A. Schulman Reports Second-Quarter 1999 Results
13 April 1999
A. Schulman Reports Second-Quarter 1999 Results
AKRON, Ohio--April 13, 1999--A. Schulman Inc. announced today that net income for the fiscal second quarter ended February 28, 1999 was $8,640,000 or $.27 per common share compared with $10,986,000 or $.31 per share for the same quarter last year. Sales totaled $235.2 million, down slightly compared with last year's second-quarter sales of $239.8 million. The Company reported on March 8, 1999, that second-quarter results would be lower than the $.31 per share for the comparable quarter last year.Sales declined due to the low level of pricing in the worldwide plastics market. Net income for the quarter was down due to the decline in sales, slightly lower margins and higher operating expenses including interest.
"Worldwide, our costs are higher," said Terry L. Haines, president and chief executive officer. "We have decided to add resources to increase our presence in new areas of the world and invest in state-of-the-art equipment and new business systems to better serve our customers. Of course, these actions result in higher costs, but they will help ensure A. Schulman's future growth."
Haines continued, "We have recently seen an improvement in our North American and European order levels, with firming in the prices of certain plastic resins. Nevertheless, low levels of pricing, higher costs and weakness in Europe will continue to hamper profit improvement for fiscal 1999. Although we anticipate a difficult environment in the months ahead, we believe profits will improve sequentially throughout the balance of our fiscal year."
For the six months ended February 28, 1999, net income was $21,458,000 or $.67 per share compared with $23,519,000 or $.66 per share before the cumulative effect of an accounting change for the first half of fiscal 1998. In November 1997, the FASB issued a new ruling requiring the write-off of business process re-engineering costs. Accordingly, in last year's first quarter, the Company wrote off $3,237,000 of such costs that were capitalized as of August 31, 1997. This 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 this charge, net income for the six months ended February 28, 1998 was $21,512,000 or $.60 per common share. Sales for the six month 1999 period were $493.8 million compared with $504.0 million for the same period last year.
Basic and diluted per share earnings are the same for all reported periods.
The translation effect of foreign currencies was not a significant factor. Translation increased sales by $5.8 million for the quarter and $5.7 million for the six month period. The translation effect also increased net income by $192,000 for the quarter and $287,000 for the six month period. The per share impact was a $.01 increase for both the quarter and six month period.
Profits for the quarter were off in Europe and North America. Business in December 1998 encountered the traditional seasonal softening, but the extent of recovery for the subsequent months was not enough to overcome the difficult December.
Business in Europe was much softer than anticipated. European profits were off $1,800,000 or 21% for the quarter due to the extremely low level of pricing in the worldwide plastics market and higher expenses.
Quarterly profits in North America were down approximately $600,000 primarily due to lower sales and increased expenses including personnel, interest and costs arising from the implementation of new business processes.
Total tonnage was up 2.5% for the quarter, but flat for the six month period. Manufacturing tonnage was flat for the quarter, but tonnage in the Company's merchant activities grew 12%, with increases of over 10% in both Europe and North America.
Quarterly profit margins were down from the first quarter and off slightly from last year's second quarter. Nevertheless, overall margins have been good considering the competitive conditions existing in today's marketplace. For the second quarter, gross profit margins were 16.8% compared with 17% in 1998. For the first fiscal half, gross profit margins were 18% in 1999 and 16.8% in 1998.
"We have implemented new business processes for a majority of our core plants and customer service operations in North America," Haines said. "These new processes will enable us to enhance future profitability and better serve our customers."
In Europe, the Company is also implementing new enterprise resource programs which will provide consistency throughout the operations and provide A. Schulman with a base to expand its business and profitability. These programs will be implemented during the summer months and are planned for completion by the end of our fiscal year in August 1999.
Worldwide capacity utilization was 82% in the current quarter compared with 86% in last year's quarter. Utilization declined in both Europe and North America due to higher capacities and softer than anticipated business conditions.
"We continue to be aggressive buyers of our common shares," said Haines. "We repurchased 409,500 shares in our second quarter and an additional 497,000 shares during March 1999. Since the beginning of this fiscal year, we have repurchased 1,956,000 shares for $30.8 million. These shares are an excellent investment and reflect our commitment to enhance shareholder value." The Company currently has 3.9 million shares remaining under a 6 million share repurchase program approved by A. Schulman's Board in August 1998. As of February 28, 1999, there were 31,819,505 shares outstanding compared with 35,719,818 shares at the same period last 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 was 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 the currencies in major areas where
the Company operates, i.e., the U.S. dollar, the Euro, U.K. pound
sterling, Canadian dollar, Mexican peso and Indonesian rupiah
-- Fluctuations in the prices of plastic resins and other raw
materials
-- Changes in customer demand and requirements
-- tables attached --
A. Schulman, Inc. and its Consolidated Subsidiaries
Financial Highlights
Three Months Ended
Feb. 28, 1999 Feb. 28, 1998
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Net Sales $235,198,000 $239,840,000
Interest and Other Income 1,111,000 672,000
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236,309,000 240,512,000
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Cost of Sales 195,706,000 198,962,000
Other Costs and Expenses 26,293,000 22,941,000
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221,999,000 221,903,000
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Income before Taxes and Cumulative
Effect of Accounting Change 14,310,000 18,609,000
Provision for U.S. and Foreign
Income Taxes 5,670,000 7,623,000
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Income before Cumulative Effect of
Accounting Change 8,640,000 10,986,000
Cumulative Effect of Accounting Change(a) - -
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Net Income $8,640,000 $10,986,000
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Weighted Average Number of Shares Outstanding:
Basic 31,981,838 35,764,943
Diluted 32,005,575 35,834,581
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $0.27 $0.31
Cumulative Effect of Accounting Change(a) - -
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Net Income $0.27 $0.31
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Six Months Ended
Feb. 28, 1999 Feb. 28, 1998
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Net Sales $493,844,000 $504,048,000
Interest and Other Income 1,762,000 1,603,000
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495,606,000 505,651,000
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Cost of Sales 404,902,000 419,351,000
Other Costs and Expenses 55,278,000 46,577,000
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460,180,000 465,928,000
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Income before Taxes and Cumulative
Effect of Accounting Change 35,426,000 39,723,000
Provision for U.S. and Foreign
Income Taxes 13,968,000 16,204,000
-------------- -------------
Income before Cumulative Effect of
Accounting Change 21,458,000 23,519,000
Cumulative Effect of Accounting Change(a) - (2,007,000)
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Net Income $21,458,000 $21,512,000
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Weighted Average Number of Shares Outstanding:
Basic 32,135,088 35,897,235
Diluted 32,146,957 35,948,676
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $0.67 $0.66
Cumulative Effect of Accounting Change(a) - (0.06)
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Net Income $0.67 $0.60
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(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.
Condensed Balance Sheet
February 28, 1999 August 31, 1998
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Assets
Current Assets $410,492,000 $395,485,000
Other Assets 23,506,000 18,252,000
Net Property, Plant and Equipment 152,542,000 148,183,000
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$586,540,000 $561,920,000
----------------- ---------------
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Liabilities and Stockholders' Equity
Current Liabilities $123,558,000 $107,185,000
Long-Term Debt 60,000,000 40,000,000
Deferred Credits and Other Long-Term
Liabilities, etc 48,812,000 48,464,000
Stockholders' Equity 354,170,000 366,271,000
----------------- ---------------
$586,540,000 $561,920,000
----------------- ---------------
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Supplemental Information (In thousands of dollars)
Three Months Ended
Feb. 28, 1999 Feb. 28, 1998
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Net Sales
Manufacturing $162,140 $158,513
Merchant 38,950 43,353
Distribution 34,108 37,974
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$235,198 $239,840
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Gross Profit
Manufacturing $30,375 $30,968
Merchant 4,210 5,265
Distribution 4,907 4,645
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$39,492 $40,878
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Six Months Ended
Feb. 28, 1999 Feb. 28, 1998
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Net Sales
Manufacturing $337,911 $331,359
Merchant 86,466 92,745
Distribution 69,467 79,944
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$493,844 $504,048
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Gross Profit
Manufacturing $67,964 $63,431
Merchant 11,067 11,450
Distribution 9,911 9,816
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$88,942 $84,697
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