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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended August 31, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to _____________.
Commission File No. 0-7459
A. SCHULMAN, INC.
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- - - ------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3550 West Market Street, Akron, Ohio 44333
- - - ------------------------------------------ ----------------
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (216)666-3751
-------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. Yes X No
-- --
[Cover continued on following page]
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[Cover Continued From Previous Page]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
on October 24, 1994: $1,050,204,452
--------------
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practical date:
37,467,120 Common Shares, $1.00 Par Value, at October 24, 1994.
- - - ---------------------------------------------------------------
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DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document in Which Incorporated
- - - -------- ---------------------
Portions of the Registrant's Notice
of Annual Meeting and Proxy Statement
Dated November 11, 1994 III and IV
Portions of the Registrant's 1994
Annual Report to Stockholders I and II
Neither the Report of the Compensation Committee on Executive Compensation nor
the Performance Graph contained in the Registrant's Notice of Annual Meeting
and Proxy Statement dated November 11, 1994 shall be deemed incorporated by
reference herein.
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PART I
------
ITEM I. BUSINESS
- - - ------ --------
A. Schulman, Inc. (the "Company") was organized as an Ohio corporation in
1928 and changed its state of incorporation to Delaware in 1969.
The Company operates in one industry segment which is the sale of plastic
resins to customers who use the products as raw materials in their
manufacturing operations. For informative reasons, the Company classifies its
activities within its only industry segment as manufacturing, merchant or
distribution. These activities are carried on in all markets and geographic
areas in which the Company operates. The Company purchases plastic resins and
other materials which either can be sold directly to customers or used by the
Company in the manufacture of other products for sale to customers. Because of
their interchangeable nature, inventories are not segregated as to
manufacturing, merchant or distribution activities. All of the products
which the Company sells are used for the same purpose--as raw material to be
molded or extruded by the Company's customers. The Company has one sales force
and it utilizes the same warehouses for all of its products and materials.
The first classification, manufacturing, involves primarily the
formulation and manufacture of proprietary plastic compounds
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engineered to fulfill the application requirements of the Company's customers.
These compounds, also known as engineered products, are formulated in the
Company's laboratories and are manufactured in the Company's nine plastics
compounding plants in North America and Europe. The Company combines basic
resins purchased from plastic resin producers with various additives in
accordance with formulae and specifications developed in the Company's
laboratories. Customers for the Company's proprietary plastic compounds
include manufacturers, custom molders and extruders of a wide variety of
plastic products and parts. Proprietary compounds are produced by the Company
generally on the basis of customer commitments. When necessary, compounds are
produced for future delivery and are stored in Company and public warehouses.
The Company's proprietary plastic compounds are sold to manufacturers and
suppliers in various markets such as consumer products, electrical/electronics,
packaging, office equipment, automotive and agriculture. For example, these
compounds are used in the consumer products industry for such items as writing
instruments, shelving, soft drink coolers, video tape cassettes, batteries,
outdoor furniture, lawn sprinklers, artificial turf, skateboards, toys, games
and plastic parts for various household appliances; the electrical/electronics
industry for such products as outdoor lighting, parts for telephones, connector
blocks, transformers, capacitor housings and wire and cable insulation for
power generation, distribution and control systems; the
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packaging industry for such products as plastic bags and labels and packaging
materials for food, soap, fragrances, flowers, gardening supplies and various
household necessities; the office equipment industry for such products as cases
and housings for computers, folders and binders, stack trays and panels and
drawers for copying machines; the automotive industry for such products as
grills, body side moldings, bumper protective strips, window seals, valance
panels, bumper guards, air ducts, steering wheels, fan shrouds and other
interior and exterior components; and the agriculture industry for such
products as greenhouse coverings, protective film for plants and agricultural
mulch.
On March 31, 1994, the Company, through a wholly-owned subsidiary,
acquired the assets of ComAlloy International Corporation, a subsidiary of
Exxon Chemical. This acquisition expanded the Company's product line of
engineered plastics to include alloys designed for demanding high-strength
applications. These materials are used in the automotive market and in
applications for specialty construction materials, plumbing devices, hand and
power tools, farm equipment, and recreational products such as exercise
equipment, and commercial food handling items.
The Company manufactures various flame retardant engineered compounds,
including Polyman(R), Polyflam(R) and Polyvin(R). These compounds are used in
applications such as telephone system terminal blocks, parts for color
televisions, electrical components and housings for household appliances and
outdoor
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products.
Schulamid(R), a nylon compound, can be unfilled, reinforced or
impact-modified and is used in applications which require good impact strength
and resistance to high temperatures and chemicals. Typical applications
include under-the-hood automotive components and various building and consumer
products.
The Company manufactures Superohm(R), a specialized elastomer-based
compound for use as insulation for high and medium voltage wire and cable which
may be either flame retardant or resistant to high temperatures. The Company
also manufactures Formion(R), a specialized compound which has good impact
strength, is resistant to abrasion and has performance characteristics which do
not decrease in low temperatures. This product is sold principally to the
transportation industry for use in bumper blocks and protective rub strips.
In addition, the Company manufactures Polytrope(R), a thermoplastic
elastomer which has high resiliency and good impact resistance. Presently, the
principal market is the domestic automotive industry. Typical applications are
valance panels, body side moldings, grills and bumper rub strips. Parts molded
from Polytrope(R) weigh less than equivalent metal parts, are impact-resistant
and may be painted to match adjoining exterior body parts.
Polypur(R), a polyurethane-based compound manufactured by the Company,
has good thermal stability, is easy to mold and can be finished with only one
coat of paint. It presently is used for
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automotive exterior body components and trim parts such as body side moldings.
The Company also manufactures Polyfort(R), a reinforced polypropylene
compound for applications which require stiffness and resistance to heat
distortion. Examples of such applications are coffee makers, binders for
computer printouts, seatbacks and under-the-hood products for automobiles.
Schulink(R), a crosslink polyethylene-based compound, is used in rotational
molding applications requiring high strength and chemical resistance.
The Company's plastics compounding operations include the manufacture of
Polybatch(R), an additive or color concentrate used for modifying various
plastic resins. An additive concentrate provides various physical properties
required by customers. These properties include slip, anti-slip, UV
stabilizers, etc. A color concentrate is a clear or natural plastic resin into
which a substantial amount of color pigment is incorporated or dispersed. The
Company manufactures its proprietary concentrates using its formulae and
purchased prime natural resins. These concentrates are sold to manufacturers
of plastic products. The Company also manufactures Polyblak(R), a line of
black concentrates. In addition, the Company manufactures custom concentrates
using resins and formulae supplied by customers.
Concentrates provide specific color and/or other physical properties used
in the manufacture of film for packaging, household goods, toys, automotive
parts, mechanical goods and other plastic items. Black concentrates, which are
resistant to
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weather and sunlight, are used by wire and cable manufacturers for insulation
coating and in the production of plastic pipe, black film and other black
plastic items.
Custom plastics compounding, or tolling, which accounted for less than 5%
of the Company's revenues from manufacturing in its latest fiscal year,
involves the use of resins and formulae provided by customers. Custom
compounding is done principally for major plastic resin producers. The Company
is compensated on the basis of an agreed price per pound plus an additional
charge for any additives and packaging supplied by the Company.
The Company also is engaged in the manufacture of rubber shims and tie
pads. A rubber shim is placed between two metals to prevent direct abrasive
contact. The principal market for rubber shims is the automotive industry. A
tie pad is a rubber pad generally inserted between the metal rail and the wood
tie in railroad trackage to reduce heat on the tie. The activities described
in this paragraph constitute a minor portion of the Company's business.
In the second classification within its plastics industry segment, the
Company, through its sales offices in North America and Europe, acts as a
merchant which buys prime and off-grade plastic resins and resells these
commodities, without further processing, to a variety of users. The plastic
resins generally are purchased from major producers. Prime resins are
purchased from these producers and usually are sold to small and medium-sized
customers. In addition to prime resins, the Company
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also purchases supplies of resins resulting from overruns, changes in
customers' specifications and failure to meet rigid prime specifications.
Historically, these materials have been in continuous supply generally in
proportion to the total industry production of plastic resins.
In the third classification within its plastics industry segment, the
Company, in its European operations, acts as a distributor for several major
resin producers which include Huels AG, BASF, Dow Chemical, Exxon Chemical, and
ATOCHEM.
The Company is the exclusive third-party United States distributor for
Enichem America, Inc. of prime polychloroprene (neoprene), nitrile and EPDM
rubber. These products are purchased by the Company and are sold principally
to the adhesive industry and to manufacturers of wire and cable products,
automotive oil-resistant products, footwear heels and soles and heavy duty
conveyor belting. Further, the Company is the exclusive third-party United
States, Canada and Mexico distributor of nylon 11 and 12 for Elf Atochem North
America, Inc. Nylon 11 and 12 are used in the rotational molding business and
the extrusion and injection molding markets. The Company also acts as the
exclusive United States distributor for Vestolit, a polyvinyl chloride
dispersion resin manufactured by Huels AG of Marl, Germany.
In addition, the Company acts as United States distributor of Escorene(R)
polypropylene resins and Escorene(R) roto molding resins, both manufactured by
Exxon Chemical. In 1994, the Company became
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the exclusive distributor in the United States for Exxon Chemical of
polyethylene used in injection molding, EMA and EVA. The Company also acts as
a distributor in Canada of K-Resin(R) for Phillips Petroleum and polypropylene
for Epsilon Products Company.
Supplemental information regarding net sales and gross profit of the
Company's three classifications within its only industry segment is set forth
on page 28 of the Company's 1994 Annual Report to Stockholders, which
information is incorporated herein by reference.
The Company's operations outside the United States are an important part
of its business. The Company's foreign subsidiaries manufacture additives,
concentrates, flame retardants and other proprietary and custom plastic
compounds, act as merchants of plastic resins, and distribute certain plastic
resins for foreign prime producers.
Information regarding the amount of sales, operating income and
identifiable assets attributable to each of the Company's geographic areas and
the amount of inter-geographic area sales for the last three years is set forth
in Note 10 of the Notes to Consolidated Financial Statements in the Company's
1994 Annual Report to Stockholders, which information is incorporated herein by
reference.
N.V. A. Schulman Plastics, S.A., a Belgian subsidiary located in Bornem,
manufactures proprietary and custom concentrates and compounds. These products
principally are sold in Germany,
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France, the Benelux countries, Italy and the Far East.
A. Schulman, Inc., Limited, a United Kingdom subsidiary located in South
Wales, manufactures proprietary and custom plastic concentrates which are sold
primarily in the United Kingdom.
A. Schulman GmbH, a German subsidiary located in Sindorf, operates seven
sales offices and manufactures proprietary and custom plastic compounds. In
addition, a major portion of the sales volume of this subsidiary is derived
from the purchase and sale of prime and off-grade plastic resins from major
European producers. During the fiscal year ended August 31, 1994, this
subsidiary purchased approximately 34% of the compounds manufactured in the
Bornem, Belgium plant. Approximately 22% of the sales volume of A. Schulman
GmbH during the same period was derived from its distribution activity of
selling plastic resins and compounds of Huels AG. This subsidiary also
distributes products for Dow Chemical and Exxon Chemical.
A. Schulman Canada Ltd., a Canadian subsidiary located in St. Thomas,
Ontario, manufactures proprietary and custom plastic compounds, acts as a
merchant of prime and off-grade plastic resins and distributes K-Resin(R) for
Phillips Petroleum and polypropylene for Epsilon Products Company. These
products are sold primarily in Canada. Its principal sales office is located
in Toronto.
A. Schulman AG, a Swiss subsidiary located in Zurich, is engaged as a
merchant of plastic resins and sells plastic
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compounds and concentrates manufactured by other European subsidiaries of the
Company.
A. Schulman, S.A., a French subsidiary, has four sales offices
in France and is a distributor in France for ATOCHEM, a merchant of
plastic resins, and sells compounds manufactured by the Company's subsidiaries
in Bornem, Belgium, Sindorf, Germany and Givet, France.
Diffusion Plastique is a Paris-based distributor of plastic materials.
A. Schulman Plastics, S.A., another French subsidiary, is located in Givet,
France. This subsidiary produces plastic concentrates for the Company's
European market. Both A. Schulman, S.A. and Diffusion Plastique are
distributors in France for BASF.
A. Schulman de Mexico, S.A. de C.V., ASI Employment, S.A. de C.V., and AS
Mex Hold, S.A. de C.V., each a Mexican subsidiary, have been formed in
connection with the Company's investment in a new production facility in
Mexico.
The Company has a 70% partnership interest in The Sunprene Company, which
manufactures a line of PVC thermoplastic elastomers and compounds primarily for
the North American automotive market. The other partner is an indirect
wholly-owned subsidiary of Mitsubishi Chemical Corporation, one of the largest
chemical companies in Japan. This partnership has a manufacturing line at the
Company's Bellevue, Ohio facility. The Company's partner provides technical
and manufacturing expertise.
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As of August 31, 1994, the Company had approximately 797 employees in the
United States and approximately 966 employees in its foreign operations.
Substantially all of the Company's hourly production employees are represented
by various unions under collective bargaining agreements.
The Company has laboratory facilities at each of its plastics compounding
plants staffed by approximately 208 technical personnel. The Company's plastic
compounding business is to a degree dependent on its ability to hire and retain
qualified technical personnel. These personnel are involved in activities
relating to the development of new compounds and the testing and sampling of
material for conformity with product specifications. The Company has
experienced no difficulty in hiring or retaining such personnel.
A large part of the Company's technical activities relates to the
development of compounds for specific applications of customers. Research
activities relating to the development of new products and the improvement of
existing products are important to the Company; however, the amounts spent
during the last three fiscal years have not been material.
Management believes that compliance with Federal, state and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have not had a
material effect upon the capital expenditures, earnings or competitive position
of the Company.
During the year ended August 31, 1994, the Company's five
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largest customers accounted in the aggregate for less than 10% of total sales.
In management's opinion, the Company is not dependent upon any single customer
and the loss of any one customer would not have a materially adverse effect on
the Company's business other than on a temporary basis.
The raw materials required by the Company readily are available from
major plastic resin producers or other suppliers. The principal types of
plastic resins used in the manufacture of the Company's proprietary plastic
compounds are polypropylene, ABS (acrylontrile butadiene styrene), PVC
(polyvinyl chloride), polyethylene and polystyrene.
The Company's business is highly competitive. In its manufacturing
classification, the Company competes with producers of the basic plastic
resins, many of which also operate compounding plants, and also competes with
other independent plastic compounders. The producers of basic plastic resins
generally are large producers of petroleum and chemicals, which are much larger
than the Company and have greater financial resources. Although no industry
statistics are available, the Company believes that it is one of the largest of
the ten to fifteen manufacturers of plastic compounds in the United States and
Europe which is not also engaged in the petrochemical industry or a basic
producer of plastic resins. Each of these ten to fifteen competitors competes
with the Company generally in its own local market area.
The Company also competes with others as a merchant and
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distributor of plastic resins, synthetic rubber and other products. No
accurate information is available to the Company as to the extent of its
competitors' sales and earnings in these classifications, but management
believes that the Company has only a small fraction of the total market.
The principal methods of competition in plastics manufacturing and
distribution are innovation, quality, service and price. In the Company's
merchant classification, the principal methods of competition are service and
price. The primary competitive advantages of the Company arise from its
financial capabilities, its excellent supplier relationships and its ability to
provide quality plastic compounds at competitive prices.
The Company uses various trademarks and trade names in its business.
These trademarks and trade names protect certain names in respect of the
Company's products and are significant to the extent they provide a certain
amount of goodwill and name recognition in the industry. Although these
trademarks and trade names contribute to profitability, the Company does not
consider a material part of its business to be dependent on such trademarks and
trade names. The Company also has some patents in various parts of the world
for certain of its products. The products covered by these patents do not
constitute a material part of the Company's business.
ITEM 2. PROPERTIES
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The Company owns and operates five plastics compounding plants in North
America and four in Europe. The following Table
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indicates the location of each plastics compounding plant and the approximate
annual plastics compounding capacity and approximate floor area, including
warehouse space:
<TABLE>
<CAPTION>
Approximate Approximate
Capacity Floor Area
Location (lbs.) (Square Feet)
- - - --------------------------------------------------------------------
<S> <C> <C>
Akron, Ohio 73,000,000 104,000
Bellevue, Ohio 80,000,000(1) 141,000
Orange, Texas 72,000,000 122,000
Nashville, Tennessee 60,000,000 90,000
Bornem, Belgium 130,000,000 356,000
Crumlin Gwent, South Wales (2)(a) 47,000,000 85,000
Givet, France(2)(b) 40,000,000 50,000
St. Thomas, Ontario, Canada(2)(c) 50,000,000 104,000
Sindorf, Germany 90,000,000 320,000(3)
-----------
642,000,000 (2)(a),(b),(c),
=========== (d),(e)
<FN>
(1) Includes capacity of approximately 12 million pounds from a
manufacturing line owned by The Sunprene Company, a
partnertship in which the Company has a 70% partnership
interest.
(2) Excludes the following capital projects:
(a) A new manufacturing line having a capacity of
approximately 12 million pounds is being installed.
This line will commence operations in fiscal 1995.
A new warehouse facility consisting of approximately
11,000 square feet is being constructed and is
scheduled for completion in fiscal 1995.
(b) A new manufacturing line having a capacity of
approximately 12 million pounds is being installed.
This line will commence operations in fiscal 1995.
Also, approximately 20,000 square feet of space
is being constructed and is scheduled for completion
in fiscal 1995.
(c) A new manufacturing line having a capacity of 12 million
pounds is being installed. This new line will replace an
existing manufacturing line having a capacity of 5 million
pounds and will commence operations in fiscal 1995.
</TABLE>
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(d) The Company recently commenced construction in central Mexico of
a new production facility. The total investment including land,
building, equipment and working capital, will be approximately
$15 million. This facility is expected to have an initial annual
capacity of approximately 40 million pounds and is scheduled to
commence operations in late fiscal 1995.
(e) The Company plans to invest $6 million in a new manufacturing
facility in Indonesia. This facility is expected to have an
initial annual capacity of approximately 13 million pounds and is
scheduled to commence operations in fiscal 1996.
(3) Includes approximately 28,000 square feet of sales and
administrative office space, 196,000 square feet of warehouse
space, and 96,000 square feet for manufacturing.
The approximate annual plastics compounding capacity set forth in the
preceding Table is based upon several factors, including the weekly five-day,
three-shift basis on which the Company customarily operates. Another factor is
the approximate historical mix of specific types of plastic compounds
manufactured at each plant, as a plant operating at full capacity will produce
a greater or lesser quantity (in pounds) depending upon the specific plastic
compound then being manufactured. The annual pounds of plastic compounds
manufactured does not, in itself, reflect the extent of utilization of the
Company's plants or the profitability of the plastic compounds produced.
The Company also owns and operates a rubber shim and tie pad plant in
East St. Louis, Illinois having a floor area of approximately 65,000 square
feet.
The Company considers each of the foregoing facilities to be in good
condition and suitable for its purposes.
Public warehouses are used wherever needed to store the
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Company's products conveniently for shipment to customers. The number of
public warehouses in use varies from time to time, but a yearly average
approximates 35. The Company also leases approximately 100,000 square feet of
warehouse space located in Sindorf and Horrem, Germany.
The Company owns its corporate headquarters which is located in Akron,
Ohio and which contains approximately 48,000 square feet of usable floor space.
The Company leases sales offices in various locations in the United States,
Canada, the United Kingdom, Mexico and Europe.
ITEM 3. PENDING LEGAL PROCEEDINGS
- - - ------ -------------------------
The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - - ------ ---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended August 31, 1994.
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
The age (as of October 24, 1994), business experience during the past
five years and offices presently held by each of the Company's Executive
Officers are reported below. The Company's By-Laws provide that officers shall
hold office until their successors are elected and qualified.
Terry L. Haines: Age 48; President and Chief Executive Officer of the
Company since January, 1991; formerly Chief Operating Officer, 1990-1991 and
Vice President--North American Sales, 1989-1990; and prior to that time General
Manager of A. Schulman
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Canada Ltd. since 1986.
Robert A. Stefanko: Age 51; Chairman of the Board since January, 1991;
Executive Vice President--Finance and Administration of the Company since 1989;
Chief Financial Officer of the Company since 1979; and formerly Vice
President--Finance since 1979.
Larry A. Kushkin: Age 54; Executive Vice President--International
Automotive Operations of the Company since 1989 and prior to that time Vice
President--Automotive Sales of the Company since 1977.
Brian R. Colbow: Age 47; Treasurer of the Company since 1984.
Alain C. Adam: Age 46; Vice President--Automotive Marketing since 1990;
formerly General Manager--Automotive Marketing since 1989 and prior to that
time Manager--Automotive Marketing since 1985.
Leonard E. Emge: Age 64; Vice President--Manufacturing since 1993 and
prior to that time General Plant Manager--North America since 1985.
James H. Berick: Age 61; Secretary of the Company since 1979 and
Chairman, Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).
PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
- - - ------ -------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The Company's Common Stock is traded in the over-the-counter market and
is quoted through the NASDAQ National Market System.
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Additional information in response to this Item is set forth on
page 1 of the Company's 1994 Annual Report to Stockholders, which information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- - - ------ -----------------------
Information in response to this Item is set forth on pages 28 and 29 of
the Company's 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - - ------ ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Information in response to this Item is set forth on pages 26 and 27 of
the Company's 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - - ------ -------------------------------------------
(a) Financial Statements
--------------------
The financial statements, together with the report thereon of Price
Waterhouse dated October 14, 1994, appearing on pages 14 through 25 of the
Company's 1994 Annual Report to Stockholders, are incorporated herein by
reference.
(b) Supplementary Data
------------------
Information in response to this Item is set forth in the financial
statement schedules set forth on pages F-1 through F-6 of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
- - - ------ -----------------------------------------------------
None.
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PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- - - ------- -----------------------------------------------
The information required in response to this Item in respect of Directors
is set forth under the captions "Election of Directors" and "Compliance with
Section 16(a) of The Securities Exchange Act of 1934" in the Company's proxy
statement dated November 11, 1994, previously filed with the Commission, which
information is incorporated herein by reference. The information required by
this Item in respect of Executive Officers is set forth on pages 19 and 20 of
this Form 10-K and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- - - ------- ----------------------
Information in response to this Item is set forth under the caption
"Compensation of Executive Officers" in the Company's proxy statement dated
November 11, 1994, previously filed with the Commission, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
- - - ------- ----------------------------------------
OWNERS AND MANAGEMENT
---------------------
Information in response to this Item is set forth under the caption
"Election of Directors" in the Company's proxy statement dated November 11,
1994, previously filed with the Commission, which information is incorporated
herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - - ------- ----------------------------------------------
Information in response to this Item is set forth under the caption
"Compensation Committee Interlocks and Insider Participation" in the Company's
proxy statement dated November 11, 1994, previously filed with the Commission,
which information is incorporated herein by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
- - - ------- ---------------------------------------------------
ON FORM 8-K
-----------
(a) The following documents are filed as part of this report:
Page
----
(1) Financial Statements:
---------------------
Report of Independent Accountants 25*
Consolidated Statement of Income for
the three years ended August 31, 1994 14*
Consolidated Balance Sheet at August 31,
1994 and 1993 16*
Consolidated Statement of Cash Flows for
the three years ended August 31, 1994 18*
Consolidated Statement of Stockholders'
Equity for the three years ended August 31,
1994 15*
Notes to Consolidated Financial
Statements 19*
___________
*Incorporated by reference from the indicated page of the
Company's 1994 Annual Report to Stockholders. With the exception of this
information and the information incorporated in Items 1, 5, 6, 7 and 8, the
1994 Annual Report to Stockholders is not deemed filed as part of this report.
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(2) Financial Statement Schedules:
------------------------------
Report of Independent Accountants
on Financial Statement Schedules F-1
V-Property, Plant and Equipment F-2
VI-Reserves for Depreciation of
Property, Plant and Equipment F-3
VIII-Valuation and Qualifying Accounts F-4
IX-Short-Term Borrowings F-5
X-Supplementary Income Statement
Information F-6
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits:
---------
Exhibit
Number
------
3(a) Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(a)
of the Company's Form 10-K for fiscal year
ended August 31, 1990).
3(b) Certificate of Amendment of Certificate
of Incorporation filed January 14, 1987
(incorporated by reference to Exhibit 3(b)
of the Company's Form 10-K for fiscal year
ended August 31, 1991).
3(c) Certificate of Amendment of Certificate of
Incorporation filed December 14, 1987.
3(d) Certificate of Amendment of Certificate of
Incorporation filed December 12, 1990
(incorporated by reference to Exhibit 3(d)
of the Company's Form 10-K for fiscal year
ended August 31, 1991).
24
<PAGE> 25
3(e) By-Laws (incorporated by reference to Exhibit 3(c) of the
Company's Form 10-K for fiscal year ended August 31, 1990).
3(f) Amendment to By-Laws dated October 20, 1986 (incorporated by
reference to Exhibit 3(f) of the Company's Form 10-K for fiscal
year ended August 31, 1991).
10(a)* 1981 Incentive Stock Option Plan (incorporated by reference to
Exhibit 10(b) of the Company's Form 10-K for fiscal year
ended August 31, 1990).
10(b)* A. Schulman, Inc. 1991 Stock Incentive Plan (incorporated by
reference to Exhibit 10(b) of the Company's Form 10-K for fiscal
year ended August 31, 1991).
10(c)* A. Schulman, Inc. 1992 Non-Employee Directors' Stock Option
Plan (incorporated by reference to Exhibit A of the Company's
Proxy Statement dated November 12, 1992 filed as Exhibit 28 of
the Company's Form 10-K for fiscal year ended August 31, 1992).
10(d)* Employment Agreement between the Company and Robert A. Stefanko
dated December 28, 1990 (incorporated by reference to Exhibit
10(c) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(e)* Employment Agreement between the Company and Terry L. Haines
dated December 28, 1990 (incorporated by reference to Exhibit
10(d) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(f)* Employment Agreement between the Company and Larry A. Kushkin
dated December 28, 1990 (incorporated by reference to Exhibit
10(e) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(g)* Employment Agreement between the Company and Brian R. Colbow
dated December 28, 1990 (incorporated by reference to Exhibit
10(f) of the Company's Form 10-K for fiscal year ended August
31, 1991).
10(h)* Employment Agreement between the Company and Alain C. Adam
dated December 28, 1990 (incorporated by reference to Exhibit
10(g) of the Company's Form 10-K for fiscal year ended August
31, 1991).
25
<PAGE> 26
10(i)* Agreement between the Company and Robert A. Stefanko dated as of
August 1, 1985 (incorporated by reference to Exhibit 10(h) of the
Company's Form 10-K for fiscal year ended August 31, 1991).
10(j)* Agreement between the Company and Larry A. Kushkin dated as of
August 1, 1985 (incorporated by reference to Exhibit 10(i) of the
Company's Form 10-K for fiscal year ended August 31, 1991).
10(k)* Agreement between the Company and Robert A. Stefanko dated as of
March 21, 1991 (incorporated by reference to Exhibit 10(l) of the
Company's Form 10-K for fiscal year ended August 31, 1992).
10(l)* Agreement between the Company and Terry L. Haines dated as of
March 21, 1991 (incorporated by reference to Exhibit 10(m) of the
Company's Form 10-K for fiscal year ended August 31, 1992).
10(m)* Agreement between the Company and Larry A. Kushkin dated as of
August 31, 1993 (incorporated by reference to Exhibit 10(n) of
the Company's Form 10-K for fiscal year ended August 31, 1993).
10(n) Credit Agreement between the Company, Society National Bank,
First National Bank of Ohio and Union Bank of Switzerland dated
as of June 30, 1993 (incorporated by reference to Exhibit 10(o)
of the Company's Form 10-K for fiscal year ended August 31,
1993).
10(o) Amendment Agreement between the Company, Society National Bank,
First National Bank of Ohio and Union Bank of Switzerland dated
as of May 31, 1994.
11 Computation of Earnings Per Common Share
13 Company's 1994 Annual Report to Stockholders
21 Subsidiaries of the Company
23 Consent of Independent Accountants
24 Powers of Attorney
27 Financial Data Schedule
99 Notice of Annual Meeting and Proxy Statement
Dated November 11, 1994
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
26
<PAGE> 27
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the Company's
fiscal year ended August 31, 1994.
27
<PAGE> 28
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
A. SCHULMAN, INC.
By: /s/ Robert A. Stefanko
-------------------------------
Robert A. Stefanko
Chairman of the Board of
Directors and Executive Vice
President - Finance and
Administration
Dated: November 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- - - --------- ----- ----
/s/ Terry L. Haines Director and Principal November 23, 1994
- - - ---------------------- Executive Officer
Terry L. Haines
/s/ Robert A. Stefanko Director, Principal November 23, 1994
- - - ---------------------- Financial Officer and
Robert A. Stefanko Principal Accounting Officer
James H. Berick* Director
Lucille G. Ford* Director
Gordon E. Heffern* Director
Larry A. Kushkin* Director
Franz A. Loehr* Director
Alan L. Ockene* Director
Charles J. Pilliod* Director
Paul Craig Roberts* Director
Rene C. Rombouts* Director
Robert G. Wallace* Director
Peggy Gordon Elliott* Director
*By: /s/ Robert A. Stefanko November 23, 1994
----------------------
Robert A. Stefanko
Attorney-in-Fact
*Powers of attorney authorizing Robert A. Stefanko to sign this annual
report on Form 10-K on behalf of certain Directors of the Company are being
filed with the Securities and Exchange Commission herewith.
28
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors of A. Schulman, Inc.
Our audits of the consolidated financial statements referred to in our report
dated October 14, 1994 appearing on page 25 of the 1994 Annual Report to the
Stockholders of A. Schulman, Inc. (which report and consolidated financial
statements are incorported by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes and its method of accounting
for postretirement health care benefits and life insurance, effective September
1, 1992.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
October 14, 1994
F-1
<PAGE> 30
<TABLE>
SCHEDULE V
A. SCHULMAN, INC.
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
Balance at Balance at
beginning Additions Retirements Translation close of
Classification of period at cost or sales Transfers adjustment Other period
-------------- ---------- --------- ----------- --------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Land and improvements $ 4,674,000 $ 630,000 $ (140,000) $ 442,000 $ 207,000 $ 5,813,000
Buildings and leasehold
improvements 47,441,000 $ 2,050,000 2,608,000 2,042,000 $(17,000)(1) 54,124,000
Machinery and equipment 118,302,000 6,992,000 (2,157,000) 13,420,000 4,808,000 141,365,000
Furniture and fixtures 13,001,000 1,514,000 (64,000) 102,000 674,000 15,227,000
Construction in progress 7,648,000 14,116,000 (16,572,000) 188,000 5,380,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$191,066,000 $25,302,000 $(2,361,000) $ - $ 7,919,000 $(17,000) $221,909,000
============ =========== =========== =========== =========== ======== ============
Year ended August 31, 1993:
Land and improvements $ 5,213,000 $ 91,000 $ (630,000) $ 4,674,000
Buildings and leasehold
improvements 52,242,000 $ 19,000 1,473,000 (6,276,000) $(17,000)(1) 47,441,000
Machinery and equipment 125,356,000 2,296,000 $(3,619,000) 8,123,000 (13,854,000) 118,302,000
Furniture and fixtures 13,059,000 1,047,000 (250,000) 885,000 (1,740,000) 13,001,000
Construction in progress 3,935,000 14,796,000 (10,572,000) (511,000) 7,648,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$199,805,000 $18,158,000 $(3,869,000) $ - $(23,011,000) $(17,000) $191,066,000
============ =========== =========== =========== =========== ======== ============
Year ended August 31, 1992:
Land and improvements $ 4,163,000 $ 351,000 $ 699,000 $ 5,213,000
Buildings and leasehold
improvements 43,095,000 $ 423,000 2,459,000 6,282,000 $(17,000)(1) 52,242,000
Machinery and equipment 95,686,000 4,544,000 $(1,725,000) 14,291,000 12,560,000 125,356,000
Furniture and fixtures 10,026,000 1,476,000 (962,000) 736,000 1,783,000 13,059,000
Construction in progress 11,871,000 9,384,000 (17,837,000) 517,000 3,935,000
------------ ----------- ----------- ----------- ----------- -------- ------------
$164,841,000 $15,827,000 $(2,687,000) $ - $21,841,000 $(17,000) $199,805,000
============ =========== =========== =========== =========== ======== ============
<FN>
Note:
(1) Amortization of leasehold improvements credited directly to asset accounts.
</TABLE>
F-2
<PAGE> 31
<TABLE>
SCHEDULE VI
A. SCHULMAN, INC.
CONSOLIDATED RESERVES FOR DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
Provision for
Balance at depreciation Retirements Balance at
beginning charged to renewals and Translation close of
Description of period income replacements adjustment Other period
----------- ---------- ------------- ------------ ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Land improvements $ 201,000 $ 63,000 $ 264,000
Buildings 17,983,000 1,878,000 $ 883,000 20,744,000
Machinery and equipment 79,396,000 11,170,000 $(2,071,000) 3,468,000 91,963,000
Furniture and fixtures 7,989,000 1,787,000 (58,000) 483,000 10,201,000
Investment grant 541,000 (187,000) 39,000 $241,000(1) 634,000
------------ ----------- ----------- ------------ -------- ------------
$106,110,000 $14,711,000 $(2,129,000) $ 4,873,000 $241,000 $123,806,000
============ =========== =========== ============ ======== ============
Year ended August 31, 1993:
Land improvements $ 155,000 $ 46,000 $ 201,000
Buildings 18,595,000 1,875,000 $ (2,487,000) 17,983,000
Machinery and equipment 81,278,000 11,222,000 $(3,397,000) (9,707,000) 79,396,000
Furniture and fixtures 7,549,000 1,705,000 (175,000) (1,090,000) 7,989,000
Investment grant 838,000 (148,000) (149,000) 541,000
------------ ----------- ----------- ------------ -------- ------------
$108,415,000 $14,700,000 $(3,572,000) $(13,433,000) - $106,110,000
============ =========== =========== ============ ======== ============
Year ended August 31, 1992:
Land improvements $ 118,000 $ 37,000 $ 155,000
Buildings 13,980,000 2,253,000 $ 2,362,000 18,595,000
Machinery and equipment 62,678,000 10,946,000 $ (943,000) 8,597,000 81,278,000
Furniture and fixtures 5,888,000 1,490,000 (851,000) 1,022,000 7,549,000
Investment grant 852,000 (193,000) 179,000 838,000
------------ ----------- ----------- ------------ -------- ------------
$83,516,000 $14,533,000 $(1,794,000) $12,160,000 - $108,415,000
============ =========== =========== ============ ======== ============
<FN>
Note:
(1) Received from various European countries as investment grants. See Note 2 of Notes to Consolidated Financial Statements.
</TABLE>
F-3
<PAGE> 32
<TABLE>
SCHEDULE VIII
A. SCHULMAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Balance at Charged to Net Balance at
beginning of cost and write Translation close of
period expenses offs adjustment Other period
----------- ---------- ----- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Reserve for doubtful accounts
Year ended August 31, 1994 $3,974,000 $298,000 $(450,000) $ 139,000 $150,000(1) $4,111,000
Year ended August 31, 1993 4,433,000 655,000 (576,000) (538,000) - 3,974,000
Year ended August 31, 1992 4,335,000 1,846,000 (2,240,000) 492,000 - 4,433,000
Valuation allowance - deferred tax assets
Year ended August 31, 1994 5,557,000 - - - (1,360,000)(2) 4,197,000
Year ended August 31, 1993 - 5,557,000 - - - 5,557,000
<FN>
Note:
(1) Acquisition of assets of ComAlloy International.
(2) Represents current year change in valuation allowance for foreign tax credit
carryforward benefits which are not likely to be utilized.
</TABLE>
F-4
<PAGE> 33
<TABLE>
SCHEDULE IX
A. SCHULMAN, INC.
SHORT-TERM BORROWINGS
<CAPTION>
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
at end of interest during the during the during the
period rate period period period
--------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Payable to U.S. banks $12,300,000 5.49% $12,300,000 $3,359,000 4.52%
Payable to foreign banks -0- - 11,501,000 191,000 8.60%
Year ended August 31, 1993:
Payable to U.S. banks -0- - 11,300,000 2,859,000 3.80%
Payable to foreign banks -0- - 12,832,000 183,000 10.78%
Year ended August 31, 1992:
Payable to U.S. banks 4,800,000 4.13% 12,400,000 5,123,000 5.18%
Payable to foreign banks -0- - 15,612,000 625,000 11.71%
</TABLE>
F-5
<PAGE> 34
<TABLE>
SCHEDULE X
A. SCHULMAN, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<CAPTION>
Year ended August 31,
---------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $ 9,326,000 $ 8,724,000 $ 8,973,000
Depreciation and amortization 14,728,000 14,717,000 14,550,000
Taxes other than income taxes:
Payroll 7,720,000 7,565,000 6,845,000
Property and other taxes 3,270,000 2,786,000 2,797,000
Rents 2,606,000 2,391,000 2,444,000
Advertising (a) (a) (a)
Research and development (a) (a) (a)
<FN>
(a) Expenditures were less than 1% of total revenues.
</TABLE>
F-6
<PAGE> 1
Exhibit 3(c)
Certificate of Amendment of Certificate of Incorporation filed December 14,
1987.
<PAGE> 2
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION OF
A. SCHULMAN, INC.
A. SCHULMAN, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That a meeting of the Board of Directors of A. Schulman, Inc.,
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, that the Board of Directors believes it advisable to
(i) adopt an amendment, as indicated below, to the first paragraph of
Article FOURTH of the Company's Certificate of Incorporation to increase
from 15,000,000 to 25,000,000 the authorized number of shares of Common
Stock and (ii) submit the proposed amendment to the Stockholders for
their consideration at the Annual Meeting of Stockholders on December 10,
1987. As amended, the first paragraph of Article FOURTH would read as
follows:
FOURTH: The total number of shares of stock which the
------
Corporation shall have authority to issue is 26,010,707 shares,
consisting of 1,000,000 shares of special stock without par
value, 10,707 shares of preferred stock of the par value of
$100.00 per share and 25,000,000 shares of common stock of the
par value of $1.00 per share.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the Annual Meeting of the Stockholders of said corporation was duly
called and held, upon notice in accordance
<PAGE> 3
with Section 222 of the General Corporation Law of the State of Delaware, at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said A. Schulman, Inc. has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by William C. Zekan,
its President, and James H. Berick, its Secretary, this 10th day of
December, 1987.
A. SCHULMAN, INC.
By: /s/ William C. Zekan
----------------------------
William C. Zekan, President
ATTEST:
By: /s/ James H. Berick
------------------------------
James H. Berick, Secretary
<PAGE> 1
Exhibit 10(o)
Amendment Agreement between the Company, Society National Bank, First National
Bank of Ohio and Union Bank of Switzerland dated as of May 31, 1994.
<PAGE> 2
AMENDMENT AGREEMENT
-------------------
Amendment Agreement made as of the 31st day of May, 1994, by and among A.
SCHULMAN, INC., a Delaware corporation ("Borrower") and SOCIETY NATIONAL BANK,
FIRST NATIONAL BANK OF OHIO and UNION BANK OF SWITZERLAND ("Banks") and SOCIETY
NATIONAL BANK, as Agent for the Banks:
WHEREAS, Borrower, the Agent and the Banks are parties to a certain credit
agreement dated as of June 30, 1993, which provides, among other things, for
revolving credits and terms loans aggregating the maximum principal amount of
Forty Million Dollars ($40,000,000) until May 31, 1996, all upon certain terms
and conditions (the "credit agreement");
WHEREAS, Borrower, the Agent and the Banks desire to amend the credit agreement
by extending the term of the revolving credit and by making certain other
amendments thereto;
WHEREAS, each term used herein shall be defined in accordance with the credit
agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein and for other valuable considerations, Borrower, the Agent and the Banks
agree as follows:
1. The credit agreement is hereby amended by deleting the date
"May 31, 1996" from the definition of "Commitment Period" in Article I and
substituting the date "May 31, 1997" in place thereof.
2. The credit agreement is hereby amended by deleting the date "May
31, 1996" from the first paragraph of Section 2.1A, subparts (i), (ii) and
(iii), and substituting the date "May 31, 1997" in place thereof.
3. The credit agreement is hereby amended by deleting the date
"May 31, 1996" from the third paragraph of Section 2.1A, line 15, and
substituting the date "May 31, 1997" in place thereof.
4. The credit agreement is hereby amended by deleting the date
"May 31, 1996" from Section 2.1B, line 3, and substituting the date "May 31,
1997" in place thereof.
5. The credit agreement is hereby amended by deleting the date
"May 31, 2000" from Section 2.1B, the first full paragraph, page 13, and
substituting the date "May 31, 2001" in place thereof.
6. The credit agreement is hereby amended by deleting the date
"May 31, 1996" from Section 2.5, line 7, and substituting the date "May 31,
1997" in place thereof.
7. The credit agreement is hereby amended by deleting Exhibit A and
substituting in place thereof, new Exhibit A in the form of Exhibit A attached
hereto.
-1-
<PAGE> 3
8. Concurrently with the execution of this Amendment Agreement,
Borrower shall execute and deliver to each Bank a Revolving Credit Note dated
as of June 30, 1993, and being in the form and substance of Exhibit A attached
hereto with the blanks appropriately filled. After receipt of such new
Revolving Credit Note, each Bank will mark the Revolving Credit Note being
replaced thereby, "Replaced" and return the same to Borrower.
9. Borrower hereby represents and warrants to the Banks that (a)
Borrower has the legal power and authority to execute and deliver this
Amendment Agreement; (b) the officials executing this Amendment Agreement have
been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions
hereof do not violate or conflict with the organizational agreements of
Borrower or any law applicable to Borrower or result in a breach of any
provision of or constitute a default under any other agreement, instrument or
document binding upon or enforceable against Borrower; and (d) this Amendment
Agreement constitutes a valid and binding obligation of Borrower in every
respect, enforceable in accordance with its terms.
10. No Possible Default exists under the credit agreement, nor will
any occur immediately after the execution and delivery of this Amendment
Agreement by the performance or observance of any provision hereof.
11. Each reference to the credit agreement that is made in the
credit agreement or any other writing shall hereafter be construed as a
reference to the credit agreement as amended hereby. Except as herein
otherwise specifically provided, all provisions of the credit agreement shall
remain in full force and effect and be unaffected hereby.
12. The rights and obligations of all parties hereto shall be
governed by the laws of the State of Ohio.
A. SCHULMAN, INC. FIRST NATIONAL BANK OF OHIO
By: /s/ R. A. Stefanko By: /s/ Jerry T. Belknap
----------------------- --------------------------
Its: Executive Vice President Its: Vice President
---------------------- -------------------------
SOCIETY NATIONAL BANK, UNION BANK OF SWITZERLAND
individually and as Agent
By: /s/ Lamar C. Ratcliffe, Jr. By: /s/ Steven M. Dadmun
----------------------- --------------------------
Title: Vice President Its: Vice President
-------------------- -------------------------
By: /s/ Curtis Flammini
--------------------------
Its: Assistant Vice President
-------------------------
-2-
<PAGE> 1
Exhibit 11
Computation of Earnings Per Common Share.
<PAGE> 2
<TABLE>
A. SCHULMAN, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Year ended August 31,
---------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income $44,571,000 $36,738,000 $43,760,000
Dividends on preferred stock 54,000 54,000 54,000
----------- ----------- -----------
Net income applicable to
common stock $44,517,000 $36,684,000 $43,706,000
============ =========== ===========
Weighted average number of
shares of common stock
outstanding, net of
treasury shares* 37,438,118 37,325,547 37,024,548
Net income per share of
common stock* $1.19 $ .98 $1.18
<FN>
*Adjusted for the five-for-four stock split paid in the form of a 25% stock
dividend on April 15, 1994.
</TABLE>
<PAGE> 1
Exhibit 13
Company's 1994 Annual Report to Stockholders.
<PAGE> 2
A. Schulman Inc. 1994 Annual Report
[photo 1]
<PAGE> 3
On The Cover: A. Schulman is a global supplier of plastic compounds and resins
to manufacturers throughout the world.
Below: Stylish European eyeglass case is produced from an A. Schulman ABS
plastic compound in a choice of seven designer colors. The specialty plastic
compound contains flakes of metallic tinsel to enhance the product's visual
appeal.
[photo 2]
A. Schulman is a leading international supplier of high-performance
plastic compounds and resins. These materials are fabricated into a wide
variety of end products by manufacturers around the world.
The Company's principal product lines consist of engineered plastic
compounds which are custom formulated to match customer product specifications.
A. Schulman also produces specialty color concentrates and additive
masterbatches widely used in products such as plastic packaging films, fibers
and other applications.
In addition, the Company's worldwide marketing organization serves as a
distributor and merchant for plastic materials manufactured by major polymer
producers.
A. Schulman's business is highly service oriented, providing timely and
effective response to challenging technical, product performance and materials
delivery requirements.
A Fortune 500 company with headquarters in Akron, Ohio, A. Schulman
operates nine manufacturing plants in North America and Europe, with a tenth
plant under construction in Mexico. The Company employs 1,763 people.
A. Schulman stock is quoted through the NASDAQ National Market System
(Symbol: SHLM).
<PAGE> 4
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year Ended August 31,
------------ ------------ ------------
1994 1993 1992
<S> <C> <C> <C>
Net sales.................................................. $748,778,000 $685,112,000 $732,170,000
Income before cumulative effect of accounting changes...... $ 44,571,000 $ 38,907,000 $ 43,760,000
Cumulative effect of accounting changes(1)................. -- $ (2,169,000) --
Net income................................................. $ 44,571,000 $ 36,738,000 $ 43,760,000
Net income per share of common stock:*
Before cumulative effect of accounting changes......... $1.19 $1.04 $1.18
Cumulative effect of accounting changes(1)............. -- $(.06) --
Net income............................................. $1.19 $ .98 $1.18
Capital expenditures....................................... $ 25,302,000 $ 18,158,000 $ 15,827,000
Long-term debt and other non-current liabilities........... $ 50,673,000 $ 34,120,000 $ 27,707,000
Long-term liabilities to capital........................... 12.8% 10.4% 8.3%
Stockholders' equity....................................... $345,919,000 $294,209,000 $307,576,000
Book value per common share*............................... $9.21 $7.84 $8.26
Number of stockholders..................................... 1,405 1,426 1,421
CASH DIVIDENDS PER SHARE*
1st Quarter................................................ $.064 $.056 $.048
2nd Quarter................................................ .072 .064 .056
3rd Quarter................................................ .075 .064 .056
4th Quarter................................................ .075 .064 .056
------------ ------------ ------------
$.286 $.248 $.216
============ ============ ============
COMMON STOCK PRICE RANGE* High -- Low High -- Low High -- Low
1st Quarter................................................ 25 -- 21 1/4 27 1/8 -- 21 22 1/4 -- 19 1/4
2nd Quarter................................................ 29 -- 22 3/4 25 1/4 -- 21 1/8 28 1/8 -- 18 7/8
3rd Quarter................................................ 28 3/8 -- 21 24 3/4 -- 20 3/4 27 1/2 -- 23
4th Quarter................................................ 28 3/8 -- 23 1/2 25 1/2 -- 21 1/8 27 1/2 -- 22 1/2
<FN>
* Adjusted for the five-for-four stock split paid in the form of a 25% stock dividend on April 15, 1994.
(1) Effective September 1, 1992, the Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", and SFAS 109, "Accounting for Income Taxes".
</TABLE>
<PAGE> 5
TO OUR STOCKHOLDERS:
We are pleased to report that revenues and net income established new records
for the fourth quarter and fiscal year ended August 31, 1994.
Net income for the fourth quarter was $13,761,000 or $.37 per common share, an
increase of 14% over earnings of $12,024,000 or $.32 per share for the same
period last year. Revenues were $210.7 million compared with $160.4 million in
last year's fourth quarter.
For the fiscal year ended August 31, 1994, revenues and net income were the
highest in the history of A. Schulman. In fact, net income has established new
records in eleven of the last twelve years. Net income for fiscal 1994 was
$44,571,000 or $1.19 per common share, up 15% from 1993 earnings of $38,907,000
or $1.04 per share before accounting changes. Revenues were $756.2 million, 9%
higher than last year's revenues of $693.2 million.
All per share amounts have been adjusted for the five-for-four stock split
paid in the form of a 25% stock dividend on April 15, 1994.
Fourth quarter revenues and net income were new records because of continuing
strong results in North America, coupled with further improvement in our
European operations. Quarterly profits were up 23% in North America and 11% in
Europe.
Total tonnage for our products grew 21% for the quarter and 11% for the year.
The manufacturing operations posted tonnage increases of 26% for the quarter
and 15% for the year.
Manufacturing continues to generate the largest portion of our overall growth.
Profits from manufacturing sales constituted over 75% of our overall increase
in quarterly and annual profits before operating expenses.
Gross profit margins for the quarter were 17% compared with 18.8% last year.
Prices of most plastic resins have advanced sharply during the last few months,
mainly because of strong demand and lack of new supplies. These increases have
resulted in some erosion in our margins, primarily in Europe, due to
competitive pricing pressures.
For the quarter, the translation effect of the foreign currencies due to the
weaker U.S. dollar increased revenues by $7.3 million and net income by
$360,000 or $.01 per share. The translation effect for fiscal 1994 decreased
sales by $16.3 million and net income by $1,216,000 or $.03 per share,
primarily due to the strength of the dollar during the first six months of our
fiscal year.
Capital expenditures reached $25 million in 1994 compared with $18 million in
1993. During the year, we placed in service a new manufacturing line in
Belgium. This line and additional warehouse space cost $9 million and has an
annual capacity of 30 million pounds. We are presently adding a new
manufacturing line at each of our plants in Canada, the United Kingdom and
France. These lines will increase our annual capacity by over 30 million
pounds. We recently commenced construction of a new manufacturing facility in
Mexico which will have an annual capacity of 40 million pounds. These projects
are planned for completion within the next 18 months.
We also completed, in 1994, the acquisition of ComAlloy International which
adds another 60 million pounds to our annual capacity.
Our Board of Directors recently approved an initial capital investment for
Indonesia. This project for a new manufacturing facility will cost
approximately $6 million and will enable us to provide concentrates and
additives to the large and growing market in Indonesia and Asia. Start-up of
this new facility is scheduled for 1996.
Our strong financial position enables us to continue our worldwide capital
program and pursue new growth opportunities. We have a solid level of working
capital and equity, and our debt level is low by today's standards. We have
significant resources and capabilities to fund these new projects around the
globe.
During the fiscal year, we renegotiated the union contracts at our plants in
Orange, Texas and Akron, Ohio. We also completed a new union contract at
ComAlloy in Nashville, Tennessee. These contracts, with three-year terms, will
enable us to maintain production without interruption.
2
<PAGE> 6
<TABLE>
<S> <C>
Mr. Franz A. Loehr, our Managing Director in Germany and Associate General
Manager of our European Operations retired at the end of our 1994 fiscal year.
He will continue as a member of our Board of Directors. Mr. Loehr, who has
forty years of service, has been an important factor in building our position
in Germany and our other European operations. His foresight and ability to
encourage and motivate people is a major reason for our success. We thank him [photo 3]
for his dedication and many accomplishments.
Mr. Gerald M. Weinberger will succeed Mr. Loehr as General Manager of
Germany. Mr. Weinberger has been with A. Schulman for approximately four years TERRY L. HAINES ROBERT A. STEFANKO
and previously worked in the chemical industry in a number of locations
throughout the world. He has a wide range of management abilities, and we are /s/ Terry L. Haines /s/ Robert A. Stefanko
confident he will provide the expertise required for our continuing growth in
Germany. Terry L. Haines Robert A. Stefanko
Mr. Charles J. Pilliod, Jr. and Dr. Lucille G. Ford will retire from our President and Chairman
Board at the annual meeting in December 1994. They have been directors for a Chief Executive Officer
number of years and have been instrumental in helping us achieve many years of
successful growth. We will certainly miss their guidance, counsel and wisdom. November 11, 1994
We thank them for all their help and dedication.
In April 1994, a five-for-four stock split was paid in the form of a 25%
stock dividend. In addition, the Board increased the quarterly cash dividend in
January and April 1994. These increases, totaling 17%, reflect the Company's
higher profit level and the Board's confidence in future growth prospects for
A. Schulman. The Board will review the annual dividend policy at its meeting in
January 1995.
Our manufacturing facilities throughout the world have a solid level of
orders. Demand for our products is strong and pricing for resins continues to
firm.
We expect continued improvement in the key European economies. Business in
North America remains firm and the weaker U.S. dollar will have a positive
effect on earnings.
We are optimistic about the future and anticipate a higher level of
earnings for our 1995 first quarter and fiscal year.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
SERVING CUSTOMERS WORLDWIDE
A. Schulman is a customer service organization, supplying high-performance
plastic compounds and resins to a wide range of manufacturers throughout the
world.
The Company capitalizes on its decades of experience and strong
technology base to create custom formulated plastic compounds tailored to
individual customer product applications. Currently, A. Schulman serves over
10,000 customers in North America, Europe, Central and South America, and in
the Asia/Pacific region.
The Company's principal product lines consist of engineered plastic [photo 4]
compounds, specialty color concentrates and additive masterbatches. The
Company utilizes an array of sophisticated processing machinery in its
production facilities. This equipment is designed to achieve both high quality
and production versatility. Much of the equipment is automated and computer
controlled. It is manned by a team of skilled people who are an essential
element in the manufacturing process.
The Company has a worldwide marketing organization which also serves
as a distributor and merchant for plastic materials manufactured by major
polymer producers throughout the world.
There was a return to traditional growth patterns for most major
markets in fiscal 1994, including Europe where economic activity is increasing
after a prolonged recession. Higher economic activity generally has a prompt
and positive impact on the Company's production volume and sales pace.
Opportunities for continued business growth will be derived from both
market diversification and geographic expansion.
</TABLE>
4
<PAGE> 8
This popular soft drink cooler is rotation molded from a special polyethylene
compound supplied by A. Schulman. The cooler features a double wall design with
foam insulation added between the walls.
(c) 1994 The Coca-Cola Company. "Coca-Cola", "Coke", and the Dynamic Ribbon
device are registered trademarks of the Coca-Cola Company.
[photo 4]
<PAGE> 9
<TABLE>
<S> <C>
NORTH AMERICA
There was strong demand for the full range of A. Schulman polymer products
throughout the North American markets.
- - - - Business was good in the automotive market, an important factor in the
Company's North American operations.
- - - - Packaging and film materials are one of the fastest growing markets in North
America.
- - - - To meet demand, all of the Company's North American plants are operating
on a three-shift schedule, with frequent weekend work.
- - - - Modifications to domestic production processes have increased capacity and [photo 5]
added efficiency.
- - - - Strong demand has resulted in longer production runs of individual products,
leading to lower unit costs.
- - - - A new $4.5 million manufacturing line is being added in Canada. Start-up is
scheduled for 1995, and annual capacity will be increased by approximately
10 million pounds.
During the year, A. Schulman expanded its domestic and international
product lines with the acquisition of ComAlloy International, a former
subsidiary of Exxon Chemical. ComAlloy specializes in premium performance,
engineered plastic alloys designed for demanding high-strength applications.
These products extend A. Schulman's market reach into new areas of
sophisticated technology and higher value-added materials.
ComAlloy applications include specialty construction materials, plumbing
devices, hand and power tools, farm equipment, recreational products such as
exercise equipment, commercial food handling items and special automotive
components.
Sales and profitability were good at Sunprene, an
A. Schulman joint venture which produces and markets specialty plastic
compounds for automotive and window profile extrusion applications. The Company
holds a 70 percent interest in Sunprene, which is based in Bellevue, Ohio.
</TABLE>
6
<PAGE> 10
The Company is a leading supplier of high-performance engineered plastics for
demanding interior and exterior applications on passenger cars, vans and
trucks. The side cladding on this vehicle is formed from Polypur(R), a
proprietary, impact-resistant polyurethane compound developed by A. Schulman.
[photo 5]
<PAGE> 11
<TABLE>
<S> <C>
MEXICO, CENTRAL AND SOUTH AMERICA
Rapidly expanding markets in Mexico are currently served
by export from the Company's U.S. and Canadian facilities.
Key uses for A. Schulman engineered plastics in Mexico include agricultural
materials, packaging for fresh fruit and produce, automotive applications,
water tanks, and a wide variety of consumer products.
- The Company presently has sales offices in Mexico City and Monterrey.
In order to meet the increasing business in Mexico, construction has
started on a new $15 million manufacturing facility in San Luis Potosi.
- The new plant will have an annual capacity of 40 million pounds and is [photo 6]
expected to go on-stream in late-summer 1995.
- The plant will enhance development and expansion of Mexican markets, as
well as supply growing markets throughout Central and South America.
- The Mexican plant will be managed and staffed by local nationals, a
customary practice of A. Schulman.
The Latin American region is currently the second fastest growing
economic area in the world -- trailing only Asia. At the same time, it is a
highly service-oriented marketplace. As international trade barriers are
reduced, A. Schulman expects to leverage its technology and product support
capabilities to serve a growing list of customers throughout all of Latin
America.
</TABLE>
8
<PAGE> 12
Packaged snack foods, cookies and crackers are commonly wrapped in
bi-oriented polypropylene film containing specialty additives and colorants
supplied by A. Schulman. The packaging industry is one of the Company's largest
markets throughout the world.
[photo 6]
<PAGE> 13
<TABLE>
<S> <C>
EUROPE
A. Schulman has traditionally derived more than half its annual business from
European markets and from the export of its European products to other areas of
the world.
With a population in excess of 320 million people, Europe and the
former Eastern Bloc nations are now recovering their economic vitality and
represent significant market potential for future development.
- The Company's largest manufacturing facility in the world is located in
Belgium, with additional major production capacity operating in the
United Kingdom, Germany and France.
- The facilities in Europe are managed and staffed by local personnel in each
country. Each plant is versatile, efficient and has state-of-the-art
equipment.
- Packaging materials are the largest European market for A. Schulman. The [photo 7]
Company is a leading supplier of these materials throughout the area.
- Other key European products include reinforced engineered thermoplastics,
such as nylon, polyester, polycarbonate and ABS compound formulations.
- End product applications generally parallel those of North America, with
rapidly improving standards of living in various smaller nations offering
important growth opportunities. These relate to housing construction, home
appliances, telecommunication, recreational and automotive/transportation
uses.
Production process upgrades and expansion of the Company's European
manufacturing facilities are expected to continue, in order to serve the
growing markets for high performance plastics in this major geographic region.
</TABLE>
10
<PAGE> 14
High-performance engineered plastic compounds from A. Schulman
are widely used in consumer electronic and telecommunications product
applications, such as the housing and handset of this attractive telephone
produced by one of Europe's leading manufacturers.
[photo 7]
<PAGE> 15
<TABLE>
<S> <C>
ASIA/PACIFIC
The Pacific Rim maintains its position as the fastest growing economic region
in the world.
A huge population base makes this region a unique market for all consumer
and commercial products, as well as for the materials essential to their
manufacture.
- A. Schulman has supplied its specialty plastics and product support
services throughout the region for many years.
- The Company has participated in Peoples Republic of China markets for
nearly a decade and currently serves 20 customer entities in this
rapidly growing market.
- Expansion of component and parts manufacturing activities into Thailand, [photo 8]
Malaysia and other surrounding nations opens up a realm of new customer
business opportunities.
- During 1995, the Company will open a new sales and customer service
office in Singapore to enhance its customer contact and technical
response activities throughout the region.
- A new manufacturing facility in Indonesia is scheduled for start-up in
1996. The cost of the project is approximately $6 million and represents
an initial investment in this region.
Along with high-performance engineered plastics for manufactured
products, the Asian market also has become a prime market for A. Schulman's
packaging and film materials. Demand for quality packaging is growing rapidly,
with plastics clearly the materials of choice.
The Company anticipates that the Asia/Pacific region will continue to
grow as a major segment of its worldwide business. Consequently, A. Schulman
will further enhance its strong commitment to customers and markets in this
economically expanding region of the world.
</TABLE>
12
<PAGE> 16
High-strength glass-reinforced nylon compounds, supplied by the ComAlloy
International subsidiary, are used to form the cylindrical hand grip component
of keyless chucks for portable power tools. These easy-to-use hand-tightened
tool holding devices have become virtually standard on power drills and other
workshop equipment.
[photo 8]
<PAGE> 17
A. Schulman, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME Year Ended August 31,
============ ============================
1994 1993 1992
<S> <C> <C> <C>
NET SALES .............................................................. $748,778,000 $685,112,000 $732,170,000
INTEREST AND OTHER INCOME .............................................. 7,456,000 8,103,000 6,778,000
------------ ------------ ------------
TOTAL .............................................................. 756,234,000 693,215,000 738,948,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales .......................................................... 617,855,000 565,284,000 599,009,000
Selling, general and administrative expenses ........................... 66,201,000 64,141,000 65,933,000
Interest expense ....................................................... 1,222,000 1,176,000 1,373,000
Foreign currency transaction losses (gains) ............................ 90,000 (97,000) (609,000)
Minority interest ...................................................... 426,000 260,000 141,000
------------ ------------ ------------
685,794,000 630,764,000 665,847,000
------------ ------------ ------------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGES ................................................ 70,440,000 62,451,000 73,101,000
PROVISION FOR U.S. AND FOREIGN INCOME TAXES ............................ 25,869,000 23,544,000 29,341,000
------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES .................. 44,571,000 38,907,000 43,760,000
CUMULATIVE EFFECT OF ACCOUNTING CHANGES:
Postretirement Benefits Other Than Pensions .......................... -- (4,841,000) --
Income Taxes ......................................................... -- 2,672,000 --
------------ ------------ -------------
NET INCOME ............................................................. $ 44,571,000 $ 36,738,000 $ 43,760,000
============ =============================
EARNINGS PER SHARE OF COMMON STOCK:*
Before Cumulative Effect of Accounting Changes ....................... $ 1.19 $ 1.04 $ 1.18
Cumulative Effect of Accounting Changes:
Postretirement Benefits Other Than Pensions ....................... -- (.13) --
Income Taxes ........................................................ -- .07 --
------------ ------------ ------------
Net income ............................................................ $ 1.19 $ .98 $ 1.18
============ =============================
<FN>
*Adjusted for the five-for-four stock split paid in the form of a 25% stock dividend on April 15, 1994.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
14
<PAGE> 18
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Foreign Unearned
Currency Stock
Common Other Retained Translation Grant
Stock Capital Earnings Adjustment Compensation
=========================================================================
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1991 .................... $20,142,000 $29,601,000 $177,276,000 $15,314,000 $ --
Net income for 1992 ........................... 43,760,000
Cash dividends paid:
Preferred stock, $5 per share ............... (54,000)
Common stock, $.216 per share* .............. (8,005,000)
Foreign currency translation adjustment ....... 38,156,000
Stock options exercised ....................... 108,000 1,037,000
Three-for-two stock split paid as a 50%
stock dividend on January 13, 1992 .......... 9,866,000 (9,866,000)
Grant of restricted stock ..................... 913,000 (913,000)
Amortization of restricted stock .............. 8,000
----------- ----------- ------------ ----------- -----------
Balance at August 31, 1992 .................... 30,116,000 31,551,000 203,111,000 53,470,000 (905,000)
Net income for 1993 ........................... 36,738,000
Cash dividends paid or accrued:
Preferred stock, $5 per share ............... (54,000)
Common stock, $.248 per share* .............. (9,266,000)
Foreign currency translation adjustment ....... (43,223,000)
Stock options exercised ....................... 238,000 2,018,000
Amortization of restricted stock .............. 182,000
----------- ----------- ------------ ----------- -----------
Balance at August 31, 1993 .................... 30,354,000 33,569,000 230,529,000 10,247,000 (723,000)
Net income for 1994 ........................... 44,571,000
Cash dividends paid or accrued:
Preferred stock, $5 per share ............... (54,000)
Common stock, $.286 per share* .............. (10,730,000)
Foreign currency translation adjustment ....... 16,323,000
Stock options exercised ....................... 58,000 1,351,000
Five-for-four stock split paid as a 25%
stock dividend on April 15, 1994 ............ 7,490,000 (7,490,000)
Grant of restricted stock ..................... 893,000 (893,000)
Amortization of restricted stock .............. 191,000
----------- ----------- ------------ ----------- -----------
Balance at August 31, 1994 .................... $37,902,000 $35,813,000 $256,826,000 $26,570,000 $(1,425,000)
========================================================================
<FN>
*Adjusted for the five-for-four stock split paid in the form of a 25% stock dividend on April 15, 1994.
</TABLE>
15
<PAGE> 19
A. Schulman, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31, August 31,
1994 1993
============ ============
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................ $ 60,062,000 $ 69,690,000
Short-term investments, at cost...................................................... 61,763,000 43,850,000
Accounts receivable, less allowance for doubtful accounts of $4,111,000 in 1994
and $3,974,000 in 1993............................................................. 129,010,000 93,653,000
Inventories, average cost or market, whichever is lower.............................. 136,667,000 94,952,000
Prepaids, including tax effect of temporary differences.............................. 11,870,000 10,596,000
------------ ------------
TOTAL CURRENT ASSETS............................................................... 399,372,000 312,741,000
------------ ------------
OTHER ASSETS:
Cash surrender value of life insurance............................................... 340,000 299,000
Deferred charges, etc., including tax effect of temporary differences................ 12,604,000 9,869,000
------------ ------------
12,944,000 10,168,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements................................................................ 5,813,000 4,674,000
Buildings and leasehold improvements................................................. 54,124,000 47,441,000
Machinery and equipment.............................................................. 141,365,000 118,302,000
Furniture and fixtures............................................................... 15,227,000 13,001,000
Construction in progress............................................................. 5,380,000 7,648,000
------------ ------------
221,909,000 191,066,000
Accumulated depreciation and investment grants of $634,000 in 1994
and $541,000 in 1993............................................................... 123,806,000 106,110,000
------------ ------------
98,103,000 84,956,000
------------ ------------
$510,419,000 $407,865,000
============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
August 31, August 31,
1994 1993
============ =============
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ............................................................... $12,300,000 $ --
Current portion of long-term debt ........................................... 35,000 31,000
Accounts payable ............................................................ 54,286,000 36,433,000
U.S. and foreign income taxes payable ....................................... 9,939,000 8,611,000
Accrued payrolls, taxes and related benefits ................................ 16,901,000 15,395,000
Other accrued liabilities ................................................... 14,903,000 14,341,000
------------ -------------
TOTAL CURRENT LIABILITIES ............................................... 108,364,000 74,811,000
------------ -------------
LONG-TERM DEBT .............................................................. 23,126,000 10,149,000
OTHER LONG-TERM LIABILITIES ................................................. 27,547,000 23,971,000
DEFERRED INCOME TAXES ....................................................... 3,794,000 3,062,000
MINORITY INTEREST ........................................................... 1,669,000 1,663,000
STOCKHOLDERS' EQUITY:
Preferred stock, 5% cumulative, $100 par value, authorized,
issued and outstanding - 10,707 shares ..................................... 1,071,000 1,071,000
Special stock, 1,000,000 shares authorized, none outstanding ................. -- --
Common stock, $1 par value
Authorized - 75,000,000 shares
Issued - 37,902,043 shares in 1994 and 30,353,526 shares in 1993 ............ 37,902,000 30,354,000
Other capital ................................................................. 35,813,000 33,569,000
Cumulative foreign currency translation adjustment ............................ 26,570,000 10,247,000
Retained earnings ............................................................. 256,826,000 230,529,000
Treasury stock, at cost, 442,674 shares in 1994 and 1993 ..................... (10,838,000) (10,838,000)
Unearned stock grant compensation ............................................. (1,425,000) (723,000)
------------ -------------
COMMON STOCKHOLDERS' EQUITY ............................................... 344,848,000 293,138,000
------------ -------------
TOTAL STOCKHOLDERS' EQUITY ................................................ 345,919,000 294,209,000
------------ ------------
$510,419,000 $407,865,000
============ ============
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended August 31,
============ =============================
1994 1993 1992
<S> <C> <C> <C>
Provided from (used in) operating activities:
Net income ............................................................ $ 44,571,000 $ 36,738,000 $ 43,760,000
Items not requiring the current use of cash:
Cumulative effect of accounting changes:
Postretirement benefits other than pensions ....................... -- 4,841,000 --
Income taxes ...................................................... -- (2,672,000) --
Depreciation ........................................................ 14,728,000 14,717,000 14,550,000
Non-current deferred taxes .......................................... 1,196,000 (96,000) 360,000
Foreign pension and other deferred compensation ..................... 2,252,000 2,372,000 2,212,000
Postretirement benefit obligation ................................... 1,088,000 920,000 --
Changes in working capital:
Accounts receivable ................................................. (28,312,000) (11,815,000) 17,657,000
Inventories ......................................................... (37,437,000) 17,919,000 (6,955,000)
Prepaids ............................................................ (919,000) 57,000 (1,686,000)
Accounts payable .................................................... 14,104,000 8,433,000 (21,671,000)
Income taxes ........................................................ 908,000 (303,000) (1,132,000)
Accrued payrolls and other accrued liabilities ...................... 664,000 4,637,000 891,000
Changes in other assets and other long-term liabilities ............... (3,582,000) (1,728,000) (964,000)
------------ ------------ ------------
Net cash provided from operating activities ....................... 9,261,000 74,020,000 47,022,000
------------ ------------ ------------
Provided from (used in) investing activities:
Expenditures for property, plant and equipment ........................ (25,302,000) (18,158,000) (15,827,000)
Disposals of property, plant and equipment ............................ 232,000 297,000 893,000
Purchases of short-term investments ................................... (67,729,000) (64,663,000) (9,156,000)
Proceeds from sales of short-term investments ......................... 53,546,000 26,656,000 --
------------ ------------ ------------
Net cash used in investing activities ............................. (39,253,000) (55,868,000) (24,090,000)
------------ ------------ ------------
Provided from (used in) financing activities:
Cash dividends paid ................................................... (10,774,000) (9,311,000) (8,059,000)
Increase (decrease) of notes payable .................................. 12,300,000 (4,800,000) 3,000,000
Reduction of long-term debt ........................................... (32,000) (27,000) --
Increase of long-term debt ............................................ 13,000,000 110,000 1,096,000
Exercise of stock options ............................................. 1,409,000 2,256,000 1,145,000
Investment grants from foreign countries .............................. 241,000 -- --
Increase in minority interest, net of distributions ................... 6,000 260,000 142,000
------------ ------------ ------------
Net cash provided (used in) financing activities .................. 16,150,000 (11,512,000) (2,676,000)
------------ ------------ ------------
Effect of exchange rate changes on cash ................................. 4,214,000 (10,902,000) 9,100,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents .................... (9,628,000) (4,262,000) 29,356,000
Cash and cash equivalents at beginning of year .......................... 69,690,000 73,952,000 44,596,000
------------ ------------ ------------
Cash and cash equivalents at end of year ................................ $ 60,062,000 $ 69,690,000 $ 73,952,000
============ =============================
Cash paid during the year for:
Interest .............................................................. $ 1,006,000 $ 1,042,000 $ 1,361,000
Income Taxes .......................................................... $ 25,650,000 $ 21,723,000 $ 32,608,000
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
18
<PAGE> 22
A. Schulman, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of A. Schulman, Inc.
and its domestic and foreign subsidiaries. All significant intercompany
transactions have been eliminated.
Minority interest represents a 30% equity position of Mitsubishi Kasei Vinyl
in a partnership with the Company.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly liquid investments purchased with a maturity of three months or less
are considered to be cash equivalents. Such investments amounted to $50,942,000
at August 31, 1994 and $61,498,000 at August 31, 1993. Investments with
maturities between three and twelve months are considered to be short-term
investments. Investments are placed with numerous financial institutions having
good credit ratings.
DEPRECIATION
It is the Company's policy to depreciate the cost of property, plant and
equipment over the estimated useful lives of the assets generally using the
straight-line method. The estimated useful lives used in the computation of
depreciation are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings and leasehold improvements 10 to 40 years
Machinery and equipment 5 to 12 years
Furniture and fixtures 10 years
</TABLE>
The cost of property sold or otherwise disposed of is eliminated from the
property accounts and the related reserve accounts, with recognition of gain or
loss.
Maintenance and repair costs are charged against income. The cost of renewals
and betterments are capitalized in the property accounts.
INVENTORIES
The Company and its subsidiaries do not distinguish between raw materials and
finished goods because numerous products which can be sold as finished goods
are also used as raw materials in the production of other inventory items.
GOODWILL
Net goodwill of $5,829,000 is being amortized over 15 to 25 years
using the straight-line method and is included in deferred charges.
RETIREMENT PLANS
The Company has several pension plans covering hourly employees in the
U.S. and certain employees in foreign countries. For certain plans in the U.S.,
pension funding is based on an amount paid to union trust funds at an agreed
rate for each hour for which employees are paid. For other U.S. plans, the
policy is to fund amounts to cover current cost and amortize prior service
costs over approximately 30 years.
Generally, the foreign plans accrue the current and prior service costs
annually. In certain countries, funding is not required and the liability for
such pensions is included in other long-term liabilities.
The Company also has deferred profit sharing plans for its North American
salaried employees for which contributions are determined at the discretion of
the Board of Directors.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the exchange
rate in effect at each year-end. Income statement accounts are translated at
the average rate of exchange prevailing during the year. The cumulative foreign
currency translation adjustment account in stockholders' equity includes
primarily translation adjustments arising from the use of different exchange
rates on the balance sheet from period to period.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective September 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires the Company to accrue
over the employee service period the expected costs of providing postretirement
healthcare and life insurance benefits. Previously, the Company accounted for
such costs on a cash basis. The cumulative effect of this change to September
1, 1992 was to decrease pretax income by $7.7 million and net income by $4.8
million or $.13 per share.
INCOME TAXES
Effective September 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This statement
requires that deferred income taxes reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts. Previously, provisions for deferred income taxes
were made where differences existed between the time that transactions affected
taxable income and the time that these transactions entered into the
determination of income for financial statement purposes. The cumulative effect
of this change to September 1, 1992 was to increase net income by $2.7 million,
or $.07 per share.
EARNINGS PER COMMON SHARE
Earnings per common share are based on net income after reduction for dividends
on preferred stock and on the weighted average number of shares of common stock
outstanding during the year. Stock options had no dilutive effect on earnings
per common share.
NOTE 2 -- INVESTMENT GRANTS
The Company has received investment grants from various European countries.
These grants have been provided to subsidize a portion of the Company's
European manufacturing facilities. The total cost of the facilities has been
included in plant and equipment and the amount of the grants has been included
with accumulated depreciation in the financial statements. The entire cost of
the facilities are depreciated over their estimated useful life and the
investment grants are amortized against the related depreciation charges. The
amortization of these grants amounted to $187,000 in 1994, $148,000 in 1993 and
$193,000 in 1992.
19
<PAGE> 23
NOTE 3 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
August 31,
========== ==========
1994 1993
<S> <C> <C>
A. Schulman, Inc.:
Revolving credit loan, 4.7554% in 1994
and 3.8125% in 1993 .................. $23,000,000 $10,000,000
Notes payable of foreign subsidiary:
5% through September 1998 161,000 180,000
----------- -----------
23,161,000 10,180,000
Less current portion ..................... 35,000 31,000
----------- -----------
$23,126,000 $10,149,000
=========== ===========
</TABLE>
The revolving credit agreement, as amended on May 31, 1994, provides for
borrowings of up to $40,000,000 on a revolving credit basis through May 31,
1997. Interest rates will be either the London Interbank Offered Rate (LIBOR)
plus 1/2%, certificate of deposit rate plus 5/8%, or the prime rate. The
agreement may be converted to a four year term loan, at the option of the
Company, any time through May 31, 1997. Interest rates under the term loan are
either LIBOR plus 3/4%, certificate of deposit rate plus 7/8% or the prime
rate. Commitment fees are 1/4% of the unused line. Under the terms of this
agreement, approximately $138,000,000 of retained earnings was available for
the payment of cash dividends at August 31, 1994.
The 5% note for $161,000 is a French Franc obligation which is repayable in
quarterly installments.
Annual maturities of long-term debt for the five years subsequent to
August 31, 1994 are $35,000 in 1995, $37,000 in 1996, $1,476,000 in 1997,
$5,790,000 in 1998 and $5,760,000 in 1999.
The Company has $24,500,000 of unsecured short-term lines of credit from
various domestic banks. Borrowings under these credit lines bear interest at
the prime rate or at rates based on the bank's cost of funds. Short-term
borrowings of $12,300,000 were outstanding under these domestic lines at August
31, 1994. No domestic short-term borrowings were outstanding at August 31,
1993. The Company has informal agreements with certain banks to maintain
average cash balances of $500,000.
The Company has $30,453,000 of unsecured short-term foreign lines of credit
available to its subsidiaries at August 31, 1994. No foreign short-term
borrowings were outstanding at August 31, 1994 or 1993.
NOTE 4 -- FOREIGN CURRENCY FORWARD CONTRACTS
The Company enters into forward foreign exchange contracts as a hedge against
substantially all amounts due or payable in foreign currencies. These
contracts limit the Company's exposure to loss resulting from adverse
fluctuations in foreign currency exchange rates. Any gains or losses associated
with these contracts as well as the offsetting gains or losses from the
underlying assets or liabilities hedged are recognized on the foreign cur-
rency transaction line in the Consolidated Statement of Income.
The following table presents a summary of foreign exchange contracts
outstanding as of August 31, 1994 and August 31, 1993:
<TABLE>
<CAPTION>
1994 1993
========================= =========================
Contract Fair Contract Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Buy Currency ..... $ 8,947,000 $ 9,139,000 $ 1,448,000 $ 1,409,000
Sell Currency .... $37,758,000 $37,863,000 $19,165,000 $19,858,000
</TABLE>
The fair value of foreign exchange contracts was estimated by obtaining quotes
from banks. All of the foreign exchange contracts were in European or United
States currencies and generally have maturities of less than nine months.
Foreign exchange contracts are entered into with several financial institutions
having good credit ratings.
NOTE 5 -- INCOME TAXES
Income before taxes and cumulative effect of accounting changes is as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992
=========== =========== ===========
<S> <C> <C> <C>
Domestic .............. $19,012,000 $14,513,000 $11,725,000
Foreign .............. 51,428,000 47,938,000 61,376,000
----------- ----------- -----------
$70,440,000 $62,451,000 $73,101,000
=========== =========== ===========
</TABLE>
The provisions for U.S. and foreign income taxes consist of the following:
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992
=========== =========== ===========
<S> <C> <C> <C>
Current taxes:
U.S. ............... $ 6,700,000 $ 3,988,000 $ 3,135,000
Foreign ............ 20,290,000 18,671,000 27,211,000
----------- ----------- -----------
26,990,000 22,659,000 30,346,000
----------- ----------- -----------
Deferred taxes:
U.S. ............... (715,000) 83,000 (110,000)
Foreign ............ (406,000) 802,000 (895,000)
----------- ----------- -----------
(1,121,000) 885,000 (1,005,000)
----------- ----------- -----------
$25,869,000 $23,544,000 $29,341,000
=========== =========== ===========
</TABLE>
A reconciliation of the statutory U.S. federal income tax rate with the
effective tax rates of 36.7% in 1994, 37.7% in 1993 and 40.1% in 1992 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
% of % of % of
Pretax Pretax Pretax
(in thousands) Amount Income Amount Income Amount Income
============== ===============================
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S.
tax rate ........... $24,654 35.0% $21,652 34.7% $24,854 34.0%
Amount of
foreign
income taxes
in excess of
U.S. taxes at
statutory
rate ............... 700 1.0 1,730 2.7 4,245 5.8
Other, net ........... 515 .7 162 .3 242 .3
-------------- -------------------------------
$25,869 36.7 $23,544 37.7 $29,341 40.1
============== ===============================
</TABLE>
20
<PAGE> 24
<TABLE>
Deferred tax assets and (liabilities) consist of the following at
August 31, 1994 and August 31, 1993:
<CAPTION>
(in thousands) 1994 1993
======== =======
<S> <C> <C>
Pensions........................................... $ 1,969 $ 1,540
Inventory reserves................................. 1,871 1,266
Bad debt reserves.................................. 699 793
Accruals........................................... 2,393 1,642
Dividend to be received............................ 1,217 745
Postretirement benefits other than pensions........ 3,409 3,028
Foreign tax credit carryforwards................... 4,197 5,557
Other.............................................. 1,747 1,177
------- -------
Gross deferred tax assets.......................... 17,502 15,748
Valuation allowance................................ (4,197) (5,557)
------- -------
Total deferred tax assets.......................... 13,305 10,191
------- -------
Depreciation....................................... (8,300) (6,072)
Other.............................................. (24) (57)
------- -------
Gross deferred tax liabilities..................... (8,324) (6,129)
------- -------
$ 4,981 $ 4,062
======= =======
</TABLE>
The valuation allowance is for foreign tax credit carryforward benefits which
are not likely to be utilized. The foreign tax credit carryforwards will expire
in periods from 1995 to 1999.
During 1992, deferred income taxes were provided for timing differences in
the recognition of revenue and expense items for financial statement and tax
purposes. These items consisted of the following:
<TABLE>
<S> <C>
Excess of tax over book depreciation............................. $ 135,000
Basis reduction of fixed assets.................................. (13,000)
Compensation payable in future years............................. (108,000)
Provisions for reduction of inventory and
other charges or credits not allowable
for tax purposes............................................... (2,900,000)
Tax deductible charges for inventory,
vacation, and other expenses of
foreign subsidiaries, etc...................................... 1,881,000
-----------
$(1,005,000)
===========
</TABLE>
The tax effect of temporary differences included in prepaids were $7,853,000
and $5,538,000 at August 31, 1994 and 1993 respectively. Deferred charges also
included $922,000 and $1,586,000 from the tax effect of temporary differences
at August 31, 1994 and 1993 respectively.
At August 31, 1994, no taxes have been provided on the undistributed earnings
of certain foreign subsidiaries amounting to $180,473,000 because the Company
intends to reinvest these earnings.
NOTE 6 -- RETIREMENT PLANS
The total expense for all retirement plans was $4,510,000 in 1994, $4,306,000
in 1993 and $3,751,000 in 1992. The components of pension expense are as
follows:
<TABLE>
<CAPTION>
Year Ended August 31,
========== ========== ==========
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost-benefits earned during the period........................................ $1,060,000 $1,035,000 $1,059,000
Interest accrued on projected benefit obligation...................................... 1,319,000 1,336,000 1,136,000
Actual return on assets............................................................... (325,000) (689,000) (236,000)
Net amortization and deferral......................................................... 254,000 506,000 (147,000)
---------- ---------- ----------
2,308,000 2,188,000 1,812,000
Defined contribution plans.............................................................. 2,202,000 2,118,000 1,939,000
---------- ---------- ----------
Pension cost............................................................................ $4,510,000 $4,306,000 $3,751,000
========== ========== ==========
</TABLE>
21
<PAGE> 25
The following table presents the funded status of the defined benefit plans as
of August 31, 1994 and August 31, 1993:
<TABLE>
<CAPTION>
1994 1993
============================= =============================
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ........................................ $1,724,000 $ 12,766,000 $1,478,000 $ 10,614,000
Non-vested benefit obligation .................................... 2,000 2,059,000 2,000 1,744,000
---------- ------------ ---------- ------------
Accumulated benefit obligation ................................... $1,726,000 $ 14,825,000 $1,480,000 $ 12,358,000
========== ============ ========== ============
Projected benefit obligation ....................................... $2,134,000 $ 17,643,000 $2,076,000 $ 14,979,000
Plan assets at fair value .......................................... 2,233,000 1,046,000 1,798,000 844,000
---------- ------------ ---------- ------------
Projected benefit obligation less than (in excess of) plan assets .. 99,000 (16,597,000) (278,000) (14,135,000)
Unrecognized net liability (asset) at date of adoption of SFAS No.87 (36,000) 2,080,000 (38,000) 2,175,000
Unrecognized prior service cost .................................... 59,000 496,000 62,000 336,000
Unrecognized net loss (gain) ....................................... (40,000) (600,000) 300,000 (289,000)
Adjustment required to recognize minimum liability -- (1,031,000) -- (842,000)
---------- ------------ ---------- ------------
Prepaid (accrued) pension cost ..................................... $82,000 $(15,652,000) $ 46,000 $(12,755,000)
========== ============ ========== ============
Assumptions: U.S.-1994 Foreign-1994 U.S.-1993 Foreign-1993
- - - ----------- ---------- ------------ ---------- ------------
Discount rate ...................................................... 7.25% 7.0%- 9.0% 7.0% 7.5%- 9.0%
Expected rate of return on assets 9.5% 0.0%-11.0% 9.5% 0.0%-11.0%
Rate of increase in compensation levels ............................ -- 4.0%- 7.0% -- 4.5%- 7.0%
</TABLE>
In respect to multiemployer plans, ERISA extends the Com-
pany's liability for benefit obligations in the event of termination or
withdrawal. The extent of any potential unfunded liability is not determinable
at this time.
The Company has agreements with four current employees that upon retirement,
or death or disability prior to retirement, it shall make ten payments of
$50,000 each to one employee or his beneficiary for a ten year period, $100,000
each to two employees or their beneficiaries for a ten year period and $75,000
to one employee or his beneficiary for a ten year period. One of these
agreements is fully vested and the other agreements will vest over the next one
to eight years. However, vesting and payments may be accelerated under certain
conditions. The Company has provided $206,000 in 1994, $270,000 in 1993 and
$603,000 in 1992 to cover the current cost for these agreements. In connection
with these agreements, the Company owns and is the beneficiary of life
insurance policies amounting to $3,500,000. The amounts provided are included
in other long-term liabilities.
NOTE 7 -- POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
The Company provides postretirement health care and life insurance benefits to
certain domestic employees. The postretirement benefit cost includes the
following components:
<TABLE>
<CAPTION>
Year Ended August 31,
===========================
1994 1993
---------- ----------
<S> <C> <C>
Service cost -- benefits earned during the period ......... $ 666,000 $ 558,000
Interest cost on projected benefit obligation ............. 653,000 573,000
---------- ----------
$1,319,000 $1,131,000
========== ==========
</TABLE>
The cash cost for providing these benefits to retirees prior to the adoption
of Statement of Financial Accounting Standards No. 106 was not significant. The
Company's postretirement health care and life insurance plans are not funded.
The status of the plans at August 31, 1994 and August 31, 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
=========== ===========
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees ............................................. $2,625,000 $2,993,000
Fully eligible active plan participants .............. 1,376,000 1,587,000
Other active plan participants ....................... 3,640,000 4,856,000
---------- ----------
7,641,000 9,436,000
Unrecognized net loss .................................. (467,000) (784,000)
Unrecognized prior service cost ........................ 2,566,000 --
---------- ----------
Net postretirement benefit liability ................... $9,740,000 $8,652,000
========== ==========
</TABLE>
The net postretirement benefit liability is included in other long-term
liabilities.
In 1994, the Company amended its postretirement benefit program which reduced
the accumulated benefit obligation at August 31, 1994 by $2.6 million. This
reduction will be amortized over the average future service period of active
employees starting in 1995.
22
<PAGE> 26
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12.5% in 1994 and 13% in 1993, gradually
declining to 6% in 2007 and remaining at that level thereafter. A
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation by
$1,039,000 at August 31, 1994 and the postretirement benefit cost by $195,000
for the year then ended.
The discount rate used in determining the accumulated postretirement benefit
obligation at August 31 was 7.25% in 1994 and 7% in 1993.
NOTE 8 -- INCENTIVE STOCK PLANS
In 1981, the Company adopted an Incentive Stock Option Plan. One year from
the date of grant, 25% of the options are exercisable and an additional 25%
become exercisable in each of the next three years. Options must be exercised
within five years from the date of grant. Options may no longer be granted
under this Plan.
Effective in December 1991, the Company adopted the 1991 Stock Incentive Plan
and authorized 1,875,000 shares for future grants. The 1991 Plan provides for
the grant of incentive stock options, nonqualified stock options and
restricted stock awards. The option price of incentive stock options is the
fair market value of the common shares on the date of grant. In the case of
nonqualified stock options, the Company intends to grant options at fair market
value on the date of grant, however, the Plan does provide that the option
price may not be less than 50% of the fair market value of the common shares on
the date of grant. Stock options may be exercised as determined by the
Company, but in no event prior to six months following the date of grant or
after the tenth anniversary date of grant. At August 31, 1994, there were
1,380,950 shares available for issuance under the 1991 Plan.
Effective in October 1992, the Company adopted the 1992 Non-Employee
Directors' Stock Option Plan and authorized 125,000 shares for future grants.
The 1992 Plan provides for the grant of 875 nonqualified stock options to each
non-employee director on the first business day of February of each year. The
option price is the fair market value of the common shares on the first
business day immediately preceding the date of grant. All options become
exercisable at the rate of 25% per year, commencing on the first anniversary of
the date of grant of the option. Each option expires five years from the date
of grant. At August 31, 1994, there were 112,750 shares available for issuance
under the 1992 Plan.
The following is a summary with respect to options for both plans:
<TABLE>
<CAPTION>
Year Ended August 31,
=========================================
1994 1993
------------------- -------------------
Shares Option Shares Option
Under Price Under Price
Option Per Share Option Per Share
------ ---------- -------- ----------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year.................... 694,595 $20-26 810,340 $ 7-26
Granted during the year...... 138,175 26 143,900 22-25
Exercised during the year.... (57,450) 20-26 (237,491) 7-20
Cancelled during the year.... (23,675) 20-26 (22,154) 7
Five-for-four stock split paid
as a 25% stock dividend on
April 15, 1994............. 156,231 --
------- -------
Outstanding at end of year... 907,876 $20-26 694,595 $20-26
======= =======
</TABLE>
At August 31, 1994, options for 353,260 shares were exercisable at $19.74 per
share under the 1981 Plan. Options for 61,281 shares were
exercisable at $26, 42,500 shares at $24.60 and 1,531 shares at $22.60 under
the 1991 Plan. Under the 1991 Plan, 35,125 shares of restricted stock were
granted on August 18, 1992 and 34,000 shares were granted on August 19, 1994.
The fair market value on the date of grant in 1992 was $26 per share and in
1994 was $26.25 per share. These shares vest five years following the date of
grant so long as the holder remains employed by the Company. Unearned
compensation representing the fair market value of the shares at the date of
grant is charged to income over the five year vesting period.
NOTE 9 -- CAPITAL STOCK
The Special Stock of 1,000,000 shares was authorized with such preferences
or special terms and for such consideration as may be determined at the
discretion of the Board of Directors.
On March 10, 1994, the Board of Directors declared a five-for-four stock
split payable in the form of a 25% stock dividend on April 15, 1994 to
shareholders of record on March 25, 1994. The consolidated financial
statements and other information throughout this Annual Report have been
adjusted to reflect the split.
NOTE 10 -- BUSINESS SEGMENT INFORMATION
The Company is engaged in the sale of plastic resins in various forms which
are used as raw materials by its customers. The Company considers its business
to be a single industry segment.
23
<PAGE> 27
<TABLE>
A summary of operating information by geographic area for
the three years ended August 31, 1994 is as follows:
<CAPTION>
Adjustments
North and
(In thousands) America Europe Eliminations Consolidated
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
AUGUST 31, 1994
Sales to unaffiliated
customers................ $319,192 $429,586 -- $748,778
Inter-geographic
sales.................... 187 332 $ (519) --
-------- -------- ------- --------
Total sales............ $319,379 $429,918 $ (519) $748,778
======== ======== ======= ========
Operating income........... $ 33,325 $ 41,880 $ -- $ 75,205
======== ======== =======
Interest expense........... (1,222)
Corporate expense less revenues (3,453)
Foreign currency transaction losses (90)
--------
Income before taxes........ $ 70,440
========
Identifiable assets........ $202,006 $307,397 $ (322) $509,081
======== ======== =======
Corporate assets........... 1,338
--------
Total assets............... $510,419
========
AUGUST 31, 1993
Sales to unaffiliated
customers................ $259,136 $425,976 -- $685,112
Inter-geographic
sales.................... 670 253 $ (923) --
-------- -------- ------- --------
Total sales............ $259,806 $426,229 $ (923) $685,112
======== ======== ======= ========
Operating income........... $ 25,056 $ 39,392 $ 36 $ 64,484
======== ======== =======
Interest expense........... (1,176)
Corporate expense less revenues (954)
Foreign currency transaction gains 97
--------
Income before taxes and
cumulative effect of
accounting changes $ 62,451
========
Identifiable assets........ $150,249 $255,918 $ (230) $405,937
======== ======== =======
Corporate assets........... 1,928
--------
Total assets............... $407,865
========
AUGUST 31, 1992
Sales to unaffiliated
customers................ $237,517 $494,653 -- $732,170
Inter-geographic
sales.................... 2,439 341 $(2,780) --
-------- -------- ------- --------
Total sales............ $239,956 $494,994 $(2,780) $732,170
======== ======== ======= ========
Operating income........... $ 22,537 $53,298 $ (138) $ 75,697
======== ======== =======
Interest expense........... (1,373)
Corporate expense less revenues (1,832)
Foreign currency transaction gains 609
--------
Income before taxes....... $ 73,101
========
Identifiable assets....... $139,557 $286,385 $ (252) $425,690
======== ======== =======
Corporate assets.......... 2,276
--------
Total assets.............. $427,966
========
</TABLE>
The North American geographic area includes operations in the United States
and Canada. The Company's European operations are conducted in Belgium, France,
Germany, Switzerland and the United Kingdom.
Inter-geographic sales are based on selling prices which are negotiated at
the time of the transaction. These sales have no significant effect on the
operating income of any geographic segment.
Operating income is total revenues less operating expenses, gains on
disposals of properties and excludes corporate expense and revenues, interest
expense, loss or gain on foreign currency transactions, and income taxes.
General corporate expense and revenue are primarily domestic central office
administrative expenses less other income.
Assets of geographic segments represent those assets identified with the
operation of each segment. Corporate assets consist mainly of cash and other
miscellaneous investments.
NOTE 11 -- LEASES
Total rental expense was $2,606,000 in 1994, $2,391,000 in 1993 and $2,444,000
in 1992. The future minimum rental commitments for non-cancellable leases
excluding obligations for taxes, insurance, etc. are as follows:
<TABLE>
<CAPTION>
Year ended August 31, Minimum rental
============================================================
<S> <C>
1995 $1,677,000
1996 846,000
1997 658,000
1998 349,000
1999 319,000
Later years 170,000
----------
$4,019,000
==========
</TABLE>
NOTE 12 -- CONTINGENCIES
The Company is engaged in various legal proceedings arising in the ordinary
course of business. The ultimate outcome of these proceedings is not expected
to have a material adverse effect on the Company's financial condition.
24
<PAGE> 28
NOTE 13 -- QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
Quarter ended Year ended
-------------------------------------- ----------
Nov. 30, Feb. 28, May 31, Aug. 31, Aug. 31,
1993 1994 1994 1994 1994
====================================== ========
<S> <C> <C> <C> <C> <C>
Net sales .......... $167,960 $168,055 $203,766 $208,997 $748,778
Gross profit........ 30,468 29,188 35,761 35,506 130,923
Net income ......... 9,787 8,956 12,067 13,761 44,571
Net income per
share of
common stock...... $.26 $.24 $.32 $.37 $1.19
</TABLE>
<TABLE>
<CAPTION>
Quarter ended Year ended
-------------------------------------- ----------
Nov. 30, Feb. 28, May 31, Aug. 31, Aug. 31,
1992 1993 1993 1993 1993
====================================== ========
<S> <C> <C> <C> <C> <C>
Net sales .......... $181,732 $159,936 $185,115 $158,329 $685,112
Gross profit........ 30,752 26,214 33,027 29,835 119,828
Income before
cumulative
effect of
accounting
changes........... 8,822 7,798 10,263 12,024 38,907
Cumulative effect
of accounting
changes:**
Postretirement
benefits other
than pensions... (4,841) (4,841)
Income taxes...... 2,672 2,672
-------------------------------------- --------
Net income.......... $ 6,653 $ 7,798 $ 10,263 $ 12,024 $ 36,738
====================================== ========
Earnings per share
of common
stock:*
Before cumulative
effect of
accounting
changes........... $.24 $.21 $.27 $.32 $1.04
Cumulative effect
of accounting
changes:**
Postretirement
benefits other
than pensions... (.13) (.13)
Income taxes...... .07 .07
-------------------------------------- --------
Net income.......... $.18 $.21 $.27 $.32 $.98
====================================== ========
<F/N>
*Adjusted for the five-for-four stock split paid in the form of a 25% stock
dividend on April 15, 1994.
**Refer to Note 1.
</TABLE>
A. Schulman, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
- - - ------------------------------------------------------------------------------
PRICE WATERHOUSE L.L.P. [logo]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF A. SCHULMAN, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of A. Schulman, Inc.
and its subsidiaries at August 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," and Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," both
effective as of September 1, 1992.
/s/ PRICE WATERHOUSE LLP
Cleveland, Ohio
October 14, 1994
25
<PAGE> 29
A. Schulman, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994
Net sales were $748.8 million in 1994, an increase of 9.3%
over 1993 sales of $685.1 million. A comparison of net sales is
as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== =================
1994 1993 Increase
<S> <C> <C> <C>
Manufacturing ..................... $449,085 $408,763 $40,322
Merchant .......................... 149,798 136,116 13,682
Distribution ...................... 149,895 140,233 9,662
-------- -------- -------
$748,778 $685,112 $63,666
======== ======== =======
</TABLE>
The translation effects from the stronger U.S. dollar, primarily during the
first six months of the fiscal year, decreased 1994 sales by $16.3 million.
Volume or tonnage increased in all classifications and was up 11% for 1994.
European volume increased approximately 5% and North American volume grew
approximately 21%.
Gross margins on sales were 17.5% in both 1994 and 1993.
A comparison of gross profit is as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== =================
1994 1993 Increase
(Decrease)
<S> <C>
Manufacturing ..................... $ 88,609 $ 78,548 $ 10,061
Merchant .......................... 22,582 21,495 1,087
Distribution ...................... 19,732 19,784 (52)
-------- -------- --------
$130,923 $119,827 $ 11,096
======== ======== ========
</TABLE>
Prices of most plastic resins have advanced sharply during the last few
months, mainly because of strong demand and lack of new supplies. These
increases have resulted in some erosion in margins during the fourth quarter,
primarily in Europe, due to competitive pricing pressures.
Selling, general and administrative expenses increased $2.1 million in 1994
due to the inclusion of ComAlloy International which was acquired as of March
31, 1994, higher compensation levels and additional costs required to support
the increase in sales volume. The strengthening of the U.S. dollar decreased
these expenses by $1.4 million in 1994.
Interest expense increased in 1994 due to greater levels of
borrowing and higher interest rates.
Foreign currency transaction losses and gains are due to changes in the value
of currencies within the European Monetary System.
Other income is lower primarily due to reduced interest income from temporary
investments, because of lower European interest rates.
The effective tax rate in 1994 was 36.7% compared with 37.7% in 1993. The
reduction in 1994 was due to lower taxes in the German operations and the
settlement of certain outstanding tax matters in Europe. These decreases were
partially offset by the imposition of a surtax in Belgium.
The strengthening in the value of the U.S. dollar decreased
net income by approximately $1.2 million or $.03 per share in 1994. The
translation effects from currency fluctuations are not covered with contracts,
options or other devices. Generally, forward hedging contracts are used to
mitigate exposure to currency transactions.
Earnings in Europe were up approximately 9% in 1994 on a volume increase of
5%. Continued improvement is expected in the key European economies and a
weaker U.S. dollar will have a positive effect on earnings in 1995.
In North America, earnings increased approximately 26% on a volume increase of
21%. Business continues to be firm.
Both the European and North American operations are experiencing strong
product demand and pricing for resins continues to firm. A higher level of
earnings is anticipated in 1995.
1993
Net sales for 1993 were $685.1 million or 6.4% lower than 1992 sales of $732.2
million. A comparison of net sales is as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== ================
1993 1992 (Decrease)
<S> <C> <C> <C>
Manufacturing ..................... $408,763 $426,846 $(18,083)
Merchant .......................... 136,116 147,587 (11,471)
Distribution ...................... 140,233 157,737 (17,504)
-------- -------- --------
$685,112 $732,170 $(47,058)
======== ======== ========
</TABLE>
The translation effects from the stronger U.S. dollar decreased 1993 sales by
$15.3 million.
Total volume increased 4% in 1993 due to an increase of 15% in North America.
However, lower selling prices due to an oversupply in the plastic resin market
were the major factor for lower net sales.
Gross margins on sales were 17.5% in 1993 compared to 18.2% in 1992. Gross
margins were down primarily because of the recession in Europe. A comparison
of gross profit is as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== ==================
1993 1992 (Decrease)
<S> <C> <C> <C>
Manufacturing ..................... $ 78,548 $ 87,476 $ (8,928)
Merchant .......................... 21,495 23,399 (1,904)
Distribution ...................... 19,784 22,286 (2,502)
-------- -------- --------
$119,827 $133,161 $(13,334)
======== ======== ========
</TABLE>
Selling, general and administrative expenses decreased $1.8 million in 1993.
The strengthening of the U.S. dollar decreased these expenses by approximately
$1 million and lower retirement and compensation provisions were the primary
factors for the remainder of the reduction.
Interest expense decreased in 1993 due to reduced borrowing levels and lower
interest rates.
Other income in 1993 was greater due to an increase in interest from
temporary investments.
26
<PAGE> 30
The effective tax rate was 37.7% in 1993 and 40.1% in 1992. The effective tax
rate was lower in 1993 primarily due to reduced earnings in Germany which has a
higher tax rate than the other countries where the Company operates.
The strengthening in the value of the U.S. dollar decreased net income by
approximately $1.1 million or $.04 per share in 1993.
Earnings in Europe declined approximately 19% in 1993. The recession in
Europe, especially in Germany, plus lower selling prices, were the major
factors for the reduced level of profits. European tonnage was off 2% in 1993.
In North America, earnings increased approximately 13%. There has been
strong demand, especially from the automotive and consumer product markets.
Effective September 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This statement requires the
expected cost of postretirement health care and life insurance benefits to be
recognized during the years that employees render service. The cumulative
effect of this change to September 1, 1992 was to decrease net income by $4.8
million or $.13 per share.
Also, effective September 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".
This statement requires the Company to adopt the liability method of accounting
for income taxes. The cumulative effect of this change to September 1, 1992 was
to increase net income by $2.7 million or $.07 per share.
FINANCIAL CONDITION
The Company's primary source of funds has been from operations. It is
expected that this source will continue to provide a substantial portion of
the Company's future needs.
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates. Income statement
items are translated at average exchange rates prevailing during the period.
The resulting translation adjustments are recorded in the "cumulative foreign
currency translation adjustment" account in stockholders' equity. The weakening
of the U.S. dollar during the later part of the fiscal year increased this
account by approximately $16.3 million during 1994. If the U.S. dollar
continues to weaken, this trend will continue in 1995.
Working capital and the current ratio are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
======== ===================
1994 1993 1992
<S> <C> <C> <C>
Working capital ................ $291,008 $237,930 $243,154
Current ratio .................. 3.7:1 4.2:1 3.9:1
</TABLE>
The following represent key measurements of the capital structure and
profitability of the Company:
<TABLE>
<CAPTION>
(Dollars in Thousands
except per share data)
======== ==================
1994 1993 1992
<S> <C> <C> <C>
Net worth..................................... $345,919 $294,209 $307,576
Book value per share ......................... $9.21 $7.84 $8.26
Ratio of long-term liabilities to capital .... 12.8% 10.4% 8.3%
Return on average net worth .................. 13.9% 12.9% 16.2%
Net income as a percent of sales ............. 6.0% 5.4% 6.0%
</TABLE>
The ratio of long-term liabilities to capital is computed by dividing
long-term debt and other long-term liabilities by the sum of total
stockholders' equity plus long-term debt and other long-term liabilities. This
ratio increased in 1994 primarily due to greater borrowings to finance the
acquisition of assets of ComAlloy International.
The return on average net worth is computed by dividing income before
cumulative effect of accounting changes by the average of the total
stockholders' equity during the year. This ratio increased in 1994 due to a
higher level of earnings.
Short-term lines of credit are maintained with various domestic and foreign
banks. The unused commitment under these lines was $42.7 million at August 31,
1994.
Capital expenditures were $25.3 million in 1994. New manufacturing lines are
currently being added in Canada, the United Kingdom and France. These lines
will have an annual capacity of 30 million pounds. Construction has also
recently commenced on a new manufacturing facility in Mexico. This investment
of $15 million will have an annual capacity of 40 million pounds. These
projects are planned for completion within the next 18 months. The construction
of a new $6 million manufacturing facility in Indonesia is also planned for
start up in 1996. It is anticipated that the Company will spend at least $20
million in fiscal 1995 on capital projects.
The Company's unfunded pension liability is $16.6 million at August 31, 1994.
This amount is primarily due to a book reserve plan maintained by the Company's
German subsidiary. Under such plans, there is no separate vehicle to accumulate
assets to provide for the payment of benefits. The benefits are paid directly
by the Company to the participants. It is anticipated that the German
subsidiary will generate sufficient funds from operations to pay these benefits
in the future.
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits," which requires the recognition by employers of
benefits provided to former or inactive employees after employment but before
retirement, has not yet been adopted by the Company. This statement will be
effective for the Company in fiscal 1995. A determination has not been made at
this time as to its impact on the Company.
27
<PAGE> 31
A. Schulman, Inc.
TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended August 31,
======== ==================================
1994 1993 1992 1991
<S> <C> <C> <C> <C>
Net sales........................................................ $748,778 $685,112 $732,170 $736,007
Interest and other income........................................ 7,456 8,103 6,778 4,083
-------- -------- -------- --------
756,234 693,215 738,948 740,090
-------- -------- -------- --------
Cost of sales.................................................... 617,855 565,284 599,009 614,001
Other costs, expenses, etc. ..................................... 67,939 65,480 66,838 55,876
-------- -------- -------- --------
685,794 630,764 665,847 669,877
-------- -------- -------- --------
Income before taxes and cumulative effect of accounting changes.. 70,440 62,451 73,101 70,213
Provision for U.S. and foreign income taxes...................... 25,869 23,544 29,341 27,864
-------- -------- -------- --------
Income before cumulative effect of accounting changes............ 44,571 38,907 43,760 42,349
Cumulative effect of accounting changes (1)...................... -- (2,169) -- --
-------- -------- -------- --------
Net income....................................................... $ 44,571 $ 36,738 $ 43,760 $ 42,349(2)
======== ==================================
Total assets..................................................... $510,419 $407,865 $427,966 $344,273
Long-term debt................................................... $ 23,126 $ 10,149 $ 10,108 $ 9,000
Total stockholders' equity....................................... $345,919 $294,209 $307,576 $232,567
Average number of common shares outstanding,
net of treasury shares*........................................ 37,438,118 37,325,547 37,024,548 36,963,010
Per share of common stock:
Net income:*
Before cumulative effect of accounting changes............... $1.19 $1.04 $1.18 $1.14
Cumulative effect of accounting changes (1).................. -- ($ .06) -- --
Net income................................................... $1.19 $ .98 $1.18 $1.14(2)
Cash dividends*................................................ $ .286 $ .248 $ .216 $ .186
Stockholders' equity*.......................................... $9.21 $7.84 $8.26 $6.26
<FN>
*Adjusted for the five-for-four stock split paid in the form of a 25% stock dividend on April 15, 1994.
(1) Effective September 1, 1992, the Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and SFAS 109, "Accounting for Income Taxes."
(2) Includes a gain of $887,000 or $.02 per share from life insurance proceeds and a tax benefit of $945,000 or $.03 per share
from a new U.S./German tax treaty. This tax benefit included $466,000 or $.01 per share applicable to 1990 and $479,000 or
$.01 per share applicable to prior years.
(3) Includes special cash dividend of $.02 per share paid on November 23, 1987.
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION
(In thousands of dollars)
Year Ended August 31,
================ ============================================================================
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES
Manufacturing........ $449,085 60% $408,763 60% $426,846 58% $410,987 56% $376,647 55%
Merchant Activities.. 149,798 20% 136,116 20% 147,587 20% 178,268 24% 167,988 25%
Distribution......... 149,895 20% 140,233 20% 157,737 22% 146,752 20% 134,009 20%
--------------- ---------------------------------------------------------------------------
Total................ $748,778 100% $685,112 100% $732,170 100% $736,007 100% $678,644 100%
=============== ===========================================================================
GROSS PROFIT
Manufacturing........ $ 88,609 68% $ 78,548 66% $ 87,476 66% $ 74,547 61% $ 70,392 63%
Merchant Activities.. 22,582 17% 21,495 18% 23,399 18% 27,747 23% 23,968 21%
Distribution......... 19,732 15% 19,784 16% 22,286 16% 19,712 16% 17,412 16%
--------------- ---------------------------------------------------------------------------
Total................ $130,923 100% $119,827 100% $133,161 100% $122,006 100% $111,772 100%
=============== ===========================================================================
</TABLE>
28
<PAGE> 32
======================================================================
1990 1989 1988 1987 1986 1985
$678,644 $624,410 $597,696 $463,824 $387,833 $318,876
2,409 1,675 1,211 1,245 680 41
-------- -------- -------- -------- -------- --------
681,053 626,085 598,907 465,069 388,513 318,917
-------- -------- -------- -------- -------- --------
566,872 528,296 505,907 390,247 330,426 272,684
50,644 43,000 42,567 37,063 29,368 23,682
-------- -------- -------- -------- -------- --------
617,516 571,296 548,474 427,310 359,794 296,366
-------- -------- -------- -------- -------- --------
63,537 54,789 50,433 37,759 28,719 22,551
27,441 23,977 22,787 17,946 13,533 10,840
-------- -------- -------- -------- -------- --------
36,096 30,812 27,646 19,813 15,186 11,711
-- -- -- -- -- --
-------- -------- -------- -------- -------- --------
$ 36,096 $ 30,812 $ 27,646 $ 19,813 $ 15,186 $ 11,711
======================================================================
$328,210 $257,687 $240,475 $214,698 $174,467 $143,911
$ 7,000 $ 10,000 $ 9,570 $ 11,230 $ 10,137 $ 8,828
$223,973 $166,640 $145,183 $125,803 $101,620 $ 75,624
37,699,043 37,674,290 37,665,819 37,665,819 37,290,224 36,934,095
$ .96 $ .82 $ .73 $ .52 $ .41 $ .31
-- -- -- -- -- --
$ .96 $ .82 $ .73 $ .52 $ .41 $ .31
$ .153 $ .135 $ .132(3) $ .086 $ .068 $ .056
$5.91 $4.39 $3.82 $3.31 $2.68 $2.01
29
<PAGE> 33
A. SCHULMAN, INC.
THE BOARD OF DIRECTORS
ROBERT A. STEFANKO
Chairman
TERRY L. HAINES
President and Chief Executive Officer
JAMES H. BERICK
Managing Partner,
Berick, Pearlman & Mills
DR. PEGGY GORDON ELLIOTT
President, The University of Akron
DR. LUCILLE G. FORD
Executive Assistant to the President
and Professor of Economics,
Ashland University
GORDON E. HEFFERN
Former Chairman and Director,
Society Corporation and
Society National Bank
LARRY A. KUSHKIN
Executive Vice President --
International Automotive Operations
FRANZ A. LOEHR
Former Managing Director -- Germany and
Associate General Manager -- Europe
ALAN L. OCKENE
President and Chief Executive Officer,
General Tire, Inc.
CHARLES J. PILLIOD, JR.
Chairman
Dal-Tile Group Inc.
Former Chairman and Chief
Executive Officer,
The Goodyear Tire & Rubber Company
DR. PAUL C. ROBERTS
Chairman, The Institute for
Political Economy
Distinguished Fellow, Cato Institute
RENE C. ROMBOUTS
General Manager-Europe
ROBERT G. WALLACE
Former Executive
Vice President and Director,
Phillips Petroleum Company
+ + +
MELVIN D. SACKS
Director Emeritus
EXECUTIVE OFFICERS
TERRY L. HAINES
President and Chief Executive Officer
ROBERT A. STEFANKO
Chairman and
Chief Financial Officer
LARRY A. KUSHKIN
Executive Vice President --
International Automotive Operations
ALAIN C. ADAM
Vice President -- Automotive Marketing
LEONARD E. EMGE
Vice President -- Manufacturing
BRIAN R. COLBOW
Treasurer
JAMES H. BERICK
Secretary
EUROPEAN OPERATIONS
RENE C. ROMBOUTS
General Manager -- Europe
GERALD M. WEINBERGER
Managing Director -- Germany
DOMESTIC OFFICES
AKRON, OHIO 44333
Corporate Headquarters
3550 West Market Street
(216) 666-3751
BIRMINGHAM, MICHIGAN 48009-6524
2100 East Maple Road
(810) 643-6100
EVANSVILLE, INDIANA 47712
122 N. St. Joseph Avenue
(812) 423-5836
FORT WAYNE, INDIANA 46825
9017 Coldwater
Suite 300A
(219) 497-0371
GRAND RAPIDS, MICHIGAN 49546
500 Cascade West Parkway, SE
(616) 285-2800
HOCKESSIN, DELAWARE 19707
724 Yorklyn Road, Suite 260
(302) 234-4870
MINNEAPOLIS, MINNESOTA 55431
Northwestern Financial Center
7900 Xerxes Avenue South
Suite 820
(612) 835-1601
PASADENA, CALIFORNIA 91106
600 South Lake Avenue
Suite 506
(818) 792-0053
PISCATAWAY, NEW JERSEY 08854
144B Carlton Avenue
(908) 424-9130
SCHAUMBURG, ILLINOIS 60173
Embassy Plaza
1933 N. Meacham Road
Suite 500
(708) 397-3973
ST. LOUIS, MISSOURI 63045-1303
514 Earth City Expressway
Suite 351
(314) 291-8626
NASHVILLE, TENNESSEE 27311-3333
ComAlloy International Company
481 Allied Drive
(615) 333-3453
30
<PAGE> 34
A. SCHULMAN, INC.
OTHER SALES LOCATIONS
ARLINGTON, TEXAS 76006
1907 Mill Run Dr.
(817) 265-8000
CAMBRIDGE, MASSACHUSETTS 02139
P.O. Box 391373
(617) 577-1123
ROSWELL, GEORGIA 30076-7430
P.O. Box 767430
(404) 992-9350
WESTON, MASSACHUSETTS 02193
130 Concord Rd.
P.O. Box 355
(617) 891-5485
FOREIGN OFFICES
BORNEM, BELGIUM
N.V.A. Schulman Plastics, S.A.
Pedro Colomalaan 25
Industriepark
2880 Bornem, Belgium
3-8904211
SINDORF, GERMANY
A. Schulman GmbH
Huttenstrasse 211
D-50170 Kerpen
(2273) 5610
PARIS, FRANCE
A. Schulman, S.A./
Diffusion Plastique
Immeuble Dynasteur
10/12 rue Andras Beck
92360 Meudon-la-Foret
(1) 41 07 75 00
CRUMLIN, SOUTH WALES (U.K.)
A. Schulman Inc. Limited
Croespenmaen Industrial Estate
Crumlin, Newport
Gwent NP1 4AG
Newbridge 495-244090
ZURICH, SWITZERLAND
A. Schulman AG
Kernstrasse 10
CH 8004 Zurich, Switzerland
(1) 241 60 30
MISSISSAUGA, ONTARIO, CANADA
L5R 3G5
A. Schulman Canada Ltd.
5770 Hurontario Street
Suite 602
(905) 568-8470
MEXICO CITY, MEXICO
A. Schulman
Bosques de Duraznos #65
Suite 401B
Bosques de Las Lomas
Mexico, D.F. 11700
(525) 596-7113
MONTERREY, MEXICO
Camino del Lago #4517
Sector 4
Colonia Cortijo del Rio
Monterrey, N.L. 64890
(5283) 655-505
PLANTS
AKRON, OHIO 44310
790 E. Tallmadge Ave.
(216) 633-8164
BELLEVUE, OHIO 44811
350 North Buckeye Street
(419) 483-2931
EAST ST. LOUIS, ILLINOIS 62202
14th & Converse Streets
(618) 271-5326
ORANGE, TEXAS 77630
(Dispersion Plant)
P.O. Box 1527
Thomas Street near Foreman Rd.
(409) 883-9371
NASHVILLE, TENNESSEE 27311-3333
ComAlloy International Company
481 Allied Drive
(615) 333-3453
BORNEM, BELGIUM
N.V.A. Schulman Plastics, S.A.
Pedro Colomalaan 25
Industriepark
2880 Bornem, Belgium
3-8904211
SINDORF, GERMANY
A. Schulman GmbH
Huttenstrasse 211
D-50170 Kerpen
(2273) 5610
CRUMLIN, SOUTH WALES (U.K.)
A. Schulman Inc. Limited
Croespenmaen Industrial Estate
Crumlin, Newport
Gwent NP1 4AG
Newbridge 495-244090
GIVET, FRANCE
A. Schulman Plastics S.A.
Rue Alex Schulman
F-08600 Givet, France
(24) 42 71 61
ST. THOMAS, ONTARIO, CANADA
N5P 3Z5
A. Schulman Canada Ltd.
400 S. Edgeware Road
(519) 633-3451
31
<PAGE> 35
A. SCHULMAN, INC.
CORPORATE HEADQUARTERS
3550 West Market Street
Akron, Ohio 44333
216/666-3751
ANNUAL MEETING
of Stockholders will be held on
Thursday, December 8, 1994,
at 10 AM E.S.T., at the Fairlawn Country Club,
200 North Wheaton Road
Akron, Ohio 44313
INDEPENDENT ACCOUNTANTS
Price Waterhouse L.L.P.
BP America Building
27th Floor
200 Public Square
Cleveland, Ohio 44114-2301
STOCK LISTING
The common stock of
A. Schulman, Inc. is traded
and quoted through the
NASDAQ National Market
System. Symbol: SHLM
TRANSFER AGENT
Society National Bank
Corporate Trust Division
P.O. Box 6477
Cleveland, Ohio 44101
Any questions regarding shareholder
records should be directed to
Society National Bank.
800-542-7792
216-737-5745
The annual report to the Securities
and Exchange Commission,
Form 10-K, will be made available
upon request without charge.
Write:
Robert A. Stefanko,
Chairman and
Chief Financial Officer
A. Schulman, Inc.
3550 West Market Street
Akron, Ohio 44333
32
<PAGE> 36
LOGO A. Schulman Inc.
<PAGE> 37
LOGO A. Schulman Inc.
3550 West Market Street, Akron, Ohio 44333 - 216/666-3751
<PAGE> 38
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
PHOTO 1 (FRONT COVER PAGE) : Photo of a stylized globe of the world,
North and South America shown.
PHOTO 2 (INSIDE FRONT COVER) : Photo of purple European eyeglass case and
glasses resting on books.
PHOTO 3 (PAGE 3) : Photo of Terry L. Haines and Robert A.
Stefanko in upper right corner of page.
PHOTO 4 (PAGES 4 & 5) : Photo of Coca-Cola (R) soft drink cooler containing
ice and bottled soft drinks, resting on sand with
volleyball in foreground and bathers' legs in
background.
PHOTO 5 (PAGES 6 & 7) : Photo of red pick-up truck and a man and a woman
unloading straw from the bed thereof in foreground,
with horse and red barn in background.
PHOTO 6 (PAGES 8 & 9) : Photo of a tea cup and saucer with cookies and
packets of cookies wrapped in colorful bi-oriented
polypropylene film.
PHOTO 7 (PAGES 10 & 11) : Photo of woman talking on a telephone.
PHOTO 8 (PAGES 12 & 13) : Photo of yellow power drill showing keyless
chuck, and tool handle and loose drill bit.
<PAGE> 1
Exhibit 21
Subsidiaries of the Company.
<PAGE> 2
SUBSIDIARIES OF A. SCHULMAN, INC.
---------------------------------
Jurisdiction
Name of Incorporation
- - - ---- ----------------
N.V. A. Schulman, Plastics, S.A. Belgium
N.V. A. Schulman, S.A. Belgium
A. Schulman, S.A. (1) France
A. Schulman Plastics, S.A. France
Diffusion Plastique (2) France
A. Schulman GmbH Germany
A. Schulman, Inc., Limited United Kingdom
A. Schulman Canada Ltd. Ontario, Canada
A. Schulman Foreign Sales Corporation Virgin Islands
Master Grip, Inc. Ohio
Gulf Coast Plastics, Inc. Texas
A. Schulman AG Switzerland
ASI Investments Holding Co. Delaware
ASI Akron Land Co. Delaware
Comalloy International Company Ohio
A. Schulman International, Inc. Delaware
A. Schulman de Mexico, S.A. de C.V. (3) Mexico
ASI Employment, S.A. de C.V. (3) Mexico
AS Mex Hold, S.A. de C.V. (3) Mexico
___________________________________________
(1) Owned by N.V. A. Schulman, S.A.
(2) Owned by A. Schulman, S.A.
(3) Owned by A. Schulman International, Inc.
<PAGE> 1
Exhibit 23
Consent of Independent Accountants.
<PAGE> 2
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-69042) of A. Schulman, Inc. of our report dated
October 14, 1994 appearing on page 25 of the Annual Report to Shareholders
which is incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules, which appears on page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
November 21, 1994
<PAGE> 1
Exhibit 24
Powers of Attorney.
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of
November, 1994. ---
/s/ Gordon E. Heffern
-----------------------
Gordon E. Heffern
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
November, 1994. ---
/s/ Dr. Lucille G. Ford
--------------------------
Dr. Lucille G. Ford
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of
November, 1994. ---
/s/ Dr. Paul Craig Roberts
-----------------------------
Dr. Paul Craig Roberts
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of
November, 1994. ---
/s/ Rene C. Rombouts
----------------------------
Rene C. Rombouts
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of
November, 1994. ---
/s/ Alan L. Ockene
--------------------------
Alan L. Ockene
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of
November, 1994. ---
/s/ Larry A. Kushkin
---------------------------
Larry A. Kushkin
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
November, 1994. ---
/s/ Robert G. Wallace
----------------------------
Robert G. Wallace
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of
November, 1994. ---
/s/ Franz A. Loehr
-----------------------------
Franz A. Loehr
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of
November, 1994. ---
/s/ Dr. Peggy Gordon Elliott
------------------------------
Dr. Peggy Gordon Elliott
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full
power of substitution and resubstitution, as attorneys or attorney to sign for
the undersigned and in my name, place and stead, as Director of said
Corporation, said Annual Report and any and all amendments and exhibits
thereto, and any and all applications and documents to be filed with the
Securities and Exchange Commission pertaining to such Annual Report, with full
power and authority to do and perform any and all acts and things whatsoever
requisite, necessary or advisable to be done in the premises, as fully and for
all intents and purposes as the undersigned could do if personally present,
hereby approving the acts of said attorneys, and any of them and any such
substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
November, 1994. ---
/s/ Charles J. Pilliod
---------------------------
Charles J. Pilliod
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1994, hereby constitutes and appoints TERRY L.
HAINES and ROBERT A. STEFANKO, and each of them, with full power of
substitution and resubstitution, as attorneys or attorney to sign for the
undersigned and in my name, place and stead, as Director of said Corporation,
said Annual Report and any and all amendments and exhibits thereto, and any and
all applications and documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report, with full power and authority to
do and perform any and all acts and things whatsoever requisite, necessary or
advisable to be done in the premises, as fully and for all intents and purposes
as the undersigned could do if personally present, hereby approving the acts of
said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
November, 1994. ---
/s/ James H. Berick
---------------------------
James H. Berick
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at August 31, 1994 and the Consolidated Statement of
Income for the year ended August 31, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000087565
<NAME> A. SCHULMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1993
<PERIOD-END> AUG-31-1994
<CASH> 60,062
<SECURITIES> 61,763
<RECEIVABLES> 129,010
<ALLOWANCES> 4,111
<INVENTORY> 136,667
<CURRENT-ASSETS> 399,372
<PP&E> 221,909
<DEPRECIATION> 123,806
<TOTAL-ASSETS> 510,419
<CURRENT-LIABILITIES> 108,364
<BONDS> 23,126
<COMMON> 37,902
0
1,071
<OTHER-SE> 306,946
<TOTAL-LIABILITY-AND-EQUITY> 510,419
<SALES> 748,778
<TOTAL-REVENUES> 756,234
<CGS> 617,855
<TOTAL-COSTS> 685,794
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 298
<INTEREST-EXPENSE> 1,222
<INCOME-PRETAX> 70,440
<INCOME-TAX> 25,869
<INCOME-CONTINUING> 44,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,571
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
<PAGE> 1
Exhibit 99
Notice of Annual Meeting and Proxy Statement Dated November 11, 1994.
<PAGE> 2
A. SCHULMAN LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of A.
Schulman, Inc. will be held at the Fairlawn Country Club, 200 North Wheaton
Road, Akron, Ohio, on Thursday, December 8, 1994 at 10:00 A.M., local time, for
the purpose of considering and acting upon:
1. The election of three (3) Directors for a three-year term expiring in
1997;
2. The ratification of the selection by the Board of Directors of Price
Waterhouse as independent accountants for the fiscal year ending August
31, 1995; and
3. The transaction of any other business which properly may come before the
meeting and any adjournments thereof.
Stockholders of A. Schulman, Inc. of record at the close of business on
October 24, 1994 are entitled to vote at the Annual Meeting and any adjournments
thereof.
By order of the Board of Directors
JAMES H. BERICK
Secretary
Akron, Ohio
November 11, 1994
***************************************************************************
* *
* YOUR VOTE IS IMPORTANT. STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE, *
* SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH *
* REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. *
* *
***************************************************************************
<PAGE> 3
A. SCHULMAN LOGO
3550 West Market Street
Akron, Ohio 44333
PROXY STATEMENT
November 11, 1994
The accompanying proxy is solicited by the Board of Directors of the
Corporation for use at the Annual Meeting of Stockholders to be held on December
8, 1994, and any adjournments thereof.
Stockholders of record at the close of business on October 24, 1994 (the
record date) will be entitled to vote at the Annual Meeting. At that date the
Corporation had issued and outstanding 37,467,120 shares of Common Stock, $1.00
par value. Each such share is entitled to one vote on all matters properly
coming before the Annual Meeting. At least 18,733,561 shares of Common Stock of
the Corporation must be represented at the meeting in person or by proxy in
order to constitute a quorum for the transaction of business.
This Proxy Statement and the accompanying form of proxy were first mailed
to stockholders on November 11, 1994.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation presently is comprised of
thirteen Directors. On the date of the Annual Meeting, two of the Directors will
be retiring and the number of Directors of the Corporation will be reduced to
eleven. The Directors of the Corporation are divided into three classes; Classes
I and III each consist of four Directors and Class II consists of three
Directors. At the Annual Meeting, three Directors of Class II are to be elected
to serve for three-year terms expiring in 1997 and until their respective
successors are duly elected and qualified. Unless a stockholder requests that
voting of the proxy be withheld for any one or more of the nominees for Director
in accordance with the instructions set forth on the proxy, it presently is
intended that shares represented by proxies will be voted for the election as
Directors of the three Class II nominees named in the table below.
All nominees have consented to being named in this Proxy Statement and to
serve if elected. Should any nominee subsequently decline or be unable to accept
such nomination to serve as a Director, an event which the Board of Directors
does not now expect, the persons voting the shares represented by proxies
solicited hereby either may vote such shares for a slate of four
<PAGE> 4
persons which includes a substitute nominee or for a reduced number of nominees,
as they may deem advisable.
The following information concerning each nominee and each Director
continuing in office is based in part on information received from the
respective nominees and Directors and in part on the Corporation's records:
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 24, 1994 DIRECTOR
- - - ------------------------- ------------------------------------------------- --------
<S> <C> <C>
NOMINEES TO SERVE UNTIL 1997 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
Gordon E. Heffern degree dagger double-dagger Professor, Kent State University since fall 1992 1983
and prior thereto, 1988-1990; formerly
President and Chief Executive Officer, Akron
Community Foundation and Consultant to Society
Corporation, 1990-1992; also formerly Chairman
and Chief Executive Officer, Society
Corporation and Chairman, Society National
Bank, 1983-1987; Age 70
Robert A. Stefanko* Chairman of the Board of the Corporation since 1980
1991; Executive Vice President -- Finance and
Administration of the Corporation since 1989;
Chief Financial Officer of the Corporation
since 1979; formerly Vice President -- Finance
of the Corporation; Age 51
Dr. Peggy Gordon Elliott President, The University of Akron since 1992; 1994
formerly Chancellor and Chief Executive
Officer, Indiana University Northwest, 1984-
1992; Age 57
CONTINUING DIRECTORS SERVING UNTIL 1995 ANNUAL MEETING OF STOCKHOLDERS (CLASS III)
James H. Berick degree dagger double-dagger Chairman, Berick, Pearlman & Mills Co., L.P.A., 1973
Cleveland, Ohio (attorneys) and Secretary of
the Corporation; President and Treasurer,
Realty ReFund Trust since 1990; Age 61
Terry L. Haines* President and Chief Executive Officer of the 1990
Corporation since 1991; formerly Chief
Operating Officer, 1990-1991; Vice President --
North American Sales, 1989-1990; prior thereto
General Manager of A. Schulman Canada, Ltd.;
Age 48
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 24, 1994 DIRECTOR
- - - ------------------------- ------------------------------------------------- --------
<S> <C> <C>
Dr. Paul Craig Roberts degree Distinguished Fellow, Cato Institute since 1993; 1992
Chairman of Institute for Political Economy
since 1985; Columnist for Business Week since
1983 and The Washington Times since 1988;
nationally syndicated Columnist for Scripps
Howard News Service since 1989; formerly
William E. Simon Chair in Political Economy at
Center for Strategic and International Studies,
1982-1993, and Assistant Secretary of Treasury
for Economic Policy, 1981-1982; Age 55
Rene C. Rombouts General Manager of the Corporation's European 1992
subsidiaries since 1993 and Director of
European Marketing -- Manufactured Products of
the Corporation since 1983; age 56
CONTINUING DIRECTORS SERVING UNTIL 1996 ANNUAL MEETING OF STOCKHOLDERS (CLASS I)
Larry A. Kushkin* Executive Vice President -- International 1989
Automotive Operations of the Corporation since
1989; formerly Vice President -- Automotive
Sales of the Corporation; Age 54
Franz A. Loehr Retired; formerly Associate General Manager of 1984
the Corporation's European subsidiaries and
Managing Director, A. Schulman GmbH; Age 65
Alan L. Ockene degree President and Chief Executive Officer of General 1992
Tire, Inc. since 1991; formerly Vice President
of Goodyear Tire & Rubber Company --
International, 1985-1991; Age 63
Robert G. Wallace dagger double-dagger Retired; formerly Executive Vice President, 1988
Phillips Petroleum Company and
President of Phillips 66 Company; Age 68
<FN>
- - - ---------------
* Member of Executive Committee
degree Member of Audit Committee
dagger Member of Nominating Committee
double-dagger Member of Compensation Committee
</TABLE>
Mr. Haines is a Director of First Bancorporation of Ohio. Mr. Berick is a
Director of MBNA Corporation, Realty ReFund Trust, The Tranzonic Companies, and
The Town and Country Trust. Mr. Heffern is a Director of Pioneer Standard
Electronics, Inc. and Scripps Howard Broadcasting Company. Dr. Roberts is a
Director of each of the 13 Value Line Mutual Funds. Mr. Wallace is a Director of
CBI Industries, Inc. and Valmont Industries, Inc. Dr. Elliott is a Director of
The Lubrizol Corporation.
3
<PAGE> 6
The Board of Directors has established the following committees: Executive
Committee, Audit Committee, Compensation Committee and Nominating Committee.
The functions performed by the Audit Committee of the Board of Directors
include: (i) recommending to the Board of Directors the appointment of a firm of
independent accountants to examine the books and accounts of the Corporation and
its subsidiaries; (ii) reviewing with the independent accountants the scope of
their work, prior to their examination; (iii) reviewing with the independent
accountants the scope of their examination after it has been completed, as well
as any recommendations made by the independent accountants; (iv) reviewing with
the independent accountants the requirements of the Foreign Corrupt Practices
Act of 1977, as amended; (v) reviewing with the independent accountants and
approving each non-audit service performed or proposed to be performed by the
independent accountants, as well as the relationship of audit to non-audit fees;
and (vi) considering the possible effect of the non-audit services upon the
independence of the accountants. The Audit Committee held two meetings during
the year ended August 31, 1994.
The functions performed by the Compensation Committee of the Board of
Directors include making recommendations to the Board of Directors concerning
compensation policies, salaries, grants of stock options and other forms of
compensation for management and certain other employees of the Corporation. The
Compensation Committee held two meetings during the year ended August 31, 1994.
The functions performed by the Nominating Committee include identifying
potential directors and making recommendations as to the size, functions and
composition of the Board and its committees. The Nominating Committee has no
formal procedures for consideration of nominees recommended by stockholders. The
Nominating Committee held one meeting during the year ended August 31, 1994.
The Board of Directors held five meetings during the year ended August 31,
1994. All incumbent Directors attended at least 75% of the meetings of the Board
of Directors and any committees thereof on which they served during the year.
COMPENSATION OF DIRECTORS
Each Director of the Corporation who is not an employee of the Corporation
receives an annual Director's fee of $17,000 plus $700 for each Board or
committee meeting attended. In addition, on the first business day of February
of each year, each non-employee Director of the Corporation receives a grant of
an option to purchase 875 Shares of the Common Stock of the Corporation, at an
option price equal to the fair market value of such shares on the first business
day immediately preceding the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James H. Berick, Secretary, Director, and a member of the Corporation's
Compensation Committee is the Chairman of Berick, Pearlman & Mills Co., L.P.A.,
which is retained by the Corporation as legal counsel.
4
<PAGE> 7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report describes the Corporation's executive compensation programs and
the basis on which fiscal year 1994 compensation determinations were made by the
Corporation's Compensation Committee in respect of the executive officers of the
Corporation, including the Chief Executive Officer and the other executive
officers named in the compensation tables in this proxy statement.
To ensure that the compensation program is administered in an objective
manner, the Compensation Committee is comprised entirely of independent
Directors. The duties of the Compensation Committee include recommending to the
Board of Directors the base salary level and bonus for the Chief Executive
Officer, setting the base salaries and bonuses for all other executive officers,
and approving the design and awards of all other elements of the executive pay
program. The Compensation Committee further evaluates executive performance and
addresses other matters related to executive compensation.
COMPENSATION POLICY AND OVERALL OBJECTIVES
In determining the amount and composition of executive compensation, the
Compensation Committee's goal is to provide a compensation package that will
enable the Corporation to attract and retain talented executives, reward
outstanding performance and link the interests of the Corporation's executives
to the interests of the Corporation's shareholders. In determining actual
compensation levels, the Compensation Committee considers all elements of the
program in total, rather than any one element in isolation.
The Compensation Committee members believe that each element of the
compensation program should target compensation levels at rates that are
reflective of current market practices. Offering market-comparable pay
opportunities allows the Corporation to maintain a stable, successful management
team.
Competitive market data is provided by an independent compensation
consultant. The data provided compares the Corporation's compensation practices
to those of a group of comparison companies. The Corporation's market for
compensation comparison purposes is comprised of a group of diversified
manufacturing companies that have national and international business
operations. The Compensation Committee reviews and approves the selection of
companies used for compensation comparison purposes.
In establishing a comparison group for compensation purposes, the
Compensation Committee neither bases its decisions on quantitative relative
weights of various factors, nor follows mathematical formulae. Rather, the
Compensation Committee exercises its discretion and makes its judgment after
considering the factors it deems relevant.
The key elements of the Corporation's executive compensation are base
salary, annual bonuses and long-term incentives. These key elements are
addressed separately below. In determining compensation, the Compensation
Committee considers all elements of an executive's total compensation package.
5
<PAGE> 8
BASE SALARIES
The Compensation Committee regularly reviews each executive's base salary.
Base salaries for executives initially are determined by evaluating executives'
levels of responsibility, prior experience, breadth of knowledge, internal
equity issues and external pay practices. Increases to base salaries are driven
primarily by individual performance. Individual performance is evaluated based
on sustained levels of individual contribution to the Corporation.
In determining Mr. Haines' base salary in 1994, the Compensation Committee
considered the Corporation's financial performance for the prior year, Mr.
Haines' individual performance and his long-term contributions to the success of
the Corporation. The Compensation Committee also compares Mr. Haines' base
salary to the base salaries of other chief executive officers.
ANNUAL BONUSES
The Corporation's bonus program promotes the Corporation's
pay-for-performance philosophy by providing executives with direct financial
incentives in the form of annual cash bonuses based on individual performance.
Annual bonus opportunities allow the Corporation to communicate specific goals
that are of primary importance during the coming year and motivate executives to
achieve these goals.
Although target bonus opportunities are not established at the beginning of
the year, the payouts are intended to represent a significant portion of each
executive's total compensation. This practice reinforces the Corporation's
pay-for-performance philosophy. The sizes of the payouts are determined at the
discretion of the Compensation Committee, based upon each executive's
performance during the prior fiscal year and on Corporation performance. Mr.
Haines' 1994 bonus award was determined using the same criteria as the other
executive officers and is reported in the Summary Compensation Table, below.
LONG-TERM INCENTIVES
Long-term incentives are provided pursuant to the Corporation's 1991 Stock
Incentive Plan (the "1991 Plan").
In keeping with the Corporation's commitment to provide a total
compensation package which includes at-risk components of pay, the Compensation
Committee makes annual decisions regarding appropriate stock-based grants for
each executive. When determining these awards, the Compensation Committee
considers the Corporation's financial performance in the prior year, executives'
levels of responsibility, prior experience, historical award data, and
compensation practices at the comparison companies.
Stock options were granted in 1994 at an option price equal to the fair
market value of the Corporation's common stock on the date of grant.
Accordingly, stock options granted in 1994 have value only if the stock price
appreciates following the date the options are granted. This design focuses
executives on the creation of shareholder value over the long term and
encourages equity ownership of the Corporation. These stock options become
exercisable at the rate of 25% per year commencing on the first anniversary of
the date of grant of the option, so long as the holder remains employed by the
Corporation or a subsidiary.
6
<PAGE> 9
In 1994, Mr. Haines received options to purchase 25,000 shares at the fair
market value ($26.25) of such shares on the date of grant. These grants were
established after comparison to the averages of long-term incentive grants at
the comparison companies. The Compensation Committee believes that this equity
interest provides a strong link to the interests of shareholders.
RESTRICTED STOCK
Shares of restricted stock were awarded to certain executives in 1994.
Restricted stock awarded to executives vests five years after the date awarded.
Because of its vesting requirements, restricted stock enhances the Corporation's
ability to maintain a stable executive team, focused on the Corporation's
long-term success. Restricted stock provides executives with an immediate link
to shareholder interests. Dividends are accrued until the lapse of restrictions
on the restricted stock and are paid out thereafter. In 1994, Mr. Haines
received an award of 6,000 shares of restricted stock.
The Compensation Committee:
Gordon E. Heffern, Chairman
James H. Berick
Dr. Lucille G. Ford
Robert G. Wallace
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid or to be paid by the
Corporation and its subsidiaries in respect of services rendered during the
Corporation's last three fiscal years to the Corporation's Chief Executive
Officer and each of the four most highly compensated executive officers (as
measured by salary and bonus) whose aggregate salary and bonus during the fiscal
year ended August 31, 1994, exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION (1) AWARDS
---------------------------------- ------------------------
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
FISCAL COMPENSA- AWARD(S) OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS TION(2) (3) (#) SATION
- - - ------------------------------ ------ -------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Terry L. Haines 1994 $270,833 $180,000 $ 12,075 $157,500 25,000 $42,328(4)
President & Chief 1993 $250,000 $150,000 $ 72,781 $0 30,000 $43,967
Executive Officer 1992 $232,500 $150,000 $ 49,281 $130,000 15,000 $44,796
Robert A. Stefanko 1994 $226,667 $180,000 $0 $131,250 20,000 $41,412(4)
Chairman of the Board 1993 $210,000 $150,000 $377,081 $0 25,000 $42,081
of Directors, Chief 1992 $195,417 $150,000 $ 28,717 $ 97,500 12,500 $42,115
Financial Officer and
Executive Vice President--
Finance and Administration
Larry A. Kushkin 1994 $185,000 $155,000 $0 $ 78,750 12,000 $20,288(4)
Executive Vice President-- 1993 $175,000 $135,000 $514,206 $0 10,000 $19,287
International Automotive 1992 $166,200 $135,000 $0 $ 65,000 10,000 $18,413
Operations
Alain C. Adam 1994 $110,000 $ 53,000 $ 2,165 $ 31,500 3,500 $12,787(4)
Vice President-- 1993 $105,000 $ 45,000 $ 34,271 $0 3,000 $12,287
Automotive Marketing 1992 $100,000 $ 45,000 $ 20,042 $ 29,250 3,000 $11,787
Leonard E. Emge 1994 $117,833 $ 40,000 $ 7,121 $ 39,375 5,000 $13,570(4)
Vice President-- 1993 $103,834 $ 30,000 $0 $0 4,500 $11,687
Manufacturing 1992 $ 96,334 $ 25,000 $ 98,635 $ 22,750 2,500 $10,987
<FN>
- - - ---------------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) Represents the net value (market value less exercise price) realized in respect of Common Shares purchased from the
Corporation pursuant to exercise of stock options.
(3) The total number of restricted shares and the aggregate market value at August 31, 1994: Mr. Haines held 11,000 shares valued
at $291,500; Mr. Stefanko held 8,750 shares valued at $231,875; Mr. Kushkin held 5,500 shares valued at $145,750; Mr. Adam held
2,325 shares valued at $61,613; and Mr. Emge held 2,375 shares valued at $62,938. Dividends accrue but are not paid on the
restricted shares until the restrictions thereon lapse. The aggregate market value is based on the fair market value at
August 31, 1994 of $26.50.
(4) Amounts shown include the following: Corporation contributions to Profit Sharing Plan -- $23,584 for Mr. Haines, $22,668 for
Mr. Stefanko, $18,501 for Mr. Kushkin, $11,000 for Mr. Adam and $11,783 for Mr. Emge; Corporation payments of term life
insurance premiums -- $1,787 for each named executive officer; and Director's fees received from the Corporation's Belgian
subsidiary -- $16,957 for each of Messrs. Haines and Stefanko.
</TABLE>
8
<PAGE> 11
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 1994 to the named executive officers. The amounts
shown for each of the named executive officers as potential realizable values
are based on arbitrarily assumed annualized rates of stock appreciation of five
percent and ten percent over the full five-year term of the options, which would
result in stock prices of approximately $33.50 and $42.28, respectively. No gain
to the optionees is possible without an increase in stock price which will
benefit all stockholders proportionately. Actual gains, if any, on an option
exercise are dependent upon future performance of the Corporation's Common Stock
and overall market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1994 POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE 5-YEAR OPTION TERM
EMPLOYEES IN OR BASE ---------------------
OPTIONS FISCAL PRICE(3) EXPIRATION 5% ($) 10% ($)
NAME (#)GRANTED(1) YEAR(2) ($/SH) DATE (4) (4)
- - - ---------------------- ------------- ------------ -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Haines 25,000 28.90% $26.25 08/18/99 $181,250 $400,750
Robert A. Stefanko 20,000 23.12% $26.25 08/18/99 $145,000 $320,600
Larry A. Kushkin 12,000 13.87% $26.25 08/18/99 $ 87,000 $192,360
Alain C. Adam 3,500 4.05% $26.25 08/18/99 $ 25,375 $ 56,105
Leonard E. Emge 5,000 5.78% $26.25 08/18/99 $ 36,250 $ 80,150
<FN>
- - - ---------------
(1) All options for common shares were granted pursuant to the 1991 Plan. Such options become exercisable at the rate of 25% per
year commencing on the first anniversary of the date of grant of the option, so long as the optionee remains employed by the
Corporation.
(2) Based on 86,500 options granted to all employees.
(3) Fair market value on the date of grant.
(4) The share price represents the price of the Common Stock if the assumed annual rates of stock price appreciation are achieved.
If the named executive officers realize these values, the Corporation's shareholders will realize aggregate appreciation in the
price of the 37,467,120 shares of Common Stock outstanding of $271.6 million or $600.6 million, respectively, over the
five-year term of the options.
</TABLE>
9
<PAGE> 12
The following table contains information concerning stock option exercises
during fiscal year 1994 by the named executive officers and the value of their
unexercised options at August 31, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR END(#) AT FISCAL YEAR END(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - -------------------- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Haines 2,500 $12,075 31,523 66,758 $ 99,523 $93,177
Robert A. Stefanko 0 $ 0 30,825 56,318 $ 121,569 $87,712
Larry A. Kushkin 0 $ 0 24,576 32,692 $ 111,883 $58,211
Alain C. Adam 500 $ 2,165 19,218 17,407 $ 78,196 $34,278
Leonard E. Emge 1,125 $ 7,121 5,350 5,618 $ 23,800 $13,231
<FN>
- - - ---------------
(1) Represents the net value (market value less exercise price).
(2) Represents the net value of all exercisable and unexercisable options which, on August 31, 1994, had an exercise price equal
to or less than the market value of the Corporation's shares of Common Stock on August 31, 1994 ($26.50).
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 24, 1994 in
respect of beneficial ownership of shares of the Corporation's Common Stock by
each person known to the Corporation to own five percent or more of its Common
Stock, by each Director, by each named executive officer, and by all Directors
and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)(2)(3) OUTSTANDING
- - - ----------------------------------- ----------------- -----------
<S> <C> <C>
Nicholas Company, Inc. (4) 2,423,031 6.5%
700 North Water Street
Milwaukee, Wisconsin 53202
Gordon E. Heffern 1,609 *
Robert A. Stefanko 121,787 *
Dr. Peggy Gordon Elliott 0 *
James H. Berick 16,183 *
Terry L. Haines 61,826 *
Dr. Paul Craig Roberts 343 *
Rene C. Rombouts 51,950 *
Larry A. Kushkin 318,011(5) *
Franz A. Loehr 149,125 *
Alan L. Ockene 3,118 *
Robert G. Wallace 5,843 *
Alain C. Adam 24,041 *
Leonard E. Emge 23,051 *
All Directors and
Executive Officers as a
group (14 persons) 824,557 2.2%
<FN>
- - - ---------------
* Less than 1% of the shares outstanding
(1) Includes the following number of shares which are not owned, but can be
purchased within 60 days upon the exercise of options granted under the
Corporation's 1981 Incentive Stock Option Plan and 1991 Stock Incentive
Plan: 12,076 and 18,750, respectively, by Terry L. Haines; 15,201 and 9,375,
respectively, by Larry A. Kushkin; 15,201 and 15,624, respectively, by
Robert A. Stefanko; 15,201 and 11,718, respectively, by Franz A. Loehr;
10,781 and 2,812, respectively, by Alain C. Adam; 3,163 and 2,187,
respectively, by Leonard E. Emge; 15,201 and 10,156, respectively, by Rene
C. Rombouts; and 93,074 and 72,027, respectively, by all Directors and
executive officers as a group.
(2) Includes 218 shares which are not owned but can be purchased within 60 days
upon the exercise of options granted under the Corporation's 1992
Non-Employee Directors' Stock Option Plan by each of Alan L. Ockene, Robert
G. Wallace, Gordon E. Heffern, James H.
</TABLE>
11
<PAGE> 14
Berick, and Dr. Paul Craig Roberts and 1,090 shares by all Directors and
executive officers as a group.
(3) Includes the following number of restricted shares of Common Stock awarded
under the Corporation's 1991 Stock Incentive Plan: 11,000 for Terry L.
Haines, 8,750 for Robert A. Stefanko, 5,500 each for Larry A. Kushkin and
Rene C. Rombouts, 3,750 for Franz A. Loehr, 2,325 for Alain C. Adam, 2,375
for Leonard E. Emge, and 40,525 for all Directors and executive officers as
a group.
(4) According to their report on Schedule 13G, as of February 8, 1994, Nicholas
Company, Inc., a registered investment advisor, and Albert O. Nicholas, a
director, majority shareholder and president of Nicholas Company, Inc., each
directly or indirectly beneficially owned 1,938,425 shares (2,423,031 shares
taking into effect the 25% stock dividend paid by the Corporation on April
15, 1994) of the Corporation's Common Stock held for investment advisory
clients of Nicholas Company, Inc. Nicholas Company, Inc. stated in the
Schedule 13G that it was deemed to beneficially own, and Albert O. Nicholas
may be deemed to beneficially own, the shares because of their discretionary
authority to dispose of the shares for Nicholas Company Inc.'s investment
advisory clients.
(5) Includes 5,450 shares held solely by Mr. Kushkin's wife and 54,725 shares
held in trust for Mr. Kushkin's children, the beneficial ownership of all of
which Mr. Kushkin disclaims.
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph compares total stockholder returns in respect of the
Corporation's Common Shares over the last five fiscal years (i.e. the cumulative
changes over the past five-year period of $100 invested) to the Standard &
Poor's 500 Stock Index ("S&P 500") and the Standard and Poor's Specialty
Chemical Group ("S&P Specialty Chemicals"). Total return values for the
Corporation's Common Shares, S&P 500 and S&P Specialty Chemicals were calculated
based upon market weighting at the beginning of the period and include
reinvestment of dividends on a quarterly basis. The stockholder returns shown on
the graph below are not necessarily indicative of future performance.
The following graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Corporation specifically incorporates this
information by reference and otherwise shall not be deemed filed under such
Acts.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period A. Schulman, S&P Specialty
(Fiscal Year Covered) Inc. S&P 500 Chemicals
- - - ------------------------- ------------ ------- -------------
<S> <C> <C> <C>
8/89 $100.00 $100.00 $100.00
8/90 $111.08 $ 94.98 $ 91.53
8/91 $174.07 $120.35 $114.97
8/92 $233.73 $129.90 $122.96
8/93 $206.20 $149.56 $144.64
8/94 $236.16 $157.68 $139.87
</TABLE>
13
<PAGE> 16
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In 1990, the Corporation entered into employment agreements with Messrs.
Haines, Stefanko, Kushkin and Adam and certain other senior personnel. The
employment agreements of Messrs. Haines, Stefanko and Kushkin provide for
remaining three-year terms at all times and the employment agreement of Mr. Adam
provides for a remaining one-year term at all times. The employment agreements
provide that in the event employment is terminated by the employer as a result
of a merger, consolidation or liquidation of the Corporation or by a change in
control of the Corporation, the employee shall receive a lump sum payment in an
amount equal to his salary for the term of his employment agreement, plus an
amount equal to three times (for a three-year employment agreement), or one time
(for a one-year employment agreement), the employee's average annual bonus
during the most recent five calendar years of employment; provided, however,
that the employer shall not be obligated to pay any amount which is in excess of
the maximum amount which it can deduct for federal income tax purposes. In
addition, if the employer terminates an employee's employment other than by
reason of the events described in the preceding sentence or by reason of death,
disability or cause, the employee shall receive his salary for the term of his
employment agreement, plus an annual bonus for the term of his agreement in an
amount equal to fifty percent of his average annual bonus during the most recent
five calendar years of employment. These employment agreements may tend to
discourage a takeover attempt of the Corporation due to the possible increased
expenses.
In addition, the Corporation has a Profit Sharing Plan (the "Profit Sharing
Plan") which provides that in any year the Corporation's Board of Directors, in
its discretion, may authorize the payment of contributions to the Corporation's
Profit-Sharing Trust, which contributions are allocated among participants. The
maximum amount which may be allocated to a participant generally is limited to
the lesser of (i) $30,000 or (ii) 25% of the participant's compensation.
Participation in the Profit Sharing Plan is available to all salaried employees
of the Corporation who are employed on the last day of the Profit Sharing Plan
Year. Benefits under the Profit Sharing Plan vest in accordance with a specified
formula which provides for partial vesting starting after three years of
employment with the Corporation and full vesting after seven years of employment
with the Corporation. The assets of the Profit-Sharing Trust are invested, and
each participant's account reflects the aggregate investment performance of the
Trust assets. For the fiscal year ended August 31, 1994, the amounts contributed
to the Profit Sharing Plan accounts of the persons listed in the Summary
Compensation Table were: Mr. Haines, $23,584; Mr. Stefanko, $22,668; Mr.
Kushkin, $18,501; Mr. Adam, $11,000; and Mr. Emge, $11,783.
The Corporation also has deferred compensation agreements with Messrs.
Stefanko, Haines and Kushkin, providing for the payment of benefits for ten
years following retirement, disability or death in the annual amount of $100,000
(two agreements each in the annual amount of $50,000), $100,000 and $75,000 (two
agreements in the annual amounts of $50,000 and $25,000), respectively, except
that any amounts payable at retirement will be reduced proportionately to the
extent that Messrs. Stefanko, Haines and Kushkin are employed by the Corporation
for less than ten years from the date of their agreements. The effective dates
of Mr. Stefanko's two agreements are 1985 and 1991, of Mr. Haines' agreement is
1991 and of Mr. Kushkin's two agreements are 1985 and 1992. No additional
benefits are payable under the agreements upon a change in control of the
Corporation; however, payment of all of the benefits of Messrs. Stefanko,
Haines, and Kushkin will be accelerated in the event of a termination of
14
<PAGE> 17
employment following certain changes in control. The Corporation owns and is the
beneficiary of life insurance policies upon the lives of Messrs. Stefanko,
Haines and Kushkin, in the amount of $1,000,000, $1,000,000 and $500,000,
respectively.
SELECTION OF ACCOUNTANTS
Upon the recommendation of its Audit Committee, the Board of Directors of
the Corporation has selected Price Waterhouse as independent accountants to
examine the books, records and accounts of the Corporation and its subsidiaries
for the fiscal year ending August 31, 1995. In accordance with past practice,
this selection is being presented to stockholders for ratification or rejection
at this Annual Meeting. The Board of Directors recommends that such selection be
ratified. Price Waterhouse is the independent accountant of the Corporation for
the fiscal year ended August 31, 1994, and is considered by the Board of
Directors to be well qualified. Representatives of Price Waterhouse will be
present at the Annual Meeting to make a statement if they desire to do so and
will be available to respond to appropriate questions.
For ratification, this proposal will require the affirmative vote of the
holders of a majority of the shares of Common Stock represented at the meeting
in person or by proxy. If the resolution is rejected, or if Price Waterhouse
declines to act or becomes incapable of action, or if its employment is
discontinued, the Board will appoint other public accountants whose continued
employment after the following Annual Meeting of Stockholders will be subject to
ratification by stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors, and persons who own more than 10% of the
Corporation's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Mr. Kushkin filed his
statement of beneficial ownership on Form 4 for the month of January, 1994,
subsequent to the due date for such filing. Bruce A. Petersen, a former
executive officer of the Corporation, reported his two December, 1993 changes in
beneficial ownership subsequent to the due date for such reporting.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Annual Meeting other than those described in this Proxy Statement. Should
other matters come before the meeting, the shares represented by proxies
solicited hereby will be voted in respect thereof in accordance with the best
judgment of the proxy holders.
GENERAL INFORMATION
VOTING OF PROXIES
Shares represented by properly executed proxies will be voted at the
meeting, and if a stockholder has specified how the shares represented thereby
are to be voted, they will be voted in accordance with such specification. It is
intended that shares represented by proxies on which
15
<PAGE> 18
no specification has been made will be voted (i) for the election of Directors
and (ii) for ratification of the selection of the independent accountants.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders, presently scheduled for December 1995, must be received
by the Corporation no later than July 15, 1995 for consideration for inclusion
in the proxy statement and form of proxy for that meeting.
REVOCATION OF PROXIES
A proxy may be revoked at any time before a vote is taken or the authority
granted is otherwise exercised. Revocation may be accomplished by the execution
of a later proxy with regard to the same shares or by giving notice in writing
or in open meeting.
SOLICITATION OF PROXIES
The cost of soliciting the accompanying proxies will be borne by the
Corporation. The Corporation does not expect to pay any compensation for the
solicitation of proxies but may pay brokers, nominees, fiduciaries and
custodians their reasonable expenses for sending proxy material to principals
and obtaining their instructions. In addition to solicitation by mail, proxies
may be solicited in person, by telephone or telegraph or by officers, Directors
and regular employees of the Corporation.
By order of the Board of Directors
JAMES H. BERICK
Secretary
November 11, 1994
16
