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Form 8-K SCHULMAN A INC For: Jun 28

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June 28, 2016 5:25 PM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


Date of Report (Date of earliest event reported) June 28, 2016    

A. SCHULMAN, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
0-7459
 
34-0514850
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

3637 Ridgewood Rd, Fairlawn, Ohio
44333
(Address of principal executive offices)
(Zip Code)

(330) 666-3751
(Registrant’s telephone number, including area code)

 
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On June 28, 2016, A. Schulman, Inc. (the “Company”) announced earnings for the quarter ended May 31, 2016. A copy of the press release announcing these results is attached as Exhibit 99.1 hereto and incorporated by reference herein.

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.


Exhibit Number
Description
 
 
99.1
Press Release, dated June 28, 2016 (filed herewith)




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 hereunto duly authorized.


 
 
 
A. Schulman, Inc.
 
 
 
 
 
 
By:
/s/ David C. Minc
 
 
 
David C. Minc
 
 
 
Executive Vice President, Chief Legal Officer and Secretary

Date: June 28, 2016




Exhibit 99.1

FOR IMMEDIATE RELEASE

A. Schulman Reports Fiscal 2016 Third Quarter Results

•
Consolidated gross profit and operating income increased by 20.6% and 35.8%, respectively, versus the prior year period
•
Strong cash flow and aggressive debt reduction during the quarter
•
Lucent matter addressed operationally; lawsuit filed against sellers to recoup damages
•
Maintains fiscal 2016 adjusted earnings guidance of $2.40 to $2.45 per diluted share

AKRON, Ohio - June 28, 2016 - A. Schulman, Inc. (Nasdaq: SHLM) announced today earnings for the fiscal 2016 third quarter ended May 31, 2016 of $0.53 per diluted share, compared to a loss of ($0.34) per share in the prior year period. On an adjusted basis, reported earnings per share were $0.79 compared with $0.72 in the prior year period.

Consolidated net sales for the fiscal 2016 third quarter were $650.4 million, compared with $560.9 million in the same prior-year quarter. After adjusting for negative foreign currency translation of $6.2 million, and net sales from the Citadel acquisition of $112.4 million during the quarter, legacy revenues declined 3%, approximately the same as in the prior quarter due to the reduction of our commodity portfolio embedded within the Company’s Distribution Services and Specialty Powders product families. As a result of the Company’s relentless focus on growing value-added products, the Company improved its product mix. Adjusted gross margin in the fiscal third quarter increased to 17.4% compared with 16.2% in the prior year period and adjusted operating income increased to 7% compared with 5.9% in the prior year period. Both Citadel and legacy portfolios contributed to these improved adjusted gross and operating margins.

“We are encouraged by the continued improvement in our adjusted margins which validates our strategy to provide superior value to a vast array of market leading customers,” said Bernard Rzepka, President and Chief Executive Officer. “Much of this profit improvement was a result of our Smart Sales, Savings and Safety initiative that is entrenched within our businesses and is positioning us as the preferred premier materials solutions provider.”

Europe, Middle East and Africa (“EMEA”) net sales were $322.4 million, compared with $326.3 million in the same prior-year period. Excluding the favorable impact of foreign currency translation of $4.3 million, revenues fell 2.5% primarily related to commodity products in the Specialty Powders and Distribution Services product families. This decrease was partially offset by increased activity in the Masterbatch solutions product family. Adjusted gross profit for the segment fell 30 basis points to 15.5% when compared to the same prior year period.

Net sales for United States and Canada (“USCAN”) were $183.3 million, compared with $137.1 million in the third quarter of fiscal 2015. The incremental contribution from the Citadel acquisition was $57.9 million in net sales in the Company’s Engineered Product family. Excluding the contribution of Citadel’s Engineered Plastics sales, legacy revenues declined 8.5% in the third quarter of fiscal 2016. Softness in the agricultural and sports & leisure markets, and continued focus to replace commodity product offerings contributed to the sales decline. The combination of improved mix of product sales; lower production costs and the contribution of Citadel Engineered Plastic revenues resulted in adjusted gross margin improving to 17.8% compared with 16.1% in the prior year period.





“While we are in no way satisfied with the results in these regions, our teams have done a good job controlling what we could control as evidenced by the USCAN adjusted gross margin improvement,” said Rzepka. “With the claims and operational issues at Lucent largely identified and addressed, we can now focus on realizing our full growth potential. As we enter our fiscal fourth quarter, our priorities will be to further deepen our engagement with existing customers, increase our share in attractive target markets, and continue to invest smartly in R&D while aggressively managing our costs through productivity initiatives and supply chain efficiencies.”

LATAM net sales for the quarter were $43.4 million, compared with $44.8 million a year ago. Excluding the unfavorable impact of foreign currency translation of $7.3 million, revenues increased 13.1%. Excluding a $1.5 million negative impact of foreign currency, gross profit rose 13% over the prior year period yielding an adjusted gross margin of 20.9%.
 
“This marks our fourth consecutive quarter of double-digit growth in this region,” Rzepka said. “We saw strength in the agricultural market in the LATAM region. Our business also increased in packaging and we experienced improved product mix in our Engineered Plastics business related to the strong automotive markets. Lastly, our export business in Brazil increased roughly 18% during the quarter to further improve our performance in the region.”

Asia Pacific (“APAC”) net sales were $46.9 million, compared with $52.7 million in the third quarter of fiscal 2015. Adjusting for a negative foreign exchange impact of $2.9 million, revenues fell 5.5% primarily related to lower sales in Specialty Powders due to the transfer of our rotational molded product line into a minority owned joint venture during fiscal 2016. APAC adjusted gross profit margin was 17.2%, up 250 basis points from the prior period due to improved product mix.

Engineered Composites (“EC”) net sales for the quarter were $54.5 million, compared with $56.9 million in the year-ago comparable period, prior to the June 1 acquisition. On a year-over-year comparison, revenues from the Citadel business declined 4.2% due to the impact of weak oil and gas customer activity. On the lower volumes, gross margin fell 110 basis points to 25.2%, but operating margin increased considerably to 9.2% as restructuring and integration synergies begin to impact the operating performance.

Lucent Update
As previously reported, the Company identified quality reporting issues affecting certain product lines at two former Citadel manufacturing facilities that were once part of Lucent Polymers, 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 fact that we were able to identify and address this matter as quickly as we did without the need for any product recalls speaks volumes to the strength of our team and culture. As a result of the tireless efforts and excellent work of our team, we are now focusing our attention toward organic growth instead of resolving issues of the past,” said Rzepka. “We thank our customers for their patience and support as we addressed this critical matter.”

The Company incurred costs of $1.8 million in the quarter related to the Lucent remediation matter, including $1.1 million of recurring production and material costs down from the prior quarter and $0.7 million of other costs including settlement of claims and dedicated internal personnel costs.

A. Schulman believes that the sellers are responsible to compensate A. Schulman for the Lucent losses that the Company has experienced or may incur. Therefore, on June 15, 2016, the Company filed a lawsuit against the sellers of Citadel Plastics in the Court of Chancery of the State of Delaware. Among other things, the suit seeks indemnification and damages for the fraudulent business practices within the Lucent subsidiary. Previously, the Company provided a written claim notice to this effect to the sellers and to the escrow agent with respect to the $31 million indemnity escrow established. During the fiscal third quarter, the Company incurred $1.2 million of legal costs associated with this lawsuit.




In accordance with the Company’s policy, it will make no further comments on this ongoing legal matter, nor will it speculate to the timing or potential outcome of this matter. A. Schulman can make no assurances it will be able to recoup funds sufficient enough to offset the substantial costs it has incurred - and will incur - to investigate, isolate and mitigate these fraudulent practices.

Working Capital/Cash Flow 
Cash provided from operations was $95.7 million in the nine months ended May 31, 2016, an improvement compared to $56.3 million in the comparable prior year period. Net working capital days were 61 at May 31, compared to 71 days on February 29, 2016. Both metrics were favorably impacted by a focus on supply chain leading to significant improvements in days of inventory on hand.

During the quarter, the Company reduced its debt position by approximately $40 million. This brings net debt to $937 million, which equates to an adjusted net leverage ratio of 3.96 at quarter-end.

Capital expenditures for the nine months ended May 31, 2016 were $34.6 million, compared with $32.7 million last year. During the three months ended May 31, 2016, the Company declared and paid quarterly cash dividends of $6.1 million, or $0.205 per quarter per common share in accordance to its ongoing goal to provide an attractive yield to shareholders. In addition, a quarterly cash dividend of $15.00 per share was declared and paid on the 125,000 shares of the Company’s convertible special stock, representing a $1.9 million cash outflow.

Business Update and Outlook
“Despite the continued volatility in the global marketplace, our outlook for the full year remains unchanged,” said Rzepka. “We continue to anticipate full-year fiscal 2016 adjusted earnings to be in the range of $2.40 to $2.45 per diluted share.”

Rzepka noted that the Company is positioning itself for accelerating earnings growth in fiscal 2017 and beyond. “We have organic growth programs as well as cost and productivity initiatives underway, and with the distraction of addressing the Lucent matter largely behind us, we fully expect that these focused efforts will continue to improve our operating margins. We are actively pursuing different avenues to further advance our strategy and drive value through additional investments in profitable growth.”

As is customary, the Company will provide fiscal 2017 earnings and other financial metrics guidance at the end of October when it releases results for the full year.

Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2016 third-quarter earnings can be accessed at 10:00 a.m. Eastern Time on June 29, 2016, on the Company’s website, www.aschulman.com. An archived replay of the call will also be available on the website.

Investor Presentation Materials
Senior executives of the Company may participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which may be used during such meetings, in the Investors section of its website at www.aschulman.com. The presentation will remain on the website as long as it is in use.

About A. Schulman, Inc.
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. Since 1928, the Company has been providing innovative solutions to meet its customers' demanding requirements. The Company's customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, sports, leisure & home, custom services and others. The Company employs approximately 4,900 people and has 57 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.4 billion for the fiscal year ended August 31, 2015. Additional information about A. Schulman can be found at www.aschulman.com.





Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include segment gross profit, SG&A expenses excluding certain items, segment operating income, operating income before certain items, net income excluding certain items, net income per diluted share excluding certain items and adjusted EBITDA, as discussed further in the Reconciliation of GAAP and Non-GAAP Financial Measures below. These non-GAAP financial measures are considered relevant to aid analysis and understanding of the Company's results and business trends. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that could cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:

•
worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company’s major product markets or countries where the Company has operations;
•
the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
•
competitive factors, including intense price competition;
•
fluctuations in the value of currencies in areas where the Company operates;
•
volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company’s products, particularly plastic resins derived from oil and natural gas;
•
changes in customer demand and requirements;
•
effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions, joint ventures and restructuring initiatives;
•
escalation in the cost of providing employee health care;
•
uncertainties and unanticipated developments regarding contingencies, such as pending and future litigation and other claims, including developments that would require increases in our costs and/or reserves for such contingencies;
•
the performance of the global automotive market as well as other markets served;



•
further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products;
•
operating problems with our information systems as a result of system security failures such as viruses, cyber-attacks or other causes;
•
our current debt position could adversely affect our financial health and prevent us from fulfilling our financial obligations;
•
integration of acquisitions, including most recently Citadel, with our existing business, including the risk that the integration will be more costly or more time consuming and complex or simply less effective than anticipated;
•
our ability to achieve the anticipated synergies, cost savings and other benefits from the Citadel acquisition;
•
substantial time devoted by management to the integration of the Citadel acquisition; and
•
failure of counterparties to perform under the terms and conditions of contractual arrangements, including suppliers, customers, buyers and sellers of a business and other third parties with which the Company contracts.

The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company's performance are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company’s business, financial condition and results of operations.

# # #
SHLM_ALL

Contact
Jennifer K. Beeman
Vice President, Corporate Communications & Investor Relations
A. Schulman, Inc.
3637 Ridgewood Road
Fairlawn, Ohio 44333
Tel: 330-668-7346
www.aschulman.com














A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended May 31,
 
Nine months ended May 31,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except per share data)
Net sales
$
650,439

 
$
560,858

 
$
1,891,419

 
$
1,718,206

Cost of sales
540,965

 
470,101

 
1,587,192

 
1,462,531

Selling, general and administrative expenses
73,641

 
64,842

 
222,482

 
195,482

Restructuring expense
4,245

 
2,649

 
8,005

 
10,530

Operating income
31,588

 
23,266

 
73,740

 
49,663

Interest expense
13,557

 
2,618

 
40,965

 
7,288

Bridge financing fees
—

 
18,750

 
—

 
18,750

Foreign currency transaction (gains) losses
392

 
857

 
2,071

 
3,097

Other (income) expense, net
(229
)
 
(335
)
 
(246
)
 
(900
)
Gain on early extinguishment of debt
—

 
—

 
—

 
(1,290
)
Income (loss) from continuing operations before taxes
17,868

 
1,376

 
30,950

 
22,718

Provision (benefit) for U.S. and foreign income taxes
312

 
10,344

 
4,076

 
18,801

Income (loss) from continuing operations
17,556

 
(8,968
)
 
26,874

 
3,917

Income (loss) from discontinued operations, net of tax
82

 
(18
)
 
283

 
(86
)
Net income (loss)
17,638

 
(8,986
)
 
27,157

 
3,831

Noncontrolling interests
(241
)
 
(343
)
 
(1,075
)
 
(890
)
Net income (loss) attributable to A. Schulman, Inc.
17,397

 
(9,329
)
 
26,082

 
2,941

Convertible special stock dividends
1,875

 
563

 
5,625

 
563

Net income (loss) available to A. Schulman, Inc. common stockholders
$
15,522

 
$
(9,892
)
 
$
20,457

 
$
2,378

 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
Basic
29,339

 
29,219

 
29,284

 
29,125

Diluted
29,474

 
29,219

 
29,459

 
29,547

 
 
 
 
 
 
 
 
Basic earnings per share available to A. Schulman, Inc. common stockholders
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
0.53

 
$
(0.34
)
 
$
0.69

 
$
0.08

Income (loss) from discontinued operations
—

 
—

 
0.01

 
—

Net income (loss) available to A. Schulman, Inc. common stockholders
$
0.53

 
$
(0.34
)
 
$
0.70

 
$
0.08

 
 
 
 
 
 
 
 
Diluted earnings per share available to A. Schulman, Inc. common stockholders
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
0.53

 
$
(0.34
)
 
$
0.68

 
$
0.08

Income (loss) from discontinued operations
—

 
—

 
0.01

 
—

Net income (loss) available to A. Schulman, Inc. common stockholders
$
0.53

 
$
(0.34
)
 
$
0.69

 
$
0.08

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.205

 
$
0.205

 
$
0.615

 
$
0.615

Cash dividends per share of convertible special stock
$
15.00

 
$
—

 
$
45.00

 
$
—







A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
May 31,
2016
 
August 31,
2015
 
(In thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
47,019

 
$
96,872

Restricted Cash
2,407

 
—

Accounts receivable, less allowance for doubtful accounts of $11,367 at May 31, 2016 and $10,777 at August 31, 2015
405,118

 
413,943

Inventories
289,656

 
317,328

Prepaid expenses and other current assets
72,767

 
60,205

Total current assets
816,967

 
888,348

Property, plant and equipment, at cost:
 
 
 
Land and improvements
33,160

 
31,674

Buildings and leasehold improvements
177,748

 
164,759

Machinery and equipment
440,631

 
427,183

Furniture and fixtures
34,537

 
34,393

Construction in progress
24,032

 
23,866

Gross property, plant and equipment
710,108

 
681,875

Accumulated depreciation
394,605

 
367,381

Net property, plant and equipment
315,503

 
314,494

Deferred charges and other noncurrent assets
89,652

 
90,749

Goodwill
620,649

 
623,583

Intangible assets, net
405,539

 
434,537

Total assets
$
2,248,310

 
$
2,351,711

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable
$
296,308

 
$
305,385

U.S. and foreign income taxes payable
—

 
4,205

Accrued payroll, taxes and related benefits
47,017

 
56,192

Other accrued liabilities
81,636

 
70,824

Short-term debt
24,515

 
20,710

Total current liabilities
449,476

 
457,316

Long-term debt
961,569

 
1,045,349

Pension plans
118,034

 
117,889

Deferred income taxes
109,428

 
115,537

Other long-term liabilities
22,525

 
22,885

Total liabilities
1,661,032

 
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 - 48,506 shares at May 31, 2016 and 48,369 shares at August 31, 2015
48,506

 
48,369

Additional paid-in capital
275,361

 
274,319

Accumulated other comprehensive income (loss)
(93,144
)
 
(83,460
)
Retained earnings
610,135

 
607,690

Treasury stock, at cost, 19,071 shares at May 31, 2016 and 19,077 shares at August 31, 2015
(382,999
)
 
(383,121
)
Total A. Schulman, Inc.’s stockholders’ equity
578,148

 
584,086

Noncontrolling interests
9,130

 
8,649

Total equity
587,278

 
592,735

Total liabilities and equity
$
2,248,310

 
$
2,351,711





A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine months ended May 31,
 
2016
 
2015
 
(In thousands)
Operating from continuing and discontinued operations:
 
 
 
Net income
$
27,157

 
$
3,831

Adjustments to reconcile net income to net cash provided from (used in) operating activities:
 
 
 
Depreciation
37,347

 
26,481

Amortization
30,163

 
11,899

Bridge financing fees
—

 
18,750

Deferred tax provision (benefit)
(2,395
)
 
(1,143
)
Pension, postretirement benefits and other compensation
3,161

 
8,318

Restricted stock compensation - CEO transition costs, net of cash
—

 
4,789

Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
2,574

 
(13,610
)
Inventories
19,900

 
(13,309
)
Accounts payable
(8,145
)
 
9,599

Income taxes
(9,955
)
 
2,598

Accrued payroll and other accrued liabilities
2,583

 
4,776

Other assets and long-term liabilities
(6,718
)
 
(6,698
)
Net cash provided from (used in) operating activities
95,672

 
56,281

Investing from continuing and discontinued operations:
 
 
 
Expenditures for property, plant and equipment
(34,618
)
 
(32,662
)
Investment in equity investees
—

 
(12,456
)
Proceeds from the sale of assets
1,184

 
1,411

Restricted cash
(2,407
)
 
(3,509
)
Business acquisitions, net of cash
—

 
(6,698
)
Net cash provided from (used in) investing activities
(35,841
)
 
(53,914
)
Financing from continuing and discontinued operations:
 
 
 
Cash dividends paid to special stockholders
(5,625
)
 
—

Cash dividends paid to common stockholders
(18,012
)
 
(18,058
)
Increase (decrease) in short-term debt
2,780

 
(12,995
)
Borrowings on long-term debt
124,671

 
255,196

Repayments on long-term debt including current portion
(210,448
)
 
(353,647
)
Noncontrolling interests' contributions (distributions)
—

 
(1,750
)
Issuances of convertible special stock, net
—

 
120,296

Issuances of stock, common and treasury
213

 
231

Redemptions of common stock
(1,077
)
 
(4,999
)
Purchases of treasury stock
—

 
(3,335
)
Net cash provided from (used in) financing activities
(107,498
)
 
(19,061
)
Effect of exchange rate changes on cash
(2,186
)
 
(11,756
)
Net increase (decrease) in cash and cash equivalents
(49,853
)
 
(28,450
)
Cash and cash equivalents at beginning of period
96,872

 
135,493

Cash and cash equivalents at end of period
$
47,019

 
$
107,043

 
 
 
 
Non-cash Activity:
 
 
 
Senior Notes funding held in restricted cash
$
—

 
$
375,000

Unpaid debt issuance costs
$
—

 
$
11,116




A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
Unaudited
Three months ended May 31, 2016
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Operating Income per Pound
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
31,863,000

 
(In thousands, except for %'s, per pound and per share data)
As reported
 
$
540,965

 
16.8
%
 
$
73,641

 
$
4,245

 
$
31,588

 
$
0.048

 
$
13,720

 
$
312

 
$
15,522

 
$
0.53

Convertible special stock dividends (9)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,875

 
0.03

Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation (1)
 
(1,283
)
 
 
 
(3
)
 
—

 
1,286

 
 
 
—

 
243

 
1,043

 
0.03

Costs related to acquisitions and integrations (2)
 
(423
)
 
 
 
(1,020
)
 
—

 
1,443

 
 
 
—

 
235

 
1,208

 
0.04

Restructuring and related costs (3)
 
(1,647
)
 
 
 
(3,628
)
 
(4,245
)
 
9,520

 
 
 
(209
)
 
2,099

 
7,630

 
0.23

Lucent costs (4)
 
(466
)
 
 
 
(1,485
)
 
—

 
1,951

 
 
 
—

 
385

 
1,566

 
0.05

Accelerated amortization of deferred financing fees (5)
 
—

 
 
 
—

 
—

 
—

 
 
 
(163
)
 
34

 
129

 
—

Tax (benefits) charges (6)
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
3,664

 
(3,664
)
 
(0.12
)
Loss (income) from discontinued operations
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
—

 
(82
)
 
—

Total certain items
 
(3,819
)
 
0.6
%
 
(6,136
)
 
(4,245
)
 
14,200

 
0.022

 
(372
)
 
6,660

 
7,830

 
0.26

As Adjusted
 
$
537,146

 
17.4
%
 
$
67,505

 
$
—

 
$
45,788

 
$
0.070

 
$
13,348

 
$
6,972

 
$
25,227

 
$
0.79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
10.4
%
 
 
 
7.0
%
 
 
 
 
 
 
 
3.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended May 31, 2015
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Operating Income per Pound
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
29219

 
(In thousands, except for %'s, per pound and per share data)
As reported
 
$
470,101

 
16.2
%
 
$
64,842

 
$
2,649

 
$
23,266

 
$
0.043

 
$
21,890

 
$
10,344

 
$
(9,892
)
 
$
(0.34
)
Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation (1)
 
(29
)
 
 
 
 
 
 
 
29

 
 
 
 
 
 
 
29

 
—

Costs related to acquisitions and integrations (2)
 
(59
)
 
 
 
(3,531
)
 
—

 
3,590

 
 
 
—

 
29

 
3,561

 
0.12

Restructuring and related costs (3)
 
(49
)
 
 
 
(3,239
)
 
(2,649
)
 
5,937

 
 
 
—

 
1,144

 
4,793

 
0.16

Acquisition related interest expense (11)
 
—

 
 
 
—

 
—

 
—

 
 
 
(19,134
)
 
—

 
19,134

 
0.66

Tax (benefits) charges (6)
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
(3,559
)
 
3,559

 
0.12

Loss (income) from discontinued operations
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
—

 
18

 
—

Total certain items
 
(137
)
 
—
%
 
(6,770
)
 
(2,649
)
 
9,556

 
0.017

 
(19,134
)
 
(2,386
)
 
31,094

 
1.06

As Adjusted
 
$
469,964

 
16.2
%
 
$
58,072

 
$
—

 
$
32,822

 
$
0.060

 
$
2,756

 
$
7,958

 
$
21,202

 
$
0.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
10.4
%
 
 
 
5.9
%
 
 
 
 
 
 
 
3.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Nine months ended May 31, 2016
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Operating Income per Pound
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
29,459,000

 
(In thousands, except for %'s, per pound and per share data)
As reported
 
$
1,587,192

 
16.1
%
 
$
222,482

 
$
8,005

 
$
73,740

 
$
0.039

 
$
42,790

 
$
4,076

 
$
20,457

 
$
0.69

Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation (1)
 
(4,779
)
 
 
 
(17
)
 
—

 
4,796

 
 
 
—

 
1,127

 
3,669

 
0.12

Costs related to acquisitions and integrations (2)
 
(2,522
)
 
 
 
(5,048
)
 
—

 
7,570

 
 
 
—

 
1,779

 
5,791

 
0.20

Restructuring and related costs (3)
 
(2,532
)
 
 
 
(9,422
)
 
(8,005
)
 
19,959

 
 
 
(771
)
 
4,872

 
15,858

 
0.54

Lucent costs (4)
 
(1,844
)
 
 
 
(4,424
)
 
—

 
6,268

 
 
 
—

 
1,473

 
4,795

 
0.17

Accelerated amortization of deferred financing fees (5)
 
—

 
 
 
—

 
—

 
—

 
 
 
(437
)
 
103

 
334

 
0.01

Tax (benefits) charges (6)
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
3,197

 
(3,197
)
 
(0.11
)
Loss (income) from discontinued operations
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
—

 
(283
)
 
(0.01
)
Total certain items
 
(11,677
)
 
0.6
%
 
(18,911
)
 
(8,005
)
 
38,593

 
0.021

 
(1,208
)
 
12,551

 
26,967

 
0.92

As Adjusted
 
$
1,575,515

 
16.7
%
 
$
203,571

 
$
—

 
$
112,333

 
$
0.060

 
$
41,582

 
$
16,627

 
$
47,424

 
$
1.61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
10.8
%
 
 
 
5.9
%
 
 
 
 
 
 
 
2.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended May 31, 2015
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Operating Income per Pound
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
29547

 
(In thousands, except for %'s, per pound and per share data)
As reported
 
$
1,462,531

 
14.9
%
 
$
195,482

 
$
10,530

 
$
49,663

 
$
0.031

 
$
26,945

 
$
18,801

 
$
2,378

 
$
0.08

Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation (1)
 
(327
)
 
 
 
—

 
—

 
327

 
 
 
—

 
—

 
327

 
0.01

Costs related to acquisitions and integrations (2)
 
(174
)
 
 
 
(7,798
)
 
—

 
7,972

 
 
 
—

 
307

 
7,665

 
0.26

Restructuring and related costs (3)
 
(347
)
 
 
 
(4,426
)
 
(10,530
)
 
15,303

 
 
 
—

 
3,146

 
12,157

 
0.41

CEO transition costs (8)
 
—

 
 
 
(6,167
)
 
—

 
6,167

 
 
 
—

 
—

 
6,167

 
0.21

Inventory step-up (7)
 
(341
)
 
 
 
—

 
—

 
341

 
 
 
—

 
102

 
239

 
0.01

Gain on early extinguishment of debt (10)
 
—

 
 
 
—

 
—

 
—

 
 
 
1,290

 
(428
)
 
(862
)
 
(0.03
)
Acquisition related interest expense (11)
 
—

 
 
 
—

 
—

 
—

 
 
 
(19,134
)
 
—

 
19,134

 
0.65

Tax (benefits) charges (6)
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
(3,841
)
 
3,841

 
0.13

Loss (income) from discontinued operations
 
—

 
 
 
—

 
—

 
—

 
 
 
—

 
—

 
86

 
—

Total certain items
 
(1,189
)
 
—
%
 
(18,391
)
 
(10,530
)
 
30,110

 
0.019

 
(17,844
)
 
(714
)
 
48,754

 
1.65

As Adjusted
 
$
1,461,342

 
14.9
%
 
$
177,091

 
$
—

 
$
79,773

 
$
0.050

 
$
9,101

 
$
18,087

 
$
51,132

 
$
1.73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
10.3
%
 
 
 
4.6
%
 
 
 
 
 
 
 
3.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





1 - Accelerated depreciation is related to restructuring plans in the Company's USCAN and EMEA segments. Refer to Note 14 in the Company's Quarterly Report on Form 10-Q for further discussion.
2 - Costs related to acquisitions and integrations primarily include third party professional, legal, IT and other expenses associated with successful and unsuccessful full or partial acquisition and divestiture/dissolution transactions, as well as certain employee-related expenses such as travel, bonuses and post-acquisition severance separate from a formal restructuring plan.
3 - Restructuring and related costs include items such as employee severance charges, lease termination charges, curtailment gains/losses, other employee termination costs, and professional fees related to the reorganization of the Company’s legal entity structure and facility operations.
4 - Lucent costs primarily represent legal and investigation costs related to resolving the Lucent matter, product manufacturing costs for reworking existing Lucent inventory, obsolete Lucent inventory reserve costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations.
5 - Write off of deferred financing costs related to the €79.0 million prepayment of the Euro Term Loan B.
6 - Tax (benefits) charges represent the Company's quarterly non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.
7 - Inventory step-up costs represent the amortization of adjustments to fair value of inventory acquired for acquisition purchase accounting.
8 - CEO transition costs represent a charge for the modification and accelerated vesting upon retirement of the outstanding equity compensation awards granted to Joseph M. Gingo in 2013 and 2014.
9 - Convertible special stock dividends have been added back as the 2.4 million shares of convertible special stock were considered dilutive to the third quarter of fiscal 2016.
10 - Represents a pre-tax net gain of $1.3 million on the early extinguishment of debt.
11 - Primarily relates to $18.8 million in bridge financing fees.



A. SCHULMAN, INC.
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
 
Three months ended May 31,
 
Nine months ended May 31,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
 
 
 
 
 
 
 
 
Net income available to A. Schulman, Inc. common stockholders
$
15,522

 
$
(9,892
)
 
$
20,457

 
$
2,378

Interest expense and bridge financing fees
13,557

 
21,368

 
40,965

 
26,038

Provision for U.S. and foreign income taxes
312

 
10,344

 
4,076

 
18,801

Depreciation and Amortization
22,409

 
12,145

 
67,510

 
38,444

Noncontrolling interests
241

 
343

 
1,075

 
890

Convertible special stock dividends
1,875

 
563

 
5,625

 
563

Other (1)
163

 
522

 
1,825

 
907

EBITDA, as calculated
$
54,079

 
$
35,393

 
$
141,533

 
$
88,021

Non-GAAP adjustments (2)
12,832

 
9,812

 
33,501

 
29,857

EBITDA, as adjusted
$
66,911

 
$
45,205

 
$
175,034

 
$
117,878

 
 
 
 
 
 
 
 

(1) - Other includes Foreign currency transaction (gains) losses, Other (income) expense, net, and Gain on early extinguishment of debt.

(2) - For details on Non-GAAP adjustments, refer to "Reconciliation of GAAP and Non-GAAP Financial Measures", items (2) - (11) and Loss (income) from discontinued operations. Amounts are included in Non Operating (Income) Expense, Income Tax Expense (Benefit) and Net Income Available to ASI Common Stockholders. Accelerated depreciation on the "Reconciliation of GAAP and Non-GAAP Financial Measures" has been excluded as it is already included in Depreciation and Amortization above. The three months ended May 31, 2015 and nine months ended May 31, 2016 and May 31, 2015 also include additional amortization expense which is in SG&A in the "Reconciliation of GAAP and Non-GAAP Financial Measures". This expense has been added back to adjusted EBITDA.





A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
 
 
Net Sales
 
Pounds Sold
 
 
Three months ended May 31,
EMEA
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
33,378

 
$
33,800

 
$
(422
)
 
(1.2
)%
 
13,902

 
13,924

 
(22
)
 
(0.2
)%
Masterbatch solutions
 
107,774

 
102,188

 
5,586

 
5.5
 %
 
108,291

 
104,355

 
3,936

 
3.8
 %
Engineered plastics
 
92,560

 
95,403

 
(2,843
)
 
(3.0
)%
 
72,091

 
71,926

 
165

 
0.2
 %
Specialty powders
 
36,711

 
37,903

 
(1,192
)
 
(3.1
)%
 
43,698

 
46,997

 
(3,299
)
 
(7.0
)%
Distribution services
 
51,945

 
56,961

 
(5,016
)
 
(8.8
)%
 
79,816

 
85,689

 
(5,873
)
 
(6.9
)%
Total EMEA
 
$
322,368

 
$
326,255

 
$
(3,887
)
 
(1.2
)%
 
317,798

 
322,891

 
(5,093
)
 
(1.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Three months ended May 31,
USCAN
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
10,840

 
$
11,209

 
$
(369
)
 
(3.3
)%
 
4,004

 
3,925

 
79

 
2.0
 %
Masterbatch solutions
 
33,575

 
37,077

 
(3,502
)
 
(9.4
)%
 
50,433

 
51,659

 
(1,226
)
 
(2.4
)%
Engineered plastics
 
101,836

 
48,172

 
53,664

 
111.4
 %
 
100,897

 
31,897

 
69,000

 
216.3
 %
Specialty powders
 
22,426

 
22,914

 
(488
)
 
(2.1
)%
 
33,689

 
33,563

 
126

 
0.4
 %
Distribution services
 
14,661

 
17,708

 
(3,047
)
 
(17.2
)%
 
18,024

 
21,437

 
(3,413
)
 
(15.9
)%
Total USCAN
 
$
183,338

 
$
137,080

 
$
46,258

 
33.7
 %
 
207,047

 
142,481

 
64,566

 
45.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Three months ended May 31,
LATAM
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
1,242

 
$
1,054

 
$
188

 
17.8
 %
 
468

 
395

 
73

 
18.5
 %
Masterbatch solutions
 
23,103

 
23,769

 
(666
)
 
(2.8
)%
 
17,657

 
16,789

 
868

 
5.2
 %
Engineered plastics
 
11,221

 
11,889

 
(668
)
 
(5.6
)%
 
9,058

 
9,196

 
(138
)
 
(1.5
)%
Specialty powders
 
7,811

 
8,109

 
(298
)
 
(3.7
)%
 
9,445

 
7,177

 
2,268

 
31.6
 %
Distribution services
 
—

 
—

 
—

 
N/A

 
—

 
—

 
—

 
N/A

Total LATAM
 
$
43,377

 
$
44,821

 
$
(1,444
)
 
(3.2
)%
 
36,628

 
33,557

 
3,071

 
9.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Three months ended May 31,
APAC
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
3,113

 
$
2,567

 
$
546

 
21.3
 %
 
2,513

 
1,615

 
898

 
55.6
 %
Masterbatch solutions
 
19,705

 
21,375

 
(1,670
)
 
(7.8
)%
 
22,457

 
22,331

 
126

 
0.6
 %
Engineered plastics
 
23,328

 
26,454

 
(3,126
)
 
(11.8
)%
 
18,938

 
19,479

 
(541
)
 
(2.8
)%
Specialty powders
 
713

 
2,207

 
(1,494
)
 
(67.7
)%
 
693

 
2,617

 
(1,924
)
 
(73.5
)%
Distribution services
 
21

 
99

 
(78
)
 
(78.8
)%
 
43

 
135

 
(92
)
 
(68.1
)%
Total APAC
 
$
46,880

 
$
52,702

 
$
(5,822
)
 
(11.0
)%
 
44,644

 
46,177

 
(1,533
)
 
(3.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




 
 
Net Sales
 
Pounds Sold
 
 
Nine months ended May 31,
EMEA
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
96,572

 
$
102,312

 
$
(5,740
)
 
(5.6
)%
 
39,424

 
38,320

 
1,104

 
2.9
 %
Masterbatch solutions
 
305,688

 
311,708

 
(6,020
)
 
(1.9
)%
 
304,893

 
292,602

 
12,291

 
4.2
 %
Engineered plastics
 
279,435

 
295,212

 
(15,777
)
 
(5.3
)%
 
214,407

 
207,141

 
7,266

 
3.5
 %
Specialty powders
 
104,513

 
114,637

 
(10,124
)
 
(8.8
)%
 
124,470

 
134,043

 
(9,573
)
 
(7.1
)%
Distribution services
 
154,586

 
188,723

 
(34,137
)
 
(18.1
)%
 
237,880

 
276,101

 
(38,221
)
 
(13.8
)%
Total EMEA
 
$
940,794

 
$
1,012,592

 
$
(71,798
)
 
(7.1
)%
 
921,074

 
948,207

 
(27,133
)
 
(2.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Nine months ended May 31,
USCAN
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
30,012

 
$
31,524

 
$
(1,512
)
 
(4.8
)%
 
10,923

 
10,742

 
181

 
1.7
 %
Masterbatch solutions
 
98,646

 
119,514

 
(20,868
)
 
(17.5
)%
 
145,098

 
160,352

 
(15,254
)
 
(9.5
)%
Engineered plastics
 
294,921

 
140,840

 
154,081

 
109.4
 %
 
290,379

 
89,950

 
200,429

 
222.8
 %
Specialty powders
 
65,495

 
71,574

 
(6,079
)
 
(8.5
)%
 
92,010

 
111,383

 
(19,373
)
 
(17.4
)%
Distribution services
 
43,363

 
51,769

 
(8,406
)
 
(16.2
)%
 
56,547

 
56,487

 
60

 
0.1
 %
Total USCAN
 
$
532,437

 
$
415,221

 
$
117,216

 
28.2
 %
 
594,957

 
428,914

 
166,043

 
38.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Nine months ended May 31,
LATAM
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
3,698

 
$
3,457

 
$
241

 
7.0
 %
 
1,382

 
1,347

 
35

 
2.6
 %
Masterbatch solutions
 
68,149

 
65,971

 
2,178

 
3.3
 %
 
52,958

 
46,316

 
6,642

 
14.3
 %
Engineered plastics
 
32,170

 
34,857

 
(2,687
)
 
(7.7
)%
 
26,463

 
25,775

 
688

 
2.7
 %
Specialty powders
 
22,721

 
27,850

 
(5,129
)
 
(18.4
)%
 
25,891

 
23,456

 
2,435

 
10.4
 %
Distribution services
 
—

 
—

 
—

 
N/A

 
—

 
—

 
—

 
N/A

Total LATAM
 
$
126,738

 
$
132,135

 
$
(5,397
)
 
(4.1
)%
 
106,694

 
96,894

 
9,800

 
10.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Nine months ended May 31,
APAC
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
8,653

 
$
8,500

 
$
153

 
1.8
 %
 
7,066

 
5,809

 
1,257

 
21.6
 %
Masterbatch solutions
 
58,187

 
61,038

 
(2,851
)
 
(4.7
)%
 
65,022

 
60,900

 
4,122

 
6.8
 %
Engineered plastics
 
68,052

 
79,196

 
(11,144
)
 
(14.1
)%
 
56,326

 
55,809

 
517

 
0.9
 %
Specialty powders
 
2,351

 
8,661

 
(6,310
)
 
(72.9
)%
 
2,510

 
9,084

 
(6,574
)
 
(72.4
)%
Distribution services
 
392

 
863

 
(471
)
 
(54.6
)%
 
603

 
1,062

 
(459
)
 
(43.2
)%
Total APAC
 
$
137,635

 
$
158,258

 
$
(20,623
)
 
(13.0
)%
 
131,527

 
132,664

 
(1,137
)
 
(0.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
 
Net Sales
 
Pounds Sold
 
 
Three months ended May 31,
Consolidated
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
48,573

 
$
48,630

 
$
(57
)
 
(0.1
)%
 
20,887

 
19,859

 
1,028

 
5.2
 %
Engineered composites
 
54,476

 
—

 
54,476

 
N/A

 
45,417

 
—

 
45,417

 
N/A

Masterbatch solutions
 
184,157

 
184,409

 
(252
)
 
(0.1
)%
 
198,838

 
195,134

 
3,704

 
1.9
 %
Engineered plastics
 
228,945

 
181,918

 
47,027

 
25.9
 %
 
200,984

 
132,498

 
68,486

 
51.7
 %
Specialty powders
 
67,661

 
71,133

 
(3,472
)
 
(4.9
)%
 
87,525

 
90,354

 
(2,829
)
 
(3.1
)%
Distribution services
 
66,627

 
74,768

 
(8,141
)
 
(10.9
)%
 
97,883

 
107,261

 
(9,378
)
 
(8.7
)%
Total Consolidated
 
$
650,439

 
$
560,858

 
$
89,581

 
16.0
 %
 
651,534

 
545,106

 
106,428

 
19.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Pounds Sold
 
 
Nine months ended May 31,
Consolidated
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
Lbs. Change
 
% Change
 
 
(In thousands, except for %'s)
Custom performance colors
 
$
138,935

 
$
145,793

 
$
(6,858
)
 
(4.7
)%
 
58,795

 
56,218

 
2,577

 
4.6
 %
Engineered composites
 
153,815

 
—

 
153,815

 
N/A

 
130,338

 
—

 
130,338

 
N/A

Masterbatch solutions
 
530,670

 
558,231

 
(27,561
)
 
(4.9
)%
 
567,971

 
560,170

 
7,801

 
1.4
 %
Engineered plastics
 
674,578

 
550,105

 
124,473

 
22.6
 %
 
587,575

 
378,675

 
208,900

 
55.2
 %
Specialty powders
 
195,080

 
222,722

 
(27,642
)
 
(12.4
)%
 
244,881

 
277,966

 
(33,085
)
 
(11.9
)%
Distribution services
 
198,341

 
241,355

 
(43,014
)
 
(17.8
)%
 
295,030

 
333,650

 
(38,620
)
 
(11.6
)%
Total Consolidated
 
$
1,891,419

 
$
1,718,206

 
$
173,213

 
10.1
 %
 
1,884,590

 
1,606,679

 
277,911

 
17.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
 
Three months ended May 31,
 
Nine months ended May 31,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except for %'s)
Segment gross profit
 
 
 
 
 
 
 
EMEA
$
49,852

 
$
51,695

 
$
136,489

 
$
145,908

USCAN
32,560

 
22,104

 
90,095

 
66,478

LATAM
9,055

 
9,324

 
27,226

 
22,075

APAC
8,080

 
7,771

 
24,153

 
22,403

EC
13,746

 
—

 
37,941

 
—

     Total segment gross profit
113,293

 
90,894

 
315,904

 
256,864

Inventory step-up
—

 
—

 
—

 
(341
)
Accelerated depreciation and restructuring related costs
(2,930
)
 
(78
)
 
(7,311
)
 
(674
)
Costs related to acquisitions and integrations
(423
)
 
(59
)
 
(2,522
)
 
(174
)
Lucent costs
(466
)
 
—

 
(1,844
)
 
—

     Total gross profit
$
109,474

 
$
90,757

 
$
304,227

 
$
255,675

 
 
 
 
 
 
 
 
Segment operating income
 
 
 
 
 
 
 
EMEA
$
23,382

 
$
24,716

 
$
59,147

 
$
61,032

USCAN
15,576

 
7,982

 
38,166

 
25,299

LATAM
4,748

 
4,654

 
14,581

 
7,531

APAC
4,540

 
3,972

 
13,517

 
10,903

EC
5,031

 
—

 
10,583

 
—

Total segment operating income
53,277

 
41,324

 
135,994

 
104,765

Corporate
(7,489
)
 
(8,502
)
 
(23,661
)
 
(24,992
)
Costs related to acquisitions and integrations
(1,443
)
 
(3,590
)
 
(7,570
)
 
(7,972
)
Restructuring and related costs
(9,520
)
 
(5,937
)
 
(19,959
)
 
(15,303
)
Accelerated depreciation
(1,286
)
 
(29
)
 
(4,796
)
 
(327
)
Lucent costs
(1,951
)
 
—

 
(6,268
)
 
—

Inventory step-up
—

 
—

 
—

 
(341
)
CEO transition costs
—

 
—

 
—

 
(6,167
)
Operating income
31,588

 
23,266

 
73,740

 
49,663

Interest expense
(13,557
)
 
(2,618
)
 
(40,965
)
 
(7,288
)
Bridge financing fees
—

 
(18,750
)
 
—

 
(18,750
)
Foreign currency transaction gains (losses)
(392
)
 
(857
)
 
(2,071
)
 
(3,097
)
Other income (expense), net
229

 
335

 
246

 
900

Gain on early extinguishment of debt
—

 
—

 
—

 
1,290

Income from continuing operations before taxes
$
17,868

 
$
1,376

 
$
30,950

 
$
22,718

 
 
 
 
 
 
 
 
Capacity utilization
 
 
 
 
 
 
 
EMEA
88
%
 
94
%
 
82
%
 
88
%
USCAN
67
%
 
62
%
 
67
%
 
63
%
LATAM
73
%
 
76
%
 
72
%
 
71
%
APAC
68
%
 
67
%
 
66
%
 
65
%
EC
72
%
 
—
%
 
69
%
 
—
%
Worldwide
75
%
 
78
%
 
73
%
 
75
%



A. SCHULMAN, INC.
Sales by Geographical Region
(Unaudited)
 
 
Three months ended May 31, 2016
 
 
(In thousands, except for %'s)

 
 
Thermoplastics
 
Engineered Composites
 
Total
Geographical Region
 
Sales by Region
 
% of TP
 
Sales by Region
 
% of EC
 
Total Sales
 
Total %
United States / Canada
 
$
183,338

 
30.8
%
 
$
39,030

 
71.6
%
 
$
222,368

 
34.2
%
Europe
 
322,368

 
54.0
%
 
5,841

 
10.8
%
 
328,209

 
50.5
%
Mexico / South America
 
43,377

 
7.3
%
 
9,605

 
17.6
%
 
52,982

 
8.1
%
Asia Pacific
 
46,880

 
7.9
%
 
—

 
—
%
 
46,880

 
7.2
%
Total
 
$
595,963

 
100.0
%
 
$
54,476

 
100.0
%
 
$
650,439

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended May 31, 2015
 
 
(In thousands, except for %'s)

 
 
Thermoplastics
 
Engineered Composites
 
Total
Geographical Region
 
Sales by Region
 
% of TP
 
Sales by Region
 
% of EC
 
Total Sales
 
Total %
United States / Canada
 
$
137,080

 
24.4
%
 
$
—

 
—
%
 
$
137,080

 
24.4
%
Europe
 
326,255

 
58.2
%
 
—

 
—
%
 
326,255

 
58.2
%
Mexico / South America
 
44,821

 
8.0
%
 
—

 
—
%
 
44,821

 
8.0
%
Asia Pacific
 
52,702

 
9.4
%
 
—

 
—
%
 
52,702

 
9.4
%
Total
 
$
560,858

 
100.0
%
 
$
—

 
—
%
 
$
560,858

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended May 31, 2016
 
 
(In thousands, except for %'s)

 
 
Thermoplastics
 
Engineered Composites
 
Total
Geographical Region
 
Sales by Region
 
% of TP
 
Sales by Region
 
% of EC
 
Total Sales
 
Total %
United States / Canada
 
$
532,437

 
30.6
%
 
$
110,199

 
71.6
%
 
$
642,636

 
34.0
%
Europe
 
940,794

 
54.2
%
 
17,289

 
11.2
%
 
958,083

 
50.7
%
Mexico / South America
 
126,738

 
7.3
%
 
26,327

 
17.2
%
 
153,065

 
8.0
%
Asia Pacific
 
137,635

 
7.9
%
 
—

 
—
%
 
137,635

 
7.3
%
Total
 
$
1,737,604

 
100.0
%
 
$
153,815

 
100.0
%
 
$
1,891,419

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended May 31, 2015
 
 
(In thousands, except for %'s)

 
 
Thermoplastics
 
Engineered Composites
 
Total
Geographical Region
 
Sales by Region
 
% of TP
 
Sales by Region
 
% of EC
 
Total Sales
 
Total %
United States / Canada
 
$
415,221

 
24.2
%
 
$
—

 
—
%
 
$
415,221

 
24.2
%
Europe
 
1,012,592

 
58.8
%
 
—

 
—
%
 
1,012,592

 
58.9
%
Mexico / South America
 
132,135

 
7.7
%
 
—

 
—
%
 
132,135

 
7.7
%
Asia Pacific
 
158,258

 
9.3
%
 
—

 
—
%
 
158,258

 
9.2
%
Total
 
$
1,718,206

 
100.0
%
 
$
—

 
—
%
 
$
1,718,206

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 




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