A. Schulman Reports Fiscal 2015 Fourth Quarter And Full Year Results

AKRON, Ohio, Oct. 20, 2015 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq: SHLM) today announced earnings for the fiscal 2015 fourth quarter ended August 31, 2015.

Bernard Rzepka, president and chief executive officer, said, "Through our transformational acquisition of Citadel, we made significant strides toward our strategic vision of becoming the premier plastics solutions provider. At the same time, we continued to deliver strong operational and financial results.  For three consecutive years, excluding the impact from foreign currency, we achieved year-over-year growth in sales, gross margin and EBITDA. These results give us confidence that we have the team and the tools in place to deliver further profitable growth in fiscal 2016 and beyond."

Joseph Levanduski, executive vice president & chief financial officer, said, "Through our intense efforts, we overcame significant foreign currency headwinds and improved our adjusted consolidated gross profit by 10% for the year and 28% for the quarter. Our operational focus, acquisitions and organic growth initiatives collectively delivered these strong results. Since the acquisition of Citadel, we have made steady progress in debt reduction and have succeeded in lowering debt levels from the June opening balance sheet by $64 million. We are on track to achieve a 2.5x net leverage within fiscal 2017, while supporting our growth initiatives."

Engineered Plastics Consolidation
As part of the integration of its Citadel Plastics acquisition announced earlier this year, the Company is consolidating its United States and Canada ("USCAN") production facilities. The Company will close three facilities in Evansville, Indiana and the production from these facilities will be consolidated into other facilities in Evansville to improve our capacity utilization. Additionally, the Company will relocate production of its Engineered Plastics products from its Akron, Ohio plant to one of the Evansville facilities. The Company intends to invest in our Akron plant in order to grow our Masterbatch product family. Overall, the Company expects to reduce headcount by approximately 26 people.

On a pre-tax basis, the Company expects the Engineered Plastic consolidation to deliver approximately $9.5 million in annual savings, of which approximately $4 million is expected in fiscal 2016 and the remainder will be recognized in fiscal year 2017. The Company expects approximately $2 to $3 million of pretax employee-related cash and other charges as well as approximately $5 to $6 million of pretax machinery and equipment accelerated depreciation. Costs associated with the plan are expected to be recognized through December 2016 as the Company completes the facility consolidation activities.

"We are swiftly executing our integration of Citadel," said Rzepka. "While these decisions are not easy for those impacted, the additional Citadel plants in the Evansville area required that we evaluate capacity utilization and manufacturing capabilities and achieve efficiencies and cost savings. The consolidation of our Engineered Plastics business illustrates our continuing commitment to right-sizing our capacity and affirms our commitment to capturing our stated synergy savings of $25 million by the end of 2016."

Fiscal Fourth-Quarter Results
Consolidated net sales for the fiscal 2015 fourth quarter were $674.0 million, compared with $627.4 million in the same prior-year quarter. Net sales from Citadel and prior 2014 acquisitions, which includes legacy volume consolidated during the integration process, contributed $128.5 million of revenue during the quarter.  These contributions were partially offset by $79.8 million of unfavorable foreign currency translation. Adjusted gross margin in the fourth quarter as a percent of net sales improved to 16.2% compared with 13.6% in the prior-year period.

The Company reported profit from continuing operations of $0.75 per diluted share. On an adjusted basis, excluding financing, restructuring and acquisitions-related costs, the Company generated net income of $0.64 per diluted share.

Europe, Middle East and Africa ('EMEA") net sales were $326.7 million compared with $388.6 million in the same prior-year period. The unfavorable impact of foreign currency translation was $64.1 million. EMEA adjusted gross profit was $44 million. Excluding the negative impact of foreign currency translation of $8.3 million, adjusted gross profit increased by $2.2 million, or 4.5%, primarily due to improved product mix as well as the incremental contribution of the Specialty Plastics acquisition.

Net sales for the U.S. and Canada ("USCAN") were $195.3 million in the fourth quarter, an increase of 41% compared with the same prior-year period primarily as a result of the Citadel acquisition. USCAN adjusted gross profit was $34.1 million, an increase of $11.7 million from the same prior-year period. The strong gross margin gains came both from Citadel's contribution, and improvements across A. Schulman's legacy businesses.

Latin America's ("LATAM") net sales for the quarter were $45.3 million, a decrease of $4.2 million compared with the same prior-year period. Excluding the unfavorable impact of foreign currency translation of $10.5 million, core revenue growth accelerated to 12.7%. LATAM adjusted gross profit was $9.9 million, an increase of $3.7 million primarily due to the benefits of improved product mix and operations. Operating margins improved from 4.2% to 12.1% during the quarter.

Asia Pacific ("APAC") reported net sales were $49.5 million, which included acquisition contribution of $2.8 million, and a negative foreign exchange impact of $4.5 million. APAC adjusted gross profit was $6.8 million, an increase of $0.3 million compared with the prior-year period. Gross profit benefited from smart savings initiatives and increased organic volume. Operating margins improved from 5.3% to 7.1% during the quarter.

Engineered Composites ("EC") net sales for the quarter were $57.1 million from the acquisition date of June 1, 2015. Organic volumes in the legacy EC business improved over historical levels. EC gross profit for the quarter was $14.5 million, or 25.4% of net sales.

Working Capital/Cash Flow
Cash provided from operations was $60.2 million in the twelve months ended August 31, 2015. Working capital days were 64 days in the fourth quarter of fiscal 2015 versus 57 days at the end of the comparable period.

Capital expenditures for fiscal 2015 were $42.6 million compared with $35.1 million last year. These expenditures were primarily related to strategic investments in the Company's global manufacturing facilities and technical innovation and collaboration centers focused on organic growth and new product development. During the year, the Company declared and paid quarterly cash dividends to common shareholders of $24.0 million, or $0.82 per common share consistent with our past strategy of providing an attractive yield to shareholders in addition to share price appreciation.

Year-to-Date Results
Net sales for the year were $2.4 billion, compared with $2.5 billion for the same prior-year period. Fiscal year net sales results included a negative foreign currency translation of $257.1 million, and contributions from acquisitions of $258.3 million.

Operating income was $70.4 million, a decrease of $11.9 million compared with the same prior-year period. Total operating income before certain items was $120.7 million, an increase of $20.9 million or 21% compared with last year. Excluding the negative impact of foreign currency translation of $11.8 million, total operating income before certain items increased 33% versus the comparable period. Organic growth contributed an incremental $10.3 million while recent acquisitions added $22.4 million.

Business Outlook
The Company initiates a fiscal 2016 adjusted net income guidance range of $2.80 to $2.85 per diluted share including the accretive impact of the Citadel acquisition.

"We are excited about the opportunities that Citadel brings to us. We've taken a transformative step forward in achieving our long-term strategic goals, one of them being rebalancing our regional footprint. Given the current volatile markets, we expect another challenging year; however, we are committed to achieving further profitable growth through a focus on execution, including the continued seamless integration of Citadel," Rzepka added.

Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2015 fourth-quarter earnings can be accessed at 10:00 a.m. Eastern Time on October 21, 2015, on the Company's website, www.aschulman.com. An archived replay of the call will also be available on the website.

Investor Presentation Materials
Senior executives of the Company may participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which may be used during such meetings, in the Investors section of its website at www.aschulman.com. The presentation will remain on the website as long as it is in use.

About A. Schulman, Inc.
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. Since 1928, the Company has been providing innovative solutions to meet its customers' demanding requirements. The Company's customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, sports, leisure & home, custom services and others. The Company employs approximately 5,000 people and has 58 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.4 billion for the fiscal year ended August 31, 2015. Additional information about A. Schulman can be found at www.aschulman.com.

Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include segment gross profit, SG&A expenses excluding certain items, segment operating income, operating income before certain items, net income excluding certain items, net income per diluted share excluding certain items and adjusted EBITDA, as discussed further in the Reconciliation of GAAP and Non-GAAP Financial Measures below. These non-GAAP financial measures are considered relevant to aid analysis and understanding of the Company's results and business trends. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, August not be reported by all of the Company's competitors and August not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and August constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that August cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:

• worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company's major product markets or countries where the Company has operations;
• the effectiveness of the Company's efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
• competitive factors, including intense price competition;
• fluctuations in the value of currencies in areas where the Company operates;
• volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company's products, particularly plastic resins derived from oil and natural gas;
• changes in customer demand and requirements;
• effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions, joint ventures and restructuring initiatives;
• escalation in the cost of providing employee health care;
• uncertainties regarding the resolution of pending and future litigation and other claims;
• the performance of the global automotive market as well as other markets served;
• further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products;
• operating problems with our information systems as a result of system security failures such as viruses, cyber-attacks or other causes;
• the impact of the indebtedness incurred to finance the Citadel acquisition;
• integration of the business of Citadel with our existing business, including the risk that the integration will be more costly or more time consuming and complex than anticipated;
• our ability to achieve the anticipated synergies, cost savings and other benefits from the Citadel acquisition;
• transaction and acquisition-related costs incurred in connection with the Citadel acquisition and related transactions; and
• substantial time devoted by management to the integration of the Citadel acquisition.

The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company's performance are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company's business, financial condition and results of operations.

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SOURCE A. Schulman, Inc.