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Form 10-Q SCHULMAN A INC For: Nov 30

January 11, 2016 8:24 AM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ______________________________
FORM 10-Q
 ______________________________
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2015
OR 
o
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)
 ______________________________ 
Delaware
 
34-0514850
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
3637 Ridgewood Road, Fairlawn, Ohio
 
44333
(Address of Principal Executive Offices)
 
(ZIP Code)
Registrant’s 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ     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 “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
 
  
Accelerated filer
 
o
Non-accelerated filer
 
o
 (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
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 January 8, 2016– 29,297,942





TABLE OF CONTENTS





PART I—FINANCIAL INFORMATION
Item 1—Financial Statements
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands, except per share data)
Net sales
$
649,219


$
615,053

Cost of sales
544,290

 
528,209

Selling, general and administrative expenses
77,237

 
60,547

Restructuring expense
1,546

 
5,219

Operating income
26,146


21,078

Interest expense
13,618

 
2,359

Foreign currency transaction (gains) losses
729

 
1,099

Other (income) expense, net
71

 
(254
)
Income (loss) from continuing operations before taxes
11,728


17,874

Provision (benefit) for U.S. and foreign income taxes
4,251

 
4,486

Income (loss) from continuing operations
7,477

 
13,388

Income (loss) from discontinued operations, net of tax
20

 
(10
)
Net income (loss)
7,497


13,378

Noncontrolling interests
(404
)
 
(220
)
Net income (loss) attributable to A. Schulman, Inc.
7,093

 
13,158

Convertible special stock dividends
1,875

 

Net income (loss) available to A. Schulman, Inc. common stockholders
$
5,218

 
$
13,158

 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
Basic
29,223


29,017

Diluted
29,462


29,468

 
 
 
 
Basic earnings per share available to A. Schulman, Inc. common stockholders
Income (loss) from continuing operations
$
0.18

 
$
0.45

Income (loss) from discontinued operations

 

Net income (loss) available to A. Schulman, Inc. common stockholders
$
0.18

 
$
0.45

 
 
 
 
Diluted earnings per share available to A. Schulman, Inc. common stockholders
Income (loss) from continuing operations
$
0.18

 
$
0.45

Income (loss) from discontinued operations

 

Net income (loss) available to A. Schulman, Inc. common stockholders
$
0.18

 
$
0.45

 
 
 
 
Cash dividends per common share
$
0.205

 
$
0.205

Cash dividends per share of convertible special stock
$
15.00

 
$



The accompanying notes are an integral part of the consolidated financial statements
- 1 -




A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Net income (loss)
$
7,497

 
$
13,378

Other comprehensive income (loss):
 
 
 
Foreign currency translation gains (losses)
(10,776
)
 
(25,615
)
Defined benefit retirement plans, net of tax
1,015

 
336

Other comprehensive income (loss)
(9,761
)
 
(25,279
)
Comprehensive income (loss)
(2,264
)
 
(11,901
)
Less: comprehensive income (loss) attributable to noncontrolling interests
335

 
196

Comprehensive income (loss) attributable to
A. Schulman, Inc.
$
(2,599
)
 
$
(12,097
)


The accompanying notes are an integral part of the consolidated financial statements
- 2 -




A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
November 30,
2015
 
August 31,
2015
 
(In thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
95,562

 
$
96,872

Accounts receivable, less allowance for doubtful accounts of $10,533 at November 30, 2015 and $10,777 at August 31, 2015
395,317

 
413,943

Inventories
313,616

 
317,328

Prepaid expenses and other current assets
68,483

 
60,205

Total current assets
872,978


888,348

Property, plant and equipment, at cost:
 
 
 
Land and improvements
31,883

 
31,674

Buildings and leasehold improvements
163,448

 
164,759

Machinery and equipment
418,652

 
427,183

Furniture and fixtures
33,733

 
34,393

Construction in progress
25,960

 
23,866

Gross property, plant and equipment
673,676

 
681,875

Accumulated depreciation
365,590

 
367,381

Net property, plant and equipment
308,086

 
314,494

Deferred charges and other noncurrent assets
88,490

 
90,749

Goodwill
623,551

 
623,583

Intangible assets, net
423,302

 
434,537

Total assets
$
2,316,407

 
$
2,351,711

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable
$
299,219

 
$
305,385

U.S. and foreign income taxes payable
3,885

 
4,205

Accrued payroll, taxes and related benefits
58,067

 
56,192

Other accrued liabilities
84,109

 
70,824

Short-term debt
22,433

 
20,710

Total current liabilities
467,713

 
457,316

Long-term debt
1,013,576

 
1,045,349

Pension plans
112,265

 
117,889

Deferred income taxes
117,186

 
115,537

Other long-term liabilities
22,281

 
22,885

Total liabilities
1,733,021

 
1,758,976

Commitments and contingencies


 


Stockholders’ equity:
 
 
 
Convertible special stock, no par value
120,289

 
120,289

Common stock, $1 par value, authorized - 75,000 shares, issued - 48,371 shares at November 30, 2015 and 48,369 shares at August 31, 2015
48,371

 
48,369

Additional paid-in capital
275,095

 
274,319

Accumulated other comprehensive income (loss)
(93,152
)
 
(83,460
)
Retained earnings
606,884

 
607,690

Treasury stock, at cost, 19,075 shares at November 30, 2015 and 19,077 shares at August 31, 2015
(383,085
)
 
(383,121
)
Total A. Schulman, Inc.’s stockholders’ equity
574,402

 
584,086

Noncontrolling interests
8,984

 
8,649

Total equity
583,386

 
592,735

Total liabilities and equity
$
2,316,407

 
$
2,351,711


The accompanying notes are an integral part of the consolidated financial statements
- 3 -




A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Operating from continuing and discontinued operations:
 
 
 
Net income
$
7,497

 
$
13,378

Adjustments to reconcile net income to net cash provided from (used in) operating activities:
 
 
 
Depreciation
12,013

 
8,963

Amortization
10,039

 
4,066

Deferred tax provision
1,306

 
633

Pension, postretirement benefits and other compensation
1,217

 
2,452

Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
7,345

 
(4,731
)
Inventories
(8,671
)
 
(16,341
)
Accounts payable
377

 
8,200

Income taxes
1,432

 
463

Accrued payroll and other accrued liabilities
18,614

 
2,846

Other assets and long-term liabilities
(11,144
)
 
(9,670
)
Net cash provided from (used in) operating activities
40,025

 
10,259

Investing from continuing and discontinued operations:
 
 
 
Expenditures for property, plant and equipment
(7,402
)
 
(10,324
)
Proceeds from the sale of assets
361

 
904

Business acquisitions, net of cash

 
(6,698
)
Net cash provided from (used in) investing activities
(7,041
)
 
(16,118
)
Financing from continuing and discontinued operations:
 
 
 
Cash dividends paid to special stockholders
(1,875
)
 

Cash dividends paid to common stockholders
(6,024
)
 
(5,962
)
Increase (decrease) in short-term debt
1,926

 
870

Borrowings on long-term debt

 
27,500

Repayments on long-term debt including current portion
(24,946
)
 
(10,915
)
Noncontrolling interests' contributions (distributions)

 
(1,750
)
Issuances of stock, common and treasury
90

 
71

Purchases of treasury stock

 
(3,335
)
Net cash provided from (used in) financing activities
(30,829
)
 
6,479

Effect of exchange rate changes on cash
(3,465
)
 
(4,004
)
Net increase (decrease) in cash and cash equivalents
(1,310
)
 
(3,384
)
Cash and cash equivalents at beginning of period
96,872

 
135,493

Cash and cash equivalents at end of period
$
95,562

 
$
132,109


The accompanying notes are an integral part of the consolidated financial statements
- 4 -



A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)
GENERAL
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 periods presented. All such adjustments are of a normal recurring nature. The fiscal 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. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The results of operations for the three months ended November 30, 2015 are not necessarily indicative of the results expected for the fiscal year ending August 31, 2016.
The accounting policies for the periods presented are the same as described in Note 1 – Business and Summary of Significant Accounting Policies to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
Certain items previously reported in specific financial statement captions have been reclassified to conform to the fiscal 2016 presentation.
(2)
BUSINESS ACQUISITIONS
Citadel
On June 1, 2015, the Company acquired all of the issued and outstanding shares of privately held Citadel, a portfolio company of certain private equity firms, for $801.6 million. Citadel is a plastics materials science business that produces engineered composites and engineered plastics for specialty product applications spanning multiple industries including transportation, industrial & construction, consumer, electrical, energy and healthcare & safety. The acquisition expands the Company's presence substantially, especially in the North America engineered plastics markets as well as balancing the global geographic footprint and gives A. Schulman a second growth platform with its added-value specialty engineered composites business. The business enhances the Company's existing portfolio and presents attractive expansion opportunities in other sectors such as aerospace, medical, LED lighting and oil & gas. Through this acquisition the Company's portfolio becomes more highly specialized, which enables the Company to better serve its global customer base with comprehensive solutions to address their needs such as light-weighting, material replacement, and high temperature strength.
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 using discounted cash flow and comparative market multiple approaches, quoted market prices and estimates made by management. The purchase price allocation is subject to further adjustment until all pertinent information regarding the acquired accounts receivable, inventory, intangible assets, accrued liabilities and deferred taxes are fully evaluated by the Company.

- 5 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed from the Citadel acquisition at the date of acquisition:
 
 
As of June 1, 2015
 
 
(In thousands)
Accounts receivable
 
$
71,498

Inventories
 
41,771

Prepaid expenses and other current assets
 
15,320

Property, plant and equipment
 
78,113

Intangible assets
 
325,000

Other long-term assets
 
3,593

Total assets acquired
 
$
535,295

 
 
 
Accounts payable
 
29,500

Accrued liabilities
 
19,608

Deferred income taxes, long-term
 
116,102

Other long-term liabilities
 
3,121

Total liabilities assumed
 
$
168,331

Identifiable net assets acquired
 
$
366,964

Goodwill
 
434,596

Net assets acquired
 
$
801,560

The Company recorded acquired intangible assets of $325.0 million, with an estimated weighted-average useful life of 14.1 years. These intangible assets include customer related intangibles of $230.5 million, developed technology of $75.3 million, and trademarks and trade names of $19.2 million, with estimated weighted-average useful lives of 14.0 years, 16.3 years and 8.1 years, respectively. In addition, the estimated fair value of accounts receivable acquired was $71.5 million with the gross contractual amount being $72.1 million.

Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The amount allocated to goodwill associated with the Citadel acquisition is primarily the result of anticipated synergies resulting from the consolidation and centralization of manufacturing and global purchasing activities, insurance savings, elimination of duplicate corporate administrative costs and the previously discussed market expansion. The Company allocated the goodwill to its USCAN engineered plastics and global engineered composites reporting units. Except for certain pre-acquisition tax-deductible goodwill, none of the goodwill associated with this transaction is deductible for income tax purposes.

A. Schulman's fiscal year ends on August 31 while Citadel's fiscal year ended on December 31. The pro forma information in the table below for the three months ended November 30, 2014 includes (1) A. Schulman’s three months ended November 30, 2014 and (2) Citadel’s three months ended December 31, 2014. The following pro forma information represents the consolidated results of the Company as if the Citadel acquisition occurred on September 1, 2013:
 
Three months ended November 30,
 
2014
 
Unaudited
(In thousands, except per share data)
Net sales
$
739,738

Net income available to A. Schulman, Inc. common stockholders
$
7,906

Net income per share of common stock attributable to A. Schulman, Inc. - diluted
$
0.27



- 6 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The unaudited pro forma information has been adjusted with respect to certain aspects of the acquisition to reflect the following:

Citadel acquired The Composites Group (“TCG”) in November of 2014. For purposes of the pro forma information disclosed above, the TCG acquisition was included as if the acquisition date was on September 1, 2013.
Additional depreciation and amortization expenses that would have been recognized assuming fair value adjustments to the existing Citadel assets acquired and liabilities assumed, including intangible assets, fixed assets and expense associated with the fair value step-up of inventory acquired.
Increased interest expense due to additional borrowings to fund the acquisition.
Adjustment of valuation allowances associated with US deferred tax assets.
Acquisition-related costs of $14.1 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.
Costs associated with acquisition bridge financing of $18.8 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.

The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of the acquired business. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on September 1, 2013, nor are they indicative of the future operating results of the Company.

The following table summarizes the Company's other business acquisitions for the periods presented:
Transaction Description
Date of Transaction
 
Purchase
Consideration
(In millions)
 
Segment
Compco Pty. Ltd.
September 2, 2014
 
$
6.7

 
APAC

The Company incurred $1.9 million and $1.1 million of acquisition and integration related costs, primarily included in selling, general and administrative expenses, during the three months ended November 30, 2015 and 2014, respectively.
(3)
GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the Company's carrying value of goodwill are as follows: 
 
EMEA
 
USCAN
 
LATAM
 
APAC
 
EC
 
Total
 
(In thousands)
Balance as of August 31, 2015
$
75,714

 
$
285,791

 
$
11,695

 
$
901

 
$
249,482

 
$
623,583

Acquisitions

 
(31
)
(1) 

 

 
3,237

(1) 
3,206

Translation
(3,128
)
 

 
(107
)
 
(3
)
 

 
(3,238
)
Balance as of November 30, 2015
$
72,586

 
$
285,760

 
$
11,588

 
$
898

 
$
252,719

 
$
623,551


(1) Activity relates to adjustments to preliminary purchase price allocation made in fiscal 2016, primarily due to inventory valuation adjustments.
Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.
Goodwill is tested for impairment 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 completed its annual impairment review of goodwill as of June 1, 2015 and noted no impairment. Management uses judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement approach that combines the income and market valuation techniques for each of the Company’s reporting units that carry goodwill. These valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market comparables, projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
The Company is not aware of any triggers which would require a goodwill impairment test as of November 30, 2015.

- 7 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes intangible assets with finite useful lives by major category:
 
November 30, 2015
 
August 31, 2015
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
(In thousands)
Customer related
$
358,758

 
$
(46,650
)
 
$
312,108

 
$
360,193

 
$
(40,447
)
 
$
319,746

Developed technology
94,885

 
(11,392
)
 
83,493

 
93,518

 
(9,398
)
 
84,120

Registered trademarks and tradenames
34,694

 
(6,993
)
 
27,701

 
37,964

 
(7,293
)
 
30,671

Total finite-lived intangible assets
$
488,337

 
$
(65,035
)
 
$
423,302

 
$
491,675

 
$
(57,138
)
 
$
434,537

Amortization expense of intangible assets was $9.3 million and $3.4 million for the three months ended November 30, 2015 and 2014, respectively.

(4)
LONG-TERM DEBT AND CREDIT ARRANGEMENTS

The following table summarizes short-term and long-term debt:
 
November 30, 2015
 
August 31, 2015
 
(In thousands)
Notes payable and other, due within one year
$
7,399

 
$
5,584

Current portion of long-term debt
15,034

 
15,126

Short-term debt
$
22,433

 
$
20,710

 
 
 
 
Revolving credit facility, LIBOR plus applicable spread, due June 2020
$

 
$

Term Loan A, LIBOR plus applicable spread, due June 2020
185,000

 
187,500

U.S. Term Loan B, LIBOR plus applicable spread, due June 2022
343,938

 
344,781

Euro Term Loan B, LIBOR plus applicable spread, due June 2022
108,525

 
137,818

Senior notes, 6.875%, due June 2023
375,000

 
375,000

Capital leases and other long-term debt
1,113

 
250

Long-term debt
$
1,013,576

 
$
1,045,349

For a detailed discussion of the Company's long-term debt and credit arrangements, refer to Note 5 in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The Company is in compliance with its debt covenants as of November 30, 2015.
The Company paid €20.0 million on its Euro Term Loan B Facility debt during the three months ended November 30, 2015, in addition to normal required payments of $3.8 million on all term debt.

- 8 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(5) FAIR VALUE MEASUREMENT
The following table presents information about the Company’s assets and liabilities measured at fair value:
 
November 30, 2015
 
August 31, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(In thousands)
Assets recorded at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
2,733

 
$

 
$
2,733

 
$

 
$
1,818

 
$

 
$
1,818

 
$

Liabilities recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
3,957

 
$

 
$
3,957

 
$

 
$
1,576

 
$

 
$
1,576

 
$

Liabilities not recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Long-term fixed-rate debt
$
367,969

 
$

 
$
367,969

 
$

 
$
374,299

 
$

 
$
374,299

 
$

Cash and cash equivalents are recorded at cost, which approximates fair value. Additionally, the carrying value of the Company's variable-rate debt approximates fair value.
The Company measures the fair value of its foreign exchange forward contracts using an internal model. The model maximizes the use of Level 2 market observable inputs including interest rate curves, currency forward and spot prices, and credit spreads. The total contract value of foreign exchange forward contracts outstanding was $207.9 million and $161.5 million as of November 30, 2015 and August 31, 2015, respectively. The amount of foreign exchange forward contracts outstanding as of the end of the period is indicative of the exposure of current balances and the forecasted change in exposures for the following quarter. 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 (gains) losses line in the Company’s consolidated statements of operations. The fair value of the Company’s foreign exchange forward contracts is recognized in other current assets or other accrued liabilities in the consolidated balance sheets based on the net settlement value. The foreign exchange forward contracts are entered into with creditworthy financial institutions, generally have a term of three months or less, and the Company does not hold or issue foreign exchange forward contracts for trading purposes. There were no foreign exchange forward contracts designated as hedging instruments as of November 30, 2015 and August 31, 2015.
Long-term fixed-rate debt as of November 30, 2015 and August 31, 2015 represents the Senior Notes, due 2023, recorded at cost and presented at fair value for disclosure purposes. The Level 2 fair value of the Company's fixed-rate debt was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities. As of November 30, 2015 and August 31, 2015, the carrying value of the Company's long-term fixed-rate debt recorded on the consolidated balance sheets was $375.0 million.
For a discussion of the Company’s fair value measurement policies under the fair value hierarchy, refer to Note 1 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during fiscal 2016, and transfers between levels within the fair value hierarchy, if any, are recognized at the end of each quarter. There were no transfers between levels during the period presented.
Additionally, the Company remeasures certain assets to fair value, using Level 3 measurements, as a result of the occurrence of triggering events. There were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis during the period presented.
(6) INCOME TAXES
The effective tax rate for the three months ended November 30, 2015 and 2014 was 36.2% and 25.1%, respectively. The increase in the effective tax rate for the three months ended November 30, 2015 as compared with the same period last year was driven primarily by the prior year benefit of U.S. income with no tax due to valuation allowance and an increase in current year foreign income subject to U.S. tax, including income recognized due to the expiration of the “look-thru” provision of U.S. tax law, partially offset by fewer losses with no tax benefit.
We record quarterly taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory federal income tax rate in the current year is primarily attributable to certain foreign income being

- 9 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

taxable in the U.S., including a portion due to the expiration of the “look-thru” provision of U.S. tax law, partially offset by our overall foreign rate being less than the U.S. statutory federal income tax rate.
Subsequent to the close of the quarter, the “look-thru” provision of U.S. tax law was extended. The additional tax recorded in the three months ended November 30, 2015, due to the expiration of this provision, will be reversed in the second quarter, reducing our annual effective rate.
As of November 30, 2015, the Company's gross unrecognized tax benefits totaled $2.0 million. If recognized, $1.4 million of the total unrecognized tax benefits would favorably affect the Company's effective tax rate. The Company reports interest and penalties related to income tax matters in income tax expense. As of November 30, 2015, the Company had $0.9 million of accrued interest and penalties on unrecognized tax benefits.
The Company’s statute of limitations is open in various jurisdictions as follows: Germany - from 2005 onward, France - from 2010 onward, U.S. - from 2012 onward, Belgium - from 2012 onward, other foreign jurisdictions - from 2006 onward.
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.
(7) PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The components of the Company’s net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Defined benefit pension plans:
 
 
 
Service cost
$
1,294

 
$
1,254

Interest cost
1,063

 
1,168

Expected return on plan assets
(504
)
 
(471
)
Actuarial loss (gain) and amortization of prior service cost (credit), net
724

 
786

Net periodic pension benefit cost
$
2,577

 
$
2,737

 
 
 
 
Other postretirement benefit plan:
 
 
 
Service cost
$
1

 
$
1

Interest cost
97

 
110

Actuarial loss (gain) and amortization of prior service cost (credit), net
(149
)
 
(135
)
Net periodic postretirement benefit cost (credit)
$
(51
)
 
$
(24
)

- 10 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(8) CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
A summary of the changes in stockholders’ equity is as follows:
 
Convertible Special Stock
 
Common
Stock ($1 par value)
 
Additional Paid-In Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Treasury
Stock
 
Non-controlling
Interests
 
Total
Equity
 
(In thousands, except per share data)
Balance as of September 1, 2015
$
120,289

 
$
48,369

 
$
274,319

 
$
(83,460
)
 
$
607,690

 
$
(383,121
)
 
$
8,649

 
$
592,735

Comprehensive income (loss)
 
 
 
 

 
(9,692
)
 
7,093

 

 
335

 
(2,264
)
Cash dividends paid on common stock, $0.205 per share
 
 
 
 

 

 
(6,024
)
 

 

 
(6,024
)
Cash dividends paid on convertible special stock, $15.00 per share
 
 
 
 
 
 
 
 
(1,875
)
 
 
 
 
 
(1,875
)
Issuance of treasury stock
 
 
 
 
22

 

 

 
36

 

 
58

Stock options exercised
 
 
2

 
30

 

 

 


 

 
32

Amortization of restricted stock
 
 
 
 
724

 

 

 

 

 
724

Balance as of November 30, 2015
$
120,289

 
$
48,371

 
$
275,095

 
$
(93,152
)
 
$
606,884

 
$
(383,085
)
 
$
8,984

 
583,386

(9) CONVERTIBLE SPECIAL STOCK
On May 4, 2015, the Company filed with the Delaware Secretary of State a Certificate of Designation, Preferences, Rights and Limitations (the "Certificate of Designation") for the purpose of amending its Restated Certificate of Incorporation to fix the designations, preferences, limitations and relative rights of 125,000 shares of the Company’s 6.00% Cumulative Perpetual Convertible Special Stock, without par value (the “Convertible Special Stock”). On May 4, 2015, the Company received gross cash proceeds of $125.0 million from the sale of 125,000 shares of Convertible Special Stock. As of November 30, 2015 and August 31, 2015, the $120.3 million amount recorded in the Convertible Special Stock line in the balance sheet is net of issuance costs of $4.7 million.

Since August 31, 2015, there have been no changes to the Convertible Special Stock in regards to the:

ranking upon payment of dividends and distributions upon the Company’s liquidation, winding up or dissolution;
cumulative 6.00% per annum dividend entitlements;
voting rights;
redemption rights;
conversion rate, of which there have been no conversions as of November 30, 2015 and August 31, 2015; and
optional conversion by the Company on or after May 1, 2020.
The Company paid $1.9 million of convertible special stock dividends in case during the first quarter of fiscal 2016 and currently intends to pay future dividends in cash.
If the Company undergoes a fundamental change, as defined in the Certificate of Designation, and a holder subsequently converts its shares of Convertible Special Stock, the holder will receive, for each share of Convertible Special Stock surrendered for conversion, a number of shares of common stock of the Company as set forth in the Certificate of Designations. There have been no fundamental changes as of November 30, 2015 or August 31, 2015.


- 11 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(10) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss) are as follows(1):
 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2015
$
(49,562
)
 
$
(33,898
)
 
$
(83,460
)
Other comprehensive income (loss) before reclassifications
(10,776
)
 

 
(10,776
)
Amounts reclassified to earnings

 
1,015

(2) 
1,015

Net current period other comprehensive income (loss)
(10,776
)
 
1,015

 
(9,761
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(69
)
 

 
(69
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(10,707
)
 
1,015

 
(9,692
)
Balance as of November 30, 2015
$
(60,269
)
 
$
(32,883
)
 
$
(93,152
)

 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2014
$
22,786

 
$
(39,477
)
 
$
(16,691
)
Other comprehensive income (loss) before reclassifications
(25,615
)
 

 
(25,615
)
Amounts reclassified to earnings

 
336

(2) 
336

Net current period other comprehensive income (loss)
(25,615
)
 
336

 
(25,279
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(24
)
 

 
(24
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(25,591
)
 
336

 
(25,255
)
Balance as of November 30, 2014
$
(2,805
)
 
$
(39,141
)
 
$
(41,946
)

(1) All amounts presented are net of tax. All tax amounts are related to pension and other retiree benefits.
(2) Amounts represent amortization of net actuarial loss and prior service costs and are reclassified from accumulated other comprehensive income into cost of sales and selling, general & administrative expenses on the consolidated statements of operations. These components are included in the computation of net periodic pension cost. Refer to Note 7 of this Form 10-Q for further details.
(11) SHARE-BASED INCENTIVE COMPENSATION PLANS
For a discussion of the Company's share-based incentive compensation plans, refer to Note 11 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company did not grant any restricted stock awards during the three months ended November 30, 2015 and 2014.
The Company recorded share-based incentive compensation expense of $0.4 million and $1.3 million during the three months ended November 30, 2015 and 2014, respectively. These amounts are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

- 12 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(12) EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if common stock equivalents are exercised as well as the impact of restricted stock awards expected to vest, which combined would then share in the earnings of the Company.
Dividends on convertible special stock that an issuer has paid or intends to pay are deducted from net income or added to the amount of a net loss in computing income available to common stockholders.
The difference between basic and diluted weighted-average shares results from the assumed exercise of outstanding stock options and vesting of restricted stock awards, calculated using the treasury stock method, and the inclusion of the convertible special stock dividends, calculated using the if-converted method.
The Company computes income available to common stockholders by deducting dividends accumulated on the convertible special stock from income (loss) from continuing operations and net income (loss). The convertible special stock does not impact the denominator of basic EPS. The dilutive effect of convertible special stock is reflected in diluted EPS by application of the if-converted method. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The convertible special stock is anti-dilutive whenever the amount of the dividend declared in or accumulated for the current period per share on conversion exceeds basic EPS. For the three months ended November 30, 2015, the accumulated dividend per share on conversion exceeds basic EPS, therefore the 2,388,913 shares related to the convertible special stock were considered anti-dilutive.
The following table presents the number of incremental weighted-average shares used in computing diluted per share amounts:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Weighted-average shares outstanding:
 
 
 
Basic
29,223

 
29,017

Incremental shares from equity awards
239

 
451

Incremental shares from convertible special stock

 

Diluted
29,462

 
29,468

Diluted weighted-average shares outstanding for the three months ended November 30, 2015, excludes 8,661 shares related to equity awards, as their inclusion would have been anti-dilutive. For the three months ended November 30, 2014, there were no anti-dilutive shares related to share-based compensation plans that were excluded from diluted weighted-average shares outstanding.
(13) SEGMENT INFORMATION
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 CODM makes decisions, assesses performance and allocates resources by the following current reportable segments: Europe, Middle East and Africa (“EMEA”), United States & Canada (“USCAN”), Latin America (“LATAM”), Asia Pacific (“APAC”), and Engineered Composites ("EC").
The CODM uses net sales to unaffiliated customers, segment gross profit and segment operating income in order to make decisions, assess performance and allocate resources to each segment. Segment operating income does not include items such as restructuring and related costs including accelerated depreciation, asset impairments, or costs and inventory step-up charges related to business acquisitions and integration. Corporate expenses include the compensation of certain personnel, certain audit expenses, Board of Directors related costs, certain insurance costs, costs associated with being a publicly traded entity and other miscellaneous legal and professional fees.

- 13 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes net sales to unaffiliated customers by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
328,096


$
371,191

USCAN
178,282


144,707

LATAM
45,203

 
46,181

APAC
45,692


52,974

EC
51,946

 

Total net sales to unaffiliated customers
$
649,219

 
$
615,053

Below the Company presents gross profit by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
47,684

 
$
49,706

USCAN
30,294

 
24,629

LATAM
9,705

 
5,650

APAC
7,874

 
7,250

EC
13,208

 

Total segment gross profit
108,765

 
87,235

Inventory step-up

 
(341
)
Accelerated depreciation and restructuring related costs
(1,877
)
 

Costs related to acquisitions and integrations
(129
)
 
(50
)
Lucent costs
(1,830
)
 

Total gross profit
$
104,929

 
$
86,844


- 14 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Below is a reconciliation of segment operating income to operating income and income from continuing operations before taxes:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
20,153

 
$
20,039

USCAN
12,163

 
11,393

LATAM
5,604

 
595

APAC
4,307

 
3,508

EC
4,102

 

Total segment operating income
46,329

 
35,535

Corporate
(8,488
)
 
(7,484
)
Costs related to acquisitions and integrations
(1,866
)
 
(1,053
)
Restructuring and related costs
(4,670
)
 
(5,579
)
Accelerated depreciation
(1,453
)
 

Inventory step-up

 
(341
)
Lucent costs (1)
(3,706
)
 

Operating income
26,146

 
21,078

Interest expense
(13,618
)
 
(2,359
)
Foreign currency transaction gains (losses)
(729
)
 
(1,099
)
Other income (expense), net
(71
)
 
254

Income from continuing operations before taxes
$
11,728

 
$
17,874

 
(1) Refer to Note 15 for additional discussion on this matter. Lucent costs of $3.7 million include additional product and manufacturing operational costs for reworking inventory, legal and investigative costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations. Included in USCAN segment results are additional costs of $1.2 million required to produce products to meet customer specifications.
Globally, the Company operates in six product families: (1) custom performance colors, (2) engineered composites, (3) masterbatch solutions, (4) engineered plastics, (5) specialty powders and (6) distribution services. The three months ended November 30, 2014 includes a reclassification of revenue between product families to better reflect the way the businesses are managed. The consolidated net sales for these product families are as follows:
 
Three months ended November 30,
 
2015

2014
 
(In thousands, except for %'s)
Custom Performance Colors
$
46,520

 
7
%
 
$
51,298

 
8
%
Engineered Composites
51,946

 
8

 

 

Masterbatch Solutions
181,895


28


198,358


33

Engineered Plastics
234,218

 
36

 
194,968

 
32

Specialty Powders
67,422


11


82,357


13

Distribution Services
67,218

 
10

 
88,072

 
14

Total consolidated net sales
$
649,219


100
%

$
615,053


100
%


- 15 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(14) RESTRUCTURING
Fiscal 2016 Restructuring Plan
USCAN Plan
In October 2015, as part of the Company’s previously announced Citadel acquisition integration strategy and a careful evaluation of capacity utilization and manufacturing capabilities, the Company approved plans to close three manufacturing facilities in Evansville, Indiana and consolidate production into other existing facilities in the area. The Company also plans to relocate production of its engineered plastics products from its Akron, Ohio facility into other facilities in Evansville, while retaining masterbatch solutions production in Akron. Overall, the Company expects to reduce headcount by approximately 25 as a result of these actions. The Company recorded minimal pretax employee-related costs and $1.2 million of accelerated depreciation costs during the three months ended November 30, 2015. The Company anticipates recognizing approximately $2.0 million to $3.0 million of pretax employee-related cash and other charges as well as approximately $3.0 million to $4.0 million of pretax machinery and equipment accelerated depreciation through fiscal 2017. As of November 30, 2015, the Company has no balance accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2017 as the plan is completed.
Fiscal 2015 Restructuring Plans
EMEA Plans
In August 2015, the Company approved plans to integrate the existing Paris, Montereau, and Beaucaire, France facilities into one new facility in St. Germain-Laval, France. As a result of this consolidation, the Company plans to reduce headcount in France by approximately 20 in fiscal 2016, partially offset by the addition of approximately 15 associates at the Company's new facility. The Company has recognized $0.4 million in pre-tax employee-related costs and accelerated depreciation costs of $0.2 million during the three months ended November 30, 2015. The Company expects to incur an additional $0.3 million in pretax employee-related costs and $0.3 million in accelerated depreciation throughout the remainder of fiscal 2016. As of November 30, 2015, the Company has a balance of $1.0 million accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2017 as the plan is completed.
In May 2015, the Company announced plans to relocate its EMEA Shared Service Center from Londerzeel, Belgium to Poznan, Poland as part of the Company’s ongoing cost control initiatives. The Company expects to reduce headcount by approximately 40 employees in Londerzeel, Belgium by the end of fiscal 2016. The Company recorded pretax employee-related costs and other charges of $0.5 million during the three months ended November 30, 2015, and expects to recognize minimal additional pre-tax employee-related costs through the remainder of fiscal 2016. As of November 30, 2015, the Company has a balance of $1.7 million accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2016 as the plan is completed.
For discussion of the Company's previous restructuring plans, refer to Note 16 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The following table summarizes the activity related to the Company’s restructuring plans:
 
Employee-related Costs
 
Other Costs
 
Translation Effect
 
Total Restructuring Costs
 
(In thousands)
Accrual balance as of August 31, 2015
$
5,786

 
$
461

 
$
(864
)
 
$
5,383

Fiscal 2016 charges
982

 
564

 

 
1,546

Fiscal 2016 payments
(1,141
)
 
(633
)
 

 
(1,774
)
Translation

 

 
(300
)
 
(300
)
Accrual balance as of November 30, 2015
$
5,627

 
$
392

 
$
(1,164
)
 
$
4,855


- 16 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Restructuring expenses are excluded from segment operating income but are attributable to the reportable segments as follows:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
1,211

 
$
4,274

USCAN
234

 
762

LATAM
70

 
183

APAC
31

 

Total restructuring expense
$
1,546

 
$
5,219

(15) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such legal actions, after reviewing all pending and threatened legal actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial position or cash flow of the Company. However, it is possible, that the ultimate resolution of such matters, if unfavorable, may be material to the results of operations in a particular future period as the time and amount of any resolution of such legal actions and its relationship to the future results of operations are not currently known.
Reserves are established for legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not considered probable that a liability has been incurred or it is not possible to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no reserve would be recognized until that time.
There were no material changes to the Company’s future contractual obligations as previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
Lucent Matter
As previously reported by the Company in its filings with the SEC, on June 1, 2015, the Company completed the acquisition of Citadel and its subsidiaries from certain private equity firms for $801.6 million. In August 2015, the Company identified quality reporting issues affecting certain product lines at two manufacturing facilities located on Lynch Road in Evansville, Indiana. Both facilities are a part of Lucent Polymers, Inc. (“Lucent”), an indirect wholly-owned subsidiary of Citadel which was acquired as part of the Citadel acquisition. Specifically, the Company discovered discrepancies between laboratory data and certifications provided by Lucent to customers with respect to certain products using recycled or reclaimed raw materials. The Company also discovered inaccuracies in materials and information provided by Lucent employees to Underwriter Laboratories with respect to such products.
The Company took immediate decisive actions following its initial discoveries, including implementing protocols designed so that future shipments of products meet customer standards and certification requirements, entering into discussions and exploring different certification standards with customers and other third parties. To date, the Company has notified all affected customers. The Company is working with customers and will deliver accurate certifications with respect to all products going forward. In addition, the Company has notified and is cooperating with Underwriter Laboratories to institute all necessary corrective action.
The Company also commenced an internal investigation into these matters. The Company’s internal investigation, which is ongoing, has revealed that the discrepancies and inaccuracies initially identified were due to longstanding practices at Lucent under its prior ownership pursuant to which Lucent falsified test results on documents provided to customers and other parties pertaining to the physical properties of Lucent products made with recycled or reclaimed raw materials.
To date, no customers, or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries.
The Company incurred a total of $4.9 million of costs related to this matter that negatively impacted the Company’s operating results for the first quarter of fiscal 2016, including product and manufacturing operational costs, dedicated internal personnel

- 17 -

A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

costs, a reduction in inventory value, and additional legal and investigative costs. A break out of these expenses include additional product and manufacturing operational costs of approximately $1.0 million primarily for reworking existing inventory, $0.8 million to rework inventory produced or acquired since the acquisition, $0.5 million of dedicated internal personnel costs that would have otherwise been focused on normal operations during the three months ended November 30, 2015, legal and investigative costs related to the matter of $1.4 million, and $1.2 million of production costs associated with adding prime material and changing of production processes to ensure that finished product met customer specifications.
Additionally, the Company reduced the carrying value of Lucent related inventory on the opening balance sheet by $0.3 million which did not impact the Company’s operational results for the quarter ended November 30, 2015.
The Company continues with the internal investigation as to the scope of products, customers, and other parties affected.  As no customer or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries from the date we identified this issue in August through the date of filing, we are currently unable to conclude that litigation or claims losses related to these matters are probable or to estimate the potential range of loss, if any. The Company is currently unable to determine whether such issues will have any material adverse effect on our financial position, liquidity, or results of operations.
The Company has provided a written claim notice to the sellers and to the escrow agent with respect to the indemnity escrow established in connection with the stock purchase agreement pursuant to which the Company acquired Citadel and its subsidiaries. As of November 30, 2015, approximately $31.0 million remained in such indemnity escrow.
As Lucent was effectively acquired by Citadel in December of 2013, the Company also submitted written claim notices pursuant to the Agreement and Plan of Merger, dated December 6, 2013, among The Matrixx Group, Incorporated, LPI Merger Sub, Inc., LPI Holding Company, River Associates Investments, LLC and certain stockholders of LPI Holding Company, pursuant to which Citadel initially acquired Lucent, and pursuant to the representations and warranties insurance policy issued in connection with that acquisition.
The Company is continuing to assess the scope of indemnifiable losses under these agreements and to evaluate all other possible claims and remedies which may be available to the Company and its subsidiaries in connection with this matter.
(16) ACCOUNTING PRONOUNCEMENTS
In November 2015, the Financial Accounting Standards Board (“the FASB”) issued new accounting guidance that requires deferred tax assets and liabilities to be classified as noncurrent in the balance sheet. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods. Early application is permitted. The Company is currently evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.
In May 2014, the FASB issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods, and the Company will adopt the new guidance on September 1, 2018. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on its consolidated financial statements.
No other new accounting pronouncements issued or with effective dates during fiscal 2016 had or are expected to have a material impact on the Company's consolidated financial statements.

- 18 -


Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help investors understand our results of operations, financial condition and current business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report and the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The MD&A is organized as follows:
Overview: From management’s point of view, we discuss the following:
Summary of our business and the markets in which we operate; and
Significant events during the current fiscal year.
Results of Operations: An analysis of our results of operations as reflected in our consolidated financial statements. Throughout this MD&A, the Company provides operating results for continuing operations exclusive of certain items such as costs related to acquisitions and integration, restructuring and related expenses, and asset write-downs, which are considered relevant to aid analysis and understanding of the Company’s results and business trends.
Liquidity and Capital Resources: An analysis of our cash flows, working capital, debt structure, contractual obligations and other commercial commitments.
Overview
Business Summary
A. Schulman, Inc. is an international supplier of high-performance plastic formulations, resins and services headquartered in Fairlawn, Ohio. The Company’s customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, custom services, and sports, leisure & home. The Chief Operating Decision Maker ("CODM") makes decisions, assesses performance and allocates resources by the following five reportable segments:
Europe, Middle East and Africa (“EMEA”),
United States & Canada (“USCAN”),
Latin America (“LATAM”),
Asia Pacific (“APAC”), and
Engineered Composites ("EC").
As of November 30, 2015, the Company has approximately 5,000 employees and 58 manufacturing facilities worldwide. Globally, the Company operates in six product families: (1) custom performance colors, (2) engineered composites, (3) masterbatch solutions, (4) engineered plastics, (5) specialty powders and (6) distribution services.
Lucent Matter
As previously reported by the Company in its filings with the SEC, on June 1, 2015, the Company completed the acquisition of Citadel and its subsidiaries from certain private equity firms for $801.6 million. In August 2015, the Company identified quality reporting issues affecting certain product lines at two manufacturing facilities located on Lynch Road in Evansville, Indiana. Both facilities are a part of Lucent Polymers, Inc. (“Lucent”), an indirect wholly-owned subsidiary of Citadel which was acquired as part of the Citadel acquisition. Specifically, the Company discovered discrepancies between laboratory data and certifications provided by Lucent to customers with respect to certain products using recycled or reclaimed raw materials. The Company also discovered inaccuracies in materials and information provided by Lucent employees to Underwriter Laboratories with respect to such products.
The Company took immediate decisive actions following its initial discoveries, including implementing protocols designed so that future shipments of products meet customer standards and certification requirements, entering into discussions and exploring different certification standards with customers and other third parties. To date, the Company has notified all affected customers. The Company is working with customers and will deliver accurate certifications with respect to all products going forward. In addition, the Company has notified and is cooperating with Underwriter Laboratories to institute all necessary corrective action.
The Company also commenced an internal investigation into these matters. The Company’s internal investigation, which is ongoing, has revealed that the discrepancies and inaccuracies initially identified were due to longstanding practices at Lucent under its prior ownership pursuant to which Lucent falsified test results on documents provided to customers and other parties pertaining to the physical properties of Lucent products made with recycled or reclaimed raw materials.

- 19 -


To date, no customers, or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries.
The Company incurred a total of $4.9 million of costs related to this matter that negatively impacted the Company’s operating results for the first quarter of fiscal 2016, including product and manufacturing operational costs, dedicated internal personnel costs, a reduction in inventory value, and additional legal and investigative costs. A break out of these expenses include additional product and manufacturing operational costs of approximately $1.0 million primarily for reworking existing inventory, $0.8 million to rework inventory produced or acquired since the acquisition, $0.5 million of dedicated internal personnel costs that would have otherwise been focused on normal operations during the three months ended November 30, 2015, legal and investigative costs related to the matter of $1.4 million, and $1.2 million of production costs associated with adding prime material and changing of production processes to ensure that finished product met customer specifications.
Additionally, the Company reduced the carrying value of Lucent related inventory on the opening balance sheet by $0.3 million which did not impact the Company’s operational results for the quarter ended November 30, 2015.
The Company continues with the internal investigation as to the scope of products, customers, and other parties affected.  As no customer or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries from the date we identified this issue in August through the date of filing, we are currently unable to conclude that litigation or claims losses related to these matters are probable or to estimate the potential range of loss, if any. The Company is currently unable to determine whether such issues will have any material adverse effect on our financial position, liquidity, or results of operations.
The Company has provided a written claim notice to the sellers and to the escrow agent with respect to the indemnity escrow established in connection with the stock purchase agreement pursuant to which the Company acquired Citadel and its subsidiaries. As of November 30, 2015, approximately $31.0 million remained in such indemnity escrow.
As Lucent was effectively acquired by Citadel in December of 2013, the Company also submitted written claim notices pursuant to the Agreement and Plan of Merger, dated December 6, 2013, among The Matrixx Group, Incorporated, LPI Merger Sub, Inc., LPI Holding Company, River Associates Investments, LLC and certain stockholders of LPI Holding Company, pursuant to which Citadel initially acquired Lucent, and pursuant to the representations and warranties insurance policy issued in connection with that acquisition.
The Company is continuing to assess the scope of indemnifiable losses under these agreements and to evaluate all other possible claims and remedies which may be available to the Company and its subsidiaries in connection with this matter.
Fiscal Year 2016 Significant Events
The following represent significant events during fiscal year 2016:
1.
Restructuring Plan. In October 2015, the Company announced a plan to close three manufacturing facilities in Evansville, Indiana and consolidate production into other existing facilities in the area. The Company also plans to relocate production of its engineered plastics products from its Akron, Ohio facility into other facilities in Evansville, Indiana while retaining masterbatch solutions production in Akron, Ohio. Overall, the Company expects to realize annual savings of approximately $9.5 million on completion of these activities.
2.
Global Expansion. The Company intends to expand its production and technological capabilities in China, Turkey and Saudi Arabia through continued progress in production facility investments, as previously announced.

- 20 -


Results of Operations
Segment Information
 
Three months ended November 30,
 
 
 
 
 
 
 
Favorable (unfavorable)
EMEA
2015
 
2014
 
Increase (decrease)
 
FX Impact
 
Excluding FX
 
(In thousands, except for %’s and per pound data)
Pounds sold
314,926

 
316,458

 
(1,532
)
 
(0.5
)%
 
 
 
 
Net sales
$
328,096

 
$
371,191

 
$
(43,095
)
 
(11.6
)%
 
$
(44,151
)
 
0.3
%
Segment gross profit
$
47,684

 
$
49,706

 
$
(2,022
)
 
(4.1
)%
 
$
(5,915
)
 
7.8
%
Segment gross profit percentage
14.5
%
 
13.4
%
 
 
 
 
 
 
 
 
Segment operating income
$
20,153

 
$
20,039

 
$
114

 
0.6
 %
 
$
(2,172
)
 
11.4
%
Price per pound
$
1.042

 
$
1.173

 
$
(0.131
)
 
(11.2
)%
 
$
(0.140
)
 
0.8
%
Segment operating income per pound
$
0.064

 
$
0.063

 
$
0.001

 
1.6
 %
 
$
(0.007
)
 
12.7
%
Three months ended November 30, 2015
EMEA net sales for the three months ended November 30, 2015 were $328.1 million compared with $371.2 million in the corresponding prior-year period. Excluding the unfavorable impact of foreign currency translation of $44.2 million, net sales increased slightly, primarily due to improved sales in the masterbatch solutions and engineered plastics product families.
EMEA gross profit was $47.7 million for the three months ended November 30, 2015. Excluding the negative impact of foreign currency translation of $5.9 million, gross profit increased by $3.9 million, or 7.8%, primarily due to improved product mix.
EMEA operating income for the three months ended November 30, 2015 was $20.2 million. Excluding the negative impact of foreign currency translation of $2.2 million, operating income increased by $2.3 million, or 11.4%. Operating income increased due to higher gross profit as noted above and lower selling, general and administrative ("SG&A") expense. SG&A expense decreased by $2.1 million primarily due to the favorable impact of foreign currency translation of $3.7 million, partially offset by incremental increases in variable incentive compensation and bad debt expense of $0.5 million and $0.4 million, respectively.
 
Three months ended November 30,
 
 
 
 
 
 
 
Favorable (unfavorable)
USCAN
2015
 
2014
 
Increase (decrease)
 
FX Impact
 
Excluding FX
 
(In thousands, except for %’s and per pound data)
Pounds sold
198,445

 
152,964

 
45,481

 
29.7
 %
 
 
 
 
Net sales
$
178,282

 
$
144,707

 
$
33,575

 
23.2
 %
 
$
(500
)
 
23.5
 %
Segment gross profit
$
30,294

 
$
24,629

 
$
5,665

 
23.0
 %
 
$
(93
)
 
23.4
 %
Segment gross profit percentage
17.0
%
 
17.0
%
 
 
 
 
 
 
 
 
Segment operating income
$
12,163

 
$
11,393

 
$
770

 
6.8
 %
 
$
(92
)
 
7.6
 %
Price per pound
$
0.898

 
$
0.946

 
$
(0.048
)
 
(5.1
)%
 
$
(0.003
)
 
(4.8
)%
Segment operating income per pound
$
0.061

 
$
0.074

 
$
(0.013
)
 
(17.6
)%
 
$
(0.001
)
 
(16.2
)%
Three months ended November 30, 2015
USCAN net sales for the three months ended November 30, 2015 were $178.3 million, an increase of $33.6 million or 23.2% compared with the prior-year period. During the first quarter of fiscal 2016, the incremental contribution from the Citadel acquisition was $59.1 million and 70.4 million pounds in net sales and volume, respectively. The incremental net sales were partially offset by lower organic volume, primarily in the masterbatch solutions and specialty powders product families, which both experienced a decline in tolling services due to customer destocking linked to lower oil prices.
USCAN gross profit was $30.3 million for the three months ended November 30, 2015, an increase of $5.7 million from the comparable period last year. The benefits of the Citadel acquisition and related integration were partially offset by lower organic volumes resulting in flat gross profit as a percentage of net sales year over year.
USCAN operating income for the three months ended November 30, 2015 was $12.2 million compared with $11.4 million in the same quarter of fiscal 2015. Operating income increased due to the above noted increase in gross profit, offset by incremental

- 21 -


SG&A expenses from the Citadel acquisition of $5.9 million, which included additional intangible asset amortization expense of $2.9 million.
Included in USCAN segment results are Lucent costs of $1.2 million required to produce products to meet customer specifications. Additional Lucent costs excluded from segment operating income of $3.7 million include additional product and manufacturing operational costs of $1.8 million for reworking inventory, $1.4 million for legal and investigative costs, and $0.5 million for dedicated internal personnel costs that would have otherwise been focused on normal operations.
 
Three months ended November 30,
 
 
 
 
 
 
 
Favorable (unfavorable)
LATAM
2015
 
2014
 
Increase (decrease)
 
FX Impact
 
Excluding FX
 
(In thousands, except for %’s and per pound data)
Pounds sold
37,358

 
32,944

 
4,414

 
13.4
 %
 
 
 
 
Net sales
$
45,203

 
$
46,181

 
$
(978
)
 
(2.1
)%
 
$
(10,616
)
 
20.9
%
Segment gross profit
$
9,705

 
$
5,650

 
$
4,055

 
71.8
 %
 
$
(954
)
 
88.7
%
Segment gross profit percentage
21.5
%
 
12.2
%
 
 
 
 
 
 
 
 
Segment operating income
$
5,604

 
$
595

 
$
5,009

 
841.8
 %
 
$
253

 
799.3
%
Price per pound
$
1.210

 
$
1.402

 
$
(0.192
)
 
(13.7
)%
 
$
(0.284
)
 
6.6
%
Segment operating income per pound
$
0.150

 
$
0.018

 
$
0.132

 
733.3
 %
 
$
0.007

 
694.4
%
Three months ended November 30, 2015
LATAM net sales for the three months ended November 30, 2015 were $45.2 million, a decrease of $1.0 million or 2.1% compared with the prior-year period. Excluding the unfavorable impact of foreign currency translation of $10.6 million, net sales increased 20.9% primarily due to improved volume across all product families, primarily in masterbatch solutions, due to continued market expansion.
LATAM gross profit was $9.7 million for the three months ended November 30, 2015, an increase of $4.1 million from the comparable period last year. The benefits of improved product mix and operational improvements were partially offset by unfavorable foreign currency translation of $1.0 million.
LATAM operating income for the three months ended November 30, 2015 was $5.6 million compared with $0.6 million in the same quarter of fiscal 2015. Operating income increased due to improved gross profit, as noted above, and decreased SG&A expenses primarily related to benefits of consolidation activities in prior periods and the favorable impact of foreign currency translation of $1.2 million.
 
Three months ended November 30,
 
 
 
 
 
 
 
Favorable (unfavorable)
APAC
2015
 
2014
 
Increase (decrease)
 
FX Impact
 
Excluding FX
 
(In thousands, except for %’s and per pound data)
Pounds sold
43,043

 
42,230

 
813

 
1.9
 %
 
 
 
 
Net sales
$
45,692

 
$
52,974

 
$
(7,282
)
 
(13.7
)%
 
$
(6,684
)
 
(1.1
)%
Segment gross profit
$
7,874

 
$
7,250

 
$
624

 
8.6
 %
 
$
(621
)
 
17.2
 %
Segment gross profit percentage
17.2
%
 
13.7
%
 
 
 
 
 
 
 
 
Segment operating income
$
4,307

 
$
3,508

 
$
799

 
22.8
 %
 
$
(217
)
 
29.0
 %
Price per pound
$
1.062

 
$
1.254

 
$
(0.192
)
 
(15.3
)%
 
$
(0.155
)
 
(3.0
)%
Segment operating income per pound
$
0.100

 
$
0.083

 
$
0.017

 
20.5
 %
 
$
(0.005
)
 
26.5
 %
Three months ended November 30, 2015
APAC net sales for the three months ended November 30, 2015 were $45.7 million, a decrease of $7.3 million or 13.7% compared with the same prior-year period. Excluding the negative foreign currency translation of $6.7 million, net sales decreased by 1.1% as a result of net price/mix changes.
APAC gross profit for the three months ended November 30, 2015 was $7.9 million, an increase of $0.6 million compared with the prior-year period. Gross profit benefited from improved product mix partially offset by negative foreign currency translation of $0.6 million.

- 22 -


APAC operating income for the three months ended November 30, 2015 was $4.3 million compared with $3.5 million in the prior-year comparable quarter. The increase in operating income was primarily due to the aforementioned increase in gross profit and decreased SG&A expenses primarily due to the favorable impact of foreign currency translation of $0.4 million.
 
Three months ended November 30,
EC
2015
 
(In thousands, except for %’s and per pound data)
Pounds sold
44,096

Net sales
$
51,946

Segment gross profit
$
13,208

Segment gross profit percentage
25.4
%
Segment operating income
$
4,102

Price per pound
$
1.178

Segment operating income per pound
$
0.093

EC net sales for the three months ended November 30, 2015 were $51.9 million, an increase of $12.6 million over the prior-year comparable period. The prior-year period discussion is for comparative purposes only given the Company's acquisition of Citadel on June 1, 2015. The incremental contribution of Citadel's November 2014 acquisition of The Composites Group ("TCG") was $14.8 million and 5.4 million pounds in net sales and volume, respectively. An increase in organic volumes in the legacy EC business was offset by the decrease in oil and gas market sales and the impact of unfavorable currency translation.
EC gross profit for the three months ended November 30, 2015 was $13.2 million, an increase of $2.0 million over the prior year. Gross profit increased primarily due to the positive contribution of the TCG acquisition, partially offset by the unfavorable impact of foreign currency translation of $0.5 million.
EC operating income for the three months ended November 30, 2015 was $4.1 million, a decrease of $0.4 million over the prior year. The decrease in operating income was primarily due to increased SG&A expenses from the legacy EC business and the incremental SG&A expenses from the TCG acquisition of $1.5 million.
 
Three months ended November 30,
 
 
 
 
 
 
 
Favorable (unfavorable)
Consolidated
2015
 
2014
 
Increase (decrease)
 
FX Impact
 
Excluding FX
 
(In thousands, except for %’s and per pound data)
Pounds sold
637,868

 
544,596

 
93,272

 
17.1
 %
 
 
 
 
Net sales
$
649,219

 
$
615,053

 
$
34,166

 
5.6
 %
 
$
(61,950
)
 
15.6
 %
Operating income
$
26,146

 
$
21,078

 
$
5,068

 
24.0
 %
 
$
(2,102
)
 
34.0
 %
Total operating income before certain items*
$
37,841

 
$
28,051

 
$
9,790

 
34.9
 %
 
$
(2,228
)
 
42.8
 %
Price per pound
$
1.018

 
$
1.129

 
$
(0.111
)
 
(9.8
)%
 
$
(0.097
)
 
(1.2
)%
Total operating income per pound before certain items*
$
0.059

 
$
0.052

 
$
0.007

 
13.5
 %
 
$
(0.004
)
 
21.2
 %
* Total operating income before certain items, a non-GAAP measurement, represents segment operating income combined with Corporate expenses. For a reconciliation of segment operating income to operating income and income from continuing operations before taxes, refer to Note 13 of this Form 10-Q.
Three months ended November 30, 2015
Consolidated net sales for the three months ended November 30, 2015 were $649.2 million compared with $615.1 million for the three months ended November 30, 2014. Incremental net sales and volume in the first quarter of fiscal 2016 from the Company’s recent Citadel acquisition contributed $111.1 million and 114.5 million pounds, respectively. Foreign currency translation unfavorably impacted net sales for the three months ended November 30, 2015 by $62.0 million.
Operating income increased by $5.1 million for the three months ended November 30, 2015 compared with the same prior-year period. Total operating income before certain items for the three months ended November 30, 2015 was $37.8 million, an increase of $9.8 million compared with the same prior-year period. The increase in total operating income before certain items was primarily

- 23 -


due to the contribution from the Citadel acquisition of $7.1 million and decreased legacy SG&A expense of $2.8 million as noted below, partially offset by the negative impact of foreign currency translation of $2.2 million.
The Company’s SG&A expenses, excluding certain items, increased by $12.2 million for the three months ended November 30, 2015 compared with the same period in the prior year. The increase was primarily attributable to the incremental SG&A expense of $15.0 million from the Citadel acquisition, partially offset by the favorable impact of foreign currency translation of $5.4 million. Items excluded from SG&A expenses consist of $6.3 million of expense related to acquisition and integration activities, restructuring and related costs, and Lucent costs for the three months ended November 30, 2015 and $1.4 million of expense related to acquisition and integration activities and restructuring and related costs for the three months ended November 30, 2014.
Additional consolidated results
Interest expense increased $11.3 million for the three months ended November 30, 2015 compared with the same period in the prior year as a result of higher outstanding debt related to the financing of the Citadel acquisition.
The Company experienced foreign currency transaction losses of $0.7 million for the three months ended November 30, 2015. Generally, the foreign currency transaction gains or losses relate to the changes in the value of the U.S. dollar compared with the Euro and other local currencies throughout all regions, and changes between the Euro and other non-Euro European currencies. The Company may enter into foreign exchange forward contracts to reduce the impact of changes in foreign exchange rates on the consolidated statements of operations. These contracts reduce exposure to currency movements affecting the remeasurement of foreign currency denominated assets and liabilities primarily related to trade receivables and payables, as well as intercompany activities. 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 operations. There were no foreign exchange forward contracts designated as hedging instruments as of November 30, 2015 and August 31, 2015.
Noncontrolling interests represent a 37% equity position of Alta Plastica S.A. in an Argentinean venture and a 35% equity position of P.T. Prima Polycon Indah in an Indonesian joint venture.
Net income available to the Company’s common stockholders was $5.2 million and $13.2 million for the three months ended November 30, 2015 and 2014, respectively. Foreign currency translation negatively impacted net income by $0.1 million for the three months ended November 30, 2015.
Product Families
Globally, the Company operates in six product families: (1) custom performance colors, (2) engineered composites, (3) masterbatch solutions, (4) engineered plastics, (5) specialty powders and (6) distribution services. The three months ended November 30, 2014 include a reclassification of revenue between product families to better reflect the way the businesses are managed. The amount and percentage of consolidated net sales for these product families are as follows:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands, except for %'s)
Custom Performance Colors
$
46,520

 
7
%
 
$
51,298

 
8
%
Engineered Composites
51,946

 
8

 

 

Masterbatch Solutions
181,895

 
28

 
198,358

 
33

Engineered Plastics
234,218

 
36

 
194,968

 
32

Specialty Powders
67,422

 
11

 
82,357

 
13

Distribution Services
67,218

 
10

 
88,072

 
14

Total consolidated net sales
$
649,219

 
100
%
 
$
615,053

 
100
%


- 24 -


Capacity
The Company’s 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 is as follows:
 
Three months ended November 30,
 
2015
 
2014
EMEA
88
%
 
92
%
USCAN
67
%
 
67
%
LATAM
78
%
 
72
%
APAC
65
%
 
65
%
EC
55
%
 
%
Worldwide
73
%
 
78
%
Restructuring
The following table summarizes the activity related to the Company’s restructuring plans:
 
Employee-related Costs
 
Other Costs
 
Translation Effect
 
Total Restructuring Costs
 
(In thousands)
Accrual balance as of August 31, 2015
$
5,786

 
$
461

 
$
(864
)
 
$
5,383

Fiscal 2016 charges
982

 
564

 

 
1,546

Fiscal 2016 payments
(1,141
)
 
(633
)
 

 
(1,774
)
Translation

 

 
(300
)
 
(300
)
Accrual balance as of November 30, 2015
$
5,627

 
$
392

 
$
(1,164
)
 
$
4,855

For discussion of the Company's fiscal 2016 restructuring plans, refer to Note 14 in this Form 10-Q.
Income Tax
The effective tax rate for the three months ended November 30, 2015 and 2014 was 36.2% and 25.1%, respectively. The increase in the effective tax rate for the three months ended November 30, 2015 as compared with the same period last year was driven primarily by the prior year benefit of U.S. income with no tax due to valuation allowance and an increase in current year foreign income subject to U.S. tax, including income recognized due to the expiration of the “look-thru” provision of U.S. tax law, partially offset by fewer losses with no tax benefit.
Goodwill
Goodwill is tested for impairment annually as of June 1. Management uses judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement approach that combines the income and market valuation techniques for each of the Company’s reporting units that carry goodwill. These valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market comparables, projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
If circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value, the Company would test goodwill for impairment. Factors which would necessitate an interim goodwill impairment assessment include a sustained decline in the Company's stock price, prolonged negative industry or economic trends, and significant under-performance relative to historical or projected future operating results.

- 25 -


As of June 1, 2015, the annual goodwill impairment test date for fiscal 2015, goodwill exists in five of the Company's reporting units in EMEA (masterbatch solutions, engineered plastics, specialty powders, custom performance colors and distribution services), four reporting units in USCAN (masterbatch solutions, custom performance colors, engineered plastics and specialty powders), three reporting units in LATAM (masterbatch solutions, custom performance colors, and specialty powders), and two reporting units in APAC (custom performance colors and engineered plastics). Based on this analysis, management concluded that as of June 1, 2015, there were no indicators of impairment to goodwill.
Management also concluded, based on the quantitative fair value measurements performed, that as of June 1, 2015, the fair values of the EMEA specialty powders and USCAN custom performance colors reporting units exceeded their carrying values by 7.6% and 14.3%, respectively. As of November 30, 2015, the EMEA specialty powders reporting unit had goodwill of $17.2 million while goodwill in the USCAN custom performance colors reporting unit was $17.2 million. The goodwill associated with these reporting units is primarily the result of the acquisitions made within the last few years. Generally, goodwill recorded in business combinations is more susceptible to risk of impairment soon after the acquisition primarily because the business combination is recorded at fair value based on operating plans and economic conditions present at the time of the acquisition. If operating results or economic conditions deteriorate soon after an acquisition, it could result in the impairment of the acquired goodwill. A change in macroeconomic conditions in the EMEA and USCAN regions, as well as future changes in the judgments, assumptions and estimates that were used in the Company's goodwill impairment testing for these two reporting units, including the discount rate and future cash flow projections, could result in a significantly different estimate of the fair value.
As of November 30, 2015, the Company concluded there were no triggering events which would have required a goodwill impairment test. See Note 3 to the consolidated financial statements within this Form 10-Q for further discussion on goodwill.
Liquidity and Capital Resources
Net cash provided from operations was $40.0 million and $10.3 million for the three months ended November 30, 2015 and 2014, respectively. This increase is due to improved operational performance and working capital management. The Company’s cash and cash equivalents decreased $1.3 million from August 31, 2015. This decrease was driven primarily by net debt repayments of $23.0 million, capital expenditures of $7.4 million, dividend payments of $7.9 million, and foreign currency translation of $3.5 million, mostly offset by cash generated from operations of $40.0 million.
The Company’s approximate working capital days are summarized as follows:
 
November 30, 2015
 
August 31, 2015
 
November 30, 2014
Days in receivables
55
 
55
 
55
Days in inventory
54
 
53
 
52
Days in payables
45
 
44
 
49
Total working capital days
64
 
64
 
58
The following table summarizes certain key balances on the Company’s consolidated balance sheets and related metrics:
 
November 30, 2015
 
August 31, 2015
 
$ Change
 
% Change
 
(In thousands, except for %’s)
Cash and cash equivalents
$
95,562

 
$
96,872

 
$
(1,310
)
 
(1.4
)%
Working capital, excluding cash
$
309,703

 
$
334,160

 
$
(24,457
)
 
(7.3
)%
Long-term debt
$
1,013,576

 
$
1,045,349

 
$
(31,773
)
 
(3.0
)%
Total debt
$
1,036,009

 
$
1,066,059

 
$
(30,050
)
 
(2.8
)%
Net debt*
$
940,447

 
$
969,187

 
$
(28,740
)
 
(3.0
)%
Total A. Schulman, Inc. stockholders’ equity
$
574,402

 
$
584,086

 
$
(9,684
)
 
(1.7
)%
* Net debt, a non-GAAP financial measure, represents total debt less cash and cash equivalents. The Company believes that net debt provides useful supplemental liquidity information to investors.
As of November 30, 2015 and August 31, 2015, the Company held 88% and 96% of the Company's cash and cash equivalents at its foreign subsidiaries, respectively. The majority of these foreign cash balances are associated with earnings that we have asserted are permanently reinvested and which we plan to use to support continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of foreign operations. From time to time, we repatriate cash from foreign subsidiaries to the U.S. through intercompany dividends for normal operating needs and service of outstanding debt. These dividends are typically paid out of current year earnings. In addition, excess cash in the U.S. is generally used to repay outstanding debt.
Working capital, excluding cash, was $309.7 million as of November 30, 2015, a decrease of $24.5 million from August 31, 2015. The primary reasons for the decrease in working capital from August 31, 2015 include a decrease of $18.6 million in accounts receivable and an increase in other accrued liabilities of $13.3 million, partially offset by an increase in prepaid expenses and other current assets of $8.3 million.
Capital expenditures for the three months ended November 30, 2015 were $7.4 million compared with $10.3 million last year. The Company continued regular and ongoing investments in its global manufacturing facilities and technical innovation centers.
Below summarizes the Company’s available funds:
 
November 30, 2015
 
August 31, 2015
 
(In thousands)
Existing capacity:
 
 
 
Revolving Facility
$
300,000

 
$
300,000

Foreign short-term lines of credit
36,014

 
34,921

Total capacity from credit lines
$
336,014

 
$
334,921

Availability:
 
 
 
Revolving Facility
$
299,047

 
$
298,574

Foreign short-term lines of credit
25,832

 
25,999

Total available funds from credit lines
$
324,879

 
$
324,573

Total available funds from credit lines represents the total capacity from credit lines less outstanding borrowings of $7.1 million and $8.9 million as of November 30, 2015 and August 31, 2015, respectively, and issued letters of credit of $4.0 million and $1.4 million as of November 30, 2015 and August 31, 2015, respectively.
The Company was in a net debt position of $940.4 million and $969.2 million as of November 30, 2015 and August 31, 2015, respectively. The decrease of $28.7 million was primarily a result of normal contractual payments plus a €20.0 million early payment of Euro Term Loan B debt.
During the three months ended November 30, 2015, the Company declared and paid quarterly cash dividends of $0.205 per share to common stockholders and $15.00 per share to special stockholders. The total amount of these dividends was $6.0 million and $1.9 million, respectively.
For a discussion of the Company's share repurchase programs, refer to Note 18 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company repurchased no common stock during fiscal 2016. The Company repurchased 109,422 shares of common stock in the first quarter of fiscal 2015 at an average price of $30.46 per share for a total cost of $3.3 million. As of November 30, 2015, shares valued at $51.7 million remain authorized for repurchase.
The Company has foreign currency exposures primarily related to the Euro, British pound sterling, Polish zloty, Mexican peso, Brazilian real, and Argentine peso, among others. The assets and liabilities of the Company’s 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 Company’s operations uses the Euro as its functional currency. Accumulated other comprehensive income decreased by $9.7 million during the three months ended November 30, 2015 primarily due to the strengthening of the U.S. dollar against various foreign currencies, most significantly the Euro which declined by 5.7% from 1.122 U.S. dollars to 1 Euro as of August 31, 2015 to 1.058 as of November 30, 2015.
Cash flow from operations, borrowing capacity under the credit facilities and cash and cash equivalents are expected to provide sufficient liquidity to maintain and grow the Company’s current operations and capital expenditure requirements, pay dividends, reduce outstanding debt, pursue acquisitions, and repurchase shares.

- 26 -


Contractual Obligations
As of November 30, 2015, there were no material changes to the Company’s future contractual obligations as previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company’s outstanding commercial commitments as of November 30, 2015 are not material to the Company’s 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, 2015.
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 Company’s critical accounting policies are the same as discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
Accounting Pronouncements
For a discussion of accounting pronouncements, refer to Note 16 of this Form 10-Q.
Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:
worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company’s major product markets or countries where the Company has operations;
the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
competitive factors, including intense price competition;
fluctuations in the value of currencies in areas where the Company operates;
volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company’s products, particularly plastic resins derived from oil and natural gas;
changes in customer demand and requirements;
effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions and the integration thereof, joint ventures and restructuring initiatives;
escalation in the cost of providing employee health care;
uncertainties and unanticipated developments regarding contingencies, such as pending and future litigation and other claims, including developments that would require increases in our costs and/or reserves for such contingencies;
the performance of the global automotive market as well as other markets served;

- 27 -


further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products;
operating problems with our information systems as a result of system security failures such as viruses, cyber-attacks or other causes;
our current debt position could adversely affect our financial health and prevent us from fulfilling our financial obligations;
integration of acquisitions, including most recently Citadel, with our existing business, including the risk that the integration will be more costly or more time consuming and complex or simply less effective than anticipated;
our ability to achieve the anticipated synergies, cost savings and other benefits from the Citadel acquisition;
substantial time devoted by management to the integration of the Citadel acquisition; and
failure of counterparties to perform under the terms and conditions of contractual arrangements, including suppliers, customers, buyers and sellers of a business and other third parties with which the Company contracts.
The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company’s performance are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company’s business, financial condition and results of operations.
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 Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015. Exposures to market risks have not changed materially since August 31, 2015.
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 Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to the Company’s 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.
The Company carries out a variety of on-going procedures, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
There has been no change in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

- 28 -


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 Quarterly Report.
Item 1A – Risk Factors
There are certain risks and uncertainties in the Company’s business that could cause our actual results to differ materially from those anticipated. In “ITEM 1A. RISK FACTORS” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015, the Company included a detailed discussion of its risk factors. There are no material changes from the risk factors previously disclosed.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company did not repurchase any shares of common stock during the first quarter of fiscal 2016, as the Board indefinitely suspended the 10b5-1 plan during the fourth quarter of fiscal 2015. Shares valued at $51.7 million remain authorized for repurchase as of November 30, 2015. For further discussion of the Company's Share Repurchase program, refer to Note 18 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.


- 29 -


Item 6 – Exhibits
(a)
Exhibits
Exhibit Number
  
Exhibit
 
 
 
3.1
  
Amended and Restated Certificate of Incorporation of the Company, as amended (for purposes of Commission reporting compliance only). (incorporated by reference from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on July 7, 2015).
 
 
 
3.2
  
Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 27, 2011).
 
 
 
4.1
 
Indenture, dated as of May 26, 2015, by and among A. Schulman, Inc., the guarantors party thereto and U.S. Bank National Association, as trustee (including the Form of 6.875% Senior Note due 2023) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 28, 2015).
 
 
 
4.2
 
First Supplemental Indenture, dated as of June 1, 2015, by and among A. Schulman, Inc., the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2015).
 
 
 
4.3
 
Registration Rights Agreement, dated as of May 26, 2015, by and among A. Schulman, Inc., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the initial purchasers of the Notes ) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 28, 2015).
 
 
 
4.4
 
Joinder to Registration Rights Agreement, dated as of June 1, 2015, by and among A. Schulman, Inc., the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the initial purchasers (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2015).
 
 
 
4.5
 
Specimen Certificate for 6.00% Cumulative Perpetual Convertible Special Stock (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 4, 2015).
 
 
 
10.1 *
 
The Company's fiscal year 2016 Bonus Plan (incorporated by reference from the Company's Current Report on Form 8-K filed with the Commission on October 15, 2015).
 
 
 
31.1
  
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
 
 
 
31.2
  
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
 
 
 
32
  
Certifications of Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. 1350.
 
 
 
101.INS
  
XBRL Instance Document.
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document.

* Management contract or compensatory plan or arrangement required to be filed as an Exhibit hereto.

- 30 -


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.
A. Schulman, Inc.
(Registrant)
 
/s/ Joseph J. Levanduski
Joseph J. Levanduski , Executive Vice President, Chief Financial Officer 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)
Date:
January 11, 2016


- 31 -


Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Bernard Rzepka, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of A. Schulman, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedure (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
January 11, 2016
 
 
 
/s/ Bernard Rzepka
 
 
Bernard Rzepka
 
 
President and Chief Executive Officer





Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Joseph J. Levanduski, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of A. Schulman, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedure (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
January 11, 2016
 
 
 
/s/ Joseph J. Levanduski
 
 
Joseph J. Levanduski
 
 
Executive Vice President, Chief Financial Officer





Exhibit 32

Certifications of Principal Executive and Principal Financial Officers
Pursuant to 18 U.S.C. 1350


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of A. Schulman, Inc. (the “Company”) on Form 10-Q for the period ending November 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company does hereby certify that:

(a)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(b)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Bernard Rzepka
 
Bernard Rzepka
 
President and Chief Executive Officer of A. Schulman, Inc.
 
January 11, 2016
 
 


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of A. Schulman, Inc. (the “Company”) on Form 10-Q for the period ending November 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company does hereby certify that:
 

(a)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(b)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Joseph J. Levanduski
 
Joseph J. Levanduski
 
Executive Vice President, Chief Financial Officer of A. Schulman, Inc.
 
January 11, 2016
 



v3.3.1.900
Document and Entity Information - shares
3 Months Ended
Nov. 30, 2015
Jan. 08, 2016
Document Information [Line Items]    
Entity Registrant Name SCHULMAN A INC  
Entity Central Index Key 0000087565  
Document Type 10-Q  
Document Period End Date Nov. 30, 2015  
Amendment Flag false  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --08-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   29,290,184
v3.3.1.900
Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Net sales $ 649,219,000 $ 615,053,000
Cost of sales 544,290,000 528,209,000
Selling, general and administrative expenses 77,237,000 60,547,000
Restructuring expense 1,546,000 5,219,000
Operating income 26,146,000 21,078,000
Interest expense 13,618,000 2,359,000
Foreign currency transaction (gains) losses 729,000 1,099,000
Other (income) expense, net 71,000 (254,000)
Income (loss) from continuing operations before taxes 11,728,000 17,874,000
Provision (benefit) for U.S. and foreign income taxes 4,251,000 4,486,000
Income (loss) from continuing operations 7,477,000 13,388,000
Income (loss) from discontinued operations, net of tax 20,000 (10,000)
Net income (loss) 7,497,000 13,378,000
Noncontrolling interests (404,000) (220,000)
Net income (loss) attributable to A. Schulman, Inc. 7,093,000 13,158,000
Convertible special stock dividends 1,875,000 0
Net income (loss) available to A. Schulman, Inc. common stockholders $ 5,218,000 $ 13,158,000
Weighted-average number of shares outstanding:    
Basic 29,223 29,017
Diluted 29,462 29,468
Basic earnings per share available to A. Schulman, Inc. common stockholders    
Income (loss) from continuing operations $ 0.18 $ 0.45
Income (loss) from discontinued operations 0.00 0.00
Net income (loss) available to A. Schulman, Inc. common stockholders 0.18 0.45
Diluted earnings per share available to A. Schulman, Inc. common stockholders    
Income (loss) from continuing operations 0.18 0.45
Income (loss) from discontinued operations 0.00 0.00
Net income (loss) available to A. Schulman, Inc. common stockholders 0.18 0.45
Cash dividends per common share 0.205 0.205
Cash dividends per share of convertible special stock $ 15.00 $ 0.00
v3.3.1.900
Consolidated Statements Of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Net income (loss) $ 7,497 $ 13,378
Other comprehensive income (loss):    
Foreign currency translation gains (losses) (10,776) (25,615)
Defined benefit retirement plans, net of tax 1,015 336
Other comprehensive income (loss) [1] (9,761) (25,279)
Comprehensive income (loss) (2,264) (11,901)
Less: comprehensive income (loss) attributable to noncontrolling interests 335 196
Comprehensive income (loss) attributable to A. Schulman, Inc. $ (2,599) $ (12,097)
[1] (1) All amounts presented are net of tax. All tax amounts are related to pension and other retiree benefits.
v3.3.1.900
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Nov. 30, 2015
Aug. 31, 2015
Current assets:    
Cash and cash equivalents $ 95,562 $ 96,872
Accounts receivable, less allowance for doubtful accounts of $10,533 at November 30, 2015 and $10,777 at August 31, 2015 395,317 413,943
Inventories 313,616 317,328
Prepaid expenses and other current assets 68,483 60,205
Total current assets 872,978 888,348
Property, plant and equipment, at cost:    
Land and improvements 31,883 31,674
Buildings and leasehold improvements 163,448 164,759
Machinery and equipment 418,652 427,183
Furniture and fixtures 33,733 34,393
Construction in progress 25,960 23,866
Gross property, plant and equipment 673,676 681,875
Accumulated depreciation 365,590 367,381
Net property, plant and equipment 308,086 314,494
Other assets:    
Deferred charges and other noncurrent assets 88,490 90,749
Goodwill 623,551 623,583
Intangible assets, net 423,302 434,537
Total assets 2,316,407 2,351,711
Current liabilities:    
Accounts payable 299,219 305,385
U.S. and foreign income taxes payable 3,885 4,205
Accrued payroll, taxes and related benefits 58,067 56,192
Other accrued liabilities 84,109 70,824
Short-term debt 22,433 20,710
Total current liabilities 467,713 457,316
Long-term debt 1,013,576 1,045,349
Pension plans 112,265 117,889
Deferred income taxes 117,186 115,537
Other long-term liabilities 22,281 22,885
Total liabilities $ 1,733,021 $ 1,758,976
Commitments and contingencies
Stockholders' equity:    
Convertible special stock, no par value $ 120,289 $ 120,289
Common stock, $1 par value, authorized - 75,000 shares, issued - 48,371 shares at November 30, 2015 and 48,369 shares at August 31, 2015 48,371 48,369
Additional paid-in capital 275,095 274,319
Accumulated other comprehensive income (loss) [1] (93,152) (83,460)
Retained earnings 606,884 607,690
Treasury stock, at cost, 19,075 shares at November 30, 2015 and 18,977 shares at August 31, 2015 (383,085) (383,121)
Total A. Schulman, Inc.'s stockholders' equity 574,402 584,086
Noncontrolling interests 8,984 8,649
Total equity 583,386 592,735
Total liabilities and equity $ 2,316,407 $ 2,351,711
[1] (1) All amounts presented are net of tax. All tax amounts are related to pension and other retiree benefits.
v3.3.1.900
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
3 Months Ended 12 Months Ended
Nov. 30, 2015
Aug. 31, 2015
Allowance for doubtful accounts $ 10,533,000 $ 10,777,000
Common stock, par value $ 1.00 $ 1.00
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued 48,371,000 48,369,000
Treasury stock, shares 19,075,000 19,077,000
Convertible special stock, shares converted to common shares 0 0
Convertible special stock, no par value $ 120,289,000 $ 120,289,000
Fair Value Hedges, Net 0 $ 0
Fair Value, Transfers Between Levels, Amount $ 0  
Equity Award [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 8,661  
v3.3.1.900
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Operating from continuing and discontinued operations:    
Net income $ 7,497 $ 13,378
Adjustments to reconcile net income to net cash provided from (used in) operating activities:    
Depreciation 12,013 8,963
Amortization 10,039 4,066
Deferred Income Tax Expense (Benefit) 1,306 633
Pension, postretirement benefits and other compensation 1,217 2,452
Changes in assets and liabilities, net of acquisitions:    
Accounts receivable (7,345) 4,731
Inventories (8,671) (16,341)
Accounts payable 377 8,200
Income taxes 1,432 463
Accrued payroll and other accrued liabilities 18,614 2,846
Other assets and long-term liabilities (11,144) (9,670)
Net cash provided from (used in) operating activities 40,025 10,259
Investing from continuing and discontinued operations:    
Expenditures for property, plant and equipment (7,402) (10,324)
Proceeds from the sale of assets 361 904
Business acquisitions, net of cash 0 (6,698)
Net cash provided from (used in) investing activities (7,041) (16,118)
Financing from continuing and discontinued operations:    
Cash dividends paid to special stockholders (1,875) 0
Cash dividends paid to common stockholders (6,024) (5,962)
Increase (decrease) in short-term debt 1,926 870
Borrowings on long-term debt 0 27,500
Repayments on long-term debt including current portion (24,946) (10,915)
Noncontrolling interests' contributions (distributions) 0 (1,750)
Issuances of stock, common and treasury 90 71
Purchases of treasury stock 0 (3,335)
Net Cash Provided by (Used in) Financing Activities (30,829) 6,479
Non-cash Activity:    
Effect of exchange rate changes on cash (3,465) (4,004)
Net increase (decrease) in cash and cash equivalents (1,310) (3,384)
Cash and cash equivalents at beginning of period 96,872 135,493
Cash and cash equivalents at end of period $ 95,562 $ 132,109
v3.3.1.900
General
3 Months Ended
Nov. 30, 2015
General [Abstract]  
GENERAL
GENERAL
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 periods presented. All such adjustments are of a normal recurring nature. The fiscal 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. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The results of operations for the three months ended November 30, 2015 are not necessarily indicative of the results expected for the fiscal year ending August 31, 2016.
The accounting policies for the periods presented are the same as described in Note 1 – Business and Summary of Significant Accounting Policies to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
Certain items previously reported in specific financial statement captions have been reclassified to conform to the fiscal 2016 presentation.
v3.3.1.900
Business Acquisitions
3 Months Ended
Nov. 30, 2015
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
BUSINESS ACQUISITIONS
Citadel
On June 1, 2015, the Company acquired all of the issued and outstanding shares of privately held Citadel, a portfolio company of certain private equity firms, for $801.6 million. Citadel is a plastics materials science business that produces engineered composites and engineered plastics for specialty product applications spanning multiple industries including transportation, industrial & construction, consumer, electrical, energy and healthcare & safety. The acquisition expands the Company's presence substantially, especially in the North America engineered plastics markets as well as balancing the global geographic footprint and gives A. Schulman a second growth platform with its added-value specialty engineered composites business. The business enhances the Company's existing portfolio and presents attractive expansion opportunities in other sectors such as aerospace, medical, LED lighting and oil & gas. Through this acquisition the Company's portfolio becomes more highly specialized, which enables the Company to better serve its global customer base with comprehensive solutions to address their needs such as light-weighting, material replacement, and high temperature strength.
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 using discounted cash flow and comparative market multiple approaches, quoted market prices and estimates made by management. The purchase price allocation is subject to further adjustment until all pertinent information regarding the acquired accounts receivable, inventory, intangible assets, accrued liabilities and deferred taxes are fully evaluated by the Company.
The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed from the Citadel acquisition at the date of acquisition:
 
 
As of June 1, 2015
 
 
(In thousands)
Accounts receivable
 
$
71,498

Inventories
 
41,771

Prepaid expenses and other current assets
 
15,320

Property, plant and equipment
 
78,113

Intangible assets
 
325,000

Other long-term assets
 
3,593

Total assets acquired
 
$
535,295

 
 
 
Accounts payable
 
29,500

Accrued liabilities
 
19,608

Deferred income taxes, long-term
 
116,102

Other long-term liabilities
 
3,121

Total liabilities assumed
 
$
168,331

Identifiable net assets acquired
 
$
366,964

Goodwill
 
434,596

Net assets acquired
 
$
801,560


The Company recorded acquired intangible assets of $325.0 million, with an estimated weighted-average useful life of 14.1 years. These intangible assets include customer related intangibles of $230.5 million, developed technology of $75.3 million, and trademarks and trade names of $19.2 million, with estimated weighted-average useful lives of 14.0 years, 16.3 years and 8.1 years, respectively. In addition, the estimated fair value of accounts receivable acquired was $71.5 million with the gross contractual amount being $72.1 million.

Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The amount allocated to goodwill associated with the Citadel acquisition is primarily the result of anticipated synergies resulting from the consolidation and centralization of manufacturing and global purchasing activities, insurance savings, elimination of duplicate corporate administrative costs and the previously discussed market expansion. The Company allocated the goodwill to its USCAN engineered plastics and global engineered composites reporting units. Except for certain pre-acquisition tax-deductible goodwill, none of the goodwill associated with this transaction is deductible for income tax purposes.

A. Schulman's fiscal year ends on August 31 while Citadel's fiscal year ended on December 31. The pro forma information in the table below for the three months ended November 30, 2014 includes (1) A. Schulman’s three months ended November 30, 2014 and (2) Citadel’s three months ended December 31, 2014. The following pro forma information represents the consolidated results of the Company as if the Citadel acquisition occurred on September 1, 2013:
 
Three months ended November 30,
 
2014
 
Unaudited
(In thousands, except per share data)
Net sales
$
739,738

Net income available to A. Schulman, Inc. common stockholders
$
7,906

Net income per share of common stock attributable to A. Schulman, Inc. - diluted
$
0.27



The unaudited pro forma information has been adjusted with respect to certain aspects of the acquisition to reflect the following:

Citadel acquired The Composites Group (“TCG”) in November of 2014. For purposes of the pro forma information disclosed above, the TCG acquisition was included as if the acquisition date was on September 1, 2013.
Additional depreciation and amortization expenses that would have been recognized assuming fair value adjustments to the existing Citadel assets acquired and liabilities assumed, including intangible assets, fixed assets and expense associated with the fair value step-up of inventory acquired.
Increased interest expense due to additional borrowings to fund the acquisition.
Adjustment of valuation allowances associated with US deferred tax assets.
Acquisition-related costs of $14.1 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.
Costs associated with acquisition bridge financing of $18.8 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.

The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of the acquired business. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on September 1, 2013, nor are they indicative of the future operating results of the Company.

The following table summarizes the Company's other business acquisitions for the periods presented:
Transaction Description
Date of Transaction
 
Purchase
Consideration
(In millions)
 
Segment
Compco Pty. Ltd.
September 2, 2014
 
$
6.7

 
APAC


The Company incurred $1.9 million and $1.1 million of acquisition and integration related costs, primarily included in selling, general and administrative expenses, during the three months ended November 30, 2015 and 2014, respectively.
v3.3.1.900
Goodwill and Intangible Assets
3 Months Ended
Nov. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure [Text Block]
GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the Company's carrying value of goodwill are as follows: 
 
EMEA
 
USCAN
 
LATAM
 
APAC
 
EC
 
Total
 
(In thousands)
Balance as of August 31, 2015
$
75,714

 
$
285,791

 
$
11,695

 
$
901

 
$
249,482

 
$
623,583

Acquisitions

 
(31
)
(1) 

 

 
3,237

(1) 
3,206

Translation
(3,128
)
 

 
(107
)
 
(3
)
 

 
(3,238
)
Balance as of November 30, 2015
$
72,586

 
$
285,760

 
$
11,588

 
$
898

 
$
252,719

 
$
623,551



(1) Activity relates to adjustments to preliminary purchase price allocation made in fiscal 2016, primarily due to inventory valuation adjustments.
Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.
Goodwill is tested for impairment 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 completed its annual impairment review of goodwill as of June 1, 2015 and noted no impairment. Management uses judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement approach that combines the income and market valuation techniques for each of the Company’s reporting units that carry goodwill. These valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market comparables, projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
The Company is not aware of any triggers which would require a goodwill impairment test as of November 30, 2015.
The following table summarizes intangible assets with finite useful lives by major category:
 
November 30, 2015
 
August 31, 2015
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
(In thousands)
Customer related
$
358,758

 
$
(46,650
)
 
$
312,108

 
$
360,193

 
$
(40,447
)
 
$
319,746

Developed technology
94,885

 
(11,392
)
 
83,493

 
93,518

 
(9,398
)
 
84,120

Registered trademarks and tradenames
34,694

 
(6,993
)
 
27,701

 
37,964

 
(7,293
)
 
30,671

Total finite-lived intangible assets
$
488,337

 
$
(65,035
)
 
$
423,302

 
$
491,675

 
$
(57,138
)
 
$
434,537


Amortization expense of intangible assets was $9.3 million and $3.4 million for the three months ended November 30, 2015 and 2014, respectively.
v3.3.1.900
Long-Term Debt and Credit Arrangements (Notes)
3 Months Ended
Nov. 30, 2015
Debt Instrument [Line Items]  
Debt Disclosure [Text Block]
LONG-TERM DEBT AND CREDIT ARRANGEMENTS

The following table summarizes short-term and long-term debt:
 
November 30, 2015
 
August 31, 2015
 
(In thousands)
Notes payable and other, due within one year
$
7,399

 
$
5,584

Current portion of long-term debt
15,034

 
15,126

Short-term debt
$
22,433

 
$
20,710

 
 
 
 
Revolving credit facility, LIBOR plus applicable spread, due June 2020
$

 
$

Term Loan A, LIBOR plus applicable spread, due June 2020
185,000

 
187,500

U.S. Term Loan B, LIBOR plus applicable spread, due June 2022
343,938

 
344,781

Euro Term Loan B, LIBOR plus applicable spread, due June 2022
108,525

 
137,818

Senior notes, 6.875%, due June 2023
375,000

 
375,000

Capital leases and other long-term debt
1,113

 
250

Long-term debt
$
1,013,576

 
$
1,045,349


For a detailed discussion of the Company's long-term debt and credit arrangements, refer to Note 5 in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The Company is in compliance with its debt covenants as of November 30, 2015.
The Company paid €20.0 million on its Euro Term Loan B Facility debt during the three months ended November 30, 2015, in addition to normal required payments of $3.8 million on all term debt.
v3.3.1.900
Fair Value Measurement
3 Months Ended
Nov. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]
FAIR VALUE MEASUREMENT
The following table presents information about the Company’s assets and liabilities measured at fair value:
 
November 30, 2015
 
August 31, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(In thousands)
Assets recorded at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
2,733

 
$

 
$
2,733

 
$

 
$
1,818

 
$

 
$
1,818

 
$

Liabilities recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
3,957

 
$

 
$
3,957

 
$

 
$
1,576

 
$

 
$
1,576

 
$

Liabilities not recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Long-term fixed-rate debt
$
367,969

 
$

 
$
367,969

 
$

 
$
374,299

 
$

 
$
374,299

 
$


Cash and cash equivalents are recorded at cost, which approximates fair value. Additionally, the carrying value of the Company's variable-rate debt approximates fair value.
The Company measures the fair value of its foreign exchange forward contracts using an internal model. The model maximizes the use of Level 2 market observable inputs including interest rate curves, currency forward and spot prices, and credit spreads. The total contract value of foreign exchange forward contracts outstanding was $207.9 million and $161.5 million as of November 30, 2015 and August 31, 2015, respectively. The amount of foreign exchange forward contracts outstanding as of the end of the period is indicative of the exposure of current balances and the forecasted change in exposures for the following quarter. 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 (gains) losses line in the Company’s consolidated statements of operations. The fair value of the Company’s foreign exchange forward contracts is recognized in other current assets or other accrued liabilities in the consolidated balance sheets based on the net settlement value. The foreign exchange forward contracts are entered into with creditworthy financial institutions, generally have a term of three months or less, and the Company does not hold or issue foreign exchange forward contracts for trading purposes. There were no foreign exchange forward contracts designated as hedging instruments as of November 30, 2015 and August 31, 2015.
Long-term fixed-rate debt as of November 30, 2015 and August 31, 2015 represents the Senior Notes, due 2023, recorded at cost and presented at fair value for disclosure purposes. The Level 2 fair value of the Company's fixed-rate debt was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities. As of November 30, 2015 and August 31, 2015, the carrying value of the Company's long-term fixed-rate debt recorded on the consolidated balance sheets was $375.0 million.
For a discussion of the Company’s fair value measurement policies under the fair value hierarchy, refer to Note 1 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during fiscal 2016, and transfers between levels within the fair value hierarchy, if any, are recognized at the end of each quarter. There were no transfers between levels during the period presented.
Additionally, the Company remeasures certain assets to fair value, using Level 3 measurements, as a result of the occurrence of triggering events. There were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis during the period presented.
v3.3.1.900
Income Taxes
3 Months Ended
Nov. 30, 2015
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
INCOME TAXES
The effective tax rate for the three months ended November 30, 2015 and 2014 was 36.2% and 25.1%, respectively. The increase in the effective tax rate for the three months ended November 30, 2015 as compared with the same period last year was driven primarily by the prior year benefit of U.S. income with no tax due to valuation allowance and an increase in current year foreign income subject to U.S. tax, including income recognized due to the expiration of the “look-thru” provision of U.S. tax law, partially offset by fewer losses with no tax benefit.
We record quarterly taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory federal income tax rate in the current year is primarily attributable to certain foreign income being taxable in the U.S., including a portion due to the expiration of the “look-thru” provision of U.S. tax law, partially offset by our overall foreign rate being less than the U.S. statutory federal income tax rate.
Subsequent to the close of the quarter, the “look-thru” provision of U.S. tax law was extended. The additional tax recorded in the three months ended November 30, 2015, due to the expiration of this provision, will be reversed in the second quarter, reducing our annual effective rate.
As of November 30, 2015, the Company's gross unrecognized tax benefits totaled $2.0 million. If recognized, $1.4 million of the total unrecognized tax benefits would favorably affect the Company's effective tax rate. The Company reports interest and penalties related to income tax matters in income tax expense. As of November 30, 2015, the Company had $0.9 million of accrued interest and penalties on unrecognized tax benefits.
The Company’s statute of limitations is open in various jurisdictions as follows: Germany - from 2005 onward, France - from 2010 onward, U.S. - from 2012 onward, Belgium - from 2012 onward, other foreign jurisdictions - from 2006 onward.
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.
v3.3.1.900
Pension and Postretirement Benefit Plans
3 Months Ended
Nov. 30, 2015
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]  
Pension and Other Postretirement Benefits Disclosure [Text Block]
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The components of the Company’s net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Defined benefit pension plans:
 
 
 
Service cost
$
1,294

 
$
1,254

Interest cost
1,063

 
1,168

Expected return on plan assets
(504
)
 
(471
)
Actuarial loss (gain) and amortization of prior service cost (credit), net
724

 
786

Net periodic pension benefit cost
$
2,577

 
$
2,737

 
 
 
 
Other postretirement benefit plan:
 
 
 
Service cost
$
1

 
$
1

Interest cost
97

 
110

Actuarial loss (gain) and amortization of prior service cost (credit), net
(149
)
 
(135
)
Net periodic postretirement benefit cost (credit)
$
(51
)
 
$
(24
)
v3.3.1.900
Consolidated Statement of Stockholders' Equity
3 Months Ended
Nov. 30, 2015
Statement of Stockholders' Equity [Abstract]  
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
A summary of the changes in stockholders’ equity is as follows:
 
Convertible Special Stock
 
Common
Stock ($1 par value)
 
Additional Paid-In Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Treasury
Stock
 
Non-controlling
Interests
 
Total
Equity
 
(In thousands, except per share data)
Balance as of September 1, 2015
$
120,289

 
$
48,369

 
$
274,319

 
$
(83,460
)
 
$
607,690

 
$
(383,121
)
 
$
8,649

 
$
592,735

Comprehensive income (loss)
 
 
 
 

 
(9,692
)
 
7,093

 

 
335

 
(2,264
)
Cash dividends paid on common stock, $0.205 per share
 
 
 
 

 

 
(6,024
)
 

 

 
(6,024
)
Cash dividends paid on convertible special stock, $15.00 per share
 
 
 
 
 
 
 
 
(1,875
)
 
 
 
 
 
(1,875
)
Issuance of treasury stock
 
 
 
 
22

 

 

 
36

 

 
58

Stock options exercised
 
 
2

 
30

 

 

 


 

 
32

Amortization of restricted stock
 
 
 
 
724

 

 

 

 

 
724

Balance as of November 30, 2015
$
120,289

 
$
48,371

 
$
275,095

 
$
(93,152
)
 
$
606,884

 
$
(383,085
)
 
$
8,984

 
583,386

v3.3.1.900
Convertible Special Stock Convertible Special Stock
3 Months Ended
Nov. 30, 2015
Convertible Special Stock [Abstract]  
Preferred Stock [Text Block]
CONVERTIBLE SPECIAL STOCK
On May 4, 2015, the Company filed with the Delaware Secretary of State a Certificate of Designation, Preferences, Rights and Limitations (the "Certificate of Designation") for the purpose of amending its Restated Certificate of Incorporation to fix the designations, preferences, limitations and relative rights of 125,000 shares of the Company’s 6.00% Cumulative Perpetual Convertible Special Stock, without par value (the “Convertible Special Stock”). On May 4, 2015, the Company received gross cash proceeds of $125.0 million from the sale of 125,000 shares of Convertible Special Stock. As of November 30, 2015 and August 31, 2015, the $120.3 million amount recorded in the Convertible Special Stock line in the balance sheet is net of issuance costs of $4.7 million.

Since August 31, 2015, there have been no changes to the Convertible Special Stock in regards to the:

ranking upon payment of dividends and distributions upon the Company’s liquidation, winding up or dissolution;
cumulative 6.00% per annum dividend entitlements;
voting rights;
redemption rights;
conversion rate, of which there have been no conversions as of November 30, 2015 and August 31, 2015; and
optional conversion by the Company on or after May 1, 2020.
The Company paid $1.9 million of convertible special stock dividends in case during the first quarter of fiscal 2016 and currently intends to pay future dividends in cash.
If the Company undergoes a fundamental change, as defined in the Certificate of Designation, and a holder subsequently converts its shares of Convertible Special Stock, the holder will receive, for each share of Convertible Special Stock surrendered for conversion, a number of shares of common stock of the Company as set forth in the Certificate of Designations. There have been no fundamental changes as of November 30, 2015 or August 31, 2015.
v3.3.1.900
Accumulated Other Comprehensive Income (Loss) Reclassification Out of Accumulated Other Comprehensive Income (Loss)
3 Months Ended
Nov. 30, 2015
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Disclosure of Reclassification Amount [Text Block]
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss) are as follows(1):
 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2015
$
(49,562
)
 
$
(33,898
)
 
$
(83,460
)
Other comprehensive income (loss) before reclassifications
(10,776
)
 

 
(10,776
)
Amounts reclassified to earnings

 
1,015

(2) 
1,015

Net current period other comprehensive income (loss)
(10,776
)
 
1,015

 
(9,761
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(69
)
 

 
(69
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(10,707
)
 
1,015

 
(9,692
)
Balance as of November 30, 2015
$
(60,269
)
 
$
(32,883
)
 
$
(93,152
)


 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2014
$
22,786

 
$
(39,477
)
 
$
(16,691
)
Other comprehensive income (loss) before reclassifications
(25,615
)
 

 
(25,615
)
Amounts reclassified to earnings

 
336

(2) 
336

Net current period other comprehensive income (loss)
(25,615
)
 
336

 
(25,279
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(24
)
 

 
(24
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(25,591
)
 
336

 
(25,255
)
Balance as of November 30, 2014
$
(2,805
)
 
$
(39,141
)
 
$
(41,946
)


(1) All amounts presented are net of tax. All tax amounts are related to pension and other retiree benefits.
(2) Amounts represent amortization of net actuarial loss and prior service costs and are reclassified from accumulated other comprehensive income into cost of sales and selling, general & administrative expenses on the consolidated statements of operations. These components are included in the computation of net periodic pension cost. Refer to Note 7 of this Form 10-Q for further details.
v3.3.1.900
Share-Based Incentive Compensation Plans
3 Months Ended
Nov. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
SHARE-BASED INCENTIVE COMPENSATION PLANS
For a discussion of the Company's share-based incentive compensation plans, refer to Note 11 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. The Company did not grant any restricted stock awards during the three months ended November 30, 2015 and 2014.
The Company recorded share-based incentive compensation expense of $0.4 million and $1.3 million during the three months ended November 30, 2015 and 2014, respectively. These amounts are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.
v3.3.1.900
Earnings Per Share
3 Months Ended
Nov. 30, 2015
Earnings Per Share [Abstract]  
Earnings Per Share [Text Block]
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if common stock equivalents are exercised as well as the impact of restricted stock awards expected to vest, which combined would then share in the earnings of the Company.
Dividends on convertible special stock that an issuer has paid or intends to pay are deducted from net income or added to the amount of a net loss in computing income available to common stockholders.
The difference between basic and diluted weighted-average shares results from the assumed exercise of outstanding stock options and vesting of restricted stock awards, calculated using the treasury stock method, and the inclusion of the convertible special stock dividends, calculated using the if-converted method.
The Company computes income available to common stockholders by deducting dividends accumulated on the convertible special stock from income (loss) from continuing operations and net income (loss). The convertible special stock does not impact the denominator of basic EPS. The dilutive effect of convertible special stock is reflected in diluted EPS by application of the if-converted method. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The convertible special stock is anti-dilutive whenever the amount of the dividend declared in or accumulated for the current period per share on conversion exceeds basic EPS. For the three months ended November 30, 2015, the accumulated dividend per share on conversion exceeds basic EPS, therefore the 2,388,913 shares related to the convertible special stock were considered anti-dilutive.
The following table presents the number of incremental weighted-average shares used in computing diluted per share amounts:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Weighted-average shares outstanding:
 
 
 
Basic
29,223

 
29,017

Incremental shares from equity awards
239

 
451

Incremental shares from convertible special stock

 

Diluted
29,462

 
29,468


Diluted weighted-average shares outstanding for the three months ended November 30, 2015, excludes 8,661 shares related to equity awards, as their inclusion would have been anti-dilutive. For the three months ended November 30, 2014, there were no anti-dilutive shares related to share-based compensation plans that were excluded from diluted weighted-average shares outstanding.
v3.3.1.900
Segment Information
3 Months Ended
Nov. 30, 2015
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block]
SEGMENT INFORMATION
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 CODM makes decisions, assesses performance and allocates resources by the following current reportable segments: Europe, Middle East and Africa (“EMEA”), United States & Canada (“USCAN”), Latin America (“LATAM”), Asia Pacific (“APAC”), and Engineered Composites ("EC").
The CODM uses net sales to unaffiliated customers, segment gross profit and segment operating income in order to make decisions, assess performance and allocate resources to each segment. Segment operating income does not include items such as restructuring and related costs including accelerated depreciation, asset impairments, or costs and inventory step-up charges related to business acquisitions and integration. Corporate expenses include the compensation of certain personnel, certain audit expenses, Board of Directors related costs, certain insurance costs, costs associated with being a publicly traded entity and other miscellaneous legal and professional fees.
The following table summarizes net sales to unaffiliated customers by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
328,096


$
371,191

USCAN
178,282


144,707

LATAM
45,203

 
46,181

APAC
45,692


52,974

EC
51,946

 

Total net sales to unaffiliated customers
$
649,219

 
$
615,053

Below the Company presents gross profit by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
47,684

 
$
49,706

USCAN
30,294

 
24,629

LATAM
9,705

 
5,650

APAC
7,874

 
7,250

EC
13,208

 

Total segment gross profit
108,765

 
87,235

Inventory step-up

 
(341
)
Accelerated depreciation and restructuring related costs
(1,877
)
 

Costs related to acquisitions and integrations
(129
)
 
(50
)
Lucent costs
(1,830
)
 

Total gross profit
$
104,929

 
$
86,844

Below is a reconciliation of segment operating income to operating income and income from continuing operations before taxes:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
20,153

 
$
20,039

USCAN
12,163

 
11,393

LATAM
5,604

 
595

APAC
4,307

 
3,508

EC
4,102

 

Total segment operating income
46,329

 
35,535

Corporate
(8,488
)
 
(7,484
)
Costs related to acquisitions and integrations
(1,866
)
 
(1,053
)
Restructuring and related costs
(4,670
)
 
(5,579
)
Accelerated depreciation
(1,453
)
 

Inventory step-up

 
(341
)
Lucent costs (1)
(3,706
)
 

Operating income
26,146

 
21,078

Interest expense
(13,618
)
 
(2,359
)
Foreign currency transaction gains (losses)
(729
)
 
(1,099
)
Other income (expense), net
(71
)
 
254

Income from continuing operations before taxes
$
11,728

 
$
17,874

 
(1) Refer to Note 15 for additional discussion on this matter. Lucent costs of $3.7 million include additional product and manufacturing operational costs for reworking inventory, legal and investigative costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations. Included in USCAN segment results are additional costs of $1.2 million required to produce products to meet customer specifications.
Globally, the Company operates in six product families: (1) custom performance colors, (2) engineered composites, (3) masterbatch solutions, (4) engineered plastics, (5) specialty powders and (6) distribution services. The three months ended November 30, 2014 includes a reclassification of revenue between product families to better reflect the way the businesses are managed. The consolidated net sales for these product families are as follows:
 
Three months ended November 30,
 
2015

2014
 
(In thousands, except for %'s)
Custom Performance Colors
$
46,520

 
7
%
 
$
51,298

 
8
%
Engineered Composites
51,946

 
8

 

 

Masterbatch Solutions
181,895


28


198,358


33

Engineered Plastics
234,218

 
36

 
194,968

 
32

Specialty Powders
67,422


11


82,357


13

Distribution Services
67,218

 
10

 
88,072

 
14

Total consolidated net sales
$
649,219


100
%

$
615,053


100
%
v3.3.1.900
Restructuring
3 Months Ended
Nov. 30, 2015
Restructuring and Related Activities [Abstract]  
Restructuring and Related Activities Disclosure [Text Block]
RESTRUCTURING
Fiscal 2016 Restructuring Plan
USCAN Plan
In October 2015, as part of the Company’s previously announced Citadel acquisition integration strategy and a careful evaluation of capacity utilization and manufacturing capabilities, the Company approved plans to close three manufacturing facilities in Evansville, Indiana and consolidate production into other existing facilities in the area. The Company also plans to relocate production of its engineered plastics products from its Akron, Ohio facility into other facilities in Evansville, while retaining masterbatch solutions production in Akron. Overall, the Company expects to reduce headcount by approximately 25 as a result of these actions. The Company recorded minimal pretax employee-related costs and $1.2 million of accelerated depreciation costs during the three months ended November 30, 2015. The Company anticipates recognizing approximately $2.0 million to $3.0 million of pretax employee-related cash and other charges as well as approximately $3.0 million to $4.0 million of pretax machinery and equipment accelerated depreciation through fiscal 2017. As of November 30, 2015, the Company has no balance accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2017 as the plan is completed.
Fiscal 2015 Restructuring Plans
EMEA Plans
In August 2015, the Company approved plans to integrate the existing Paris, Montereau, and Beaucaire, France facilities into one new facility in St. Germain-Laval, France. As a result of this consolidation, the Company plans to reduce headcount in France by approximately 20 in fiscal 2016, partially offset by the addition of approximately 15 associates at the Company's new facility. The Company has recognized $0.4 million in pre-tax employee-related costs and accelerated depreciation costs of $0.2 million during the three months ended November 30, 2015. The Company expects to incur an additional $0.3 million in pretax employee-related costs and $0.3 million in accelerated depreciation throughout the remainder of fiscal 2016. As of November 30, 2015, the Company has a balance of $1.0 million accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2017 as the plan is completed.
In May 2015, the Company announced plans to relocate its EMEA Shared Service Center from Londerzeel, Belgium to Poznan, Poland as part of the Company’s ongoing cost control initiatives. The Company expects to reduce headcount by approximately 40 employees in Londerzeel, Belgium by the end of fiscal 2016. The Company recorded pretax employee-related costs and other charges of $0.5 million during the three months ended November 30, 2015, and expects to recognize minimal additional pre-tax employee-related costs through the remainder of fiscal 2016. As of November 30, 2015, the Company has a balance of $1.7 million accrued for this plan. Cash payments associated with this plan are expected to occur through fiscal 2016 as the plan is completed.
For discussion of the Company's previous restructuring plans, refer to Note 16 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The following table summarizes the activity related to the Company’s restructuring plans:
 
Employee-related Costs
 
Other Costs
 
Translation Effect
 
Total Restructuring Costs
 
(In thousands)
Accrual balance as of August 31, 2015
$
5,786

 
$
461

 
$
(864
)
 
$
5,383

Fiscal 2016 charges
982

 
564

 

 
1,546

Fiscal 2016 payments
(1,141
)
 
(633
)
 

 
(1,774
)
Translation

 

 
(300
)
 
(300
)
Accrual balance as of November 30, 2015
$
5,627

 
$
392

 
$
(1,164
)
 
$
4,855

Restructuring expenses are excluded from segment operating income but are attributable to the reportable segments as follows:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
1,211

 
$
4,274

USCAN
234

 
762

LATAM
70

 
183

APAC
31

 

Total restructuring expense
$
1,546

 
$
5,219

v3.3.1.900
Commitments and Contingencies
3 Months Ended
Nov. 30, 2015
Commitments and Contingencies  
Commitments and Contingencies Disclosure [Text Block]
COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such legal actions, after reviewing all pending and threatened legal actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial position or cash flow of the Company. However, it is possible, that the ultimate resolution of such matters, if unfavorable, may be material to the results of operations in a particular future period as the time and amount of any resolution of such legal actions and its relationship to the future results of operations are not currently known.
Reserves are established for legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not considered probable that a liability has been incurred or it is not possible to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no reserve would be recognized until that time.
There were no material changes to the Company’s future contractual obligations as previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
Lucent Matter
As previously reported by the Company in its filings with the SEC, on June 1, 2015, the Company completed the acquisition of Citadel and its subsidiaries from certain private equity firms for $801.6 million. In August 2015, the Company identified quality reporting issues affecting certain product lines at two manufacturing facilities located on Lynch Road in Evansville, Indiana. Both facilities are a part of Lucent Polymers, Inc. (“Lucent”), an indirect wholly-owned subsidiary of Citadel which was acquired as part of the Citadel acquisition. Specifically, the Company discovered discrepancies between laboratory data and certifications provided by Lucent to customers with respect to certain products using recycled or reclaimed raw materials. The Company also discovered inaccuracies in materials and information provided by Lucent employees to Underwriter Laboratories with respect to such products.
The Company took immediate decisive actions following its initial discoveries, including implementing protocols designed so that future shipments of products meet customer standards and certification requirements, entering into discussions and exploring different certification standards with customers and other third parties. To date, the Company has notified all affected customers. The Company is working with customers and will deliver accurate certifications with respect to all products going forward. In addition, the Company has notified and is cooperating with Underwriter Laboratories to institute all necessary corrective action.
The Company also commenced an internal investigation into these matters. The Company’s internal investigation, which is ongoing, has revealed that the discrepancies and inaccuracies initially identified were due to longstanding practices at Lucent under its prior ownership pursuant to which Lucent falsified test results on documents provided to customers and other parties pertaining to the physical properties of Lucent products made with recycled or reclaimed raw materials.
To date, no customers, or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries.
The Company incurred a total of $4.9 million of costs related to this matter that negatively impacted the Company’s operating results for the first quarter of fiscal 2016, including product and manufacturing operational costs, dedicated internal personnel costs, a reduction in inventory value, and additional legal and investigative costs. A break out of these expenses include additional product and manufacturing operational costs of approximately $1.0 million primarily for reworking existing inventory, $0.8 million to rework inventory produced or acquired since the acquisition, $0.5 million of dedicated internal personnel costs that would have otherwise been focused on normal operations during the three months ended November 30, 2015, legal and investigative costs related to the matter of $1.4 million, and $1.2 million of production costs associated with adding prime material and changing of production processes to ensure that finished product met customer specifications.
Additionally, the Company reduced the carrying value of Lucent related inventory on the opening balance sheet by $0.3 million which did not impact the Company’s operational results for the quarter ended November 30, 2015.
The Company continues with the internal investigation as to the scope of products, customers, and other parties affected.  As no customer or other parties have initiated recalls, or have made material claims against or sought to terminate their relationships with the Company or its subsidiaries from the date we identified this issue in August through the date of filing, we are currently unable to conclude that litigation or claims losses related to these matters are probable or to estimate the potential range of loss, if any. The Company is currently unable to determine whether such issues will have any material adverse effect on our financial position, liquidity, or results of operations.
The Company has provided a written claim notice to the sellers and to the escrow agent with respect to the indemnity escrow established in connection with the stock purchase agreement pursuant to which the Company acquired Citadel and its subsidiaries. As of November 30, 2015, approximately $31.0 million remained in such indemnity escrow.
As Lucent was effectively acquired by Citadel in December of 2013, the Company also submitted written claim notices pursuant to the Agreement and Plan of Merger, dated December 6, 2013, among The Matrixx Group, Incorporated, LPI Merger Sub, Inc., LPI Holding Company, River Associates Investments, LLC and certain stockholders of LPI Holding Company, pursuant to which Citadel initially acquired Lucent, and pursuant to the representations and warranties insurance policy issued in connection with that acquisition.
The Company is continuing to assess the scope of indemnifiable losses under these agreements and to evaluate all other possible claims and remedies which may be available to the Company and its subsidiaries in connection with this matter.
v3.3.1.900
Accounting Pronouncements
3 Months Ended
Nov. 30, 2015
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
ACCOUNTING PRONOUNCEMENTS
ACCOUNTING PRONOUNCEMENTS
In November 2015, the Financial Accounting Standards Board (“the FASB”) issued new accounting guidance that requires deferred tax assets and liabilities to be classified as noncurrent in the balance sheet. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods. Early application is permitted. The Company is currently evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.
In May 2014, the FASB issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods, and the Company will adopt the new guidance on September 1, 2018. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on its consolidated financial statements.
No other new accounting pronouncements issued or with effective dates during fiscal 2016 had or are expected to have a material impact on the Company's consolidated financial statements.
v3.3.1.900
General (Policies)
3 Months Ended
Nov. 30, 2015
General [Abstract]  
Basis of Accounting
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 periods presented. All such adjustments are of a normal recurring nature. The fiscal 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. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015.
The results of operations for the three months ended November 30, 2015 are not necessarily indicative of the results expected for the fiscal year ending August 31, 2016.
v3.3.1.900
Business Acquisitions (Tables)
3 Months Ended
Nov. 30, 2015
Business Acquisitions [Line Items]  
Schedule of Business Acquisitions, by Acquisition [Table Text Block]
The following table summarizes the Company's other business acquisitions for the periods presented:
Transaction Description
Date of Transaction
 
Purchase
Consideration
(In millions)
 
Segment
Compco Pty. Ltd.
September 2, 2014
 
$
6.7

 
APAC
Citadel Acquisition [Member]  
Business Acquisitions [Line Items]  
Business Acquisition, Pro Forma Information [Table Text Block]
A. Schulman's fiscal year ends on August 31 while Citadel's fiscal year ended on December 31. The pro forma information in the table below for the three months ended November 30, 2014 includes (1) A. Schulman’s three months ended November 30, 2014 and (2) Citadel’s three months ended December 31, 2014. The following pro forma information represents the consolidated results of the Company as if the Citadel acquisition occurred on September 1, 2013:
 
Three months ended November 30,
 
2014
 
Unaudited
(In thousands, except per share data)
Net sales
$
739,738

Net income available to A. Schulman, Inc. common stockholders
$
7,906

Net income per share of common stock attributable to A. Schulman, Inc. - diluted
$
0.27

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]
The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed from the Citadel acquisition at the date of acquisition:
 
 
As of June 1, 2015
 
 
(In thousands)
Accounts receivable
 
$
71,498

Inventories
 
41,771

Prepaid expenses and other current assets
 
15,320

Property, plant and equipment
 
78,113

Intangible assets
 
325,000

Other long-term assets
 
3,593

Total assets acquired
 
$
535,295

 
 
 
Accounts payable
 
29,500

Accrued liabilities
 
19,608

Deferred income taxes, long-term
 
116,102

Other long-term liabilities
 
3,121

Total liabilities assumed
 
$
168,331

Identifiable net assets acquired
 
$
366,964

Goodwill
 
434,596

Net assets acquired
 
$
801,560

v3.3.1.900
Goodwill and Intangible Assets (Tables)
3 Months Ended
Nov. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill [Table Text Block]
The changes in the Company's carrying value of goodwill are as follows: 
 
EMEA
 
USCAN
 
LATAM
 
APAC
 
EC
 
Total
 
(In thousands)
Balance as of August 31, 2015
$
75,714

 
$
285,791

 
$
11,695

 
$
901

 
$
249,482

 
$
623,583

Acquisitions

 
(31
)
(1) 

 

 
3,237

(1) 
3,206

Translation
(3,128
)
 

 
(107
)
 
(3
)
 

 
(3,238
)
Balance as of November 30, 2015
$
72,586

 
$
285,760

 
$
11,588

 
$
898

 
$
252,719

 
$
623,551

[1]
Schedule of Finite-Lived Intangible Assets [Table Text Block]
The following table summarizes intangible assets with finite useful lives by major category:
 
November 30, 2015
 
August 31, 2015
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
(In thousands)
Customer related
$
358,758

 
$
(46,650
)
 
$
312,108

 
$
360,193

 
$
(40,447
)
 
$
319,746

Developed technology
94,885

 
(11,392
)
 
83,493

 
93,518

 
(9,398
)
 
84,120

Registered trademarks and tradenames
34,694

 
(6,993
)
 
27,701

 
37,964

 
(7,293
)
 
30,671

Total finite-lived intangible assets
$
488,337

 
$
(65,035
)
 
$
423,302

 
$
491,675

 
$
(57,138
)
 
$
434,537

[1] (1) Activity relates to adjustments to preliminary purchase price allocation made in fiscal 2016, primarily due to inventory valuation adjustments.
v3.3.1.900
Long-Term Debt and Credit Arrangements Schedule of Debt (Tables)
3 Months Ended
Nov. 30, 2015
Debt Instrument [Line Items]  
Schedule of Debt [Table Text Block]
The following table summarizes short-term and long-term debt:
 
November 30, 2015
 
August 31, 2015
 
(In thousands)
Notes payable and other, due within one year
$
7,399

 
$
5,584

Current portion of long-term debt
15,034

 
15,126

Short-term debt
$
22,433

 
$
20,710

 
 
 
 
Revolving credit facility, LIBOR plus applicable spread, due June 2020
$

 
$

Term Loan A, LIBOR plus applicable spread, due June 2020
185,000

 
187,500

U.S. Term Loan B, LIBOR plus applicable spread, due June 2022
343,938

 
344,781

Euro Term Loan B, LIBOR plus applicable spread, due June 2022
108,525

 
137,818

Senior notes, 6.875%, due June 2023
375,000

 
375,000

Capital leases and other long-term debt
1,113

 
250

Long-term debt
$
1,013,576

 
$
1,045,349

v3.3.1.900
Fair Value Measurement (Tables)
3 Months Ended
Nov. 30, 2015
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
The following table presents information about the Company’s assets and liabilities measured at fair value:
 
November 30, 2015
 
August 31, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(In thousands)
Assets recorded at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
2,733

 
$

 
$
2,733

 
$

 
$
1,818

 
$

 
$
1,818

 
$

Liabilities recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
3,957

 
$

 
$
3,957

 
$

 
$
1,576

 
$

 
$
1,576

 
$

Liabilities not recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Long-term fixed-rate debt
$
367,969

 
$

 
$
367,969

 
$

 
$
374,299

 
$

 
$
374,299

 
$

v3.3.1.900
Pension and Postretirement Benefit Plans (Tables)
3 Months Ended
Nov. 30, 2015
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]  
Schedule of Net Benefit Costs [Table Text Block]
The components of the Company’s net periodic benefit cost for defined benefit pension and other postretirement benefit plans are shown below:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Defined benefit pension plans:
 
 
 
Service cost
$
1,294

 
$
1,254

Interest cost
1,063

 
1,168

Expected return on plan assets
(504
)
 
(471
)
Actuarial loss (gain) and amortization of prior service cost (credit), net
724

 
786

Net periodic pension benefit cost
$
2,577

 
$
2,737

 
 
 
 
Other postretirement benefit plan:
 
 
 
Service cost
$
1

 
$
1

Interest cost
97

 
110

Actuarial loss (gain) and amortization of prior service cost (credit), net
(149
)
 
(135
)
Net periodic postretirement benefit cost (credit)
$
(51
)
 
$
(24
)
v3.3.1.900
Consolidated Statement of Stockholders' Equity (Tables)
3 Months Ended
Nov. 30, 2015
Statement of Stockholders' Equity [Abstract]  
Schedule of Stockholders Equity [Table Text Block]
A summary of the changes in stockholders’ equity is as follows:
 
Convertible Special Stock
 
Common
Stock ($1 par value)
 
Additional Paid-In Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Treasury
Stock
 
Non-controlling
Interests
 
Total
Equity
 
(In thousands, except per share data)
Balance as of September 1, 2015
$
120,289

 
$
48,369

 
$
274,319

 
$
(83,460
)
 
$
607,690

 
$
(383,121
)
 
$
8,649

 
$
592,735

Comprehensive income (loss)
 
 
 
 

 
(9,692
)
 
7,093

 

 
335

 
(2,264
)
Cash dividends paid on common stock, $0.205 per share
 
 
 
 

 

 
(6,024
)
 

 

 
(6,024
)
Cash dividends paid on convertible special stock, $15.00 per share
 
 
 
 
 
 
 
 
(1,875
)
 
 
 
 
 
(1,875
)
Issuance of treasury stock
 
 
 
 
22

 

 

 
36

 

 
58

Stock options exercised
 
 
2

 
30

 

 

 


 

 
32

Amortization of restricted stock
 
 
 
 
724

 

 

 

 

 
724

Balance as of November 30, 2015
$
120,289

 
$
48,371

 
$
275,095

 
$
(93,152
)
 
$
606,884

 
$
(383,085
)
 
$
8,984

 
583,386

v3.3.1.900
Accumulated Other Comprehensive Income (Loss) Reclassification Out of Accumulated Other Comprehensive Income (Loss) (Tables)
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]    
Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]
The components of accumulated other comprehensive income (loss) are as follows(1):
 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2015
$
(49,562
)
 
$
(33,898
)
 
$
(83,460
)
Other comprehensive income (loss) before reclassifications
(10,776
)
 

 
(10,776
)
Amounts reclassified to earnings

 
1,015

(2) 
1,015

Net current period other comprehensive income (loss)
(10,776
)
 
1,015

 
(9,761
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(69
)
 

 
(69
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(10,707
)
 
1,015

 
(9,692
)
Balance as of November 30, 2015
$
(60,269
)
 
$
(32,883
)
 
$
(93,152
)
 
Foreign Currency Translation Gain (Loss)
 
Pension and Other Retiree Benefits
 
Total Accumulated Other Comprehensive Income (Loss)
 
(In thousands)
Balance as of August 31, 2014
$
22,786

 
$
(39,477
)
 
$
(16,691
)
Other comprehensive income (loss) before reclassifications
(25,615
)
 

 
(25,615
)
Amounts reclassified to earnings

 
336

(2) 
336

Net current period other comprehensive income (loss)
(25,615
)
 
336

 
(25,279
)
Less: comprehensive income (loss) attributable to
noncontrolling interests
(24
)
 

 
(24
)
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc.
(25,591
)
 
336

 
(25,255
)
Balance as of November 30, 2014
$
(2,805
)
 
$
(39,141
)
 
$
(41,946
)
v3.3.1.900
Earnings Per Share (Tables)
3 Months Ended
Nov. 30, 2015
Earnings Per Share [Abstract]  
Schedule of Weighted Average Number of Shares [Table Text Block]
The following table presents the number of incremental weighted-average shares used in computing diluted per share amounts:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
Weighted-average shares outstanding:
 
 
 
Basic
29,223

 
29,017

Incremental shares from equity awards
239

 
451

Incremental shares from convertible special stock

 

Diluted
29,462

 
29,468

v3.3.1.900
Segment Information (Tables)
3 Months Ended
Nov. 30, 2015
Segment Reporting Information [Line Items]  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
The following table summarizes net sales to unaffiliated customers by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
328,096


$
371,191

USCAN
178,282


144,707

LATAM
45,203

 
46,181

APAC
45,692


52,974

EC
51,946

 

Total net sales to unaffiliated customers
$
649,219

 
$
615,053

Below the Company presents gross profit by segment:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
47,684

 
$
49,706

USCAN
30,294

 
24,629

LATAM
9,705

 
5,650

APAC
7,874

 
7,250

EC
13,208

 

Total segment gross profit
108,765

 
87,235

Inventory step-up

 
(341
)
Accelerated depreciation and restructuring related costs
(1,877
)
 

Costs related to acquisitions and integrations
(129
)
 
(50
)
Lucent costs
(1,830
)
 

Total gross profit
$
104,929

 
$
86,844

Below is a reconciliation of segment operating income to operating income and income from continuing operations before taxes:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
20,153

 
$
20,039

USCAN
12,163

 
11,393

LATAM
5,604

 
595

APAC
4,307

 
3,508

EC
4,102

 

Total segment operating income
46,329

 
35,535

Corporate
(8,488
)
 
(7,484
)
Costs related to acquisitions and integrations
(1,866
)
 
(1,053
)
Restructuring and related costs
(4,670
)
 
(5,579
)
Accelerated depreciation
(1,453
)
 

Inventory step-up

 
(341
)
Lucent costs (1)
(3,706
)
 

Operating income
26,146

 
21,078

Interest expense
(13,618
)
 
(2,359
)
Foreign currency transaction gains (losses)
(729
)
 
(1,099
)
Other income (expense), net
(71
)
 
254

Income from continuing operations before taxes
$
11,728

 
$
17,874

Revenue from External Customers by Products and Services [Table Text Block]
Globally, the Company operates in six product families: (1) custom performance colors, (2) engineered composites, (3) masterbatch solutions, (4) engineered plastics, (5) specialty powders and (6) distribution services. The three months ended November 30, 2014 includes a reclassification of revenue between product families to better reflect the way the businesses are managed. The consolidated net sales for these product families are as follows:
 
Three months ended November 30,
 
2015

2014
 
(In thousands, except for %'s)
Custom Performance Colors
$
46,520

 
7
%
 
$
51,298

 
8
%
Engineered Composites
51,946

 
8

 

 

Masterbatch Solutions
181,895


28


198,358


33

Engineered Plastics
234,218

 
36

 
194,968

 
32

Specialty Powders
67,422


11


82,357


13

Distribution Services
67,218

 
10

 
88,072

 
14

Total consolidated net sales
$
649,219


100
%

$
615,053


100
%
v3.3.1.900
Restructuring (Tables)
3 Months Ended
Nov. 30, 2015
Restructuring and Related Activities [Abstract]  
Schedule of Restructuring and Related Costs [Table Text Block]
The following table summarizes the activity related to the Company’s restructuring plans:
 
Employee-related Costs
 
Other Costs
 
Translation Effect
 
Total Restructuring Costs
 
(In thousands)
Accrual balance as of August 31, 2015
$
5,786

 
$
461

 
$
(864
)
 
$
5,383

Fiscal 2016 charges
982

 
564

 

 
1,546

Fiscal 2016 payments
(1,141
)
 
(633
)
 

 
(1,774
)
Translation

 

 
(300
)
 
(300
)
Accrual balance as of November 30, 2015
$
5,627

 
$
392

 
$
(1,164
)
 
$
4,855

Schedule of Restructuring and Related Costs by Segment [Table Text Block]
Restructuring expenses are excluded from segment operating income but are attributable to the reportable segments as follows:
 
Three months ended November 30,
 
2015
 
2014
 
(In thousands)
EMEA
$
1,211

 
$
4,274

USCAN
234

 
762

LATAM
70

 
183

APAC
31

 

Total restructuring expense
$
1,546

 
$
5,219

v3.3.1.900
Business Acquisitions (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Jul. 06, 2015
Nov. 30, 2015
Nov. 30, 2014
Aug. 31, 2015
Jun. 01, 2015
Sep. 02, 2014
Business Acquisitions            
Finite-Lived Intangible Assets, Gross   $ 488,337   $ 491,675    
Goodwill   623,551   623,583    
Business Combination, Acquisition Related Costs   1,900 $ 1,100      
Bridge financing fees       18,800    
Citadel Acquisition [Member]            
Business Acquisitions            
Business Combination, Cost of Acquistion, Purchase Price         $ 801,560  
Accounts receivable         71,498  
Inventories         41,771  
Prepaid expenses and other current assets         15,320  
Property, plant and equipment         78,113  
Finite-Lived Intangible Assets, Gross         325,000  
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Other Noncurrent Assets         3,593  
Total assets acquired         535,295  
Accounts payable         29,500  
Other accrued liabilities         19,608  
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities Noncurrent         116,102  
Other long-term liabilities         3,121  
Total liabilities assumed         168,331  
Identifiable net assets acquired         366,964  
Goodwill         434,596  
Finite-Lived Intangible Asset, Useful Life 14 years 1 month 6 days          
Gross contractual amount of acquired receivables         72,100  
Business Acquisition, Pro Forma Revenue   739,738        
Business Acquisition, Pro Forma Net Income (Loss)   $ 7,906        
Business Acquisition, Pro Forma Earnings Per Share, Diluted   $ 0.27        
Business Combination, Acquisition Related Costs       14,100    
Compco Pty. Ltd. [Member]            
Business Acquisitions            
Business Combination, Cost of Acquistion, Purchase Price           $ 6,700
Customer-Related Intangible Assets [Member] | Citadel Acquisition [Member]            
Business Acquisitions            
Finite-Lived Intangible Assets, Gross         230,500  
Finite-Lived Intangible Asset, Useful Life 14 years          
Developed Technology [Member]            
Business Acquisitions            
Finite-Lived Intangible Assets, Gross   $ 94,885   $ 93,518    
Developed Technology [Member] | Citadel Acquisition [Member]            
Business Acquisitions            
Finite-Lived Intangible Assets, Gross         75,300  
Finite-Lived Intangible Asset, Useful Life 16 years 3 months 16 days          
Trademarks and Trade Names [Member] | Citadel Acquisition [Member]            
Business Acquisitions            
Finite-Lived Intangible Assets, Gross         $ 19,200  
Finite-Lived Intangible Asset, Useful Life 8 years 1 month 6 days          
v3.3.1.900
Goodwill and Intangible Assets (Details) - USD ($)
3 Months Ended 12 Months Ended
Nov. 30, 2015
Aug. 31, 2015
Goodwill    
Goodwill $ 623,551,000 $ 623,583,000
Goodwill, Acquired During Period 3,206,000  
Goodwill, Translation and Purchase Accounting Adjustments (3,238,000)  
Goodwill, Impairment Loss   0
EMEA [Member]    
Goodwill    
Goodwill 72,586,000 75,714,000
Goodwill, Acquired During Period [1] 0  
Goodwill, Translation and Purchase Accounting Adjustments (3,128,000)  
USCAN [Member]    
Goodwill    
Goodwill 285,760,000 285,791,000
Goodwill, Acquired During Period (31,000)  
Goodwill, Translation and Purchase Accounting Adjustments 0  
LATAM [Member]    
Goodwill    
Goodwill 11,588,000 11,695,000
Goodwill, Acquired During Period [1] 0  
Goodwill, Translation and Purchase Accounting Adjustments (107,000)  
APAC [Member]    
Goodwill    
Goodwill 898,000 901,000
Goodwill, Acquired During Period 0  
Goodwill, Translation and Purchase Accounting Adjustments (3,000)  
EC [Member]    
Goodwill    
Goodwill 252,719,000 $ 249,482,000
Goodwill, Acquired During Period 3,237,000  
Goodwill, Translation and Purchase Accounting Adjustments $ 0  
[1] (1) Activity relates to adjustments to preliminary purchase price allocation made in fiscal 2016, primarily due to inventory valuation adjustments.
v3.3.1.900
Goodwill and Intangible Assets (Details 2) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Aug. 31, 2015
Acquired Finite-Lived Intangible Assets      
Finite-Lived Intangible Assets, Gross $ 488,337   $ 491,675
Finite-Lived Intangible Assets, Accumulated Amortization (65,035)   (57,138)
Finite-Lived Intangible Assets, Net 423,302   434,537
Amortization of Intangible Assets 9,300 $ 3,400  
Customer Related Intangibles [Member]      
Acquired Finite-Lived Intangible Assets      
Finite-Lived Intangible Assets, Gross 358,758   360,193
Finite-Lived Intangible Assets, Accumulated Amortization (46,650)   (40,447)
Finite-Lived Intangible Assets, Net 312,108   319,746
Developed Technology [Member]      
Acquired Finite-Lived Intangible Assets      
Finite-Lived Intangible Assets, Gross 94,885   93,518
Finite-Lived Intangible Assets, Accumulated Amortization (11,392)   (9,398)
Finite-Lived Intangible Assets, Net 83,493   84,120
Trademarks and Tradenames [Member]      
Acquired Finite-Lived Intangible Assets      
Finite-Lived Intangible Assets, Gross 34,694   37,964
Finite-Lived Intangible Assets, Accumulated Amortization (6,993)   (7,293)
Finite-Lived Intangible Assets, Net $ 27,701   $ 30,671
v3.3.1.900
Long-Term Debt and Credit Arrangements (Details)
$ in Thousands
3 Months Ended
Nov. 30, 2015
USD ($)
Nov. 30, 2015
EUR (€)
Aug. 31, 2015
USD ($)
Debt Instrument [Line Items]      
Notes Payable, Current $ 7,399   $ 5,584
Long-term Debt, Current Maturities 15,034   15,126
Debt, Current 22,433   20,710
Senior Notes, Noncurrent 375,000   375,000
Capital Lease Obligations, Noncurrent 1,113   250
Long-term Debt and Capital Lease Obligations 1,013,576   1,045,349
Repayments of Debt 3,800    
2015 Revolver, due 2020 [Member]      
Debt Instrument [Line Items]      
Long-term Line of Credit 0   0
2015 Credit Facility Term Loan B Euro [Member]      
Debt Instrument [Line Items]      
Long-term Debt, Excluding Current Maturities 108,525   137,818
Repayments of Debt | €   € 20,000,000.0  
2015 Credit Facility Term Loan A [Member]      
Debt Instrument [Line Items]      
Long-term Debt, Excluding Current Maturities 185,000   187,500
2015 Credit Facility Term Loan B [Member]      
Debt Instrument [Line Items]      
Long-term Debt, Excluding Current Maturities $ 343,938   $ 344,781
v3.3.1.900
Fair Value Measurement (Details) - USD ($)
3 Months Ended
Nov. 30, 2015
Aug. 31, 2015
Assets recorded at fair value:    
Foreign exchange forward contracts, assets $ 2,733,000 $ 1,818,000
Liabilities recorded at fair value:    
Foreign exchange forward contracts, liabilities 3,957,000 1,576,000
Liabilities not recorded at fair value:    
Long-term fixed-rate debt 367,969,000 374,299,000
Contract value of foreign exchange forward contracts outstanding 207,900,000 161,500,000
Fair Value Hedges, Net 0 0
Fair Value, Transfers Between Levels, Amount 0  
Fair Value, Inputs, Level 1 [Member]    
Assets recorded at fair value:    
Foreign exchange forward contracts, assets 0 0
Liabilities recorded at fair value:    
Foreign exchange forward contracts, liabilities 0 0
Liabilities not recorded at fair value:    
Long-term fixed-rate debt 0 0
Fair Value, Inputs, Level 2 [Member]    
Assets recorded at fair value:    
Foreign exchange forward contracts, assets 2,733,000 1,818,000
Liabilities recorded at fair value:    
Foreign exchange forward contracts, liabilities 3,957,000 1,576,000
Liabilities not recorded at fair value:    
Long-term fixed-rate debt 367,969,000 374,299,000
Fair Value, Inputs, Level 3 [Member]    
Assets recorded at fair value:    
Foreign exchange forward contracts, assets 0 0
Liabilities recorded at fair value:    
Foreign exchange forward contracts, liabilities 0 0
Liabilities not recorded at fair value:    
Long-term fixed-rate debt $ 0 $ 0
v3.3.1.900
Income Taxes (Details) - USD ($)
$ in Millions
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Income Tax Contingency [Line Items]    
Provision (benefit) for U.S. and foreign income taxes percentage 36.20% 25.10%
Unrecognized tax benefits $ 2.0  
Total unrecognized tax benefits that would impact effective tax rate 1.4  
Accrued interest and penalties on unrecognized tax benefits $ 0.9  
v3.3.1.900
Pension and Postretirement Benefit Plans (Details) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Pension Plans, Defined Benefit [Member]    
Defined Benefit Pension Plan Disclosure [Line Items]    
Service cost $ 1,294 $ 1,254
Interest cost 1,063 1,168
Expected return on plan assets (504) (471)
Actuarial loss (gain) and amortization of prior service cost (credit), net 724 786
Net periodic benefit cost 2,577 2,737
Other Postretirement Benefit Plans, Defined Benefit [Member]    
Defined Benefit Pension Plan Disclosure [Line Items]    
Service cost 1 1
Interest cost 97 110
Actuarial loss (gain) and amortization of prior service cost (credit), net (149) (135)
Net periodic benefit cost $ (51) $ (24)
v3.3.1.900
Consolidated Statement of Stockholders' Equity (Details) - USD ($)
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Aug. 31, 2015
Comprehensive income (loss) $ (2,264,000) $ (11,901,000)  
Cash dividends paid on common stock, $0.205 per share (6,024,000)    
Cash dividends paid on convertible special stock, $15.00 per share (1,875,000) $ 0  
Issuance of treasury stock 58,000    
Stock options exercised 32,000    
Amortization of restricted stock 724,000    
Balance (583,386,000)   $ (592,735,000)
Common Stock [Member]      
Stock options exercised 2,000    
Balance (48,371,000)   (48,369,000)
Convertible special stock, no par value [Member]      
Balance (120,289,000)   (120,289,000)
Additional Paid-in Capital [Member]      
Issuance of treasury stock 22,000    
Stock options exercised 30,000    
Amortization of restricted stock 724,000    
Balance (275,095,000)   (274,319,000)
Treasury Stock [Member]      
Issuance of treasury stock 36,000    
Balance (383,085,000)   (383,121,000)
Accumulated Other Comprehensive Income (Loss) [Member]      
Comprehensive income (loss) (9,692,000)    
Balance 93,152,000   83,460,000
Retained Earnings [Member]      
Comprehensive income (loss) 7,093,000    
Cash dividends paid on common stock, $0.205 per share (6,024,000)    
Cash dividends paid on convertible special stock, $15.00 per share (1,875,000)    
Balance (606,884,000)   (607,690,000)
Noncontrolling Interest [Member]      
Comprehensive income (loss) 335,000    
Balance $ (8,984,000)   $ (8,649,000)
v3.3.1.900
Convertible Special Stock Convertible Special Stock (Details) - USD ($)
3 Months Ended 12 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Aug. 31, 2015
May. 04, 2015
Class of Stock [Line Items]        
Convertible special stock, shares authorized       125,000
Convertible special stock, dividend rate, percentage       6.00%
Issuances of convertible special stock, gross   $ 125,000,000    
Convertible special stock, shares issued       125,000
Convertible special stock, no par value $ 120,289,000   $ 120,289,000  
Payment of financing and stock issuance costs       $ 4,700,000
Convertible special stock, shares converted to common shares 0   0  
Convertible special stock dividends $ 1,875,000 $ 0    
v3.3.1.900
Accumulated Other Comprehensive Income (Loss) Reclassification Out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Aug. 31, 2015
Aug. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]        
Accumulated Other Comprehensive Income (Loss), Net of Tax [1] $ (93,152) $ (41,946) $ (83,460) $ (16,691)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax [1] (10,776) (25,615)    
Amounts reclassified to earnings [1] 1,015 336    
Other Comprehensive Income (Loss), Net of Tax [1] (9,761) (25,279)    
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest [1] (69) (24)    
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax (10,776) (25,615)    
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax 1,015 336    
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc. [1] (9,692) (25,255)    
Accumulated Translation Adjustment [Member]        
Accumulated Other Comprehensive Income (Loss) [Line Items]        
Accumulated Other Comprehensive Income (Loss), Net of Tax [1] (60,269) (2,805) (49,562) 22,786
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax [1] (10,776) (25,615)    
Amounts reclassified to earnings [1] 0 0    
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest [1] (69) (24)    
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax [1] (10,776) (25,615)    
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc. [1] (10,707) (25,591)    
Accumulated Defined Benefit Plans Adjustment [Member]        
Accumulated Other Comprehensive Income (Loss) [Line Items]        
Accumulated Other Comprehensive Income (Loss), Net of Tax [1] (32,883) (39,141) $ (33,898) $ (39,477)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax [1] 0 0    
Amounts reclassified to earnings [1],[2] 1,015 336    
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest [1] 0 0    
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax [1] 1,015 336    
Net current period other comprehensive income (loss) attributable to A. Schulman, Inc. [1] $ 1,015 $ 336    
[1] (1) All amounts presented are net of tax. All tax amounts are related to pension and other retiree benefits.
[2] (2) Amounts represent amortization of net actuarial loss and prior service costs and are reclassified from accumulated other comprehensive income into cost of sales and selling, general & administrative expenses on the consolidated statements of operations. These components are included in the computation of net periodic pension cost. Refer to Note 7 of this Form 10-Q for further details.
v3.3.1.900
Share-Based Incentive Compansation Plans (Details) - USD ($)
$ in Millions
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Share-based Incentive Compensation Plans by Share-based Payment Award [Line Items]    
Share-based incentive compensation $ 0.4 $ 1.3
v3.3.1.900
Earnings Per Share (Details) - shares
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Weighted-average shares outstanding:    
Basic 29,223,000 29,017,000
Diluted 29,462,000 29,468,000
Equity Award [Member]    
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 8,661 0
Weighted-average shares outstanding:    
Incremental shares from dilutive securities 239,000 451,000
Convertible special stock, no par value [Member]    
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 2,388,913  
Weighted-average shares outstanding:    
Incremental shares from dilutive securities 0 0
v3.3.1.900
Segment Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Nov. 30, 2014
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 649,219 $ 615,053
Total gross profit 104,929 86,844
Operating income 26,146 21,078
Interest expense (13,618) (2,359)
Foreign currency transaction gains (losses) (729) (1,099)
Other income (expense), net (71) 254
Income (loss) from continuing operations before taxes $ 11,728 $ 17,874
Net sales, percentage 100.00% 100.00%
Segment Reconciling Items [Member]    
Segment Reporting Information [Line Items]    
Inventory step-up $ 0 $ (341)
Accelerated depreciation, restructuring and related costs (1,877) 0
Costs related to acquisitions and integrations in gross profit (129) (50)
Lucent costs in gross profit 1,830 0
Costs related to acquisitions and integrations in operating income (1,866) (1,053)
Restructuring and related costs (4,670) (5,579)
Accelerated depreciation (1,453) 0
Lucent costs in operating income (3,706) 0
Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Total segment gross profit 108,765 87,235
Operating income 46,329 35,535
Corporate, Non-Segment [Member]    
Segment Reporting Information [Line Items]    
Corporate (8,488) (7,484)
Custom Performance Colors [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 46,520 $ 51,298
Net sales, percentage 7.00% 8.00%
EC [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 51,946 $ 0
Net sales, percentage 8.00% 0.00%
Masterbatch Solutions [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 181,895 $ 198,358
Net sales, percentage 28.00% 33.00%
Engineered Plastics [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 234,218 $ 194,968
Net sales, percentage 36.00% 32.00%
Specialty Powders [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 67,422 $ 82,357
Net sales, percentage 11.00% 13.00%
Distribution Services [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 67,218 $ 88,072
Net sales, percentage 10.00% 14.00%
EMEA Segment [Member] | Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers $ 328,096 $ 371,191
Total segment gross profit 47,684 49,706
Total segment operating income 20,153 20,039
USCAN Segment [Member] | Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers 178,282 144,707
Total segment gross profit 30,294 24,629
Total segment operating income 12,163 11,393
LATAM Segment [Member] | Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers 45,203 46,181
Total segment gross profit 9,705 5,650
Total segment operating income 5,604 595
APAC [Member] | Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers 45,692 52,974
Total segment gross profit 7,874 7,250
Total segment operating income 4,307 3,508
EC [Member] | Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Net sales to unaffiliated customers 51,946 0
Total segment gross profit 13,208 0
Total segment operating income $ 4,102 $ 0
v3.3.1.900
Restructuring (Details)
3 Months Ended 12 Months Ended
Nov. 30, 2015
USD ($)
Nov. 30, 2014
USD ($)
Aug. 31, 2016
Aug. 31, 2015
USD ($)
Restructuring        
Charges $ 1,546,000 $ 5,219,000    
Restructuring reserve 4,855,000     $ 5,383,000
Payments (1,774,000)      
Translation (300,000)      
EMEA [Member]        
Restructuring        
Charges 1,211,000 4,274,000    
USCAN [Member]        
Restructuring        
Charges 234,000 762,000    
LATAM [Member]        
Restructuring        
Charges 70,000 183,000    
APAC [Member]        
Restructuring        
Charges 31,000 $ 0    
Employee Related Costs [Member]        
Restructuring        
Charges 982,000      
Restructuring reserve 5,627,000     5,786,000
Payments (1,141,000)      
Translation 0      
Other Restructuring Related Costs [Member]        
Restructuring        
Charges 564,000      
Restructuring reserve 392,000     461,000
Payments (633,000)      
Translation 0      
Translation Effect on Restructuring Reserve [Member]        
Restructuring        
Charges 0      
Restructuring reserve (1,164,000)     $ (864,000)
Payments 0      
Translation (300,000)      
EP Consolidation Plan [Member]        
Restructuring        
Restructuring and related cost, expected number of positions eliminated     25  
Accelerated depreciation 1,200,000      
Restructuring reserve 0      
France Asset Footprint Reduction Plan [Member]        
Restructuring        
Restructuring and related cost, expected number of positions eliminated     20  
Charges 400,000      
Accelerated Depreciation, Expected Cost 300,000      
Restructuring and related cost, expected cost 300,000      
Restructuring reserve 1,000,000      
Restructuring related cost number of additional positions     15  
FY15 EMEA Shared Service Center Plan [Member]        
Restructuring        
Restructuring and related cost, expected number of positions eliminated     40  
Charges 500,000      
Restructuring reserve 1,700,000      
Minimum [Member] | EP Consolidation Plan [Member]        
Restructuring        
Accelerated Depreciation, Expected Cost 3,000,000      
Restructuring and related cost, expected cost 2,000,000      
Maximum [Member] | EP Consolidation Plan [Member]        
Restructuring        
Accelerated Depreciation, Expected Cost 4,000,000      
Restructuring and related cost, expected cost $ 3,000,000      
v3.3.1.900
Commitments and Contingencies Commitments and Contingencies (Details) - USD ($)
$ in Thousands
3 Months Ended
Nov. 30, 2015
Jun. 01, 2015
Loss Contingencies [Line Items]    
Lucent Costs $ 4,900  
Citadel Acquisition [Member]    
Loss Contingencies [Line Items]    
Business Combination, Cost of Acquistion, Purchase Price   $ 801,560
Escrow Deposit 31,000  
Lucent Matter [Member]    
Loss Contingencies [Line Items]    
Cost of reworking existing inventory 1,000  
Cost of reworking inventory acquired since acquisition 800  
Labor and Related Expense 500  
Legal Fees 1,400  
Production costs associated with adding prime material 1,200  
Inventory Write-down $ 300  
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