<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, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to _____________.
Commission File No. 0-7459
A. SCHULMAN, INC.
-----------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
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(State of Incorporation) (I.R.S. Employer Identification No.)
3550 West Market Street, Akron, Ohio 44333
------------------------------------ -----
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (330)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
-----------------------------
(Title of Class)
Special Stock Purchase Rights
-----------------------------
(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
--- ---
[Cover continued on following page]
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[Cover Continued From Previous Page]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
on October 22, 1996: $798,363,263
------------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practical date:
37,806,131 Shares of Common Stock, $1.00 Par Value, at
- ------------------------------------------------------
October 22, 1996.
- -----------------
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document in Which Incorporated
- -------- ---------------------
Portions of the Registrant's Notice
of Annual Meeting and Proxy Statement
Dated November 12, 1996 III and IV
Portions of the Registrant's 1996
Annual Report to Stockholders I and II
Neither the Report of the Compensation Committee on Executive Compensation nor
the Performance Graph contained in the Registrant's Notice of Annual Meeting and
Proxy Statement dated November 12, 1996 shall be deemed incorporated by
reference herein.
<PAGE> 3
PART I
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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 theCompany's customers. These compounds,
also known as engineered
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products, are formulated in the Company's laboratories and are manufactured in
the Company's twelve plastics compounding plants (including one plant acquired
on November 7, 1996) 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 bags and labels
and packaging materials for food, soap,
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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.
Papermatch(R), one of the Company's newer product lines, is a plastic
alternative to paper used for packaging, menus, maps and other products.
Papermatch(R) is printable and resistant to tearing, moisture and chemicals.
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-
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based compound for use as insulation for high and medium voltage wire and cable
which may be either flame retardant or resistant to high temperatures. The
Company also manufactures Formion(R), a specialized compound which has good
impact strength, is resistant to abrasion and has performance characteristics
which do not decrease in low temperatures. This product is sold principally to
the transportation industry for use in bumper blocks and protective rub strips.
In addition, the Company manufactures Polytrope(R), a thermoplastic
elastomer which has high resiliency and good impact resistance. Presently, the
principal market 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
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polyethylene-based compound, is used in rotational molding applications
requiring high strength and chemical resistance.
The Company's plastics compounding operations include the manufacture
of Polybatch(R), an additive or color concentrate used for modifying various
plastic resins. An additive concentrate provides various physical properties
required by customers. These properties include slip, anti-slip, UV stabilizers,
etc. A color concentrate is a clear or natural plastic resin into which a
substantial amount of color pigment is incorporated or dispersed. The Company
manufactures its proprietary concentrates using its formulae and purchased prime
natural resins. These concentrates are sold to manufacturers of plastic
products. The Company also manufactures Polyblak(R), a line of black
concentrates. In addition, the Company 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
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done principally for major plastic resin producers. The Company is compensated
on the basis of an agreed price per pound plus an additional charge for any
additives and packaging supplied by the Company.
On November 7, 1996, the Company acquired the business and assets of
a manufacturing facility in Sharon Center, Ohio. This facility has four
manufacturing lines and an annual capacity of approximately 15 million pounds.
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, Vestolen GmbH, BASF, Dow Chemical,
Exxon Chemical, and ATOCHEM.
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The Company is the exclusive third-party United States, Canada and
Mexico distributor of rotational molding grades 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 acts as a
distributor of polyvinyl chloride dispersion resin manufactured by Kaneka
Delaware Corporation of the United States. The Company also distributes ABS
resins in the United States for Nitriflex S.A. of Brazil.
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 1996 Annual Report to Stockholders, which information
is incorporated herein by reference.
The Company's operations outside the United States are an important
part of its business. The Company's foreign subsidiaries manufacture additives,
concentrates, flame retardants and other proprietary and custom plastic
compounds,
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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
1996 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
off-grade plastic resins from major European producers. During the fiscal year
ended August 31, 1996, this subsidiary purchased
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approximately 30% of the compounds manufactured in the Bornem, Belgium plant.
Approximately 29% 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 and Vestolen GmbH, both members of the Veba AG group of
companies. This subsidiary also distributes products for Dow Chemical, Exxon
Chemical, Hoechst and Solvay.
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 produces plastic concentrates for the Company's European market.
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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 MKV Co., 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, 1996, the Company had approximately 989 employees in the
United States and approximately 1,029 employees in its foreign operations. More
than 90% 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 222 technical personnel. The Company's plastic
compounding business is to a degree dependent on its ability to hire and retain
qualified technical personnel. These personnel are involved in activities
relating to the development of new compounds and the testing and sampling of
material for conformity with product
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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, 1996, 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, polystyrene and polyurethane.
The Company's business is highly competitive. In its
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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 as
a basic producer of plastic resins. Certain of these competitors compete with
the Company generally in each such competitor's own local market area, while
other competitors compete with the Company on a global basis.
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
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The Company owns and operates eight 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 73,000,000 164,000
Bellevue, Ohio 97,000,000(1) 160,000
Sharon Center, Ohio 15,000,000(2) 43,000
Orange, Texas 72,000,000 147,000
Orange, Texas--Texas
Polymer Services, Inc. 145,000,000 182,000
Nashville, Tennessee 80,000,000 131,000
San Luis Potosi, Mexico(3)(a) 25,000,000 78,000
Bornem, Belgium 130,000,000 356,000
Crumlin Gwent, South Wales 54,000,000 99,000(3)(b)
Givet, France 52,000,000 74,000
St. Thomas, Ontario, Canada 65,000,000 111,000
Sindorf, Germany 90,000,000 325,000
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883,000,000(3)(a),(b),(c)
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<FN>
(1) Includes capacity of approximately 29 million pounds from two
manufacturing lines owned by The Sunprene Company, a partnership in
which the Company has a 70% partnership interest.
(2) The Company acquired this facility on November 7, 1996.
(3) Excludes the following capital projects:
(a) A new manufacturing line will be added to the facility in
Mexico. This line will have an annual capacity of
approximately 14 million pounds, is projected to cost $6
million and is scheduled to commence operations in fiscal
1997.
(b) The Company will replace an existing manufacturing line which
will increase capacity by approximately 8 million pounds. This
line will cost approximately $4 million and is scheduled to
commence operations in fiscal 1997.
(c) The Company is constructing a new manufacturing facility in
Indonesia at an anticipated cost of $6 million. This facility
is expected to have an initial annual capacity of
approximately 13 million pounds and is scheduled to commence
operations in fiscal year 1997.
</TABLE>
The approximate annual plastics compounding capacity set forth in the
preceding Table is based upon several factors,
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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
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The Company is not a party to any material pending legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended August 31, 1996.
EXECUTIVE OFFICERS OF THE COMPANY
The age (as of October 22, 1996), 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 50; 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.
Robert A. Stefanko: Age 53; Chairman of the Board since January, 1991;
Executive Vice President--Finance and Administration of the Company since 1989;
and Chief Financial Officer of the Company since 1979.
Larry A. Kushkin: Age 56; Executive Vice President-- International
Automotive Operations of the Company since 1989.
Brian R. Colbow: Age 49; Treasurer of the Company since 1984.
Alain C. Adam: Age 48; Vice President--Automotive Marketing since 1990.
Leonard E. Emge: Age 66; Vice President--Manufacturing since 1993 and prior
to that time General Plant Manager--North America
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since 1985.
James H. Berick: Age 63; Secretary of the Company since 1979 and Chairman,
Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).
PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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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 1996 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
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Information in response to this Item is set forth on pages 30 and 31 of the
Company's 1996 Annual Report to Stockholders, which information is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------
Information in response to this Item is set forth on pages 28 and 29 of the
Company's 1996 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 14, 1996, appearing on pages 16 through 27 of the
Company's 1996 Annual Report to Stockholders, are incorporated herein by
reference.
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(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
- ------- -------------------------------------------------------------------
The information required in response to this Item in respect of Directors
is set forth under the captions "Election of Directors" and "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" in the Company's proxy
statement dated November 12, 1996, 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 16 and 17 of
this Form 10-K and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Information in response to this Item is set forth under the caption
"Compensation of Executive Officers" in the Company's proxy statement dated
November 12, 1996, 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
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dated November 12, 1996, 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 12, 1996, previously filed with the Commission,
which information is incorporated herein by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(1) Financial Statements:
---------------------
Report of Independent Accountants 27*
Consolidated Statement of Income for
the three years ended August 31, 1996 16*
Consolidated Balance Sheet at August 31,
1996 and 1995 18*
Consolidated Statement of Cash Flows for
the three years ended August 31, 1996 20*
Consolidated Statement of Stockholders'
Equity for the three years ended
August 31, 1996 17*
Notes to Consolidated Financial
Statements 21*
<FN>
- --------------------
*Incorporated by reference from the indicated page of the Company's 1996
Annual Report to Stockholders. With the exception of this information and the
information incorporated in Items 1, 5, 6, 7 and 8, the 1996 Annual Report to
Stockholders is not deemed filed as part of this report.
</TABLE>
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<TABLE>
<S> <C>
(2) Financial Statement Schedules:
------------------------------
Report of Independent Accountants
on Financial Statement Schedule F-1
VIII-Valuation and Qualifying Accounts F-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits:
---------
Exhibit
Number
------
3(a) Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3(a) to the Company's Form
10-K for fiscal year ended August 31, 1990).
3(b) Certificate of Amendment of Certificate of
Incorporation dated December 12, 1985 (incorporated
by reference to Exhibit 2(b) of the Company's
Registration Statement on Form 8-A dated
January 15, 1996).
3(c) Certificate of Amendment of Certificate of
Incorporation dated January 9, 1987 (incorporated by
reference to Exhibit 3(b) to the Company's Form 10-K
for fiscal year ended August 31, 1994).
3(d) Certificate of Amendment of Certificate of
Incorporation dated December 10, 1987 (incorporated
by reference to Exhibit 3(c) to the Company's Form
10-K for fiscal year ended August 31, 1991).
3(e) Certificate of Amendment of Certificate of
Incorporation dated December 6, 1990 (incorporated by
reference to Exhibit 3(d) to the Company's Form 10-K
for fiscal year ended August 31, 1991).
3(f) Certificate of Amendment of Certificate of
Incorporation dated December 9, 1993 (incorporated by
reference to Exhibit 2(f) to the Company's
Registration Statement on Form 8-A dated January 15,
1996).
3(g) By-Laws dated December 8, 1983 (incorporated by
reference to Exhibit 3(c) to the Company's Form 10-K
for fiscal year ended August 31, 1990).
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3(h) Amendment to By-Laws dated October 20, 1986
(incorporated by reference to Exhibit 3(f) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
3(i) Amendment to By-Laws dated January 11, 1996
(incorporated by reference to Exhibit 3.3 to the
Company's Report on Form 8-K dated January 15, 1996).
4 Rights Agreement dated as of January 12, 1996,
between the Company and Society National Bank, as
Rights Agent, which includes as Exhibit B thereto the
Form of Rights Certificate (incorporated by reference
to Exhibit 1 to the Company's Registration Statement
on Form 8-A, dated January 15, 1996).
10(a)* A. Schulman, Inc. 1991 Stock Incentive Plan
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
10(b)* Amendment to A. Schulman, Inc. 1991 Stock Incentive
Plan (incorporated by reference to Exhibit 10.9 to
the Company's Form 10-Q for the fiscal quarter ended
February 29, 1996).
10(c)* A. Schulman, Inc. 1992 Non-Employee Directors' Stock
Option Plan (incorporated by reference to Exhibit A
to the Company's Proxy Statement dated November 12,
1992 filed as Exhibit 28 to the Company's Form 10-K
for fiscal year ended August 31, 1992).
10(d)* Amendment to A. Schulman, Inc. 1992 Non-Employee
Directors' Stock Option Plan (incorporated by
reference to Exhibit 10.10 to the Company's Form 10-Q
for the fiscal quarter ended February 29, 1996).
10(e)* Non-Qualified Profit Sharing Plan (incorporated by reference
to Exhibit 10(d) to the Company's Form 10-K for the fiscal
year ended August 31, 1995).
10(f)* Amendment to A. Schulman, Inc. Non-Qualified Profit
Sharing Plan (incorporated by reference to Exhibit
10.8 to the Company's Form 10-Q for the fiscal
quarter ended February 29, 1996).
10(g)* Employment Agreement between the Company and Robert A.
Stefanko dated January 31, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Form 10-Q for fiscal quarter
ended February 29, 1996).
21
<PAGE> 24
10(h)* Employment Agreement between the Company and Terry L.
Haines dated January 31, 1996 (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(i)* Employment Agreement between the Company and Larry A.
Kushkin dated January 31, 1996 (incorporated by
reference to Exhibit 10.4 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(j)* Employment Agreement between the Company and Leonard E. Emge
dated January 31, 1996 (incorporated by reference to Exhibit
10.5 to the Company's Form 10-Q for fiscal quarter ended
February 29, 1996).
10(k)* Employment Agreement between the Company and Brian R. Colbow
dated January 31, 1996 (incorporated by reference to Exhibit
10.7 to the Company's Form 10-Q for fiscal quarter ended
February 29, 1996).
10(l)* Employment Agreement between the Company and Alain C. Adam
dated January 31, 1996 (incorporated by reference to Exhibit
10.6 to the Company's Form 10-Q for fiscal quarter ended
February 29, 1996).
10(m)* Agreement between the Company and Robert A. Stefanko
dated as of August 1, 1985 (incorporated by reference
to Exhibit 10(h) to the Company's Form 10-K for
fiscal year ended August 31, 1991).
10(n)* Agreement between the Company and Larry A. Kushkin dated as of
August 31, 1985 (incorporated by reference to Exhibit 10(i) of
the Company's Form 10-K for fiscal year ended August 31,
1991).
10(o)* Agreement between the Company and Robert A. Stefanko
dated as of March 21, 1991 (incorporated by reference
to Exhibit 10(l) to the Company's Form 10-K for
fiscal year ended August 31, 1992).
10(p)* Agreement between the Company and Terry L. Haines dated as of
March 21, 1991 (incorporated by reference to Exhibit 10(m) to
the Company's Form 10-K for fiscal year ended August 31,
1992).
10(q)* Agreement between the Company and Larry A. Kushkin dated as of
August 31, 1993 (incorporated by reference to Exhibit 10(n) to
the Company's Form 10-K for fiscal year ended August 31,
1993).
22
<PAGE> 25
10(r)* Form of Amendment to Deferred Compensation Agreements between
the Company and Robert A. Stefanko, Terry L. Haines and Larry
A. Kushkin (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the fiscal quarter ended February 29,
1996).
10(s)* Agreement between the Company and Franz A. Loehr dated as of
August 31, 1994 (incorporated by reference to Exhibit 10(o) to
the Company's Form 10-K for the fiscal year ended August 31,
1995).
10(t)* Agreement between the Company and Franz A. Loehr
dated as of August 31, 1996.
10(u) Credit Agreement between the Company, The Banks and Society
National Bank, individually 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).
10(v) First Amendment to Credit Agreement dated February 26, 1996,
among the Company and Society National Bank, individually and
as Agent, First National Bank of Ohio, Union Bank of
Switzerland and The First National Bank of Chicago
(incorporated by reference to Exhibit 10.11 to the Company's
Form 10-Q for the fiscal quarter ended February 29, 1996).
11 Computation of Earnings Per Common Share
13 Company's 1996 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
12, 1996
*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, 1996.
23
<PAGE> 26
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 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Terry L. Haines Director and Principal November 26, 1996
- ------------------ Executive Officer
Terry L. Haines
/s/Robert A. Stefanko Director, Principal November 26, 1996
- --------------------- 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
Willard R. Holland* Director
James A. Karman* Director
James S. Marlen* Director
*By: /s/Robert A. Stefanko November 26, 1996
---------------------
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.
24
<PAGE> 27
BP American Building Telephone 216 781 3700
200 Public Square
27th Floor
Price Waterhouse LLP Cleveland, Ohio 44114-2301
[LOGO]
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 14, 1996, appearing on page 27 of the 1996 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.
/s/ Price Waterhouse LLP
PRICE WATFRHOUSE LLP
Cleveland, Ohio
October 14, 1996
F-1
<PAGE> 28
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 expense offs adjustment Other period
------------ ---------- ----- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Reserve for doubtful accounts
Year ended August 31, 1996 $4,859,000 $2,490,000 $(1,425,000) $(21,000) $ - $5,903,000
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
Valuation allowance - deferred tax assets
Year ended August 31, 1996 4,820,000 - - - (1,665,000)(3) 3,155,000
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
<FN>
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.
</TABLE>
F-2
<PAGE> 1
Exhibit 10(t)
Agreement between the Company and Franz A. Loehr
dated as of August 31, 1996
<PAGE> 2
August 31, 1996
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:
1. CONSULTING
----------
For the one (1) year period beginning September 1, 1996, and ending August
31, 1997 (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.
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.
2. COMPENSATION
------------
In consideration of the consulting services provided by you, Schulman will
pay you a fee (the "Consulting Fee") in an amount equal to the equivalent of
USD 50,000 (based on the September 1, 1996 exchange rate) for the Consulting
Period. Monthly, at the beginning of each month, you will submit invoices to
Schulman for one-twelfth (1/12th) of the Consulting Fee plus expense
reimbursement in respect of expenses incurred by you during the preceding month
as provided in paragraph 4 (Reimbursement of Expenses), 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
<PAGE> 3
of invoice or as you and Schulman otherwise mutually shall agree.
The exchange rate of USD to German marks on September 1, 1996, will be used
to fix the compensation in German marks. No fluctuations in exchange rates
after September 1, 1996, will affect the amounts payable hereunder.
In addition to the Consulting Fee, during the Consulting Period Schulman
will continue to pay or reimburse you for reasonable expenses related to your
automobile, such as gasoline and maintenance.
Schulman also will provide you with office space in Schulman's Sindorf
facility and with reasonable clerical assistance.
3. 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.
4. 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.
5. 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.
<PAGE> 4
6. 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.
7. REMEDIES
--------
You agree that in the event that you violate the provisions of paragraphs 5
(Non-Compete and Non-Disparagement) or 6 (Trade Secrets), 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 such
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.
8. 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.
9. 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.
<PAGE> 5
10. 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.
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, 1996
------------------
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,
---------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income $42,177,000 $53,618,000 $44,571,000
Dividends on preferred
stock 54,000 54,000 54,000
----------- ----------- -----------
Net Income applicable
to common stock $42,123,000 $53,564,000 $44,517,000
=========== =========== ===========
Weighted average number
of shares of common
stock outstanding,
net of treasury shares 37,584,561 37,544,408 37,438,118
Net income per share of
common stock $1.12 $1.43 $1.19
===== ===== =====
</TABLE>
<PAGE> 1
Exhibit 13
A. SCHULMAN INC.
1996 ANNUAL REPORT
[PHOTO OF MISCELLANEOUS ITEMS CONSTRUCTED OF THE COMPANY'S PLASTIC PAPERMATCH
(R) MATERIAL, INCLUDING GIFT BAGS, A MAP, WALLPAPER BORDER AND A MENU.]
[OUTSIDE FRONT COVER]
<PAGE> 2
ON OUR COVER:
[PHOTO OF MISCELLANEOUS ITEMS PAPERMATCH(R) IS A PLASTIC
INCLUDING THE COVER OF THE MATERIAL THAT COMBINES THE
COMPANY'S 1996 ANNUAL REPORT UNIQUE PROPERTIES OF PLASTIC
TO SHAREHOLDERS, A CAN OF AND PAPER. AVAILABLE IN
PAINT, PAINT SWATCHES, VARIOUS TEXTURES AND
A PUTTY KNIFE, WALLPAPER THICKNESSES, PAPERMATCH(R) IS
BORDER AND A MENU.] NOTED FOR ITS DURABILITY AND
RESISTANCE TO MOISTURE AND
CHEMICALS. THE COVER OF THIS
ANNUAL REPORT WAS PRINTED ON
PAPERMATCH.(R)
THIS PRODUCT IS SUITABLE
WHEREVER DURABILITY OF PRINTED
MATERIALS IS IMPORTANT.
TYPICAL APPLICATIONS INCLUDE
PACKAGING, LABELS, WALL
COVERINGS, MAPS, BOOKS,
MENUS, AND ADVERTISING
MATERIALS.
A.
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 films for plastic packaging,
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.
Headquartered in Akron, Ohio, A. Schulman currently has 11
manufacturing plants in North America and Europe, and plans to open a new
production facility in Asia in 1997. The Company employs approximately 2,000
people. A. Schulman stock is quoted through the NASDAQ National Market System
(Symbol: SHLM).
[INSIDE FRONT COVER]
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31,
1996 1995 1994
------------ -------------- ------------
<S> <C> <C> <C>
Net sales ...................................... $976,694,000 $1,027,458,000 $748,778,000
Net income ..................................... $ 42,177,000 $ 53,618,000 $ 44,571,000
Net income per share of common stock ........... $ 1.12 $ 1.43 $ 1.19
Capital expenditures ........................... $ 18,542,000 $ 58,533,000 $ 25,302,000
Long-term debt and other non-current liabilities $ 73,696,000 $ 106,326,000 $ 50,673,000
Long-term liabilities to capital ............... 14.5% 20.8% 12.8%
Stockholders' equity ........................... $433,110,000 $ 405,218,000 $345,919,000
Book value per common share .................... $ 11.43 $ 10.75 $ 9.21
Number of stockholders ......................... 1,278 1,352 1,405
CASH DIVIDENDS PER SHARE
1st Quarter .................................... $ .085 $ .075 $ .064
2nd Quarter .................................... .095 .085 .072
3rd Quarter .................................... .095 .085 .075
4th Quarter .................................... .095 .085 .075
------------- -------------- ------------
$.370 $ .330 $ .286
============= ============== ============
COMMON STOCK PRICE RANGE High - Low High - Low High - Low
1st Quarter..................................... 27-3/4 - 17-1/4 29-3/4 - 25-3/4 25 -21-1/4
2nd Quarter..................................... 24-1/2 - 17-1/2 29-1/4 - 24-1/4 29 -22-3/4
3rd Quarter..................................... 26-1/4 - 20 32-3/4 - 28 28-3/8-21
4th Quarter..................................... 26-1/2 - 20-1/8 31-1/2 - 23-1/4 28-3/8-23-1/2
</TABLE>
NET SALES
(Dollars in Billions)
<TABLE>
<S> <C>
87
88
89
90
91
92
93
94 $ 748,778,000
95 $1,027,458,000
96 $ 976,694,000
</TABLE>
NET INCOME
(Dollars in Millions)
<TABLE>
<S> <C>
87
88
89
90
91
92
93
94 $ 44,571,000
95 $ 53,618,000
96 $ 42,177,000
</TABLE>
CAPITAL EXPENDITURES
(Dollars in Millions)
<TABLE>
<S> <C>
87
88
89
90
91
92
93
94 $ 25,302,000
95 $ 58,533,000
96 $ 18,542,000
</TABLE>
<PAGE> 4
TO OUR STOCKHOLDERS:
Sales for the year ended August 31, 1996 were $976.7 million, a decline
of 5% from last year's record sales of $1,027.5 million. Net income was
$42,177,000 or $1.12 per common share. This was 21% below 1995 record earnings
of $53,618,000 or $1.43 per share.
Net income for the quarter ended August 31, 1996 was the highest for
any fourth quarter in the history of A. Schulman. Earnings were $13,987,000 or
$.37 per share, an increase of 16% over net income of $12,047,000 or $.32 per
share for the same period last year. Sales of $239.1 million were slightly lower
than last year's 1995 fourth quarter sales of $242.0 million.
Fourth quarter profits advanced to record levels due to an 8% increase
in European earnings and a significant improvement in North American net income.
Tonnage was up and gross profit margins improved from last year's depressed
fourth quarter levels.
Profits for fiscal 1996 were lower due to a sharp drop in plastic resin
prices early in the year and a concerted effort by our customers to reduce their
high level of inventories in the wake of declining prices. This environment
resulted in lower profit margins due to demand-driven reductions in production
levels and the period costs associated with new capacity additions.
The decline in profits bottomed out at the end of our second quarter.
Since then, profits have improved sequentially through our fourth quarter when
earnings surpassed last year's level.
European net income for fiscal 1996 was down 11% or $4.5 million from
last year's results. This decline was attributable primarily to lower resin
prices and weak economic conditions, especially in Germany.
Sales in North America were off slightly for the year because of lower
resin prices, even though tonnage was up 9%. However, earnings declined $7
million. Profit margins were less than last year because of lower than planned
utilization of new capacities and our customers' resolve to reduce inventories.
The translation effect of the stronger U.S. dollar lowered sales by
$7.1 million for the quarter and $3.6 million for the year. Net income was
reduced by $410,000 or $.02 per share for the quarter and $217,000 or $.01 per
share for the year.
Total worldwide tonnage was up 14% for the quarter. European tonnage
increased 6%, while North American volumes advanced 23% on solid growth in each
business category. For the year, total tonnage grew 3% due to a 9% increase in
North America which was partially offset by a decline from our European merchant
activities.
Manufacturing tonnage was up 19% for the quarter and 8% for the year.
Fourth quarter capacity utilization was 85% in 1996 versus 73% last year.
The increases in tonnage and the significant improvement in capacity
utilization were the major reasons for the better fourth quarter profit margins.
Profit margins were 16.8% compared with 14.6% in the same quarter last year. The
major improvement was derived from manufacturing, where gross profit was up $8.2
million on higher margins.
For the year, profit margins were 15.4%, down from 16% in 1995. This
decline was attributable to lower margins and profits in both manufacturing and
merchant activities. The fall in resin prices early in fiscal 1996, along with a
reduction in capacity utilization, were the principal reasons for the margin
reductions.
2
<PAGE> 5
Capital expenditures were $18.5 million in 1996, down from last year's
all-time record of $58.5 million. The major expenditure in 1996 was the addition
of a second manufacturing line for The Sunprene Company, our partnership with
MKV America Inc. This line, with a cost of $5 million, provides approximately 14
million pounds of additional capacity.
Currently, we are constructing a new manufacturing facility in
Indonesia, and investing $8.5 million for an additional line at our facility in
Mexico. These projects are scheduled for start-up in fiscal 1997 and 1998,
respectively. We will also replace a line in our United Kingdom facility. These
projects will add approximately 32 million pounds or 4% to our existing
capacity.
We continued to strengthen our financial position during the year.
Inventories are down 21% or $40 million. We have reduced our short and long term
debt by $46 million, and our current ratio is 4.4:1. Our strong financial
position enables us to pursue new opportunities in growing areas throughout the
world.
We increased our dividend in January 1996. The new annual rate of $.38
per share represents an increase of 12% over last year's rate of $.34. The
dividends have been increased annually since 1982. These increases reflect the
Board's confidence in the long-term prospects for A. Schulman. The Board will
review the current dividend rate and policy at its meeting in January 1997.
We should resume a pattern of growth in fiscal 1997. Resin pricing has
stabilized, our capacity additions provide a solid foundation for expansion of
our business, and it appears that in the European economies, including Germany,
there are some signs of recovery. In addition, our presence throughout the world
provides broad capabilities for new opportunities.
Fiscal 1996 has been an extremely difficult period, with significant
changes in resin pricing throughout the year. The future undoubtedly will be
full of many challenges, but we continue to be enthusiastic about the worldwide
prospects for A. Schulman.
/s/ Terry L. Haines /s/Robert A. Stefanko
Terry L. Haines Robert A. Stefanko
President and Chairman
Chief Executive Officer
November 1, 1996
[PHOTO OF TERRY L. HAINES AND ROBERT A. STEFANKO IN FRONT OF FLAGS]
3
<PAGE> 6
SERVING MARKETS THROUGHOUT THE WORLD
There is increasing demand for high-performance plastics in virtually every
economy around the world. A. Schulman is an international leader in the
industry, supplying one of the broadest ranges of engineered polymer compounds
and concentrates available from a single worldwide supplier.
Through its international network of strategically located and
efficient manufacturing facilities, the Company is well-positioned to meet
customer delivery and service needs whenever required. The technical and
marketing specialists of A. Schulman can assist customers with design,
development and production virtually anywhere in the world.
A BUSINESS BUILT ON SERVICE.
Customer service has always been a top priority for A. Schulman. This, coupled
with reliable product quality, has been a key factor in the growth and success
of the Company.
The A. Schulman team is staffed with qualified, hands-on, service
focused personnel experienced in a variety of markets. The entire organization
is dedicated to anticipating and meeting each customer's complete product needs.
A LEADING EUROPEAN TOY
MANUFACTURER USES A.
SCHULMAN'S POLYMAG(R) FOR
THESE MAGNETIC BLOCKS. THE
COLOR AND PERFORMANCE WILL
PLEASE EVEN THE SMALLEST
CONSUMERS.
4
<PAGE> 7
[PHOTO OF TODDLER WITH COLORFUL MAGNETIC TOY BLOCKS.]
<PAGE> 8
A. Schulman technical specialists often work with customers in the
initial stages of product design. In many cases, they become a valued integral
member of the customer's development team. They assist in defining parameters
for product performance while advising and recommending specifications and
materials. This enables the early identification of unique solutions that keep
the Company at the forefront of sourcing decisions.
- - GLOBAL EXPANSION OF FACILITIES.
A. Schulman's international network of modern manufacturing and technical
facilities plays an important role in serving the needs of customers throughout
the world.
Since 1990, A. Schulman has invested more than $250 million in new and
upgraded facilities and state-of-the-art equipment. These investments not only
have increased worldwide capacities, but have also enhanced A. Schulman's
ability to meet the evolving requirements of its broad and diverse customer
base. The continuing globalization of markets also has resulted in the Company's
strategic expansion of laboratory and manufacturing operations. Accordingly, the
Company is expanding into new geographic areas, namely Mexico and Indonesia.
These areas were formerly supplied with products imported from other Company
locations.
HIGH-PERFORMANCE POLYFORT(R)
ENGINEERED PLASTICS ARE WIDELY
USED IN CONSUMER ELECTRONIC
AND ELECTRICAL APPLIANCE ITEMS
LIKE THIS TOASTER PRODUCED BY
ONE OF EUROPE'S PREMIER
MANUFACTURERS. THIS MATERIAL
PROVIDES GOOD HEAT RESISTANCE,
ELECTRICAL INSULATION,
TOUGHNESS AND SURFACE SCRATCH
RESISTANCE.
6
<PAGE> 9
[PHOTO OF RED TOASTER CONTAINING TOASTED BREAD, BESIDE BAGELS.]
<PAGE> 10
A. Schulman's new Mexican plant, which commenced operations in late
1995, not only serves expanding local markets, but is a platform for development
and penetration of promising market opportunities throughout Latin America.
Likewise, a new facility in Indonesia, scheduled for start-up in 1997,
will expedite the Company's activities in the Asia-Pacific region, currently one
of the world's fastest growing economic areas.
Today, A. Schulman has the geographic diversification and capacity
necessary to increase its customer and product base around the world.
- - SUPPLYING THE RIGHT PRODUCT
A. Schulman provides high-performance compounded plastics for specialized uses
in packaging, automotive, electronics, appliance and numerous other markets. The
Company utilizes the latest polymer developments throughout its worldwide
operations. It has extensive experience and expertise in compounding various
polymers to maximize user performance advantage.
Manufacturers often bring the Company their latest concepts and
designs, seeking recommendations on polymer compound selection and
cost-effectiveness. A. Schulman, in tandem with customer personnel, provides the
expertise necessary to bring these projects to market. This service capability
is provided on a global scale to
THE LOWER BODY SIDE MOLDINGS
ON THIS POPULAR SPORT UTILITY
VEHICLE ARE MOLDED WITH A.
SCHULMAN'S POLYPUR(R).
POLYPUR(R) WAS SELECTED
BECAUSE OF ITS EXCELLENT
DIMENSIONAL STABILITY,
SUPERIOR IMPACT RESISTANCE AND
PAINTABILITY.
8
<PAGE> 11
[PHOTO OF THE SIDE OF A WHITE SPORT UTILITY VEHICLE, WITH GIRL IN REAR SEAT]
<PAGE> 12
customers both large and small.
With manufacturers today seeking to work with fewer, more capable
suppliers, A. Schulman's expertise and international presence provide a strong
competitive advantage.
- - DIVERSIFIED GLOBAL MARKETS
The Company utilizes its strategic geographic locations to serve markets
throughout the world. It has a strong presence in key sectors of the global
plastics markets.
PACKAGING. A. Schulman is a premier supplier of specialty color concentrates and
additive masterbatch materials used by packaging manufacturers to enhance the
performance and appearance of plastic materials and films. Polybatch(R) is a
family of several hundred color concentrates and additive combinations which
function as modifiers for packaging materials, such as polyethylene,
polystyrene, and polypropylene.
Papermatch(R) is one of the newer product lines with good growth
potential. It is a plastic alternative to paper that is printable and resistant
to tearing, moisture and chemicals. This product, currently marketed in Europe,
has recently been introduced in North America. The cover of this annual report
is printed on Papermatch(R).
THE BODY AND SOLUTION
CONTAINERS OF THIS INDUSTRIAL
CLEANING MACHINE ARE
ROTATIONALLY MOLDED WITH
DIFFERENT TYPES OF
POLYETHYLENE. THIS MATERIAL
WAS SELECTED FOR ITS
COLORABILITY AND PHYSICAL
STRENGTH.
10
<PAGE> 13
[PHOTO OF BLUE INDUSTRIAL CLEANING MACHINE.]
<PAGE> 14
AUTOMOTIVE. A. Schulman is a leading supplier of engineered plastic compounds
and resins to the automotive market. Engineers, chemists, and production
specialists at A. Schulman work closely with automotive manufacturers in the
early vehicle design stages. They evaluate and determine which engineered
plastic compounds are best suited for various automotive components. For unique
applications, A. Schulman has the expertise to create materials based on
specific customer performance requirements. The stringent tolerance criteria for
these plastic components often includes high strength, rigidity or flexibility,
impact and abrasion resistance, weather resistance, chemical and thermal
stability, electrical properties, moldability, color and finish.
A promising product line for the future is Polybatch(R) Automotive
Color Concentrates. When processors use these concentrates, they are able to
color an entire batch of resin by blending it with a small amount of colored
pellets. This is economically beneficial in both cost savings and inventory
reduction. Overall, with pre-colored materials, color blends, and color
concentrates, A. Schulman is able to offer automotive customers an extensive
product line that few competitors can match.
APPLIANCE/HOUSEHOLD CONSUMER GOODS. From toasters to toothbrushes, A. Schulman's
proprietary plastic compounds meet the
THE HANDLES OF THESE QUALITY
TOOTHBRUSHES INCLUDE AN INSERT
MOLDED WITH A. SCHULMAN'S
POLYFORT(R) REINFORCED
POLYPROPYLENE. POLYFORT(R) WAS
CHOSEN FOR ITS COLOR,
APPEARANCE, FINISH, STAIN
RESISTANCE, STIFFNESS AND
SANITARY PROPERTIES.
12
<PAGE> 15
[PHOTO TOOTHBRUSHES PLACED ON A MARBLE SURFACE.]
<PAGE> 16
demands of the most challenging consumer applications.
There has been expanded demand for A. Schulman products in the North
American and European appliance industry. The Company's global network and
shared technology benefit customers worldwide. Multinational manufacturers have
confidence in A. Schulman's ability to supply consistent, quality materials
anywhere in the world. As appliances and consumer goods become more
sophisticated, demand for quality high-performance plastics continues to
increase.
OTHER MARKETS. A. Schulman also provides a wide array of products to numerous
other important markets. Examples include construction, electronics, leisure,
recreational, toys and industrial products.
- - A PROMISING FUTURE
A fundamental philosophy of A. Schulman has always been a strong commitment to
the customer. This is paramount both now and in the future. Every facet of the
Company's worldwide organization is focused on meeting or exceeding the product,
performance and delivery expectations of customers around the globe.
With a strong international presence, solid market diversification, and
a relentless commitment to quality, A. Schulman will continue to be a plastics
industry leader into the next century and beyond.
THE HULLS OF THIS TRIMARAN
SAILBOAT ARE MOLDED FROM A
CUSTOM COLOR-MATCHED A.
SCHULMAN ENGINEERED
POLYETHYLENE COMPOUND. THIS
COMPOUND WILL ENSURE
DURABILITY AND VIVID COLORS
THROUGH MANY SEASONS OF SUN
AND SURF.
14
<PAGE> 17
[PHOTO OF A YELLOW TRIMARAN WITH GREEN SAIL, IN WATER.]
<PAGE> 18
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended August 31,
-------------- -------------------------------
1996 1995 1994
<S> <C> <C> <C>
NET SALES .................................. $ 976,694,000 $1,027,458,000 $ 748,778,000
INTEREST AND OTHER INCOME .................. 6,075,000 7,099,000 7,456,000
-------------- -------------- --------------
TOTAL ...................................... 982,769,000 1,034,557,000 756,234,000
-------------- -------------- --------------
COSTS AND EXPENSES:
Cost of sales .............................. 826,076,000 863,409,000 617,855,000
Selling, general and administrative expenses 81,118,000 75,551,000 66,201,000
Interest expense ........................... 4,192,000 5,250,000 1,222,000
Foreign currency transaction losses ........ 57,000 20,000 90,000
Minority interest .......................... 354,000 515,000 426,000
-------------- -------------- --------------
911,797,000 944,745,000 685,794,000
-------------- -------------- --------------
INCOME BEFORE TAXES ........................ 70,972,000 89,812,000 70,440,000
PROVISION FOR U.S. AND FOREIGN INCOME TAXES 28,795,000 36,194,000 25,869,000
-------------- -------------- --------------
NET INCOME ................................. $ 42,177,000 $ 53,618,000 $ 44,571,000
============== ============== ==============
EARNINGS PER SHARE OF COMMON STOCK ......... $ 1.12 $ 1.43 $ 1.19
============== ===============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 19
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, 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)
Net income for 1996 ................... 42,177,000
Cash dividends paid or accrued:
Preferred stock, $5 per share ....... (54,000)
Common stock, $.37 per share ........ (13,931,000)
Foreign currency translation adjustment (5,117,000)
Stock options exercised ............... 287,000 5,369,000
Grant of restricted stock ............. 1,036,000 (1,036,000)
Amortization of restricted stock ...... 386,000
------------ ------------ ------------ ------------ ------------
Balance at August 31, 1996 ............ $ 38,309,000 $ 44,474,000 $326,171,000 $ 36,862,000 ($ 1,714,000)
============ ============ ============ ============ ============
</TABLE>
17
<PAGE> 20
A. Schulman, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31, August 31,
1996 1995
----------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................................... $113,555,000 $ 83,997,000
Short-term investments, at cost ............................................... 36,925,000 60,275,000
Accounts receivable, less allowance for doubtful accounts of $5,903,000 in 1996
and $4,859,000 in 1995 ...................................................... 152,342,000 143,183,000
Inventories, average cost or market, whichever is lower ....................... 150,363,000 190,946,000
Prepaids, including tax effect of temporary differences ....................... 13,618,000 12,705,000
----------- -----------
TOTAL CURRENT ASSETS ........................................................ 466,803,000 491,106,000
----------- -----------
OTHER ASSETS:
Cash surrender value of life insurance ........................................ 411,000 377,000
Deferred charges, etc., including tax effect of temporary differences ......... 17,128,000 14,506,000
----------- -----------
17,539,000 14,883,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and improvements ......................................................... 9,312,000 8,909,000
Buildings and leasehold improvements .......................................... 70,907,000 62,362,000
Machinery and equipment ....................................................... 193,190,000 173,325,000
Furniture and fixtures ........................................................ 20,446,000 19,054,000
Construction in progress ...................................................... 1,969,000 19,471,000
----------- -----------
295,824,000 283,121,000
Accumulated depreciation and investment grants of $551,000 in 1996
and $415,000 in 1995 ........................................................ 156,788,000 141,944,000
----------- -----------
139,036,000 141,177,000
----------- -----------
$623,378,000 $647,166,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 21
<TABLE>
<CAPTION>
August 31, August 31,
1996 1995
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable ............................................................ $ 7,000,000 $ 17,800,000
Current portion of long-term debt ........................................ 41,000 39,000
Accounts payable ......................................................... 51,816,000 60,204,000
U.S. and foreign income taxes payable .................................... 10,898,000 15,009,000
Accrued payrolls, taxes and related benefits ............................. 17,921,000 16,820,000
Other accrued liabilities ................................................ 18,281,000 18,194,000
------------- -------------
TOTAL CURRENT LIABILITIES .............................................. 105,957,000 128,066,000
------------- -------------
LONG-TERM DEBT ........................................................... 40,054,000 75,096,000
OTHER LONG-TERM LIABILITIES .............................................. 33,642,000 31,230,000
DEFERRED INCOME TAXES .................................................... 8,677,000 5,973,000
MINORITY INTEREST ........................................................ 1,938,000 1,583,000
STOCKHOLDERS' EQUITY:
Preferred stock, 5% cumulative, $100 par value, authorized,
issued and outstanding-10,705 shares .................................. 1,071,000 1,071,000
Special stock, 1,000,000 shares authorized, none outstanding ............. -- --
Common stock, $1 par value
Authorized-75,000,000 shares
Issued-38,308,805 shares in 1996 and 38,022,242 shares in 1995 ........ 38,309,000 38,022,000
Other capital ............................................................ 44,474,000 38,069,000
Cumulative foreign currency translation adjustment ....................... 36,862,000 41,979,000
Retained earnings ........................................................ 326,171,000 297,979,000
Treasury stock, at cost, 502,674 shares in 1996 and 442,674 shares in 1995 (12,063,000) (10,838,000)
Unearned stock grant compensation ........................................ (1,714,000) (1,064,000)
------------- -------------
COMMON STOCKHOLDERS' EQUITY ............................................... 432,039,000 404,147,000
------------- -------------
TOTAL STOCKHOLDERS' EQUITY .............................................. 433,110,000 405,218,000
------------- -------------
$ 623,378,000 $ 647,166,000
============= =============
</TABLE>
19
<PAGE> 22
A. Schulman, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31,
----------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Provided from (used in) operating activities:
Net income ................................................... $ 42,177,000 $ 53,618,000 $ 44,571,000
Items not requiring the current use of cash:
Depreciation .............................................. 18,130,000 16,834,000 14,728,000
Non-current deferred taxes ................................ 2,410,000 1,870,000 1,196,000
Foreign pension and other deferred compensation ........... 2,654,000 2,871,000 2,252,000
Postretirement benefit obligation ......................... 820,000 713,000 1,088,000
Changes in working capital:
Accounts receivable ....................................... (10,190,000) (6,757,000) (28,312,000)
Inventories ............................................... 39,603,000 (49,110,000) (37,437,000)
Prepaids .................................................. (1,126,000) (775,000) (919,000)
Accounts payable .......................................... (8,015,000) 1,867,000 14,104,000
Income taxes .............................................. (4,058,000) 4,657,000 908,000
Accrued payrolls and other accrued liabilities ............ 1,381,000 1,610,000 664,000
Changes in other assets and other long-term liabilities ...... (161,000) (2,265,000) (3,582,000)
------------- ------------- -------------
Net cash provided from operating activities ............. 83,625,000 25,133,000 9,261,000
------------- ------------- -------------
Provided from (used in) investing activities:
Expenditures for property, plant and equipment ............... (18,542,000) (58,533,000) (25,302,000)
Disposals of property, plant and equipment ................... 529,000 371,000 232,000
Purchases of short-term investments .......................... (173,573,000) (112,044,000) (67,729,000)
Proceeds from sales of short-term investments ................ 196,446,000 117,776,000 53,546,000
------------- ------------- -------------
Net cash provided from (used in) investing activities ... 4,860,000 (52,430,000) (39,253,000)
------------- ------------- -------------
Provided from (used in) financing activities:
Cash dividends paid .......................................... (13,958,000) (12,442,000) (10,774,000)
Increase (decrease) of notes payable ......................... (10,800,000) 5,500,000 12,300,000
Reduction of long-term debt .................................. (35,039,000) (37,000) (32,000)
Increase of long-term debt ................................... -- 52,000,000 13,000,000
Exercise of stock options .................................... 5,656,000 2,376,000 1,409,000
Investment grants from foreign countries ..................... 255,000 -- 241,000
Increase (decrease) in minority interest, net of distributions 355,000 (86,000) 6,000
Purchase of treasury stock ................................... (1,225,000) -- --
------------- ------------- -------------
Net cash provided (used in) financing activities ........ (54,756,000) 47,311,000 16,150,000
------------- ------------- -------------
Effect of exchange rate changes on cash ........................ (4,171,000) 3,921,000 4,214,000
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents ........... 29,558,000 23,935,000 (9,628,000)
Cash and cash equivalents at beginning of year ................. 83,997,000 60,062,000 69,690,000
------------- ------------- -------------
Cash and cash equivalents at end of year ....................... $ 113,555,000 $ 83,997,000 $ 60,062,000
============= ==============================
Cash paid during the year for:
Interest ..................................................... $ 4,795,000 $ 3,846,000 $ 1,006,000
Income Taxes ................................................. $ 32,227,000 $ 31,093,000 $ 25,650,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 23
A. Schulman, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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 Chemical MKV
Co. 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 $102,040,000
at August 31,1996 and $56,198,000 at August 31, 1995. 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. The recorded amount of these investments approximates fair
value.
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 10 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 $8,443,000 is being amortized over 15 to 25 years using the
straight-line method and is included in deferred charges.
INCOME TAXES
Income taxes are recognized during the year in which transactions enter into the
determination of financial statement income.
Accordingly, deferred taxes are provided for temporary differences between the
book and tax bases of assets and liabilities.
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.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
21
<PAGE> 24
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 is depreciated over their estimated useful life and the investment
grants are amortized against the related depreciation charges. The amortization
of these grants amounted to $119,000 in 1996, $254,000 in 1995 and $187,000 in
1994.
NOTE 3 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
August 31,
1996 1995
----------- -----------
A. Schulman, Inc.:
Revolving credit loan, 5.81% in 1996 .....
and 6.51% in 1995 ....................... $40,000,000 $75,000,000
Notes payable of foreign subsidiary:
5% through September 1998 ................ 95,000 135,000
----------- -----------
40,095,000 75,135,000
Less current portion ......................... 41,000 39,000
----------- -----------
$40,054,000 $75,096,000
=========== ===========
The revolving credit agreement, as amended on February 26, 1996, provides for
borrowings of up to $75,000,000 on a revolving credit basis through February 28,
2001. 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 $139,000,000 of retained earnings was available for the payment of
cash dividends at August 31, 1996.
The 5% note for $95,000 is a French Franc obligation which is repayable in
quarterly installments.
Annual maturities of long-term debt for the five years subsequent to August
31,1996 are $41,000 in 1997, $43,000 in 1998, $11,000 in 1999 and $40,000,000 in
2001.
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 $7,000,000 with a weighted average interest rate of 5.81% at August 31, 1996
and $17,800,000 with a weighted average interest rate of 6.30% at August 31,
1995 were outstanding under these domestic lines.
The Company has $35,806,000 of unsecured short-term foreign lines of credit
available to its subsidiaries at August 31, 1996. No foreign short-term
borrowings were outstanding at August 31, 1996 or 1995.
NOTE 4 - FOREIGN CURRENCY FORWARD CONTRACTS
The Company enters into forward foreign exchange contracts as a hedge against
amounts due or payable in foreign currencies. These contracts limit the
Company's exposure to 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, 1996 and August 31, 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------ -------------------------
Contract Fair Contract Fair
Amount Value Amount Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Buy Currency........ $ 390,000 $ 391,000 $ 4,002,000 $ 4,052,000
Sell Currency....... $49,960,000 $50,131,000 $44,221,000 $44,678,000
</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.
22
<PAGE> 25
NOTE 5 - INCOME TAXES
Income before taxes is as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Domestic ................ $ 4,876,000 $17,231,000 $19,012,000
Foreign ................. 66,096,000 72,581,000 51,428,000
----------- ----------- -----------
$70,972,000 $89,812,000 $70,440,000
=========== =========== ===========
</TABLE>
The provisions for U.S. and foreign income taxes consist of the following:
<TABLE>
<CAPTION>
Year Ended August 31,
1996 1995 1994
----------- ----------- -----------
Current taxes:
<S> <C> <C> <C>
U.S. ................ $ 1,764,000 $ 4,244,000 $ 6,700,000
Foreign ............. 26,946,000 29,252,000 20,290,000
----------- ----------- -----------
28,710,000 33,496,000 26,990,000
----------- ----------- -----------
Deferred taxes:
U.S. ................ 72,000 1,868,000 (715,000)
Foreign ............. 13,000 830,000 (406,000)
----------- ----------- -----------
85,000 2,698,000 (1,121,000)
----------- ----------- -----------
$28,795,000 $36,194,000 $25,869,000
=========== =========== ===========
</TABLE>
A reconciliation of the statutory U.S. federal income tax rate with the
effective tax rates of 40.6% in 1996, 40.3% in 1995 and 36.7% in 1994 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
% of % of % of
Pretax Pretax Pretax
(in thousands) Amount Income Amount Income Amount Income
--------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S.
tax rate ......... $24,840 35.0% $31,434 35.0% $24,654 35.0%
Amount of
foreign
income taxes
in excess of
U.S. taxes at
statutory
rate ............. 4,208 5.9 4,326 4.8 700 1.0
Other, net ......... (253) (.3) 434 .5 515 .7
-------------- ---------------------------------
$28,795 40.6% $36,194 40.3% $25,869 36.7%
=============== =================================
</TABLE>
Deferred tax assets and (liabilities) consist of the following at August 31,
1996 and August 31, 1995:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
--------- ---------
<S> <C> <C>
Pensions ........................................ $ 2,426 $ 2,068
Inventory reserves .............................. 1,959 1,274
Bad debt reserves ............................... 1,498 871
Accruals ........................................ 3,099 2,600
Dividend to be received ......................... 578 785
Postretirement benefits other than pensions ..... 3,945 3,659
Foreign tax credit carryforwards ................ 3,155 4,820
Other ........................................... 2,486 1,878
-------- --------
Gross deferred tax assets ....................... 19,146 17,955
Valuation allowance ............................. (3,155) (4,820)
-------- --------
Total deferred tax assets ....................... 15,991 13,135
-------- --------
Gross deferred tax liabilities - depreciation ... (13,861) (10,839)
-------- --------
$ 2,130 $ 2,296
======== ========
</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 1997 to 2001.
The tax effect of temporary differences included in prepaids were $9,432,000
and $7,216,000 at August 31, 1996 and 1995 respectively. Deferred charges also
included $1,375,000 and $1,052,000 from the tax effect of temporary differences
at August 31, 1996 and 1995 respectively.
At August 31, 1996, no taxes have been provided on the undistributed earnings
of certain foreign subsidiaries amounting to $232,281,000 because the Company
intends to reinvest these earnings.
NOTE 6 -- RETIREMENT PLANS
The total expense for all retirement plans was $6,009,000 in 1996, $5,503,000 in
1995 and $4,510,000 in 1994.
The components of pension expense are as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost-benefits earned
during the period ............... $ 1,402,000 $ 1,243,000 $ 1,060,000
Interest accrued on projected
benefit obligation .............. 1,783,000 1,520,000 1,319,000
Actual return on assets ......... (414,000) (184,000) (325,000)
Net amortization and deferral ... 242,000 67,000 254,000
----------- ----------- -----------
3,013,000 2,646,000 2,308,000
Defined contribution plans ........ 2,996,000 2,857,000 2,202,000
----------- ----------- -----------
Net periodic pension cost ......... $ 6,009,000 $ 5,503,000 $ 4,510,000
=========== =========== ===========
</TABLE>
23
<PAGE> 26
The following table presents the funded status of the defined benefit plans
as of August 31, 1996 and August 31, 1995:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
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 ......................................... $ 3,289,000 $ 15,391,000 $ 2,150,000 $ 15,280,000
Non-vested benefit obligation ..................................... -- 2,317,000 3,000 2,349,000
------------ ------------ ----------- ------------
Accumulated benefit obligation .................................... $ 3,289,000 $ 17,708,000 $ 2,153,000 $ 17,629,000
============ ============ =========== ============
Projected benefit obligation ........................................ $ 4,472,000 $ 20,067,000 $ 2,600,000 $ 21,049,000
Plan assets at fair value ........................................... 3,751,000 1,038,000 2,605,000 886,000
------------ ------------ ----------- ------------
Projected benefit obligation less than (in excess of) plan assets ... (721,000) (19,029,000) 5,000 (20,163,000)
Unrecognized net liability (asset) at date of adoption of SFAS No. 87 461,000 1,772,000 (33,000) 1,998,000
Unrecognized prior service cost ..................................... 51,000 431,000 56,000 464,000
Unrecognized net loss (gain) ........................................ 182,000 (2,530,000) 99,000 79,000
Adjustment required to recognize minimum liability .................. -- (712,000) -- (984,000)
------------ ------------ ----------- ------------
Prepaid (accrued) pension cost ...................................... $ (27,000) $(20,068,000) $ 127,000 $(18,606,000)
============ ============ =========== ============
Significant Assumptions: U.S.-1996 Foreign-1996 U.S.-1995 Foreign-1995
- ------------------------ ------------ ------------ ----------- ------------
Discount rate ....................................................... 7.5% 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 ............................. -- 3.0%-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, $1,825,000 is vested and $925,000 will vest over the next five to
seven years. However, vesting and payments may be accelerated under certain
conditions. The Company has provided $131,000 in 1996, $182,000 in 1995 and
$206,000 in 1994 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,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during
the period ..................... $ 550,000 $ 509,000 $ 666,000
Interest cost on projected benefit
obligation ..................... 572,000 558,000 653,000
Net amortization ................. (135,000) (146,000) --
----------- ----------- -----------
$ 987,000 $ 921,000 $ 1,319,000
=========== =========== ===========
</TABLE>
The Company's postretirement health care and life insurance plans are not
funded. The status of the plans at August 31, 1996 and August 31, 1995 is as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees .............................. $ 2,247,000 $ 2,258,000
Fully eligible active plan participants 1,640,000 1,483,000
Other active plan participants ........ 4,329,000 4,258,000
----------- -----------
8,216,000 7,999,000
Unrecognized net gain ................... 1,149,000 411,000
Unrecognized prior service cost ......... 1,908,000 2,043,000
----------- -----------
Net postretirement benefit liability .... $11,273,000 $10,453,000
=========== ===========
</TABLE>
The net postretirement benefit liability is included in other long-term
liabilities.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.5% in 1996, 11% in 1995 and 12.5% in
1994, gradually declining to 6% in 2005 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
$1,074,000 at August 31, 1996 and the postretirement benefit cost by $196,000
for the year then ended.
The discount rate used in determining the accumulated postretirement benefit
obligation at August 31 was 7.5% in 1996 and 7.25% in 1995.
24
<PAGE> 27
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, 1996, there were 1,061,006 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, 1996, there were 103,125 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,
------------------------------------------------
1996 1995
--------------------- -----------------------
Shares Option Shares Option
Under Price Under Price
Option Per Share Option Per Share
------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year .......................... 919,559 $20-28 907,876 $20-27
Granted during the year ............. 204,025 23 169,900 26-28
Exercised during the year ........... (286,563) 20 (120,199) 20-26
Cancelled during the year ........... (68,363) 20-26 (38,018) 20-26
------- -------
Outstanding at end of year .......... 768,658 $23-26 919,559 $20-28
======= =======
</TABLE>
At August 31, 1996, options under the 1991 Plan, were exercisable as
follows: 104,563 shares at $26, 113,978 shares at $24.60, 65,125 shares at
$26.50 and 40,962 shares at $25.50. Under the 1992 Plan, 6,781 shares were
exercisable at prices ranging from $22.60 to $28.25. Under the 1991 Plan, 35,125
shares of restricted stock were granted on August 18, 1992, 34,000 shares were
granted on August 19, 1994, and 43,1 50 shares were granted on July 1 1, 1996.
The fair market value on the date of grant in 1992 was $26 per share, 1994 was
$26.25 per share and in 1996 was $23 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 AND STOCKHOLDER RIGHTS PLAN
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.
In January 1996, the Company adopted a Shareholder Rights Plan, and reserved
100,000 shares of Special Stock for use under such Plan. Under this Plan, one
Right shall be attached to each share of Common Stock of the Company. Initially,
the Rights are not exercisable and automatically trade with the Common Stock.
However, 10 days after a person or group acquires 15% or more of the Company's
Common Stock, or 10 business days after a person or group commences a tender or
exchange offer that would result in such person or group owning 15% or more of
the outstanding shares of Common Stock of the Company (even if no purchases
actually occur), whichever is earlier, the Rights will become exercisable.
When the Rights first become exercisable, each Right will entitle the holder
thereof to buy from the Company one share of Special Stock for $85.00 (subject
to adjustment thereafter). However, if any person or entity acquires 15% or more
of the Company's Common Stock, each Right not owned by a 15%-or-more
stockholder would become exercisable for a certain number of shares of Common
Stock of the Company in lieu of one share of Special Stock. The number of shares
of Common Stock would be that having at that time, a market value of two times
the then current exercise price of the Right. If the Company is involved in a
merger or other business combination with or into another person or entity in
which the Company's Common Stock is changed into or exchanged for common stock
of such other person or entity, or if the Company sells 50% or more of its
assets or earning power to another person or entity, at any time after the
Rights become exercisable, each Right will entitle the holder thereof to buy
such number of shares of common stock of such other person or entity as have a
market value of twice the then current exercise price of each Right.
The Company may redeem the Rights at a price of $.0l per Right at any time
prior to the 10th business day after public announcement of the acquisition by
any person or entity of 15% or more of the Company's Common Stock. The Rights
will expire on January 25, 2006 unless earlier redeemed by the Company. At no
time will the Rights have any voting power.
25
<PAGE> 28
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.
A summary of operating information by geographic area for the three years
ended August 31, 1996 is as follows:
<TABLE>
<CAPTION>
Adjustments
North and
(In thousands) America Europe Eliminations Consolidated
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
AUGUST 31, 1996
Sales to unaffiliated
customers ....................... $ 415,322 $ 561,372 -- $ 976,694
Inter-geographic
sales ........................... 2,440 334 $ (2,774) --
----------- ----------- -------- -----------
Total sales ................... $ 417,762 $ 561,706 $ (2,774) $ 976,694
=========== =========== ======== ===========
Operating income .................. $ 26,511 $ 55,823 $ -- $ 82,334
=========== =========== ========
Interest expense .................. (4,192)
Corporate expense less revenues ... (7,113)
Foreign currency transaction losses (57)
-----------
Income before taxes ............... $ 70,972
===========
Identifiable assets ............... $ 261,942 $ 361,302 $ (573) $ 622,671
=========== =========== ========
Corporate assets .................. 702
-----------
Total assets ...................... $ 623,378
===========
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
===========
</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 $2,847,000 in 1996, $2,760,000 in 1995 and $2,606,000
in 1994. 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
- --------------------------------------------
<C> <C>
1997 $1,849,000
1998 1,346,000
1999 1,219,000
2000 753,000
2001 376,000
Later years 16,000
----------
$5,559,000
==========
</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> 29
NOTE 13 -- QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Year ended
-------------------------------------------- -----------
Nov. 30, Feb. 29, May 31, Aug. 31, Aug. 31,
1995 1996 1996 1996 1996
-------------------------------------------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ........ $249,541 $233,625 $254,432 $239,096 $ 976,694
Gross profit ..... 36,055 33,543 40,742 40,278 150,618
Net income ....... 8,474 7,612 12,104 13,987 42,177
Net income per
share of
common stock ... $.23 $.20 $.32 $.37 $1.12
</TABLE>
<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>
A. Schulman, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [logo]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF A. SCHULMAN, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of A. Schulman, Inc.
and its subsidiaries at August 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996, 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.
/s/ Price Waterhouse LLP
Cleveland, Ohio
October 14, 1996
27
<PAGE> 30
A. Schulman, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1996
Net sales were $976.7 million in 1996, a decrease of 4.9% over 1995 sales of
$1,027.5 million. A comparison of net sales is as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== =====================
Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Manufacturing $598,297 $ 593,478 $ 4,819
Merchant 201,795 230,330 (28,535)
Distribution 176,602 203,650 (27,048)
-------- ---------- --------
$976,694 $1,027,458 $(50,764)
======== ========== ========
</TABLE>
A major factor contributing to the decline in sales was lower plastic resin
prices.
The translation effect from the stronger U.S. dollar reduced 1996 sales by
$3.6 million.
Worldwide tonnage was 3% higher than in 1995. North American tonnage
increased 9% but was partially offset by a decline from European merchant
activities. One of the major reasons for the increase in 1996 North American
tonnage was the acquisition of Texas Polymer Services on February 28, 1995.
Gross margins on sales were 15.4% in 1996 compared with 16% in 1995. The
primary reasons for the lower margins were the decline in plastic resin prices
early in fiscal 1996 and a reduction in capacity utilization, mainly in North
America. A comparison of gross profit is as follows:
<TABLE>
<CAPTION>
(In Thousands)
======== =====================
Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Manufacturing $102,557 $106,690 $ (4,133)
Merchant 22,331 31,929 (9,598)
Distribution 25,730 25,430 300
-------- -------- --------
$150,618 $164,049 $(13,431)
======== ======== ========
</TABLE>
Selling, general and administrative expenses increased $5.6 million in 1996
due to the acquisition of Texas Polymer Services on February 28, 1995, higher
compensation, increased provisions for bad debts and additional costs necessary
to support business opportunities throughout the world.
Interest expense decreased approximately $1.1 million in 1996 due to lower
levels of borrowing.
Foreign currency transaction losses were primarily due to changes in the
value of currencies within the European Monetary System as well as the Mexican
peso and Canadian dollar.
Minority interest represents a 30% equity position of MKV America Inc., an
affiliate of Mitsubishi Chemical MKV Company, in a partnership with the Company.
Earnings of the partnership declined during 1996 due to lower profit margins.
Other income declined because of reduced interest income from temporary
investments, mainly because of lower European interest rates.
The effective tax rate in 1996 was 40.6% compared with 40.3% in 1995. Lower
earnings in Germany had the effect of decreasing the 1996 effective tax rate.
However, this decrease was offset by greater taxes incurred due to the
repatriation of earnings from a subsidiary.
The strengthening in the value of the U.S. dollar decreased net income by
approximately $217,000 or $.01 per share in 1996. The translation effect from
currency fluctuations is not covered with contracts, options or other devices.
Generally, forward hedging contracts are used to mitigate exposure to currency
transactions. The Company does not utilize any other types of derivative
instruments.
Earnings in Europe decreased approximately 11% or $4.5 million in 1996. The
decline was primarily due to lower plastic resin prices and weak economic
conditions, especially in Germany.
North American earnings decreased approximately $7 million in 1996.
Earnings were adversely affected by lower selling prices and profit margins.
Profit margins declined in 1996 because of less than planned utilization of new
capacities as well as a concerted effort by customers to reduce inventories.
Currently, plastic resin pricing has stabilized and it appears that the
European economies, including Germany, are showing some signs of recovery. These
factors should benefit the Company in fiscal 1997.
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 effect 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>
28
<PAGE> 31
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 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.
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 there was a reduction in the
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.
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.
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
strengthening of the U.S. dollar during the fiscal year decreased this account
by approximately $5.1 million during 1996.
Working capital and the current ratio are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------- -------------------
1996 1995 1994
<S> <C> <C> <C>
Working capital ............................... $360,846 $363,040 $291,008
Current ratio ................................. 4.4:1 3.8:1 3.7:1
</TABLE>
The following represent key measurements of the capital structure and
profitability of the Company:
<TABLE>
<CAPTION>
(Dollars in Thousands
except per share data)
-------- --------------------
1996 1995 1994
<S> <C> <C> <C>
Net worth .................................. $433,110 $405,218 $345,919
Book value per share ....................... $11.43 $10.75 $9.21
Ratio of long-term liabilities to capital .. 14.5% 20.8% 12.8%
Return on average net worth ................ 10.1% 14.3% 13.9%
Net income as a percent of sales ........... 4.3% 5.2% 6.0%
</TABLE>
The ratio of long-term liabilities to capital is computed by dividing
long-term debt and other long-term liabilities by the sum of total stockholders'
equity plus long-term debt and other long-term liabilities. This ratio decreased
in 1996 due to the $35 million reduction in the outstanding debt under the
revolving credit agreement.
The return on average net worth is computed by dividing net income by the
average of the total stockholders' equity during the year. This ratio decreased
in 1996 primarily due to a lower level of earnings and a higher amount of
equity.
In February 1996, the Company amended its $75 million revolving credit
agreement to extend the term one additional year. The termination date of the
credit agreement is now February 28, 2001.
Short-term lines of credit are maintained with various domestic and foreign
banks. The unused commitment under these lines was $71.3 million at August 31,
1996.
During November 1995, the Company repurchased 60,000 shares of its common
stock for $1,225,000. The Board of Directors of the Company has authorized the
repurchase of up to 3,940,000 additional shares. The timing of any purchases
will depend on the price of the stock and the value it provides to the Company.
The Company's unfunded pension liability is approximately $19.8 million at
August 31, 1996. 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 payments 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.
The Company plans to adopt Statement of Financial Accounting Standards No.
121 (SFAS121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," in fiscal 1997. The Company does not
expect adoption of SFAS121 to have a material impact on the Company's results of
operations or financial position.
The Company also plans to adopt Statement of Financial Accounting Standards
No. 123 (SFAS123), "Accounting for Stock-Based Compensation," in fiscal 1997.
This statement encourages, but does not require the recording of compensation
cost for stock-based employee compensation plans at fair value. The Company
plans to continue to account for stock compensation in accordance with the
provisions of the Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". Accordingly, the adoption of SFAS123 will not have a
material impact on the Company's results of operations or financial position.
29
<PAGE> 32
A. Schulman, Inc.
TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended August 31,
=========== ========================================
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Net sales ..................................................... $ 976,694 $ 1,027,458 $ 748,778 $ 685,112
Interest and other income ..................................... 6,075 7,099 7,456 8,103
----------- ----------- ----------- ------------
982,769 1,034,557 756,234 693,215
----------- ----------- ----------- ------------
Cost of sales ................................................. 826,076 863,409 617,855 565,284
Other costs, expenses, etc .................................... 85,721 81,336 67,939 65,480
----------- ----------- ----------- ------------
911,797 944,745 685,794 630,764
----------- ----------- ----------- ------------
Income before taxes and cumulative effect of accounting changes 70,972 89,812 70,440 62,451
Provision for U.S. and foreign income taxes ................... 28,795 36,194 25,869 23,544
----------- ----------- ----------- ------------
Income before cumulative effect of accounting changes ......... 42,177 53,618 44,571 38,907
Cumulative effect of accounting changes (1) ................... -- -- -- (2,169)
----------- ----------- ----------- ------------
Net income .................................................... $ 42,177 $ 53,618 $ 44,571 $ 36,738
=========== ========================================
Total assets .................................................. $ 623,378 $ 647,166 $ 510,419 $ 407,865
Long-term debt ................................................ $ 40,054 $ 75,096 $ 23,126 $ 10,149
Total stockholders' equity .................................... $ 433,110 $ 405,218 $ 345,919 $ 294,209
Average number of common shares outstanding,
net of treasury shares ...................................... 37,584,561 37,544,408 37,438,118 37,325,547
Per share of common stock:
Net income:
Before cumulative effect of accounting changes ............ $ 1.12 $ 1.43 $ 1.19 $ 1.04
Cumulative effect of accounting changes (1) ............... -- -- -- ($ .06)
Net income ................................................ $ 1.12 $ 1.43 $ 1.19 $ .98
Cash dividends .............................................. $ .37 $ .33 $ .286 $ .248
Stockholders' equity ........................................ $ 11.43 $ 10.75 $ 9.21 $ 7.84
<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,
================= =================================================================================
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES
Manufacturing ............. $598,297 61% $ 593,478 58% $449,085 60% $408,763 60% $426,846 58%
Merchant Activities ....... 201,795 21% 230,330 22% 149,798 20% 136,116 20% 147,587 20%
Distribution .............. 176,602 18% 203,650 20% 149,895 20% 140,233 20% 157,737 22%
----------------- ---------------------------------------------------------------------------------
Total ..................... $976,694 100% $1,027,458 100% $748,778 100% $685,112 100% $732,170 100%
================= =================================================================================
GROSS PROFIT
Manufacturing ............. $102,557 68% $ 106,690 65% $ 88,609 68% $ 78,548 66% $ 87,476 66%
Merchant Activities ....... 22,331 15% 31,929 19% 22,582 17% 21,495 18% 23,399 18%
Distribution .............. 25,730 17% 25,430 16% 19,732 15% 19,784 16% 22,286 16%
----------------- ---------------------------------------------------------------------------------
Total ..................... $150,618 100% $ 164,049 100% $130,923 100% $119,827 100% $133,161 100%
================= =================================================================================
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
Year Ended August 31,
===================================================================================
1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C>
Net sales ..................................... $ 732,170 $ 736,007 $ 678,644 $ 624,410 $ 597,696 $ 463,824
Interest and other income ..................... 6,778 4,083 2,409 1,675 1,211 1,245
----------- ----------- ----------- ----------- ----------- -----------
738,948 740,090 681,053 626,085 598,907 465,069
----------- ----------- ----------- ----------- ----------- -----------
Cost of sales ................................. 599,009 614,001 566,872 528,296 505,907 390,247
Other costs, expenses, etc .................... 66,838 55,876 50,644 43,000 42,567 37,063
----------- ----------- ----------- ----------- ----------- -----------
665,847 669,877 617,516 571,296 548,474 427,310
----------- ----------- ----------- ----------- ----------- -----------
Income before taxes and cumulative
effect of accounting changes ................ 73,101 70,213 63,537 54,789 50,433 37,759
Provision for U.S. and foreign income taxes ... 29,341 27,864 27,441 23,977 22,787 17,946
----------- ----------- ----------- ----------- ----------- -----------
Income before cumulative effect of
accounting changes .......................... 43,760 42,349 36,096 30,812 27,646 19,813
Cumulative effect of accounting changes (1) ... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income .................................... $ 43,760 $ 42,349 (2) $ 36,096 $ 30,812 $ 27,646 $ 19,813
===================================================================================
Total assets .................................. $ 427,966 $ 344,273 $ 328,210 $ 257,687 $ 240,475 $ 214,698
Long-term debt ................................ $ 10,108 $ 9,000 $ 7,000 $ 10,000 $ 9,570 $ 11,230
Total stockholders' equity .................... $ 307,576 $ 232,567 $ 223,973 $ 166,640 $ 145,183 $ 125,803
Average number of common shares outstanding,
net of treasury shares ...................... 37,024,548 36,963,010 37,699,043 37,674,290 37,665,819 37,665,819
Per share of common stock:
Net income:
Before cumulative effect of
accounting changes ...................... $ 1.18 $ 1.14 $ .96 $ .82 $ .73 $ .52
Cumulative effect of accounting changes (1) -- -- -- -- -- --
Net income ................................ $ 1.18 $ 1.14 (2) $ .96 $ .82 $ .73 $ .52
Cash dividends .............................. $ .216 $ .186 $ .153 $ .135 $ .132 (3) $ .086
Stockholders' equity ........................ $ 8.26 $ 6.26 $ 5.91 $ 4.39 $ 3.82 $ 3.31
</TABLE>
CORPORATE HEADQUARTERS
3550 West Market Street
Akron, Ohio 44333
(330) 666-3751
ANNUAL MEETING
of Stockholders will be held on
Thursday, December 5, 1996,
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
KeyCorp
Shareholder Services, Inc.
P.O. Box 6477
Cleveland, Ohio 44101
Any questions regarding shareholder
records should be directed to
KeyCorp Shareholder Services, Inc.
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> 34
A. SCHULMAN, INC.
THE BOARD OF DIRECTORS
ROBERT A. STEFANKO
Chairman
TERRY L. HAINES
President and Chief Executive Officer
JAMES H. BERICK
Managing Partner,
Berick, Pearlman & Mills
DR. PEGGY GORDON ELLIOTT
Senior Fellow,
National Center for Higher Education
GORDON E. HEFFERN
Former Chairman and Director,
Society Corporation and
Society National Bank
WILLARD R. HOLLAND
Chairman and Chief Executive Officer,
Ohio Edison Company
JAMES A. KARMAN
President,
RPM, Inc.
LARRY A. KUSHKIN
Executive Vice President --
International Automotive Operations
FRANZ A. LOEHR
Former Managing Director -- Germany and
Associate General Manager -- Europe
JAMES S. MARLEN
Chairman, President and
Chief Executive Officer,
Ameron, Inc.
ALAN L. OCKENE
Former President and Chief Executive Officer,
General Tire, Inc.
DR. PAUL C. ROBERTS
Chairman, The Institute for
Political Economy
Distinguished Fellow, Cato Institute
RENE C. ROMBOUTS
General Manager-Europe
ROBERT G. WALLACE
Former Executive
Vice President and Director,
Phillips Petroleum Company
EXECUTIVE OFFICERS
TERRY L. HAINES
President and Chief Executive Officer
ROBERT A. STEFANKO
Chairman and
Chief Financial Officer
LARRY A. KUSHKIN
Executive Vice President --
International Automotive Operations
ALAIN C. ADAM
Vice President -- Automotive Marketing
LEONARD E. EMGE
Vice President -- Manufacturing
BRIAN R. COLBOW
Treasurer
JAMES H. BERICK
Secretary
EUROPEAN OPERATIONS
RENE C. ROMBOUTS
General Manager -- Europe
GERALD M. WEINBERGER
Managing Director -- Germany
OTTO H. BRUDER
Managing Director -- France
RITSON D. GILLINGS
Managing Director -- United Kingdom
CANADIAN OPERATIONS
GORDON L. TRIMMER
Managing Director - Canada
DOMESTIC OFFICES
AKRON, OHIO 44333
Corporate Headquarters
3550 West Market Street
(330) 666-3751
BIRMINGHAM, MICHIGAN 48009-6524
2100 East Maple Road
(810) 643-6100
EAGAN, MINNESOTA 55121
1380 Corporate Center Curve
Suite 316
(612) 681-8020
EVANSVILLE, INDIANA 47712
122 N. St. Joseph Avenue
(812) 423-5836
FORT WAYNE, INDIANA 46825
9017 Coldwater
Suite 300A
(219) 497-0371
GRAND RAPIDS, MICHIGAN 49546
500 Cascade West Parkway, SE
(616) 285-2800
HOCKESSIN, DELAWARE 19707
724 Yorklyn Road, Suite 260
(302) 234-4870
HOUSTON, TEXAS 77060
363 N. Sam Houston Parkway E.
Suite 480
(713) 820-8093
PASADENA, CALIFORNIA 91106
600 South Lake Avenue
Suite 506
(818) 792-0053
PISCATAWAY, NEW JERSEY 08854
144B Carlton Avenue
(908) 424-9130
SCHAUMBURG, ILLINOIS 60173
Embassy Plaza
1933 N. Meacham Road
Suite 500
(847) 397-3973
ST. LOUIS, MISSOURI 63045-1303
514 Earth City Expressway
Suite 351
(314) 291-8626
NASHVILLE, TENNESSEE 37211-3333
ComAlloy International Company
481 Allied Drive
(615) 333-3453
ORANGE, TEXAS 77632
Texas Polymer Services, Inc.
6522 Interstate Highway 10 West
(409) 883-4331
32
<PAGE> 35
A. SCHULMAN, INC.
OTHER SALES LOCATIONS
ARLINGTON, MASSACHUSETTS 02174
33 James St.
(617) 684-6949
ARLINGTON, TEXAS 76006
1907 Mill Run Dr.
(817) 265-8000
ATLANTA, GEORGIA 30350
1302 Harbor Pointe Parkway
(770) 395-7305
CAMBRIDGE, MASSACHUSETTS 02139
129 Franklin St.
Suite 102
(617) 577-1123
REPRESENTATIVE OFFICES
BARCELONA, SPAIN
A. Schulman
Oficina de Representation en Espana
Paseje Francesc Ferrer n(degree)3
08348 Cabrils (Barcelona), Spain
(34) (3) 750 76 63
SINGAPORE
A. Schulman, Inc.
Singapore Representative Office
Contact Address:
05-05, Balmoral Condominium
Singapore - 259802
65-235-7675
FOREIGN OFFICES
BORNEM, BELGIUM
N.V.A. Schulman Plastics, S.A.
Pedro Colomalaan 25
Industriepark
2880 Bornem, Belgium
3-8904211
SINDORF, GERMANY
A. Schulman GmbH
Huttenstrasse 211
D-50170 Kerpen
(2273) 5610
PARIS, FRANCE
A. Schulman, S.A./
Diffusion Plastique
Immeuble Dynasteur
10/12 rue Andras Beck
92360 Meudon-la-Foret
(1) 41 07 75 00
CRUMLIN, SOUTH WALES (U.K.)
A. Schulman Inc. Limited
Croespenmaen Industrial Estate
Crumlin, Newport
Gwent NP1 4AG
Newbridge 1495-244090
ZURICH, SWITZERLAND
A. Schulman AG
Kernstrasse 10
CH 8004 Zurich, Switzerland
(1) 241 60 30
MISSISSAUGA, ONTARIO, CANADA
L5R 3G5
A. Schulman Canada Ltd.
5770 Hurontario Street
Suite 602
(905) 568-8470
MEXICO CITY, MEXICO
A. Schulman de Mexico, S.A. de C.V.
Manuel E. Izaguirre #13
Despacho 304 - Ciudad Satelite
Naucalpan, Edo. de Mexico 53100
(525) 393-1216
MONTERREY, MEXICO
A. Schulman de Mexico, S.A. de C.V.
Camino del Lago #4517
Sector 4
Colonia Cortijo del Rio
Monterrey, N.L. 64890
(5283) 655-505
SAN LUIS POTOSI, MEXICO
A. Schulman de Mexico, S.A. de C.V.
Avenida CFE, 730
Entre Eje 134 y Eje 136
Zona Industrial del Potosi
San Luis Potosi, S.L.P. 78090
(5248) 240-708
PLANTS
AKRON, OHIO 44310
790 E. Tallmadge Ave.
(330) 633-8164
BELLEVUE, OHIO 44811
350 North Buckeye Street
(419) 483-2931
ORANGE, TEXAS 77630
(Dispersion Plant)
3007 Burnett
(409) 883-9371
NASHVILLE, TENNESSEE 37211-3333
ComAlloy International Company
481 Allied Drive
(615) 333-3453
ORANGE, TEXAS 77632
Texas Polymer Services, Inc.
6522 Interstate Highway 10 West
(409) 883-4331
BORNEM, BELGIUM
N.V.A. Schulman Plastics, S.A.
Pedro Colomalaan 25
Industriepark
2880 Bornem, Belgium
3-8904211
SINDORF, GERMANY
A. Schulman GmbH
Huttenstrasse 211
D-50170 Kerpen
(2273) 5610
CRUMLIN, SOUTH WALES (U.K.)
A. Schulman Inc. Limited
Croespenmaen Industrial Estate
Crumlin, Newport
Gwent NP1 4AG
Newbridge 1495-244090
GIVET, FRANCE
A. Schulman Plastics S.A.
Rue Alex Schulman
F-08600 Givet, France
(24) 42 71 61
ST. THOMAS, ONTARIO, CANADA
N5P 3Z5
A. Schulman Canada Ltd.
400 S. Edgeware Road
(519) 633-3451
SAN LUIS POTOSI, MEXICO
A. Schulman de Mexico, S.A. de C.V.
Avenida CFE, 730
Entre Eje 134 y Eje 136
Zona Industrial del Potosi
San Luis Potosi, S.L.P. 78090
(5248) 240-708
33
<PAGE> 36
[A. SCHULMAN INC. LOGO] A. Schulman Inc.
3550 West Market Street, Akron, Ohio 44333 - 330/666-3751
[OUTSIDE BACK COVER PAGE]
<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
- ------------------------------
<FN>
(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
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-69042) of A. Schulman, Inc. of our report dated
October 14, 1996 appearing on page 27 of the Annual Report to Stockholders 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 26, 1996
<PAGE> 1
EXHIBIT 24
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, 1996, 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 21st day of October,
1996.
/s/James H. Berick
------------------
James H. Berick
<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, 1996, 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 21st day of October,
1996.
/s/Alan L. Ockene
-----------------
Alan L. Ockene
<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, 1996, 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 21st day of October,
1996.
/s/Dr. Peggy Gordon Elliott
---------------------------
Dr. Peggy Gordon Elliott
<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, 1996, 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 21st day of October,
1996.
/s/Franz A. Loehr
-----------------
Franz A. Loehr
<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, 1996, 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 21st day of October,
1996.
/s/ Larry A. Kushkin
--------------------
Larry A. Kushkin
<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, 1996, 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 21st day of October,
1996.
/s/ Robert G. Wallace
---------------------
Robert G. Wallace
<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, 1996, 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 21st day of October,
1996.
/s/ Gordon E. Heffern
---------------------
Gordon E. Heffern
<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, 1996, 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 21st day of October,
1996.
/s/Dr. Paul Craig Roberts
-------------------------
Dr. Paul Craig Roberts
<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, 1996, 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 21st day of October,
1996.
/s/Rene C. Rombouts
-------------------
Rene C. Rombouts
<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, 1996, 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 21st day of October,
1996.
/s/ Willard R. Holland
----------------------
Willard R. Holland
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1996, 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 21st day of October,
1996.
/s/ James A. Karman
-------------------
James A. Karman
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned Director of A. Schulman, Inc. (the "Corporation"), a
Delaware corporation, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's
fiscal year ended August 31, 1996, 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 21st day of October,
1996.
/s/James S. Marlen
------------------
James S. Marlen
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1996 AND 1995 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR EACH OF THE THREE YEARS ENDED AUGUST 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STAEMENTS.
</LEGEND>
<CIK> 0000087565
<NAME> A. SCHULMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 113,555
<SECURITIES> 36,925
<RECEIVABLES> 152,342
<ALLOWANCES> 5,903
<INVENTORY> 150,363
<CURRENT-ASSETS> 466,803
<PP&E> 295,824
<DEPRECIATION> 156,788
<TOTAL-ASSETS> 623,378
<CURRENT-LIABILITIES> 105,957
<BONDS> 40,054
<COMMON> 38,309
0
1,071
<OTHER-SE> 393,730
<TOTAL-LIABILITY-AND-EQUITY> 623,378
<SALES> 976,694
<TOTAL-REVENUES> 982,769
<CGS> 826,076
<TOTAL-COSTS> 911,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,192
<INCOME-PRETAX> 70,972
<INCOME-TAX> 28,795
<INCOME-CONTINUING> 42,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,177
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
<PAGE> 1
Exhibit 99
Notice of Annual Meeting and Proxy Statement Dated November 12, 1996
<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 5, 1996 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
1999;
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, 1997; 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 22, 1996 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 12, 1996
- --------------------------------------------------------------------------------
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 12, 1996
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
5, 1996, and any adjournments thereof.
Stockholders of record at the close of business on October 22, 1996 (the
record date) will be entitled to vote at the Annual Meeting. At that date the
Corporation had issued and outstanding 37,806,131 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 18,903,066 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 12, 1996.
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 I are to be
elected to serve for three-year terms expiring in 1999 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 I nominees named in the table
below.
All nominees have consented to being named in this Proxy Statement and to
serve if elected. Should any nominee subsequently decline or be unable to accept
such nomination to serve as a Director, an event which the Board of Directors
does not now expect, the persons voting the
<PAGE> 4
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. For election as a Director, a
nominee must receive the affirmative vote of the holders of a majority of shares
of Common Stock represented at the meeting in person or by proxy.
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 22, 1996 DIRECTOR
------------------- ------------------ --------
<S> <C> <C>
NOMINEES TO SERVE UNTIL 1999 ANNUAL MEETING OF STOCKHOLDERS (CLASS I)
Larry A. Kushkin* Executive Vice President -- International 1989
Automotive Operations of the Corporation since
1989; Age 56
Franz A. Loehr Retired; formerly Associate General Manager of 1984
the Corporation's European subsidiaries and
Managing Director, A. Schulman GmbH; Age 67
Alan L. Ockene degree dagger Chairman, Akron Regional Development Board, since 1992
double-dagger 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 65
Robert G. Wallace dagger Retired; formerly Executive Vice President, 1988
double-dagger Phillips Petroleum Company and
President of Phillips 66 Company; Age 70
Willard R. Holland double-dagger Chairman of the Board of Ohio Edison Company 1995
(electric utility) since November 1, 1996;
President and Chief Executive Officer, Ohio
Edison Company since 1993; Chairman of the
Board and Chief Executive Officer of Ohio
Edison Company's 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 60
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 22, 1996 DIRECTOR
------------------- ----------------- --------
<S> <C> <C>
CONTINUING DIRECTORS SERVING UNTIL 1997 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
Gordon E. Heffern degree dagger Consultant to KeyCorp (formerly Society 1983
double-dagger 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 72
Robert A. Stefanko* Chairman of the Board of the Corporation since 1980
1991; Executive Vice President -- Finance and
Administration of the Corporation since 1989;
Age 53
Dr. Peggy Gordon Elliott degree Senior Fellow, National Center for Higher 1994
Education since August 1996; formerly,
President, The University of Akron 1992-1996,
and Chancellor and Chief Executive Officer,
Indiana University Northwest, 1984-1992; Age 59
James S. Marlen degree Chairman of the Board of Ameron International 1995
Corporation (construction and industrial
manufacturing) since January, 1995; President
and Chief Executive Officer of Ameron
International Corporation 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 55
CONTINUING DIRECTORS SERVING UNTIL 1998 ANNUAL MEETING OF STOCKHOLDERS (CLASS III)
James H. Berick degree dagger Chairman, Berick, Pearlman & Mills Co., L.P.A., 1973
double-dagger Cleveland, Ohio (attorneys) and Secretary of
the Corporation; President and Treasurer,
Realty ReFund Trust since 1990; Age 63
Terry L. Haines* President and Chief Executive Officer of the 1990
Corporation since 1991; formerly, Chief
Operating Officer, 1990-1991; Age 50
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
PAST FIVE YEARS FIRST
NAME OF AND AGE AS OF BECAME
NOMINEE OR DIRECTOR OCTOBER 22, 1996 DIRECTOR
------------------- ------------------ --------
<S> <C> <C>
Dr. Paul Craig Roberts degree Distinguished Fellow, Cato Institute since 1993; 1992
Chairman of Institute for Political Economy
since 1985; Columnist for Business Week since
1983 and The Washington Times since 1988;
nationally syndicated Columnist for Scripps
Howard News Service since 1989; formerly,
William E. Simon Chair in Political Economy at
Center for Strategic and International Studies,
1982-1993, and Assistant Secretary of Treasury
for Economic Policy, 1981-1982; Age 57
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 58
James A. Karman degree President and Chief Operating Officer, RPM, Inc. 1995
(coatings, sealants and specialty chemicals)
since 1978; formerly, Chief Financial Officer,
RPM, Inc. 1982-1993; Age 59
<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 FirstMerit Corporation. 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 Valmont Industries, Inc. Dr. Elliott is a
Director of The Lubrizol Corporation. Mr. Marlen is a Director of Ameron
International Corporation. 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. Mr. Ockene is a Director of Sudbury, Inc. and
Ameron International Corporation.
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 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
4
<PAGE> 7
fees; and (v) 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, 1996.
The functions performed by the Compensation Committee of the Board of
Directors include making recommendations to the Board of Directors concerning
compensation policies, salaries, grants of stock options and other forms of
compensation for management and certain other employees of the Corporation. The
Compensation Committee held two meetings during the year ended August 31, 1996.
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 did not meet during the year ended August 31, 1996.
The Board of Directors held five meetings during the year ended August 31,
1996. 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 $21,000 plus $1,000 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 Consulting Agreements
with the Corporation, one providing for annual compensation of $75,000 for each
of the years ended August 31, 1995 and 1996 and one providing for compensation
of $50,000 for the year ended August 31, 1997.
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.
5
<PAGE> 8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report describes the Corporation's executive compensation programs and
the basis on which fiscal year 1996 compensation determinations were made by the
Corporation's Compensation Committee in respect of the executive officers of the
Corporation, including the Chief Executive Officer and the other executive
officers named in the compensation tables in this proxy statement.
To ensure that the compensation program is administered in an objective
manner, the Compensation Committee is comprised entirely of independent
Directors. The duties of the Compensation Committee include recommending to the
Board of Directors the base salary level and bonus for the Chief Executive
Officer, setting the base salaries and bonuses for all other executive officers,
and approving the design and awards of all other elements of the executive pay
program. The Compensation Committee further evaluates executive performance and
addresses other matters related to executive compensation.
COMPENSATION POLICY AND OVERALL OBJECTIVES
In determining the amount and composition of executive compensation, the
Compensation Committee's goal is to provide a compensation package that will
enable the Corporation to attract and retain talented executives, reward
outstanding performance and link the interests of the Corporation's executives
to the interests of the Corporation's shareholders. In determining actual
compensation levels, the Compensation Committee considers all elements of the
program in total, rather than any one element in isolation.
The Compensation Committee members believe that each element of the
compensation program should target compensation levels at rates that are
reflective of current market practices. Offering market-comparable pay
opportunities allows the Corporation to maintain a stable, successful management
team.
Competitive market data is provided by an independent compensation
consultant. The data provided compares the Corporation's compensation practices
to those of a group of comparison companies. The Corporation's market 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.
6
<PAGE> 9
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 1996, the Compensation Committee
considered the Corporation's financial performance for the prior year, Mr.
Haines' individual performance and his long-term contributions to the success of
the Corporation. The Compensation Committee also compares Mr. Haines' base
salary to the base salaries of other chief executive officers.
ANNUAL BONUSES
The Corporation's bonus program promotes the Corporation's
pay-for-performance philosophy by providing executives with direct financial
incentives in the form of annual cash bonuses based on individual performance.
Annual bonus opportunities allow the Corporation to communicate specific goals
that are of primary importance during the coming year and motivate executives to
achieve these goals.
Although target bonus opportunities are not established at the beginning of
the year, the payouts are intended to represent a significant portion of each
executive's total compensation. This practice reinforces the Corporation's
pay-for-performance philosophy. The sizes of the payouts are determined at the
discretion of the Compensation Committee, based upon each executive's
performance during the prior fiscal year and on Corporation performance. Mr.
Haines' 1996 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 1996 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 1996 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.
7
<PAGE> 10
In 1996, Mr. Haines received options to purchase 30,000 shares at the fair
market value ($23.00) of such shares on the date of grant. These grants were
established after comparison to the averages of long-term incentive grants at
the comparison companies. The Compensation Committee believes that this equity
interest provides a strong link to the interests of shareholders.
RESTRICTED STOCK
Shares of restricted stock were awarded to certain executives in 1996.
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 1996, Mr. Haines
received an award of 8,000 shares of restricted stock.
The Compensation Committee:
Gordon E. Heffern, Chairman
James H. Berick
Robert G. Wallace
Alan L. Ockene
Willard R. Holland
8
<PAGE> 11
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, 1996, 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 1996 $360,000(5) $145,000 $ 29,491 $184,000 30,000 $ 137,049(6)
President & Chief 1995 $325,000 $180,000 $ 21,910 $0 27,500 $ 130,819
Executive Officer 1994 $270,833 $180,000 $ 12,075 $157,500 25,000 $ 117,309
Robert A. Stefanko 1996 $300,000(5) $145,000 $ 7,976 $149,500 25,000 $ 92,904(6)
Chairman of the Board 1995 $270,833 $180,000 $118,335 $0 23,000 $ 122,274
of Directors, Chief 1994 $226,667 $180,000 $0 $131,250 20,000 $ 116,474
Financial Officer and
Executive Vice President--
Finance and Administration
Larry A. Kushkin 1996 $215,000(5) $130,000 $ 29,206 $ 75,900 18,000 $ 41,942(6)
Executive Vice President-- 1995 $200,000 $160,000 $139,899 $0 14,000 $ 69,278
International Automotive 1994 $185,000 $155,000 $0 $ 78,750 12,000 $ 76,585
Operations
Leonard E. Emge 1996 $150,000(5) $ 50,000 $ 3,399 $ 41,400 7,000 $ 16,110(6)
Vice President-- 1995 $135,000 $ 60,000 $ 11,646 $0 7,000 $ 14,610
Manufacturing 1994 $117,833 $ 40,000 $ 7,121 $ 39,375 5,000 $ 13,570
Alain C. Adam 1996 $122,000(5) $ 45,000 $ 45,052 $ 27,600 3,500 $ 13,310(6)
Vice President-- 1995 $116,000 $ 55,000 $0 $0 3,500 $ 12,710
Automotive Marketing 1994 $110,000 $ 53,000 $ 2,165 $ 31,500 3,500 $ 12,787
- ---------------
(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, 1996: Mr. Haines held 19,000 shares valued at $413,250; Mr.
Stefanko held 15,250 shares valued at $331,688; Mr. Kushkin held 8,800
shares valued at $191,400; Mr. Adam held 3,525 shares valued at $76,669; and
Mr. Emge held 4,175 shares valued at $90,806. 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, 1996
of $21.75.
(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; 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.
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<PAGE> 12
(5) There has been no increase in the named executive officers' salaries since
the following dates: Messrs. Haines and Stefanko, April 1, 1995, and Messrs.
Kushkin, Emge and Adam, September 1, 1995.
(6) Amounts shown include the following: Corporation contributions to Profit
Sharing Plan -- $15,000 for each of Messrs. Haines, Stefanko, Kushkin and
Emge, and $12,200 for Mr. Adam; amounts accrued by the Corporation for the
fiscal year ended August 31, 1996 under non-qualified profit sharing plan --
$22,984 for Mr. Haines, $16,370 for Mr. Stefanko, and $7,067 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, 1996
-- $75,062 for Mr. Haines ($37,531 of which was not vested), $37,531 for Mr.
Stefanko ($18,766 of which was not vested), and $18,765 for Mr. Kushkin
($13,136 of which was not vested); and Director's fees received from the
Corporation's Belgian subsidiary -- $22,893 for each of Messrs. Haines and
Stefanko.
</TABLE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 1996 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 $27.96 and $33.67, respectively. No gain
to the optionees is possible without an increase in stock price which will
benefit all stockholders proportionately. Actual gains, if any, on an option
exercise are dependent upon future performance of the Corporation's Common Stock
and overall market conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1996 POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION FOR
EMPLOYEES IN OR BASE 5-YEAR OPTION TERM
OPTIONS FISCAL PRICE(3) EXPIRATION 5% ($) 10% ($)
NAME (#)GRANTED(1) YEAR(2) ($/SH) DATE (4) (4)
- ---------------------- ------------- ------------ -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Haines 30,000 15.29% $23.00 07/10/01 $148,800 $320,100
Robert A. Stefanko 25,000 12.75% $23.00 07/10/01 $124,000 $266,750
Larry A. Kushkin 18,000 9.18% $23.00 07/10/01 $ 89,280 $192,060
Leonard E. Emge 7,000 3.57% $23.00 07/10/01 $ 34,720 $ 74,690
Alain C. Adam 3,500 1.78% $23.00 07/10/01 $ 17,360 $ 37,345
<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 196,150 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 37,806,131 shares of
Common Stock outstanding of $187.5 million or $403.4 million, respectively,
over the five-year term of the options.
</TABLE>
10
<PAGE> 13
The following table contains information concerning stock option exercises
during fiscal year 1996 by the named executive officers and the number of their
unexercised options at August 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS
AT YEAR END(#)
SHARES FISCAL
ACQUIRED ON VALUE -------------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Terry L. Haines 14,643 $ 29,491 66,250 72,500
Robert A. Stefanko 5,268 $ 7,976 54,812 60,063
Larry A. Kushkin 5,067 $ 29,206 31,375 37,625
Leonard E. Emge 2,718 $ 3,399 9,562 15,688
Alain C. Adam 14,375 $ 45,052 9,187 8,813
<FN>
- ---------------
(1) Represents the net value (market value less exercise price).
</TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth information as of October 22, 1996 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP OUTSTANDING
- ------------------------------------------ ----------------- -----------
<S> <C> <C>
FMR Corp.(1) 4,386,962 11.6%
82 Devonshire Street
Boston, Massachusetts 02109
Dietche & Field Advisers, Inc.(2) 2,139,900 5.7%
437 Madison Avenue
New York, New York 10022
<FN>
- ---------------
(1) According to FMR Corp.'s ("FMR") report on Schedule 13G dated January 10,
1996, FMR, a parent holding company, Fidelity Management & Research Company
("Adviser"), a wholly-owned subsidiary of FMR and a registered investment
adviser, Edward C. Johnson 3d, Chairman of the Board and a shareholder of
FMR, and Abigail P. Johnson, a Director and a shareholder of FMR, each
directly or indirectly beneficially owned 4,386,962 shares of the
Corporation's Common Stock. FMR further stated in the Schedule 13G that
Fidelity Magellan Fund, 82 Devonshire Street, Boston, Massachusetts 02109,
an investment company for which Adviser serves as investment adviser, is the
indirect or direct beneficial owner of 2,722,025 shares or 7.2% of the
Corporation's outstanding Common Stock.
(2) Information according to Dietche & Field Advisers, Inc.'s report on Schedule
13G dated October 11, 1996.
</TABLE>
11
<PAGE> 14
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of October 22, 1996 in
respect of beneficial ownership of shares of the Corporation's 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>
Gordon E. Heffern 3,702 *
Robert A. Stefanko 154,774 *
Dr. Peggy Gordon Elliott 1,218 *
James H. Berick 16,311 *
Terry L. Haines 115,250(4) *
Dr. Paul Craig Roberts 3,716(5) *
Rene C. Rombouts 87,079 *
Larry A. Kushkin 319,138(6) *
Franz A. Loehr 142,474 *
Alan L. Ockene 5,011 *
Robert G. Wallace 8,936 *
James S. Marlen 6,000(7) *
Willard R. Holland 1,500 *
James A. Karman 500 *
Alain C. Adam 20,835 *
Leonard E. Emge 33,281 *
All Directors and
Executive Officers as a
group (17 persons) 960,246 2.5%
- ---------------
* 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 1991 Stock Incentive Plan: 66,250 by Terry L. Haines; 31,375
by Larry A. Kushkin; 54,812 by Robert A. Stefanko; 9,187 by Alain C. Adam;
9,562 by Leonard E. Emge; 36,218 by Rene C. Rombouts; and 212,110 by all
Directors and executive officers as a group.
(2) Includes 1,311 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 6,555 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: 19,000 for Terry L.
Haines, 15,250 for Robert A.
12
<PAGE> 15
Stefanko, 8,800 for Larry A. Kushkin, 9,500 for Rene C. Rombouts, 3,750 for
Franz A. Loehr, 3,525 for Alain C. Adam, 4,175 for Leonard E. Emge, and
66,125 for all Directors and executive officers as a group.
(4) Includes 2,500 shares of the Corporation's Common Stock acquired by Mr.
Haines on October 30, 1996.
(5) Includes 100 shares held by Dr. Roberts as trustee for his son, the
beneficial ownership of which Dr. Roberts 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.
(7) Includes 2,000 shares held solely by Mr. Marlen's wife, the beneficial
ownership of which Mr. Marlen disclaims.
</TABLE>
13
<PAGE> 16
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>
8/91 100.00 100.00 100.00
8/92 134.27 107.94 106.95
8/93 118.46 124.27 125.81
8/94 135.67 131.02 121.66
8/95 137.28 158.96 153.07
8/96 114.57 188.59 152.39
</TABLE>
14
<PAGE> 17
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In January 1996, the Corporation replaced the 1990 employment agreements
with Messrs. Haines, Stefanko, Kushkin, Adam, and certain other senior personnel
and entered into an employment agreement with Mr. Emge. The employment
agreements of Messrs. Haines, Stefanko and Kushkin have an initial three-year
term. Such agreements automatically will be extended at the end of each month
for an additional month unless prior notice of termination is given, to
constitute at all times a three-year agreement; provided, however, that no such
monthly extension shall occur after August 31, 2008, January 31, 2005, or July
31, 2002, respectively. The employment agreement of Mr. Emge provides for a
two-year term expiring in December 1997 and the employment agreement of Mr. Adam
has an initial one-year term. Mr. Adam's agreement automatically will be
extended at the end of each month for an additional month unless prior notice of
termination is given, to constitute at all times a one-year agreement; provided,
however, that no such monthly extension shall occur after November 30, 2012. The
employment agreements provide that in the event employment is terminated as a
result of a merger, consolidation, liquidation, or change in control
(collectively, "Change in Control") of the Corporation, or for any other reason
except for death, disability or for cause, the employee shall be paid a lump sum
amount equal to a multiple (equal to the initial term of such agreement) of the
sum of (i) the higher of his annual salary payable prior to the event causing
the termination or salary payable prior to the Change in Control, plus (ii) an
amount equal to the higher of his bonus earned in the preceding fiscal year or
the average bonus earned in the most recent three fiscal years. In addition,
upon a Change in Control, each of the employment agreements provides that the
employee also will continue to receive certain insurance benefits not provided
to the employee by another source after termination, for a period of time equal
to the original term of such employee's employment agreement, and the employee
will be paid a lump sum amount equal to the sum of (i) any unpaid annual
incentive compensation previously awarded to the employee, the payment of which
was contingent only upon continued employment, and (ii) a pro rata portion of
his bonus for the fiscal year in which the termination occurred. If the
Corporation terminates an employee's employment without cause prior to the
expiration of the term of the employment agreement or prior to a Change in
Control, the employee shall receive his salary for the remaining term of his
employment agreement, plus a bonus each year for the remaining 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. If the employee's employment
is terminated by reason of death, the Corporation shall pay a lump sum amount
equal to sixty percent of the employee's salary for twenty-four months. In
addition, the amounts described above payable under the employment agreements
for Messrs. Haines, Stefanko and Kushkin shall be "grossed up" to cover certain
taxes payable by the employee on certain of the amounts paid to such employee in
respect of a Change in Control of the Corporation. Notwithstanding the
foregoing, in respect of the employment agreements of Messrs. Emge and Adam, the
Corporation is not obligated to pay any amount which is in excess of the maximum
amount which it can deduct for federal income tax purposes. These employment
agreements may tend to discourage a takeover attempt of the Corporation inasmuch
as a Change in Control of the Corporation could result in increased compensation
expense.
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
15
<PAGE> 18
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 (and participating
subsidiaries) 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, 1996, the amounts contributed
to the Profit Sharing Plan accounts of the persons listed in the Summary
Compensation Table were: $15,000 for each of Messrs. Haines, Stefanko, Kushkin,
and Emge; and $12,200 for Mr. Adam.
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. In addition, upon a Change in Control of the Corporation, benefits
become fully vested. 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 during such year in the Profit Sharing Trust
pursuant to the Profit Sharing Plan. For the fiscal year ended August 31, 1996,
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, $22,984; Mr. Stefanko, $16,370; and Mr. Kushkin $7,067.
The Corporation also has deferred compensation agreements with Messrs.
Haines, Stefanko and Kushkin, providing for the payment of benefits for ten
years following retirement, disability or death in the annual amount of $100,000
for Mr. Haines, $100,000 (under two agreements for $50,000 each) for Mr.
Stefanko and $75,000 (under two agreements for $50,000 and $25,000,
respectively) for Mr. Kushkin, except that any amounts payable at retirement
will be reduced proportionately to the extent that Messrs. Haines, Stefanko and
Kushkin are employed by the Corporation for less than ten years from the date
of their agreements. The effective dates of Mr. Haines' Agreement is 1991, of
Mr. Stefanko's two agreements are 1985 and 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. Haines, Stefanko 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. Haines, Stefanko and Kushkin, in the amount of $1,000,000,
$1,000,000 and $500,000, respectively.
16
<PAGE> 19
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, 1997. 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, 1996, 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.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors, and persons who own more than 10% of the
Corporation's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Mr. Wallace, a Director
of the Corporation, filed his statement of beneficial ownership on Form 4
reporting a December 1995 transaction subsequent to the due date for such
filing.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Annual Meeting other than those described in this Proxy Statement. Should
other matters come before the meeting, the shares represented by proxies
solicited hereby will be voted in respect thereof in accordance with the best
judgment of the proxy holders.
GENERAL INFORMATION
VOTING OF PROXIES
Shares represented by properly executed proxies will be voted at the
meeting, and if a stockholder has specified how the shares represented thereby
are to be voted, they will be voted in accordance with such specification. It is
intended that shares represented by proxies on which 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.
17
<PAGE> 20
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders, presently scheduled for December 1997, must be received
by the Corporation no later than July 17, 1997 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 12, 1996
18
