A. Schulman Posts Record Earnings Per Share for Fourth Quarter
20 October 1999
A. Schulman Posts Record Earnings Per Share for Fourth Quarter and Fiscal Year 1999
AKRON, Ohio--Oct. 20, 1999--A. Schulman Inc. announced today that net income per share, before the effect of an accounting change in fiscal 1998, established new records for the fourth quarter and year ended August 31, 1999.Net income per share for the fourth quarter ended August 31, 1999 was $.48, a 9% increase over the $.44 per share recorded in the same period last year. However, net income of $15,034,000 for the final quarter of 1999 was off slightly from last year's earnings of $15,099,000 for the fourth quarter of fiscal 1998. Sales of $241.3 million were up 3.8% from last year's fourth quarter sales of $232.5 million.
Fiscal year 1999 net income per share of $1.51 was a new record for A. Schulman, surpassing last year's record of $1.48 before the cumulative effect of an accounting change. Net income for 1999 was $47,789,000, down 8.4% from last year's $52,150,000 before the cumulative effect of an accounting change. Sales for fiscal 1999 were $985.6 million compared with $993.3 million for the same period last year. A lower level of pricing in the plastic market more than offset improved volume of approximately 2% for the 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 year ended August 31, 1998 was $50,143,000 or $1.42 per common share.
Basic and diluted per share earnings are the same for all reported periods.
"Although we accomplished many of our objectives during the past year, net income was off from last year's levels," said Terry L. Haines, president and chief executive officer. "The major reason for the reduction in income was low pricing and higher operating expenses resulting from investments in new employees, costs arising from the implementation of new business systems and a number of other cost pressures."
There was a positive impact on per share earnings from the shares repurchased under A. Schulman's existing authorization. During the year ended August 31, 1999, the Company repurchased 2,182,000 shares for $34,533,000 or an average cost of $15.82 per share. The Company currently has 3,692,000 shares remaining under a six million share repurchase authorization approved by A. Schulman's Board in August 1998. As of August 31, 1999, there were 31,130,155 shares outstanding, down 6.5% from the 33,278,505 shares outstanding at the end of the 1998 fiscal year.
Profits in A. Schulman's European operations were up in the final quarter of the fiscal year. Tonnage for the fourth quarter was up 8.5%, but sales were off slightly mainly because of the adverse effect of the translation of foreign currencies which reduced sales by $6.4 million for the quarter and $4.4 million for the year. The adverse effect of translation also reduced net income by $297,000 or $.01 per share for the quarter and $189,000 or $.01 per share for the year.
For the 1999 fiscal year, European profits were up slightly on a sales decline of $10.7 million resulting from the adverse effects of translation and lower prices of plastics which offset tonnage gains of 4.7%.
"Currently, we have a strong level of orders in Europe," Haines said. "Pricing of resins has firmed during the last six months and we anticipate good business conditions through the 1999 calendar year."
North American profits were down for the quarter and were off $4.6 million for the year. Tonnage for the quarter was up 4.1%, but the gain was more than offset by lower margins and higher operating expenses.
For the year, volume in North America was down approximately 1%, but an improvement in profit margins was offset by higher operating expenses.
"In North America, we have a good level of orders but have noted some pressure on margins due to the higher costs of plastic resins," said Haines. "Although the cost of implementing new business systems will decline in fiscal 2000, most of the lower cost will occur in the second half of the fiscal year."
Worldwide volume was up 6.6% for the quarter and 2.2% for the year. Tonnage in manufacturing was off approximately 2% for the year, but merchant volume was up strongly in Europe and North America.
Capacity utilization in the quarter was 82% compared with 86% last year. Utilization was down in Europe, mainly due to the startup of a new large manufacturing line in the Givet, France operation. Utilization in North America declined from 82% in last year's fourth quarter to 78% in the current quarter due to equipment problems at the Company's Texas tolling facility and additional capacity in the Canadian and Mexican facilities.
For the year, capacity utilization was 84% compared with 90% last year. Utilization was down 8% in Europe due to a weak second quarter.
Gross profit margins for the quarter were up because of strong margins in Europe. Worldwide margins were 19.2% compared with 17.6% last year. For the year, overall margins improved from 17.1% to 18.3% in 1999.
Capital expenditures were $35 million for 1999, the second highest in A. Schulman's history. The largest project, with a cost of $12.5 million was an addition to the Givet, France facility which included a new manufacturing line with an annual capacity of 60 million pounds. This line, which commenced operations in June 1999, will increase European capacity by approximately 15%. During the year, the Company also completed a product development and color center, both in northeast Ohio. These two facilities, with a cost of $5.8 million, will provide new and enhanced capabilities for the development of products for customers.
The A. Schulman Board, today, approved several new capital projects amounting to approximately $13 million. These projects include a new state-of-the-art manufacturing line for the Company's ComAlloy facility in Tennessee. This line will cost $4 million and will replace two small volume older manufacturing lines.
The Company will also add a production line to its facility in Indonesia and replace a line in its Belgian plant. The Belgian project will also include a warehouse addition. These projects will cost $6.2 million. A. Schulman will also invest $3.2 million to add a fourth line to its Givet, France facility.
These projects will increase worldwide capacity by approximately 4% and are planned for completion in fiscal 2001.
"There have been a number of important accomplishments during the year," concluded Haines. "First, record per share earnings were achieved in an extremely difficult environment of strong competition, low plastic prices and a weak Euro. In addition, we have been aggressive in our repurchase of shares under an existing authorization. We have increased our European capacity with a large new line in France and have opened two new centers in Ohio for the development of products. We also have redesigned our business processes and have installed new information systems in the majority of our worldwide facilities. We have also enhanced our financial capabilities with a new $50 million financing."
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, 1999, were $986 million. 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
August 31, 1999 August 31, 1998
Net Sales $241,329,000 $232,536,000
Interest and Other Income 449,000 648,000
241,778,000 233,184,000
Cost of Sales 194,942,000 191,685,000
Other Costs and Expenses 22,581,000 16,979,000
217,523,000 208,664,000
Income before Taxes and Cumulative Effect
of Accounting Change 24,255,000 24,520,000
Provision for U.S. and Foreign Income
Taxes 9,221,000 9,421,000
Income before Cumulative Effect of
Accounting Change 15,034,000 15,099,000
Cumulative Effect of Accounting Change(a) - -
Net Income $15,034,000 $15,099,000
Weighted Average Number of Shares
Outstanding:
Basic 31,131,055 33,882,172
Diluted 31,138,701 33,882,172
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $0.48 $0.44
Cumulative Effect of Accounting Change(a) - -
Net Income $0.48 $0.44
Year Ended
August 31, 1999 August 31, 1998
Net Sales $985,623,000 $993,394,000
Interest and Other Income 2,712,000 3,072,000
988,335,000 996,466,000
Cost of Sales 805,030,000 823,856,000
Other Costs and Expenses 105,349,000 86,281,000
910,379,000 910,137,000
Income before Taxes and Cumulative Effect
of Accounting Change 77,956,000 86,329,000
Provision for U.S. and Foreign Income
Taxes 30,167,000 34,179,000
Income before Cumulative Effect of
Accounting Change 47,789,000 52,150,000
Cumulative Effect of Accounting Change(a) - (2,007,000)
Net Income $47,789,000 $50,143,000
Weighted Average Number of Shares
Outstanding:
Basic 31,671,768 35,236,098
Diluted 31,679,614 35,275,327
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $1.51 $1.48
Cumulative Effect of Accounting Change(a) - (0.06)
Net Income $1.51 $1.42
(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
August 31, 1999 August 31, 1998
Assets
Current Assets $408,096,000 $395,485,000
Other Assets 23,088,000 18,252,000
Net Property, Plant and Equipment 160,343,000 148,183,000
$591,527,000 $561,920,000
Liabilities and Stockholders' Equity
Current Liabilities $117,816,000 $107,185,000
Long-Term Debt 65,000,000 40,000,000
Deferred Credits and Other Long-Term
Liabilities, etc. 52,465,000 48,464,000
Stockholders' Equity 356,246,000 366,271,000
$591,527,000 $561,920,000