<PAGE>
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 February 29, 2000 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: 0-7459
-------
A. Schulman, Inc.
- --------------------------------------------------------------------------------
(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)
(330) 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 March 31, 2000 - 30,032,822
- 1 -
<PAGE>
A. SCHULMAN, INC.
STATEMENT OF CONSOLIDATED NET INCOME
(In Thousands except per share data)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---- ---- ---- ----
Unaudited Unaudited
------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 248,088 $ 235,198 $ 521,773 $ 493,844
Interest and other income
(Note 6) 3,200 1,111 5,028 1,762
--------- --------- --------- ---------
251,288 236,309 526,801 495,606
--------- --------- --------- ---------
Cost and expenses:
Cost of goods sold 207,157 195,706 433,965 404,902
Selling, general and
administrative expense 25,870 25,205 53,520 52,230
Interest expense 1,393 793 3,058 1,623
Foreign currency transaction
losses (gain) 764 (87) 119 722
Minority interest 415 382 960 703
--------- --------- --------- ---------
235,599 221,999 491,622 460,180
--------- --------- --------- ---------
Income before taxes 15,689 14,310 35,179 35,426
Provision for income taxes 5,955 5,670 13,503 13,968
--------- --------- --------- ---------
Net income 9,734 8,640 21,676 21,458
Less: Preferred stock dividends (13) (13) (27) (27)
--------- --------- --------- ---------
Net income applicable to
common stock $ 9,721 $ 8,627 $ 21,649 $ 21,431
========= ========= ========= =========
Weighted average number of
shares outstanding
Basic 30,561 31,982 30,776 32,135
Diluted 30,561 32,006 30,776 32,147
Basic and diluted earnings per
common share (Note 6): $ 0.32 $ 0.27 $ 0.70 $ 0.67
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
- 2 -
<PAGE>
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
------------ ----------
Assets Unaudited
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,857 $ 56,836
Marketable securities at fair value 2,512 -
Accounts receivable, less allowance
for doubtful accounts of $4,625 at
February 29, 2000 and $3,678 at
August 31, 1999 180,037 159,840
Inventories, average cost or market,
whichever is lower 186,834 171,454
Prepaids, including tax effect of
temporary differences 22,155 19,966
------------ ----------
Total current assets 423,395 408,096
Other assets:
Cash surrender value of life insurance 491 484
Deferred charges, etc., including tax effect
of temporary differences 20,235 22,604
------------ ----------
20,726 23,088
Property, plant and equipment, at cost:
Land and improvements 9,607 9,982
Buildings and leasehold improvements 76,803 78,038
Machinery and equipment 227,456 228,803
Furniture and fixtures 24,166 24,162
Construction in progress 7,172 7,838
------------ ----------
345,204 348,823
Accumulated depreciation and investment grants
of $958 at February 29, 2000 and
$230 at August 31, 1999 191,900 188,480
------------ ----------
153,304 160,343
------------ ----------
$ 597,425 $ 591,527
============ ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
- 3 -
<PAGE>
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
----------- ----------
Unaudited
----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 7,713 $ 10,721
Accounts payable 70,212 64,402
U.S. and foreign income taxes payable 5,235 6,721
Accrued payrolls, taxes and related benefits 17,797 19,180
Other accrued liabilities 18,587 16,792
----------- ----------
Total current liabilities 119,544 117,816
Long-term debt 83,924 65,000
Other long-term liabilities 38,396 37,696
Deferred income taxes 11,080 11,375
Minority interest 3,753 3,394
Stockholders' equity
Preferred stock, 5% cumulative, $100
par value, authorized, issued and
outstanding - 10,567 shares at February 29,
2000 and 10,689 shares at August 31, 1999 1,056 1,069
Special stock 1,000,000 shares authorized
none outstanding -- --
Common stock, $1 par value Authorized -
75,000,000 shares Issued -
38,381,017 shares at February 29,
2000 and August 31, 1999 38,381 38,381
Other capital 46,694 46,694
Accumulated other comprehensive income (32,239) (17,191)
Retained earnings 441,442 427,880
Treasury stock, at cost, 8,241,695 shares at
February 29, 2000 & 7,250,862 shares at
August 31, 1999 (152,636) (138,291)
Unearned stock grant compensation (1,970) (2,296)
----------- ----------
Common stock equity 339,672 355,177
----------- ----------
Total stockholders' equity 340,728 356,246
----------- ----------
$ 597,425 $ 591,527
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
- 4 -
<PAGE>
A. SCHULMAN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
For the six months ended,
-------------------------------------
February 29, 2000 February 28, 1999
----------------- -----------------
Unaudited
---------
<S> <C> <C>
Provided from (used in) operations
Net income $ 21,676 $ 21,458
Items not requiring the current use of cash:
Depreciation 11,471 10,643
Securities from insurance demutualization (2,512) -
Non-current deferred taxes 1,748 228
Foreign pension and other deferred compensation 1,314 1,432
Postretirement benefit obligation 787 532
Changes in working capital:
Accounts receivable (33,332) (28,037)
Inventories (22,516) (7,750)
Prepaids (3,029) 4,302
Accounts payable 14,692 11,048
Income taxes (1,240) 3,249
Accrued payrolls and other accrued liabilities 2,205 4,007
Changes in other assets and other
long-term liabilities 1,417 (6,300)
-------- -------
Net cash provided from (used in)
operating activites (7,319) 14,812
-------- -------
Provided from (used in) investing activites:
Expenditures for property, plant and equipment (9,894) (16,072)
Disposals of property, plant and equipment 739 318
-------- -------
Net cash used in investing activites (9,155) (15,754)
-------- -------
Provided from (used in) financing activities:
Cash dividends paid (8,114) (7,722)
Notes payable (3,011) 900
Long-term debt 19,018 20,000
Minority interest 360 (648)
Purchase of preferred stock (12) --
Purchase of treasury stock (14,345) (23,984)
Foreign investments grants 820 --
-------- -------
Net cash used in financing activities (5,284) (11,454)
-------- -------
Effect of exchange rate changes on cash (3,221) (195)
-------- -------
Net decrease in cash and cash equivalents (24,979) (12,591)
Cash and cash equivalents at beginning of period 56,836 60,766
-------- -------
Cash and cash equivalents at end of period $ 31,857 $ 48,175
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
-5-
<PAGE>
A. SCHULMAN, INC.
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The results of operations for the six months ended February 29, 2000 are
not necessarily indicative of the results expected for the year ended
August 31, 2000.
(2) The interim financial statements furnished reflect all adjustments, which
are, in the opinion of management, necessary for a fair presentation of
the results of the interim period 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 $13,071,000 at February 29, 2000 and $39,705,000 at August 31, 1999.
(4) A summary of the stockholders' equity section for the six months ended
February 29, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
------------------------------------
ACCUMULATED OTHER UNEARNED STOCK TOTAL
COMMON OTHER RETAINED COMPREHENSIVE GRANT COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME COMPENSATION INCOME
----- ------- -------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance-September 1, 1999 $38,381 $46,694 $427,880 $(17,191) $(2,296)
Comprehensive income
Net Income 21,676
Foreign currency
translation loss (14,932)
Unrealized holding loss
on securities, net of tax of $61 (116)
Total Comprehensive $ 6,628
income =======
Dividends paid or accrued:
Preferred (27)
Common, $.26 per share (8,087)
Amortization of
restricted stock 326
------- ------- -------- --------- --------
Balance-February 29, 2000 $38,381 $46,694 $441,442 $(32,239) $(1,970)
======= ======= ======== ========= ========
Balance-September 1, 1998 $38,347 $45,778 $395,746 $(8,917) $(1,994)
Comprehensive income
Net Income 21,458
Foreign currency
translation loss (2,113)
Total Comprehensive $19,345
income =======
Dividends paid or accrued:
Preferred (27)
Common, $.24 per share (7,756)
Amortization of
restricted stock 321
------- ------- -------- --------- --------
Balance-February 28, 1999 $38,347 $45,778 $409,421 $(11,030) $(1,673)
======= ======= ======== ========= ========
</TABLE>
-6-
<PAGE>
(5) During the six months ended February 29, 2000, the Company repurchased
991,000 shares of its common stock for $14,345,000. Subject to market
conditions, the Company intends to continue repurchasing its common stock
in 2000.
(6) Other income for the three months ended February 29, 2000 includes
pre-tax income of $2,689,000 relating to consideration received due to
demutualization of an insurance carrier in North America. Other income
for the six months ended February 29, 2000, includes pre-tax of
$2,689,000 relating to consideration received due to demutualization of
an insurance carrier in North America and pre-tax income of $1,211,000
from an insurance settlement resulting from an equipment problem at a
North American facility.
(7) A summary of the other comprehensive income section for the three months
ended February 29, 2000 and 1999 and six months ended February 29, 2000
and 1999 is as follows:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
------------------------------ ----------------------------
(In Thousands) February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Unaudited Unaudited
----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 9,734 $ 8,640 $ 21,676 $ 21,458
Other comprehensive income:
Foreign currency
translation adjustment (6,825) 8,517 (14,932) (2,113)
Unrealized investment loss, - -
net of tax of $61 (116) - (116) -
------------ ------------ ------------ ------------
Comprehensive income $ 2,793 $ 17,157 $ 6,628 $ 19,345
============ ============ ============ ============
</TABLE>
(8) The Company is engaged in the sale of plastic resins in various forms,
which are used as raw materials by its customers. The Company operates
in two geographic business segments, North America and Europe. A
reconciliation of segment income to consolidated income before tax is
presented below.
-7-
<PAGE>
A. SCHULMAN, INC.
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(in thousands) North
America Europe Other Consolidated
----------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Three months ended February 29, 2000
Sales to unaffiliated customers $ 105,253 $ 142,835 - $ 248,088
----------- ---------- --------- ----------------
Gross Profit $ 14,397 $ 26,534 - $ 40,931
----------- ---------- --------- ----------------
Operating income (Note 6) $ 4,108 $ 12,781 - $ 16,889
Interest expense, net - - $ (1,200) $ (1,200)
----------- ---------- --------- ----------------
Income before taxes $ 4,108 $ 12,781 $ (1,200) $ 15,689
----------- ---------- --------- ----------------
Three months ended February 28, 1999
Sales to unaffiliated customers $ 101,234 $ 133,964 - $ 235,198
----------- ---------- --------- ----------------
Gross Profit $ 16,151 $ 23,341 - $ 39,492
----------- ---------- --------- ----------------
Operating income $ 3,672 $ 11,060 - $ 14,732
Interest expense, net - - $ (422) $ (422)
----------- ---------- --------- ----------------
Income before taxes $ 3,672 $ 11,060 $ (422) $ 14,310
----------- ---------- --------- ----------------
Six months ended February 29, 2000
Sales to unaffiliated customers $ 221,609 $ 300,164 - $ 521,773
----------- ---------- --------- ----------------
Gross Profit $ 30,960 $ 56,848 - $ 87,808
----------- ---------- --------- ----------------
Operating income (Note 6) $ 8,453 $ 28,960 - $ 37,413
Interest expense, net - - $ (2,234) $ (2,234)
----------- ---------- --------- ----------------
Income before taxes $ 8,453 $ 28,960 $ (2,234) $ 35,179
----------- ---------- --------- ----------------
Six months ended February 28, 1999
Sales to unaffiliated customers $ 207,197 $ 286,647 - $ 493,844
----------- ---------- --------- ----------------
Gross Profit $ 35,053 $ 53,889 - $ 88,942
----------- ---------- --------- ----------------
Operating income $ 10,157 $ 25,874 - $ 36,031
Interest expense, net - - $ (605) $ (605)
----------- ---------- --------- ----------------
Income before taxes $ 10,157 $ 25,874 $ (605) $ 35,426
----------- ---------- --------- ----------------
</TABLE>
(9) The difference between basic and diluted weighted-average common
shares results from the assumed exercise of outstanding stock options and
grants of restricted stock, calculated using the treasury stock method.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net sales for the three months ended February 29, 2000 were $248.1
million, an increase of 5.5% over sales of $235.2 million for the comparable
period in 1999. For the six month period, net sales increased $27.9 million
or 5.7% over the comparable period last year. A comparison of net sales by
business segment for the three months and six months ended February 29, 2000
and February 28, 1999 is as follows:
<TABLE>
<CAPTION>
(In Thousands) (In Thousands)
Three Months Ended Six Months Ended
------------------ ----------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2000 1999 Increase 2000 1999 Increase
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Europe $142,835 $133,964 $8,871 $300,164 $286,647 $13,517
North America 105,253 101,234 4,019 221,609 207,197 14,412
-------- -------- ------- -------- -------- -------
$248,088 $235,198 $12,890 $521,773 $493,844 $27,929
======== ======== ======= ======== ======== =======
</TABLE>
The translation effect of foreign currencies decreased sales by $19.2
million for the quarter and $35.2 million for the six month period ended
February 29, 2000.
Worldwide tonnage was up 7.8% for the quarter and 8.3% for the six
months. Tonnage was up 10.2% in Europe and 4.7% in North America for the
quarter and 11.7% in Europe and 3.9% in North America for the six month
period.
Gross margins on sales for the quarter were 16.5% compared with 16.8%
for the same quarter last year. Gross margins on sales for the six months
ended February 29, 2000 were 16.8% compared with 18.0% for the same period
last year. The decreases in margins are primarily due to a significant
increase in resin prices and competitive price pressures. A comparison of
gross margin by business segment for the three month and six month periods
ended February 29, 2000 and February 28, 1999 is as follows:
<TABLE>
<CAPTION>
(In Thousands) (In Thousands)
Three Months Ended Six Months Ended
------------------ ----------------
Feb. 29, Feb. 28, Increase Feb. 29, Feb. 28, Increase
2000 1999 (Decrease) 2000 1999 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Europe $26,534 $23,341 $3,193 $56,848 $53,889 $2,959
North America 14,397 16,151 (1,754) 30,960 35,053 (4,093)
------ ------ ------- ------ ------ -------
$40,931 $39,492 $1,439 $87,808 $88,942 $(1,134)
======= ======= ====== ======= ======= ========
</TABLE>
Selling, general and administrative expenses increased $0.7 million or
2.6% for the quarter and $1.3 million or 2.5% for the six month period. The
increase is attributable primarily to the North American segment due to
higher compensation and the opening of new color and product development
centers in 1999.
Interest expense increased in 2000 due to higher levels of borrowing
incurred to support the Company's stock repurchase program and working
capital requirements.
Foreign currency transaction losses were primarily due to changes in
the value of currencies in major areas where the Company operates. The major
portion of the loss relates to the strengthening of the U.S. dollar at the
Company's Canadian subsidiary.
-9-
<PAGE>
Minority interest represents a 30% equity position of Mitsubishi
Chemical MKV Company in a partnership with the Company and a 35% equity position
of P.T. Prima Polycon in an Indonesian joint venture with the Company.
A comparison of pre-tax income by business segment for the three
months and six months ended February 29, 2000 and February 28, 1999 is as
follows:
<TABLE>
<CAPTION>
(In Thousands)
For the three months ended February 29 and 28,
2000 1999
------------------------------------------------ -------------------------------------------------
Net Net
Operating Interest Pretax Operating Interest Pretax Increase
Income Expense Income Income Expense Income (Decrease)
----------- -------- -------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
Europe $12,781 75.7% $12,781 $11,060 75.1% $11,060 $1,721
N. America (Note 6) 4,108 24.3% 4,108 3,672 24.9% 3,672 436
Interest
exp., net ($1,200) (1,200) ($422) (422) (778)
------------- --------- ------------ ----------- ------------ --------- ------------- ----------- -------------
$16,889 100.0% ($1,200) $15,689 $14,732 100.0% ($422) $14,310 $1,379
============= ========= ============ =========== ============ ========= ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
For the six months ended February 29 and 28,
2000 1999
------------------------------------------------ -------------------------------------------------
Net Net
Operating Interest Pretax Operating Interest Pretax Increase
Income Expense Income Income Expense Income (Decrease)
----------- -------- -------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
Europe $28,960 77.4% $28,960 $25,874 71.8% $25,874 $3,086
N. America (Note 6) 8,453 22.6% 8,453 10,157 28.2% 10,157 (1,704)
Interest
exp., net ($2,234) (2,234) ($605) (605) (1,629)
------------- --------- ------------ ----------- ------------ --------- ------------- ----------- -------------
$37,413 100.0% ($2,234) $35,179 $36,031 100.0% ($605) $35,426 ($247)
============= ========= ============ =========== ============ ========= ============= =========== =============
</TABLE>
Net income for the three months ended February 29, 2000 includes income
of $1,748,000 or $.05 per share from consideration received due to the
demutualization of an insurance carrier in North America. Net
income for the six months ended February 29, 2000 includes the aforementioned
gain and a net gain of $787,000 or $.02 per share from the settlement
of an insurance claim resulting from equipment problems at one of our North
American manufacturing facilities.
The effective tax rate for the quarters ended February 29, 2000 and
February 28, 1999 was 38.0% and 39.6% respectively. The effective tax rate
for the six months ended Feb. 29, 2000 and Feb. 28, 1999 was 38.4% and 39.4%
respectively. The 2000 rates were lower primarily because of a reduction in
certain European tax rates.
The translation effect of foreign currencies decreased net income by
$0.9 million or $.03 per share for the quarter and $1.8 million or $.06 per
share for the six month period.
Europe's operating income of $12.8 million for the quarter was up
16% from the same period last year. For the six month period, European
operating income was up $3.1 million or 12%. European volume was up 10% for
the quarter and 12% for the six month period. Capacity utilization in Europe
was 85% for the quarter and 87% for the six month period. Profit margins were
up modestly for the quarter and approximately the same for the six month
period.
North American operating income for the quarter was $1.4 million
down 38.6% from the same period last year, excluding $2.7 million of income
from the demutualization of an insurance carrier. North American capacity
utilization for the quarter improved to 83% from 81% last year, but profit
margins declined from 16.0% to 13.7% due to higher cost of plastic resins and
competitive price pressures.
-10-
<PAGE>
There has been a significant increase in plastic resin prices over
the past year due to an increase in oil prices and strong demand throughout
world markets. Due to competitive pressures, it has been extremely difficult
to pass on these increases to customers through higher selling prices. The
Company has had recent success in raising prices, but expects continued
upward pricing pressures for resins used in its products for the balance of
the fiscal year.
Order levels are good, especially in Europe and the Company
anticipates volume gains throughout its operations. But there will be
continuing pressure on margins and an adverse translation effect from the
Euro during the second half of the fiscal year.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of February 29, 2000, the current ratio was 3.5:1 and working
capital was $304 million. Marketable securities relating to the
demutualization of an insurance carrier in North America accounted for $2.5
million of the increase in working capital at February 29, 2000. Accounts
receivable increased $20.2 million at February 29, 2000 from the previous
year ended August 31, 1999. The increase is primarily attributable to higher
sales and a slight increase in the number of days sales outstanding due to
some lengthening in credit terms.
During the six months ended February 29, 2000, the Company repurchased
991,000 shares of its common stock for $14.4 million. Approximately 2.7 million
shares remain under a 6 million-share authorization approved by the Board of
Directors in August 1998. Subject to market conditions, the Company intends to
continue repurchasing its common stock in 2000.
The ratio of long-term liabilities to capital was 26.4% at February
29, 2000 and 22.4% at August 31, 1999. This ratio is calculated by dividing
the sum of long-term debt and other long-term liabilities by the sum total of
total stockholders' equity, long-term debt and other long-term liabilities.
The primary factor contributing to the increase was an additional $17.0
million borrowing under the revolving credit agreement in North America to
fund share repurchases.
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 adjustment is recorded in "accumulated other
comprehensive income" account in stockholders' equity. The strengthening of
the U.S. dollar during the six months ended February 29, 2000 decreased this
account by $14.9 million.
On June 15, 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is
effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.
Management of the Company anticipates that the adoption of SFAS 133 will not
have a significant effect on the Company's results of operations or its
financial position.
-11-
<PAGE>
YEAR 2000
The Company experienced no significant interruptions to its normal
operations at the start of calendar year 2000. The Company completed the
modification of its internal computer software applications and systems to
function properly with respect to dates in the Year 2000 and thereafter. The
Company utilized both its in-house staff as well as outside resources to
modify its systems. The Company's total cost of modifying its computer
software applications and systems to be Year 2000 compliant was approximately
$6 million. These amounts have been funded from operating cash flow. As of
April 5, 2000, the Company has not experienced any material disruptions of
its internal computer systems or software applications, and has not
experienced any problems with the computer systems or software applications
of its third party vendors and service providers. The Company will continue
to monitor these third party entities to determine the impact, if any, on the
business of the Company and the actions the Company must take, if any, in the
event of non-compliance by any of these third parties. Based upon the
Company's assessment of compliance by third parties, there appears to be no
material business risk posed by any such noncompliance.
CAUTIONARY STATEMENTS
Statements in this report which are not historical facts are forward
looking statements which involve risks and uncertainties and actual events or
results could differ materially from those expressed or implied in this report.
These "forward looking statements" are based on currently available information.
They are also inherently uncertain, and investors must recognize that events
could turn out to be significantly different from what we had expected. Examples
of such uncertainties include, but are not limited to the following:
- Worldwide and regional economic, business and political
conditions
- Fluctuations in the value of currencies in major areas where
the Company operates, i.e. the U.S. dollar, Euro, U.K. pound
sterling, Canadian dollar, Mexican peso and Indonesian rupiah
- Fluctuations in prices of plastic resins and other raw
materials
- Changes in customer demand and requirements
-12-
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 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 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<S> <C>
10.1* Employment Agreement dated December 9, 1999, between
the Registrant and Alain C. Adam (replacing
Employment Agreement dated January 31, 1996).
27 Financial Data Schedule (Filed only in electronic
format pursuant to Item 601(b)(27) of Regulation S-K.)
</TABLE>
(b) REPORTS ON FORM 8-K.
No Reports on Form 8-K have been filed during the quarter for which
this Report is filed.
*Management contract or compensatory plan or arrangement required to
be filed as an Exhibit hereto.
-13-
<PAGE>
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: April 14, 2000 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)
-14-
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Exh 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 9th day of December, 1999, by and between A. SCHULMAN,
INC., a Delaware corporation (the "Employer"), and ALAIN C. ADAM (the
"Employee").
WHEREAS, the Board of Directors of the Employer desires to
provide for the continued employment of the Employee as a member of the
Employer's management, in the best interest of the Employer and its
stockholders. The Employee is willing to commit himself continue to serve the
Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
The definitions of capitalized terms used in this Agreement
(unless stated where first used) are provided in the last Section hereof.
2. EMPLOYMENT
The Employer hereby continues to employ the Employee as Vice
President-International Automotive Operations for the Employer, and the Employee
hereby accepts such continued employment upon the terms and conditions herein
contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
3.1 DUTIES. The Employee shall devote his entire business
time, attention and energies to the Employer and shall not engage in any conduct
which shall reflect adversely upon the Companies. The Employee shall perform
such duties for the Companies as may be assigned to one in his executive status
and capacity by the Board. The Employee shall serve diligently and to the best
of his ability.
During his employment by the Employer, the Employee shall not,
without the Employer's prior written consent, be
<PAGE>
engaged in any other business activity, whether or not such business activity is
pursued for gain, profit or other pecuniary advantage, except that
notwithstanding the foregoing, he may invest his personal funds for his own
account; provided that such investment shall be passive and not controlling in
any such investment and subject to the provisions of Section 13.2 hereof and
provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the
Employee may serve on the Boards of Directors of other corporations during the
Term as long as such service does not interfere with the performance of his
duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable
office space, furnishings, secretarial and administrative assistance. Without
the Employee's consent, the Employee shall not be required to report principally
to an office located more than five hundred (500) miles from his principal
office at the date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW
DURING DISPUTE
4.1 TERM OF AGREEMENT. The Employer hereby employs the
Employee for a Term commencing as of the date hereof and ending December 9,
2002. At the end of January 2000 and at the end of each calendar month
thereafter up to and including the end of the calendar month in which the
Employee's 62nd birthday occurs, this Agreement shall automatically be extended
for one (1) month unless either party shall give notice to the other of
non-extension prior to the end of such calendar month; provided, however, if a
Change in Control shall have occurred during the Term of this Agreement,
Sections 7 and 8 and 10 through 20 of this Agreement shall continue in effect
until at least the end of the Change-in-Control Protective Period (whether or
not the Term of the Agreement shall have expired for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL.
Prior to any Change in Control, the Employer may terminate the employment of the
Employee for Cause pursuant to this Agreement. Prior to any Change in Control,
the Employee may terminate his employment pursuant to this Agreement if the
Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
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4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change
in Control, if the Employee shall be terminated for Cause, and, within 30 days
of such termination, shall notify the Employer of his intention to adjudicate
such termination as improper, the Employer agrees that it will deposit with
KeyBank National Association, Cleveland, Ohio, as Escrow Agent the installments
of the Employee's Base Salary (as provided in Section 5 below) as the same would
have become payable but for such termination. In the event of a final
adjudication by a tribunal of competent jurisdiction that such termination was
not for Cause, then the amounts so deposited in escrow, plus any interest earned
by the Escrow Agent thereon, shall be delivered promptly to the Employee. If
such adjudication shall be in favor of the Employer, the Escrow Agent shall
return the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated
damages but the Employer shall be entitled to a credit against any such award to
the extent of the sums so delivered to the Employee.
5. COMPENSATION
The Employer agrees to pay to the Employee as compensation for
his services hereunder a Base Salary initially equal to the fixed annual salary
currently being paid to the Employee as shown on the Employer's employment
records, payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business judgment.
The Base Salary in effect from time to time shall not be decreased during the
Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation
may not be limited to his Base Salary and that the Employee may receive an
annual bonus in the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation
and benefit plans available generally to executives of the Employer (including,
without limitation, any tax-qualified profit sharing plan, nonqualified profit
sharing plan, life insurance plan and health insurance plan) on a level
appropriate to his position and shall receive the employee fringe benefits
available generally to executives of the
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Employer (including, without limitation, the use of a company car).
6. EXPENSES
The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for entertainment,
travel and similar items. The Employer shall reimburse the Employee for all such
expenses upon the presentation by the Employee, from time to time, of an
itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's
employment shall be terminated for any reason during the Term (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer shall
pay the Employee's Base Salary to the Employee through the Date of Termination
at the rate in effect at the time the Notice of Termination is given (subject to
Section 7.2 hereof), together with all compensation and benefits payable to the
Employee through the Date of Termination under the terms of any compensation or
benefit plan, program or arrangement maintained by the Employer during such
period. Subject to Sections 8, 9, 10 and 11 hereof, after completing the expense
reimbursements required by Section 6 hereof and making the payments and
providing the benefits required by this Section 7, the Employer shall have no
further obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During the
Term (or, if later, at any time prior to the end of the Change-in-Control
Protective Period), during any period that the Employee fails to perform the
Employee's full-time duties with the Employer as a result of incapacity due to
physical or mental illness (but in no event for more than twenty-four (24)
months), the Employer shall pay only sixty percent (60%) of the Employee's Base
Salary to the Employee at the rate in effect at the commencement of any such
period (less amounts, if any, payable to the Employee at or prior to the time of
any such Base Salary payment under disability benefit plans of the Employer or
under the Social Security disability insurance program). After six (6) months of
Disability, the Employer shall have the right to terminate the Employee's
employment pursuant to this Agreement and all Base Salary payments (except the
sixty percent (60%) payments pursuant to the foregoing sentence) shall cease.
Except to the extent
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provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6 hereof
and making the payments and providing the benefits required by this Section 7,
the Employer shall have no further obligations to the Employee under this
Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY;
TERMINATION PAY; PROMPT PAYMENT
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's
employment shall be terminated for any reason during the Term of this Agreement
(or, if later, prior to the end of the Change-in-Control Protective Period), the
Employer shall pay the Employee's normal post-termination compensation and
benefits to the Employee as such payments become due. Subject to Section 10
hereof, such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Employer's retirement, insurance and
other compensation or benefit plans, programs and arrangements (other than this
Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding
anything to the contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws
governing this Agreement shall require that the Employer continue to pay or
otherwise compensate the Employee for any period of time following termination
of the Employee's employment ("Continuation Pay") or if such laws require
certain amounts of severance pay, termination compensation or the like
(collectively, "Termination Pay"), then to the fullest extent permitted by law
any payments to the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof
shall be included in the calculation of Continuation Pay and Termination Pay and
such payments shall be deducted from the amount of Continuation Pay or
Termination Pay due the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7 or
9 hereof or this Section 8 shall be made promptly after the event giving rise to
the obligation and shall be made to the Employee or in accordance with Section
14.2 hereof, as the case may be.
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9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A
CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
9.1 DEATH BENEFIT. If the Employee's employment shall be
terminated by death during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period), then, in addition to the compensation and
benefits provided by Sections 7.1 and 8 hereof, the Employer shall pay a lump
sum amount equal to sixty percent (60%) of the Base Salary for twenty-four (24)
months in accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the
Employer shall terminate the Employee's employment during the Term and prior to
a Change in Control, without Cause (and not for Disability or in connection with
the Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term, each
of which bonuses shall be equal to one-half (1/2) times the average annual bonus
paid to the Employee during the most recent five (5) calendar years of the
Employee's employment by any of the Companies (prorated for any partial years in
the remaining Term).
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
10.1 SEVERANCE PAYMENTS.
Subject to Section 10.2 hereof, the Employer shall pay the
Employee the payments described in this Section 10.1 (the "Severance Payments")
upon the termination of the Employee's employment following a Change in Control
and prior to the end of the Change-in-Control Protective Period, in addition to
any payments and benefits to which the Employee is entitled under Sections 5, 6,
7 and 8.1 hereof, unless such termination is (i) by the Employer for Cause, (ii)
by reason of death or Disability, or (iii) by the Employee without Good Reason.
For purposes of this Agreement, the Employee's employment shall be deemed to
have been terminated by the Employer without Cause following a Change in Control
or by the Employee with Good Reason following a Change in Control, as the case
may be, if (i) the Employee's employment is terminated without Cause prior to a
Change in Control and such termination was at the request or direction of a
Person who has entered into an agreement with the Employer the consummation of
which would constitute a Change in Control, (ii) the Employee terminates his
employment with Good Reason prior to a Change in Control and the circum-
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<PAGE>
stance or event which constitutes Good Reason occurs at the request or direction
of such Person, or (iii) the Employee's employment is terminated by the Employer
without Cause prior to a Change in Control (but following a Potential Change in
Control) and such termination is otherwise in connection with or in anticipation
of a Change in Control which actually occurs. For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position
taken by the Employee shall be presumed to be correct unless the Employer
establishes to the Committee by clear and convincing evidence that such position
is not correct.
(A) In lieu of any further salary payments to the
Employee for periods subsequent to the Date of Termination and in lieu of
any severance benefit otherwise payable to the Employee, the Employer shall
pay to the Employee a lump sum severance payment, in cash, equal to three
(3) times the sum of (i) the higher of the Employee's Base Salary in effect
immediately prior to the occurrence of the event or circumstance upon which
the Notice of Termination is based or the Employee's Base Salary in effect
immediately prior to the Change in Control, and (ii) the higher of the
annual bonus earned by the Employee in respect of the Employer's fiscal
year immediately preceding that in which the Date of Termination occurs or
the average annual bonus so earned in respect of the three fiscal years
immediately preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of any annual incentive
plan to the contrary, the Employer shall pay to the Employee a lump sum
amount, in cash, equal to the sum of (i) any annual incentive compensation
which has been allocated or awarded to the Employee for a completed fiscal
year preceding the Date of Termination and which, as of the Date of
Termination, is contingent only upon the continued employment of the
Employee to a subsequent date, and (ii) a pro rata portion to the Date of
Termination of a deemed annual bonus for the Employer's fiscal year in
which the Date of Termination occurs, calculated by multiplying (i) the
higher of the annual bonus earned by the Employee with respect to the
immediately preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years of
the Employer by (ii) the fraction obtained by dividing the number of days
in the fiscal year of the
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Employer in which termination occurs up to and including the Date of
Termination by 365.
(C) For the thirty-six (36) month period immediately
following the Date of Termination, the Employer shall arrange to provide
the Employee with life, disability, accident and health insurance benefits
substantially similar to those which the Employee is receiving immediately
prior to the Notice of Termination (without giving effect to any amendment
to such benefits made subsequent to a Change in Control, which amendment
adversely affects in any manner the Employee's entitlement to or the amount
of such benefits); PROVIDED, HOWEVER, that, unless the Employee consents to
a different method (after taking into account the effect of such method on
the calculation of "parachute payments" pursuant to Section 10.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Employee pursuant to this
Section 10.1(C) shall be reduced to the extent comparable benefits are
actually received by or made available to the Employee without cost during
the thirty-six (36) month period following the Employee's termination of
employment (and any such benefits actually received by or made available to
the Employee shall be reported to the Employer by the Employee). If the
Severance Payments shall be decreased pursuant to Section 10.2 hereof, and
the Section 10.1(C) benefits which remain payable after the application of
Section 10.2 hereof are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt or availability of comparable
benefits, the Employer shall, at the time of such reduction, pay to the
Employee the least of (a) the amount of the decrease made in the Severance
Payments pursuant to Section 10.2 hereof, (b) the amount of the subsequent
reduction in these Section 10.1(C) benefits, or (c) the maximum amount
which can be paid to the Employee without being, or causing any other
payment to be, nondeductible by reason of section 280G of the Code.
10.2 DEDUCTIBILITY.
(A) Notwithstanding any other provisions of this Agreement,
in the event that any payment or benefit received or to be received by the
Employee in connection with a Change in Control or the termination of the
Employee's employment (whether pursuant to the terms of this Agreement or any
other plan,
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arrangement or agreement with the Employer, any Person whose actions result in a
Change in Control or any Person affiliated with the Employer or such Person)
(all such payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would not be deductible (in whole or part),
by the Employer, an affiliate or Person making such payment or providing such
benefit as a result of section 280G of the Code, then, to the extent necessary
to make such portion of the Total Payments deductible (and after taking into
account any reduction in the Total Payments provided by reason of section 280G
of the Code in such other plan, arrangement or agreement), the cash Severance
Payments shall first be reduced (if necessary, to zero), and the noncash
Severance Payments shall thereafter be reduced (if necessary, to zero);
PROVIDED, HOWEVER, that the Employee may elect (at any time prior to the
delivery of a Notice of Termination hereunder) to have the noncash Severance
Payments reduced (or eliminated) prior to any reduction of the cash Severance
Payments.
(B) For purposes of this limitation, (i) no portion of the
Total Payments the receipt or enjoyment of which the Employee shall have
effectively waived in writing prior to the delivery of a Notice of Termination
shall be taken into account, (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel (the "Tax Counsel")
reasonably acceptable to the Employee and selected by the accounting firm which
was, immediately prior to the Change in Control, the Employer's independent
auditor (the "Auditor") does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4)(B) of the
Code or are otherwise not subject to disallowance as deductions by reason of
section 280G of the Code, in the opinion of the Tax Counsel, and (iv) the value
of any noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
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(C) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Employee and the Employer in applying the terms of this Section
10.2, the aggregate "parachute payments" paid to or for the Employee's benefit
are in an amount that would result in any portion of such "parachute payments"
not being deductible by reason of section 280G of the Code, then the Employee
shall have an obligation to pay the Employer upon demand an amount equal to the
sum of (i) the excess of the aggregate "parachute payments" paid to or for the
Employee's benefit over the aggregate "parachute payments" that could have been
paid to or for the Employee's benefit without any portion of such "parachute
payments" not being deductible by reason of section 280G of the Code; and (ii)
interest on the amount set forth in clause (i) of this sentence at one hundred
twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code
from the date of the Employee's receipt of such excess until the date of such
payment.
10.3 The payments provided in Sections 10.1(A) and (B) hereof
shall be made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments, and the limitation on
such payments set forth in Section 10.2 hereof, cannot be finally determined on
or before such day, the Employer shall pay to the Employee on such day an
estimate, as determined in good faith by the Employer, in accordance with
Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined but in no event later than the thirtieth (30th) day after the Date
of Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one hundred
twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Employer shall
provide the Employee with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Employer has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be
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attached to the statement). In the event the Employer should fail to pay when
due the amounts described in Sections 10.1(A), (B) and (C) hereof or in Section
10.2 hereof, the Employee shall also be entitled to receive from the Employer an
amount representing interest on any such unpaid amounts from the due date, as
determined under this Section 10.3 (without regard to any extension of the Date
of Termination pursuant to Section 11.3 hereof), to the date of payment at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code.
10.4 The Employer also shall pay to the Employee all legal
fees and expenses incurred by the Employee (i) in disputing in good faith any
issue relating to the termination of the Employee's employment following a
Change in Control and prior to the end of the Change-in-Control Protective
Period, (ii) in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement, or (iii) in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred as the
Employer reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
11.1 NOTICE OF TERMINATION. During the Term (and, if longer,
until the end of the Change-in-Control Protective Period), any purported
termination of the Employee's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated. Further, with respect to any purported termination of the Employee's
employment after a Change in Control and prior to the end of the
Change-in-Control Protective Period, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termi-
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nation (after reasonable notice to the Employee and an opportunity for
the Employee, together with the Employee's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Employee was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Employee's employment during the Term (and,
if longer, prior to the end of the Change-in-Control Protective Period), shall
mean (i) if the Employee's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Employee shall not
have returned to the full-time performance of the Employee's duties during such
thirty (30) day period), and (ii) if the Employee's employment is terminated for
any other reason, the date specified in the Notice of Termination (which, in the
case of a termination by the Employer, shall not be less than thirty (30) days
(except in the case of a termination for Cause) and, in the case of a
termination by the Employee, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any
purported termination of the Employee's employment after a Change in Control and
prior to the end of the Change-in-Control Protective Period, if within fifteen
(15) days after any Notice of Termination is given, or, if later, prior to the
Date of Termination (as determined without regard to this Section 11.3), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
extended until the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended by
a notice of dispute given by the Employee only if such notice is given in good
faith and the Employee pursues the resolution of such dispute with reasonable
diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs following a Change in Control and prior to the end of the
Change-in-Control Protective Period and the Date of Termination is extended in
accordance with Section 11.3
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hereof, the Employer shall continue to pay the Employee the full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was
participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 11.3 hereof.
Amounts paid under this Section 11.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 7.1 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
12. NO MITIGATION
The Employer agrees that, if the Employee's employment with
the Employer terminates following a Change in Control and prior to the end of
the Change-in-Control Protective Period, the Employee is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
13.1 CONFIDENTIALITY. The Companies' methods, plans for doing
business, processes, pricing, compounds, customers and supplies are vital to the
Companies and, to the extent not made public by the Companies, constitute
confidential information subject to the Companies' proprietary rights therein.
The Employee covenants and agrees that during the Term and at all times
thereafter, the Employee will not, directly or indirectly, make known, divulge,
furnish, make available or use, otherwise than in the regular course of the
Employee's employment by the Employer, any invention, product, process,
apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and
techniques), or any other confidential or so-called "insider" information of any
of the Companies. This
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covenant shall apply without regard to the time or circumstances of any
termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee
covenants and agrees that during the period of one (1) year following any
termination of the Employee's employment which occurs prior to a Change in
Control, the Employee will not, directly or indirectly, either as an individual
for the Employee's own account or as an investor, or other participant in, or as
an employee, agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with,
or attempt to solicit, employ, entice, take away or
interfere with, any employee of the Employer or the
Companies; or
(ii) engage or participate in or finance, aid or be
connected with any enterprise which competes with the
business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in which
the Companies or any of them shall be doing business as of such date of such
termination. This covenant shall apply without regard to the circumstances of
any termination of the Employee's employment which occurs prior to a Change in
Control.
13.3 The Employee acknowledges that the covenants contained in
this Section 13 are of the essence of this Agreement and said covenants shall be
construed as independent of any other provisions of this Agreement. Recognizing
the irreparable nature of the injury that could result from the Employee's
violation of any of the covenants and agreement to be performed and/or observed
by the Employee pursuant to the provisions of this Section 13, and that damages
would be inadequate compensation, it is agreed that any violations by the
Employee of the provisions of this Section 13, shall be the proper subject for
immediate injunctive and other equitable relief to the Employer.
14. SUCCESSORS; BINDING AGREEMENT
14.1 In addition to any obligations imposed by law upon any
successor to the Employer, the Employer will require any successor (whether
direct or indirect, by purchase, merger,
14
<PAGE>
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Employer to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Employer would be required to
perform it if no such succession had taken place. Failure of the Employer to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Employer in the same amount and on the same terms as the
Employee would be entitled to hereunder if the Employee were to terminate the
Employee's employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. Except as
provided in this Section 14.1, this Agreement shall not be assignable by either
party without the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to the Employee
hereunder (other than amounts which, by their terms, terminate upon the death of
the Employee) if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Employee's estate.
15. NOTICES
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Employee, to the address shown for the Employee in the personnel records of the
Employer and, if to the Employer, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
15
<PAGE>
To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Employee and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes the Employment Agreement between the
Employer and the Employee dated as of December 28, 1990 and any other agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party, except as expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio. All references to sections of the Exchange Act or the Code shall be deemed
also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Employee has agreed. The obligations of the Employer and the Employee under this
Agreement which by their nature may require (partial or total) performance after
the expiration of the Term or the Change-in-Control Protective Period
(including, without limitation, those under Sections 5 through 11 and Section 13
hereof) shall survive such expiration.
16
<PAGE>
17. VALIDITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
18. COUNTERPARTS
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL;
ARBITRATION
After a Change in Control and prior to the end of the
Change-in-Control Protective Period, all claims by the Employee for benefits
under this Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set forth
the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to
the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Employee's claim
has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Akron, Ohio, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding any provision of this Agreement
to the contrary, the Employee shall be entitled to seek specific performance of
the Employee's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
20. DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
17
<PAGE>
(B) "Board" shall mean the Board of Directors of the Employer.
(C) "Cause" for termination by the Employer of the Employee's
employment shall mean the following:
(I) with respect to a termination as to
which the Notice of Termination is duly given prior to a
Change in Control, the Employee's breach of his covenants
herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or
knowingly permitting nonfeasance of his duties in any material
respect, or the Employee's committing a felony; and
(II) with respect to a termination as to
which the Notice of Termination is duly given following a
Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties
with the Employer (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Employee pursuant
to Section 11.1 hereof) after a written demand for substantial
performance is delivered to the Employee by the Board, which
demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the
Employee's duties, or (ii) the willful engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Employer or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's
part shall be deemed "willful" unless done, or omitted to be
done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the
best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim
by the Employer that Cause exists shall be given effect unless
the Employer establishes to the Committee by clear and
convincing evidence that Cause exists.
18
<PAGE>
(D) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its affiliates other than in connection with the acquisition
by the Employer or its affiliates of a business) representing
25% or more of either the then outstanding shares of common
stock of the Employer or the combined voting power of the
Employer's then outstanding securities; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Employer) whose appointment or election by the Board or
nomination for election by the Employer's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(III) the stockholders of the Employer
approve a merger or consolidation of the Employer with any
other corporation or approve the issuance of voting securities
of the Employer in connection with a merger or consolidation
of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which would result in
the voting securities of the Employer outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee
19
<PAGE>
benefit plan of the Employer or any subsidiary of the
Employer, at least 75% of the combined voting power of the
voting securities of the Employer or such surviving entity or
any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition
by the Employer or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer
approve a plan of complete liquidation or dissolution of the
Employer or an agreement for the sale or disposition by the
Employer of all or substantially all of the Employer's assets,
other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at
least 75% of the combined voting power of the voting
securities of which are owned by stockholders in substantially
the same proportions as their ownership of the Employer
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Employer immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Employer
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Employee participates as
an equity investor in the acquiring entity or any of its affiliates (the
20
<PAGE>
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under one
or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(E) "Change-in-Control Protective Period" shall mean the
period from the occurrence of a Change in Control until the later of the second
anniversary of such Change in Control or, if such Change in Control shall be
caused by the stockholder approval of a merger or consolidation described in
Section 20(E)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Committee" shall mean (i) the individuals (not fewer
than three in number) who, immediately prior to a Potential Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the individual
or individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed five.
(H) "Companies" shall mean, collectively, the Employer and
each corporation which is now and hereafter shall become a subsidiary of, or a
parent of, the Employer, together with their respective successors and assigns.
21
<PAGE>
(I) "Continuation Pay" shall mean those payments so described
in Section 8.2 hereof.
(J) "Date of Termination" shall have the meaning stated in
Section 11.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Employer of the Employee's employment, if, as a result of the
Employee's incapacity due to physical or mental illness, the Employee shall have
been absent from the full-time performance of the Employee's duties with the
Employer for a period of six (6) consecutive months, the Employer shall have
given the Employee a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Employee shall not have
returned to the full-time performance of the Employee's duties.
(L) "Employee" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Employer" shall mean A. Schulman, Inc. and, except in
determining under Section 20(E) hereof whether or not any Change in Control of
the Employer has occurred, any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(N) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(O) "Good Reason" for termination by the Employee of the
Employee's employment shall mean the occurrence (without the Employee's express
prior written consent) after any Change in Control, or after any Potential
Change in Control under the circumstances described in the second sentence of
Section 10.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Employer, or failures by the
Employer to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(I) the assignment to the Employee of any
duties inconsistent with the Employee's status as an executive
officer of the Employer or a substantial adverse alteration in
the nature or status of the
22
<PAGE>
Employee's responsibilities from those in effect immediately
prior to the Change in Control (other than any such alteration
primarily attributable to the fact that the Employer may no
longer be a public company);
(II) a reduction by the Employer in the
Employee's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in
control of the Employer;
(III) the relocation of the Employer's
principal executive offices to a location more than fifty (50)
miles from the location of such offices immediately prior to
the Change in Control or the Employer's requiring the Employee
to be based anywhere other than the Employer's principal
executive offices except for required travel on the Employer's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(IV) the failure by the Employer, without
the Employee's consent, to pay to the Employee any portion of
the Employee's current compensation, or to pay to the Employee
any portion of an installment of deferred compensation under
any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue
in effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan
and Nonqualified Profit Sharing Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Employer to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's
23
<PAGE>
participation relative to other participants, as existed at
the time of the Change in Control;
(VI) the failure by the Employer to continue
to provide the Employee with benefits substantially similar to
those enjoyed by the Employee under any of the Employer's
pension, life insurance, medical, health and accident, or
disability plans in which the Employee was participating at
the time of the Change in Control, the taking of any action by
the Employer which would directly or indirectly materially
reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of
the Change in Control, or the failure by the Employer to
provide the Employee with the number of paid vacation days to
which the Employee is entitled on the basis of years of
service with the Employer in accordance with the Employer's
normal vacation policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment
for Good Reason shall not be affected by the Employee's incapacity due to
physical or mental illness. The Employee's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Employee that Good Reason exists shall be presumed
to be correct unless the Employer establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(P) "Notice of Termination" shall have the meaning stated in
Section 11.1 hereof.
(Q) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not
24
<PAGE>
include (i) the Employer or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Employer or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Employer in substantially the
same proportions as their ownership of stock of the Employer.
(R) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(1) the Employer enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(2) the Employer or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Employer
representing 15% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(S) "Severance Payments" shall mean those payments described
in Section 10.1 hereof.
(T) "Term" shall mean the period of time described in Section
4.1 hereof (including any extension or continuation described therein).
25
<PAGE>
(U) "Termination Pay" shall mean those payments so described
in Section 8.2 hereof.
(V) "Total Payments" shall mean those payments described in
Section 10.2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed (the corporate signatory by the respective officer
duly authorized) as of the day and year first above written.
/s/ Alain C. Adam
--------------------------------------
Alain C. Adam
A. SCHULMAN, INC.
By /s/ James H. Berick
------------------------------------
James H. Berick, Secretary
By: /s/ R. A. Stefanko
-----------------------------------------
R. A. Stefanko, Executive Vice President
26
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 31,857,000
<SECURITIES> 2,512,000
<RECEIVABLES> 180,037,000
<ALLOWANCES> 4,625,000
<INVENTORY> 186,834,000
<CURRENT-ASSETS> 423,395,000
<PP&E> 345,204,000
<DEPRECIATION> 191,900,000
<TOTAL-ASSETS> 597,425,000
<CURRENT-LIABILITIES> 119,544,000
<BONDS> 83,924,000
0
1,056,000
<COMMON> 38,381,000
<OTHER-SE> 301,291,000
<TOTAL-LIABILITY-AND-EQUITY> 597,425,000
<SALES> 521,773,000
<TOTAL-REVENUES> 526,801,000
<CGS> 433,965,000
<TOTAL-COSTS> 491,622,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,069,000
<INTEREST-EXPENSE> 3,058,000
<INCOME-PRETAX> 35,179,000
<INCOME-TAX> 13,503,000
<INCOME-CONTINUING> 21,676,000
<DISCONTINUED> 0
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<EPS-BASIC> 0.70
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