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Form 8-K SCHULMAN A INC For: Jan 09

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January 9, 2017 5:14 PM EST


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) January 9, 2017    

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 January 9, 2017, A. Schulman, Inc. (the “Company”) announced earnings for the quarter ended November 30, 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 January 9, 2017 (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/ Andrean R. Horton
 
 
 
Andrean R. Horton
 
 
 
Executive Vice President & Chief Legal Officer

Date: January 9, 2017




Exhibit 99.1
shlmnewsreleaselogo2a01a02.jpg

FOR IMMEDIATE RELEASE

A. Schulman Reports Fiscal 2017 First Quarter Results

•
On a GAAP basis, Company reported earnings per diluted share of $0.04 compared with $0.18 in the prior year period
•
Adjusted earnings per diluted share were $0.49 compared with $0.50 in the prior year period
•
Continued reduction of debt; year-end net leverage target of 3.5x to 3.8x remains unchanged
•
Company reiterates fiscal 2017 adjusted earnings guidance of $2.08 to $2.18 per diluted share

AKRON, Ohio - January 9, 2017 - A. Schulman, Inc. (Nasdaq: SHLM) today announced earnings for the fiscal 2017 first quarter for the period ended November 30, 2016. On a GAAP basis, the Company reported earnings per diluted share of $0.04 compared with $0.18 in the prior period. Adjusted earnings per diluted share were $0.49 compared with $0.50 in the prior year period.
Consolidated net sales for the fiscal first quarter were $600 million compared with $649.2 million for the prior year quarter. Excluding the negative impact of foreign currency translation of $9.3 million, net sales fell 6.2% when compared with the prior year quarter.
GAAP gross margin in the fiscal 2017 first quarter increased to 16.8% compared with 16.2% in the prior year period. Segment gross margin in the fiscal 2017 first quarter was improved slightly when compared with the prior year period at 16.9%.
Operating income margin was 3.2% compared with 4% in the prior year period. Adjusted operating income margin was 5.8% consistent with the prior year period.
On a GAAP basis, the Company reported fiscal first quarter net income of $1.1 million, compared with $5.2 million in the first quarter of fiscal 2016. On an adjusted basis, excluding certain items as noted in the reconciliation of GAAP and Non-GAAP financial measures, the Company generated net income of $14.4 million compared with $14.9 million in the prior-year period. Fiscal first quarter adjusted EBITDA was $54.6 million, compared with $58.4 million in the prior year period.
“Clearly, a lot of hard work remains to be done as we restore the Company’s operational and financial performance worldwide. While we were able to grow sales and gross margins in Asia-Pacific and in our Engineered Composites segment, we experienced continued weakness in the United States and Europe. Our recently implemented global actions to strengthen our sales organization and optimize our footprint are designed to address this weakness,” said Joseph M. Gingo, chairman, president and chief executive officer. “As we move forward in fiscal 2017, we must continue to execute as we reset the business and rejuvenate our growth plan.”
John W. Richardson, chief financial officer, stated, “We are well into the completion of our simplification efforts which facilitated the consolidation of our product families allowing for the reduction of layers of middle management. We believe this will generate our previously stated savings of approximately $5




million to $6 million in fiscal 2017 and 2018. In the meantime, we continue to keep an eye on cost controls as evidenced by an improvement in SG&A.”
Balance Sheet/Cash Flow 
Cash provided from operations during the fiscal first quarter was $26.3 million, compared with $40 million in the prior period. Working capital days were lower at 53 days on a trailing 12-month basis, an improvement from 54 days in the prior year.
The cash flow was used to reduce net debt, which represents total debt less cash and cash equivalents and restricted cash, by $7 million in the fiscal first quarter, to $894 million, for a net leverage ratio of 3.97x. Additionally, the Company prepaid $56 million in term debt, plus another $3.4 million of normal required payments during the quarter. The pre-payments were facilitated by the Company borrowing on its revolving credit facility in Europe and transferring approximately $40 million in a tax efficient manner to the U.S. Since the purchase of Citadel in mid-2015, the Company has paid down approximately $180 million of total debt.
Business Outlook
The Company is maintaining its previously stated fiscal 2017 targets of $2.5 billion to $2.6 billion in sales, adjusted EBITDA of $225 million to $230 million, adjusted earnings per diluted share in the range of $2.08 to $2.18, and a return on invested capital of 11 percent to 12.5 percent. Refer to the reconciliation of GAAP and Non-GAAP financial measures for the types of items excluded from the Company’s business outlook.
Gingo stated, “As we look forward to the remainder of the year, we expect continued challenges to our top-line growth. Further, if the dollar remains strong against world currencies, we will see additional pressure. However, I believe the near-term benefits of our simplified business structure - coupled with our enhanced global sales process and renewed product development initiative - creates an environment for us to withstand current headwinds and deliver solid results on a full-year basis.”
Conference Call on the Web
A live Internet broadcast of A. Schulman’s conference call regarding fiscal 2017 first-quarter earnings can be accessed at 10:00 a.m. Eastern Time on January 10, 2017, 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 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 4,800 people and has 54 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.5 billion for the fiscal year ended August 31, 2016. 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.
The Company uses 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 to assess performance and allocate resources because the Company believes that these measures are useful to investors and management in understanding current profitability levels that may serve as a basis for evaluating future performance and facilitating comparability of results. In addition, operating income before certain items, segment operating income before certain items and net income excluding certain items are important to management as all are a component of the Company’s annual and long-term employee incentive plans. Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company’s non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.
While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company’s competitors and may not be directly comparable to similarly titled measures of the Company’s competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:
 
•
worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company’s major product markets or countries where the Company has operations;
•
the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
•
competitive factors, including intense price competition;
•
fluctuations in the value of currencies in 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 regarding the resolution of pending and future litigation and other claims;
•
the performance of the global automotive market as well as other markets served;
•
further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products;




•
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; 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, 2016. 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 November 30,
 
2016

2015
 
(In thousands, except per share data)
Net sales
$
600,000

 
$
649,219

Cost of sales
498,985

 
544,290

Selling, general and administrative expenses
72,374

 
77,237

Restructuring expense
9,544

 
1,546

Operating income (loss)
19,097

 
26,146

Interest expense
13,164

 
13,618

Foreign currency transaction (gains) losses
562

 
729

Other (income) expense, net
(1,132
)
 
51

Income (loss) before taxes
6,503

 
11,748

Provision (benefit) for U.S. and foreign income taxes
3,319

 
4,251

Net income (loss)
3,184

 
7,497

Noncontrolling interests
(241
)
 
(404
)
Net income (loss) attributable to A. Schulman, Inc.
2,943

 
7,093

Convertible special stock dividends
1,875

 
1,875

Net income (loss) available to A. Schulman, Inc. common stockholders
$
1,068

 
$
5,218

 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
Basic
29,363

 
29,223

Diluted
29,477

 
29,462

 
 
 
 
Net income (loss) per common share available to A. Schulman, Inc. common stockholders
 
 
 
Basic
$
0.04

 
$
0.18

Diluted
$
0.04

 
$
0.18

 
 
 
 
Cash dividends per common share
$
0.205

 
$
0.205

Cash dividends per share of convertible special stock
$
15.00

 
$
15.00







A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
November 30,
2016
 
August 31,
2016
 
(In thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
39,285

 
$
35,260

Restricted cash
8,256

 
8,143

Accounts receivable, less allowance for doubtful accounts of $11,106 at November 30, 2016 and $11,341 at August 31, 2016
376,138

 
376,786

Inventories
275,663

 
263,617

Prepaid expenses and other current assets
44,516

 
40,263

Total current assets
743,858

 
724,069

Property, plant and equipment, at cost:
 
 
 
Land and improvements
32,423

 
32,957

Buildings and leasehold improvements
179,274

 
184,291

Machinery and equipment
435,993

 
447,932

Furniture and fixtures
33,615

 
34,457

Construction in progress
23,095

 
20,431

Gross property, plant and equipment
704,400

 
720,068

Accumulated depreciation
401,151

 
405,246

Net property, plant and equipment
303,249

 
314,822

Deferred charges and other noncurrent assets
84,995

 
88,161

Goodwill
256,878

 
257,773

Intangible assets, net
352,046

 
362,614

Total assets
$
1,741,026

 
$
1,747,439

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable
$
281,056

 
$
280,060

U.S. and foreign income taxes payable
6,707

 
8,985

Accrued payroll, taxes and related benefits
52,517

 
47,569

Other accrued liabilities
87,113

 
67,704

Short-term debt
37,659

 
25,447

Total current liabilities
465,052

 
429,765

Long-term debt
904,352

 
919,349

Pension plans
139,108

 
145,108

Deferred income taxes
57,636

 
59,013

Other long-term liabilities
24,599

 
25,844

Total liabilities
1,590,747

 
1,579,079

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 - 48,526 shares at November 30, 2016 and 48,510 shares at August 31, 2016
48,526

 
48,510

Additional paid-in capital
276,456

 
275,115

Accumulated other comprehensive income (loss)
(135,373
)
 
(120,721
)
Retained earnings
214,047

 
219,039

Treasury stock, at cost, 19,067 shares at November 30, 2016 and 19,069 shares at August 31, 2016
(382,928
)
 
(382,963
)
Total A. Schulman, Inc.’s stockholders’ equity
141,017

 
159,269

Noncontrolling interests
9,262

 
9,091

Total equity
150,279

 
168,360

Total liabilities and equity
$
1,741,026

 
$
1,747,439





A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three months ended November 30,
 
2016
 
2015
 
(In thousands)
Operating activities:
 
 
 
Net income
$
3,184

 
$
7,497

Adjustments to reconcile net income to net cash provided from (used in) operating activities:
 
 
 
Depreciation
11,172

 
12,013

Amortization
8,817

 
10,039

Deferred tax provision (benefit)
(2,429
)
 
1,306

Pension, postretirement benefits and other compensation
1,893

 
1,217

Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
(12,947
)
 
7,345

Inventories
(21,639
)
 
(8,671
)
Accounts payable
16,404

 
377

Income taxes
(2,723
)
 
1,432

Accrued payroll and other accrued liabilities
27,623

 
18,614

Other assets and long-term liabilities
(3,046
)
 
(11,144
)
Net cash provided from (used in) operating activities
26,309

 
40,025

Investing activities
 
 
 
Expenditures for property, plant and equipment
(12,972
)
 
(7,402
)
Proceeds from the sale of assets
375

 
361

Other investing activities
12

 
—

Net cash provided from (used in) investing activities
(12,585
)
 
(7,041
)
Financing activities:
 
 
 
Cash dividends paid to special stockholders
(1,875
)
 
(1,875
)
Cash dividends paid to common stockholders
(6,060
)
 
(6,024
)
Increase (decrease) in short-term debt
14,546

 
1,926

Borrowings on long-term debt
133,985

 
—

Repayments on long-term debt including current portion
(149,301
)
 
(24,946
)
Issuances of stock, common and treasury
51

 
90

Redemptions of common stock
(229
)
 
—

Net cash provided from (used in) financing activities
(8,883
)
 
(30,829
)
Effect of exchange rate changes on cash
(816
)
 
(3,465
)
Net increase (decrease) in cash and cash equivalents
4,025

 
(1,310
)
Cash and cash equivalents at beginning of period
35,260

 
96,872

Cash and cash equivalents at end of period
$
39,285

 
$
95,562




A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
Unaudited
Three months ended November 30, 2016
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
29,477

 
(In thousands, except for %'s and per share data)
As reported
 
$
498,985

 
16.8
%
 
$
72,374

 
$
9,544

 
$
19,097

 
$
12,594

 
$
3,319

 
$
1,068

 
$
0.04

Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment (8)
 
—

 
 
 
(678
)
 
—

 
678

 
—

 
183

 
495

 
0.02

Accelerated depreciation (1)
 
(355
)
 
 
 
(1
)
 
—

 
356

 
—

 
96

 
260

 
0.01

Costs related to acquisitions and integrations (2)
 
(57
)
 
 
 
(548
)
 
—

 
605

 
—

 
163

 
442

 
0.01

Restructuring and related costs (3)
 
(173
)
 
 
 
(3,556
)
 
(9,544
)
 
13,273

 
—

 
3,584

 
9,689

 
0.33

Lucent costs (4)
 
(85
)
 
 
 
(724
)
 
—

 
809

 
—

 
218

 
591

 
0.02

CEO transition costs (5)
 
—

 
 
 
(189
)
 
—

 
189

 
—

 
51

 
138

 
—

Accelerated amortization of debt issuance costs (6)
 
—

 
 
 
—

 
—

 
—

 
(205
)
 
55

 
150

 
0.01

Tax (benefits) charges (7)
 
—

 
 
 
—

 
—

 
—

 
—

 
(1,562
)
 
1,562

 
0.05

Total certain items
 
(670
)
 
0.1
%
 
(5,696
)
 
(9,544
)
 
15,910

 
(205
)
 
2,788

 
13,327

 
0.45

As Adjusted
 
$
498,315

 
16.9
%
 
$
66,678

 
$
—

 
$
35,007

 
$
12,389

 
$
6,107

 
$
14,395

 
$
0.49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
11.1
%
 
 
 
5.8
%
 
 
 
 
 
2.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
27.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended November 30, 2015
 
Cost of Sales
 
Gross Margin
 
SG&A
 
Restructuring Expense
 
Operating Income
 
Non Operating (Income) Expense
 
Income Tax Expense (Benefit)
 
Net Income Available to ASI Common Stockholders
 
Diluted EPS
29,462

 
(In thousands, except for %'s and per share data)
As reported
 
$
544,290

 
16.2
%
 
$
77,237

 
$
1,546

 
$
26,146

 
$
14,398

 
$
4,251

 
$
5,218

 
$
0.18

Certain items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation (1)
 
(1,447
)
 
 
 
(6
)
 
—

 
1,453

 
—

 
406

 
1,047

 
0.03

Costs related to acquisitions and integrations (2)
 
(129
)
 
 
 
(1,737
)
 
—

 
1,866

 
—

 
522

 
1,344

 
0.05

Restructuring and related costs (3)
 
(430
)
 
 
 
(2,694
)
 
(1,546
)
 
4,670

 
(277
)
 
1,391

 
3,556

 
0.12

Lucent costs (4)
 
(1,830
)
 
 
 
(1,876
)
 
—

 
3,706

 
—

 
1,037

 
2,669

 
0.09

Accelerated amortization of debt issuance costs (6)
 
—

 

 
—

 
—

 
—

 
(110
)
 
31

 
79

 
—

Tax (benefits) charges (7)
 
—

 

 
—

 
—

 
—

 
—

 
(965
)
 
965

 
0.03

Total certain items
 
(3,836
)
 
0.6
%
 
(6,313
)
 
(1,546
)
 
11,695

 
(387
)
 
2,422

 
9,660

 
0.32

As Adjusted
 
$
540,454

 
16.8
%
 
$
70,924

 
$
—

 
$
37,841

 
$
14,011

 
$
6,673

 
$
14,878

 
$
0.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
10.9
%
 
 
 
5.8
%
 
 
 
—

 
2.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
28.0
%
 
 
 
 





1 - Accelerated depreciation is related to restructuring plans in the Company's USCAN and EMEA segments.
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, one-time bonuses and post-acquisition severance separate from a formal restructuring plan.
3 - Restructuring and related costs include items such as employee severance charges, lease termination charges, curtailment gains/losses, other employee termination costs and charges related to the reorganization of the legal entity structure. Refer to Note 12 in the Company's Quarterly Report on Form 10-Q for the three months ended November 30, 2016 for further discussion.
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 - CEO transition costs represent charges for deferred compensation granted to Bernard Rzepka.
6 - Write off of debt issuance costs are related to prepayments of $56.0 million of Term Loan B. Refer to Note 3 in the Company's Quarterly Report on Form 10-Q for further discussion.
7 - Tax (benefits) charges represent the Company's quarterly non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.
8 - Asset impairment relates to the discontinuation of information technology assets in the USCAN segment.






A. SCHULMAN, INC.
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
 
Three months ended November 30,
 
2016
 
2015
 
(In thousands)
 
 
 
 
Net income available to A. Schulman, Inc. common stockholders
$
1,068

 
$
5,218

     Interest expense
13,164

 
13,618

     Provision for U.S. and foreign income taxes
3,319

 
4,251

     Depreciation and amortization
19,989

 
22,052

     Noncontrolling interests
241

 
404

     Convertible special stock dividends
1,875

 
1,875

     Other (1)
(570
)
 
780

EBITDA, as calculated
$
39,086

 
$
48,198

     Non-GAAP Adjustments (2)
15,554

 
10,236

EBITDA, as adjusted
$
54,640

 
$
58,434

 
 
 
 


(1) - Other includes Foreign currency transaction (gains) losses and Other (income) expense, net.

(2) - For details on Non-GAAP adjustments, refer to "Reconciliation of GAAP and Non-GAAP Financial Measures", items (2) - (8). Amounts are included in Operating Income. 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.









A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
 
 
Net Sales
 
 
Three months ended November 30,
EMEA
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
Custom Concentrates and Services
 
158,035

 
174,129

 
(16,094
)
 
(9.2
)%
Performance Materials
 
138,037

 
153,967

 
(15,930
)
 
(10.3
)%
Total EMEA
 
$
296,072

 
$
328,096

 
$
(32,024
)
 
(9.8
)%
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
Three months ended November 30,
USCAN
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
Custom Concentrates and Services
 
62,926

 
64,152

 
(1,226
)
 
(1.9
)%
Performance Materials
 
93,492

 
114,130

 
(20,638
)
 
(18.1
)%
Total USCAN
 
$
156,418

 
$
178,282

 
$
(21,864
)
 
(12.3
)%
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
Three months ended November 30,
LATAM
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
Custom Concentrates and Services
 
29,969

 
34,013

 
(4,044
)
 
(11.9
)%
Performance Materials
 
12,247

 
11,190

 
1,057

 
9.4
 %
Total LATAM
 
$
42,216

 
$
45,203

 
$
(2,987
)
 
(6.6
)%
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
Three months ended November 30,
APAC
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
Custom Concentrates and Services
 
24,991

 
23,543

 
1,448

 
6.2
%
Performance Materials
 
25,746

 
22,149

 
3,597

 
16.2
%
Total APAC
 
$
50,737

 
$
45,692

 
$
5,045

 
11.0
%
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
 
Three months ended November 30,
Consolidated
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
Engineered Composites
 
$
54,557

 
$
51,946

 
$
2,611

 
5.0
 %
Custom Concentrates and Services
 
275,921

 
295,837

 
(19,916
)
 
(6.7
)%
Performance Materials
 
269,522

 
301,436

 
(31,914
)
 
(10.6
)%
Total Consolidated
 
$
600,000

 
$
649,219

 
$
(49,219
)
 
(7.6
)%






 
 
Segment Gross Profit
 
 
Three months ended November 30,
 
 
2016
 
2015
 
$ Change
 
% Change
 
 
(In thousands, except for %'s)
EMEA
 
$
44,658

 
$
47,684

 
$
(3,026
)
 
(6.3
)%
USCAN
 
24,516

 
30,294

 
$
(5,778
)
 
(19.1
)%
LATAM
 
9,417

 
9,705

 
$
(288
)
 
(3.0
)%
APAC
 
9,126

 
7,874

 
$
1,252

 
15.9
 %
EC
 
13,968

 
13,208

 
$
760

 
5.8
 %
Total segment gross profit
 
$
101,685

 
$
108,765

 
$
(7,080
)
 
(6.5
)%
Accelerated depreciation and restructuring related costs
 
(528
)
 
(1,877
)
 
$
1,349

 
(71.9
)%
Costs related to acquisitions and integrations
 
(57
)
 
(129
)
 
$
72

 
(55.8
)%
Lucent costs (1)
 
(85
)
 
(1,830
)
 
$
1,745

 
(95.4
)%
Total gross profit
 
$
101,015

 
$
104,929

 
$
(3,914
)
 
(3.7
)%
 (1)Refer to Note 13 in the Company’s Quarterly Report on Form 10-Q for the three months ended November 30, 2016 for additional discussion on this matter. Lucent costs in cost of sales in the three months ended November 30, 2016 and 2015 include additional product and manufacturing operational costs for reworking inventory. In the three months ended November 30, 2016 and 2015, additional Lucent costs in selling, general and administrative expenses include legal and investigative costs. In the three months ended November 30, 2015, Lucent costs in SG&A also include dedicated internal personnel costs that would have otherwise been focused on normal operations. 
.




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