A. Schulman Posts Record Earnings per Share for Q4
21 October 1998
A. Schulman Posts Record Earnings per Share for Fourth Quarter; 1998 Fiscal Year per Share Earnings at all Time High Prior to Accounting Change
AKRON, Ohio--Oct. 20, 1998--A. Schulman Inc. today announced record net income per share for the fourth quarter ended August 31, 1998. Per share earnings for fiscal 1998 were also an all time high prior to recognizing the cumulative effect of an accounting change.Net income per share for the fourth quarter ended August 31, 1998 was $.44, a 5% increase over last year's record of $.42. Net income was $15,099,000 for 1998 compared with $15,293,000 for the 1997 fourth quarter. Net income for the fourth quarter was off slightly due to a 2% decline in European profits and the negative effect from the General Motors strike. Sales totaled $232.5 million compared with $238.2 million in the 1997 quarter. Sales were down due to the General Motors strike, lower prices and a $2.8 million adverse translation effect from a stronger U.S. dollar. These factors offset overall volume gains of 3%.
For the year ended August 31, 1998, per share earnings before the cumulative effect of an accounting change were a record $1.48 or 8% higher than 1997 per share earnings of $1.37. Income before the cumulative effect of an accounting change increased to $52,150,000 compared with $50,744,000 in fiscal 1997. Sales for fiscal 1998 were $993.3 million compared with $996.4 million for the 1997 fiscal year. The translation effect from a stronger U.S. dollar reduced sales by $45.8 million and more than offset annual tonnage gains of 7%.
"We are pleased to attain record per share earnings before the cumulative effect of accounting changes, especially in such a difficult competitive environment which also included the adverse effect of translation and the General Motors strike," said Terry L. Haines, president and chief executive officer.
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 year was $50,143,000 or $1.42 per common share on both the basic and diluted method compared with $50,744,000 or $1.37 per share in fiscal 1997.
There was a positive impact on per share earnings due to the lower number of outstanding shares. During the last two fiscal years, the company has completed two share repurchase plans aggregating 4.5 million shares. In August 1998, A. Schulman's Board authorized a plan for an additional 6 million shares. "Since the announcement of that plan, we have been aggressive buyers of our shares," said Haines. "We have repurchased approximately 1 million shares since the announcement on August 21, 1998. We believe that at current market prices, these purchases are an excellent investment and are an affirmation of management's commitment to enhance shareholder value." Currently, there are 32.3 million outstanding shares.
Profits in A. Schulman's European operations were down for the fourth quarter, mainly because of lower profit margins which more than offset volume gains of 12%. The U.S. dollar weakened during the fourth quarter and the translation effect increased net income by $382,000 or $.01 per share. Income in the European operations was off 3% for fiscal 1998 due to lower profit margins and the adverse effect of translation from the strength of the U.S. dollar. During the first three quarters of fiscal 1998, the U.S. dollar strengthened against the currencies of the countries where the company operates. The stronger U.S. dollar reduced net income for the year by $2,180,000 or $.06 per share.
Profits in North America before the cumulative effect of the accounting change improved 26% for the year. Fourth quarter profits for 1998 were approximately the same as in 1997, mainly due to the General Motors strike which reduced sales by approximately $15 million and net income by about $.03 to $.04 per share.
Worldwide gross profit margins for the year were 17.1% compared with 16.4% in fiscal 1997. The higher margins are the result of lower resin prices and capacity utilization which improved year to year from 83% to 90% for fiscal 1998, the company said. Europe operated at close to capacity throughout the year and North American utilization improved significantly from 77% to 86% in the current year.
"We are confident on the outlook for A. Schulman," Haines said. "Our European operations have a good level of orders and stabilization of the U.S. dollar at current levels will have a positive impact on earnings."
In North America, the order level has improved since the settlement of the General Motors strike. With business activity moderating, the company closed certain high cost manufacturing lines in the United States. "These steps and overall production and operating efficiencies provide us with a solid base to meet the challenges in today's competitive environment," noted Haines.
A. Schulman recently purchased the assets of a distribution business in Italy, the second largest plastic market in Europe. Last year's acquisition in Poland is now profitable and the company plans on increasing its presence in other Eastern European countries.
Capital expenditures for 1998 were $31 million, the second highest in the history of the Company. Major investments consist of new manufacturing lines which are being added to the United Kingdom, Mexico, Canada and Givet, France facilities. Other major items were a new product development center in Akron, Ohio and an expansion of the facilities and equipment modifications at the Specialty Compounding facility in Sharon Center, Ohio.
"Though there are a number of economic uncertainties throughout the world, we have taken many actions over the past year which provide us with the capability to grow in the year ahead," said Haines. "Unless global economic conditions weaken, we anticipate an improvement in earnings for the 1999 fiscal year."
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 about 2,300 people and has 13 manufacturing facilities in North America, Europe, Mexico and the Asia-Pacific region. Revenues for the fiscal year ended August 31, 1998 were approximately $1 billion. Additional information about A. Schulman can be found on the World Wide Web at www.aschulman.com.
Statements in this release which are not historical facts are forward looking statements which Involve risks and uncertainties and actual events or results could differ materially from those expressed or implied in this release. These "forward-looking statements" are based on currently available information. They are also inherently uncertain, and investors must recognize that events could turn out to be significantly different from what we had expected. Examples of such uncertainties include, but are not limited to, the following:
-- Worldwide and regional economic, business and political
conditions
-- Fluctuations in the value of currencies within the European
Monetary System, as well as the U.S. dollar, Canadian dollar,
Mexican peso and Indonesian rupiah
-- Fluctuations in the prices of plastic resins and other raw
materials
-- Changes in customer demand and requirements
A. Schulman, Inc. and its Consolidated Subsidiaries
Financial Highlights
Three Months Ended
August 31, 1998 August 31, 1997
_______________ _______________
Net Sales $232,536,000 $238,212,000
Interest and Other Income 648,000 1,018,000
______________ ______________
233,184,000 239,230,000
______________ ______________
Cost of Sales 191,685,000 198,193,000
Other Costs and Expenses 16,979,000 15,093,000
______________ ______________
208,664,000 213,286,000
______________ ______________
Income before Taxes and
Cumulative Effect of
Accounting Change 24,520,000 25,944,000
Provision for U.S. and
Foreign Income Taxes 9,421,000 10,651,000
______________ ______________
Income before Cumulative
Effect of Accounting Change 15,099,000 15,293,000
Cumulative Effect of
Accounting Change(a) 0 0
______________ ______________
Net Income $ 15,099,000 $ 15,293,000
______________ ______________
______________ ______________
Weighted Average Number of
Shares Outstanding:
Basic 33,882,172 36,295,818
Diluted 33,882,172 36,342,631
Basic Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $0.44 $0.42
Cumulative Effect of
Accounting Change(a) - -
______________ ______________
Net Income $0.44 $0.42
______________ ______________
______________ ______________
Diluted Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $0.44 $0.42
Cumulative Effect of
Accounting Change(a) - -
______________ ______________
Net Income $0.44 $0.42
______________ ______________
______________ ______________
Year Ended
August 31, 1998 August 31, 1997
_______________ _______________
Net Sales $993,394,000 $ 996,376,000
Interest and Other Income 3,072,000 4,998,000
______________ ______________
996,466,000 1,001,374,000
______________ ______________
Cost of Sales 823,856,000 833,345,000
Other Costs and Expenses 86,281,000 81,747,000
______________ ______________
910,137,000 915,092,000
______________ ______________
Income before Taxes and
Cumulative Effect of
Accounting Change 86,329,000 86,282,000
Provision for U.S. and
Foreign Income Taxes 34,179,000 35,538,000
______________ ______________
Income before Cumulative Effect
of Accounting Change 52,150,000 50,744,000
Cumulative Effect
of Accounting Change(a) (2,007,000) 0
______________ ______________
Net Income $ 50,143,000 $ 50,744,000
______________ ______________
______________ ______________
Weighted Average Number of
Shares Outstanding:
Basic 35,236,098 37,125,345
Diluted 35,275,327 37,144,327
Basic Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $1.48 $1.37
Cumulative Effect of
Accounting Change(a) (0.06) -
______________ ______________
Net Income $1.42 $1.37
______________ ______________
______________ ______________
Diluted Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $1.48 $1.37
Cumulative Effect of
Accounting Change(a) (0.06) -
______________ ______________
Net Income $1.42 $1.37
______________ ______________
______________ ______________
(a) On November 20, 1997, The FASB Emerging Issues Task Force
issued a new ruling which requires the write-off of business process
re-engineering costs. Accordingly, $3,237,000 of such costs
capitalized as of August 31, 1997 were written off in the quarter
ending November 30, 1997. This write-off, net of income taxes,
amounted to $2,007,000 or $.06 per common share and was accounted for
as a change in accounting.
A. Schulman, Inc. and its Consolidated Subsidiaries
Condensed Balance Sheet
August 31, 1998 August 31, 1997
_______________ _______________
Assets
Current Assets $395,485,000 $403,714,000
Other Assets 18,252,000 19,836,000
Net Property, Plant and Equipment 148,183,000 139,395,000
____________ ____________
$561,920,000 $562,945,000
____________ ____________
____________ ____________
Liabilities and Stockholders' Equity
Current Liabilities $107,185,000 $111,741,000
Long-Term Debt 40,000,000 12,009,000
Deferred Credits and
Other Long-Term Liabilities, etc. 48,464,000 45,794,000
Stockholders' Equity 366,271,000 393,401,000
____________ ____________
$561,920,000 $562,945,000
____________ ____________
____________ ____________
Supplemental Information (in thousands of dollars)
Three Months Ended Year Ended
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
_________ _________ _________ _________
Net Sales
Manufacturing $160,397 $158,453 $661,280 $661,152
Merchant 37,566 42,136 178,482 176,120
Distribution 34,573 37,623 153,632 159,104
_________ _________ _________ _________
$232,536 $238,212 $993,394 $996,376
_________ _________ _________ _________
_________ _________ _________ _________
Gross Profit
Manufacturing $ 32,296 $ 29,997 $128,995 $120,400
Merchant 4,116 5,409 21,333 22,421
Distribution 4,440 4,613 19,210 20,210
_________ _________ _________ _________
$ 40,852 $ 40,019 $169,538 $163,031
_________ _________ _________ _________
_________ _________ _________ _________
Certain items previously reported have been reclassified to
conform with the 1998 presentation.