<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended August 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to _____________.
Commission File No. 0-7459
A. SCHULMAN, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-0514850
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(State of Incorporation) (I.R.S. Employer Identification No.)
3550 WEST MARKET STREET, AKRON, OHIO 44333
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(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (330) 666-3751
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
[Cover continued on following page]
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[Cover Continued From Previous Page]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
on October 18, 2000: $311,762,824.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practical date:
29,239,922 Shares of Common Stock, $1.00 Par Value, at October 18, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document In Which Incorporated
-------- ---------------------
Portions of the Registrant's Notice
of Annual Meeting and Proxy Statement
Dated November 10, 2000 III and IV
Portions of the Registrant's 2000
Annual Report to Stockholders I and II
Neither the Report of the Compensation Committee on Executive Compensation nor
the Performance Graph contained in the Registrant's Notice of Annual Meeting and
Proxy Statement dated November 10, 2000 shall be deemed incorporated by
reference herein.
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PART I
ITEM 1. BUSINESS
A. Schulman, Inc. (the "Company") was organized as an Ohio corporation
in 1928 and changed its state of incorporation to Delaware in 1969.
The Company is engaged in the sale of plastic resins and compounds,
which are used as raw materials by its customers. To identify reportable
segments, the Company considered its operating structure and the types of
information subject to regular review by executive management. On this basis,
the Company operates in two geographic business segments, North America and
Europe.
BUSINESS ACTIVITIES
The Company combines basic resins purchased from plastic resin
producers and, through mixing and extrusion processes, introduces additives that
provide color, stabilizers, flame retardants or other enhancements that may be
required by a customer. These compounds are formulated in the Company's
laboratories and are manufactured in the Company's fourteen plastics compounding
plants in North America, Europe and Asia. Customers for the Company's plastic
compounds include manufacturers, custom molders and extruders of a wide variety
of plastic products and parts. The Company generally produces compounds on the
basis of customer commitments. When necessary, compounds are produced for future
delivery and are stored in Company or public warehouses.
The Company's plastic compounds are sold to manufacturers and suppliers
in various markets such as packaging, automotive, consumer products,
electrical/electronics, office equipment, and agriculture. These compounds are
used in the packaging industry for such products as plastic bags and labels and
packaging materials for food, soap, fragrances, flowers, gardening supplies and
various household necessities; in the automotive industry for such products as
grilles, body side moldings, bumper protective strips, window seals, valance
panels, bumper guards, air ducts, steering wheels, fan shrouds and other
interior and exterior components; in the consumer products industry for such
items as writing instruments, shelving,
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soft drink coolers, video tape cassettes, batteries, outdoor furniture, lawn
sprinklers, artificial turf, skateboards, toys, games and plastic parts for
various household appliances; in the electrical/electronics industry for such
products as outdoor lighting, parts for telephones, connector blocks,
transformers, capacitor housings and wire and cable insulation for power
generation, distribution and control systems; in the office equipment industry
for such products as cases and housings for computers, folders and binders,
stack trays and panels and drawers for copying machines; and in the agriculture
industry for such products as greenhouse coverings and protective film for
plants and agricultural mulch.
The Company's manufacturing can be classified into four product
families: color and additive concentrates; engineered compounds; polyolefins;
and polyvinyl chloride (PVC).
COLOR AND ADDITIVE CONCENTRATES
The Company's concentrate business consists of the compounding of
resins that provide plastic with specific color and/or physical properties, such
as conductivity, flexibility, viscosity and textures. A color concentrate is a
clear or natural plastic resin into which a substantial amount of color pigment
is incorporated or dispersed. The Company manufactures its concentrates using
its formulae and purchased prime natural resins. These concentrates are sold to
manufacturers of plastic products, such as film for packaging, household goods,
toys, automotive parts, mechanical goods and other plastic items.
The Company's concentrates are sold under various trade names,
including the following:
Polybatch-Registered Trademark-, which is an additive or color
concentrate used for modifying various plastic resins and which
provides various physical properties required by customers;
Polyblak-Registered Trademark-, which is a line of black concentrates
that are resistant to weather and sunlight and that are used by wire
and cable manufactures for insulation coating and in the production
of plastic pipe, black film and other black plastic items; and
Papermatch-Registered Trademark-, one of the Company's newer product
lines, which is a plastic alternative to paper used for packaging,
menus, maps and other products. Papermatch-Registered Trademark- is
printable and resistant to tearing, moisture and chemicals.
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ENGINEERED COMPOUNDS
The Company's engineered compounds are products designed to have and
maintain characteristics such as chemical resistance, electrical conductivity,
heat resistance and/or high strength-to-weight ratios. The engineered compounds
manufactured by the Company include the following:
Polyman-Registered Trademark- and Polyflam-Registered Trademark- are
flame retardant compounds used in applications such as telephone
systems, terminal blocks, parts for color televisions, electrical
components and housings for household appliances and outdoor products.
Schulamid-Registered Trademark- is a nylon compound which can be
unfilled, reinforced or impact-modified. Schulamid-Registered
Trademark- is used in applications which require good impact strength
and resistance to high temperatures and chemicals. Typical
applications include under-the-hood automotive components and various
building and consumer products.
Formion-Registered Trademark-, a specialized compound which has good
impact strength, is resistant to abrasion and has performance
characteristics which do not decrease in low temperatures.
Formion-Registered Trademark- is sold principally to the
transportation industry for use in bumper blocks and protective rub
strips.
Polypur-Registered Trademark- is a reinforced and alloyed
thermoplastic polyurethane that has impact resistance and molding
properties for automotive applications such as exterior side moldings,
grilles, body side moldings and other painted parts.
Reflection Series-TM-, is a Surlyn-Registered Trademark- alloy
manufactured by Dupont and color-styled by the Company. It is used as
a replacement for painted applications which require durability.
POLYOLEFINS
The Company's polyolefin business consists of numerous polypropylene
and polyethylene resins and compounds. Polyolefins are used for interior trim,
fascias and bumper covers in automotive applications; for toys, small
appliances, sporting goods, and agricultural and watercraft products in
roto-molding applications; and for office supplies in industrial/commercial
applications. The polyolefin products manufactured by the Company include the
following:
Polytrope-Registered Trademark-, which is a thermoplastic elastomer
which has high resiliency and good impact resistance. Presently, the
principal market for this product is the domestic automotive industry
and typical applications include valance panels, body side moldings,
grilles and bumper rub strips. Parts molded from Polytrope-Registered
Trademark- weigh less than equivalent
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metal parts, are impact-resistant and may be painted to match adjoining
exterior body parts.
Polyfort-Registered Trademark-, which is a reinforced polypropylene
compound for applications which require stiffness and resistance to
heat distortion, such as coffee makers, binders for computer printouts,
setbacks and under-the-hood products for automobiles.
Schulink-Registered Trademark-, which is a crosslink polyethylene-based
compound, is used in rotational molding applications requiring high
strength and chemical resistance, such as industrial doors and
commercial waste containers.
POLYVINYL CHLORIDE
The Company's PVC business is transacted under the name
Polyvin-Registered Trademark- and involves the formulation of compounds and
elastomers to introduce a variety of product attributes, including
weatherability, consistency, ease of processing, material flexibility, and
high-gloss or low-gloss finish. The Company's thermoplastic PVC compounds are
available in blow molding, injection molding and extrusion grades for
application in the manufacture of automotive, furniture, architectural and
consumer products. The Company's Sunprene(R) compound serves as a replacement
for rubber and other thermoplastic elastomers in automotive applications.
The Company also performs tolling services, which involve the
compounding of resins and other materials provided by customers based upon
formulae provided by such customers. Tolling is done principally for major
plastic resin producers. The Company is compensated on the basis of an agreed
price per pound plus an additional charge for any additives and packing supplied
by the Company.
The Company also acts as a merchant, buying prime and off-grade plastic
resins and reselling these commodities, without further processing, to a variety
of users. The plastic resins generally are purchased from major producers. Prime
resins purchased from these producers are usually sold to small and medium-sized
customers. In addition to prime resins, the Company also purchases supplies of
resins resulting from overruns, changes in customers' specifications and failure
to meet rigid prime specifications. Historically, these materials have been in
continuous supply, generally in proportion to the total industry production of
plastic resins.
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The Company, through its European operations, acts as a distributor
for several major resin producers which include BASF, Exxon Chemical,
ATOFINA, Solvay, BP Amoco and Vestolit GmbH. The Company also acts as United
States and Canadian distributor of Escorene-Registered Trademark-
polypropylene resins and, in the United States, Escorene-Registered
Trademark- roto-molding resins, both manufactured by Exxon Chemical. The
Company also is a distributor in the United States and Canada for Exxon
Chemical of polyethylene used in injection molding.
Information regarding the amount of sales, operating income and
identifiable assets attributable to each of the Company's geographic areas
for the last three years is set forth in Note 12 of the Notes to Consolidated
Financial Statements in the Company's 2000 Annual Report to Stockholders,
which information is incorporated herein by reference.
The Company's principal foreign subsidiaries are as follows:
N.V.A. Schulman Plastics, S.A., a Belgian subsidiary located in
Bornem, Belgium, manufactures color and additive concentrates and compounds.
These products principally are sold in Germany, France, the Benelux countries,
Italy and the Far East.
A. Schulman International Services N.V., a Belgian subsidiary located
in Bornem, Belgium, is a subsidiary of N.V. A. Schulman, S.A. This company
provides financing and administrative services to the Company's subsidiaries.
A. Schulman, Inc., Limited, a United Kingdom subsidiary located in
South Wales, United Kingdom, manufactures color and additive plastic
concentrates which are sold primarily in the United Kingdom.
A. Schulman GmbH, a German subsidiary located in Sindorf, Germany,
manufactures engineered and flame-retardant plastic compounds. In addition,
the Company purchases and sells prime and off-grade plastic resins from major
European producers. During the fiscal year ended August 31, 2000, this
subsidiary purchased approximately 27% of the compounds manufactured in the
Bornem, Belgium plant. Approximately 18% of the sales volume of A. Schulman
GmbH during the same period was derived from the sale of plastic resins and
compounds of Vestolit GmbH, BP Amoco, Exxon Chemical, Ticona and Solvay.
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A. Schulman Canada Ltd., a Canadian subsidiary located in St. Thomas,
Ontario, manufactures engineered and various other plastic compounds, acts as a
merchant of prime and off-grade plastic resins and distributes for Exxon
Chemical, Escorene polypropylene resin and polyethylene for injection molding.
Its principal sales office is located in Toronto. Approximately 54% of its
production is sold to customers in the United States with the remainder sold in
Canada.
A. Schulman AG, a Swiss subsidiary located in Zurich, Switzerland,
sells plastic compounds and concentrates manufactured by other European
subsidiaries of the Company and also acts as a merchant of plastic resins.
A. Schulman, S.A., a French subsidiary, has six sales offices in France
and is a distributor in France for ATOFINA and Appryl. A. Schulman, S.A. also
acts as a merchant of plastic resins, and sells compounds manufactured by the
Company's subsidiaries in Bornem, Belgium, Sindorf, Germany and Givet, France.
Diffusion Plastique is also a Paris-based distributor for BASF and Solvay of
certain plastic materials in France.
A. Schulman Plastics, S.A., another French subsidiary, is located in
Givet, France. This subsidiary produces plastic concentrates for the Company's
European market.
Through its Mexican subsidiary, A. Schulman de Mexico, S.A. de C.V.,
the Company manufactures concentrates for the packaging industry and
compounds for the automotive, construction, appliance and consumer products
markets.
A. Schulman Polska Sp. z o.o., located in Warsaw, Poland, is a
wholly-owned subsidiary of A. Schulman GmbH. This Company sells products
manufactured by other subsidiaries of the Company and acts as distributor and
merchant of plastic resins and compounds in Poland.
A. Schulman Plastics SpA, located in Italy, is a wholly-owned
subsidiary of N.V. A. Schulman, S.A. This subsidiary manufactures and sells
engineered compounds and concentrates for the Italian market. It also performs
tolling services, sells manufacturing products of N.V. A. Schulman Plastics,
S.A. and acts as a merchant of plastic resins in Italy.
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A. Schulman Plastics S.L., a Spanish subsidiary, is engaged primarily
in distribution to the Spanish market through its offices located in Barcelona,
Madrid and Valencia, Spain. This subsidiary also engages in merchant
activities in Spain.
A. Schulman Hungary Kft., a Hungarian subsidiary, sells engineered
compounds manufactured by A. Schulman GmbH and concentrates manufactured by
N.V. A. Schulman Plastics, S.A. in Belgium and by A. Schulman Plastics, S.A.
in France. It also acts as a merchant of plastic resins in Hungary.
JOINT VENTURES
The Company, through its wholly-owned subsidiary ASI Investments
Holding Co., owns a 70% partnership interest in The Sunprene Company, which
manufactures a line of PVC thermoplastic elastomers and compounds primarily for
the North American automotive market. The other partner is an indirect
wholly-owned subsidiary of Mitsubishi Chemical MKV Co., one of the largest
chemical companies in Japan. This partnership has two manufacturing lines at the
Company's Bellevue, Ohio facility. The Company's partner provides technical and
manufacturing expertise.
The Company, through its wholly-owned subsidiary A. Schulman
International, Inc., owns a 65% interest in PT. A. Schulman Plastics, Indonesia,
an Indonesian joint venture. This joint venture has a manufacturing facility
with two production lines in Surabaya, Indonesia. The other partner is P.T.
Prima Polycon Indah.
EMPLOYEE INFORMATION
As of August 31, 2000, the Company had approximately 984 employees in
the United States and approximately 1,515 employees in its foreign operations.
In October 2000 the Company announced its plan to terminate manufacturing at its
Akron, Ohio plant. Upon such termination of manufacturing, the Company expects
that it will have approximately 860 employees in the United States. More than
80% of the Company's hourly production employees are represented by various
unions under collective bargaining agreements.
The Company has laboratory facilities at each of its plastics
compounding plants staffed by approximately 252 technical personnel. The
Company's plastic compounding business is, to
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a degree, dependent on its ability to hire and retain qualified technical
personnel. These personnel are involved in activities relating to the
development of new compounds and the testing and sampling of material for
conformity with product specifications. The Company has experienced no
difficulty in hiring or retaining such personnel.
RESEARCH AND DEVELOPMENT
A large part of the Company's technical activities relates to the
development of compounds for specific applications of customers. Research
activities relating to the development of new products and the improvement of
existing products are important to the Company; however, the amounts spent
during the last three fiscal years have not been material.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
Management believes that compliance with Federal, state and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, has not had a material
effect upon the capital expenditures, earnings or competitive position of the
Company.
DEPENDENCE ON CUSTOMERS
During the year ended August 31, 2000, the Company's five largest
customers accounted in the aggregate for less than 10% of total sales. In
management's opinion, the Company is not dependent upon any single customer and
the loss of any one customer would not have a materially adverse effect on the
Company's business other than, potentially, on a temporary basis.
AVAILABILITY OF RAW MATERIALS
The raw materials required by the Company are readily available from
major plastic resin producers or other suppliers. The principal types of plastic
resins used in the manufacture of the Company's proprietary plastic compounds
are polypropylene, PVC (polyvinyl chloride), polyethylene, polystyrene, ABS
(acrylonitrile butadiene styrene) and polyurethane.
COMPETITION
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The Company's business is highly competitive. The Company competes with
producers of basic plastic resins, many of which also operate compounding
plants, and also competes with other independent plastic compounders. The
producers of basic plastic resins generally are large producers of petroleum and
chemicals, which are much larger than the Company and have greater financial
resources. Although no industry statistics are available, the Company believes
that it is one of the largest of the ten to fifteen manufacturers of plastic
compounds in North America and Europe which is not also engaged in the
petrochemical industry or is not a basic producer of plastic resins. Certain of
these competitors compete with the Company principally in such competitors' own
respective local market areas, while other competitors compete with the Company
on a global basis.
The Company also competes with other merchants and distributors of
plastic resins and other products. No accurate information is available to the
Company as to the extent of its competitors' sales and earnings in respect of
these activities, but management believes that the Company has only a small
fraction of the total market.
The principal methods of competition in plastics manufacturing are
innovation, quality, service and price. The principal methods of competition in
respect of merchant and distribution activities are service and price. The
Company believes that its financial capabilities, its excellent supplier
relationships and its ability to provide quality plastic compounds at
competitive prices provide its primary competitive advantages.
TRADEMARKS AND TRADE NAMES
The Company uses various trademarks and trade names in its business.
These trademarks and trade names protect names of certain of the Company's
products and are significant to the extent they provide a certain amount of
goodwill and name recognition in the industry. Although these trademarks and
trade names contribute to profitability, the Company does not consider a
material part of its business to be dependent on such trademarks and trade
names. The Company also holds some patents in various parts of the world for
certain of its products. The products covered by these patents do not constitute
a material part of the Company's business.
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ITEM 2. PROPERTIES
The Company owns and operates eight plastics compounding plants in
North America, five in Europe and one in Asia. The following Table indicates the
location of each plastics compounding plant and the approximate annual plastics
compounding capacity and approximate floor area, including warehouse space:
[CONTINUED ON NEXT PAGE]
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<TABLE>
<CAPTION>
Approximate Approximate
Capacity Floor Area
Location (lbs.)(1) (Square Feet)
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Akron, Ohio(2) 73,000,000 164,000(3)
Bellevue, Ohio(4) 60,000,000(5) 160,000
Sharon Center, Ohio 10,000,000 145,000(6)
Orange, Texas 43,000,000 145,000
Orange, Texas--Texas
Polymer Services, Inc. 145,000,000 182,000
Nashville, Tennessee 81,000,000 138,000
San Luis Potosi, Mexico(7) 42,000,000 147,000
Bornem, Belgium(8) 136,000,000 367,000
Crumlin Gwent, South Wales 79,000,000 106,000
Givet, France(9) 120,000,000 187,000
St. Thomas, Ontario, Canada 74,000,000 111,000
Kerpen, Germany(10) 93,000,000 325,000
Surabaya, Indonesia (Joint Venture) 10,000,000 89,000
Milan, Italy(11) 25,000,000 110,000
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991,000,000 2,376,000
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(1) The approximate annual plastics compounding capacity set forth in this
table is an estimate and is based upon several factors, including the
daily and shift operating schedules which are customary in the area where
each facility is located. Another factor is the approximate historical
mix of specific types of plastic compounds manufactured at each plant. A
plant operating at full capacity will produce a greater or lesser quantity
(in pounds) depending upon the specific plastic compound then being
manufactured. The annual poundage of plastic compounds manufactured does
not, in itself, reflect the extent of utilization of the Company's plants
or the profitability of the plastic compounds produced.
(2) The Company has announced that it will terminate manufacturing at this
facility. Upon such termination, this facility will be used as a warehouse
and logistics center and for product sampling.
(3) Includes 15,800 square feet of space comprising the Company's product
development center.
(4) Excludes a new manufacturing line being added by The Sunprene Company at a
cost of approximately $7.5 million. This line will have an annual capacity
of approximately 12 million pounds and is scheduled to commence operations
in March 2001.
(5) Includes capacity of approximately 29 million pounds from two manufacturing
lines owned by The Sunprene Company, a partnership in which the Company
has a 70% partnership interest.
(6) Includes approximately 14,500 square feet of space comprising the Company's
color technology center.
(7) Excludes a new manufacturing line being added with an annual capacity of
approximately 22 million pounds that is expected to commence operations in
Spring 2001. This line will cost approximately $4.5 million.
(8) Excludes new manufacturing equipment that will increase annual capacity by
approximately 7 million pounds. This project, with a cost of approximately
$3.4 million, is expected to commence operations in calendar year 2000.
(9) Excludes a new manufacturing line and approximately 5,000 square feet of
warehouse space being added at a cost of approximately $3.2 million. The
line will have an annual capacity of approximately 17 million pounds and
is scheduled to commence operations in 2001.
(10) Excludes two new manufacturing lines being added at a cost of approximately
$2.6 million. These lines will have an aggregate annual capacity of
approximately 12 million pounds and are scheduled to commence operations
in calendar year 2001.
(11) New manufacturing facility acquired in July 2000 at a cost of approximately
$5.6 million.
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The Company considers each of the foregoing facilities to be in good
condition and suitable for its purposes.
Public warehouses are used wherever needed to store the Company's
products conveniently for shipment to customers. The number of public warehouses
in use varies from time to time, but ranges yearly from approximately 25 to 30.
The Company believes an adequate supply of suitable public warehouse facilities
is available to it.
The Company owns its corporate headquarters which is located in Akron,
Ohio and which contains approximately 48,000 square feet of usable floor space.
The Company leases sales offices in various locations in North America, Europe
and Asia.
ITEM 3. PENDING LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended August 31, 2000.
EXECUTIVE OFFICERS OF THE COMPANY
The age (as of October 18, 2000), business experience during the past
five years and offices presently held by each of the Company's Executive
Officers are reported below. The Company's By-Laws provide that officers shall
hold office until their successors are elected and qualified.
Terry L. Haines: Age 54; President and Chief Executive Officer of the Company
since January, 1991; formerly Chief Operating Officer, 1990-1991 and Vice
President--North American Sales, 1989-1990.
Robert A. Stefanko: Age 57; Chairman of the Board since January, 1991;
Executive Vice President--Finance and Administration of the Company since 1989;
Chief Financial Officer of the Company since 1979; and Treasurer since 1999.
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Alain C. Adam: Age 52; Vice President--International Automotive
Operations of the Company since September 1, 1999; Vice President--Automotive
Marketing from 1990 until August 31, 1999.
Gordon L. Trimmer: Age 56; Vice President--North American Sales and
Marketing since April 1997 and prior to that time Managing Director of A.
Schulman Canada, Ltd.
John M. Myles: Age 57; Vice President--North American Purchasing since
October 1997 and prior to that time General Manager-Operations of Laurel
Industries since 1992.
Ronald G. Andres: Age 50; Vice President--North American Manufacturing
since October 20, 1999; prior to that time, Director of Manufacturing for North
America from 1998 until October 1999; North American Manufacturing Manager from
1997 to 1998; and Plant Manager of the Bellevue, Ohio plant from 1990 to 1997.
Rengarajan Ramesh: Age 39; Vice President--Technology since April 2000
and General Manager--Asian Operations since 1995; prior thereto, Marketing and
Technical Service Manager for the Company's Mexican operations from 1989 to
1995.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded in the over-the-counter market and
is quoted through the NASDAQ National Market System.
Additional information in response to this Item is set forth on page 1
of the Company's 2000 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information in response to this Item is set forth on pages 30 and 31 of
the Company's 2000 Annual Report to Stockholders, which information is
incorporated herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information in response to this Item is set forth on pages 27 through
29 of the Company's 2000 Annual Report to Stockholders, which information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company enters into forward foreign exchange contracts as a hedge
against amounts due or payable in foreign currencies. These contracts limit the
Company's exposure to fluctuations in foreign currency exchange rates. Any gains
or losses associated with these contracts, as well as the offsetting gains or
losses from the underlying assets or liabilities hedged, are recognized on the
foreign currency transaction line in the Consolidated Statement of Income
appearing on page 14 of the Company's 2000 Annual Report to Stockholders. The
Company estimates that a ten percent (10%) change in foreign exchange rates at
August 31, 2000 would have changed the fair value of the contracts by
approximately $0.5 million. Changes in the fair value of forward exchange
contracts are substantially offset by changes in the fair value of the hedged
positions. The Company does not hold or issue financial instruments for trading
purposes or utilize any other types of derivative instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) FINANCIAL STATEMENTS
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated October 19, 2000, appearing on pages 14 through
27 of the Company's 2000 Annual Report to Stockholders, are incorporated herein
by reference.
(b) SUPPLEMENTARY DATA
Information in response to this Item is set forth in the financial
statement schedules set forth on pages F-1 through F-2 of this Form 10-K.
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ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required in response to this Item in respect of
Directors is set forth under the captions "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Company's proxy statement dated November 10, 2000, previously filed with the
Commission, which information is incorporated herein by reference. The
information required by this Item in respect of Executive Officers is set forth
on pages 12 and 13 of this Form 10-K and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is set forth under the caption
"Compensation of Executive Officers" in the Company's proxy statement dated
November 10, 2000, previously filed with the Commission, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is set forth under the caption
"Security Ownership of Management and Certain Beneficial Owners" in the
Company's proxy statement dated November 10, 2000, previously filed with the
Commission, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
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<TABLE>
<CAPTION>
Page
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(1) FINANCIAL STATEMENTS:
Report of Independent Accountants 27*
Consolidated Statement of Income for
the three years ended August 31, 2000 14*
Consolidated Balance Sheet at August 31,
2000 and 1999 16*
Consolidated Statement of Cash Flows for
the three years ended August 31, 2000 18*
Consolidated Statement of Stockholders'
Equity for the three years ended
August 31, 2000 15*
Notes to Consolidated Financial
Statements 19*
</TABLE>
*Incorporated by reference from the indicated page of the Company's
2000 Annual Report to Stockholders. With the exception of this information and
the information incorporated in Items 1, 5, 6, 7 and 8, the 2000 Annual Report
to Stockholders is not deemed filed as part of this report.
<TABLE>
<CAPTION>
<S> <C>
(2) Financial Statement Schedules:
Report of Independent Accountants
on Financial Statement Schedule F-1
II-Valuation and Qualifying Accounts F-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
<TABLE>
<CAPTION>
<S> <C>
(3) EXHIBITS:
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
3(a) Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3(a) to the Company's Form
10-K for fiscal year ended August 31, 1990).
3(b) Certificate of Amendment of Certificate of
Incorporation dated December 12, 1985 (incorporated
by reference to Exhibit 2(b) of the Company's
Registration Statement on Form 8-A dated January 15,
1996).
3(c) Certificate of Amendment of Certificate of
Incorporation dated January 9, 1987 (incorporated by
reference to Exhibit 3(b) to the Company's Form 10-K
for fiscal year ended August 31, 1994).
-16-
<PAGE>
<CAPTION>
<S> <C>
3(d) Certificate of Amendment of Certificate of
Incorporation dated December 10, 1987 (incorporated
by reference to Exhibit 3(c) to the Company's Form
10-K for fiscal year ended August 31, 1991).
3(e) Certificate of Amendment of Certificate of
Incorporation dated December 6, 1990 (incorporated by
reference to Exhibit 3(d) to the Company's Form 10-K
for fiscal year ended August 31, 1991).
3(f) Certificate of Amendment of Certificate of
Incorporation dated December 9, 1993 (incorporated by
reference to Exhibit 2(f) to the Company's
Registration Statement on Form 8-A dated January 15,
1996).
3(g) By-Laws dated December 8, 1983 (incorporated by
reference to Exhibit 3(c) to the Company's Form 10-K
for fiscal year ended August 31, 1990).
3(h) Amendment to By-Laws dated October 20, 1986
(incorporated by reference to Exhibit 3(f) to the
Company's Form 10-K for fiscal year ended August 31,
1991).
3(i) Amendment to By-Laws dated January 11, 1996
(incorporated by reference to Exhibit 3.3 to the
Company's Report on Form 8-K dated January 15, 1996).
4(a) Rights Agreement dated as of January 12, 1996,
between the Company and Society National Bank, as
Rights Agent, which includes as Exhibit B thereto the
Form of Rights Certificate (incorporated by reference
to Exhibit 1 to the Company's Registration Statement
on Form 8-A, dated January 15, 1996).
4(b) Amendment No. 1 to Rights Agreement dated as of
November 21, 1997 between the Company, KeyBank
National Association (as successor by merger to
Society National Bank) and First Chicago Trust
Company of New York as successor Rights Agent
(incorporated by reference to Exhibit 1(b) to the
Company's Amendment No. 1 to Registration Statement
on Form 8-A/A).
10(a)* A. Schulman, Inc. 1991 Stock Incentive Plan
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for fiscal year ended
August 31, 1991).
10(b)* Amendment to A. Schulman, Inc. 1991 Stock Incentive
Plan (incorporated by reference to Exhibit 10.9 to
the Company's Form 10-Q for the fiscal quarter ended
February 29, 1996).
10(c)* Second Amendment to A. Schulman, Inc. 1991 Stock
Incentive Plan (incorporated by reference to Exhibit
4(k) to the Company's Registration Statement on Form
S-8, dated December 20, 1999, Registration No.
333-93093).
10(d)* Third Amendment to A. Schulman, Inc. 1991 Stock
Incentive Plan (incorporated by reference to Exhibit
4(l) to the Company's Registration Statement on Form
S-8, dated December 20, 1999, Registration No.
333-93093.
-17-
<PAGE>
<CAPTION>
<S> <C>
10(e)* A. Schulman, Inc.1992 Non-Employee Directors' Stock
Option Plan (incorporated by reference to Exhibit A
to the Company's Proxy Statement dated November 12,
1992 filed as Exhibit 28 to the Company's Form 10-K
for fiscal year ended August 31, 1992).
10(f)* Amendment to A. Schulman, Inc. 1992 Non-Employee
Directors' Stock Option Plan (incorporated by
reference to Exhibit 10.10 to the Company's Form 10-Q
for the fiscal quarter ended February 29, 1996).
10(g)* Second Amendment to A. Schulman, Inc.1992
Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(e) to the
Company's Form 10-K for the fiscal year ended August
31, 1998).
10(h)* Third Amendment to A. Schulman, Inc.1992 Non-Employee
Directors Stock Option Plan (incorporated by
reference to Exhibit 4(p) to the Company's
Registration Statement on Form S-8, dated December
20, 1999, Registration No. 333-93093.
10(i)* Non-Qualified Profit Sharing Plan (incorporated by
reference to Exhibit 10(d) to the Company's Form 10-K
for the fiscal year ended August 31, 1995).
10(j)* Amendment to A. Schulman, Inc. Nonqualified Profit
Sharing Plan (incorporated by reference to Exhibit
10.8 to the Company's Form 10-Q for the fiscal
quarter ended February 29, 1996).
10(k)* A. Schulman, Inc. Directors' Deferred Compensation
Plan (incorporated by reference to Exhibit 10(h) to
the Company's Form 10-K for the fiscal year ended
August 31, 1998).
10(l)* Employment Agreement between the Company and
Robert A. Stefanko dated January 31, 1996
(incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for fiscal quarter ended February
29, 1996).
10(m)* Employment Agreement between the Company and Terry L.
Haines dated January 31, 1996 (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q
for fiscal quarter ended February 29, 1996).
10(n)* Employment Agreement between the Company and Alain C.
Adam dated December 9, 1999 (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q
for fiscal quarter ended February 29, 2000).
10(o)* Employment Agreement between the Company and Gordon
L. Trimmer dated May 14, 1997 (incorporated by
reference to Exhibit 10(a) to the Company's Form 10-K
for the fiscal year ended August 31, 1997).
10(p)* Employment Agreement between the Company and John M.
Myles dated as of July 8, 1998 (incorporated by
reference to Exhibit 10(p) to the Company's Form 10-K
for fiscal year ended August 31, 1998)
10(q)* Employment Agreement between the Company and
Ronald G. Andres dated as of October 20, 1999
(incorporated by reference to Exhibit 10(o) to the
Company's Form 10-K for the fiscal year ended August
31, 1999).
-18-
<PAGE>
<CAPTION>
<S> <C>
10(r)* Employment Agreement between the Company and
Rengarajan Ramesh dated July 11, 2000.
10(s)* Agreement between the Company and Robert A.
Stefanko dated as of August 1, 1985 (incorporated
by reference to Exhibit 10(h) to the Company's Form
10-K for fiscal year ended August 31, 1991).
10(t)* Agreement between the Company and Robert A. Stefanko
dated as of March 21, 1991 (incorporated by reference
to Exhibit 10(l) to the Company's Form 10-K for
fiscal year ended August 31, 1992).
10(u)* Agreement between the Company and Terry L. Haines
dated as of March 21, 1991 (incorporated by reference
to Exhibit 10(m) to the Company's Form 10-K for
fiscal year ended August 31, 1992).
10(v)* Form of Amendment to Deferred Compensation Agreements
between the Company and Robert A. Stefanko and Terry
L. Haines (incorporated by reference to Exhibit 10.1
to the Company's Form 10-Q for the fiscal quarter
ended February 29, 1996).
10(w) Credit Agreement between the Company, The Banks
and Society National Bank, individually and as Agent,
dated as of March 13, 1995 (incorporated by reference
to Exhibit 10 of the Company's Form 10-Q for fiscal
quarter ended February 28, 1995).
10(x) First Amendment to Credit Agreement dated February
26, 1996, among the Company and Society National
Bank, individually and as Agent, First National Bank
of Ohio, Union Bank of Switzerland and The First
National Bank of Chicago (incorporated by reference
to Exhibit 10.11 to the Company's Form 10-Q for the
fiscal quarter ended February 29, 1996).
10(y) Second Amendment to Credit Agreement dated as of
August 14, 1997, among the Company, KeyBank National
Association, individually and as Agent, The First
National Bank of Chicago, National City Bank,
Northeast and Morgan Guaranty Trust Company of New
York (incorporated by reference to Exhibit 10(x) to
the Company's Form 10-K for fiscal year ended August
31, 1997).
10(z) Note Purchase Agreement dated August 1, 1999
regarding $50,000,000 7.27% Senior Notes Due 2009,
among the Company, New York Life Insurance Company,
Mutual Trust Life Insurance Company, National
Travelers Life Company, Guarantee Reserve Life
Insurance Company, Pioneer Mutual Life Insurance
Company, Great Western Insurance Company, The
Catholic Aid Association, The Reliable Life Insurance
Company, The North West Life Assurance Company of
Canada, Lutheran Brotherhood and Modern Woodmen of
America (incorporated by reference to Exhibit 10(y)
to the Company's Form 10-K for the fiscal year ended
August 31, 1999).
10(aa) Form of the Company's 7.27% Senior Notes Due 2009
(incorporated by reference to Exhibit 10(z) to the
Company's Form 10-K for the fiscal year ended August
31, 1999).
-19-
<PAGE>
<CAPTION>
<S> <C>
11 Computation of Basic and Diluted Earnings Per Common
Share
13 Company's 2000 Annual Report to Stockholders
21 Subsidiaries of the Company
23 Consent of Independent Accountants
24 Powers of Attorney
27** Financial Data Schedule
99 Notice of Annual Meeting and Proxy Statement Dated
November 10, 2000
</TABLE>
*Management contract or compensatory plan or arrangement
required to be filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item 601(b)(27) of
Regulation S-K.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the Company's
fiscal year ended August 31, 2000.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
A. SCHULMAN, INC.
By: /s/Robert A. Stefanko
---------------------------------
Robert A. Stefanko
Chairman of the Board of
Directors and Executive Vice
President - Finance and
Administration
Dated: November 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Terry L. Haines Director and Principal
------------------ Executive Officer November 27, 2000
Terry L. Haines
/s/Robert A. Stefanko Director, Principal
----------------------- Financial Officer and
Robert A. Stefanko Principal Accounting Officer November 27, 2000
Alan L. Ockene* Director
Paul Craig Roberts* Director
Rene C. Rombouts* Director
Peggy Gordon Elliott* Director
Willard R. Holland* Director
James A. Karman* Director
James S. Marlen* Director
John B. Yasinsky* Director
Joseph M. Gingo* Director
*By: /s/Robert A. Stefanko
-----------------------------------------------
Robert A. Stefanko
Attorney-in-Fact November 27, 2000
</TABLE>
*Powers of attorney authorizing Robert A. Stefanko to sign this annual
report on Form 10-K on behalf of certain Directors of the Company are being
filed with the Securities and Exchange Commission herewith.
-21-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of A. Schulman, Inc.
Our audits of the consolidated financial statements referred to in our report
dated October 19, 2000 appearing in the Annual Report to Stockholders of A.
Schulman, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the financial statement schedule listed in Item 14(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cleveland, Ohio
October 19, 2000
F-1
<PAGE>
A. SCHULMAN, INC.
II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Beginning at Charages to Balance at
Beginning of Cost and Net Translation Close of
Period Expenses Write-offs Adjustment Other Period
------------- ----------- ----------- ------------- ------- --------------
Reserve of Doubful Accounts
<S> <C> <C> <C> <C> <C> <C>
Year ended August 31, 2000 3,678,000 1,905,000 (748,000) (300,000) - 4,535,000
Year ended August 31, 1999 4,778,000 1,206,000 (2,256,000) (50,000) - 3,678,000
Year ended August 31, 1998 5,304,000 1,806,000 (2,300,000) (32,000) - 4,778,000
Valuation Allowance - Deferred Tax Assets
Year ended August 31, 2000 8,129,000 - - - 7,005,000 15,134,000
Year ended August 31, 1999 5,968,000 - - - 2,161,000 8,129,000
Year ended August 31, 1998 5,937,000 - - - 31,000 5,968,000
</TABLE>
F-2
