<PAGE> 1
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, 1995 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 .
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Commission File No. 0-7459
A. SCHULMAN, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
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(State of Incorporation) (I.R.S. Employer Identification No.)
3550 West Market Street, Akron, Ohio 44333
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(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (216)666-3751
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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
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or l5(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
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[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. /X/
Aggregate market value of voting stock held by non-affiliates of the Registrant
on October 23, 1995: $744,562,429
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Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practical date:
37,584,318 Shares of Common Stock, $1.00 Par Value, at October 23, 1995.
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part of Form 10-K
Document in Which Incorporated
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<S> <C>
Portions of the Registrant's Notice
of Annual Meeting and Proxy Statement
Dated November 13, 1995 III and IV
Portions of the Registrant's 1995
Annual Report to Stockholders I and II
</TABLE>
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 13, 1995 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 purposes, 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 for all of
its products and materials.
The first classification, manufacturing, involves primarily the
formulation and manufacture of proprietary plastic compounds engineered to
fulfill the application requirements of the
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Company's customers. These compounds, also known as engineered products, are
formulated in the Company's laboratories and are manufactured in the Company's
eleven 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; in
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; in the
packaging industry for such products as plastic
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bags and labels and packaging materials for food, soap, fragrances, flowers,
gardening supplies and various household necessities; in 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; in 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 in
the agriculture industry for such products as greenhouse coverings, protective
film for plants and agricultural mulch.
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 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
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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 for this product 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 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
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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 performs tolling of plastic compounds
and 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 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.
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. Tolling 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
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for any additives and packaging supplied by the Company.
On February 28, 1995, the Company, through a wholly-owned subsidiary,
Texas Polymer Services, Inc., acquired the assets of the Polymer Services
division of J. M. Huber Corporation. This acquisition provides new tolling
production capabilities and additional compounding capacity.
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 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, through 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, through December 1995, is the exclusive third-party United
States distributor for Enichem America, Inc. of prime polychloroprene
(neoprene), nitrile and EPDM rubber.
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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 a 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. The Company also is a distributor in the United
States for Exxon Chemical of polyethylene used in injection molding, EMA and
EVA. The Company also acts as a distributor of K-Resin(R) in the United States
for Phillips Petroleum and of polypropylene in Canada for Epsilon Products
Company.
Supplemental information regarding net sales and gross profit of the
Company's three classifications within its sole industry segment is set forth on
page 30 of the Company's 1995 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
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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
1995 Annual Report to Stockholders, which information is incorporated herein by
reference.
The Company's foreign subsidiaries are as follows:
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, 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 merchant activities consisting of the purchase and sale of prime and
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off-grade plastic resins from major European producers. During the fiscal year
ended August 31, 1995, this subsidiary purchased approximately 37% of the
compounds manufactured in the Bornem, Belgium plant. Approximately 23% 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 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 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
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produces plastic concentrates for the Company's European market. Both A.
Schulman, S.A. and Diffusion Plastique are distributors in France for BASF.
Through its Mexican subsidiary, A. Schulman de Mexico, S.A. de C.V.,
the Company manufactures concentrates for the packaging industry and compounds
for the automotive, construction, appliance and consumer products markets.
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.
As of August 31, 1995, the Company had approximately 938 employees in
the United States and approximately 1,001 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 215 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
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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, 1995, the Company's five 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.
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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 such competitor's own local market area.
The Company also competes with other merchants and distributors 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
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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 names of certain 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 holds 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
The Company owns and operates seven plastics compounding plants in
North America and four in Europe. The following Table indicates the location of
each plastics compounding plant and the approximate annual plastics compounding
capacity and approximate floor area, including warehouse space:
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<TABLE>
<CAPTION>
Approximate Approximate
Capacity Floor Area
Location (lbs.) (Square Feet)
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<S> <C> <C>
Akron, Ohio 73,000,000 161,000(1)
Bellevue, Ohio 80,000,000(2) 156,000
Orange, Texas 72,000,000 147,000
Orange, Texas--Texas
Polymer Services, Inc. 145,000,000 182,000
Nashville, Tennessee 60,000,000 131,000
San Luis Potosi, Mexico 25,000,000 78,000
Bornem, Belgium 130,000,000 356,000
Crumlin Gwent, South Wales(3)(a) 44,000,000 99,000
Givet, France (3)(a) 40,000,000 74,000
St. Thomas, Ontario, Canada 65,000,000 111,000
Sindorf, Germany 90,000,000 325,000(4)
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824,000,000(3)(a),(b)
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</TABLE>
(1) Includes 57,000 square feet for a facility purchased in fiscal 1995. This
location has 36,000 square feet for warehouse space, 11,000 square feet
for laboratory facilities and the balance for office and maintenance
storage.
(2) Includes capacity of approximately 12 million pounds from a manufacturing
line owned by The Sunprene Company, a partnership in which the Company has
a 70% partnership interest. Excludes a new manufacturing line having a
capacity of approximately 16 million pounds, which is being added by The
Sunprene Company. This line is scheduled for start-up in late spring 1996.
(3) 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 early fiscal 1996.
(b) 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 late calendar year 1996.
(4) Includes approximately 32,000 square feet of sales and administrative
office space, 197,000 square feet of warehouse space, and 96,000 square
feet for manufacturing.
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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 poundage 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 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 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, Mexico, the United Kingdom, Europe and Asia.
ITEM 3. PENDING LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
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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, 1995.
EXECUTIVE OFFICERS OF THE COMPANY
The age (as of October 23, 1995), 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 49; 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 Canada Ltd. since 1986.
Robert A. Stefanko: Age 52; 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 55; 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 48; Treasurer of the Company since
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1984.
Alain C. Adam: Age 47; 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 65; Vice President--Manufacturing since 1993 and
prior to that time General Plant Manager--North America since 1985.
James H. Berick: Age 62; Secretary of the Company since 1979 and Chairman,
Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).
PART II
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.
Additional information in response to this Item is set forth on page 1
of the Company's 1995 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 30 and 31 of
the Company's 1995 Annual Report to Stockholders, which information is
incorporated herein by reference.
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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 28 and 29 of
the Company's 1995 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 LLP dated October 16, 1995, appearing on pages 16 through 27 of
the Company's 1995 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-2 of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
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" in the Company's proxy
statement dated November 13, 1995, 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.
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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 13, 1995, 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 13,
1995, previously filed with the Commission, which information is incorporated
herein by reference.
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 13, 1995, previously filed with the Commission,
which information is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
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<CAPTION>
Page
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(1) Financial Statements:
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Report of Independent Accountants 27*
Consolidated Statement of Income for
the three years ended August 31, 1995 16*
Consolidated Balance Sheet at August 31,
1995 and 1994 18*
Consolidated Statement of Cash Flows for
the three years ended August 31, 1995 20*
Consolidated Statement of Stockholders'
Equity for the three years ended
August 31, 1995 17*
Notes to Consolidated Financial
Statements 21*
(2) Financial Statement Schedules:
------------------------------
Report of Independent Accountants
on Financial Statement Schedule F-1
VIII-Valuation and Qualifying Accounts F-2
</TABLE>
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*Incorporated by reference from the indicated page of the Company s 1995
Annual Report to Stockholders. With the exception of this information and the
information incorporated in Items 1, 5, 6, 7 and 8, the 1995 Annual Report to
Stockholders is not deemed filed as part of this report.
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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:
<TABLE>
<CAPTION>
Exhibit
Number
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<S> <C>
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. (incorporated by
reference to Exhibit 3(c) of the Company's Form 10-K
for fiscal year ended August 31, 1994).
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).
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
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
Number
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<S> <C>
filed as Exhibit 28 of the Company's Form 10-K for fiscal
year ended August 31, 1992).
10(d)* Non-Qualified Profit Sharing Plan.
10(e)* 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(f)* 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-Kfor fiscal
year ended August 31, 1991).
10(g)* 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(h)* 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(i)* 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).
10(j)* 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(k)* 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(l)* 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(m)* 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(n)* Agreement between the Company and Larry A. Kushkin dated
as of August 31, 1993 (incorporated by reference
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
to Exhibit 10(n) of the Company's Form 10-K for fiscal
year ended August 31, 1993).
10(o)* Agreement between the Company and Franz A. Loehr dated as
of August 31, 1994.
10(p) Credit Agreement between the Company, The Banks and
Society National Bank, as Individuals and as Agent, dated
as of March 13, 1995 (incorporated by reference to
Exhibit 10 of the Company's Form 10-Q for fiscal quarter
ended February 28, 1995).
11 Computation of Earnings Per Common Share
13 Company's 1995 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 13, 1995
</TABLE>
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item 601(b)(27) of
Regulation S-K.
(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, 1995.
-26-
<PAGE> 27
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 28, 1995
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Terry L. Haines Director and Principal November 28, 1995
- ---------------------- Executive Officer
Terry L. Haines
/s/Robert A. Stefanko Director, Principal November 28, 1995
- ---------------------- Financial Officer and
Robert A. Stefanko Principal Accounting Officer
James H. Berick* Director
Gordon E. Heffern* Director
Larry A. Kushkin* Director
Franz A. Loehr* Director
Alan L. Ockene* Director
Paul Craig Roberts* Director
Rene C. Rombouts* Director
Robert G. Wallace* Director
Peggy Gordon Elliott* Director
</TABLE>
*By: /s/ Robert A. Stefanko November 28, 1995
----------------------
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.
-27-
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Board of Directors
of A. Schulman, Inc.
Our audits of the consolidated financial statements referred to in our report
dated October 16, 1995, appearing on page 27 of the 1995 Annual Report to the
Stockholders of A. Schulman, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
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 16, 1995
F-1
<PAGE> 29
SCHEDULE VIII
A. SCHULMAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<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, 1995 $4,111,000 $1,134,000 $(565,000) $ 163,000 $ 16,000 (1) $4,859,000
Year ended August 31, 1994 3,974,000 298,000 (450,000) 139,000 150,000 (2) 4,111,000
Year ended August 31, 1993 4,433,000 655,000 (576,000) (538,000) - 3,974,000
Valuation allowance - deferred tax assets
Year ended August 31, 1995 4,197,000 - - - 623,000 (3) 4,820,000
Year ended August 31, 1994 5,557,000 - - - (1,360,000)(3) 4,197,000
Year ended August 31, 1993 - 5,557,000 - - - 5,557,000
</TABLE>
Note:
(1) Acquisition of assets of Texas Polymer Services.
(2) Acquisition of assets of ComAlloy International.
(3) Represents current year change in valuation allowance for foreign tax
credit carryforward benefits which are not likely to be utilized.
F-2
<PAGE> 1
Exhibit 10(d)
Nonqualified Profit Sharing Plan
<PAGE> 2
A. SCHULMAN, INC.
NONQUALIFIED PROFIT SHARING PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT OF PLAN. A. Schulman, Inc., a Delaware corporation
(the "Company"), hereby establishes a nonqualified profit sharing plan to be
known as the "A. Schulman, Inc. Nonqualified Profit Sharing Plan" (the "Plan")
as set forth in this document. The Plan permits the unfunded accrual of
benefits to Plan participants.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to promote the long
term growth and profitability of the Company by providing key employees of the
Company and its subsidiaries with the benefits which they would have received
under the Company's Profit Sharing Plan but for the reduction of the
compensation limit under Code Section 401(a)(17), effective for plan years
beginning after December 31, 1993.
ARTICLE II
DEFINITIONS
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Committee" means the Compensation Committee of the Board.
"Company" means A. Schulman, Inc. or any successor thereto.
"Fiscal Year" means the Company's fiscal year beginning September 1 and
ending on the following August 31.
"Participant" means an employee of the Company or any Subsidiary who is
designated by the Committee to participate in the Plan.
"Profit Sharing Plan" means the A. Schulman Employees' Profit Sharing
Trust, restated as of September 1, 1989.
"Subsidiary" means a corporation of which the Company owns, directly or
indirectly, at least a majority of the shares having voting power in the
election of directors.
<PAGE> 3
ARTICLE III
PARTICIPANTS AND PLAN ACCRUALS
3.1 DESIGNATION OF PARTICIPANTS. The Committee shall meet at least once
in each Fiscal Year and irrevocably specify, before the end of such fiscal
year, the name of each employee of the Company or a Subsidiary who is entitled
to participate in the Plan for such Fiscal Year.
3.2 DETERMINATION OF ACCRUALS. The amount to be accrued under the Plan
for a Participant for a fiscal year shall be equal to the excess of (i) the
product of (x) the Participant's compensation for such fiscal year (excluding
bonuses) multiplied by (y) the percentage determined by the Board or the
Committee for purposes of calculating the Company's contribution to the Profit
Sharing Plan for such Fiscal Year, OVER (ii) the Company contribution allocated
to such Participant under the Profit Sharing Plan for such Fiscal Year.
3.3 EMPLOYMENT RIGHTS. Nothing in this Plan shall confer any right on
an employee to continue in the employ of the Company or shall interfere in any
way with the right of the Company to terminate an employee at any time.
ARTICLE IV
VESTING, EARNINGS, FORFEITURES AND DISTRIBUTIONS
4.1 PARTICIPANT ACCOUNTS. The Committee shall cause a memorandum
account to be kept in the name of each Participant.
4.2 VESTING OF ACCOUNTS. A Participant's account balance shall become
vested and non-forfeitable in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Employment Percent Vested
------------------- --------------
<S> <C>
Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
"Years of Employment" shall be determined in accordance with applicable
provisions of the Profit Sharing Plan. Notwithstanding the above, a
Participant's account balance shall become 100% vested upon the Participant's
death while an employee of the Company or disability (as determined under the
profit sharing plan).
<PAGE> 4
4.3 EARNINGS. At the end of each Fiscal Year, a Participant's account
shall be credited with an estimated amount (the "Earnings") equal to the
product of (i) the average yield received by such Participant's funds in the
Profit Sharing Plan for the preceding Fiscal Year, multiplied by (ii) the
Participant's account balance under this Agreement at the beginning of the
Fiscal Year. Upon final determination of the average yields earned by the
Profit Sharing Plan for a fiscal year, the Earnings credited to a Participant's
account in respect of such Fiscal Year shall be adjusted appropriately.
4.4 DISTRIBUTIONS. Payment of a Participant's vested account balance
shall be made at the time and in the manner that such Participant (or his or
her designated beneficiary) is entitled to payment under the Profit Sharing
Plan.
4.5 BENEFICIARIES. Each Participant shall have the right to designate
one or more beneficiaries in accordance with the procedures set forth in the
Profit Sharing Plan.
4.6 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS. Until a
Participant's account balance becomes vested, the interest of a Participant
(and his or her beneficiaries) is contingent and subject to forfeiture. To the
extent that a Participant's account balance becomes vested, such Participant
shall have the rights of an unsecured general creditor of the Company. The
Company shall not be required to set aside any assets to meet its payment
obligations hereunder, and Participants shall not have any property interest in
any specific assets which are in fact set aside. Nothing in this Plan shall be
deemed to create a trust of any kind or create a fiduciary relationship.
ARTICLE V
ADMINISTRATION
5.1 RECORDS. The records to be maintained for the Plan shall be
maintained by the Company at its expense and subject to the supervision and
control of the Committee. All expenses of administration of the Plan shall be
paid by the Company and shall not be charged against Participants' accounts.
5.2 ALIENATION. To the extent permitted by law, the right of any
Participant or beneficiary in any benefit or payment hereunder shall not be
subject in any manner to attachment or other legal process for the debts of such
Participant or beneficiary, nor shall any such benefit or payment be subject to
anticipation, alienation, sale, transfer, assignment or encumbrance.
5.3 COMPANY LIABILITY. No member of the Board or the Committee and no
officer or employee of the Company shall be liable to any
<PAGE> 5
person for any action taken or omitted in connection with the administration of
this Plan unless attributable to his own fraud or willful misconduct. The
Company shall not be liable to any person for any such action unless
attributable to fraud or the willful misconduct of a director, officer or
employee of the Company.
ARTICLE VI
EFFECTIVE DATE AND AMENDMENT
6.1 EFFECTIVE DATE. The Plan shall be effective as of September 1,
1994.
6.2 AMENDMENT AND TERMINATION. The Plan may be amended or terminated by
the Board at any time. Notice of any such action shall be given to each
Participant and each beneficiary of a deceased Participant.
A. Schulman, Inc.
By: /s/ Robert A. Stefanko
----------------------------
Robert A. Stefanko,
Chairman of the Board
And By: /s/ James H. Berick
----------------------------
James H. Berick, Secretary
<PAGE> 1
Exhibit 10(o)
Agreement Between the Company
and Franz A. Loehr Dated as of
August 31, 1994
<PAGE> 2
August 31, 1994
Mr. Franz A. Loehr
Mommenstrasse 109
5000 Koln 41
Dear Franz:
This letter will set forth the consulting arrangement between you and A.
Schulman GmbH (hereinafter "Schulman").
You and Schulman have agreed as follows:
CONSULTING
For the two (2) year period beginning September 1, 1994, and ending
August 31, 1996 (the "Consulting Period"), you will serve as a special
consultant for Schulman and will consult with Schulman on such matters as
Schulman may request from time to time. In particular, you will assist
Schulman in maintaining good relations and contacts with suppliers and
customers, and you will introduce Schulman personnel to your contacts at
Schulman's suppliers and customers. Part of your consulting activities will
also consist of assisting Schulman in the transition of leadership from you to
new managers of Schulman.
In performing your consulting duties, you will make yourself available on
a reasonable basis during such times and at such places in Western Europe as
Schulman may request from time to time, and Schulman will provide you with such
reasonable access to the records of, and other information relative to, its
operations as you in the proper discharge of your consulting duties may require.
However, you will not be required to relocate your home or office from Cologne.
COMPENSATION
In consideration of the consulting services provided by you,
<PAGE> 3
Schulman will pay you a fee (the "Consulting Fee") in an amount equal to the
equivalent of USD 75,000 per year (based on the September 1, 1994 exchange rate)
for each year during the Consulting Period. Monthly, at the beginning of each
month, you will submit invoices to Schulman for one-twelfth (1/12th) of the
yearly Consulting Fee plus expense reimbursement in respect of expenses incurred
by you during the preceding month as provided in paragraph 4, below. Such
invoices, in addition, will include a separate charge for any applicable value
added tax. All amounts due will be paid to you within fifteen (15) days after
the date of invoice or as you and Schulman otherwise mutually shall agree.
The exchange rate of USD to German marks on September 1, 1994, will be
used to fix the compensation in German marks. No fluctuations in exchange
rates after September 1, 1994, will affect the amounts payable hereunder.
In addition to the Consulting Fee, during the Consulting Period you will
continue to have the use of your current Schulman-owned automobile. Schulman
will continue to pay or reimburse you for reasonable expenses related to the
automobile, such as gasoline, maintenance and insurance. You agree to keep the
automobile appropriately maintained and insured during the Consulting Period.
At the end of the Consulting Period, at your option, Schulman will transfer (at
a cost of USD 100) the automobile to you, provided that you pay all costs and
expenses (including applicable taxes) associated with such transfer. Since you
were a former employee of the A. Schulman Group, you also will be entitled to
your bonus for the fiscal year ending August 31, 1994, which will be paid to
you in the customary manner or as we otherwise mutually agree.
Schulman also will provide you with office space in Schulman's Sindorf
facility and with reasonable clerical assistance.
DEATH OR DISABILITY: SICKNESS
In the event of your death or disability prior to the end of the
Consulting Period, this Agreement will terminate. As used in this paragraph,
the term disability means a mental or physical infirmity which prevents you from
performing your duties under this Agreement for a period in excess of ninety
(90) consecutive days in any twelve (12) month period.
REIMBURSEMENT OF EXPENSES
Schulman also will reimburse you for reasonable and properly documented
out-of-pocket expenses incurred by you and approved by Schulman's General
Manager in performing services for Schulman hereunder.
<PAGE> 4
NON-COMPETE AND NON-DISPARAGEMENT
During the Consulting Period, you will not, either directly or
indirectly, engage in, or assist others in engaging in, any business which
competes with the current business of Schulman, A. Schulman, Inc. (the
"Parent") or any subsidiary or affiliate of Schulman or the Parent (Schulman,
the Parent and such entities being herein referred to collectively as the
"Companies" and individually as a "Company"). In addition, you will not assist
or induce any employee of the Companies to terminate his or her employment.
Furthermore, Schulman, for itself and the Parent on the one hand, and you
on the other hand, agree that, after the date hereof, each will not defame or
disparage the other or make any derogatory remarks to any persons concerning
the financial or business capabilities of the other, nor will you defame,
disparage or make any derogatory remarks about any shareholder, director,
officer or agent of Schulman or the Parent.
TRADE SECRETS
You confirm and agree that all of the trade secrets, as that term is
understood in business parlance, of the Companies, including, but not limited
to, business plans, customer lists, financial or computer data, marketing
methods, formulae, and production methods, are, and shall remain, the exclusive
property of the Companies and shall not be used by you except in connection
with the performance of your consulting duties for Schulman.
REMEDIES
You agree that in the event that you violate the provisions of paragraphs
5 or 6, above, the Companies may suffer damages which are not compensable by
the payment of money alone. Therefore, you agree that if you violate any of
the provisions of paragraphs 5 or 6, any of the Companies will be entitled to
immediate injunctive relief, in addition to any other rights and remedies they
may have.
SEVERABLE PROVISIONS
The provisions of this Agreement are severable, and if any one or more
provisions are determined to be illegal or otherwise unenforceable, in whole or
in part, the remaining provisions and a partially unenforceable provision, to
the extent enforceable in any jurisdiction nevertheless will be binding and
enforceable. In the event that any provision of this Agreement is deemed
unenforceable, Schulman and you agree that a court of competent jurisdiction
will have jurisdiction to reform such provision to the extent necessary to
cause it to be enforceable to the maximum extent permitted by law, and will
abide by what said court determines.
<PAGE> 5
INDEPENDENT CONTRACTOR ONLY
You are being retained by Schulman only for the purposes and to the
extent set forth in this Agreement, and your relationship with Schulman is that
of an independent contractor. You will be solely responsible for all taxes
(including, without limitation, social security taxes as imposed on a
self-employed individual) and other governmental obligations arising out of
your performance of services and the payments to be made to you hereunder. You
will indemnify and hold Schulman harmless from and against any liability to pay
any such taxes or obligations.
From and after August 31, 1994, none of the Companies will have any
obligation to pay you any further salary, benefits or other compensation or
remuneration whatsoever except for (i) any pension or other benefits arising
out of your prior employment and accrued prior to August 31, 1994, and (ii) the
payments to be made hereunder. Specifically, none of the Companies will be
responsible to pay or reimburse you for legal, accounting or other professional
fees incurred by you after August 31, 1994.
RESIGNATION; RETURN OF SHARES
Effective as of August 31, 1994, you will resign from all Boards of
Directors of the Companies on which you serve, except that of the Parent. In
addition, you will deliver to Schulman free of charge all shares of stock or
other interests in any of the Companies or any other entity which are being
held by you as a nominee on behalf of any Company. Such shares or interests
will be accompanied by such documents or instruments as are necessary
effectively to vest title therein in Schulman or any nominee of Schulman, as
Schulman shall direct. It is agreed and understood that during the period of
this Agreement, i.e., until August 31, 1996, if you should then be serving as a
Director of the Parent, you will not receive any additional compensation for
your service as a Director. However, the Parent will reimburse you for all
reasonable expenses you incur in connection with your service as a Director.
MISCELLANEOUS
This Agreement is binding upon and inures to the benefit of the parties
and their respective heirs, personal representatives, successors and assigns
and supersedes all prior agreements and understandings between the parties
concerning the subject matter hereof and may not be modified or terminated
orally. No modification, termination or attempted waiver of this Agreement
shall be valid unless in writing and signed by a party against whom the same is
sought to be enforced. This Agreement shall be governed by and construed in
accordance with the laws of Germany.
<PAGE> 6
If this Agreement sets forth correctly our understanding, please sign the
enclosed counterpart and return it to the undersigned.
Sincerely yours,
A. SCHULMAN GMBH
/s/Terry L. Haines /s/Robert A. Stefanko /s/Rene Rombouts
- ------------------ --------------------- ----------------
Terry L. Haines Robert A. Stefanko Rene Rombouts
AGREED TO AND ACCEPTED:
/s/Franz A. Loehr Dated as of: August 31 , 1994
- ----------------- -----------------
FRANZ A. LOEHR
<PAGE> 1
Exhibit 11
Computation of Earnings Per Common Share.
<PAGE> 2
A. SCHULMAN, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year ended August 31,
---------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income $53,618,000 $44,571,000 $36,738,000
Dividends on preferred stock 54,000 54,000 54,000
----------- ----------- -----------
Net income applicable to
common stock $53,564,000 $44,517,000 $36,684,000
=========== =========== ===========
Weighted average number of
shares of common stock
outstanding, net of
treasury shares 37,544,408 37,438,118 37,325,547
Net income per share of
common stock $1.43 $1.19 $ .98
===== ===== =====
</TABLE>
<PAGE> 1
Exhibit 13
Company's 1995 Annual Report to Stockholders.
<PAGE> 2
A. Schulman Inc. 1995 Annual Report
PHOTO 1
Photo of two swimmers swimming in pool
between red, white and blue lane
markers.
<PAGE> 3
<TABLE>
<S> <C>
PHOTO 2 (Inside Front Cover) Front Cover and Left:
Photo of two swimmers resting High-visibility swimming
in pool with arms on pool lane markers are
red, white and blue lane molded from a pre-colored
markers; photo of red, polyethylene compound
white and blue lane marker supplied by A. Schulman.
components in foreground. Used in international
competition, these markers
are uniquely shaped to
reduce water turbulence
between adjacent
swimming lanes.
</TABLE>
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. For the first time, in fiscal 1995, the Company's
revenues exceeded $1 billion.
Headquartered in Akron, Ohio, A. Schulman operates 11 manufacturing
plants in North America and Europe, and plans to open a new production facility
in Asia in 1996. The Company employs more than 1,900 people.
A. Schulman stock is quoted through the NASDAQ National Market System
(Symbol: SHLM).
<PAGE> 4
Financial HighlIghts
<TABLE>
<CAPTION>
Year Ended August 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales $1,027,458,000 $748,778,000 $685,112,000
Income before cumulative effect of accounting changes $ 53,618,000 $ 44,571,000 $ 38,907,000
Cumulative effect of accounting changes(1) - - $ (2,169,000)
Net income $ 53,618,000 $ 44,571,000 $ 36,738,000
Net income per share of common stock:
Before cumulative effect of accounting changes $ 1.43 $ 1.19 $ 1.04
Cumulative effect of accounting changes(1) - - ($ .06)
Net income $ 1.43 $ 1.19 $ .98
Capital expenditures $ 58,533,000 $ 25,302,000 $ 18,158,000
Long-term debt and other non-current liabilities $ 106,326,000 $ 50,673,000 $ 34,120,000
Long-term liabilities to capital 20.8% 12.8% 10.4%
Stockholders' equity $ 405,218,000 $345,919,000 $294,209,000
Book value per common share $ 10.75 $ 9.21 $ 7.84
Number of stockholders 1,352 1,405 1,426
Cash dividends per share
1st Quarter $.075 $ .064 $ .056
2nd Quarter .085 .072 .064
3rd Quarter .085 .075 .064
4th Quarter .085 .075 .064
$.330 $.286 $.248
============= ============ ============
Common stock price range High - Low High - Low High - Low
1st Quarter 29 3/4 - 25 3/4 25 - 21 1/4 27 1/8- 21
2nd Quarter 29 1/4 - 24 1/4 29 - 22 3/4 25 1/4 - 21 1/8
3rd Quarter 32 3/4 - 28 28 3/8 - 21 24 3/4 - 20 3/4
4th Quarter 31 1/2 - 23 1/4 28 3/8 - 23 1/2 25 1/2 - 21 1/8
<FN>
(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>
<TABLE>
<CAPTION>
NET SALES NET INCOME CAPITAL EXPENDITURES
(Dollars in Billions) (Dollars in Millions) (Dollars in Millions)
- --------------------- --------------------- ---------------------
Fiscal Fiscal Fiscal
Year $ Year $ Year $
------ ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
1986 $ .388 1986 $15.186 1986 $11.879
1987 $ .464 1987 $19.813 1987 $11.167
1988 $ .598 1988 $27.646 1988 $11.710
1989 $ .624 1989 $30.812 1989 $25.982
1990 $ .679 1990 $36.096 1990 $17.668
1991 $ .736 1991 $42.349 1991 $17.997
1992 $ .732 1992 $43.760 1992 $15.827
1993 $ .685 1993 $36.738 1993 $18.158
1994 $ .749 1994 $44.571 1994 $25.302
1995 $1.027 1995 $53.618 1995 $58.533
</TABLE>
<PAGE> 5
To Our Stockholders:
We are pleased to report that sales and net income established
new records for the fiscal year ended August 31, 1995.
Sales for fiscal 1995 climbed to the $1 billion level for
the first time in our history. Sales were $1,027.5 million, 37%
higher than last year's sales of $748.8 million. Net income also
established another record, our twelfth in the last thirteen
years. Net income for fiscal 1995 was $53,618,000 or $1.43 per
common share, an increase of 20% over 1994 earnings of
$44,571,000 or $1.19 per share.
Sales for the fourth quarter ended August 31,1995
were $242.0 million, or 16% higher than sales of $209.0 million
for the comparable 1994 quarter. Net income was $12,047,000
or $.32 per common share compared with $13,761,000 or $.37
per share for the 1994 fourth quarter.
Earnings in the fourth quarter were down because
of lower profit margins resulting from competitive price
pressures and start-up costs in Mexico. In addition, interest
expense increased due to a higher level of borrowing.
The strength of our European operations was
responsible for the new earnings record for 1995. Net
income for fiscal 1995 advanced 39% on a sales increase
of 42%. Fourth quarter earnings were up 17% in Europe
on a 23% increase in sales.
Sales in our North American operations were up
6% for the quarter and 31% for fiscal 1995, but a decline
in earnings of $3.3 million for the fourth quarter more than
offset the $1.6 million improvement in European income.
Although tonnage in North America advanced 1.4% in
the fourth quarter, gross profits declined $2.3 million due to
lower margins which were 11.4% compared with 14.7% in the
same quarter of 1994. The lower margins were the result of
lackluster economic conditions and extremely competitive
pricing pressures. Customers also were reducing their
inventories because of sharp declines in plastic resin prices.
Furthermore, start-up costs of our new Mexican facility also
adversely affected income.
Worldwide tonnage was down 5.6% for the fourth
quarter, but tonnage for the year was up 10.5% over 1994.
Manufacturing tonnage was up 9.7% for the quarter and 21.5%
for the year. The largest increases in manufacturing tonnage
were generated in our North American operations, which were
up 15.8% for the quarter and 29% for the year. The major
reason was the inclusion of Texas Polymer Services since
February 28, 1995, the date of its acquisition.
The translation effect of the lower value of the U.S.
dollar continued to have a positive impact on our European
sales and profits. The translation effect for fiscal 1995
increased sales by $68.9 million and net income by $4,618,000
or $.12 per common share. For the 1995 fourth quarter,
translation increased sales by $14.5 million and net income by
$1,164,000 or $.03 per common share.
Capital expenditures for 1995 were $58.5 million, the
highest in our history. Major expenditures were the acquisition
of the assets of Texas Polymer Services, a new manufacturing
line placed in service at our Canadian facility, and new lines
in our United Kingdom and Givet, France facilities, both of
which commenced operation during the first quarter of fiscal
1995. We recently dedicated our new Mexican facility in San
Luis Potosi. This facility, which commenced operation in
September 1995, represents an investment of $15 million.
Initially, the plant's total capacity is approximately 25 million
pounds. This facility will service the Mexican and Latin
American markets which are expected to provide extremely
good long-term growth opportunities for A. Schulman.
We plan to commence construction soon on a new
manufacturing facility in Indonesia. This facility, our first
in the Far East, is scheduled for completion at the end
of 1996. The total investment in this project will be
$6 million. It will provide us with local manufacturing
capabilities in this growing market.
During the past year, we have established marketing
representative offices in Singapore and Barcelona, Spain.
These locations will enable us to expand into new markets
with our broad range of products.
We have continued our investment program
and increased capacity throughout our operations to meet
projected long-term demand. We have upgraded and
improved our manufacturing facilities to utilize the best
technology available.
2
<PAGE> 6
We remain committed to expanding our
manufacturing operations and capabilities throughout the
world. This will provide the foundation for continued
growth in future years.
<TABLE>
<S> <C>
In September 1995, we increased the size of PHOTO 3
our Board of Directors from eleven to fourteen members. Photo of Terry L. Haines
We are pleased to welcome to our Board, Willard R. and Robert A. Stefanko
Holland, Chief Executive Officer of Ohio Edison Company in upper-right corner
in Akron, James A. Karman, President and a director of of page.
RPM, Inc. in Medina, Ohio and James S. Marlen, Chairman
and Chief Executive Officer of Ameron, Inc. in California.
The broad experience of these new members will provide
additional strength and expertise for our expanding
worldwide operations.
</TABLE>
In January 1995, we increased our annual dividend
rate to $.34, an increase of 15% over last year's rate. This
increase reflects the Board's continuing confidence in
the long-term prospects for A. Schulman. The Board will
review the current dividend rate and policy at its meeting
in January 1996.
At its October 1995 meeting, the Board of Directors
confirmed a 1987 authorization to repurchase up to four
million of the Company's common shares. Any such
purchases would be made from time-to-time in the open
market at current market prices. The timing of any
purchases will depend on the price of the stock and value it
provides to the Company. On November 6, 1995, the
Company made its initial purchases under this authorization.
It's always gratifying to report another year of record
earnings, but it is disappointing to end the 1995 fiscal year
with lower earnings in the final quarter. During the last half
of the year, there has been a significant change in our
industry. After prices peaked in February 1995, there was an
overall slowing in the worldwide economies. Customers who
purchased materials in advance to avoid continuing price
increases decided to reduce inventories. In addition,
worldwide competitive pressures continue to squeeze our
profit margins.
Results posted in the first half of fiscal 1995
were extremely good. Continuing pressure on margins and
slower growth in the economies will make it difficult to
achieve the same level of earnings posted in last year's first
half. We also anticipate general economic weakness and
additional start-up costs at our new Mexican facility.
We remain optimistic about the outlook for
A. Schulman. Our financial position is extremely strong and
enables us to continue to invest for future growth.
We anticipate that earnings will improve and return to
traditional growth patterns during the second half of our 1996
fiscal year.
/s/ Terry L. Haines /s/ Robert A. Stefanko
- -------------------- -----------------------
Terry L. Haines Robert A. Stefanko
President and Chairman
Chief Executive Officer
November 10, 1995
3
<PAGE> 7
This popular tennis ball
retriever is manufactured
in Canada from a filled and
reinforced polypropylene
compound supplied by
A. Schulman. The material
is strong, impact resistant
and stable in prolonged
outdoor exposure.
Building on Our Strengths ...
and Extending Our Global Reach
During the past year, A. Schulman continued to strengthen its position
as a global leader in the plastics industry. Revenues surpassed $1 billion
for the first time in Company history. Capital expenditures exceeded
$55 million, and will provide A. Schulman with the tools required to
carry out its long-term strategic global plan.
The Company has dedicated, highly trained employees, and
utilizes superior technology and state-of-the-art plants and equipment.
It has the ability to effectively meet customer needs, and its financial
strength provides a solid base to achieve profitable growth in the
years ahead.
PHOTO 4 People. A. Schulman's greatest strength,
Photo of yellow tennis first and foremost, is its employee
ball in motion worldwide. The Company is customer
driven. Every individual on the A.
Schulman team is committed to providing
customers with products of the highest
quality and unparalleled service.
Technology. A. Schulman is a global leader in the high-performance
plastics market. Customers rely on the Company's technical expertise and
superior manufacturing capabilities to meet their most challenging product
requirements. With A. Schulman's extensive
4
<PAGE> 8
PHOTO 5
Photo of black Wilson(R) tennis ball
retriever containing yellow tennis
balls, with three yellow tennis balls
and a portion of a tennis racket in
the foreground
<PAGE> 9
Elegant patio grill offers PHOTO 6
kitchen convenience outdoors. Photo of patio grill with
The grill incorporates corn, tomato, salt and
components made from pepper shakers, lobster and
an A. Schulman high-impact pans (photo covers the top
thermoplastic alloy which is of pages 6 and 7); photo
resistant to abrasion, grease of corn on the cob with
and weather exposure. butter in foreground
6
<PAGE> 10
product line, it is able to provide customers with a
wide range of materials. In addition, the Company
is able to develop custom formulated materials for
customers' specific needs.
Facilities. A. Schulman's manufacturing operations PHOTO 6
focus on engineered specialty plastic compounds. See description
The Company's production plants are among the from page 6
most modern and efficient in the industry. Over the
years, the Company has invested significant amounts in
state-of-the-art manufacturing systems designed to
achieve both high quality and production versatility.
Meeting Customer Needs. The Company serves many
of the world's largest multi-national manufacturers in
the automotive, packaging, industrial and consumer
7
<PAGE> 11
product sectors. Each of these customers has a unique set of
requirements regarding quality, price, innovation, and technical
performance. Customer focus is an important factor in the Company's
plans for continuing expansion throughout the world.
Today, many customers are reducing their number of
suppliers and working with fewer, more capable sources. Customers
know that they can rely on A. Schulman to meet their unique
individual needs cost-effectively without sacrificing quality or service.
Financial Strength. A. Schulman's financial strength provides
assurance to customers of a reliable, long-term source for their
polymer material requirements. The Company's financial capability
has enabled it to invest strategically in the best facilities, equipment,
and personnel available.
Extending Our Global Reach
With market demand for high quality plastic materials growing
around the world, A. Schulman's opportunities for future business
development are promising. Over the years, A. Schulman has
continuously expanded its production base in accordance with
market demand.
<TABLE>
<S> <C> <C>
PHOTO 7 PHOTO 8 PHOTO 9
Photo of Photo of Photo of
male baby in female baby male baby
diaper with in diaper in diaper
puppy crawling sitting
</TABLE>
Disposable infant diapers use a
waterproof liner made from
A. Schulman's Polybatch(R) plastic
material. Supplied in colors of pink,
blue and other pastels, Polybatch
also is used, in clear form, for
diaper packaging in Mexico, where
pasteboard packaging is banned.
8
<PAGE> 12
PHOTO 10
Photo of male baby
sitting in diaper
with white teddy
bear
<PAGE> 13
<TABLE>
<S> <C>
A. Schulman provides PHOTO 11
automakers with a range Photo of two cheerleaders
of engineered and proprietary in red and blue uniforms
plastic compounds for with red and blue
vehicle exterior and interior pom-poms, one sitting
applications on cars, trucks in and one leaning against
and the latest minivan models. a white minivan (photo
covers the top of pages
10 and 11); photo of red
and blue pom-pom in foreground.
</TABLE>
10
<PAGE> 14
The Company has manufacturing facilities throughout
the world which can effectively serve customers in new
geographic regions.
The Pacific Rim, an area which is expanding PHOTO 11
economically at a faster rate than any other in the See description
world, is a region that offers great potential for on Page 10
A. Schulman. Southeast Asia currently is one of the
largest markets for the Company's plastic packaging
materials. These products are presently being supplied
by A. Schulman's European operations. To increase sales
and service to this region, the Company will construct a
new plant in Indonesia. This facility is expected to
become operational in late 1996. It will serve as the
cornerstone for A. Schulman's expansion into Asia.
11
<PAGE> 15
Attractive electrically-powered
hot water pot is used for
preparing tea and other
beverages. This small appliance is
molded from A. Schulman 's strong
Polyfort(R) reinforced plastic, which
is supplied in a variety of colors.
The Company has opened a customer service center in Singapore
to further enhance its position in the Pacific Rim. This facility brings
technical expertise and marketing support closer to area customers.
Elsewhere, the Company's new Mexican manufacturing plant
began operations in September 1995. The facility, which has annual
production capacity of 25 million pounds, is now supplying the growing
Mexican market. It will facilitate service to other customers throughout
Latin America. The region's large population makes it a prime
consumption area for quality, high-performance plastics, particularly
additives and concentrates for packaging applications.
Eastern Europe is another area of strong sales potential.
A. Schulman currently operates a sales office in Leipzig. This office
provides a base to establish new customer contacts and coordinate
the supply of materials from the Company's Western European plants.
A. Schulman will continue to add sales
and technical support as business increases
in this region.
PHOTO 12 During 1995,
Photo of one red A. Schulman also
and one blue reinforced its commitment
electrically-powered to geographically developed
plastic hot water market sectors. Expansion of
pots manufacturing capabilities in
12
<PAGE> 16
PHOTO 13
Photo of red
electrically-powered
plastic hot water pot
<PAGE> 17
Stylish European-designed PHOTO 14
clock is mounted in a case Photo of black European-designed
made of Schulman plastic. clock with two green apples
This radio controlled clock (photo covers top of pages 14
self-adjusts to the Greenwich and 15); photo of white electric
time signal. space heater in foreground
Portable electric space heater
(below) is fabricated from
A. Schulman's Polyflam(R)
flame-retardant plastic.
14
<PAGE> 18
Europe included a new 12 million pound capacity
production line in France and another new line of
similar capacity in the United Kingdom. North
American capabilities were expanded with a new PHOTO 14
production line in Canada and the acquisition of See description on
Texas Polymer Services Inc., a compounding page 14
and tolling production facility.
The Company has established net income
records during twelve of the last thirteen years.
A. Schulman has a strong global presence and is ready
to take advantage of reduced barriers to competition
and new access to formerly closed countries. The
Company is well positioned to advance into the next
century well ahead of its competition.
15
<PAGE> 19
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended August 31,
============== =================================
1995 1994 1993
<S> <C> <C> <C>
NET SALES $1,027,458,000 $748,778,000 $685,112,000
INTEREST AND OTHER INCOME 7,099,000 7,456,000 8,103,000
-------------- ------------ ------------
TOTAL 1,034,557,000 756,234,000 693,215,000
-------------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales 863,409,000 617,855,000 565,284,000
Selling, general and administrative expenses 75,551,000 66,201,000 64,141,000
Interest expense 5,250,000 1,222,000 1,176,000
Foreign currency transaction losses (gains) 20,000 90,000 (97,000)
Minority interest 515,000 426,000 260,000
-------------- ------------ ------------
944,745,000 685,794,000 630,764,000
-------------- ------------ ------------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 89,812,000 70,440,000 62,451,000
PROVISION FOR U.S. AND FOREIGN INCOME TAXES 36,194,000 25,869,000 23,544,000
-------------- ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 53,618,000 44,571,000 38,907,000
CUMULATIVE EFFECT OF ACCOUNTING CHANGES:
Postretirement Benefits Other Than Pensions -- -- (4,841,000)
Income Taxes -- -- 2,672,000
-------------- ------------ ------------
NET INCOME $ 53,618,000 $ 44,571,000 $ 36,738,000
============== =================================
EARNINGS PER SHARE OF COMMON STOCK:
Before Cumulative Effect of Accounting Changes $ 1.43 $ 1.19 $ 1.04
Cumulative Effect of Accounting Changes:
Postretirement Benefits Other Than Pensions -- -- (.13)
Income Taxes -- -- .07
-------------- ------------ ------------
Net Income $ 1.43 $ 1.19 $ 0.98
============== =================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 20
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, 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)
Net income for 1995 53,618,000
Cash dividends paid or accrued:
Preferred stock, $5 per share (54,000)
Common stock, $.33 per share (12,411,000)
Foreign currency translation adjustment 15,409,000
Stock options exercised 120,000 2,256,000
Amortization of restricted stock 361,000
----------- ----------- ------------ ----------- ---------
Balance at August 31, 1995 $38,022,000 $38,069,000 $297,979,000 $41,979,000 ($1,064,000)
=========================================================================
</TABLE>
17
<PAGE> 21
A. Schulman, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31, August 31,
1995 1994
============ ============
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 83,997,000 $ 60,062,000
Short-term investments, at cost 60,275,000 61,763,000
Accounts receivable, less allowance for doubtful
accounts of $4,859,000 in 1995 and $4,111,000 in 1994 143,183,000 129,010,000
Inventories, average cost or market, whichever is lower 190,946,000 136,667,000
Prepaids, including tax effect of temporary differences 12,705,000 11,870,000
------------ ------------
TOTAL CURRENT ASSETS 491,106,000 399,372,000
------------ ------------
OTHER ASSETS:
Cash surrender value of life insurance 377,000 340,000
Deferred charges, etc., including tax effect
of temporary differences 14,506,000 12,604,000
------------ ------------
14,883,000 12,944,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements 8,909,000 5,813,000
Buildings and leasehold improvements 62,362,000 54,124,000
Machinery and equipment 173,325,000 141,365,000
Furniture and fixtures 19,054,000 15,227,000
Construction in progress 19,471,000 5,380,000
------------ ------------
283,121,000 221,909,000
Accumulated depreciation
and investment grants of $415,000 in 1995
and $634,000 in 1994 141,944,000 123,806,000
------------ ------------
141,177,000 98,103,000
------------ ------------
$647,166,000 $510,419,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 22
<TABLE>
<CAPTION>
August 31, August 31,
1995 1994
============ ============
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 17,800,000 $ 12,300,000
Current portion of long-term debt 39,000 35,000
Accounts payable 60,204,000 54,286,000
U.S. and foreign income taxes payable 15,009,000 9,939,000
Accrued payrolls, taxes and related benefits 16,820,000 16,901,000
Other accrued liabilities 18,194,000 14,903,000
------------ ------------
TOTAL CURRENT LIABILITIES 128,066,000 108,364,000
------------ ------------
LONG-TERM DEBT 75,096,000 23,126,000
OTHER LONG-TERM LIABILITIES 31,230,000 27,547,000
DEFERRED INCOME TAXES 5,973,000 3,794,000
MINORITY INTEREST 1,583,000 1,669,000
STOCKHOLDERS' EQUITY:
Preferred stock, 5% cumulative, $100 par value, authorized,
issued and outstanding - 10,705 shares in 1995 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 - 38,022,242 shares in 1995 and 37,902,043
shares in 1994 38,022,000 37,902,000
Other capital 38,069,000 35,813,000
Cumulative foreign currency translation adjustment 41,979,000 26,570,000
Retained earnings 297,979,000 256,826,000
Treasury stock, at cost, 442,674 shares in 1995 and 1994 (10,838,000) (10,838,000)
Unearned stock grant compensation (1,064,000) (1,425,000)
------------ ------------
COMMON STOCKHOLDERS' EQUITY 404,147,000 344,848,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 405,218,000 345,919,000
------------ ------------
$647,166,000 $510,419,000
============ ============
</TABLE>
19
<PAGE> 23
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31,
============ ============================
1995 1994 1993
<S> <C> <C> <C>
Provided from (used in) operating activities:
Net income $ 53,618,000 $ 44,571,000 $ 36,738,000
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 16,834,000 14,728,000 14,717,000
Non-current deferred taxes 1,870,000 1,196,000 (96,000)
Foreign pension and other deferred compensation 2,871,000 2,252,000 2,372,000
Postretirement benefit obligation 713,000 1,088,000 920,000
Changes in working capital:
Accounts receivable (6,757,000) (28,312,000) (11,815,000)
Inventories (49,110,000) (37,437,000) 17,919,000
Prepaids (775,000) (919,000) 57,000
Accounts payable 1,867,000 14,104,000 8,433,000
Income taxes 4,657,000 908,000 (303,000)
Accrued payrolls and other accrued liabilities 1,610,000 664,000 4,637,000
Changes in other assets and other long-term liabilities (2,265,000) (3,582,000) (1,728,000)
------------ ------------ ------------
Net cash provided from operating activities 25,133,000 9,261,000 74,020,000
------------ ------------ ------------
Provided from (used in) investing activities:
Expenditures for property, plant and equipment (58,533,000) (25,302,000) (18,158,000)
Disposals of property, plant and equipment 371,000 232,000 297,000
Purchases of short-term investments (112,044,000) (67,729,000) (64,663,000)
Proceeds from sales of short-term investments 117,776,000 53,546,000 26,656,000
------------ ------------ ------------
Net cash used in investing activities (52,430,000) (39,253,000) (55,868,000)
------------ ------------ ------------
Provided from (used in) financing activities:
Cash dividends paid (12,442,000) (10,774,000) (9,311,000)
Increase (decrease) of notes payable 5,500,000 12,300,000 (4,800,000)
Reduction of long-term debt (37,000) (32,000) (27,000)
Increase of long-term debt 52,000,000 13,000,000 110,000
Exercise of stock options 2,376,000 1,409,000 2,256,000
Investment grants from foreign countries --- 241,000 ---
Increase (decrease) in minority interest, net of distributions (86,000) 6,000 260,000
------------ ------------ ------------
Net cash provided (used in) financing activities 47,311,000 16,150,000 (11,512,000)
------------ ------------ ------------
Effect of exchange rate changes on cash 3,921,000 4,214,000 (10,902,000)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 23,935,000 (9,628,000) (4,262,000)
Cash and cash equivalents at beginning of year 60,062,000 69,690,000 73,952,000
------------ ------------ ------------
Cash and cash equivalents at end of year $ 83,997,000 $ 60,062,000 $ 69,690,000
============ ============ ============
Cash paid during the year for:
Interest $ 3,846,000 $ 1,006,000 $ 1,042,000
Income Taxes $ 31,093,000 $ 25,650,000 $ 21,723,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 24
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 $56,198,000
at August 31, 1995 and $50,942,000 at August 31, 1994. 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:
Buildings and leasehold improvements 10 to 40 years
Machinery and equipment 5 to 12 years
Furniture and fixtures 10 years
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 $7,156,000 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 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 $254,000 in 1995, $187,000 in 1994,
and $148,000 in 1993.
21
<PAGE> 25
NOTE 3 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
August 31,
=========== ===========
1995 1994
<S> <C> <C>
A. Schulman, Inc.:
Revolving credit loan, 6.5083% in 1995
and 4.7554% in 1994 $75,000,000 $23,000,000
Notes payable of foreign subsidiary:
5% through September 1998 135,000 161,000
----------- -----------
75,135,000 23,161,000
Less current portion 39,000 35,000
----------- -----------
$75,096,000 $23,126,000
=========== ===========
</TABLE>
In March 1995, the Company entered into a new $75,000,000 credit agreement with
several banks which replaced an existing $40,000,000 agreement. The new
agreement provides for borrowings of up to $75,000,000 on a revolving credit
basis through February 28, 2000. Interest rates will be either the London
Interbank Offered Rate (LIBOR) plus 1/4%, certificate of deposit rate plus
3/8%, or the prime rate. A facility fee of 1/8% must also be paid to the banks.
Under the terms of this agreement, approximately $118,000,000 of retained
earnings was available for the payment of cash dividends at August 31, 1995.
The 5% note for $135,000 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, 1995 are $39,000 in 1996, $41,000 in 1997, $44,000 in 1998, $11,000
in 1999 and $75,000,000 in 2000.
The Company has $42,500,000 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 $17,800,000 at August 31, 1995 and $12,300,000 at August 31, 1994
were outstanding under these domestic lines.
The Company has $36,123,000 of unsecured short-term foreign lines of
credit available to its subsidiaries at August 31, 1995. No foreign short-term
borrowings were outstanding at August 31, 1995 or 1994.
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 currency
transaction line in the Consolidated Statement of Income. The Company does not
hold or issue foreign exchange contracts for trading purposes.
The following table presents a summary of foreign exchange contracts
outstanding as of August 31, 1995 and August 31, 1994:
<TABLE>
<CAPTION>
1995 1994
=========================== ===========================
Contract Fair Contract Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Buy Currency $ 4,002,000 $ 4,052,000 $ 8,947,000 $ 9,139,000
Sell Currency $44,221,000 $44,678,000 $37,758,000 $37,863,000
</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,
1995 1994 1993
=========== =========== ===========
<S> <C> <C> <C>
Domestic $17,231,000 $19,012,000 $14,513,000
Foreign 72,581,000 51,428,000 47,938,000
----------- ----------- -----------
$89,812,000 $70,440,000 $62,451,000
=========== =========== ===========
</TABLE>
The provisions for U.S. and foreign income taxes consist of the following:
<TABLE>
<CAPTION>
Year Ended August 31,
1995 1994 1993
=========== =========== ===========
<S> <C> <C> <C>
Current taxes:
U.S. $ 4,244,000 $ 6,700,000 $ 3,988,000
Foreign 29,252,000 20,290,000 18,671,000
----------- ----------- -----------
33,496,000 26,990,000 22,659,000
----------- ----------- -----------
Deferred taxes:
U.S. 1,868,000 (715,000) 83,000
Foreign 830,000 (406,000) 802,000
----------- ----------- -----------
2,698,000 (1,121,000) 885,000
----------- ----------- -----------
$36,194,000 $25,869,000 $23,544,000
=========== =========== ===========
</TABLE>
A reconciliation of the statutory U.S. federal income tax rate with the
effective tax rates of 40.3% in 1995, 36.7% in 1994 and 37.7% in 1993 is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
% 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 $31,434 35.0% $24,654 35.0% $21,652 34.7%
Amount of
foreign
income taxes
in excess of
U.S. taxes at
statutory
rate 4,326 4.8 700 1.0 1,730 2.7
Other, net 434 .5 515 .7 162 .3
------------- -----------------------------
$36,194 40.3 $25,869 36.7 $23,544 37.7
============= =============================
</TABLE>
22
<PAGE> 26
Deferred tax assets and (liabilities) consist of the following at August 31,
1995 and August 31, 1994:
<TABLE>
<CAPTION>
(in Thousands) 1995 1993
======= =======
<S> <C> <C>
Pensions $ 2,068 $ 1,969
Inventory reserves 1,274 1,871
Bad debt reserves 871 699
Accruals 2,600 2,393
Dividend to be received 785 1,217
Postretirement benefits other than pensions 3,659 3,409
Foreign tax credit carryforwards 4,820 4,197
Other 1,878 1,747
------- -------
Gross deferred tax assets 17,955 17,502
Valuation allowance (4,820) (4,197)
------- -------
Total deferred tax assets 13,135 13,305
------- -------
Depreciation (10,839) (8,300)
Other -- (24)
------- -------
Gross deferred tax liabilities (10,839) (8,324)
------- -------
$ 2,296 $ 4,981
======= =======
</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 1996 to 2000.
The tax effect of temporary differences included in prepaids were
$7,216,000 and $7,853,000 at August 31, 1995 and 1994 respectively. Deferred
charges also included $1,052,000 and $922,000 from the tax effect of temporary
differences at August 31, 1995 and 1994 respectively.
At August 31, 1995, no taxes have been provided on the undistributed
earnings of certain foreign subsidiaries amounting to $210,409,000 because the
Company intends to reinvest these earnings.
NOTE 6 - RETIREMENT PLANS
The total expense for all retirement plans was $5,503,000 in 1995, $4,510,000
in 1994, and $4,306,000 in 1993.
The components of pension expense are as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
1995 1994 1993
========== ========== ==========
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost-benefits earned during the period $1,243,000 $1,060,000 $1,035,000
---------- ---------- ----------
Interest accrued on projected benefit obligation 1,520,000 1,319,000 1,336,000
Actual return on assets (184,000) (325,000) (689,000)
Net amortization and deferral 67,000 254,000 506,000
---------- ---------- ----------
2,646,000 2,308,000 2,188,000
Defined contribution plans 2,857,000 2,202,000 2,118,000
---------- ---------- ----------
Net Periodic pension cost $5,503,000 $4,510,000 $4,306,000
---------- ---------- ----------
========== ========== ==========
</TABLE>
23
<PAGE> 27
The following table presents the funded status of the defined benefit plans as
of August 31, 1995 and August 31, 1994:
<TABLE>
<CAPTION>
1995 1994
=========================== ===========================
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 $2,150,000 $ 15,280,000 $1,724,000 $ 12,766,000
Non-vested benefit obligation 3,000 2,349,000 2,000 2,059,000
---------- ------------ ---------- ------------
Accumulated benefit obligation $2,153,000 $ 17,629,000 $1,726,000 $ 14,825,000
========== ============ ========== ============
Projected benefit obligation $2,600,000 $ 21,049,000 $2,134,000 $ 17,643,000
Plan assets at fair value 2,605,000 886,000 2,233,000 1,046,000
---------- ------------ ---------- ------------
Projected benefit
obligation less than (in excess of) plan assets 5,000 (20,163,000) 99,000 (16,597,000)
Unrecognized net liability (asset) at date of adoption of
SFAS No. 87 (33,000) 1,998,000 (36,000) 2,080,000
Unrecognized prior service cost 56,000 464,000 59,000 496,000
Unrecognized net loss (gain) 99,000 79,000 (40,000) (600,000)
Adjustment required to recognize minimum liability - (984,000) - (1,031,000)
---------- ------------ ---------- ------------
Prepaid (accrued) pension cost $ 127,000 $(18,606,000) $ 82,000 $(15,652,000)
========== ============ ========== ============
Significant Assumptions: U.S.-1995 Foreign-1995 U.S.-1994 Foreign-1994
- ----------------------- ---------- ------------ ---------- ------------
Discount rate 7.25% 7.0%-09.0% 7.25% 7.0%-09.0%
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%-07.0% - 4.0%-07.0%
</TABLE>
In respect to multiemployer plans in the U.S., ERISA extends the
Company'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 three current employees that upon
retirement, or death or disability prior to retirement, it shall make ten
payments of $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.
Under these agreements, $1,000,000 is fully vested and $1,750,000 will vest over
the next six to seven years. However, vesting and payments may be accelerated
under certain conditions. The Company has provided $182,000 in 1995, $206,000 in
1994 and $270,000 in 1993 to cover the current cost for such agreements. In
connection with such 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,
==========================================
1995 1994 1993
-------- ---------- ----------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $509,000 $ 666,000 $ 558,000
Interest cost on projected benefit
obligation 558,000 653,000 573,000
Net amortization (146,000) - -
-------- ---------- ----------
$921,000 $1,319,000 $1,131,000
======== ========== ==========
</TABLE>
The Company's postretirement health care and life insurance plans are
not funded. The status of the plans at August 31, 1995 and August 31, 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
=========== ==========
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $2,258,000 $2,625,000
Fully eligible active plan participants 1,483,000 1,376,000
Other active plan participants 4,258,000 3,640,000
----------- ----------
7,999,000 7,641,000
Unrecognized net gain (loss) 411,000 (467,000)
Unrecognized prior service cost 2,043,000 2,566,000
----------- ----------
Net postretirement benefit liability $10,453,000 $9,740,000
=========== ==========
</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 is amortized over the average future service period of active
employees starting in 1995.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 11% in 1995, 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 $1,040,000 at August 31, 1995 and the postretirement benefit cost
by $218,000 for the year then ended.
A discount rate of 7.25% was used in determining the accumulated
postretirement benefit obligation at August 31, 1995 and 1994.
24
<PAGE> 28
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, 1995, there were 1,258,068
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, 1995, there were 107,500 shares available for issuance
under the 1992 Plan.
The following is a summary with respect to options for all three plans:
<TABLE>
<CAPTION>
Year Ended August 31,
=========================================================
1995 1994
------------------------- -------------------------
Shares Option Shares Option
Under Price Under Price
Option Per Share Option Per Share
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 907,876 $20-27 694,595 $20-26
Granted during the year 169,900 26-28 138,175 26-27
Exercised during the year (120,199) 20-26 (57,450) 20-26
Cancelled during the year (38,018) 20-26 (23,675) 20-26
Five-for-four stock split paid
as a 25% stock dividend on
April 15, 1994 --- 156,231
------- -------
Outstanding at end of year 919,559 $20-28 907,876 $20-27
======= =======
</TABLE>
At August 31, 1995, options for 314,310 shares were exercisable at
$19.74 per share under the 1981 Plan. Under the 1991 Plan, options for 91,184
shares were exercisable at $26, 84,735 shares at $24.60, and 33,012 shares at
$26.25. 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.
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.
25
<PAGE> 29
A summary of operating information by geographic area for the three years ended
August 31, 1995 is as follows:
<TABLE>
<CAPTION>
Adjustments
North and
(In thousands) America Europe Eliminations Consolidated
------- ------ ------------ ------------
<S> <C> <C> <C> <C>
AUGUST 31, 1995
Sales to unaffiliated
customers $417,893 $609,565 - $1,027,458
Inter-geographic
sales 2,748 658 $(3,406) -
-------- -------- ------- ---------
Total sales $420,641 $610,223 $(3,406) $1,027,458
======== ======== ======= =========
Operating income $ 35,945 $ 63,615 $ - $ 99,560
======== ======== =======
Interest expense (5,250)
Corporate expense less revenues (4,478)
Foreign currency transaction losses (20)
---------
Income before taxes $ 89,812
=========
Identifiable assets $284,806 $361,917 $ (600) $ 646,123
Corporate assets ======== ======== ======= 1,043
---------
Total assets $647,166
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
=========
</TABLE>
The North American geographic area includes operations in the United
States, Canada and Mexico. 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 $2,760,000 in 1995, $2,606,000 in 1994, and $2,391,000
in 1993. 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>
1996 $1,840,000
1997 1,380,000
1998 1,160,000
1999 1,107,000
2000 677,000
Later years 210,000
----------
$6,374,000
</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.
26
<PAGE> 30
NOTE 13 - QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended Year ended
---------------------------------------------------------- ----------
Nov. 30, Feb. 28, May 31, Aug. 31, Aug. 31,
1994 1995 1995 1995 1995
========================================================== ==========
<S> <C> <C> <C> <C> <C>
Net sales $251,241 $249,637 $284,535 $242,045 $1,027,458
Gross profit 41,664 41,298 45,665 35,422 164,049
Net income 13,235 13,097 15,239 12,047 53,618
Net income per
share of
common stock $.35 $.35 $.41 $.32 $1.43
</TABLE>
<TABLE>
<CAPTION>
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>
A. Schulman, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
[logo]
Price Waterhouse LLP
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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1995, 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 Notes 4 and 6 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 109, "Account-
ing 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 16, 1995
27
<PAGE> 31
A. Schulman, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995
Net sales for 1995 were $1,027.5 million or 37.2% higher than 1994 sales of
$748.8 million. A comparison of net sales is as follows:
<TABLE>
<CAPTION>
(In Thousands)
========== ========================
1995 1994 Increase
<S> <C> <C> <C>
Manufacturing $ 593,478 $449,085 $144,393
Merchant 230,330 149,798 80,532
Distribution 203,650 149,895 53,755
---------- -------- --------
$1,027,458 $748,778 $278,680
========== ======== ========
</TABLE>
The translation effects from the weaker U.S. dollar increased 1995
sales by $68.9 million.
Worldwide tonnage increased 10.5% in 1995 over 1994. The largest
increase occurred in manufacturing where tonnage was up 21.5%. The inclusion of
Texas Polymer Services since its acquisition on February 28, 1995, increased
manufacturing tonnage from 13.6% to 21.5%. In addition, higher selling prices
during the first nine months of 1995 contributed to greater net sales.
Gross margins on sales were 16% in 1995 compared to 17.5% in 1994. The
decline in gross margins was primarily due to competitive price pressures and
additional period costs resulting from increases in capacities. A comparison
of gross profit is as follows:
<TABLE>
<CAPTION>
(In Thousands)
========== ========================
1995 1994 Increase
<S> <C> <C> <C>
Manufacturing $106,690 $ 88,609 $18,081
Merchant 31,929 22,582 9,347
Distribution 25,430 19,732 5,698
---------- -------- --------
$164,049 $130,923 $ 33,126
========== ======== ========
</TABLE>
Selling, general and administrative expenses increased $9.4 million in
1995. The weakening of the U.S. dollar increased these expenses by $5.1 million
in 1995. In addition, expenses were higher due to the acquisition of ComAlloy
International Company on March 31, 1994, the acquisition of Texas Polymer
Services, Inc. on February 28, 1995, higher compensation levels and additional
costs to support the increase in sales volume.
Interest expense increased in 1995 mainly in the United States due to
greater levels of borrowing and higher rates.
Foreign currency transaction losses were primarily due to changes in
the value of currencies within the European Monetary System.
Other income was down because of lower interest income resulting from a
decline in European interest rates on temporary investments.
The effective tax rate was 40.3% in 1995 and 36.7% in 1994. The 1995
tax rate was higher primarily because of greater earnings in Europe which has a
higher tax rate than the United States. Also, a retroactive 10% surtax was
enacted in France during the Company's fourth quarter and a reduction in
utilization of foreign tax credits.
The weakening in the value of the U.S. dollar increased net income by
approximately $4.6 million or $.12 per share in 1995. The translation effects
from currency fluctuations are not covered with contracts, options or other
devices. Generally, forward contracts are used to mitigate exposure to currency
transactions. The Company does not utilize any other types of derivative
instruments.
Earnings in Europe increased approximately 39% in 1995. Although
tonnage was up only 2.9%, sales increased 42% due to higher selling prices and
the weaker U.S. dollar.
North American earnings decreased approximately 14% in 1995. Lower
margins and higher interest expense were the primary reasons for the decline
in profits. In addition, start-up costs of the Company's new Mexican facility
also adversely affected income.
During the latter part of 1995, prices of many plastic resins declined
sharply. Customers reduced inventory levels in anticipation of improving
supplies of plastic resins and lower resin pricing. In addition, worldwide
competitive pressures made it difficult to obtain traditional levels of profit
margins.
Results in the first half of fiscal 1995 were extremely good. In 1996,
continuing pressure on margins and slower growth in the worldwide economies
will make it difficult to achieve the same level of earnings attained in the
first half of 1995. It is also expected that general economic weakness and
additional start-up costs will slow growth at the new Mexican facility.
1994
Net sales were $748.8 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.
Tonnage increased in all classifications and was up 11% for 1994.
European tonnage increased approximately 5% and North American tonnage 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> <C> <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>
28
<PAGE> 32
Prices of most plastic resins advanced sharply during the last quarter
of 1994, mainly because of strong demand and lack of new supplies. These
increases 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.
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.
Earnings in Europe were up approximately 9% in 1994 on a volume
increase of 5%.
In North America, earnings increased approximately 26% on a volume
increase of 21%.
FINANCIAL CONDITION
Historically, the Company's primary source of funds has been from
operations. It is expected that this source of cash flow 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 latter part of the fiscal year increased this
account by approximately $15.4 million during 1995. If the U.S. dollar
continues to weaken, this trend will continue in 1996.
Working capital and the current ratio are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
======== ========================
1995 1994 1993
<S> <C> <C> <C>
Working capital $363,040 $291,008 $237,930
Current ratio 3.8:1 3.7:1 4.2:1
</TABLE>
The following represent key measurements of the capital structure and
profitability of the Company:
<TABLE>
<CAPTION>
(Dollars in Thousands
except per share data)
======== ========================
1995 1994 1993
<S> <C> <C> <C>
Net worth $405,218 $345,919 $294,209
Book value per share $10.75 $9.21 $7.84
Ratio of long-term liabilities to capital 20.8% 12.8% 10.4%
Return on average net worth 14.3% 13.9% 12.9%
Net income as a percent of sales 5.2% 6.0% 5.4%
</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 1995 primarily due to greater borrowings to finance the acquisition of assets
of Texas Polymer Services, Inc. and greater working capital requirements.
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 1995 due to a
higher level of earnings.
In March 1995, the Company entered into a new $75 million credit
agreement with several banks which replaced an existing $40 million agreement.
The new agreement provides for borrowings on a revolving credit basis through
February 28, 2000.
Short-term lines of credit are maintained with various domestic and
foreign banks. The unused commitment under these lines was $60.8 million at
August 31, 1995.
Capital expenditures were $58.5 million in 1995. New manufacturing
lines will go into operation during the first quarter of 1996 in the United
Kingdom and France. In addition, a new manufacturing facility in Mexico
commenced operation in September 1995. Also, the construction of a new $6
million manufacturing facility in Indonesia is scheduled for completion at the
end of 1996.
On June 30, 1995, the Company sold the assets of its East St. Louis,
Illinois plant. This facility produced rubber shims and tie pads. Strategically,
this business did not fit the Company's future growth plans. The financial
impact of this transaction was not significant.
The Company's unfunded pension liability is $20.2 million at August 31,
1995. 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 was adopted by the Company in 1995. The impact of this
Statement was immaterial.
29
<PAGE> 33
A. Schulman, Inc.
TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended August 31,
========== ==========================================
1995 1994 1993 1992
<S> <C> <C> <C> <C>
Net sales $1,027,458 $748,778 $685,112 $732,170
Interest and other income 7,099 7,456 8,103 6,778
---------- ---------- ---------- ----------
1,034,557 756,234 693,215 738,948
---------- ---------- ---------- ----------
Cost of sales 863,409 617,855 565,284 599,009
Other costs, expenses, etc. 81,336 67,939 65,480 66,838
---------- ---------- ---------- ----------
944,745 685,794 630,764 665,847
---------- ---------- ---------- ----------
Income before taxes and cumulative effect of accounting changes 89,812 70,440 62,451 73,101
Provision for U.S. and foreign income taxes 36,194 25,869 23,544 29,341
---------- ---------- ---------- ----------
Income before cumulative effect of accounting changes 53,618 44,571 38,907 43,760
Cumulative effect of accounting changes (1) - - (2,169) -
---------- ---------- ---------- ----------
Net income $ 53,618 $ 44,571 $ 36,738 $ 43,760
========== ==========================================
Total assets $ 647,166 $510,419 $407,865 $427,966
Long-term debt $ 75,096 $ 23,126 $ 10,149 $ 10,108
Total stockholders' equity $ 405,218 $345,919 $294,209 $307,576
Average number of common shares outstanding,
net of treasury shares 37,544,408 37,438,118 37,325,547 37,024,548
Per share of common stock:
Net income:
Before cumulative effect of accounting changes $ 1.43 $1.19 $1.04 $1.18
Cumulative effect of accounting changes (1) - - ($ .06) -
Net income $ 1.43 $1.19 $ .98 $1.18
Cash dividends $ .33 $ .286 $ .248 $ .216
Stockholders' equity $10.75 $9.21 $7.84 $8.26
<FN>
(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>
SUPPLEMENTAL INFORMATION
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended August 31,
=================== ==========================================================================================
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES
Manufacturing $593,478 58% $449,085 60% $408,763 60% $426,846 58% $410,987 56%
Merchant Activities 230,330 22% 149,798 20% 136,116 20% 147,587 20% 178,268 24%
Distribution 203,650 20% 149,895 20% 140,233 20% 157,737 22% 146,752 20%
------------------- ------------------------------------------------------------------------------------------
Total $1,027,458 100% $748,778 100% $685,112 100% $732,170 100% $736,007 100%
=================== ==========================================================================================
GROSS PROFIT
Manufacturing $ 106,690 65% $ 88,609 68% $ 78,548 66% $ 87,476 66% $ 74,547 61%
Merchant Activities 31,929 19% 22,582 17% 21,495 18% 23,399 18% 27,747 23%
Distribution 25,430 16% 19,732 15% 19,784 16% 22,286 16% 19,712 16%
------------------- ------------------------------------------------------------------------------------------
Total $ 164,049 100% $130,923 100% $119,827 100% $133,161 100% $122,006 100%
=================== ==========================================================================================
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
===========================================================================================
1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
$736,007 $678,644 $624,410 $597,696 $463,824 $387,833
4,083 2,409 1,675 1,211 1,245 680
- ---------- ---------- ---------- ---------- ---------- ----------
740,090 681,053 626,085 598,907 465,069 388,513
- ---------- ---------- ---------- ---------- ---------- ----------
614,001 566,872 528,296 505,907 390,247 330,426
55,876 50,644 43,000 42,567 37,063 29,368
- ---------- ---------- ---------- ---------- ---------- ----------
669,877 617,516 571,296 548,474 427,310 359,794
- ---------- ---------- ---------- ---------- ---------- ----------
70,213 63,537 54,789 50,433 37,759 28,719
27,864 27,441 23,977 22,787 17,946 13,533
- ---------- ---------- ---------- ---------- ---------- ----------
42,349 36,096 30,812 27,646 19,813 15,186
- - - - - -
- ---------- ---------- ---------- ---------- ---------- ----------
$ 42,349 (2) $ 36,096 $ 30,812 $ 27,646 $ 19,813 $ 15,186
===========================================================================================
$344,273 $328,210 $257,687 $240,475 $214,698 $174,467
$ 9,000 $ 7,000 $ 10,000 $ 9,570 $ 11,230 $ 10,137
$232,567 $223,973 $166,640 $145,183 $125,803 $101,620
36,963,010 37,699,043 37,674,290 37,665,819 37,665,819 37,290,224
$1.14 $ .96 $ .82 $ .73 $ .52 $ .41
- - - - - -
$1.14 (2) $ .96 $ .82 $ .73 $ .52 $ .41
$ .186 $ .153 $ .135 $ .132 (3) $ .086 $ .068
$6.26 $5.91 $4.39 $3.82 $3.31 $2.68
</TABLE>
CORPORATE HEADQUARTERS
3550 West Market Street
Akron, Ohio 44333
(216) 666-3751
ANNUAL MEETING
of Stockholders will be held on
Thursday, December 7, 1995,
at 10 AM E.S.T., at the Fairlawn Country Club,
200 North Wheaton Road
Akron, Ohio 44313
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
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
216-813-5745
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
31
<PAGE> 35
A. SCHULMAN, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
THE BOARD OF DIRECTORS EXECUTIVE OFFICERS DOMESTIC OFFICES
ROBERT A. STEFANKO TERRY L. HAINES AKRON, OHIO 44333
Chairman President and Chief Executive Officer Corporate Headquarters
3550 West Market Street
TERRY L. HAINES ROBERT A. STEFANKO (216) 666-3751
President and Chief Executive Officer Chairman and
Chief Financial Officer BIRMINGHAM, MICHIGAN 48009-6524
JAMES H. BERICK 2100 East Maple Road
Managing Partner, LARRY A. KUSHKIN (810) 643-6100
Berick, Pearlman & Mills Executive Vice President -
International Automotive Operations EAGAN, MINNESOTA 55121
DR. PEGGY GORDON ELLIOTT 1380 Corporate Center Curve
President, The University of Akron ALAIN C. ADAM Suite 316
Vice President - Automotive Marketing (612) 681-8020
GORDON E. HEFFERN
Former Chairman and Director, LEONARD E. EMGE EVANSVILLE, INDIANA 47712
Society Corporation and Vice President - Manufacturing 122 N. St. Joseph Avenue
Society National Bank (812) 423-5836
BRIAN R. COLBOW
WILLARD R. HOLLAND Treasurer FORT WAYNE, INDIANA 46825
President and Chief Executive Officer, 9017 Coldwater
Ohio Edison Company JAMES H. BERICK Suite 300A
Secretary (219) 497-0371
JAMES A. KARMAN
President, GRAND RAPIDS, MICHIGAN 49546
RPM, Inc. European Operations 500 Cascade West Parkway, SE
(616) 285-2800
LARRY A. KUSHKIN RENE' C. ROMBOUTS
Executive Vice President - General Manager - Europe HOCKESSIN, DELAWARE 19707
International Automotive Operations 724 Yorklyn Road, Suite 260
GERALD M. WEINBERGER (302) 234-4870
FRANZ A. LOEHR Managing Director - Germany
Former Managing Director - Germany and HOUSTON, TEXAS 77060
Associate General Manager - Europe OTTO H. BRUDER 363 N. Sam Houston Parkway E.
Managing Director - France Suite 480
JAMES S. MARLEN (713) 820-8093
Chairman, President and RITSON D. GILLINGS
Chief Executive Officer, Managing Director - United Kingdom PASADENA, CALIFORNIA 91106
Ameron, Inc. 600 South Lake Avenue
Suite 506
ALAN L. OCKENE (818) 792-0053
Former President and Chief Executive Officer,
General Tire, Inc. CANADIAN OPERATIONS PISCATAWAY, NEW JERSEY 08854
144B Carlton Avenue
DR. PAUL C. ROBERTS GORDON L. TRIMMER (908) 424-9130
Chairman, The Institute for Managing Director - Canada
Political Economy SCHAUMBURG, ILLINOIS 60173
Distinguished Fellow, Cato Institute Embassy Plaza
1933 N. Meacham Road
RENE' C. ROMBOUTS Suite 500
General Manager-Europe (708) 397-3973
ROBERT G. WALLACE ST. LOUIS, MISSOURI 63045-1303
Former Executive 514 Earth City Expressway
Vice President and Director, Suite 351
Phillips Petroleum Company (314) 291-8626
* * *
MELVIN D. SACKS NASHVILLE, TENNESSEE 37211-3333
Director Emeritus ComAlloy International Company
481 Allied Drive
(615) 333-3453
ORANGE, TEXAS 77632
Texas Polymer Services, Inc.
6522 Interstate Highway 10 West
(409) 882-5890
</TABLE>
32
<PAGE> 36
A. SCHULMAN, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
OTHER SALES LOCATIONS FOREIGN OFFICES PLANTS
ARLINGTON, MASSACHUSETTS 02174 BORNEM, BELGIUM AKRON, OHIO 44310
20 Pierce Street #1 N.V.A. Schulman Plastics, S.A. 790 E. Tallmadge Ave.
(617) 684-6949 Pedro Colomalaan 25 (216) 633-8164
Industriepark
ARLINGTON, TEXAS 76006 2880 Bornem, Belgium BELLEVUE, OHIO 44811
1907 Mill Run Dr. 3-8904211 350 North Buckeye Street
(817) 265-8000 (419) 483-2931
SINDORF, GERMANY
ATLANTA, GEORGIA 30350 A. Schulman GmbH ORANGE, TEXAS 77630
1302 Harbor Pointe Parkway Huttenstrabe 211 (Dispersion Plant)
(770) 395-7305 D-50170 Kerpen 3007 Burnett
(2273) 5610 (409) 883-9371
CAMBRIDGE, MASSACHUSETTS 02139
129 Franklin St. PARIS, FRANCE NASHVILLE, TENNESSEE 37211-3333
Suite 102 A. Schulman, S.A./ ComAlloy International Company
(617) 577-1123 Diffusion Plastique 481 Allied Drive
Immeuble Dynasteur (615) 333-3453
WESTON, MASSACHUSETTS 02193 10/12 rue Andras Beck
130 Concord Rd. 92360 Meudon-la-Foret ORANGE, TEXAS 77632
P.O. Box 355 (1) 41 07 75 00 Texas Polymer Services, Inc.
(617) 891-5485 6522 Interstate Highway 10 West
CRUMLIN, SOUTH WALES (U.K.) (409) 882-5890
A. Schulman Inc. Limited
Croespenmaen Industrial Estate BORNEM, BELGIUM
Crumlin, Newport N.V.A. Schulman Plastics, S.A.
REPRESENTATIVE OFFICES Gwent NP1 4AG Pedro Colomalaan 25
BARCELONA, SPAIN Newbridge 1495-244090 Industriepark
A. Schulman 2880 Bornem, Belgium
Oficina de Representation en Espana ZURICH, SWITZERLAND 3-8904211
Paseje Francesc Ferrer n(degree)3 A. Schulman AG
08348 Cabrils (Barcelona), Spain Kernstrabe 10 SINDORF, GERMANY
(34) (3) 750 76 63 CH 8004 Zurich, A. Schulman GmbH
Switzerland Huttenstrabe 211
SINGAPORE (1) 241 60 30 D-50170 Kerpen
A. Schulman, Inc. (2273) 5610
Singapore Representative Office MISSISSAUGA, ONTARIO, CANADA
Contact Address: L5R 3G5 CRUMLIN, SOUTH WALES (U.K.)
05-05, Balmoral Condominium A. Schulman Canada Ltd. A. Schulman Inc. Limited
Singapore - 259802 5770 Hurontario Street Croespenmaen Industrial Estate
65-235-7675 Suite 602 Crumlin, Newport
(905) 568-8470 Gwent NP1 4AG
Newbridge 1495-244090
MEXICO CITY, MEXICO
A. Schulman de Mexico, S.A. de C.V. GIVET, FRANCE
Manuel E. Izaguirre #13 A. Schulman Plastics S.A.
Despacho 304 - Ciudad Satelite Rue Alex Schulman
Naucalpan, Edo. de Mexico 5310 F-08600 Givet, France
(525) 393-1216 (24) 42 71 61
MONTERREY, MEXICO ST. THOMAS, ONTARIO, CANADA
A. Schulman de Mexico, S.A. de C.V. N5P 3Z5
Camino del Lago #4517 A. Schulman Canada Ltd.
Sector 4 400 S. Edgeware Road
Colonia Cortijo del Rio (519) 633-3451
Monterrey, N.L. 64890
(5283) 655-505 SAN LUIS POTOSI, MEXICO
A. Schulman de Mexico, S.A. de C.V.
SAN LUIS POTOSI, MEXICO Avenida CFE, 730
A. Schulman de Mexico, S.A. de C.V. Entre Eje 134 y Eje 136
Avenida CFE, 730 Zona Industrial del Potosi
Entre Eje 134 y Eje 136 San Luis Potosi, S.L.P. 78090
Zona Industrial del Potosi (5248) 240-708
San Luis Potosi, S.L.P. 78090
(5248) 240-708
</TABLE>
33
<PAGE> 37
PHOTO 15
Photo of swimming pool with red, white and blue
lane markers.
[LOGO], A. Schulman Inc.
3550 West Market Street, Akron, Ohio 44333 - 216/666-3751
<PAGE> 1
Exhibit 21
Subsidiaries of the Company.
<PAGE> 2
SUBSIDIARIES OF A. SCHULMAN, INC.
<TABLE>
<CAPTION>
Jurisdiction
Name of Incorporation
- ---- ----------------
<S> <C>
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
Texas Polymer Services, Inc. Ohio
Polyvin GmbH(4) Germany
______________________________
</TABLE>
(1) Owned by N.V. A. Schulman, S.A.
(2) Owned by A. Schulman, S.A.
(3) Owned by A. Schulman International, Inc.
(4) Owned by A. Schulman GmbH
<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 16, 1995 appearing on page 27 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
Schedule, which appears on page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
November 22, 1995
<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, 1995, 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 20th day of October,
1995.
/s/ James H. Berick
-------------------
James H. Berick
<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, 1995, 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 20th day of October,
1995.
/s/Alan L. Ockene
-----------------
Alan L. Ockene
<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, 1995, 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 20th day of October,
1995.
/s/ Peggy Gordon Elliott
------------------------
Dr. Peggy Gordon Elliott
<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, 1995, 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 20th day of October,
1995.
/s/Franz A. Loehr
-----------------
Franz A. Loehr
<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, 1995, 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 20th day of October,
1995.
/s/ Larry A. Kushkin
--------------------
Larry A. Kushkin
<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, 1995, 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 20th day of October,
1995.
/s/ Robert G. Wallace
---------------------
Robert G. Wallace
<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, 1995, 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 20th day of October,
1995.
/s/ Gordon E. Heffern
---------------------
Gordon E. Heffern
<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, 1995, 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 20th day of October,
1995.
/s/ Dr. Paul Craig Roberts
--------------------------
Dr. Paul Craig Roberts
<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, 1995, 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 20th day of October,
1995.
/s/ Rene C. Rombouts
--------------------
Rene C. Rombouts
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of August 31, 1995 and 1994 and the consolidated
statement of income for each of the three years ended August 31, 1995 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-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 83,997
<SECURITIES> 60,275
<RECEIVABLES> 143,183
<ALLOWANCES> 4,859
<INVENTORY> 190,946
<CURRENT-ASSETS> 491,106
<PP&E> 283,121
<DEPRECIATION> 141,944
<TOTAL-ASSETS> 647,166
<CURRENT-LIABILITIES> 128,066
<BONDS> 75,096
<COMMON> 38,022
0
1,071
<OTHER-SE> 366,125
<TOTAL-LIABILITY-AND-EQUITY> 647,166
<SALES> 1,027,458
<TOTAL-REVENUES> 1,034,557
<CGS> 863,409
<TOTAL-COSTS> 944,745
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,250
<INCOME-PRETAX> 89,812
<INCOME-TAX> 36,194
<INCOME-CONTINUING> 53,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,618
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
<PAGE> 1
Exhibit 99
Notice of Annual Meeting and Proxy Statement Dated November 13, 1995.
<PAGE> 2
[A. SCHULMAN INC. 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 7, 1995 at 10:00 A.M., local time, for
the purpose of considering and acting upon:
1. The election of five (5) Directors for a three-year term expiring in
1998;
2. The ratification of the selection by the Board of Directors of Price
Waterhouse LLP as independent accountants for the fiscal year ending
August 31, 1996; 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 23, 1995 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 13, 1995
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 INC. LOGO]
3550 West Market Street
Akron, Ohio 44333
PROXY STATEMENT
November 13, 1995
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
7, 1995, and any adjournments thereof.
Stockholders of record at the close of business on October 23, 1995 (the
record date) will be entitled to vote at the Annual Meeting. At that date the
Corporation had issued and outstanding 37,584,318 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 18,792,160 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 13, 1995.
ELECTION OF DIRECTORS
The Board of Directors of the Corporation presently is comprised of
fourteen Directors. The Directors of the Corporation are divided into three
classes; Classes I and III each consist of five Directors and Class II consists
of four Directors. At the Annual Meeting, five Directors of Class III are to be
elected to serve for three-year terms expiring in 1998 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 five Class III 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
<PAGE> 4
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 five 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 23, 1995 DIRECTOR
- ------------------------------- ------------------------------------------------- --------
<S> <C> <C>
NOMINEES TO SERVE UNTIL 1998 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 62
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 49
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 56
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 57
James A. Karman President and Chief Operating Officer, RPM, Inc. 1995
(coatings, sealants and specialty chemicals)
since 1978; formerly, Chief Financial Officer,
RPM, Inc. 1982-1993; Age 58
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 23, 1995 DIRECTOR
- ------------------------------- -------------------------------------------------- --------
<S> <C> <C>
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 55
Franz A. Loehr Retired; formerly Associate General Manager of 1984
the Corporation's European subsidiaries and
Managing Director, A. Schulman GmbH; Age 66
Alan L. Ockene degree dagger double dagger Chairman, Akron Regional Development Board, since 1992
January, 1995; formerly, President and Chief
Executive Officer of General Tire, Inc.
1991-1994; and Vice President of Goodyear Tire
& Rubber Company -- International, 1985-1991;
Age 64
Robert G. Wallace dagger double dagger Retired; formerly Executive Vice President, 1988
Phillips Petroleum Company and
President of Phillips 66 Company; Age 69
Willard R. Holland President and Chief Executive Officer, Ohio 1995
Edison Company (electric utility) and Chairman
of the Board and Chief Executive Officer of its
subsidiary, Pennsylvania Power Company, since
1993; formerly, Chief Operating Officer, Ohio
Edison Company, 1991-1993; prior thereto Senior
Vice President, Detroit Edison Company
(electric utility), 1988-1991; Age 59
CONTINUING DIRECTORS SERVING UNTIL 1997 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
Gordon E. Heffern degree dagger double dagger Consultant to KeyCorp (formerly Society 1983
Corporation) since 1990; formerly Professor,
Kent State University, fall 1992 and prior
thereto 1988-1990; formerly President and
Chief Executive Officer, Akron Community
Foundation, 1990-1992; also formerly Chairman
and Chief Executive Officer, Society
Corporation and Chairman, Society National
Bank, 1983-1987; Age 71
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 52
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 23, 1995 DIRECTOR
- ------------------------------- ------------------------------------------------- --------
<S> <C> <C>
Dr. Peggy Gordon Elliott degree President, The University of Akron since 1992; 1994
formerly Chancellor and Chief Executive
Officer, Indiana University Northwest, 1984-
1992; Age 58
James S. Marlen Chairman of the Board of Ameron, Inc. 1995
(construction and industrial manufacturing)
since January, 1995; President and Chief
Executive Officer of Ameron, Inc. since June,
1993; formerly, Vice President, GenCorp., Inc.
(aerospace, automotive, chemical and plastics)
and President, GenCorp. Polymer Products, a
subsidiary of GenCorp., Inc., 1988-1993; Age 54
<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. Dr. Roberts is a Director of 12 of the 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. Mr. Marlen is a
Director of Ameron, Inc. Mr. Karman is a Director of RPM, Inc., McDonald & Co.
Investments, Inc., Shiloh Industries, Inc. and Sudbury, Inc. Mr. Holland is a
Director of Ohio Edison Company.
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, 1995.
The functions performed by the Compensation Committee of the Board of
Directors include making recommendations to the Board of Directors concerning
compensation policies, salaries,
4
<PAGE> 7
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, 1995.
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, 1995.
The Board of Directors held five meetings during the year ended August 31,
1995. 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 $20,000 plus $800 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. Mr. Loehr has a Consulting
Agreement with the Corporation providing for annual compensation of $75,000 for
each of the years ended August 31, 1995 and 1996.
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report describes the Corporation's executive compensation programs and
the basis on which fiscal year 1995 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
5
<PAGE> 8
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 data 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.
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 1995, 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
6
<PAGE> 9
executive's performance during the prior fiscal year and on Corporation
performance. Mr. Haines' 1995 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 1995 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 1995 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.
In 1995, Mr. Haines received options to purchase 27,500 shares at the fair
market value ($25.50) 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 are awarded to certain executives bi-annually.
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 1995, no executives
received awards of shares of restricted stock.
The Compensation Committee:
Gordon E. Heffern, Chairman
James H. Berick
Robert G. Wallace
Alan L. Ockene
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, 1995, 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(4)
- ------------------------------ ------ -------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Terry L. Haines 1995 $325,000 $180,000 $ 21,910 $ 0 27,500 $130,819 (5)
President & Chief 1994 $270,833 $180,000 $ 12,075 $157,500 25,000 $117,309
Executive Officer 1993 $250,000 $150,000 $ 72,781 $0 30,000 $123,688
Robert A. Stefanko 1995 $270,833 $180,000 $118,335 $0 23,000 $122,274 (5)
Chairman of the Board 1994 $226,667 $180,000 $0 $131,250 20,000 $116,474
of Directors, Chief 1993 $210,000 $150,000 $377,081 $0 25,000 $131,154
Financial Officer and
Executive Vice President--
Finance and Administration
Larry A. Kushkin 1995 $200,000 $160,000 $139,899 $0 14,000 $ 69,278 (5)
Executive Vice President-- 1994 $185,000 $155,000 $0 $ 78,750 12,000 $ 76,585
International Automotive 1993 $175,000 $135,000 $514,206 $0 10,000 $ 87,231
Operations
Leonard E. Emge 1995 $135,000 $ 60,000 $ 11,646 $0 7,000 $ 14,610 (5)
Vice President-- 1994 $117,833 $ 40,000 $ 7,121 $ 39,375 5,000 $ 13,570
Manufacturing 1993 $103,834 $ 30,000 $0 $0 4,500 $ 11,687
Alain C. Adam 1995 $116,000 $ 55,000 $0 $0 3,500 $ 12,710 (5)
Vice President-- 1994 $110,000 $ 53,000 $ 2,165 $ 31,500 3,500 $ 12,787
Automotive Marketing 1993 $105,000 $ 45,000 $ 34,271 $0 3,000 $ 12,287
<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, 1995: 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, 1995 of $26.50.
(4) Represents the following compensation: Corporation contributions to Profit
Sharing Plan; amounts accrued by the Corporation for the fiscal year under
non-qualified profit sharing plan (which was effected in fiscal year 1995);
Corporation payments of term life insurance premiums; amounts accrued by the
Corporation for the fiscal year under deferred compensation agreements; and
Director's fees received from the Corporation's Belgian subsidiary.
</TABLE>
8
<PAGE> 11
(5) Amounts shown include the following: Corporation contributions to Profit
Sharing Plan -- $15,000 for each of Messrs. Haines, Stefanko, and Kushkin,
$11,600 for Mr. Adam and $13,500 for Mr. Emge; amounts accrued by the
Corporation for the fiscal year ended August 31, 1995 under non-qualified
profit sharing plan -- $17,500 for Mr. Haines, $12,083 for Mr. Stefanko, and
$5,000 for Mr. Kushkin; Corporation payments of term life insurance premiums
-- $1,110 for each named executive officer; amounts accrued by the
Corporation under deferred compensation agreements for the fiscal year ended
August 31, 1995 -- $75,061 for Mr. Haines ($45,037 of which was not vested),
$71,933 for Mr. Stefanko ($22,518 of which was not vested), and $53,168 for
Mr. Kushkin ($14,990 of which was not vested); and Director's fees received
from the Corporation's Belgian subsidiary -- $22,148 for each of Messrs.
Haines and Stefanko.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 1995 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 $31.00 and $37.33, respectively. No gain
to the optionees is possible without an increase in stock price which will
benefit all stockholders proportionately. Actual gains, if any, on an option
exercise are dependent upon future performance of the Corporation's Common Stock
and overall market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1995 POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION FOR
EMPLOYEES IN OR BASE 5-YEAR OPTION TERM
OPTIONS FISCAL PRICE(3) EXPIRATION 5% ($) 10% ($)
NAME (#)GRANTED(1) YEAR(2) ($/SH) DATE (4) (4)
- ---------------------- ------------- ------------ -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Haines 27,500 10.24% $25.50 08/17/00 $151,250 $325,325
Robert A. Stefanko 23,000 8.57% $25.50 08/17/00 $126,500 $272,090
Larry A. Kushkin 14,000 5.22% $25.50 08/17/00 $ 77,000 $165,620
Leonard E. Emge 7,000 2.61% $25.50 08/17/00 $ 38,500 $ 82,810
Alain C. Adam 3,500 1.30% $25.50 08/17/00 $ 19,250 $ 41,405
<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 268,450 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 37,584,318 shares of
Common Stock outstanding of $206.7 million or $444.6 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 1995 by the named executive officers and the value of their
unexercised options at August 31, 1995.
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 $ 21,910 53,705 69,688 $ 143,264 $ 70,157
Robert A. Stefanko 15,000 $ 118,335 37,611 57,532 $ 72,429 $ 58,391
Larry A. Kushkin 15,201 $ 139,899 23,692 32,375 $ 51,586 $ 29,688
Leonard E. Emge 1,500 $ 111,646 7,718 13,250 $ 23,197 $ 11,813
Alain C. Adam 0 $ 0 19,937 8,938 $ 102,420 $ 8,188
- ---------------
<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, 1995, had an exercise price equal to or less than the market
value of the Corporation's shares of Common Stock on August 31, 1995
($26.50).
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 23, 1995 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) 2,353,906 6.26%
700 North Water Street
Milwaukee, Wisconsin 53202
Gordon E. Heffern 2,046 *
Robert A. Stefanko 133,573(5) *
Dr. Peggy Gordon Elliott 1,000 *
James H. Berick 15,655 *
Terry L. Haines 92,205 *
Dr. Paul Craig Roberts 1,880 *
Rene C. Rombouts 67,798 *
Larry A. Kushkin 308,230(6) *
Franz A. Loehr 173,724 *
Alan L. Ockene 4,355 *
Robert G. Wallace 5,843 *
James S. Marlen 1,000 *
Willard R. Holland 500 *
James A. Karman 0 *
Alain C. Adam 30,385 *
Leonard E. Emge 26,919 *
All Directors and
Executive Officers as a
group (17 persons) 913,308 2.4%
</TABLE>
- ---------------
* 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: 14,643 and 39,062, respectively, by Terry L. Haines; 5,067 and 18,895,
respectively, by Larry A. Kushkin; 5,268 and 32,343, respectively, by Robert
A. Stefanko; 0 and 31,250, respectively, by Franz A. Loehr; 14,375 and
5,562, respectively, by Alain C. Adam; 2,718 and 5,000, respectively, by
Leonard E. Emge;
11
<PAGE> 14
20,268 and 20,937, respectively, by Rene C. Rombouts; and 72,339 and
155,792, respectively, by all Directors and executive officers as a group.
(2) Includes 655 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. Berick, and Dr. Paul Craig Roberts
and 3,275 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 6, 1995, 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 2,353,906 shares 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 2,500 shares held solely by Mr. Stefanko's wife, the beneficial
ownership of which Mr. Stefanko disclaims.
(6) Includes 5,815 shares held solely by Mr. Kushkin's wife and 55,820 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.
<TABLE>
<CAPTION>
Measurement Period A. Schulman, S&P Specialty
(Fiscal Year Covered) Inc. S&P 500 Chemicals
<S> <C> <C> <C>
8/90 100.00 100.00 100.00
8/91 156.70 126.71 125.61
8/92 210.41 136.77 134.33
8/93 185.63 158.02 157.46
8/94 212.60 166.02 152.82
8/95 215.13 201.41 192.26
</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 a bonus each year 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 qualified 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, 1995, the amounts contributed to the Profit Sharing Plan accounts of
the persons listed in the Summary Compensation Table were: Mr. Haines, $15,000;
Mr. Stefanko, $15,000; Mr. Kushkin, $15,000; Mr. Adam, $11,600; and Mr. Emge,
$13,500.
The Corporation also has a non-qualified Profit Sharing Plan (the
"Non-Qualified Plan") which provides that in any year the Corporation's Board of
Directors, in its discretion, may authorize the accrual by the Corporation of
certain amounts for the benefit of the Non-Qualified Plan's participants, in
order to restore to such participants amounts not available to them under the
Profit Sharing Plan due to certain limitations thereunder. Benefits under the
Non-Qualified 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. Amounts accrued by the Corporation under the Non-Qualified Plan for
the benefit of each participant reflect the investment performance which would
have been realized had a corresponding amount been invested for the benefit of
such participant
14
<PAGE> 17
during such year in the Profit Sharing Trust pursuant to the Profit Sharing
Plan. For the fiscal year ended August 31, 1995, the amounts accrued by the
Corporation pursuant to the Non-Qualified Plan for the benefit of the persons
listed in the Summary Compensation Table were: Mr. Haines, $17,500; Mr.
Stefanko, $12,083; and Mr. Kushkin $5,000.
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
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 LLP as independent accountants to
examine the books, records and accounts of the Corporation and its subsidiaries
for the fiscal year ending August 31, 1996. 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 LLP is the independent accountant of the Corporation
for the fiscal year ended August 31, 1995, and is considered by the Board of
Directors to be well qualified. Representatives of Price Waterhouse LLP 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 LLP
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.
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.
15
<PAGE> 18
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 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 1996, must be received
by the Corporation no later than July 15, 1996 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 13, 1995
16
