A SCHULMAN INC AKRON, Ohio, June 28, 2016 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq: SHLM) announced today earnings for the fiscal 2016 third quarter ended May 31, 2016 of $0.53 per diluted share, compared to a loss of ($0.34) per share in the prior year period. On an adjusted basis, reported earnings per share were $0.79 compared with $0.72 in the prior year period.
Consolidated net sales for the fiscal 2016 third quarter were $650.4 million, compared with $560.9 million in the same prior-year quarter. After adjusting for negative foreign currency translation of $6.2 million, and net sales from the Citadel acquisition of $112.4 million during the quarter, legacy revenues declined 3%, approximately the same as in the prior quarter due to the reduction of our commodity portfolio embedded within the Company's Distribution Services and Specialty Powders product families. As a result of the Company's relentless focus on growing value-added products, the Company improved its product mix. Adjusted gross margin in the fiscal third quarter increased to 17.4% compared with 16.2% in the prior year period and adjusted operating income increased to 7% compared with 5.9% in the prior year period. Both Citadel and legacy portfolios contributed to these improved adjusted gross and operating margins.
"We are encouraged by the continued improvement in our adjusted margins which validates our strategy to provide superior value to a vast array of market leading customers," said Bernard Rzepka, President and Chief Executive Officer. "Much of this profit improvement was a result of our Smart Sales, Savings and Safety initiative that is entrenched within our businesses and is positioning us as the preferred premier materials solutions provider."
Europe, Middle East and Africa ("EMEA") net sales were $322.4 million, compared with $326.3 million in the same prior-year period. Excluding the favorable impact of foreign currency translation of $4.3 million, revenues fell 2.5% primarily related to commodity products in the Specialty Powders and Distribution Services product families. This decrease was partially offset by increased activity in the Masterbatch solutions product family. Adjusted gross profit for the segment fell 30 basis points to 15.5% when compared to the same prior year period.
Net sales for United States and Canada ("USCAN") were $183.3 million, compared with $137.1 million in the third quarter of fiscal 2015. The incremental contribution from the Citadel acquisition was $57.9 million in net sales in the Company's Engineered Product family. Excluding the contribution of Citadel's Engineered Plastics sales, legacy revenues declined 8.5% in the third quarter of fiscal 2016. Softness in the agricultural and sports & leisure markets, and continued focus to replace commodity product offerings contributed to the sales decline. The combination of improved mix of product sales; lower production costs and the contribution of Citadel Engineered Plastic revenues resulted in adjusted gross margin improving to 17.8% compared with 16.1% in the prior year period.
"While we are in no way satisfied with the results in these regions, our teams have done a good job controlling what they could control as evidenced by the USCAN adjusted gross margin improvement," said Rzepka. "With the claims and operational issues at Lucent largely identified and addressed, we can now focus on realizing our full growth potential. As we enter our fiscal fourth quarter, our priorities will be to further deepen our engagement with existing customers, increase our share in attractive target markets, and continue to invest smartly in R&D while aggressively managing our costs through productivity initiatives and supply chain efficiencies."
LATAM net sales for the quarter were $43.4 million, compared with $44.8 million a year ago. Excluding the unfavorable impact of foreign currency translation of $7.3 million, revenues increased 13.1%. Excluding a $1.5 million negative impact of foreign currency, gross profit rose 13% over the prior year period yielding an adjusted gross margin of 20.9%.
"This marks our fourth consecutive quarter of double-digit growth in this region," Rzepka said. "We saw strength in the agricultural market in the LATAM region. Our business also increased in packaging and we experienced improved product mix in our Engineered Plastics business related to the strong automotive markets. Lastly, our export business in Brazil increased roughly 18% during the quarter to further improve our performance in the region."
Asia Pacific ("APAC") net sales were $46.9 million, compared with $52.7 million in the third quarter of fiscal 2015. Adjusting for a negative foreign exchange impact of $2.9 million, revenues fell 5.5% primarily related to lower sales in Specialty Powders due to the transfer of our rotational molded product line into a minority owned joint venture during fiscal 2016. APAC adjusted gross profit margin was 17.2%, up 250 basis points from the prior period due to improved product mix.
Engineered Composites ("EC") net sales for the quarter were $54.5 million, compared with $56.9 million in the year-ago comparable period, prior to the June 1 acquisition. On a year-over-year comparison, revenues from the Citadel business declined 4.2% due to the impact of weak oil and gas customer activity. On the lower volumes, gross margin fell 110 basis points to 25.2%, but operating margin increased considerably to 9.2% as restructuring and integration synergies begin to impact the operating performance.
Lucent Update
As previously reported, the Company identified quality reporting issues affecting certain product lines at two former Citadel manufacturing facilities that were once part of Lucent Polymers, which was acquired as part of the Citadel acquisition. Specifically, the Company discovered discrepancies between laboratory data and certifications provided by Lucent to customers with respect to certain products using recycled or reclaimed raw materials.
"The fact that we were able to identify and address this matter as quickly as we did without the need for any product recalls speaks volumes to the strength of our team and culture. As a result of the tireless efforts and excellent work of our team, we are now focusing our attention toward organic growth instead of resolving issues of the past," said Rzepka. "We thank our customers for their patience and support as we addressed this critical matter."
The Company incurred costs of $1.8 million in the quarter related to the Lucent remediation matter, including $1.1 million of recurring production and material costs down from the prior quarter and $0.7 million of other costs including settlement of claims and dedicated internal personnel costs.
A. Schulman believes that the sellers are responsible to compensate A. Schulman for the Lucent losses that the Company has experienced or may incur. Therefore, on June 15, 2016, the Company filed a lawsuit against the sellers of Citadel Plastics in the Court of Chancery of the State of Delaware. Among other things, the suit seeks indemnification and damages for the fraudulent business practices within the Lucent subsidiary. Previously, the Company provided a written claim notice to this effect to the sellers and to the escrow agent with respect to the $31 million indemnity escrow established. During the fiscal third quarter, the Company incurred $1.2 million of legal costs associated with this lawsuit.
In accordance with the Company's policy, it will make no further comments on this ongoing legal matter, nor will it speculate to the timing or potential outcome of this matter. A. Schulman can make no assurances it will be able to recoup funds sufficient enough to offset the substantial costs it has incurred - and will incur - to investigate, isolate and mitigate these fraudulent practices.
Working Capital/Cash Flow
Cash provided from operations was $95.7 million in the nine months ended May 31, 2016, an improvement compared to $56.3 million in the comparable prior year period. Net working capital days were 61 at May 31, compared to 71 days on February 29, 2016. Both metrics were favorably impacted by a focus on supply chain leading to significant improvements in days of inventory on hand.
During the quarter, the Company reduced its debt position by approximately $40 million. This brings net debt to $937 million, which equates to an adjusted net leverage ratio of 3.96 at quarter-end.
Capital expenditures for the nine months ended May 31, 2016 were $34.6 million, compared with $32.7 million last year. During the three months ended May 31, 2016, the Company declared and paid quarterly cash dividends of $6.1 million, or $0.205 per quarter per common share in accordance to its ongoing goal to provide an attractive yield to shareholders. In addition, a quarterly cash dividend of $15.00 per share was declared and paid on the 125,000 shares of the Company's convertible special stock, representing a $1.9 million cash outflow.
Business Update and Outlook
"Despite the continued volatility in the global marketplace, our outlook for the full year remains unchanged," said Rzepka. "We continue to anticipate full-year fiscal 2016 adjusted earnings to be in the range of $2.40 to $2.45 per diluted share."
Rzepka noted that the Company is positioning itself for accelerating earnings growth in fiscal 2017 and beyond. "We have organic growth programs as well as cost and productivity initiatives underway, and with the distraction of addressing the Lucent matter largely behind us, we fully expect that these focused efforts will continue to improve our operating margins. We are actively pursuing different avenues to further advance our strategy and drive value through additional investments in profitable growth."
As is customary, the Company will provide fiscal 2017 earnings and other financial metrics guidance at the end of October when it releases results for the full year.
Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2016 third-quarter earnings can be accessed at 10:00 a.m. Eastern Time on June 29, 2016, on the Company's website, www.aschulman.com. An archived replay of the call will also be available on the website.
Investor Presentation Materials
Senior executives of the Company may participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which may be used during such meetings, in the Investors section of its website at www.aschulman.com. The presentation will remain on the website as long as it is in use.
About A. Schulman, Inc.
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. Since 1928, the Company has been providing innovative solutions to meet its customers' demanding requirements. The Company's customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, sports, leisure & home, custom services and others. The Company employs approximately 4,900 people and has 57 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.4 billion for the fiscal year ended August 31, 2015. Additional information about A. Schulman can be found at www.aschulman.com.
Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include segment gross profit, SG&A expenses excluding certain items, segment operating income, operating income before certain items, net income excluding certain items, net income per diluted share excluding certain items and adjusted EBITDA, as discussed further in the Reconciliation of GAAP and Non-GAAP Financial Measures below. These non-GAAP financial measures are considered relevant to aid analysis and understanding of the Company's results and business trends. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.
While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that could cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:
-- worldwide and regional economic, business and political conditions,
including continuing economic uncertainties in some or all of the
Company's major product markets or countries where the Company has
operations;
-- the effectiveness of the Company's efforts to improve operating margins
through sales growth, price increases, productivity gains, and improved
purchasing techniques;
-- competitive factors, including intense price competition;
-- fluctuations in the value of currencies in areas where the Company
operates;
-- volatility of prices and availability of the supply of energy and raw
materials that are critical to the manufacture of the Company's
products, particularly plastic resins derived from oil and natural gas;
-- changes in customer demand and requirements;
-- effectiveness of the Company to achieve the level of cost savings,
productivity improvements, growth and other benefits anticipated from
acquisitions, joint ventures and restructuring initiatives;
-- escalation in the cost of providing employee health care;
-- uncertainties and unanticipated developments regarding contingencies,
such as pending and future litigation and other claims, including
developments that would require increases in our costs and/or reserves
for such contingencies;
-- the performance of the global automotive market as well as other markets
served;
-- further adverse changes in economic or industry conditions, including
global supply and demand conditions and prices for products;
-- operating problems with our information systems as a result of system
security failures such as viruses, cyber-attacks or other causes;
-- our current debt position could adversely affect our financial health
and prevent us from fulfilling our financial obligations;
-- integration of acquisitions, including most recently Citadel, with our
existing business, including the risk that the integration will be more
costly or more time consuming and complex or simply less effective than
anticipated;
-- our ability to achieve the anticipated synergies, cost savings and other
benefits from the Citadel acquisition;
-- substantial time devoted by management to the integration of the Citadel
acquisition; and
-- failure of counterparties to perform under the terms and conditions of
contractual arrangements, including suppliers, customers, buyers and
sellers of a business and other third parties with which the Company
contracts.
The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company's performance are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company's business, financial condition and results of operations.
SHLM_ALL
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended May 31, Nine months ended May 31,
-------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
(In thousands, except per share data)
Net sales $650,439 $560,858 $1,891,419 $1,718,206
Cost of sales 540,965 470,101 1,587,192 1,462,531
Selling, general and administrative
expenses 73,641 64,842 222,482 195,482
Restructuring expense 4,245 2,649 8,005 10,530
Operating income 31,588 23,266 73,740 49,663
Interest expense 13,557 2,618 40,965 7,288
Bridge financing fees - 18,750 - 18,750
Foreign currency transaction
(gains) losses 392 857 2,071 3,097
Other (income) expense, net (229) (335) (246) (900)
Gain on early extinguishment of
debt - - - (1,290)
--- --- --- ------
Income (loss) from continuing
operations before taxes 17,868 1,376 30,950 22,718
Provision (benefit) for U.S. and
foreign income taxes 312 10,344 4,076 18,801
--- ------ ----- ------
Income (loss) from continuing
operations 17,556 (8,968) 26,874 3,917
Income (loss) from discontinued
operations, net of tax 82 (18) 283 (86)
--- --- --- ---
Net income (loss) 17,638 (8,986) 27,157 3,831
Noncontrolling interests (241) (343) (1,075) (890)
---- ---- ------ ----
Net income (loss) attributable to
A. Schulman, Inc. 17,397 (9,329) 26,082 2,941
Convertible special stock dividends 1,875 563 5,625 563
Net income (loss) available to A.
Schulman, Inc. common stockholders $15,522 $(9,892) $20,457 $2,378
======= ======= ======= ======
Weighted-average number of shares outstanding:
Basic 29,339 29,219 29,284 29,125
Diluted 29,474 29,219 29,459 29,547
Basic earnings per share available to A. Schulman,
Inc. common stockholders
Income (loss) from continuing
operations $0.53 $(0.34) $0.69 $0.08
Income (loss) from discontinued
operations - - 0.01 -
--- --- ---- ---
Net income (loss) available to A.
Schulman, Inc. common stockholders $0.53 $(0.34) $0.70 $0.08
===== ====== ===== =====
Diluted earnings per share available to A. Schulman,
Inc. common stockholders
Income (loss) from continuing
operations $0.53 $(0.34) $0.68 $0.08
Income (loss) from discontinued
operations - - 0.01 -
Net income (loss) available to A.
Schulman, Inc. common stockholders $0.53 $(0.34) $0.69 $0.08
===== ====== ===== =====
Cash dividends per common share $0.205 $0.205 $0.615 $0.615
====== ====== ====== ======
Cash dividends per share of
convertible special stock $15.00 $ - $45.00 $ -
====== === === ====== === ===
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 31, August 31,
2016 2015
---- ----
(In thousands)
ASSETS
Current assets:
Cash and
cash
equivalents $47,019 $96,872
Restricted
Cash 2,407 -
Accounts
receivable, and
less $10,777
allowance at
for August
doubtful 31, 2015
accounts
of
$11,367
at May
31, 2016 405,118 413,943
Inventories 289,656 317,328
Prepaid
expenses
and
other
current
assets 72,767 60,205
------ ------
Total
current
assets 816,967 888,348
------- -------
Property, plant and
equipment, at cost:
Land and
improvements 33,160 31,674
Buildings
and
leasehold
improvements 177,748 164,759
Machinery
and
equipment 440,631 427,183
Furniture
and
fixtures 34,537 34,393
Construction
in
progress 24,032 23,866
------ ------
Gross
property,
plant
and
equipment 710,108 681,875
Accumulated
depreciation 394,605 367,381
Net
property,
plant
and
equipment 315,503 314,494
------- -------
Deferred
charges
and
other
noncurrent
assets 89,652 90,749
Goodwill 620,649 623,583
Intangible
assets,
net 405,539 434,537
------- -------
Total
assets $2,248,310 $2,351,711
========== ==========
LIABILITIES AND
EQUITY
Current liabilities:
Accounts
payable $296,308 $305,385
U.S. and
foreign
income
taxes
payable - 4,205
Accrued
payroll,
taxes
and
related
benefits 47,017 56,192
Other
accrued
liabilities 81,636 70,824
Short-
term
debt 24,515 20,710
------ ------
Total
current
liabilities 449,476 457,316
Long-
term
debt 961,569 1,045,349
Pension
plans 118,034 117,889
Deferred
income
taxes 109,428 115,537
Other
long-
term
liabilities 22,525 22,885
------ ------
Total
liabilities 1,661,032 1,758,976
--------- ---------
Commitments and contingencies
Stockholders' equity:
Convertible
special
stock,
no par
value 120,289 120,289
Common
stock, 31, 2016
$1 par and
value, 48,369
authorized shares
-75,000 at
shares, August
issued - 31, 2015
48,506
shares
at May 48,506 48,369
Additional
paid-in
capital 275,361 274,319
Accumulated
other
comprehensive
income
(loss) (93,144) (83,460)
Retained
earnings 610,135 607,690
Treasury
stock, August
at cost, 31, 2015
19,071
shares
at May
31, 2016
and
19,077
shares
at (382,999) (383,121)
-------- --------
Total A.
Schulman,
Inc.'s
stockholders'
equity 578,148 584,086
------- -------
Noncontrolling
interests 9,130 8,649
----- -----
Total
equity 587,278 592,735
Total
liabilities
and
equity $2,248,310 $2,351,711
========== ==========
A. SCHULMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended May 31,
-------------------------
2016 2015
---- ----
(In thousands)
Operating from continuing and discontinued
operations:
Net income $27,157 $3,831
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation 37,347 26,481
Amortization 30,163 11,899
Bridge financing fees - 18,750
Deferred tax provision (benefit) (2,395) (1,143)
Pension, postretirement benefits
and other compensation 3,161 8,318
Restricted stock compensation -
CEO transition costs, net of
cash - 4,789
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable 2,574 (13,610)
Inventories 19,900 (13,309)
Accounts payable (8,145) 9,599
Income taxes (9,955) 2,598
Accrued payroll and other
accrued liabilities 2,583 4,776
Other assets and long-term
liabilities (6,718) (6,698)
------ ------
Net cash provided from (used in)
operating activities 95,672 56,281
------ ------
Investing from continuing and discontinued
operations:
Expenditures for property, plant
and equipment (34,618) (32,662)
Investment in equity investees - (12,456)
Proceeds from the sale of assets 1,184 1,411
Restricted cash (2,407) (3,509)
Business acquisitions, net of
cash - (6,698)
Net cash provided from (used in)
investing activities (35,841) (53,914)
------- -------
Financing from continuing and discontinued
operations:
Cash dividends paid to special
stockholders (5,625) -
Cash dividends paid to common
stockholders (18,012) (18,058)
Increase (decrease) in short-
term debt 2,780 (12,995)
Borrowings on long-term debt 124,671 255,196
Repayments on long-term debt
including current portion (210,448) (353,647)
Noncontrolling interests'
contributions (distributions) - (1,750)
Issuances of convertible special
stock, net - 120,296
Issuances of stock, common and
treasury 213 231
Redemptions of common stock (1,077) (4,999)
Purchases of treasury stock - (3,335)
--- ------
Net cash provided from (used in)
financing activities (107,498) (19,061)
-------- -------
Effect of exchange rate changes
on cash (2,186) (11,756)
------ -------
Net increase (decrease) in cash
and cash equivalents (49,853) (28,450)
------- -------
Cash and cash equivalents at
beginning of period 96,872 135,493
Cash and cash equivalents at end
of period $47,019 $107,043
======= ========
Non-cash Activity:
Senior Notes funding held in
restricted cash $ - $375,000
Unpaid debt issuance costs $ - $11,116
A. SCHULMAN, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
Unaudited
Three months ended May 31, 2016 Cost of Gross SG&A Restructuring
Margin Expense Operating Operating Non Income Net Income Diluted
Sales Income Income Operating Tax Available to EPS
per Pound (Income) Expense ASI Common
Stockholders
Expense (Benefit)
--- ------- --------
(In thousands, except for %'s, per pound and per share data)
As reported $540,965 16.8% $73,641 $4,245 $31,588 $0.048 $13,720 $312 $15,522 $0.53
Convertible special stock
dividends (9) 1,875 0.03
Certain items:
Accelerated depreciation (1) (1,283) (3) - 1,286 - 243 1,043 0.03
Costs related to acquisitions
and integrations (2) (423) (1,020) - 1,443 - 235 1,208 0.04
Restructuring and related costs
(3) (1,647) (3,628) (4,245) 9,520 (209) 2,099 7,630 0.23
Lucent costs (4) (466) (1,485) - 1,951 - 385 1,566 0.05
Accelerated amortization of
deferred financing fees (5) - - - - (163) 34 129 -
Tax (benefits) charges (6) - - - - - 3,664 (3,664) (0.12)
Loss (income) from discontinued
operations - - - - - - (82) -
--- --- --- --- --- --- --- ---
Total certain items (3,819) 0.6% (6,136) (4,245) 14,200 0.022 (372) 6,660 7,830 0.26
------ --- ------ ------ ------ ----- ---- ----- ----- ----
As Adjusted $537,146 17.4% $67,505 $ - $45,788 $0.070 $13,348 $6,972 $25,227 $0.79
======== ==== ======= === === ======= ====== ======= ====== ======= =====
Percentage of Revenue 10.4% 7.0% 3.9%
==== === ===
Effective Tax Rate 21.5%
====
Three months ended May 31, 2015 Cost of Gross SG&A Restructuring
Margin Expense Operating Operating Non Income Net Income Diluted
Sales Income Income Operating Tax Available to EPS
per Pound (Income) Expense ASI Common
Stockholders
Expense (Benefit)
--- ------- --------
(In thousands, except for %'s, per pound and per share data)
As reported $470,101 16.2% $64,842 $2,649 $23,266 $0.043 $21,890 $10,344 $(9,892) $(0.34)
Certain items:
Accelerated depreciation (1) (29) 29 29 -
Costs related to acquisitions
and integrations (2) (59) (3,531) - 3,590 - 29 3,561 0.12
Restructuring and related costs
(3) (49) (3,239) (2,649) 5,937 - 1,144 4,793 0.16
Acquisition related interest
expense (11) - - - - (19,134) - 19,134 0.66
Tax (benefits) charges (6) - - - - - (3,559) 3,559 0.12
Loss (income) from discontinued
operations - - - - - - 18 -
--- --- --- --- ---
Total certain items (137) - % (6,770) (2,649) 9,556 0.017 (19,134) (2,386) 31,094 1.06
---- --- --- ------ ------ ----- ----- ------- ------ ------ ----
As Adjusted $469,964 16.2% $58,072 $ - $32,822 $0.060 $2,756 $7,958 $21,202 $0.72
======== ==== ======= === === ======= ====== ====== ====== ======= =====
Percentage of Revenue 10.4% 5.9% 3.8%
==== === ===
Effective Tax Rate 26.5%
====
Nine months ended May 31, 2016 Cost of Gross SG&A Restructuring
Margin Expense Operating Operating Non Income Net Income Diluted
Sales Income Income Operating Tax Available to EPS
per Pound (Income) Expense ASI Common
Stockholders
Expense (Benefit)
--- ------- --------
(In thousands, except for %'s, per pound and per share data)
As reported $1,587,192 16.1% $222,482 $8,005 $73,740 $0.039 $42,790 $4,076 $20,457 $0.69
Certain items:
Accelerated depreciation (1) (4,779) (17) - 4,796 - 1,127 3,669 0.12
Costs related to acquisitions
and integrations (2) (2,522) (5,048) - 7,570 - 1,779 5,791 0.20
Restructuring and related costs
(3) (2,532) (9,422) (8,005) 19,959 (771) 4,872 15,858 0.54
Lucent costs (4) (1,844) (4,424) - 6,268 - 1,473 4,795 0.17
Accelerated amortization of
deferred financing fees (5) - - - - (437) 103 334 0.01
Tax (benefits) charges (6) - - - - - 3,197 (3,197) (0.11)
Loss (income) from discontinued
operations - - - - - - (283) (0.01)
--- --- --- --- ----
Total certain items (11,677) 0.6% (18,911) (8,005) 38,593 0.021 (1,208) 12,551 26,967 0.92
------- ------- ------ ------ ----- ------ ------ ------ ----
As Adjusted $1,575,515 16.7% $203,571 $ - $112,333 $0.060 $41,582 $16,627 $47,424 $1.61
========== ==== ======== === === ======== ====== ======= ======= ======= =====
Percentage of Revenue 10.8% 5.9% 2.5%
==== === ===
Effective Tax Rate 23.5%
====
Nine months ended May 31, 2015 Cost of Gross SG&A Restructuring
Margin Expense Operating Operating Non Income Net Income Diluted
Sales Income Income Operating Tax Available to EPS
per Pound (Income) Expense ASI Common
Stockholders
Expense (Benefit)
--- ------- --------
(In thousands, except for %'s, per pound and per share data)
As reported $1,462,531 14.9% $195,482 $10,530 $49,663 $0.031 $26,945 $18,801 $2,378 $0.08
Certain items:
Accelerated depreciation (1) (327) - - 327 - - 327 0.01
Costs related to acquisitions
and integrations (2) (174) (7,798) - 7,972 - 307 7,665 0.26
Restructuring and related costs
(3) (347) (4,426) (10,530) 15,303 - 3,146 12,157 0.41
CEO transition costs (8) - (6,167) - 6,167 - - 6,167 0.21
Inventory step-up (7) (341) - - 341 - 102 239 0.01
Gain on early extinguishment of
debt (10) - - - - 1,290 (428) (862) (0.03)
Acquisition related interest
expense (11) - - - - (19,134) - 19,134 0.65
Tax (benefits) charges (6) - - - - - (3,841) 3,841 0.13
Loss (income) from discontinued
operations - - - - - - 86 -
--- --- --- --- ---
Total certain items (1,189) - % (18,391) (10,530) 30,110 0.019 (17,844) (714) 48,754 1.65
------ ------- ------- ------ ----- ------- ---- ------ ----
As Adjusted $1,461,342 14.9% $177,091 $ - $79,773 $0.050 $9,101 $18,087 $51,132 $1.73
========== ==== ======== === === ======= ====== ====== ======= ======= =====
Percentage of Revenue 10.3% 4.6% 3.0%
==== === ===
Effective Tax Rate 25.6%
====
1 - Accelerated depreciation is related to restructuring plans in the Company's USCAN and EMEA segments. Refer to Note 14 in the Company's Quarterly Report on Form 10-Q for further discussion.
2 - Costs related to acquisitions and integrations primarily include third party professional, legal, IT and other expenses associated with successful and unsuccessful full or partial acquisition and divestiture/dissolution transactions, as well as certain employee-related expenses such as travel, bonuses and post-acquisition severance separate from a formal restructuring plan.
3 - Restructuring and related costs include items such as employee severance charges, lease termination charges, curtailment gains/losses, other employee termination costs, and professional fees related to the reorganization of the Company's legal entity structure and facility operations.
4 - Lucent costs primarily represent legal and investigation costs related to resolving the Lucent matter, product manufacturing costs for reworking existing Lucent inventory, obsolete Lucent inventory reserve costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations.
5 - Write off of deferred financing costs related to the EUR79.0 million prepayment of the Euro Term Loan B.
6 - Tax (benefits) charges represent the Company's quarterly non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.
7 - Inventory step-up costs represent the amortization of adjustments to fair value of inventory acquired for acquisition purchase accounting.
8 - CEO transition costs represent a charge for the modification and accelerated vesting upon retirement of the outstanding equity compensation awards granted to Joseph M. Gingo in 2013 and 2014.
9 - Convertible special stock dividends have been added back as the 2.4 million shares of convertible special stock were considered dilutive to the third quarter of fiscal 2016.
10 - Represents a pre-tax net gain of $1.3 million on the early extinguishment of debt.
11 - Primarily relates to $18.8 million in bridge financing fees.
A. SCHULMAN, INC.
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
Three months ended May 31, Nine months ended May 31,
-------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
(In thousands)
Net income available
to A. Schulman, Inc.
common stockholders $15,522 $(9,892) $20,457 $2,378
Interest expense and
bridge financing fees 13,557 21,368 40,965 26,038
Provision for U.S. and
foreign income taxes 312 10,344 4,076 18,801
Depreciation and
Amortization 22,409 12,145 67,510 38,444
Noncontrolling
interests 241 343 1,075 890
Convertible special
stock dividends 1,875 563 5,625 563
Other (1) 163 522 1,825 907
--- --- ----- ---
EBITDA, as calculated $54,079 $35,393 $141,533 $88,021
Non-GAAP adjustments
(2) 12,832 9,812 33,501 29,857
EBITDA, as adjusted $66,911 $45,205 $175,034 $117,878
======= ======= ======== ========
(1) - Other includes Foreign currency transaction (gains) losses, Other (income) expense, net, and Gain on early extinguishment of debt.
(2) - For details on Non-GAAP adjustments, refer to "Reconciliation of GAAP and Non-GAAP Financial Measures", items (2) - (11) and Loss (income) from discontinued operations. Amounts are included in Non Operating (Income) Expense, Income Tax Expense (Benefit) and Net Income Available to ASI Common Stockholders. Accelerated depreciation on the "Reconciliation of GAAP and Non-GAAP Financial Measures" has been excluded as it is already included in Depreciation and Amortization above. The three months ended May 31, 2015 and nine months ended May 31, 2016 and May 31, 2015 also include additional amortization expense which is in SG&A in the "Reconciliation of GAAP and Non-GAAP Financial Measures". This expense has been added back to adjusted EBITDA.
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
Net Sales Pounds Sold
--------- -----------
Three months ended May 31,
--------------------------
EMEA 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $33,378 $33,800 $(422) (1.2)% 13,902 13,924 (22) (0.2)%
Masterbatch solutions 107,774 102,188 5,586 5.5% 108,291 104,355 3,936 3.8%
Engineered plastics 92,560 95,403 (2,843) (3.0)% 72,091 71,926 165 0.2%
Specialty powders 36,711 37,903 (1,192) (3.1)% 43,698 46,997 (3,299) (7.0)%
Distribution services 51,945 56,961 (5,016) (8.8)% 79,816 85,689 (5,873) (6.9)%
------ ------ ------ ------ ------ ------
Total EMEA $322,368 $326,255 $(3,887) (1.2)% 317,798 322,891 (5,093) (1.6)%
======== ======== ======= ===== ======= ======= ====== =====
Net Sales Pounds Sold
--------- -----------
Three months ended May 31,
--------------------------
USCAN 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $10,840 $11,209 $(369) (3.3)% 4,004 3,925 79 2.0%
Masterbatch solutions 33,575 37,077 (3,502) (9.4)% 50,433 51,659 (1,226) (2.4)%
Engineered plastics 101,836 48,172 53,664 111.4% 100,897 31,897 69,000 216.3%
Specialty powders 22,426 22,914 (488) (2.1)% 33,689 33,563 126 0.4%
Distribution services 14,661 17,708 (3,047) (17.2)% 18,024 21,437 (3,413) (15.9)%
------ ------ ------ ------ ------ ------
Total USCAN $183,338 $137,080 $46,258 33.7% 207,047 142,481 64,566 45.3%
======== ======== ======= ==== ======= ======= ====== ====
Net Sales Pounds Sold
--------- -----------
Three months ended May 31,
--------------------------
LATAM 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $1,242 $1,054 $188 17.8% 468 395 73 18.5%
Masterbatch solutions 23,103 23,769 (666) (2.8)% 17,657 16,789 868 5.2%
Engineered plastics 11,221 11,889 (668) (5.6)% 9,058 9,196 (138) (1.5)%
Specialty powders 7,811 8,109 (298) (3.7)% 9,445 7,177 2,268 31.6%
Distribution services - - - N/A - - - N/A
--- --- --- --- --- ---
Total LATAM $43,377 $44,821 $(1,444) (3.2)% 36,628 33,557 3,071 9.2%
======= ======= ======= ===== ====== ====== ===== ===
Net Sales Pounds Sold
--------- -----------
Three months ended May 31,
--------------------------
APAC 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $3,113 $2,567 $546 21.3% 2,513 1,615 898 55.6%
Masterbatch solutions 19,705 21,375 (1,670) (7.8)% 22,457 22,331 126 0.6%
Engineered plastics 23,328 26,454 (3,126) (11.8)% 18,938 19,479 (541) (2.8)%
Specialty powders 713 2,207 (1,494) (67.7)% 693 2,617 (1,924) (73.5)%
Distribution services 21 99 (78) (78.8)% 43 135 (92) (68.1)%
--- --- --- --- --- ---
Total APAC $46,880 $52,702 $(5,822) (11.0)% 44,644 46,177 (1,533) (3.3)%
======= ======= ======= ====== ====== ====== ====== =====
Net Sales Pounds Sold
--------- -----------
Nine months ended May 31,
-------------------------
EMEA 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $96,572 $102,312 $(5,740) (5.6)% 39,424 38,320 1,104 2.9%
Masterbatch solutions 305,688 311,708 (6,020) (1.9)% 304,893 292,602 12,291 4.2%
Engineered plastics 279,435 295,212 (15,777) (5.3)% 214,407 207,141 7,266 3.5%
Specialty powders 104,513 114,637 (10,124) (8.8)% 124,470 134,043 (9,573) (7.1)%
Distribution services 154,586 188,723 (34,137) (18.1)% 237,880 276,101 (38,221) (13.8)%
------- ------- ------- ------- ------- -------
Total EMEA $940,794 $1,012,592 $(71,798) (7.1)% 921,074 948,207 (27,133) (2.9)%
======== ========== ======== ===== ======= ======= ======= =====
Net Sales Pounds Sold
--------- -----------
Nine months ended May 31,
-------------------------
USCAN 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $30,012 $31,524 $(1,512) (4.8)% 10,923 10,742 181 1.7%
Masterbatch solutions 98,646 119,514 (20,868) (17.5)% 145,098 160,352 (15,254) (9.5)%
Engineered plastics 294,921 140,840 154,081 109.4% 290,379 89,950 200,429 222.8%
Specialty powders 65,495 71,574 (6,079) (8.5)% 92,010 111,383 (19,373) (17.4)%
Distribution services 43,363 51,769 (8,406) (16.2)% 56,547 56,487 60 0.1%
------ ------ ------ ------ ------ ---
Total USCAN $532,437 $415,221 $117,216 28.2% 594,957 428,914 166,043 38.7%
======== ======== ======== ==== ======= ======= ======= ====
Net Sales Pounds Sold
--------- -----------
Nine months ended May 31,
-------------------------
LATAM 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $3,698 $3,457 $241 7.0% 1,382 1,347 35 2.6%
Masterbatch solutions 68,149 65,971 2,178 3.3% 52,958 46,316 6,642 14.3%
Engineered plastics 32,170 34,857 (2,687) (7.7)% 26,463 25,775 688 2.7%
Specialty powders 22,721 27,850 (5,129) (18.4)% 25,891 23,456 2,435 10.4%
Distribution services - - - N/A - - - N/A
--- --- --- --- --- ---
Total LATAM $126,738 $132,135 $(5,397) (4.1)% 106,694 96,894 9,800 10.1%
======== ======== ======= ===== ======= ====== ===== ====
Net Sales Pounds Sold
--------- -----------
Nine months ended May 31,
-------------------------
APAC 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance colors $8,653 $8,500 $153 1.8% 7,066 5,809 1,257 21.6%
Masterbatch solutions 58,187 61,038 (2,851) (4.7)% 65,022 60,900 4,122 6.8%
Engineered plastics 68,052 79,196 (11,144) (14.1)% 56,326 55,809 517 0.9%
Specialty powders 2,351 8,661 (6,310) (72.9)% 2,510 9,084 (6,574) (72.4)%
Distribution services 392 863 (471) (54.6)% 603 1,062 (459) (43.2)%
--- --- ---- --- ----- ----
Total APAC $137,635 $158,258 $(20,623) (13.0)% 131,527 132,664 (1,137) (0.9)%
======== ======== ======== ====== ======= ======= ====== =====
Net Sales Pounds Sold
--------- -----------
Three months ended May 31,
--------------------------
Consolidated 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance
colors $48,573 $48,630 $(57) (0.1)% 20,887 19,859 1,028 5.2%
Engineered composites 54,476 - 54,476 N/A 45,417 - 45,417 N/A
Masterbatch solutions 184,157 184,409 (252) (0.1)% 198,838 195,134 3,704 1.9%
Engineered plastics 228,945 181,918 47,027 25.9% 200,984 132,498 68,486 51.7%
Specialty powders 67,661 71,133 (3,472) (4.9)% 87,525 90,354 (2,829) (3.1)%
Distribution services 66,627 74,768 (8,141) (10.9)% 97,883 107,261 (9,378) (8.7)%
------ ------ ------ ------ ------- ------
Total Consolidated $650,439 $560,858 $89,581 16.0% 651,534 545,106 106,428 19.5%
======== ======== ======= ==== ======= ======= ======= ====
Net Sales Pounds Sold
--------- -----------
Nine months ended May 31,
-------------------------
Consolidated 2016 2015 $ Change % Change 2016 2015 Lbs. % Change
Change
--- ------
(In thousands, except for %'s)
Custom performance
colors $138,935 $145,793 $(6,858) (4.7)% 58,795 56,218 2,577 4.6%
Engineered composites 153,815 - 153,815 N/A 130,338 - 130,338 N/A
Masterbatch solutions 530,670 558,231 (27,561) (4.9)% 567,971 560,170 7,801 1.4%
Engineered plastics 674,578 550,105 124,473 22.6% 587,575 378,675 208,900 55.2%
Specialty powders 195,080 222,722 (27,642) (12.4)% 244,881 277,966 (33,085) (11.9)%
Distribution services 198,341 241,355 (43,014) (17.8)% 295,030 333,650 (38,620) (11.6)%
------- ------- ------- ------- ------- -------
Total Consolidated $1,891,419 $1,718,206 $173,213 10.1% 1,884,590 1,606,679 277,911 17.3%
========== ========== ======== ==== ========= ========= ======= ====
A. SCHULMAN, INC.
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
Three months ended May 31, Nine months ended May 31,
-------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
(In thousands, except for %'s)
Segment gross profit
EMEA $49,852 $51,695 $136,489 $145,908
USCAN 32,560 22,104 90,095 66,478
LATAM 9,055 9,324 27,226 22,075
APAC 8,080 7,771 24,153 22,403
EC 13,746 - 37,941 -
------ --- ------ ---
Total segment gross
profit 113,293 90,894 315,904 256,864
Inventory step-up - - - (341)
Accelerated
depreciation and
restructuring
related costs (2,930) (78) (7,311) (674)
Costs related to
acquisitions and
integrations (423) (59) (2,522) (174)
Lucent costs (466) - (1,844) -
---- ---
Total gross profit $109,474 $90,757 $304,227 $255,675
======== ======= ======== ========
Segment operating income
EMEA $23,382 $24,716 $59,147 $61,032
USCAN 15,576 7,982 38,166 25,299
LATAM 4,748 4,654 14,581 7,531
APAC 4,540 3,972 13,517 10,903
EC 5,031 - 10,583 -
----- --- ------ ---
Total segment
operating income 53,277 41,324 135,994 104,765
Corporate (7,489) (8,502) (23,661) (24,992)
Costs related to
acquisitions and
integrations (1,443) (3,590) (7,570) (7,972)
Restructuring and
related costs (9,520) (5,937) (19,959) (15,303)
Accelerated
depreciation (1,286) (29) (4,796) (327)
Lucent costs (1,951) - (6,268) -
Inventory step-up - - - (341)
CEO transition costs - - - (6,167)
--- --- --- ------
Operating income 31,588 23,266 73,740 49,663
Interest expense (13,557) (2,618) (40,965) (7,288)
Bridge financing fees - (18,750) - (18,750)
Foreign currency
transaction gains
(losses) (392) (857) (2,071) (3,097)
Other income
(expense), net 229 335 246 900
Gain on early
extinguishment of
debt - - - 1,290
--- --- --- -----
Income from
continuing
operations before
taxes $17,868 $1,376 $30,950 $22,718
======= ====== ======= =======
Capacity utilization
EMEA 88% 94% 82% 88%
USCAN 67% 62% 67% 63%
LATAM 73% 76% 72% 71%
APAC 68% 67% 66% 65%
EC 72% - % 69% - %
Worldwide 75% 78% 73% 75%
A. SCHULMAN, INC.
Sales by Geographical Region
(Unaudited)
Three months ended May 31, 2016
-------------------------------
(In thousands, except for %'s)
Thermoplastics Engineered Composites Total
---------------------
Geographical Region Sales by % of TP Sales by Region % of EC Total Sales Total %
Region
------
United States / Canada $183,338 30.8% $39,030 71.6% $222,368 34.2%
Europe 322,368 54.0% 5,841 10.8% 328,209 50.5%
Mexico / South America 43,377 7.3% 9,605 17.6% 52,982 8.1%
Asia Pacific 46,880 7.9% - - % 46,880 7.2%
------
Total $595,963 100.0% $54,476 100.0% $650,439 100.0%
======== ===== ======= ===== ======== =====
Three months ended May 31, 2015
-------------------------------
(In thousands, except for %'s)
Thermoplastics Engineered Composites Total
-------------- ---------------------
Geographical Region Sales by % of TP Sales by Region % of EC Total Sales Total %
Region
------
United States / Canada $137,080 24.4% $ - - % $137,080 24.4%
Europe 326,255 58.2% - - % 326,255 58.2%
Mexico / South America 44,821 8.0% - - % 44,821 8.0%
Asia Pacific 52,702 9.4% - - % 52,702 9.4%
------ --- ---
Total $560,858 100.0% $ - - % $560,858 100.0%
======== ===== === === === === ======== =====
Nine months ended May 31, 2016
------------------------------
(In thousands, except for %'s)
Thermoplastics Engineered Composites Total
---------------------
Geographical Region Sales by % of TP Sales by Region % of EC Total Sales Total %
Region
------
United States / Canada $532,437 30.6% $110,199 71.6% $642,636 34.0%
Europe 940,794 54.2% 17,289 11.2% 958,083 50.7%
Mexico / South America 126,738 7.3% 26,327 17.2% 153,065 8.0%
Asia Pacific 137,635 7.9% - - % 137,635 7.3%
-------
Total $1,737,604 100.0% $153,815 100.0% $1,891,419 100.0%
========== ===== ======== ===== ========== =====
Nine months ended May 31, 2015
------------------------------
(In thousands, except for %'s)
Thermoplastics Engineered Composites Total
-------------- ---------------------
Geographical Region Sales by % of TP Sales by Region % of EC Total Sales Total %
Region
------
United States / Canada $415,221 24.2% $ - - % $415,221 24.2%
Europe 1,012,592 58.8% - - % 1,012,592 58.9%
Mexico / South America 132,135 7.7% - - % 132,135 7.7%
Asia Pacific 158,258 9.3% - - % 158,258 9.2%
-------
Total $1,718,206 100.0% $ - - % $1,718,206 100.0%
========== ===== === === === === ========== =====
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/a-schulman-reports-fiscal-2016-third-quarter-results-300291690.html
SOURCE A. Schulman, Inc.
