A SCHULMAN INC AKRON, Ohio, Jan. 6, 2015 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today earnings for the fiscal first quarter ended November 30, 2014.
Bernard Rzepka, President and Chief Executive Officer, said, "We are pleased by the good start to fiscal 2015. Our European team was able to maintain relatively flat results in a difficult economic landscape while our Americas and APAC regions more than offset the weakness in Europe. Our seasoned leaders will continue to take proactive steps such as the recently announced restructuring initiatives to drive efficiencies and help mitigate foreign exchange fluctuations. We had solid contributions from our recent acquisitions and continue to execute on our organic initiatives to create a strong and sustainable pipeline of innovative products and seek out value-added markets."
Fiscal First-Quarter Results
Net sales for the fiscal 2015 first quarter were $615.1 million, an increase of 5% compared with $585.4 million in the prior-year quarter. Foreign currency translation negatively impacted net sales by $26.2 million. Excluding the impact of foreign currency translation, revenues would have increased by $55.9 million to $641.3 million for the quarter, up 9.5% over the prior-year period. Gross margin, excluding certain items, in the first quarter as a percent of net sales improved to 14.2% compared with 13.7% in the prior-year period.
Net sales for EMEA in the quarter were $371.2 million, a decrease of $21.3 million, or 5.4%, compared with the prior-year period. Foreign currency translation negatively impacted net sales by $21.5 million. The benefit from the Company's recent Specialty Plastics acquisition was offset by a decline in organic sales across all product families. EMEA gross profit was $49.7 million, a decrease of $2.2 million compared with the same prior-year period. The decrease in the segment's gross profit was mainly attributed to the unfavorable foreign currency translation impact of $3 million, lower organic volumes and higher pension expense of $0.2 million which were only partially offset by the incremental contribution of the Specialty Plastics acquisition.
Net sales for the Americas were $190.9 million, an increase of 30.3% or $44.4 million in the first quarter compared with the prior-year period. Volume increased 19.8% or 30.7 million pounds during the quarter. The incremental contribution of the recent acquisitions accounted for virtually all of the change in both net sales and volume during the quarter, which was a direct result of the Company's successful acquisition strategy. Foreign currency translation negatively impacted net sales by $4.2 million. Segment gross profit for the Americas was $30.3 million in the quarter, an increase of $8.8 million or 41% compared with the same period last year. The increase was primarily attributed to the contributions from recent acquisitions and improved product mix in the Company's Specialty Powders product family.
Net sales for APAC were $53 million, an increase of 14.1% or $6.6 million in the first quarter compared with the prior-year period. Volume increased 19.8% or 7 million pounds during the quarter. During the quarter, the Compco acquisition in Australia contributed net sales and volume of $3.4 million and 2.3 million pounds, respectively. Excluding the Compco acquisition, organic volume increased across nearly all product families but was partially offset by decreased price per pound driven by competitive pricing pressures. Segment gross profit for APAC for the quarter increased $0.6 million or 9.5% compared with the prior-year period.
Working Capital/Cash Flow From Operations
Cash provided from operations was $10.3 million in the first quarter of fiscal 2015 compared with $9.8 million for the first quarter of fiscal 2014. Working capital was flat at 58 days at the end of the fiscal 2015 and 2014 first quarters.
Capital expenditures for the quarter were $10.3 million compared with $9.6 million for the prior-year quarter, and were primarily related to the regular and ongoing investment in the Company's global manufacturing facilities. During the first quarter of fiscal 2015, the Company declared and paid quarterly cash dividends for a total amount of $6.0 million and repurchased shares of common stock for a total cost of $3.3 million.
Business Outlook
Rzepka said, "Despite our double-digit earnings growth in the first quarter, we believe fiscal 2015 will be challenging. We are already seeing the adverse impact related to macro economic conditions and currency fluctuations. However, we will continue to aggressively focus on our acquisition strategy, proactive restructuring actions, and marketing initiatives which are gaining good traction to overcome economic events which are out of our control. We are working hard to realize optimal synergies from our recent acquisitions; evaluating our footprint to match current demand; and efficiently managing our expenses. The focus we have on safety, smart sales and smart savings will help us to offset the slow global economic environment while allowing us to better serve our customers and position us for growth. As a result, we remain confident that our fiscal 2015 adjusted net income will be in the range of $2.60 to $2.65 per diluted share."
Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2015 first-quarter earnings can be accessed at 10:00 a.m. Eastern Time on Wednesday, January 7, 2015, 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 3,900 people and has 43 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.5 billion for the fiscal year ended August 31, 2014. 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 and net income per diluted share excluding certain items, 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 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 major areas where the Company
operates;
-- volatility of prices and availability of the supply of energy and raw
materials that are critical to the manufacture of the 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 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; and
-- operating problems with our information systems as a result of system
security failures such as viruses, computer "hackers" or other causes.
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, 2014. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company's business, financial condition and results of operations.
SHLM_ALL
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended November 30,
-------------------------------
2014 2013
---- ----
Unaudited
(In thousands, except per share
data)
Net sales $615,053 $585,397
Cost of sales 528,209 506,289
Selling, general and
administrative
expenses 60,547 57,398
Restructuring expense 5,219 1,778
Operating income 21,078 19,932
Interest expense 2,359 2,191
Interest income (95) (62)
Foreign currency
transaction (gains)
losses 1,099 682
Other (income) expense,
net (159) (78)
---- ---
Income from continuing
operations before
taxes 17,874 17,199
Provision (benefit) for
U.S. and foreign
income taxes 4,486 4,568
----- -----
Income from continuing
operations 13,388 12,631
Income (loss) from
discontinued
operations, net of tax (10) 2,655
--- -----
Net income 13,378 15,286
Noncontrolling
interests (220) (215)
---- ----
Net income attributable
to A. Schulman, Inc. $13,158 $15,071
======= =======
Weighted-average
number of shares
outstanding:
Basic 29,017 29,017
Diluted 29,468 29,205
Basic earnings per
share attributable to
A. Schulman, Inc.
Income from continuing
operations $0.45 $0.43
Income (loss) from
discontinued
operations - 0.09
--- ----
Net income attributable
to A. Schulman, Inc. $0.45 $0.52
===== =====
Diluted earnings per
share attributable to
A. Schulman, Inc.
Income from continuing
operations $0.45 $0.43
Income (loss) from
discontinued
operations - 0.09
Net income attributable
to A. Schulman, Inc. $0.45 $0.52
===== =====
Cash dividends per
common share $0.205 $0.200
====== ======
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
November 30, August 31,
2014 2013
---- ----
Unaudited
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $132,109 $135,493
Accounts receivable, less
allowance for doubtful
accounts of $10,674 at
November 30, 2014 and
$10,844 at August 31, 2014 376,486 384,444
Inventories 296,539 292,141
Prepaid expenses and other
current assets 47,591 40,473
------ ------
Total current assets 852,725 852,551
------- -------
Property, plant and
equipment, at cost:
Land and improvements 27,155 28,439
Buildings and leasehold
improvements 154,656 160,858
Machinery and equipment 394,884 398,563
Furniture and fixtures 39,785 41,255
Construction in progress 17,676 16,718
------ ------
Gross property, plant and
equipment 634,156 645,833
Accumulated depreciation 384,143 391,912
Net property, plant and
equipment 250,013 253,921
------- -------
Deferred charges and other
noncurrent assets 63,376 65,079
Goodwill 198,649 202,299
Intangible assets, net 131,488 138,634
------- -------
Total assets $1,496,251 $1,512,484
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $314,315 $314,957
U.S. and foreign income
taxes payable 6,075 6,385
Accrued payroll, taxes and
related benefits 47,661 54,199
Other accrued liabilities 52,270 46,054
Short-term debt 32,012 31,748
------ ------
Total current liabilities 452,333 453,343
Long-term debt 353,262 339,546
Pension plans 123,923 129,949
Deferred income taxes 23,222 23,826
Other long-term liabilities 28,704 29,369
------ ------
Total liabilities 981,444 976,033
------- -------
Commitments and
contingencies
Stockholders' equity:
Common stock, $1 par value,
authorized -75,000 shares,
issued -48,186 shares at
November 30, 2014 and
48,185 shares at August 31,
2014 48,186 48,185
Additional paid-in capital 269,818 268,545
Accumulated other
comprehensive income (loss) (41,946) (16,691)
Retained earnings 614,094 606,898
Treasury stock, at cost,
19,081 shares at November
30, 2014 and 18,973 shares
at August 31, 2014 (383,199) (379,894)
-------- --------
Total A. Schulman, Inc.'s
stockholders' equity 506,953 527,043
------- -------
Noncontrolling interests 7,854 9,408
----- -----
Total equity 514,807 536,451
Total liabilities and equity $1,496,251 $1,512,484
========== ==========
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
November 30,
------------
2014 2013
---- ----
Unaudited
(In thousands)
Operating from
continuing and
discontinued
operations:
Net income 13,378 15,286
Adjustments to
reconcile net income
to net cash provided
from (used in)
operating activities:
Depreciation 8,963 7,865
Amortization 4,066 3,244
Deferred tax provision 633 (693)
Pension,
postretirement
benefits and other
compensation 2,452 2,550
Gain on sale of assets
from discontinued
operations - (3,028)
Changes in assets and
liabilities, net of
acquisitions:
Accounts receivable (4,731) (12,681)
Inventories (16,341) (25,936)
Accounts payable 8,200 24,826
Income taxes 463 765
Accrued payroll and
other accrued
liabilities 2,846 1,239
Other assets and long-
term liabilities (9,670) (3,618)
------ ------
Net cash provided from
(used in) operating
activities 10,259 9,819
------ -----
Investing from
continuing and
discontinued
operations:
Expenditures for
property, plant and
equipment (10,324) (9,601)
Proceeds from the sale
of assets 904 3,087
Business acquisitions,
net of cash (6,698) (51,322)
------ -------
Net cash provided from
(used in) investing
activities (16,118) (57,836)
------- -------
Financing from
continuing and
discontinued
operations:
Cash dividends paid (5,962) (5,915)
Increase (decrease) in
short-term debt 870 3,294
Borrowings on long-
term debt 27,500 457,000
Repayments on long-
term debt including
current portion (10,915) (444,649)
Payment of debt
issuance costs - (1,731)
Noncontrolling
interests'
contributions
(distributions) (1,750) -
Issuances of stock,
common and treasury 71 211
Purchases of treasury
stock (3,335) (1,116)
------ ------
Net cash provided from
(used in) financing
activities 6,479 7,094
----- -----
Effect of exchange
rate changes on cash (4,004) 1,672
------ -----
Net increase
(decrease) in cash
and cash equivalents (3,384) (39,251)
------ -------
Cash and cash
equivalents at
beginning of period 135,493 134,054
Cash and cash
equivalents at end of
period $132,109 $94,803
======== =======
A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
Three months ended Cost of Gross SG&A Restructuring Asset Operating Operating Income tax Net income
November 30, 2014 attributable to
A. Schulman,
Inc. Diluted
Sales margin expense impairment income income expense EPS
per pound (benefit)
--- --------- --------
(In thousands, except for %'s, per pound and per share data)
As reported $528,209 14.1% $60,547 $5,219 $ - $21,078 $0.039 $4,486 $13,158 $0.45
Certain items:
Asset write-downs (1) - - - - - - - -
Costs related to
acquisitions and
integrations (2) (50) (1,003) - - 1,053 77 976 0.03
Restructuring and related
costs (3) - (360) (5,219) - 5,579 1,483 4,096 0.14
Inventory step-up (4) (341) - - - 341 102 239 0.01
Tax benefits (charges) - - - - - - - -
Loss (income) from
discontinued operations 10 -
--- ---
Total certain items (391) 0.1% (1,363) (5,219) - 6,973 0.013 1,662 5,321 0.18
---- --- ------ ------ --- ----- ----- ----- ----- ----
As Adjusted $527,818 14.2% $59,184 $ - $ - $28,051 $0.052 $6,148 $18,479 $0.63
======== ==== ======= === === === === ======= ====== ====== ======= =====
Percentage of Revenue 9.6% 4.6% 3.0%
=== === ===
Three months ended Cost of Gross SG&A Restructuring Asset Operating Operating Income tax Net income
November 30, 2013 income per expense attributable to
pound (benefit) A. Schulman,
Inc. Diluted
Sales margin expense impairment income EPS
--- ----- ------ ------- ---------- ------ ---
(In thousands, except for %'s, per pound and per share data)
As reported $506,289 13.5% $57,398 $1,778 $ - $19,932 $0.040 $4,568 $15,071 $0.52
Certain items:
Asset write-downs (1) (108) - - - 108 1 107 -
Costs related to
acquisitions and
integrations (2) - (635) - - 635 89 546 0.02
Restructuring and related
costs (3) (363) (1,231) (1,778) - 3,372 322 3,340 0.11
Inventory step-up (4) (417) - - - 417 98 319 0.01
Loss (income) from
discontinued operations (2,655) (0.09)
------ -----
Total certain items (888) 0.2% (1,866) (1,778) - 4,532 0.009 510 1,657 0.05
---- ------ ------ --- ----- ----- --- ----- ----
As Adjusted $505,401 13.7% $55,532 $ - $ - $24,464 $0.049 $5,078 $16,728 $0.57
======== ==== ======= === === === === ======= ====== ====== ======= =====
Percentage of Revenue 9.5% 4.2% 2.9%
=== === ===
1 - Asset write-downs primarily relate to asset
impairments and accelerated depreciation.
2 - Costs related to acquisitions and
integrations primarily include third party
professional, legal and other expenses associated
with successful and unsuccessful full or partial
acquisition and divestiture/dissolution
transactions. Additionally, costs related to
acquisitions include certain employee-related
expenses such as acquisition-related travel and
integration costs.
3 -Restructuring related costs include items such
as employee severance charges, lease termination
charges, curtailment gains/losses, other
employee termination costs and charges related to
the reorganization of the legal entity structure.
4 - Inventory step-up costs include the
adjustment for fair value of inventory acquired
as a result of acquisition purchase accounting.
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
Net Sales Pounds Sold
--------- -----------
Three months ended November 30,
-------------------------------
EMEA 2014 2013 $ Change % Change 2014 2013 Lbs.
Change % Change
---- ---- ---- -------- -------- ---- ---- ------- --------
(In thousands, except for %'s)
Custom Performance
Color $33,459 $36,073 $(2,614) (7.2)% 11,509 12,331 (822) (6.7)
%
Masterbatch Solutions 116,400 108,901 7,499 6.9% 97,330 85,340 11,990 14.0%
Engineered Plastics 109,273 122,216 (12,943) (10.6)% 71,690 75,157 (3,467) (4.6)
%
Specialty powders 41,450 47,040 (5,590) (11.9)% 43,443 46,998 (3,555) (7.6)
%
Distribution Services 70,609 78,232 (7,623) (9.7) 92,486 92,394 92 0.1%
%
Total EMEA $371,191 $392,462 $(21,271) (5.4) 316,458 312,220 4,238 1.4%
%
===
Net Sales Pounds Sold
--------- -----------
Three months ended November 30,
-------------------------------
Americas 2014 2013 $ Change % Change 2014 2013 Lbs.
Change % Change
-------- ---- ---- -------- -------- ---- ---- ------- --------
(In thousands, except for %'s)
Custom Performance
Color $11,388 $8,166 $3,222 39.5% 3,869 2,604 1,265 48.6%
Masterbatch Solutions 65,291 53,476 11,815 22.1% 73,143 62,528 10,615 17.0%
Engineered Plastics 59,967 37,084 22,883 61.7% 38,769 25,605 13,164 51.4%
Specialty powders 37,135 36,657 478 1.3% 52,968 52,122 846 1.6%
Distribution Services 17,107 11,144 5,963 53.5% 17,159 12,375 4,784 38.7%
------ ------ ----- ------ ------ -----
Total Americas $190,888 $146,527 $44,361 30.3% 185,908 155,234 30,674 19.8%
======== ======== ======= ==== ======= ======= ====== ====
Net Sales Pounds Sold
--------- -----------
Three months ended November 30,
-------------------------------
APAC 2014 2013 $ Change % Change 2014 2013 Lbs.
Change % Change
---- ---- ---- -------- -------- ---- ---- ------- --------
(In thousands, except for %'s)
Custom Performance
Color $3,231 $702 $2,529 360.3% 2,371 533 1,838 344.8%
Masterbatch Solutions 20,339 20,526 (187) (0.9) 18,853 17,544 1,309 7.5%
%
Engineered Plastics 25,276 21,398 3,878 18.1% 16,905 13,580 3,325 24.5%
Specialty powders 3,772 3,250 522 16.1% 3,691 2,962 729 24.6%
Distribution Services 356 532 (176) (33.1) 410 643 (233) (36.2)
% %
Total APAC $52,974 $46,408 $6,566 14.1% 42,230 35,262 6,968 19.8%
======= ======= ====== ==== ====== ====== ===== ====
Net Sales Pounds Sold
--------- -----------
Three months ended November 30,
-------------------------------
Consolidated 2014 2013 $ Change % Change 2014 2013 Lbs.
Change % Change
------------ ---- ---- -------- -------- ---- ---- ------- --------
(In thousands, except for %'s)
Custom Performance
Color $48,078 $44,941 $3,137 7.0% 17,749 15,468 2,281 14.7%
Masterbatch Solutions 202,030 182,903 19,127 10.5% 189,326 165,412 23,914 14.5%
Engineered Plastics 194,516 180,698 13,818 7.6% 127,364 114,342 13,022 11.4%
Specialty powders 82,357 86,947 (4,590) (5.3) 100,102 102,082 (1,980) (1.9)
% %
Distribution Services 88,072 89,908 (1,836) (2.0) 110,055 105,412 4,643 4.4%
%
Total Consolidated $615,053 $585,397 $29,656 5.1% 544,596 502,716 41,880 8.3%
======== ======== ======= === ======= ======= ====== ===
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(continued)
Three months ended November 30,
-------------------------------
2014 2013
---- ----
Unaudited
(In thousands, except for %'s)
Segment gross profit
EMEA $49,706 $51,940
Americas 30,279 21,433
APAC 7,250 6,623
----- -----
Total segment
gross profit 87,235 79,996
Inventory
step-up (341) (417)
Accelerated
depreciation
and
restructuring
related - (471)
Costs related
to
acquisitions
and
integrations (50) -
Total gross
profit $86,844 $79,108
======= =======
Segment operating income
EMEA $20,039 $20,417
Americas 11,988 7,364
APAC 3,508 3,366
----- -----
Total segment
operating
income 35,535 31,147
Corporate (7,484) (6,683)
Costs related
to
acquisitions
and
integrations (1,053) (635)
Restructuring
and related
costs (5,579) (3,372)
Accelerated
depreciation - (108)
Inventory
step-up (341) (417)
---- ----
Operating
income 21,078 19,932
Interest
expense, net (2,264) (2,129)
Foreign
currency
transaction
gains
(losses) (1,099) (682)
Other income
(expense),
net 159 78
--- ---
Income from
continuing
operations
before taxes $17,874 $17,199
======= =======
Capacity utilization
EMEA 87% 87%
Americas 67% 67%
APAC 65% 67%
Worldwide 76% 77%
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SOURCE A. Schulman, Inc.
