<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 30, 1995 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________ to ____________
Commission file number: 2-45166
-------
A. Schulman, Inc. and its Consolidated Subsidiaries
---------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- ------------------------------ ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3550 West Market Street, Akron, Ohio 44333
- ----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 666-3751
- ----------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
- ----------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Number of common shares outstanding
as of December 31, 1995 - 37,525,818
<PAGE> 2
A. SCHULMAN, INC.
STATEMENT OF CONSOLIDATED INCOME (Notes 1 and 2)
<TABLE>
<CAPTION>
For the three months ended
--------------------------
November 30, November 30,
1995 1994
---- ----
Unaudited
---------
<S> <C> <C>
Net sales $249,541,000 $251,241,000
Interest and other income 1,751,000 1,664,000
------------ -----------
251,292,000 252,905,000
------------ -----------
Costs and expenses:
Cost of goods sold 213,486,000 209,577,000
Selling, general and
administrative expenses 21,865,000 21,037,000
Interest expense 1,478,000 581,000
Foreign currency transaction
losses (gains) 59,000 (106,000)
Minority interest 72,000 166,000
------------ -----------
236,960,000 231,255,000
------------ -----------
Income before taxes 14,332,000 21,650,000
Provision for income taxes:
U.S. (58,000) 1,767,000
Foreign 5,916,000 6,648,000
------------ -----------
5,858,000 8,415,000
------------ -----------
Net income 8,474,000 13,235,000
Dividends on preferred stock (13,000) (13,000)
------------ -----------
Net income applicable to
common stock $ 8,461,000 $ 13,222,000
============ ===========
Net income per share of
common stock $ .23 $ .35
===== =====
Cash dividends per share of
common stock $.085 $.075
===== =====
Average number of shares outstanding
which were used in computing net
income per common share 37,565,318 37,492,959
</TABLE>
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<PAGE> 3
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
November 30, August 31,
Assets 1995 1995
------------ ----------
Unaudited
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 3) $ 88,856,000 $ 83,997,000
Short-term investments, at cost 44,543,000 60,275,000
Accounts receivable, less allowance
for doubtful accounts of $5,254,000 at
November 30, 1995 and $4,859,000 at
August 31, 1995 156,177,000 143,183,000
Inventories, average cost or market,
whichever is lower 177,384,000 190,946,000
Prepaids, including tax effect of
timing differences 11,548,000 12,705,000
------------ -----------
Total current assets 478,508,000 491,106,000
------------ -----------
Other assets:
Cash surrender value of life insurance 368,000 377,000
Deferred charges, etc., including tax effect
of temporary differences 14,235,000 14,506,000
------------ -----------
14,603,000 14,883,000
------------ -----------
Property, plant and equipment, at cost:
Land and improvements 8,960,000 8,909,000
Buildings and leasehold improvements 69,307,000 62,362,000
Machinery and equipment 180,344,000 173,325,000
Furniture and fixtures 19,629,000 19,054,000
Construction in progress 10,156,000 19,471,000
------------ -----------
288,396,000 283,121,000
Accumulated depreciation and investment grants
of $387,000 at November 30, 1995 and
$415,000 at August 31, 1995 147,128,000 141,944,000
------------ -----------
141,268,000 141,177,000
------------ -----------
$634,379,000 $647,166,000
============ ===========
</TABLE>
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<PAGE> 4
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
November 30, August 31,
Liabilities and Stockholders' Equity 1995 1995
----------- ---------
Unaudited
---------
<S> <C> <C>
Current liabilities:
Notes payable $ - $ 17,800,000
Current portion of long-term debt 40,000 39,000
Accounts payable 56,957,000 60,204,000
U.S. and foreign income taxes payable 15,400,000 15,009,000
Accrued payrolls, taxes and related benefits 17,334,000 16,820,000
Other accrued liabilities 19,670,000 18,194,000
----------- ----------
Total current liabilites 109,401,000 128,066,000
----------- ----------
Long-term debt 75,087,000 75,096,000
Other long-term liabilities 32,257,000 31,230,000
Deferred income taxes 6,241,000 5,973,000
Minority interest 1,655,000 1,583,000
Stockholders' equity (Note 4):
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 - 38,028,492 shares at November 30, 1995
and 38,022,242 shares at August 31, 1995 38,028,000 38,022,000
Other capital 38,186,000 38,069,000
Cumulative foreign currency translation
adjustment 42,251,000 41,979,000
Retained earnings 303,239,000 297,979,000
Treasury stock, at cost, 502,674 shares at
November 30, 1995 and 442,674 shares at
August 31, 1995 (Note 5) (12,063,000) (10,838,000)
Unearned stock grant compensation (974,000) (1,064,000)
----------- ----------
Common stock equity 408,667,000 404,147,000
----------- ----------
Total stockholders' equity 409,738,000 405,218,000
----------- ----------
$634,379,000 $647,166,000
=========== ==========
</TABLE>
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<PAGE> 5
A. SCHULMAN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Notes 1 and 2)
<TABLE>
<CAPTION>
Three months ended
------------------
November 30, November 30,
1995 1994
---- ----
Unaudited
---------
<S> <C> <C>
Provided (used in) operating activities:
Net income $ 8,474,000 $13,235,000
Items not requiring the current use of cash:
Depreciation 4,853,000 4,028,000
Non-current deferred taxes 232,000 (18,000)
Foreign pension and other compensation 721,000 687,000
Postretirement benefit obligation 204,000 240,000
Changes in working capital:
Accounts receivable (12,058,000) (22,681,000)
Inventories 14,513,000 (23,631,000)
Prepaids 1,024,000 (830,000)
Accounts payable (3,874,000) 27,304,000
Income taxes 301,000 5,350,000
Accrued payrolls and other accrued liabilities 1,715,000 722,000
Changes in other assets and other
long-term liabilities 298,000 55,000
------------ -----------
Net cash provided from
operating activities 16,403,000 4,461,000
------------ -----------
Provided (used in) investing activities:
Expenditures for property, plant and equipment (6,736,000) (7,767,000)
Disposals of property, plant and equipment 750,000 837,000
Purchases of short-term investments (31,462,000) (3,194,000)
Proceeds from sales of short-term investments 48,117,000 16,035,000
------------ -----------
Net cash provided from investing activities 10,669,000 5,911,000
------------ -----------
Provided from (used in) financing activities:
Cash dividends paid (3,195,000) (2,811,000)
Decrease of notes payable (17,800,000) (5,900,000)
Increase of long-term debt - 12,000,000
Reduction of long-term debt (10,000) (9,000)
Purchase of treasury stock (1,226,000) -
Exercise of stock options 123,000 1,535,000
Increase (decrease) in minority interest 72,000 (434,000)
------------ -----------
Net cash provided (used in)
financing activities (22,036,000) 4,381,000
------------ -----------
Effect of exchange rate changes on cash (177,000) 8,000
------------ -----------
Net increase in cash and cash equivalents 4,859,000 14,761,000
Cash and cash equivalents at beginning of year 83,997,000 60,062,000
------------ -----------
Cash and cash equivalents at end of period $88,856,000 $74,823,000
============ ===========
</TABLE>
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<PAGE> 6
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The results of operations for the three months ended November 30, 1995 are
not necessarily indicative of the results expected for the year ended August
31, 1996.
(2) The interim financial statements furnished reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature.
(3) All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Such investments amounted to
$78,407,000 at November 30, 1995 and $56,198,000 at August 31, 1995.
Investments with maturities between three and twelve months are considered to
be short-term investments.
(4) A summary of the stockholders' equity accounts for the three months ended
November 30, 1995 is as follows:
<TABLE>
<CAPTION>
Foreign Unearned
Currency Stock
Common Other Retained Translation Grant
Stock Capital Earnings Adjustment Compensation
---------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance-September 1, 1995 $38,022,000 $38,069,000 $297,979,000 $41,979,000 $(1,064,000)
Net income 8,474,000
Dividends paid or accrued:
Preferred (13,000)
Common, $.085 per share (3,201,000)
Stock options exercised 6,000 117,000
Foreign currency
translation adjustment 272,000
Amortization of
restricted stock 90,000
------------ ----------- ------------ ----------- ---------
Balance-November 30, 1995 $38,028,000 $38,186,000 $303,239,000 $42,251,000 $(974,000)
============ =========== ============ =========== =========
</TABLE>
(5) During November 1995, the Company repurchased 60,000 shares of its common
stock for $1,226,000. 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 value it provides to the Company.
- 6 -
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Results of Operations
- -----------------------------------------
Net sales for the three months ended November 30, 1995 were $249.5
million, a slight decrease from sales of $251.2 million for the comparable
period in 1994. A comparison of net sales by classification for the three
months ended November 30, 1995 and 1994 is a follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended November 30,
-------------------------------
Increase
1995 1994 (Decrease)
---- ---- ---------
<S> <C> <C> <C>
Manufacturing $148,419 $146,200 $ 2,219
Merchant 52,399 53,292 (893)
Distribution 48,723 51,749 (3,026)
------- -------- --------
$249,541 $251,241 $ (1,700)
======== ======== ========
</TABLE>
The translation effects from the weaker U.S. dollar increased sales by
$9.5 million.
Worldwide tonnage decreased approximately 6% during 1995. Tonnage in
Europe was down 12%. North American tonnage was down 15% excluding the tolling
operations of Texas Polymer Services which were acquired on February 28, 1995.
The tonnage declines were due to a flat economy and customers reducing
inventories.
Gross margins on sales for 1995 were 14.4% compared with 16.6% in
1994. The decline in gross profit margins was primarily due to competitive
price pressures and lower levels of production. A comparison of gross profit
by classification for the three months ended November 30, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended November 30,
------------------------------
Increase
1995 1994 (Decrease)
---- ---- ---------
<S> <C> <C> <C>
Manufacturing $ 23,380 $ 27,317 $ (3,937)
Merchant 6,021 8,237 (2,216)
Distribution 6,654 6,110 544
-------- -------- --------
$ 36,055 $ 41,664 $ (5,609)
======== ======== ========
</TABLE>
Selling, general and administrative expenses increased $828,000 in
1995. The weakening of the U.S. dollar increased these expenses by $921,000 in
1995. In addition, expenses were higher due to the acquisition of Texas
Polymer Services on February 28, 1995. However, the above increases were
partially offset by a lower provision for bad debts.
Interest expense increased in 1995 mainly in the United States due to
greater 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.
The effective tax rate was 40.9% in 1995 and 38.9% in 1994. The
increase was due to a greater level of earnings in Europe where the tax rates
are higher than the United States and a lower level of anticipated foreign tax
credits.
Earnings in Europe declined 11% or $1 million on a slight increase in
sales.
- 7 -
<PAGE> 8
Earnings were down due to profit margins which were 5% lower and a reduction in
tonnage, mainly in the merchant activities.
North American earnings declined $3.8 million on a 3% reduction in
sales. The primary reasons for the lower earnings were a 27% decline in profit
margins, higher interest expense and continuing start-up expenses in Mexico.
Results in fiscal 1995 were extremely good. In 1996, slower growth in
the worldwide economies, competitive margin pressures, higher interest and
continuing losses in Mexico will make it difficult to achieve the same level of
earnings attained in last year's second and third quarters.
Material Changes in Financial Condition
- ---------------------------------------
As of November 30, 1995, the current ratio was 4.4 to 1 and working
capital was $369 million. The improvement in the current ratio over August 31,
1995 was due to the $17.8 million reduction of notes payable during the three
months ended November 30, 1995.
During November 1995, the Company repurchased 60,000 shares of its
common stock for $1,226,000. 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 value it provides to
the Company.
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates. Income statement
items are translated at average exchange rates prevailing during the period.
The resulting translation adjustments are recorded in the "cumulative foreign
currency translation adjustment" account in stockholders' equity. The
weakening of the U.S. dollar during the three months ended November 30, 1995
increased this account by $272,000.
- 8 -
<PAGE> 9
Part II - Other Information
- ---------------------------
Items 1 through 3 and 5 are not applicable or the answer to such items
is negative; therefore, the items have been omitted and no reference is
required in this report.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held December 7, 1995.
(b) The following Directors were elected at such annual meeting, each for a
three-year term expiring in 1998:
James H. Berick
Terry L. Haines
Dr. Paul Craig Roberts
Rene C. Rombouts
James A. Karman
(c) The following matters were voted on at the annual meeting of stockholders:
(1) Election of Class III Directors:
-------------------------------
<TABLE>
<CAPTION>
Director Name Votes For Abstensions
---------------------- ---------- -----------
<S> <C> <C>
James H. Berick 31,391,639 47,867
Terry L. Haines 31,389,894 49,612
Dr. Paul Craig Roberts 31,362,727 76,779
Rene C. Rombouts 31,394,076 45,430
James A. Karman 31,374,286 65,220
</TABLE>
(2) Ratification of selection of independent accountants for the
fiscal year ending August 31, 1996:
<TABLE>
<CAPTION>
Broker
Votes For Votes Against Abstentions Non-Votes
---------- ------------- ----------- ---------
<S> <C> <C> <C>
31,330,722 77,592 31,192 -0-
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit
Number Exhibit
------- -------
27 Financial Data Schedule*
(b) No Reports on Form 8-K have been filed during the quarter for which this
report is filed.
_____
* Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
- 9 -
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date January 12, 1996 A. Schulman, Inc.
---------------- ---------------------------------------
(Registrant)
/s/ R. A. Stefanko
----------------------------------------
R. A. Stefanko, Executive Vice President-
Finance & Administration
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and signing as
the Principal Financial Officer of Registrant)
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of November 30, 1995 and August 31, 1995 and the
statement of consolidated income for the three months ended November 30, 1995
and November 30, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000087565
<NAME> A. SCHULMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 88,856
<SECURITIES> 44,543
<RECEIVABLES> 156,177
<ALLOWANCES> 5,254
<INVENTORY> 177,384
<CURRENT-ASSETS> 478,508
<PP&E> 288,396
<DEPRECIATION> 147,128
<TOTAL-ASSETS> 634,379
<CURRENT-LIABILITIES> 109,401
<BONDS> 75,087
0
1,071
<COMMON> 38,028
<OTHER-SE> 370,639
<TOTAL-LIABILITY-AND-EQUITY> 634,379
<SALES> 249,541
<TOTAL-REVENUES> 251,292
<CGS> 213,486
<TOTAL-COSTS> 236,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,478
<INCOME-PRETAX> 14,332
<INCOME-TAX> 5,858
<INCOME-CONTINUING> 8,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,474
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
