A. Schulman Reports Third-Quarter 1999 Results
9 July 1999
A. Schulman Reports Third-Quarter 1999 Results
AKRON, Ohio--July 9, 1999--A. Schulman Inc. announced today that net income for the third fiscal quarter ended May 31, 1999 was $11,297,000 or $.36 per common share compared with $13,532,000 or $.38 per share for the same quarter last year. Sales totaled $250.4 million, off 2.5% from sales of $256.8 million for the same quarter last year.There was a 2.3% increase in tonnage that was offset by a lower level of pricing in the worldwide plastic market and the adverse effect from weaker currencies in the countries where A. Schulman operates.
"There has been price improvement and a firming of orders, especially in Europe," said Terry L. Haines, president and chief executive officer. "The strengthening in order levels continued throughout the quarter. Currently, we have a strong level of orders in Europe through the traditional holiday period and the end of our fiscal year. In North America, we have recently noted an improvement in business conditions."
Haines continued, "We anticipate that profits from our fourth quarter will be better than our just ended third quarter. The improvement in overall order levels, along with good margins, should enable us to absorb higher operating costs and the continued weakness of the Euro."
For the nine months ended May 31, 1999, net income was $32,755,000 or $1.03 per share compared with $37,051,000 or $1.04 per share before the cumulative effect of an accounting change for the comparable nine month period last year. 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 the charge, net income for the nine month period ended May 31, 1998 was $35,044,000 or $.98 per common share. Sales were $744.3 million compared with $760.9 million for the same period last year. A lower level of pricing in the plastic market more than offset improved nine-month volume of approximately 1%.
Basic and diluted per share earnings are the same for all reported periods.
Gross profit margins were 18.1% compared with 17.1% in the same quarter last year. Margins were higher worldwide primarily due to the Company's manufacturing operations. Major factors for the improvement in manufacturing margins were lower material costs and higher capacity utilization, especially in Europe which operated at near capacity levels throughout the quarter. Worldwide capacity utilization for the current quarter was 90% compared with 82% for the preceding quarter, but down from the 97% level for last year's third quarter.
Quarterly profits were off $686,000 in Europe and $1,549,000 in North America. The translation effect of foreign currencies reduced sales and net income for the quarter by $3.8 million and $180,000, respectively. For the nine month period, translation effects increased sales by $1,900,000 and net income by $107,000. Margin increases were offset by increased costs of personnel, higher interest and costs arising from the implementation of new business processes.
The Company commenced operation, in June 1999, of a new manufacturing line in Givet, France. This line, with an annual capacity of 60 million pounds, will enable A. Schulman to meet the growing demands of the market with competitively priced products. This investment, with a cost of approximately $12 million, is a major addition to the existing facility.
The Company will also be adding a new manufacturing line to its Sunprene Company, which is 30% owned by Mitsubishi Chemical MKV Co. This investment, amounting to $7.5 million, is the third line for Sunprene and will be utilized for the production of specialized PVC compounds used primarily in the automotive industry. This new line will have an annual capacity of 15 million pounds and is scheduled for startup in January 2001.
"We have continued to repurchase our common shares under the existing authorization," said Haines. "During the third quarter, we repurchased 625,000 shares at a cost of $8.8 million. For the nine month period, we have repurchased 2,084,000 shares for $32.8 million." The Company currently has 3,760,000 shares remaining under a 6 million share repurchase authorization approved by A. Schulman's Board in August 1998. As of May 31, 1999, there were 31,194,505 shares outstanding compared with 34,902,029 shares at the same date 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 2,400 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
May 31, 1999 May 31, 1998
Net Sales $250,450,000 $256,810,000
Interest and Other Income 501,000 821,000
250,951,000 257,631,000
Cost of Sales 205,186,000 212,820,000
Other Costs and Expenses 27,490,000 22,725,000
232,676,000 235,545,000
Income before Taxes and Cumulative Effect
of Accounting Change 18,275,000 22,086,000
Provision for U.S. and Foreign Income
Taxes 6,978,000 8,554,000
Income before Cumulative Effect of
Accounting Change 11,297,000 13,532,000
Cumulative Effect of Accounting Change(a) - -
Net Income $11,297,000 $13,532,000
Weighted Average Number of Shares
Outstanding:
Basic 31,285,838 35,267,750
Diluted 31,285,838 35,321,785
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $0.36 $0.38
Cumulative Effect of Accounting Change(a) - -
Net Income $0.36 $0.38
Nine Months Ended
May 31, 1999 May 31, 1998
Net Sales $744,294,000 $760,858,000
Interest and Other Income 2,263,000 2,424,000
746,557,000 763,282,000
Cost of Sales 610,088,000 632,171,000
Other Costs and Expenses 82,768,000 69,302,000
692,856,000 701,473,000
Income before Taxes and Cumulative Effect
of Accounting Change 53,701,000 61,809,000
Provision for U.S. and Foreign Income
Taxes 20,946,000 24,758,000
Income before Cumulative Effect of
Accounting Change 32,755,000 37,051,000
Cumulative Effect of Accounting Change(a) - (2,007,000)
Net Income $32,755,000 $35,044,000
Weighted Average Number of Shares
Outstanding:
Basic 31,852,005 35,687,407
Diluted 31,859,917 35,739,712
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect
of Accounting Change $1.03 $1.04
Cumulative Effect of Accounting Change(a) - (0.06)
Net Income $1.03 $0.98
(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
May 31, 1999 August 31, 1998
Assets
Current Assets $408,581,000 $395,485,000
Other Assets 21,821,000 18,252,000
Net Property, Plant and Equipment 157,444,000 148,183,000
$587,846,000 $561,920,000
Liabilities and Stockholders' Equity
Current Liabilities $133,378,000 $107,185,000
Long-Term Debt 62,000,000 40,000,000
Deferred Credits and Other Long-Term
Liabilities, etc 48,795,000 48,464,000
Stockholders' Equity 343,673,000 366,271,000
$587,846,000 $561,920,000
Supplemental Information
Three Months Ended
May 31, 1999 May 31, 1998
Net Sales
Manufacturing $173,608 $169,524
Merchant 45,262 48,171
Distribution 31,580 39,115
$250,450 $256,810
Gross Profit
Manufacturing $35,627 $33,268
Merchant 5,883 5,767
Distribution 3,754 4,954
$45,264 $43,989
Nine Months Ended
May 31, 1999 May 31, 1998
Net Sales
Manufacturing $511,519 $500,883
Merchant 131,728 140,916
Distribution 101,047 119,059
$744,294 $760,858
Gross Profit
Manufacturing $103,591 $96,699
Merchant 16,950 17,217
Distribution 13,665 14,770
$134,206 $128,686