A. Schulman Reports Q3 1998 Results
9 July 1998
A. Schulman Reports Third Quarter 1998 Results
AKRON, Ohio--July 9, 1998--A. Schulman Inc. (The Nasdaq Stock Market: SHLM) today announced that net income for the third quarter ended May 31, 1998 was $13,532,000 or $.38 per common share compared with $13,722,000 or $.37 per share for the corresponding quarter last year. Basic and diluted per share earnings are the same. Sales totaled $256.8 million compared with last year's third quarter sales of $259.2 million.For the nine months ended May 31, 1998, income before the cumulative effect of an accounting change was $37,051,000 or $1.04 per common share compared with $35,451,000 or $.95 per share for the same period last year. Last year's earnings included a charge of $900,000 or $.02 per share for foreign withholding taxes on dividends from foreign affiliates. In November 1997, the FASB issued a new ruling requiring the write-off of business process re-engineering costs. Accordingly, in the first quarter, the company wrote off $3,237,000 of such costs that were capitalized as of August 31, 1997. The write-off, net of income taxes, amounted to $2,007,000 or $.06 per common share and was accounted for as a cumulative effect of an accounting change. After deducting the charge, net income for the nine months ended May 31, 1998 was $35,044,000 or $.98 per common share on both the basic and diluted method. Sales for the nine month 1998 period were $760.9 million compared with $758.2 million for the same period last year.
Charges to income for the redesign of the company's business processes in North America, net of tax, were $272,000 for the 1998 third quarter and $1,156,000 for the nine months ended May 31, 1998. These charges were capitalized in 1997.
The translation effect from the strong U.S. dollar continued to have an adverse impact on A. Schulman's foreign operations. Translation reduced net income by $720,000 or $.02 per share for the quarter and $2,562,000 or $.07 per share for the nine month period. The translation effect also reduced sales by $9.0 million for the quarter and $43 million for the nine months.
Lower prices and product mix reduced sales by 7% for the quarter, offsetting a portion of the 10% volume improvement.
"We continue to experience a good level of orders in Europe, except for some recent softening in the order level of our United Kingdom facility," said Terry L. Haines, president and chief executive officer. "We anticipate continuing competitive price pressures in Europe."
In North America, there had been some weakening in A. Schulman's automotive business. Combined with the recent strike at General Motors Corporation, the company anticipates a reduction in sales which would have a negative impact on earnings. "We have recently reduced production at one of our North American facilities which will result in annual savings of approximately $2,500,000. We will take appropriate actions, where necessary, to minimize the effect this labor dispute will have on our profits," Haines commented.
Tonnage and margins improved during the quarter. Most of the tonnage increase occurred in Europe. However, European margins declined due to continuing competitive price pressures. The North American operations provided all of the margin increase for the quarter.
North American capacity utilization improved to 94% compared with 83% in the same quarter last year. Worldwide capacity utilization improved to 97% for the quarter compared with 90% in the comparable 1997 quarter.
"We continue to believe that our global capabilities provide a sound base to participate in the many opportunities for growth throughout the worldwide markets," said Haines.
Over the years, A. Schulman has invested in a number of countries throughout the world. One of these investments was an acquisition in Poland last summer. This operation is already profitable and has good prospects for future growth.
The company recently increased production in Indonesia to seven days per week. "Although the Asian situation is quite unsettled, we are pleased with the level of orders we are receiving from our customers in Asia. We are optimistic about the potential for this new facility," Haines noted.
In early June 1998, the company completed a repurchase program of 3 million common shares for $63.4 million. The program was completed prior to the announced goal of August 31, 1998 due to market conditions. Upon completion of the original program, A. Schulman's Board approved the repurchase of an additional 1.5 million common shares. Since this approval, the company has repurchased approximately 450,000 shares.
Headquartered in Akron, Ohio, A. Schulman is a leading international supplier of high-performance plastic compounds and resins. These materials are used in a variety of consumer, industrial, automotive and packaging applications. The Company employs 2,200 people and has 13 manufacturing facilities in North America, Europe, Mexico and the Asia-Pacific region. Revenues for the fiscal year ended August 31, 1997 were approximately $1 billion. Additional information about A. Schulman can be found on the World Wide Web at www.aschulman.com.