Industry Press Releases

A. Schulman Reports Fiscal 2017 Third-Quarter Results

Thursday, Jun 29, 2017
Pressreleases

A. Schulman, Inc. today announced earnings for the quarter ended May 31, 2017 of $0.47 per diluted share, compared with $0.53 per diluted share in the prior year period. On an adjusted basis, reported earnings per share were $0.63 in the third quarter of fiscal 2017, compared with $0.79 in the third quarter of fiscal 2016. The fiscal 2017 third quarter adjusted earnings per diluted share of $0.63 includes the negative effect of foreign currency of $0.04 over the prior year period.

Joseph M. Gingo, chairman, president and chief executive officer stated, "I am very pleased with our strong performance in Asia-Pacific, Latin America and Engineered Composites. Our consolidated results were largely influenced by two factors. In our U.S and Canada region, while operations improved, our sales and profitability are still hampered by the complexity of the business consolidation in Evansville, Indiana. In Europe, a significant mid-quarter drop in polyolefin raw material prices interrupted our sales cycle and adversely impacted profitability. We have seen our sales cycle normalize in May and continue into June."

Consolidated net sales for the fiscal 2017 third quarter were $645.8 million, compared with $650.4 million in the same prior-year quarter. Excluding the negative impact of foreign currency translation in the third quarter of fiscal 2017 of $16.3 million, net sales rose 1.8 percent from a year ago.

GAAP operating income in the third quarter of fiscal 2017 was $32.2 million, compared with $31.6 million in the prior year period. Adjusted operating income margin was 5.7 percent in the third quarter of fiscal 2017, compared with 7 percent in the third quarter of fiscal 2016. On a year-to-date basis, the adjusted operating margin was 5.5 percent compared with 5.9 percent in the prior year.

Net income in the fiscal 2017 third quarter was $13.9 million, compared with $15.5 million in the year-ago period. On an adjusted basis, net income for the third quarter of fiscal 2017 was $18.5 million, compared with $25.2 million in the prior year period. Fiscal 2017 third-quarter adjusted EBITDA was $56 million, compared with $66.9 million in the third quarter of fiscal 2016.

Cash Flow/Debt Reduction

Cash provided from operations was $73.6 million in the nine months ended May 31, 2017. During the quarter, the Company reduced its net debt position by $20.3 million to a balance of $880.4 million as of May 31, 2017. Net leverage at the end of the third quarter of fiscal 2017 was 4.13x.

Business Update and Outlook

Gingo stated, "Currency translation, although improving, is a continuing headwind. If the dollar stays at the end-of-May level for the duration of the fourth quarter this would further impact the Company's earnings by as much as two cents in the quarter and would result in 12 cents for currency impact compared with the Company's guidance for the full fiscal year.  

"With the return to a more normal sales pattern in Europe and strong performances in Latin America, Asia-Pacific and Engineered Composites, we foresee stronger year-over-year performance in our fiscal 2017 fourth quarter as we anticipate operational improvement in the U.S. and Canada region. Therefore, excluding the potential 2017 currency translation as noted above, we are maintaining our initial fiscal 2017 guidance of $2.5 billion to $2.6 billion in sales, adjusted EBITDA of $225 million to $230 million, adjusted earnings per diluted share in the range of $2.08 to $2.18 on an operating basis. Likewise, we continue to expect to achieve a return on invested capital of 11 percent to 12.5 percent in fiscal 2017.

"The trends that are starting to take shape in the fourth quarter are encouraging and will create added momentum as we progress into fiscal 2018," he said.

Please refer to the reconciliation of GAAP and Non-GAAP financial measures for the types of items excluded from the Company's business outlook.

Conference Call on the Web

A live Internet broadcast of A. Schulman's conference call regarding fiscal 2017 third-quarter earnings can be accessed at 10:00 a.m. Eastern Time on June 29, 2017, 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 53 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.5 billion for the fiscal year ended August 31, 2016. 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 may 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 may 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 and the integration thereof, joint ventures and restructuring initiatives;
•    escalation in the cost of providing employee health care;
•    uncertainties regarding the resolution of pending and future litigation and other claims;
•    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; 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, 2016. 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.

A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
 

Three months ended May 31,

 

Nine months ended May 31,

 

2017

 

2016

 

2017

 

2016

 

(In thousands, except per share data)

Net sales

$

645,795

   

$

650,439

   

$

1,814,473

   

$

1,891,419

 

Cost of sales

547,368

   

540,965

   

1,525,845

   

1,587,192

 

Selling, general and administrative expenses

65,266

   

73,641

   

203,608

   

222,482

 

Restructuring expense

939

   

4,245

   

12,361

   

8,005

 

Operating income (loss)

32,222

   

31,588

   

72,659

   

73,740

 

Interest expense

13,179

   

13,557

   

39,450

   

40,965

 

Foreign currency transaction (gains) losses

(68)

   

392

   

1,575

   

2,071

 

Other (income) expense, net

(682)

   

(311)

   

(1,138)

   

(529)

 

Income (loss) before taxes

19,793

   

17,950

   

32,772

   

31,233

 

Provision (benefit) for U.S. and foreign income taxes

3,695

   

312

   

8,157

   

4,076

 

Net income (loss)

16,098

   

17,638

   

24,615

   

27,157

 

Noncontrolling interests

(320)

   

(241)

   

(868)

   

(1,075)

 

Net income (loss) attributable to A. Schulman, Inc.

15,778

   

17,397

   

23,747

   

26,082

 

Convertible special stock dividends

1,875

   

1,875

   

5,625

   

5,625

 

Net income (loss) available to A.
Schulman, Inc. common stockholders

$

13,903

   

$

15,522

   

$

18,122

   

$

20,457

 
               

Weighted-average number of shares outstanding:

             

Basic

29,421

   

29,339

   

29,392

   

29,284

 

Diluted

29,530

   

29,474

   

29,496

   

29,459

 
               

Net income (loss) per common share
available to A. Schulman, Inc. common
stockholders

             

Basic

$

0.47

   

$

0.53

   

$

0.62

   

$

0.70

 

Diluted

$

0.47

   

$

0.53

   

$

0.61

   

$

0.69

 
               

Cash dividends per common share

$

0.205

   

$

0.205

   

$

0.615

   

$

0.615

 

Cash dividends per share of convertible
special stock

$

15.00

   

$

15.00

   

$

45.00

   

$

45.00

 

 

A. SCHULMAN, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
 

May 31,
 2017

 

August 31,
 2016

 

(In thousands)

ASSETS

Current assets:

     

Cash and cash equivalents

$

50,130

   

$

35,260

 

Restricted cash

1,068

   

8,143

 

Accounts receivable, less allowance for doubtful accounts of $10,415 at May 31, 2017 and
$11,341 at August 31, 2016

411,004

   

376,786

 

Inventories

297,104

   

263,617

 

Prepaid expenses and other current assets

38,783

   

40,263

 

Assets held for sale

6,586

   

 

Total current assets

804,675

   

724,069

 

Property, plant and equipment, at cost:

     

Land and improvements

31,218

   

32,957

 

Buildings and leasehold improvements

177,468

   

184,291

 

Machinery and equipment

450,250

   

447,932

 

Furniture and fixtures

34,361

   

34,457

 

Construction in progress

28,674

   

20,431

 

Gross property, plant and equipment

721,971

   

720,068

 

Accumulated depreciation

425,486

   

405,246

 

Net property, plant and equipment

296,485

   

314,822

 

Deferred charges and other noncurrent assets

87,141

   

88,161

 

Goodwill

260,768

   

257,773

 

Intangible assets, net

338,304

   

362,614

 

Total assets

$

1,787,373

   

$

1,747,439

 

LIABILITIES AND EQUITY

Current liabilities:

     

Accounts payable

$

339,566

   

$

280,060

 

U.S. and foreign income taxes payable

3,783

   

8,985

 

Accrued payroll, taxes and related benefits

44,458

   

47,569

 

Other accrued liabilities

69,661

   

67,704

 

Short-term debt

21,453

   

25,447

 

Total current liabilities

478,921

   

429,765

 

Long-term debt

910,132

   

919,349

 

Pension plans

147,017

   

145,108

 

Deferred income taxes

49,873

   

59,013

 

Other long-term liabilities

24,270

   

25,844

 

Total liabilities

1,610,213

   

1,579,079

 

Commitments and contingencies

     

Stockholders' equity:

     

Convertible special stock, no par value

120,289

   

120,289

 

Common stock, $1 par value, authorized - 75,000 shares, issued - 48,529 shares at May 31,
2017 and 48,510 shares at August 31, 2016

48,529

   

48,510

 

Additional paid-in capital

277,867

   

275,115

 

Accumulated other comprehensive income (loss)

(115,501)

   

(120,721)

 

Retained earnings

219,032

   

219,039

 

Treasury stock, at cost, 19,064 shares at May 31, 2017 and 19,069 shares at August 31, 2016

(382,871)

   

(382,963)

 

Total A. Schulman, Inc.'s stockholders' equity

167,345

   

159,269

 

Noncontrolling interests

9,815

   

9,091

 

Total equity

177,160

   

168,360

 

Total liabilities and equity

$

1,787,373

   

$

1,747,439

 

 

 

A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
 

Nine months ended May 31,

 

2017

 

2016

 

(In thousands)

Operating activities:

     

Net income

$

24,615

   

$

27,157

 

Adjustments to reconcile net income to net cash provided from (used in)
operating activities:

     

Depreciation

32,455

   

37,347

 

Amortization

26,381

   

30,163

 

Deferred tax provision (benefit)

(9,539)

   

(2,395)

 

Pension, postretirement benefits and other compensation

5,302

   

3,161

 

Changes in assets and liabilities, net of acquisitions:

     

Accounts receivable

(32,841)

   

2,574

 

Inventories

(32,694)

   

19,900

 

Accounts payable

64,795

   

(8,145)

 

Income taxes

(5,122)

   

(9,955)

 

Accrued payroll and other accrued liabilities

(1,131)

   

2,583

 

Other assets and long-term liabilities

1,345

   

(6,718)

 

Net cash provided from (used in) operating activities

73,566

   

95,672

 

Investing activities

     

Expenditures for property, plant and equipment

(30,719)

   

(34,618)

 

Proceeds from the sale of assets

2,750

   

1,184

 

Other investing activities

125

   

 

Net cash provided from (used in) investing activities

(27,844)

   

(33,434)

 

Financing activities:

     

Cash dividends paid to special stockholders

(5,625)

   

(5,625)

 

Cash dividends paid to common stockholders

(18,129)

   

(18,012)

 

Increase (decrease) in short-term debt

(2,283)

   

2,780

 

Borrowings on revolving credit facility

283,943

   

124,671

 

Repayments of revolving credit facility

(228,973)

   

(112,470)

 

Repayments of other long-term debt and capital leases

(66,735)

   

(97,978)

 

Noncontrolling interests' distributions

(53)

   

 

Issuances of stock, common and treasury

143

   

213

 

Redemptions of common stock

(711)

   

(1,077)

 

Purchases of treasury stock

   

 

Net cash provided from (used in) financing activities

(38,423)

   

(107,498)

 

Effect of exchange rate changes on cash

496

   

(2,186)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

7,795

   

(47,446)

 

Cash, cash equivalents, and restricted cash at beginning of period

43,403

   

96,872

 

Cash, cash equivalents, and restricted cash at end of period

$

51,198

   

$

49,426

 
       

Cash and cash equivalents

$

50,130

   

$

47,019

 

Restricted cash

1,068

   

2,407

 

Total cash, cash equivalents, and restricted cash

$

51,198

   

$

49,426

 

 

A. SCHULMAN, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures

Unaudited

 

Three months ended May 31, 2017

 

Cost of
Sales

 

Gross
Margin

 

SG&A

 

Restructuring
Expense

 

Operating
Income

 

Non
Operating
(Income)
Expense

 

Income
Tax
Expense
(Benefit)

 

Net Income
Available to
ASI Common
Stockholders

 

Diluted
EPS

   

(In thousands, except for %'s and per share data)

As reported

 

$

547,368

   

15.2

%

 

$

65,266

   

$

939

   

$

32,222

   

$

12,429

   

$

3,695

   

$

13,903

   

$

0.47

 

Certain items:

                                   

Accelerated depreciation (1)

 

(236)

       

(1)

   

   

237

   

   

49

   

188

   

0.01

 

Restructuring and related costs (3)

 

       

(1,993)

   

(939)

   

2,932

   

   

604

   

2,328

   

0.07

 

Lucent costs (4)

 

(104)

       

(1,626)

   

   

1,730

   

   

356

   

1,374

   

0.05

 

Tax (benefits) charges (7)

 

       

   

   

   

   

(890)

   

890

   

0.03

 

Gain on asset sale (10)

                 

   

169

   

(35)

   

(134)

   

 

Total certain items

 

(340)

   

0.1

%

 

(3,620)

   

(939)

   

4,899

   

169

   

84

   

4,646

   

0.16

 

As Adjusted

 

$

547,028

   

15.3

%

 

$

61,646

   

$

   

$

37,121

   

$

12,598

   

$

3,779

   

$

18,549

   

$

0.63

 
                                     

Percentage of Revenue

         

9.5

%

     

5.7

%

         

2.9

%

   
                                     

Effective Tax Rate

                         

15.4

%

       
                                     

Three months ended May 31, 2016

 

Cost of
Sales

 

Gross
Margin

 

SG&A

 

Restructuring
Expense

 

Operating
Income

 

Non
Operating
(Income)
Expense

 

Income
Tax
Expense
(Benefit)

 

Net Income
Available to
ASI Common
Stockholders

 

Diluted
EPS

   

(In thousands, except for %'s and per share data)

As reported

 

$

540,965

   

16.8

%

 

$

73,641

   

$

4,245

   

$

31,588

   

$

13,638

   

$

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

   

(127)

   

2,099

   

7,548

   

0.23

 

Lucent costs (4)

 

(466)

       

(1,485)

   

   

1,951

   

   

385

   

1,566

   

0.05

 

Accelerated amortization of debt issuance costs (6)

 

       

   

   

   

(163)

   

34

   

129

   

 

Tax (benefits) charges (7)

 

       

   

   

   

   

3,664

   

(3,664)

   

(0.12)

 

Total certain items

 

(3,819)

   

0.6

%

 

(6,136)

   

(4,245)

   

14,200

   

(290)

   

6,660

   

9,705

   

0.26

 

As Adjusted

 

$

537,146

   

17.4

%

 

$

67,505

   

$

   

$

45,788

   

$

13,348

   

$

6,972

   

$

25,227

   

$

0.79

 
                                     

Percentage of Revenue

         

10.4

%

     

7.0

%

     

   

3.9

%

   
                                     

Effective Tax Rate

                         

21.5

%

       

 

Nine months ended May 31, 2017

 

Cost of Sales

 

Gross
Margin

 

SG&A

 

Restructuring
Expense

 

Operating
Income

 

Non
Operating
(Income)
Expense

 

Income
Tax
Expense
(Benefit)

 

Net Income
Available to
ASI Common
Stockholders

 

Diluted
EPS

   

(In thousands, except for %'s and per share data)

As reported

 

$

1,525,845

   

15.9

%

 

$

203,608

   

$

12,361

   

$

72,659

   

$

39,887

   

$

8,157

   

$

18,122

   

$

0.61

 

Certain items:

                                   

Asset impairment (8)

 

       

(678)

   

   

678

   

(1,623)

   

474

   

1,827

   

0.06

 

Accelerated depreciation (1)

 

(1,059)

       

(1)

   

   

1,060

   

   

218

   

842

   

0.03

 

Costs related to acquisitions and integrations (2)

 

(57)

       

(548)

   

   

605

   

   

125

   

480

   

0.02

 

Restructuring and related costs (3)

 

(1,042)

       

(7,773)

   

(12,361)

   

21,176

   

   

4,362

   

16,814

   

0.56

 

Lucent costs (4)

 

(190)

       

(2,945)

   

   

3,135

   

   

646

   

2,489

   

0.08

 

CEO transition costs (5)

 

       

(196)

   

   

196

   

   

40

   

156

   

0.01

 

Accelerated amortization of debt issuance costs (6)

 

       

   

   

   

(227)

   

47

   

180

   

0.01

 

Tax (benefits) charges (7)

 

       

   

   

   

   

(1,428)

   

1,428

   

0.05

 

Gain on asset sale (10)

 

       

   

   

   

169

   

(35)

   

(134)

   

 

Total certain items

 

(2,348)

   

0.1

%

 

(12,141)

   

(12,361)

   

26,850

   

(1,681)

   

4,449

   

24,082

   

0.82

 

As Adjusted

 

$

1,523,497

   

16.0

%

 

$

191,467

   

$

   

$

99,509

   

$

38,206

   

$

12,606

   

$

42,204

   

$

1.43

 
                                     

Percentage of Revenue

         

10.6

%

     

5.5

%

         

2.3

%

   
                                     

Effective Tax Rate

                         

20.6

%

       
                                     

Nine months ended May 31, 2016

 

Cost of Sales

 

Gross
Margin

 

SG&A

 

Restructuring
Expense

 

Operating
Income

 

Non
Operating
(Income)
Expense

 

Income
Tax
Expense
(Benefit)

 

Net Income
Available to
ASI Common
Stockholders

 

Diluted
EPS

   

(In thousands, except for %'s and per share data)

As reported

 

$

1,587,192

   

16.1

%

 

$

222,482

   

$

8,005

   

$

73,740

   

$

42,507

   

$

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

   

0.19

 

Restructuring and related costs (3)

 

(2,532)

       

(9,422)

   

(8,005)

   

19,959

   

(488)

   

4,872

   

15,575

   

0.54

 

Lucent costs (4)

 

(1,844)

       

(4,424)

   

   

6,268

   

   

1,473

   

4,795

   

0.17

 

Accelerated amortization of debt issuance costs (6)

 

       

   

   

   

(437)

   

103

   

334

   

0.01

 

Tax (benefits) charges (7)

 

       

   

   

   

   

3,197

   

(3,197)

   

(0.11)

 

Total certain items

 

(11,677)

   

0.6

%

 

(18,911)

   

(8,005)

   

38,593

   

(925)

   

12,551

   

26,967

   

0.92

 

As Adjusted

 

$

1,575,515

   

16.7

%

 

$

203,571

   

$

   

$

112,333

   

$

41,582

   

$

16,627

   

$

47,424

   

$

1.61

 
                                     

Percentage of Revenue

         

10.8

%

     

5.9

%

           

2.5

%

   
                                     

Effective Tax Rate

                         

23.5

%

       

1 - Accelerated depreciation is related to restructuring plans in the Company's USCAN and EMEA segments.

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, one-time 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 charges related to the reorganization of the legal entity structure. Refer to Note 12 in the Company's Quarterly Report on Form 10-Q for further discussion.

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 - CEO transition costs represent charges for deferred compensation granted to Bernard Rzepka.

6 - Write off of debt issuance costs are related to prepayments of $56.0 million of Term Loan B. Refer to Note 3 in the Company's Quarterly Report on Form 10-Q for further discussion.

7 - Tax (benefits) charges represent the Company's quarterly non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.

8 - Asset impairment relates to the discontinuation of information technology assets in the USCAN segment and future cash settlement of a commitment to a local government.

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 - Gain related to sale of assets that had previously been classified as held for sale.

 

A. SCHULMAN, INC.

ADJUSTED EBITDA RECONCILIATION

(Unaudited)

 
 

Three months ended May 31,

 

Nine months ended May 31,

 

2017

 

2016

 

2017

 

2016

 

(In thousands)

               

Net income available to A. Schulman, Inc.
common stockholders

$

13,903

   

$

15,522

   

$

18,122

   

$

20,457

 

     Interest expense

13,179

   

13,557

   

39,450

   

40,965

 

     Provision for U.S. and foreign income taxes

3,695

   

312

   

8,157

   

4,076

 

     Depreciation and amortization

18,977

   

22,409

   

58,836

   

67,510

 

     Noncontrolling interests

320

   

241

   

868

   

1,075

 

     Convertible special stock dividends

1,875

   

1,875

   

5,625

   

5,625

 

     Other (1)

(750)

   

163

   

437

   

1,825

 

EBITDA, as calculated

$

51,199

   

$

54,079

   

$

131,495

   

$

141,533

 

     Non-GAAP Adjustments (2)

4,765

   

12,832

   

25,790

   

33,501

 

EBITDA, as adjusted

$

55,964

   

$

66,911

   

$

157,285

   

$

175,034

 
               

(1) - Other includes Foreign currency transaction (gains) losses and Other (income) expense, net.

(2) - For details on Non-GAAP adjustments, refer to "Reconciliation of GAAP and Non-GAAP Financial Measures", items (2) - (8).  Amounts are included in Operating Income. 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, 2017 exclude additional depreciation expense which is in restructuring and related costs as it has already been included in Depreciation and amortization above. The nine months ended May 31, 2016 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

 

Net Sales

   

Three months ended May 31,

 

Nine months ended May 31,

EMEA

 

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

Custom Concentrates
and Services

 

$

174,394

   

$

177,863

   

$

(3,469)

   

(2.0)

%

 

$

481,512

   

$

506,773

   

$

(25,261)

   

(5.0)

%

Performance Materials

 

143,632

   

144,505

   

(873)

   

(0.6)

%

 

409,488

   

434,021

   

(24,533)

   

(5.7)

%

Total EMEA

 

$

318,026

   

$

322,368

   

$

(4,342)

   

(1.3)

%

 

$

891,000

   

$

940,794

   

$

(49,794)

   

(5.3)

%

                                 
   

Net Sales

 

Net Sales

   

Three months ended May 31,

 

Nine months ended May 31,

USCAN

 

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

Custom Concentrates
and Services

 

$

65,613

   

$

66,841

   

$

(1,228)

   

(1.8)

%

 

$

188,496

   

$

194,153

   

$

(5,657)

   

(2.9)

%

Performance Materials

 

102,268

   

116,497

   

(14,229)

   

(12.2)

%

 

287,721

   

338,284

   

(50,563)

   

(14.9)

%

Total USCAN

 

$

167,881

   

$

183,338

   

$

(15,457)

   

(8.4)

%

 

$

476,217

   

$

532,437

   

$

(56,220)

   

(10.6)

%

                                 
   

Net Sales

 

Net Sales

   

Three months ended May 31,

 

Nine months ended May 31,

LATAM

 

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

Custom Concentrates
and Services

 

$

32,396

   

$

32,156

   

$

240

   

0.7

%

 

$

89,739

   

$

94,568

   

$

(4,829)

   

(5.1)

%

Performance Materials

 

15,012

   

11,221

   

3,791

   

33.8

%

 

39,547

   

32,170

   

7,377

   

22.9

%

Total LATAM

 

$

47,408

   

$

43,377

   

$

4,031

   

9.3

%

 

$

129,286

   

$

126,738

   

$

2,548

   

2.0

%

                                 
   

Net Sales

 

Net Sales

   

Three months ended May 31,

 

Nine months ended May 31,

APAC

 

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

Custom Concentrates
and Services

 

$

24,514

   

$

23,531

   

$

983

   

4.2

%

 

$

72,677

   

$

69,191

   

$

3,486

   

5.0

%

Performance Materials

 

28,714

   

23,349

   

5,365

   

23.0

%

 

80,202

   

68,444

   

11,758

   

17.2

%

Total APAC

 

$

53,228

   

$

46,880

   

$

6,348

   

13.5

%

 

$

152,879

   

$

137,635

   

$

15,244

   

11.1

%

                                 
   

Net Sales

 

Net Sales

   

Three months ended May 31,

 

Nine months ended May 31,

Consolidated

 

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

Engineered Composites

 

$

59,252

   

$

54,476

   

$

4,776

   

8.8

%

 

$

165,091

   

$

153,815

   

$

11,276

   

7.3

%

Custom Concentrates
and Services

 

296,917

   

300,391

   

(3,474)

   

(1.2)

%

 

832,424

   

864,685

   

(32,261)

   

(3.7)

%

Performance Materials

 

289,626

   

295,572

   

(5,946)

   

(2.0)

%

 

816,958

   

872,919

   

(55,961)

   

(6.4)

%

Total Consolidated

 

$

645,795

   

$

650,439

   

$

(4,644)

   

(0.7)

%

 

$

1,814,473

   

$

1,891,419

   

$

(76,946)

   

(4.1)

%

                                 

 

   

Segment Gross Profit

 

Segment Gross Profit

   

Three months ended May 31,

 

Nine months ended May 31,

   

2017

 

2016

 

$ Change

 

% Change

 

2017

 

2016

 

$ Change

 

% Change

   

(In thousands, except for %'s)

               

EMEA

 

$

42,509

   

$

49,852

   

$

(7,343)

   

(14.7)

%

 

$

126,297

   

$

136,489

   

$

(10,192)

   

(7.5)

%

USCAN

 

21,844

   

32,560

   

(10,716)

   

(32.9)

%

 

66,420

   

90,095

   

(23,675)

   

(26.3)

%

LATAM

 

9,928

   

9,055

   

873

   

9.6

%

 

28,940

   

27,226

   

1,714

   

6.3

%

APAC

 

9,155

   

8,080

   

1,075

   

13.3

%

 

27,189

   

24,153

   

3,036

   

12.6

%

EC

 

15,331

   

13,746

   

1,585

   

11.5

%

 

42,130

   

37,941

   

4,189

   

11.0

%

Total segment gross profit

 

$

98,767

   

$

113,293

   

$

(14,526)

   

(12.8)

%

 

$

290,976

   

$

315,904

   

$

(24,928)

   

(7.9)

%

Accelerated depreciation and
restructuring related costs

 

(236)

   

(2,930)

   

2,694

   

(91.9)

%

 

(2,101)

   

(7,311)

   

5,210

   

(71.3)

%

Costs related to acquisitions
and integrations

 

   

(423)

   

423

   

%

 

(57)

   

(2,522)

   

2,465

   

(97.7)

%

Lucent costs (1)

 

(104)

   

(466)

   

362

   

%

 

(190)

   

(1,844)

   

1,654

   

(89.7)

%

Total gross profit

 

$

98,427

   

$

109,474

   

$

(11,047)

   

(10.1)%

   

$

288,628

   

$

304,227

   

$

(15,599)

   

(5.1)

%

                                 

(1)Refer to Note 13, Commitments and Contingencies, for additional discussion on this matter. Lucent costs in cost of sales include additional product and manufacturing operational costs for reworking inventory.  Lucent costs in selling, general and administrative expenses include legal and investigative costs. In addition, in the three and nine months ended May 31, 2016, Lucent costs in SG&A also include dedicated internal personnel costs that would have otherwise been focused on normal operations.

(2)Retructuring related costs for the three and nine months ended May 31, 2017 of $2.0 million and $8.8 million, respectively, and for the three and nine months ended May 31, 2016 of $5.3 million and $12.0 million, respectively, primarily included in selling, general and administrative expenses in the Company's statements of operations, are costs associated with professional fees for outside strategic consultants regarding actions to improve the profitability of the organization and efficiency of its operations, and costs associated with reorganizations of the legal entity structure of the Company.  Restructuring expenses included in restructuring expense in the Company's statement of operations include costs permitted under ASC 420, Exit or Disposal Obligations, such as severance costs, outplacement services and contract termination costs.

 

Source:prnewswire.com

 

 

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