financial Officer of Registrant) |
|
- 36 -