##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File No. 0-7459
 A. SCHULMAN, INC.
  Delaware
    
    34-0514850(State or Other Jurisdiction
    
    (I.R.S. Employer Identification No.)of Incorporation or Organization)3550 West Market Street, Akron, Ohio
    
    44333(Address of Principal Executive Offices)
    
    (ZIP Code)
   þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1  Consolidated Financial StatementsCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 2  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3  Quantitative and Qualitative Disclosure about Market RiskItem 4  Controls and ProceduresPART II  OTHER INFORMATIONItem 1A  Risk FactorsItem 2  Unregistered Sales of Equity Securities and Use of ProceedsItem 6   ExhibitsSIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32    Table of Contents  
  
  A. SCHULMAN, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Unaudited(In thousands, except per share data)Net sales
    
    $
    611,142
    
    
    $
    420,335
    
    
    $
    1,614,868
    
    
    $
    1,114,218Cost of sales
    
    
    532,254
    
    
    
    361,450
    
    
    
    1,400,367
    
    
    
    940,839Selling, general and administrative expenses
    
    
    51,746
    
    
    
    43,531
    
    
    
    154,081
    
    
    
    133,046Interest expense
    
    
    1,802
    
    
    
    1,159
    
    
    
    4,729
    
    
    
    3,349Interest income
    
    
    (200
    )
    
    
    (201
    )
    
    
    (591
    )
    
    
    (652
    )Foreign currency transaction (gains) losses
    
    
    60
    
    
    
    468
    
    
    
    1,398
    
    
    
    389Other (income) expense
    
    
    (1,637
    )
    
    
    (269
    )
    
    
    (2,074
    )
    
    
    (2,155
    )Asset impairment
    
    
    125
    
    
    
    300
    
    
    
    1,925
    
    
    
    5,631Restructuring expense
    
    
    1,843
    
    
    
    862
    
    
    
    5,779
    
    
    
    2,509585,993
    
    
    
    407,300
    
    
    
    1,565,614
    
    
    
    1,082,956Income from continuing operations before taxes
    
    
    25,149
    
    
    
    13,035
    
    
    
    49,254
    
    
    
    31,262Provision for (benefit from) U.S. and foreign income taxes
    
    
    6,225
    
    
    
    (12,890
    )
    
    
    13,675
    
    
    
    (4,984
    )Income from continuing operations
    
    
    18,924
    
    
    
    25,925
    
    
    
    35,579
    
    
    
    36,246Income (loss) from discontinued operations
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    (14
    )Net income
    
    
    18,924
    
    
    
    25,902
    
    
    
    35,579
    
    
    
    36,232Noncontrolling interests
    
    
    (170
    )
    
    
    (141
    )
    
    
    (441
    )
    
    
    (211
    )Net income attributable to A. Schulman, Inc.
    
    $
    18,754
    
    
    $
    25,761
    
    
    $
    35,138
    
    
    $
    36,021Weighted-average number of shares outstanding:Basic
    
    
    30,853
    
    
    
    27,896
    
    
    
    31,092
    
    
    
    26,552Diluted
    
    
    31,061
    
    
    
    28,275
    
    
    
    31,289
    
    
    
    26,901Earnings per share of common stock attributable
to A. Schulman, Inc.  Basic:Income from continuing operations
    
    $
    0.61
    
    
    $
    0.92
    
    
    $
    1.13
    
    
    $
    1.36Income (loss) from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income attributable to common
stockholders
    
    $
    0.61
    
    
    $
    0.92
    
    
    $
    1.13
    
    
    $
    1.36Earnings per share of common stock attributable
to A. Schulman, Inc.  Diluted:Income from continuing operations
    
    $
    0.60
    
    
    $
    0.91
    
    
    $
    1.12
    
    
    $
    1.34Income (loss) from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income attributable to common
stockholders
    
    $
    0.60
    
    
    $
    0.91
    
    
    $
    1.12
    
    
    $
    1.34
   - 2 -




---



##### Table of Contents



A. SCHULMAN, INC.
 
 CONSOLIDATED BALANCE SHEETS
 May 31, 2011
    
    
    August 31, 2010Unaudited(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    105,988
    
    
    $
    122,754Accounts receivable, less allowance for doubtful accounts of $9,998 at
May 31, 2011 and $13,205 at August 31, 2010
    
    
    375,542
    
    
    
    282,953Inventories, average cost or market, whichever is lower
    
    
    307,733
    
    
    
    209,228Prepaid expenses and other current assets
    
    
    32,697
    
    
    
    29,128Total current assets
    
    
    821,960
    
    
    
    644,063Other assets:Deferred charges and other assets
    
    
    38,835
    
    
    
    31,873Goodwill
    
    
    94,407
    
    
    
    84,064Intangible assets
    
    
    77,696
    
    
    
    72,352Total other assets
    
    
    210,938
    
    
    
    188,289Property, plant and equipment, at cost:Land and improvements
    
    
    31,800
    
    
    
    30,891Buildings and leasehold improvements
    
    
    169,841
    
    
    
    158,076Machinery and equipment
    
    
    395,484
    
    
    
    357,270Furniture and fixtures
    
    
    41,963
    
    
    
    37,078Construction in progress
    
    
    8,820
    
    
    
    4,996647,908
    
    
    
    588,311Accumulated depreciation and investment grants of $856 at May 31, 2011
and $744 at August 31, 2010
    
    
    404,468
    
    
    
    349,348Net property, plant and equipment
    
    
    243,440
    
    
    
    238,963Total assets
    
    $
    1,276,338
    
    
    $
    1,071,315LIABILITIES AND EQUITYCurrent liabilities:Short-term debt
    
    $
    9,337
    
    
    $
    60,876Accounts payable
    
    
    276,122
    
    
    
    195,977U.S. and foreign income taxes payable
    
    
    10,184
    
    
    
    6,615Accrued payroll, taxes and related benefits
    
    
    42,987
    
    
    
    46,492Other accrued liabilities
    
    
    45,363
    
    
    
    41,985Total current liabilities
    
    
    383,993
    
    
    
    351,945Long-term debt
    
    
    195,356
    
    
    
    93,834Pension plans
    
    
    99,658
    
    
    
    86,872Other long-term liabilities
    
    
    28,139
    
    
    
    25,297Deferred income taxes
    
    
    23,065
    
    
    
    20,227Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Common stock, $1 par value, authorized  75,000,000 shares, issued 
47,795,184
shares at May 31, 2011 and 47,690,024 shares at August 31, 2010
    
    
    47,795
    
    
    
    47,690Other capital
    
    
    252,851
    
    
    
    249,734Accumulated other comprehensive income (loss)
    
    
    37,560
    
    
    
    (6,278
    )Retained earnings
    
    
    540,228
    
    
    
    519,649Treasury stock, at cost, 16,861,491 shares at May 31, 2011 and 16,205,230 at
August 31, 2010
    
    
    (337,170
    )
    
    
    (322,777
    )Total A. Schulman, Inc. stockholders equity
    
    
    541,264
    
    
    
    488,018Noncontrolling interests
    
    
    4,863
    
    
    
    5,122Total equity
    
    
    546,127
    
    
    
    493,140Total liabilities and equity
    
    $
    1,276,338
    
    
    $
    1,071,315
   - 3 -




---



##### Table of Contents



A. SCHULMAN, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months ended May 31,2011
    
    
    2010Unaudited(In thousands)Provided from (used in) operating activities:Net income
    
    $
    35,579
    
    
    $
    36,232Adjustments to reconcile net income to net cash
provided from (used in) operating activities:Depreciation and amortization
    
    
    30,413
    
    
    
    17,492Deferred tax provision
    
    
    (1,550
    )
    
    
    (21,486
    )Pension, postretirement benefits and other deferred compensation
    
    
    5,701
    
    
    
    3,083Net gains on asset sales
    
    
    (775
    )
    
    
    (230
    )Asset impairment
    
    
    1,925
    
    
    
    5,635Changes in assets and liabilities:Accounts receivable
    
    
    (55,523
    )
    
    
    (40,703
    )Inventories
    
    
    (70,246
    )
    
    
    (56,429
    )Accounts payable
    
    
    55,893
    
    
    
    29,237Income taxes
    
    
    6,189
    
    
    
    3,433Accrued payrolls and other accrued liabilities
    
    
    (7,869
    )
    
    
    1,342Changes in other assets and other long-term liabilities
    
    
    (5,710
    )
    
    
    (2,649
    )Net cash used in operating activities
    
    
    (5,973
    )
    
    
    (25,043
    )Provided from (used in) investing activities:Expenditures for property, plant and equipment
    
    
    (18,362
    )
    
    
    (13,890
    )Proceeds from the sale of assets
    
    
    7,041
    
    
    
    1,713Business acquisitions, net of cash acquired
    
    
    (15,071
    )
    
    
    (99,223
    )Net cash used in investing activities
    
    
    (26,392
    )
    
    
    (111,400
    )Provided from (used in) financing activities:Cash dividends paid
    
    
    (14,559
    )
    
    
    (11,970
    )Increase (decrease) in notes payable
    
    
    (3,475
    )
    
    
    995Repayments on long-term debt
    
    
    (21
    )
    
    
    (19,260
    )Borrowings on revolving credit facilities
    
    
    213,000
    
    
    
    75,500Repayments on revolving credit facilities
    
    
    (170,250
    )
    
    
    (32,500
    )Payment of debt issuance costs
    
    
    (2,220
    )
    
    
    Cash distributions to noncontrolling interests
    
    
    (700
    )
    
    
    Common stock issued (redeemed), net
    
    
    (382
    )
    
    
    3,100Issuance (purchase) of treasury stock, net
    
    
    (14,393
    )
    
    
    Net cash provided from financing activities
    
    
    7,000
    
    
    
    15,865Effect of exchange rate changes on cash
    
    
    8,599
    
    
    
    (16,319
    )Net decrease in cash and cash equivalents
    
    
    (16,766
    )
    
    
    (136,897
    )Cash and cash equivalents at beginning of period
    
    
    122,754
    
    
    
    228,674Cash and cash equivalents at end of period
    
    $
    105,988
    
    
    $
    91,777
   - 4 -




---



##### Table of Contents



A. SCHULMAN, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    GENERAL
 The unaudited interim consolidated financial statements included for A. Schulman, Inc. (the
Company) reflect all adjustments, which are, in the opinion of management, necessary for a
fair presentation of the results of the interim period presented. All such adjustments are
of a normal recurring nature. The year-end consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America (U.S. GAAP). The unaudited
consolidated financial information should be read in conjunction with the consolidated
financial statements and notes thereto incorporated in the Companys Annual Report on Form
10-K for the year ended August 31, 2010.
 The results of operations for the three and nine months ended May 31, 2011 are not
necessarily indicative of the results expected for the fiscal year ending August 31, 2011.
 The accounting policies for the periods presented are the same as described in Note 1 
Summary of Significant Accounting Policies to the consolidated financial statements
contained in the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
2010, except for the adoption of the new accounting pronouncement related to fair value
disclosures. The adoption of this accounting pronouncement is discussed in Note 18.
 Certain items previously reported in specific financial statement captions have been
reclassified to conform to the fiscal 2011 presentation.
 (2)
    
    CASH AND CASH EQUIVALENTS
 All highly liquid investments purchased with an original maturity of three months or less
are considered to be cash equivalents. Such investments amounted to $12.3 million as of May
31, 2011 and $18.4 million as of August 31, 2010. The Companys cash equivalents and
investments are diversified with numerous financial institutions which management believes
to have acceptable credit ratings. These investments are primarily money-market funds and
short-term time deposits. The money-market funds are primarily AAA rated by third parties.
Management continues to monitor the placement of its cash given the current credit market.
The recorded amount of these investments approximates fair value. Investments with
maturities between three and twelve months are considered to be short-term investments. As
of May 31, 2011 and August 31, 2010, the Company did not hold any short-term investments.
 (3)
    
    BUSINESS ACQUISITIONS
 McCann Color, Inc.
 On March 1, 2010, the Company completed the purchase of McCann Color, Inc. (McCann Color),
a producer of high-quality color concentrates, based in North Canton, Ohio, for $8.8 million
in cash. The business provides specially formulated color concentrates to match precise
customer specifications. Its products are used in end markets such as packaging, lawn and
garden, furniture, consumer products and appliances. The acquisition complements the
Companys existing North American masterbatch manufacturing and product development
facilities in Akron, Ohio, San Luis Potosi, Mexico, and La Porte, Texas. The results of
operations from the McCann Color acquisition are included in the accompanying consolidated
financial statements for the period from the acquisition date, March 1, 2010, and are
reported in the Americas segment.
 The transaction was financed with available cash. Tangible assets acquired and liabilities
assumed were recorded at their estimated fair values of $2.0 million and $0.6 million,
respectively. The estimated fair values of finite-lived intangible assets acquired of $4.0
million related to intellectual property and customer relationships are being amortized over
their estimated useful lives of 15 years. Goodwill of $3.4 million represents the excess of
cost over the estimated fair value of net tangible and intangible assets acquired. None of
the goodwill associated with this transaction is deductible for income tax purposes. The
information
included herein has been prepared based on the allocation of the purchase price using
estimates of the fair value and useful lives of assets acquired and liabilities assumed
which were determined with the assistance of independent valuations, quoted market prices
and estimates made by management.
  - 5 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ICO, Inc.
 On April 30, 2010, the Company acquired ICO, Inc. (ICO) through a merger by and among the
Company, ICO and Wildcat Spider, LLC, a wholly-owned subsidiary of the Company, and which is
now known as ICO-Schulman, LLC, pursuant to the terms of the December 2, 2009 Agreement and
Plan of Merger (Merger Agreement). The results of ICOs operations have been included in
the consolidated financial statements since the date of acquisition, April 30, 2010.
 The acquisition of ICO presented the Company with an opportunity to expand its presence
substantially, especially in the global specialty powders and U.S. masterbatch markets.
ICOs business is complementary to the Companys business across markets, product lines and
geographies. The acquisition of ICOs operations increased the Companys presence in the
U.S. masterbatch market, gained plants in the high-growth market of Brazil and expanded the
Companys presence in Asia with the addition of several ICO facilities in that region. In
Europe, the acquisition added rotomold compounding and size reduction to the Companys
capabilities. It also enables growth in countries where the Company had a limited presence,
such as France, Italy and Holland, as well as leverages its existing facilities serving
high-growth markets such as Poland, Hungary and Sweden.
 Under the terms of the Merger Agreement, each share of ICO common stock outstanding
immediately prior to the merger was converted into the right to receive a pro rata portion
of the total consideration of $105.0 million in cash and 5.1 million shares of the Companys
common stock. All unvested stock options and shares of restricted stock of ICO became fully
vested immediately prior to the merger. Unexercised stock options were exchanged for cash
equal to their in the money value, which reduced the cash pool available to ICOs
stockholders. The following table summarizes the calculation of the estimated fair value of
the total consideration transferred (in thousands, except share price):
 Estimated fair value of consideration transferred:A. Schulman, Inc. common shares issued
    
    
    5,100Closing price per share of A. Schulman, Inc.
common stock, as of April 30, 2010
    
    $
    26.01Consideration attributable to common stock
    
    $
    132,651Cash paid, including cash paid to settle ICO, Inc.s
outstanding equity awards
    
    $
    105,000Total consideration transferred
    
    $
    237,651
 The information included herein has been prepared based on the allocation of the
purchase price using estimates of the fair value and useful lives of assets acquired and
liabilities assumed which were determined with the assistance of independent valuations,
quoted market prices and estimates made by management.
  - 6 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The following table presents the fair value of the assets acquired and liabilities assumed
at the date of acquisition (in thousands):
 Assets acquired and liabilities assumed:Cash and cash equivalents
    
    $
    14,577Accounts receivable
    
    
    66,935Inventories
    
    
    46,363Prepaid expenses and other current assets
    
    
    10,716Property, plant and equipment
    
    
    96,914Intangible assets
    
    
    71,126Other long-term assets
    
    
    4,712Total assets acquired
    
    $
    311,343Current
maturites of long-term debt and notes payable
    
    $
    12,776Accounts payable
    
    
    39,423Other accrued liabilities
    
    
    28,656Long-term debt
    
    
    14,494Deferred income taxes
    
    
    42,827Pension plans
    
    
    3,285Other long-term liabilities
    
    
    2,510Total liabilities assumed
    
    $
    143,971Net identifiable assets acquired
    
    $
    167,372Goodwill
    
    
    70,279Net assets acquired
    
    $
    237,651
 The Company recorded acquired intangible assets of $71.1 million. These intangible
assets include customer related intangibles of $48.5 million with estimated useful lives of
19 years, developed technology of $10.1 million with estimated useful lives of 11 years, and
trademarks and trade names of $12.5 million with estimated useful lives ranging between 5
and 20 years.
 Goodwill represents the excess of the purchase price over the estimated fair values of the
assets acquired and the liabilities assumed in the acquisition. Goodwill largely consists of
expected synergies resulting from the acquisition. The Company anticipates that the
transaction will produce run-rate synergies by the end of fiscal 2011, resulting from the
consolidation and centralization of global purchasing activities, tax benefits, and
elimination of duplicate corporate administrative costs. Goodwill as of April 30, 2010 was
allocated by segment as follows (in thousands):
 Europe, Middle East and Africa
    
    $
    17,491Americas
    
    
    52,788Total goodwill
    
    $
    70,279
 None of the goodwill associated with this transaction is deductible for income tax
purposes.
 The estimated fair value of accounts receivable acquired was $66.9 million with the gross
contractual amount being $70.3 million.
 Mash Indústria e Comércio de Compostos Plásticos LTDA
 On November 3, 2010, the Company completed the purchase of all the capital stock of Mash
Indústria e Comércio de Compostos Plásticos LTDA (Mash), a masterbatch additive
producer and engineered plastics compounder based in Sao Paulo, Brazil, for $15.2 million.
Mashs products are used in end markets such as film and packaging, automotive and
appliances. The acquisition expanded the Companys presence in the growing Brazilian market,
which is a large, diversified market with strong macroeconomic fundamentals. The Company
believes the Brazilian plastics industry holds significant growth potential because
per-capita consumption of plastic is still much lower than in other countries. With this
acquisition and the acquisition of ICO, which included two facilities in Brazil, the Company
is aggressively expanding its presence in that market and enhancing its ability to serve
customers. The results of operations from the Mash acquisition are included in the
accompanying consolidated financial statements for the period from the closing date,
November 3, 2010, and are reported in the Americas segment.
  - 7 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The transaction was financed with available cash. Tangible assets acquired and liabilities
assumed were preliminarily recorded at their estimated fair values of $8.4 million and $6.6
million, respectively. The estimated fair values of finite-lived intangible assets acquired
of $7.2 million related to a trade name and customer relationships are being amortized over
their estimated useful lives of 3 and 15 years, respectively. Goodwill of $6.2 million
represents the excess of cost over the estimated fair value of net tangible and intangible
assets acquired. Goodwill largely consists of expected synergies resulting from the
acquisition. None of the goodwill associated with this transaction is deductible for income
tax purposes. The information included herein has been prepared based on the allocation of
the purchase price using estimates of the fair value and useful lives of assets acquired and
liabilities assumed which were determined with the assistance of independent valuations,
quoted market prices and estimates made by management. The purchase price allocations are
subject to further adjustment until all pertinent information regarding the property, plant
and equipment, intangible assets, other long-term assets, goodwill, contingent consideration
liabilities, long-term debt, other long-term liabilities and deferred income tax assets and
liabilities acquired are fully evaluated by the Company and independent valuations are
complete.
 (4)
    
    GOODWILL AND OTHER INTANGIBLE ASSETS
 The Company is required to review goodwill and indefinite-lived intangible assets at least
annually for impairment. Goodwill impairment is tested at the reporting unit level on an
annual basis in the fourth quarter and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting
unit below its carrying value. The Company is not aware of any triggers which would require
a goodwill impairment test as of May 31, 2011. The carrying amount of goodwill by segment
for the Company was as follows:
 Europe, MiddleEast and Africa
    
    
    Americas
    
    
    Total(In thousands)Balance as of August 31, 2010
    
    $
    28,130
    
    
    $
    55,934
    
    
    $
    84,064Acquisition
    
    
    
    
    
    
    6,220
    
    
    
    6,220Adjustments to fair value of
net assets acquired
    
    
    319
    
    
    
    262
    
    
    
    581Translation effect
    
    
    2,833
    
    
    
    709
    
    
    
    3,542Balance as of May 31, 2011
    
    $
    31,282
    
    
    $
    63,125
    
    
    $
    94,407
  - 8 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The following table summarizes intangible assets with determinable useful lives by
major category:
 May 31, 2011
    
    
    August 31, 2010Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(In thousands)Customer related
intangibles
    
    $
    59,549
    
    
    $
    (5,977
    )
    
    $
    53,572
    
    
    $
    50,035
    
    
    $
    (1,742
    )
    
    $
    48,293Developed technology
    
    
    14,802
    
    
    
    (3,265
    )
    
    
    11,537
    
    
    
    14,018
    
    
    
    (1,925
    )
    
    
    12,093Registered trademarks
    
    
    13,743
    
    
    
    (1,156
    )
    
    
    12,587
    
    
    
    12,271
    
    
    
    (305
    )
    
    
    11,966Total finite-lived
intangible
assets
    
    $
    88,094
    
    
    $
    (10,398
    )
    
    $
    77,696
    
    
    $
    76,324
    
    
    $
    (3,972
    )
    
    $
    72,352
 The amortization of intangible assets for the three months ended May 31, 2011 and 2010
was $2.0 million and $0.7 million, respectively. For the nine months ended May 31, 2011 and
2010, the amortization of intangible assets was $5.8 million and $0.7 million, respectively.
 (5)
    
    DISCONTINUED OPERATIONS
 During fiscal 2010, the Company completed the closure of the Invision sheet manufacturing
operation at its Sharon Center, Ohio manufacturing facility. The operating results of
Invision were previously included in the Companys former Invision segment and are now
reflected as discontinued operations for the periods presented. The remaining assets of
Invision, primarily machinery and equipment, are considered held for sale as of May 31,
2011. These assets are included in the Companys consolidated balance sheet in property,
plant and equipment.
 The following summarizes the results for discontinued operations for the three and nine
months ended May 31, 2011 and 2010. The income (loss) from discontinued operations does not
include any income tax effect as the Company was not in a taxable position due to its
continued U.S. losses and a full valuation allowance.
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Net sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10Income (loss) from operations
    
    $
    
    
    
    $
    (23
    )
    
    $
    
    
    
    $
    (15
    )Other income (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Income (loss) from
discontinued operations
    
    $
    
    
    
    $
    (23
    )
    
    $
    
    
    
    $
    (14
    )
  - 9 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (6)
    
    PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS
 The components of the Companys net periodic benefit cost for defined benefit pension plans
and other postretirement benefits are shown below.
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Net periodic pension cost included the
following components:Service cost
    
    $
    910
    
    
    $
    499
    
    
    $
    2,615
    
    
    $
    1,580Interest cost
    
    
    1,242
    
    
    
    1,055
    
    
    
    3,585
    
    
    
    3,331Expected return on plan assets
    
    
    (312
    )
    
    
    (220
    )
    
    
    (911
    )
    
    
    (695
    )Net actuarial loss and net
amortization of
prior service cost
    
    
    441
    
    
    
    89
    
    
    
    1,273
    
    
    
    277Net periodic benefit cost
    
    $
    2,281
    
    
    $
    1,423
    
    
    $
    6,562
    
    
    $
    4,493Postretirement benefit cost included
the following components:Service cost
    
    $
    8
    
    
    $
    7
    
    
    $
    23
    
    
    $
    22Interest cost
    
    
    187
    
    
    
    191
    
    
    
    560
    
    
    
    574Net amortization of prior service cost
(credit)
    
    
    (86
    )
    
    
    (139
    )
    
    
    (258
    )
    
    
    (418
    )Net periodic benefit cost
    
    $
    109
    
    
    $
    59
    
    
    $
    325
    
    
    $
    178
 (7)
    
    CONTINGENCIES
 The Company is engaged in various legal proceedings arising in the ordinary course of
business. The ultimate outcome of these proceedings is not expected to have a material
adverse effect on the Companys financial condition, results of operations or cash flows.
  - 10 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (8)
    
    CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 A summary of the changes in stockholders equity for the nine months ended May 31, 2011 is
as follows:
 AccumulatedOtherCommon
    
    
    Other
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    Noncontrolling
    
    
    TotalStock
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Stock
    
    
    Interests
    
    
    EquityUnaudited(In thousands, except per share data)Balance at September 1, 2010
    
    $
    47,690
    
    
    $
    249,734
    
    
    $
    (6,278
    )
    
    $
    519,649
    
    
    $
    (322,777
    )
    
    $
    5,122
    
    
    $
    493,140Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,138
    
    
    
    
    
    
    
    441Foreign currency translation gain (loss)
    
    
    
    
    
    
    
    
    
    
    42,776Actuarial loss and amortization of
prior service costs, net
    
    
    
    
    
    
    
    
    
    
    1,062Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,417Cash dividends paid or accrued:Common stock, $0.465 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,559
    )
    
    
    
    
    
    
    
    
    
    
    (14,559
    )Cash distributions to noncontrolling
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )
    
    
    (700
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,525
    )
    
    
    
    
    
    
    (14,525
    )Issuance of treasury stock
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    149Stock options exercised
    
    
    34
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    634Restricted stock issued, net of forfeitures
    
    
    118
    
    
    
    (118
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of common stock to
cover tax withholdings
    
    
    (47
    )
    
    
    (986
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,033
    )Amortization of restricted stock
    
    
    
    
    
    
    3,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,604Balance at May 31, 2011
    
    $
    47,795
    
    
    $
    252,851
    
    
    $
    37,560
    
    
    $
    540,228
    
    
    $
    (337,170
    )
    
    $
    4,863
    
    
    $
    546,127
 (9)
    
    COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME
 Comprehensive income (loss) for the three and nine months ended May 31, 2011 and 2010 is as
follows:
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Comprehensive income (loss):Net income
    
    $
    18,924
    
    
    $
    25,902
    
    
    $
    35,579
    
    
    $
    36,232Foreign currency translation gain (loss)
    
    
    14,374
    
    
    
    (23,107
    )
    
    
    42,776
    
    
    
    (36,555
    )Actuarial loss and amortization of
prior service costs, net
    
    
    169
    
    
    
    (589
    )
    
    
    1,062
    
    
    
    (678
    )Total comprehensive income (loss)
    
    
    33,467
    
    
    
    2,206
    
    
    
    79,417
    
    
    
    (1,001
    )Comprehensive (income) loss attributable
to noncontrolling interests
    
    
    (170
    )
    
    
    (141
    )
    
    
    (441
    )
    
    
    (211
    )Comprehensive income (loss) attributable
to A. Schulman, Inc.
    
    $
    33,297
    
    
    $
    2,065
    
    
    $
    78,976
    
    
    $
    (1,212
    )
  - 11 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The assets and liabilities of the Companys foreign subsidiaries are translated into
U.S. dollars using current exchange rates. Income statement items are translated at average
exchange rates prevailing during the period. The resulting translation gains or losses are
recorded as other comprehensive income (loss) and accumulated in
the Companys stockholders equity. The foreign currency translation gains in comprehensive
income (loss) were due primarily to the significant increase in the value of the euro as
well as increases in other currencies against the U.S. dollar. Foreign currency translation
gains or losses do not have a tax effect, as such gains or losses are considered permanently
reinvested. Other comprehensive income adjustments related to pensions and other
postretirement benefit plans are recorded net of tax using the applicable effective tax
rate.
 (10)
    
    FAIR VALUE MEASUREMENT
 For a discussion of the Companys fair value measurement policies under the fair value
hierarchy, refer to the Companys Annual Report on Form 10-K for the fiscal year ended
August 31, 2010. The Company has not changed its valuation techniques for measuring the fair
value of any financial assets or liabilities during fiscal 2011, and transfers between
levels within the fair value hierarchy, if any, are recognized at the end of each quarter.
 The following table presents information about the Companys assets and liabilities recorded
at fair value as of May 31, 2011 in the Companys consolidated balance sheet:
 Quoted Prices in
    
    
    SignificantActive Markets for
    
    
    Other
    
    
    SignificantTotal Measured
    
    
    Identical Assets
    
    
    Observable
    
    
    Unobservableat Fair Value
    
    
    (Level 1)
    
    
    Inputs (Level 2)
    
    
    Inputs (Level 3)(In thousands)Assets:Cash
    
    $
    93,645
    
    
    $
    93,645
    
    
    $
    
    
    
    $
    Cash equivalents
    
    
    12,343
    
    
    
    12,343
    
    
    
    
    
    
    
    Foreign exchange contracts
    
    
    90
    
    
    
    
    
    
    
    90
    
    
    
    Total assets at fair value
    
    $
    106,078
    
    
    $
    105,988
    
    
    $
    90
    
    
    $
    Liabilities:Foreign exchange contracts
    
    $
    26
    
    
    $
    
    
    
    $
    26
    
    
    $
    Total liabilities at fair
value
    
    $
    26
    
    
    $
    
    
    
    $
    26
    
    
    $
    
 The fair value of cash and cash equivalents, by their nature, is determined utilizing
Level 1 inputs. The fair value of cash and cash equivalents at August 31, 2010 was $104.4
million and $18.4 million, respectively. The Company measures the fair value of forward
foreign exchange contracts using Level 2 inputs through observable market transactions in
active markets provided by banks. At August 31, 2010, the gross fair values of foreign
exchange contract assets and liabilities were $0.2 million, respectively.
 The Company enters into forward foreign exchange contracts to reduce its exposure to
fluctuations in foreign currency exchange rates for amounts due or payable in foreign
currencies. Any gains or losses associated with these contracts as well as the offsetting
gains or losses from the underlying assets or liabilities are included in the foreign
currency transaction line in the Companys consolidated statements of income. The forward
foreign exchange contracts are entered into with creditworthy multinational banks, and the
Company does not hold or issue forward foreign exchange contracts for trading purposes.
There were no foreign currency contracts designated as hedging instruments as of May 31,
2011.
 The total contract value of forward foreign exchange contracts outstanding as of May 31,
2011 was $18.6 million, and the amount of contracts outstanding at the end of the period is
indicative of the level of the activity during the period. The fair value of the Companys
forward foreign exchange contracts was $0.1 million as of May 31, 2011 and less than $0.1
million as of August 31, 2010 and was recognized in other accrued liabilities or other
current assets based on the net settlement value.
 Assets that were re-measured at fair value on a non-recurring basis during the nine months
ended May 31, 2011 and 2010 are disclosed in Note 16.
  - 12 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The following information presents the supplemental fair value information about long-term
fixed-rate debt as of May 31, 2011. The Companys long-term fixed-rate debt was primarily
issued in euros.
 May 31, 2011
    
    
    August 31, 2010(In millions)Carrying value of long-term fixed-rate
debt
    
    $
    72.4
    
    
    $
    63.8Fair value of long-term fixed-rate debt
    
    $
    73.9
    
    
    $
    67.2
 The fair value of long-term fixed-rate debt was calculated using discounted future cash
flows. The increase in fair value is primarily related to an increase in foreign currency
translation and a decrease in quoted market interest rates. The carrying value of the
Companys variable-rate debt approximates fair value.
 (11)
    
    INCENTIVE STOCK PLANS
 Effective in December 2002, the Company adopted the 2002 Equity Incentive Plan, which
provided for the grant of incentive stock options, nonqualified stock options, restricted
stock awards and director deferred units for employees and non-employee directors. The
option price of incentive stock options is the fair market value of the shares of common
stock on the date of the grant. In the case of nonqualified options, the Company grants
options at 100% of the fair market value of the shares of common stock on the date of the
grant. All options become exercisable at the rate of 33% per year, commencing on the first
anniversary date of the grant. Each option expires ten years from the date of the grant.
 On December 7, 2006, the Company adopted the 2006 Incentive Plan, which provides for the
grant of incentive stock options, nonqualified stock options, whole shares, restricted stock
awards, restricted stock units, stock appreciation rights, performance shares, performance
units, cash-based awards, dividend equivalents and performance-based awards. Upon adoption
of the 2006 Incentive Plan, all remaining shares eligible for award under the 2002 Equity
Incentive Plan were added to the 2006 Incentive Plan and no further awards could be made
from the 2002 Equity Incentive Plan. It has been the Companys practice to issue new shares
of common stock upon stock option exercise or vesting of other equity grants. On May 31,
2011, there were approximately 0.5 million shares available for grant pursuant to the
Companys 2006 Incentive Plan.
 On December 9, 2010, the Companys stockholders approved the adoption of the A. Schulman,
Inc. 2010 Value Creations Rewards Plan (2010 Rewards Plan) which provides for the grant of
non-qualified stock options, incentive stock options, stock appreciation rights, restricted
stock awards, restricted stock units, whole shares and performance-based awards. The 2010
Rewards Plan became effective upon approval from the Companys stockholders and a total of
1,375,000 shares of common stock may be issued under the 2010 Rewards Plan. There have been
no grants made from the 2010 Rewards Plan.
 A summary of stock options is as follows:
 Outstanding Shares
    
    
    Weighted-AverageUnder Option
    
    
    Exercise PriceOutstanding at August 31,
2010
    
    
    265,262
    
    
    $
    19.77Granted
    
    
    
    
    
    $
    Exercised
    
    
    (40,120
    )
    
    $
    18.48Forfeited and expired
    
    
    (69,000
    )
    
    $
    23.57Outstanding at May 31, 2011
    
    
    156,142
    
    
    $
    18.43Exercisable at May 31, 2011
    
    
    156,142
    
    
    $
    18.43
  - 13 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option. The intrinsic value for stock
options outstanding and exercisable as of May 31,
2011 was $1.1 million with a remaining term for options outstanding and exercisable of
approximately 3.1 years. For stock options outstanding and exercisable as of May 31, 2011,
exercise prices range from $13.99 to $19.85. All 156,142 outstanding and exercisable stock
options are fully vested as of May 31, 2011. There were no grants of stock options during
the nine months ended May 31, 2011 or 2010.
 Restricted stock awards under the 2006 Incentive Plan can vest over various periods. The
restricted stock awards outstanding under the 2006 Incentive Plan have service vesting
periods of three years following the date of grant. The following table summarizes the
outstanding non-vested time-based restricted stock awards and non-vested time-based
stock-settled restricted stock units (combined referred to as restricted shares) and
weighted-average fair market value:
 Weighted-AverageOutstanding
    
    
    Fair Market ValueRestricted Shares
    
    
    (per share)Outstanding at August 31,
2010
    
    
    153,849
    
    
    $
    20.12Granted
    
    
    60,847
    
    
    $
    21.28Vested
    
    
    (70,672
    )
    
    $
    19.86Forfeited
    
    
    (23,947
    )
    
    $
    19.91Outstanding at May 31, 2011
    
    
    120,077
    
    
    $
    20.90
 During the nine months ended May 31, 2011 and 2010, the Company granted 60,847 and
83,176 time-based restricted shares, respectively. Restricted shares earn dividends
throughout the vesting period which are subject to the same vesting terms as the underlying
restricted stock award.
 The Company also grants awards with market and performance vesting conditions. In the table
below, the Company summarizes all non-vested awards which include market-based and
performance-based restricted stock awards and performance shares.
 Outstanding
    
    
    Weighted-AveragePerformance-Based
    
    
    Fair Market ValueAwards
    
    
    (per share)Outstanding at August 31,
2010
    
    
    705,154
    
    
    $
    13.91Granted
    
    
    364,998
    
    
    $
    14.84Vested
    
    
    (61,232
    )
    
    $
    13.25Forfeited
    
    
    (218,766
    )
    
    $
    13.77Outstanding at May 31, 2011
    
    
    790,154
    
    
    $
    14.43
 The Company granted 364,998 and 272,568 performance shares during the nine months ended
May 31, 2011 and 2010, respectively. Performance shares are awards for which the vesting
will occur based on market or performance conditions and do not have voting rights. Included
in the outstanding performance-based awards as of May 31, 2011 are 431,294 performance
shares which earn dividends throughout the vesting period and 358,860 performance shares
which do not earn dividends. Earned dividends are subject to the same vesting terms as the
underlying performance share awards. Performance shares granted during fiscal 2008, which
would have vested during the nine months ended May 31, 2011, did not meet the performance
vesting conditions and were forfeited.
 The performance-based awards in the table above include 559,366 shares which are valued
based upon a Monte Carlo simulation, which is a valuation model that represents the
characteristics of these grants. Vesting of the ultimate number of shares underlying
performance-based awards, if any, will be dependent upon the Companys total stockholder
return in relation to the total stockholder return of a select group of peer companies over
a three-year period. The probability of meeting the market criteria was considered when
calculating the estimated fair market value on the date of grant using a Monte Carlo
simulation. These awards were accounted for as awards with market conditions, which are
recognized over the service period, regardless of whether the market conditions are achieved
and the awards ultimately vest. The fair value of the remaining
230,788 performance shares in the table above is based on the closing price of the Companys
common stock on the date of the grant.
  - 14 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The fair value of the performance shares granted during the nine months ended May 31, 2011
using a Monte Carlo simulation used the following weighted-average assumptions:
 Weighted-average AssumptionsDividend yield
    
    
    2.91
    %Expected volatility
    
    
    47.00
    %Risk-free interest rate
    
    
    1.05
    %Correlation
    
    
    60.00
    %
 Total unrecognized compensation cost, including a provision for forfeitures, related to
non-vested share-based compensation arrangements as of May 31, 2011 was approximately $6.8
million. This cost is expected to be recognized over a weighted-average period of
approximately 1.7 years.
 As of May 31, 2011, the Company had 20,000 stock-settled restricted stock units outstanding.
There are no service requirements for vesting for this grant. These restricted stock units
will be settled in shares of the Companys common stock, on a one-to-one basis, no later
than 60 days after the third anniversary of the award grant date. These awards earn
dividends during the restriction period; however, they do not have voting rights until
released from restriction. There were no grants of fully vested stock-settled restricted
stock units during the nine months ended May 31, 2011 or 2010.
 The Company had no cash-settled restricted stock units outstanding as of May 31, 2011 and
176,000 cash-settled restricted stock units outstanding with various vesting periods and
criteria as of May 31, 2010. There were no cash-settled restricted stock units granted
during the nine months ended May 31, 2011, and approximately 60,000 cash-settled restricted
stock units granted during the nine months ended May 31, 2010. The cash-settled restricted
stock units had either time-based vesting or performance-based vesting, similar to the
Companys restricted stock awards and performance shares. Each cash-settled restricted stock
unit was equivalent to one share of the Companys common stock on the vesting date. Certain
cash-settled restricted stock units earned dividends during the vesting period. Cash-settled
restricted stock units were settled only in cash at the vesting date and therefore were
treated as a liability award. The Company recorded a liability for these restricted stock
units in an amount equal to the total of (a) the mark-to-market adjustment of the units
vested to date; and (b) accrued dividends on the units. In addition, the liability was
adjusted for the estimated payout factor for the performance-based cash-settled restricted
stock units.
 The Company had approximately $3.6 million of cash-based awards, which are treated as
liability awards, outstanding as of May 31, 2011. These awards were granted to foreign
employees. Such awards include approximately $0.4 million which have service vesting periods
of three years following the date of grant and the remaining $3.2 million are
performance-based. The performance-based awards are based on the same conditions utilized
for the performance shares. The Company records a liability for these cash-based awards
equal to the amount of the award vested to date and adjusts the performance-based awards
based on expected payout.
 In fiscal 2010, the Companys board of directors and stockholders approved the adoption of
an Employee Stock Purchase Plan (ESPP) whereby employees may purchase Company stock
through a payroll deduction plan. Purchases are made from the ESPP and credited to each
participants account at the end of each calendar quarter (Investment Date). The purchase
price of the stock is 85% of the fair market value on the Investment Date. The ESPP is
compensatory and the 15% discount is expensed ratably over the three month offering period.
All employees, including officers, are eligible to participate in the ESPP. An employee
whose stock ownership of the Company exceeds five percent of the outstanding common stock is
not eligible to participate in the ESPP. The Company recorded minimal expense related to the
ESPP during the nine months ended May 31, 2011. It is the Companys current practice to use
treasury shares for the share settlement on the Investment Date.
  - 15 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 In January 2011, the Company granted non-employee directors 35,000 shares of unrestricted
common stock. The Company recorded compensation expense for this grant of approximately
$0.8 million for the nine months ended May 31, 2011.
 The following table summarizes the impact to the Companys consolidated statements of income
from stock-based compensation, which is primarily included in selling, general and
administrative expenses in the accompanying consolidated statements of income:
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Restricted stock awards,
unrestricted stock
awards and performance-based awards
    
    $
    1,169
    
    
    $
    812
    
    
    $
    3,604
    
    
    $
    3,148Cash-settled restricted stock units
    
    
    152
    
    
    
    202
    
    
    
    817
    
    
    
    1,013Cash-based awards
    
    
    130
    
    
    
    (152
    )
    
    
    278
    
    
    
    135Total stock-based compensation
    
    $
    1,451
    
    
    $
    862
    
    
    $
    4,699
    
    
    $
    4,296
 (12)
    
    EARNINGS PER SHARE
 Basic earnings per share is computed by dividing income available to common stockholders by
the weighted-average number of shares of common stock outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if common stock
equivalents were exercised, and the impact of restricted stock and performance-based awards
expected to vest, which would then share in the earnings of the Company.
 The difference between basic and diluted weighted-average shares of common stock results
from the assumed exercise of outstanding stock options and grants of restricted stock,
calculated using the treasury stock method. The following presents the number of incremental
weighted-average shares used in computing diluted per share amounts:
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Weighted-average shares outstanding:Basic
    
    
    30,853
    
    
    
    27,896
    
    
    
    31,092
    
    
    
    26,552Incremental shares from stock options
    
    
    40
    
    
    
    61
    
    
    
    45
    
    
    
    52Incremental shares from restricted
stock
    
    
    168
    
    
    
    318
    
    
    
    152
    
    
    
    297Diluted
    
    
    31,061
    
    
    
    28,275
    
    
    
    31,289
    
    
    
    26,901
 For the three and nine months ended May 31, 2011, there were approximately 0.2 million
equivalent shares related to stock options and restricted stock that were excluded from
diluted weighted-average shares outstanding because inclusion would have been anti-dilutive.
Additionally, there were approximately 0.1 million equivalent shares related to stock
options and restricted stock that were excluded from diluted weighted-average shares
outstanding for the three and nine months ended May 31, 2010 because inclusion would have
been anti-dilutive.
  - 16 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (13)
    
    SEGMENT INFORMATION
 The Company considers its operating structure and the types of information subject to
regular review by its President and Chief Executive Officer (CEO), who is the Chief
Operating Decision Maker (CODM), to identify reportable segments.
 The Companys reportable segments prior to fiscal 2011 were Europe, Middle East and Africa
(EMEA), North America Masterbatch (NAMB), North America Engineered Plastics (NAEP),
North America Rotomolding (NARM), Bayshore and Asia Pacific (APAC). As a result of
certain management changes and reporting structures within the Company effective in fiscal
2011, the CODM makes decisions, assesses performance and allocates resources by the
following regions: EMEA, the Americas (which includes North America and South America), and
APAC. As a result of the changes, the reportable segments are now based on the regions in
which the Company operates: EMEA, the Americas, and APAC. The Americas segment comprises the
former NAMB, NAEP, NARM and Bayshore segments. Each reportable segment has a Chief
Operating Officer who reports to the CEO.
 The CODM uses net sales to unaffiliated customers, gross profit and operating income in
order to make decisions, assess performance and allocate resources to each segment.
Operating income does not include interest income or expense, other income or expense,
restructuring related expenses, asset write-downs or foreign currency transaction gains or
losses. In some cases, the Company may choose to exclude from a segments results certain
items as determined by management. These items are included in the Corporate and Other
section in the segment operating income table below. Corporate expenses include the
compensation of certain personnel, certain audit expenses, board of directors related costs,
certain insurance costs and other miscellaneous legal and professional fees.
 Below is a presentation of net sales to unaffiliated customers, gross profit and operating
income by segment. Also included is a reconciliation of operating income by segment to
consolidated income from continuing operations before taxes.
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Net sales to unaffiliated customersEMEA
    
    $
    435,982
    
    
    $
    304,789
    
    
    $
    1,139,197
    
    
    $
    824,107Americas
    
    
    137,940
    
    
    
    92,642
    
    
    
    371,611
    
    
    
    238,199APAC
    
    
    37,220
    
    
    
    22,904
    
    
    
    104,060
    
    
    
    51,912Total net sales to unaffiliated
customers
    
    $
    611,142
    
    
    $
    420,335
    
    
    $
    1,614,868
    
    
    $
    1,114,218
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Segment gross profitEMEA
    
    $
    54,742
    
    
    $
    47,286
    
    
    $
    150,314
    
    
    $
    139,411Americas
    
    
    19,363
    
    
    
    11,468
    
    
    
    51,749
    
    
    
    29,124APAC
    
    
    4,783
    
    
    
    2,667
    
    
    
    12,721
    
    
    
    7,449Total segment gross
profit
    
    
    78,888
    
    
    
    61,421
    
    
    
    214,784
    
    
    
    175,984Asset write-downs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )Inventory step-up
    
    
    
    
    
    
    (2,536
    )
    
    
    (283
    )
    
    
    (2,536
    )Total gross profit
    
    $
    78,888
    
    
    $
    58,885
    
    
    $
    214,501
    
    
    $
    173,379
  - 17 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Segment operating incomeEMEA
    
    $
    25,726
    
    
    $
    22,297
    
    
    $
    66,850
    
    
    $
    56,754Americas
    
    
    4,892
    
    
    
    1,965
    
    
    
    12,091
    
    
    
    5,050APAC
    
    
    1,698
    
    
    
    764
    
    
    
    3,890
    
    
    
    2,443Total segment operating income
    
    
    32,316
    
    
    
    25,026
    
    
    
    82,831
    
    
    
    64,247Corporate and other
    
    
    (5,493
    )
    
    
    (5,507
    )
    
    
    (21,252
    )
    
    
    (15,993
    )Interest expense, net
    
    
    (1,602
    )
    
    
    (958
    )
    
    
    (4,138
    )
    
    
    (2,697
    )Foreign currency transaction
gains (losses)
    
    
    (60
    )
    
    
    (468
    )
    
    
    (1,398
    )
    
    
    (389
    )Other income (expense)
    
    
    1,637
    
    
    
    311
    
    
    
    2,074
    
    
    
    2,197Asset write-downs
    
    
    (125
    )
    
    
    (300
    )
    
    
    (1,925
    )
    
    
    (5,700
    )Costs related to acquisitions
    
    
    319
    
    
    
    (1,629
    )
    
    
    (876
    )
    
    
    (5,316
    )Restructuring related
    
    
    (1,843
    )
    
    
    (904
    )
    
    
    (5,779
    )
    
    
    (2,551
    )Inventory step-up
    
    
    
    
    
    
    (2,536
    )
    
    
    (283
    )
    
    
    (2,536
    )Income from continuing operations
before taxes
    
    $
    25,149
    
    
    $
    13,035
    
    
    $
    49,254
    
    
    $
    31,262
 Globally, the Company operates primarily in four lines of business or product
families: (1) masterbatch, (2) engineered plastics, (3) specialty powders (formerly the
rotomolding product family), and (4) distribution. The amount and percentage of
consolidated sales for these product families for the three and nine months ended May 31,
2011 and 2010 are as follows:
 Three months ended May 31,2011
    
    
    2010(In thousands, except for %s)Masterbatch
    
    $
    243,556
    
    
    
    40
    %
    
    $
    182,708
    
    
    
    43
    %Engineered plastics
    
    
    154,175
    
    
    
    25
    
    
    
    115,992
    
    
    
    28Specialty powders
    
    
    102,927
    
    
    
    17
    
    
    
    32,514
    
    
    
    8Distribution
    
    
    110,484
    
    
    
    18
    
    
    
    89,121
    
    
    
    21$
    611,142
    
    
    
    100
    %
    
    $
    420,335
    
    
    
    100
    %
 Nine months ended May 31,2011
    
    
    2010(In thousands, except for %s)Masterbatch
    
    $
    647,933
    
    
    
    40
    %
    
    $
    488,711
    
    
    
    44
    %Engineered plastics
    
    
    401,228
    
    
    
    25
    
    
    
    342,180
    
    
    
    31Specialty powders
    
    
    279,289
    
    
    
    17
    
    
    
    44,883
    
    
    
    4Distribution
    
    
    286,418
    
    
    
    18
    
    
    
    238,444
    
    
    
    21$
    1,614,868
    
    
    
    100
    %
    
    $
    1,114,218
    
    
    
    100
    %
 (14)
    
    INCOME TAXES
 At May 31, 2011, the Companys gross unrecognized tax benefits totaled $4.3 million. If
recognized, approximately $2.9 million of the total unrecognized tax benefits would
favorably affect the Companys effective tax rate. The Company reports interest and
penalties related to income tax matters in income tax expense. At May 31, 2011, the Company
had $0.6 million of accrued interest and penalties on unrecognized tax benefits.
  - 18 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The Company is open to potential income tax examinations in Germany from fiscal 2005 onward,
in the U.S. from fiscal 2007 onward and in Belgium from fiscal 2008 onward. The Company is
open to potential examinations from fiscal 2005 onward for most other foreign jurisdictions.
 The amount of unrecognized tax benefits is expected to change in the next 12 months;
however, the change is not expected to have a significant impact on the financial position
of the Company.
 The income (loss) from discontinued operations in fiscal 2010 does not include any income
tax effect as the Company was not in a taxable position due to its continued U.S. losses and
a full valuation allowance.
 A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates
for the three months ended May 31, 2011 and 2010 is as follows:
 Three months ended
    
    
    Three months endedMay 31, 2011
    
    
    May 31, 2010(In thousands, except for %s)Statutory U.S. tax rate
    
    $
    8,802
    
    
    
    35.0
    %
    
    $
    4,562
    
    
    
    35.0
    %Amount of foreign taxes at less than U.S.
statutory tax rate
    
    
    (3,915
    )
    
    
    (15.6
    )
    
    
    (4,476
    )
    
    
    (34.3
    )U.S. and foreign losses with no tax
benefit
    
    
    1,320
    
    
    
    5.3
    
    
    
    2,601
    
    
    
    19.9U.S. restructuring and other U.S. unusual
charges with no benefit
    
    
    (147
    )
    
    
    (0.6
    )
    
    
    835
    
    
    
    6.4Establishment (resolution) of uncertain
tax
positions
    
    
    34
    
    
    
    0.1
    
    
    
    43
    
    
    
    0.3ICO historical tax attributes
    
    
    
    
    
    
    
    
    
    
    2,733
    
    
    
    21.0U.S. valuation allowance reversal
    
    
    
    
    
    
    
    
    
    
    (19,466
    )
    
    
    (149.3
    )Other
    
    
    131
    
    
    
    0.6
    
    
    
    278
    
    
    
    2.1Total income tax expense (benefit)
    
    $
    6,225
    
    
    
    24.8
    %
    
    $
    (12,890
    )
    
    
    (98.9
    )%
 A reconciliation of the statutory U.S. federal income tax rate with the effective tax
rates for the nine months ended May 31, 2011 and 2010 is as follows:
 Nine months ended
    
    
    Nine months endedMay 31, 2011
    
    
    May 31, 2010(In thousands, except for %s)Statutory U.S. tax rate
    
    $
    17,239
    
    
    
    35.0
    %
    
    $
    10,942
    
    
    
    35.0
    %Amount of foreign taxes at less than U.S.
statutory tax rate
    
    
    (10,945
    )
    
    
    (22.2
    )
    
    
    (13,116
    )
    
    
    (41.9
    )U.S. and foreign losses with no tax
benefit
    
    
    5,655
    
    
    
    11.5
    
    
    
    8,133
    
    
    
    26.0U.S. restructuring and other U.S. unusual
charges with no benefit
    
    
    1,061
    
    
    
    2.2
    
    
    
    4,187
    
    
    
    13.4Italy valuation allowance
    
    
    
    
    
    
    
    
    
    
    984
    
    
    
    3.2Establishment (resolution) of uncertain
tax
positions
    
    
    21
    
    
    
    
    
    
    
    66
    
    
    
    0.2ICO historical tax attributes
    
    
    
    
    
    
    
    
    
    
    2,733
    
    
    
    8.7U.S. valuation allowance reversal
    
    
    
    
    
    
    
    
    
    
    (19,466
    )
    
    
    (62.3
    )Other
    
    
    644
    
    
    
    1.3
    
    
    
    553
    
    
    
    1.8Total income tax expense (benefit)
    
    $
    13,675
    
    
    
    27.8
    %
    
    $
    (4,984
    )
    
    
    (15.9
    )%
 The effective tax rates for the three and nine months ended May 31, 2011 are less than
the U.S. statutory rate primarily because of the Companys overall foreign rate being less
than the U.S. statutory rate. This favorable
effect on the Companys tax rate was partially offset by no tax benefits being recognized
for U.S. and certain foreign losses from continuing operations and other U.S. charges.
  - 19 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The effective tax rates for the three and nine months ended May 31, 2010 were substantially
less than the U.S. statutory tax rate primarily because of the tax benefits recognized for
the reversal of the valuation allowance in the U.S. relating to the ICO acquisition.
 (15)
    
    RESTRUCTURING
 Italy and Australia Plans
 On February 8, 2011, the Company announced that it is relocating its operations from its
manufacturing facility in Verolanuova, Italy to its existing facility in Gorla Maggiore,
Italy. Production lines at the Verolanuova, Italy facility are expected to be relocated by
early calendar 2012. Also on February 8, 2011, the Company announced plans to consolidate
operations in Australia by moving production from its Braeside, Australia specialty powders
facility to its Brisbane, Australia facility. As a result, the Company will reduce headcount
in Australia by approximately 20, and the majority of the reductions occurred in the second
and third quarters of fiscal 2011. The region will continue to be served by the Companys
Brisbane, Australia facility and facilities in Malaysia, Indonesia, China and a soon-to-be
constructed India plant. The consolidation in Braeside resulted, primarily, from the ongoing
deterioration of the Australian rotomolding market.
 The Company recorded pretax restructuring expense of $1.8 million and $4.9 million during
the three and nine months ended May 31, 2011, respectively, primarily for employee-related
costs and other restructuring charges related to the Australia and Italy restructuring
plans. As of May 31, 2011, the Company has $2.2 million accrued for employee-related costs.
The Company anticipates additional pretax cash charges of approximately $3.0 million to $4.0
million, and approximately $3.0 million to $4.0 million of non-cash pre-tax charges, into
fiscal 2012.
 ASI United Kingdom Plan
 On August 31, 2010, management announced restructuring plans for its operations at its
Crumlin, South Wales (U.K.) plant. The plans include moving part of the plants capacity to
two other, larger plants in Europe, and several production lines will be shut down. As a
result, the Company will reduce headcount at this location by approximately 30, with
approximately half of the reductions occurring in the second quarter of fiscal 2011. The
Company recorded $0.1 million of pretax restructuring costs for employee-related costs for
the nine months ended May 31, 2011. As of May 31, 2011, the Company has $0.2 million accrued
for employee-related costs. The Company expects minimal charges related to this plan into
fiscal 2012 as the realignment of capacity is finalized.
 ICO Merger Plan
 In conjunction with the merger with ICO, the Company reduced the workforce in the Houston,
Texas office by 17. ICO had preexisting arrangements regarding change-in-control payments
and severance pay which were based on pre-merger service. The Company assumed $2.1 million
in liabilities as a result of the merger related to these agreements, of which $2.0 million
was paid by the Company during fiscal 2010. Since the merger, the Company announced the exit
of certain senior managers in Europe in connection with the Companys ongoing integration of
ICO operations. The Company recorded $0.1 million and $0.5 million primarily in pretax
employee-related costs during the three and nine months ended May 31, 2011, respectively,
and minimal charges during the three and nine months ended May 31, 2010 related to the
integration of the ICO merger. The Company has less than $0.1 million remaining accrued for
the ICO merger plan as of May 31, 2011, to be paid in the fourth quarter of fiscal 2011. The
Company expects minimal charges to be incurred in the remainder of fiscal 2011.
 North America Masterbatch Fiscal 2010 Plan
 On March 1, 2010, the Company announced the closure of its Polybatch Color Center located in
Sharon Center, Ohio, which was a plant in the Americas segment. The Company recorded minimal
pretax restructuring expenses during the three months ended May 31, 2011 and $0.4 million
during the nine months ended May 31, 2011, primarily for employee-related costs associated
with the closure. Also, the Company recorded estimated pretax restructuring expenses of $0.3
million and $1.1 million during the three and nine
months ended May 31, 2010, respectively. As of May 31, 2011, less than $0.1 million remains
accrued which the Company expects to pay during the fourth quarter of fiscal 2011. The
Company ceased production at the Polybatch Color Center on August 31, 2010 and sold the
facility in June 2011. The Company expects minimal charges related to this plan to be
recognized during the remainder of fiscal 2011.
  - 20 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fiscal 2009 Plan
 During fiscal 2009, the Company announced various plans to realign its domestic and
international operations to strengthen the Companys performance and financial position. The
Company initiated these proactive actions to address the then weak global economic
conditions and improve the Companys competitive position. The actions included a reduction
in capacity and workforce reductions in manufacturing, selling and administrative positions
throughout Europe and North America. In addition, in fiscal 2010, the Company completed the
previously announced consolidation of its back-office operations in Europe, which include
finance and accounting functions, to a shared service center located in Belgium.
 The Company reduced its workforce by approximately 190 positions worldwide during fiscal
2009, primarily as a result of the actions taken in early fiscal 2009 to realign the
Companys operations and back-office functions. In addition, to further manage costs during
a period of significant declines in demand primarily in the second quarter of fiscal 2009,
the Companys major European locations implemented a short work schedule when necessary
and the Americas segment reduced shifts from seven to five days at its Nashville, Tennessee
plant. Also in the Americas segment, the Company reduced production capacity by temporarily
idling one manufacturing line, while permanently shutting down another line at its plant in
Bellevue, Ohio. The Company completed the right-sizing and redesign of its Gorla Maggiore,
Italy plant, which resulted in less than $0.1 million of accelerated depreciation on certain
fixed assets during the first quarter of fiscal 2010.
 The Company recorded no charges related to the fiscal 2009 initiatives during the nine
months ended May 31, 2011. The Company recorded employee-related costs of $0.5 million and
contract termination and other restructuring costs of $0.5 million related to the fiscal
2009 initiatives during the nine months ended May 31, 2010. Restructuring charges recorded
for the fiscal 2009 Plan during fiscal 2010 were related to the EMEA and Americas segments.
 The Company has no remaining accrual as of May 31, 2011 related to the fiscal 2009
initiatives and does not expect any future payments or charges. The Companys charges
related to the plans initiated in fiscal 2009 to reduce capacity and headcount at certain
international locations were substantially complete as of the end of fiscal 2010.
 Fiscal 2008 Plan
 In January 2008, the Company announced two steps in its continuing effort to improve the
profitability of its North American operations. The Company announced it would shut down its
manufacturing facility in St. Thomas, Ontario, Canada and would pursue a sale of its
manufacturing facility in Orange, Texas. All the restructuring costs related to the sale of
the Orange, Texas and the St. Thomas, Ontario, Canada facilities are related to the Americas
segment. The Company completed the sale of the Orange, Texas facility in March 2008 and the
St. Thomas, Ontario facility in June 2010.
 The St. Thomas, Ontario, Canada facility primarily produced engineered plastics for the
automotive market, with a capacity of approximately 74 million pounds per year and employed
approximately 120 individuals. The facility was shutdown at the end of June 2008 and the
Company finalized closing procedures in fiscal 2010.
 The Company recorded minimal charges related to the fiscal 2008 initiatives during the three
and nine months ended May 31, 2011 and 2010. The Company has no remaining accrual for
employee-related costs as of May 31, 2011 related to the fiscal 2008 initiatives.
  - 21 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The following table summarizes the liabilities as of May 31, 2011 related to the Companys
restructuring plans.
 Accrual Balance
    
    
    Fiscal 2011
    
    
    Fiscal 2011
    
    
    Accrual BalanceAugust 31, 2010
    
    
    Charges
    
    
    Paid
    
    
    May 31, 2011(In thousands)Employee-related
costs
    
    $
    2,011
    
    
    $
    3,840
    
    
    $
    (3,559
    )
    
    $
    2,292Other costs
    
    
    267
    
    
    
    1,939
    
    
    
    (2,095
    )
    
    
    111Translation effect
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    70Restructuring charges
    
    $
    2,231
    
    
    $
    5,779
    
    
    $
    (5,654
    )
    
    $
    2,473
 (16)
    
    ASSET IMPAIRMENT
 The Company recorded asset impairment charges of $0.1 million and $1.9 million for the three
and nine months ended May 31, 2011, respectively. In the second quarter of fiscal 2011, a
long-lived asset held for sale was written down to its then estimated fair value of $2.0
million resulting in an asset impairment charge of $1.8 million. The Company recorded an
additional charge of $0.1 million related to this asset in the third quarter of fiscal 2011.
The assets estimated fair value was determined based on Level 3 inputs obtained from a
third-party purchase offer less associated costs to sell.
 During the three and nine months ended May 31, 2010, the Company recorded $0.3 million and
$5.6 million, respectively, of asset impairment charges related to assets held and used
associated with the closure of the Companys Polybatch Color Center located in Sharon
Center, Ohio. The impaired assets include real estate and certain machinery and equipment.
The fair value of the real estate, which includes land, building and related improvements,
was determined using Level 3 inputs based on information provided by a third-party real
estate valuation source less the costs to sell. The fair value of the machinery and
equipment was determined using Level 3 inputs based on projected cash flows from operations
and estimated salvage value.
 (17)
    
    DEBT REFINANCING
 The Company entered into a Credit Agreement as of January 7, 2011 to replace the $260
million credit facility, which would have matured on February 28, 2011. The Credit Agreement
provides for an aggregate revolving loan facility (the Revolving Facility) in the
principal amount of $300 million comprised of a U.S. tranche revolving loan of up to $250
million, a foreign tranche revolving loan of up to $45 million, and a Malaysian tranche
revolving loan of up to $5 million. The Credit Agreement contains certain covenants that,
among other things, restrict the Companys ability to incur indebtedness and grant liens
other than certain types of permitted indebtedness and permitted liens. The Company must
also maintain a minimum interest coverage ratio and may not exceed a maximum net debt
leverage ratio. As of May 31, 2011, the Company was not in violation of any of its covenants
relating to the Revolving Facility. The Company was well within compliance with these
covenants and does not believe a covenant violation is reasonably possible as of May 31,
2011. The Revolving Facility matures on January 7, 2016. Outstanding borrowings under the
new Credit Agreement are classified as long-term debt at May 31, 2011, whereas outstanding
borrowings under the prior credit facility were classified as short-term debt at August 31,
2010. As of May 31, 2011, the Company had a balance of $96.4 million under the Revolving
Facility.
 (18)
    
    ACCOUNTING PRONOUNCEMENTS
 In January 2010, the Financial Accounting Standards Board (FASB) issued amended accounting
rules to require disclosure of transfers into and out of Level 1 and Level 2 fair value
measurements, and also require more detailed disclosure about the activity within Level 3
fair value measurements. The new rules also require a more detailed level of disaggregation
of the assets and liabilities being measured as well as increased disclosures regarding
inputs and valuation techniques of the fair value measurements. The changes are
effective for annual and interim reporting periods beginning after December 15, 2009, except
for requirements related to Level 3 disclosures, which are effective for annual and interim
reporting periods beginning after December 15, 2010. Adoption of this guidance in fiscal
2011 did not have a significant impact on the Companys consolidated financial statements.
  - 22 -




---



##### Table of Contents



A. SCHULMAN, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 In December 2010, the FASB issued updated accounting guidance to clarify that pro forma
disclosures should be presented as if a business combination occurred at the beginning of
the prior annual period for purposes of preparing both the current reporting period and the
prior reporting period pro forma financial information. These disclosures should be
accompanied by a narrative description about the nature and amount of material, nonrecurring
pro forma adjustments. The amendments in the update are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010. Early adoption is permitted. The
Company will adopt the new disclosures effective September 1, 2011. Adoption of this
guidance is not expected to have a material impact on the Companys consolidated financial
statements. The impact on the Companys disclosures will be dependent on the size of the
business combinations consummated subsequent to the adoption of the standard.
 In December 2010, the FASB issued updated accounting guidance related to the calculation of
the carrying amount of a reporting unit when performing the first step of a goodwill
impairment test. More specifically, this update requires the Company to use an equity
premise when performing the first step of a goodwill impairment test and if a reporting unit
has a zero or negative carrying amount, the Company must assess and consider qualitative
factors and whether it is more likely than not that a goodwill impairment exists. The new
accounting guidance is effective for impairment tests performed during entities fiscal
years (and interim periods within those years) that begin after December 15, 2010. The
Company will adopt the amended guidance effective September 1, 2011. Adoption of this
guidance is not expected to have a material impact on the Companys consolidated financial
statements.
 (19)
    
    SHARE REPURCHASE PROGRAM
 On May 13, 2011, the Board of Directors approved a new share repurchase program under which
the Company is authorized to repurchase up to $100 million of its common stock in the open
market or in privately negotiated transactions, subject to market and other conditions
(2011 Repurchase Program). The 2011 Repurchase Program replaces the Companys previous
share repurchase program which was approved in fiscal 2008 (2008 Repurchase Program).
 As part of the 2011 Repurchase Program, on May 13, 2011, the Company entered into a share
repurchase plan established under Rule 10b5-1 of the Securities Exchange Act of 1934, as
amended (the Repurchase Plan). Under the Repurchase Plan, the Companys designated
broker is authorized beginning on May 13, 2011 and ending on May 13, 2012 to repurchase up
to $30 million of the $100 million in shares authorized for repurchase under the 2011
Repurchase Program. Repurchases under the Repurchase Plan will be subject to specific
parameters and contain certain price and volume constraints; therefore, there is no
guarantee as to the exact number of common shares that will be repurchased under the
Repurchase Plan.
 Under the 2011 Repurchase Program, the Company repurchased 37,900 shares of its common stock
during the three months ended May 31, 2011 at an average price of $24.64 per share. Shares
valued at approximately $99.1 million remained authorized under the 2011 Repurchase Program
for repurchase as of May 31, 2011.
 Under the 2008 Repurchase Program, the Company repurchased 625,000 shares of its common
stock during the second quarter of fiscal 2011 at an average price of $21.75 per share. The
Company did not repurchase any shares of its common stock under the 2008 Repurchase Program
in the third quarter of fiscal 2011.
 Under both programs, the Company repurchased 662,900 shares of its common stock at an
average price of $21.91 during the nine months ended May 31, 2011. The Company did not
repurchase any shares of its common stock during the nine months ended May 31, 2010.
 (20)
    
    SUBSEQUENT EVENT
 On June 30, 2011, the Company entered into an agreement to become a 51% equity holder,
through a $1.1 million investment, in Surplast S.A. The other owner of the venture is Alta
Plastica S.A., one of the largest distributors of resins in Argentina. With this move, the
Company will now have a facility in Argentina, in addition to the three facilities that the
Company acquired in Brazil from the ICO and Mash acquisitions to meet growing demand in
South America. The Companys regional portfolio includes masterbatch, engineered plastics
and specialty powders.
  - 23 -




---



##### Table of Contents



Overview of the Business and Recent Developments
      - 24 -




---



##### Table of Contents



Segment Information
 Europe, Middle East and Africa
 Three months ended May 31,
    
    
    Nine months ended May 31,EMEA
    
    2011
    
    
    2010
    
    
    Increase (decrease)
    
    
    2011
    
    
    2010
    
    
    Increase (decrease)(In thousands, except for %s and per pound data)Net sales
    
    $
    435,982
    
    
    $
    304,789
    
    
    $
    131,193
    
    
    
    43.0
    %
    
    $
    1,139,197
    
    
    $
    824,107
    
    
    $
    315,090
    
    
    
    38.2
    %Gross profit
    
    $
    54,742
    
    
    $
    47,286
    
    
    $
    7,456
    
    
    
    15.8
    %
    
    $
    150,314
    
    
    $
    139,411
    
    
    $
    10,903
    
    
    
    7.8
    %Operating income
    
    $
    25,726
    
    
    $
    22,297
    
    
    $
    3,429
    
    
    
    15.4
    %
    
    $
    66,850
    
    
    $
    56,754
    
    
    $
    10,096
    
    
    
    17.8
    %Pounds sold
    
    
    338,233
    
    
    
    302,344
    
    
    
    35,889
    
    
    
    11.9
    %
    
    
    969,073
    
    
    
    797,389
    
    
    
    171,684
    
    
    
    21.5
    %Price per pound
    
    $
    1.289
    
    
    $
    1.008
    
    
    $
    0.281
    
    
    
    27.9
    %
    
    $
    1.176
    
    
    $
    1.034
    
    
    $
    0.142
    
    
    
    13.7
    %Gross profit per pound
    
    $
    0.162
    
    
    $
    0.156
    
    
    $
    0.006
    
    
    
    3.8
    %
    
    $
    0.155
    
    
    $
    0.175
    
    
    $
    (0.020
    )
    
    
    -11.4
    %Gross profit
percentage
    
    
    12.6
    %
    
    
    15.5
    %
    
    
    
    
    
    
    
    
    
    
    13.2
    %
    
    
    16.9
    %
 Three months ended May 31, 2011
    Nine months ended May 31, 2011
    - 25 -




---



##### Table of Contents



Americas
 Three months ended May 31,
    
    
    Nine months ended May 31,Americas
    
    2011
    
    
    2010
    
    
    Increase (decrease)
    
    
    2011
    
    
    2010
    
    
    Increase (decrease)(In thousands, except for %s and per pound data)Net sales
    
    $
    137,940
    
    
    $
    92,642
    
    
    $
    45,298
    
    
    
    48.9
    %
    
    $
    371,611
    
    
    $
    238,199
    
    
    $
    133,412
    
    
    
    56.0
    %Gross profit
    
    $
    19,363
    
    
    $
    11,468
    
    
    $
    7,895
    
    
    
    68.8
    %
    
    $
    51,749
    
    
    $
    29,124
    
    
    $
    22,625
    
    
    
    77.7
    %Operating income
    
    $
    4,892
    
    
    $
    1,965
    
    
    $
    2,927
    
    
    
    149.0
    %
    
    $
    12,091
    
    
    $
    5,050
    
    
    $
    7,041
    
    
    
    139.4
    %Pounds sold
    
    
    164,586
    
    
    
    93,626
    
    
    
    70,960
    
    
    
    75.8
    %
    
    
    468,716
    
    
    
    217,822
    
    
    
    250,894
    
    
    
    115.2
    %Price per pound
    
    $
    0.838
    
    
    $
    0.989
    
    
    $
    (0.151
    )
    
    
    -15.3
    %
    
    $
    0.793
    
    
    $
    1.094
    
    
    $
    (0.301
    )
    
    
    -27.5
    %Gross profit per pound
    
    $
    0.118
    
    
    $
    0.122
    
    
    $
    (0.004
    )
    
    
    -3.3
    %
    
    $
    0.110
    
    
    $
    0.134
    
    
    $
    (0.024
    )
    
    
    -17.9
    %Gross profit
percentage
    
    
    14.0
    %
    
    
    12.4
    %
    
    
    
    
    
    
    
    
    
    
    13.9
    %
    
    
    12.2
    %
 Three months ended May 31, 2011
    Nine months ended May 31, 2011
    - 26 -




---



##### Table of Contents



Asia Pacific
 Three months ended May 31,
    
    
    Nine months ended May 31,APAC
    
    2011
    
    
    2010
    
    
    Increase (decrease)
    
    
    2011
    
    
    2010
    
    
    Increase (decrease)(In thousands, except for %s and per pound data)Net sales
    
    $
    37,220
    
    
    $
    22,904
    
    
    $
    14,316
    
    
    
    62.5
    %
    
    $
    104,060
    
    
    $
    51,912
    
    
    $
    52,148
    
    
    
    100.5
    %Gross profit
    
    $
    4,783
    
    
    $
    2,667
    
    
    $
    2,116
    
    
    
    79.3
    %
    
    $
    12,721
    
    
    $
    7,449
    
    
    $
    5,272
    
    
    
    70.8
    %Operating income
    
    $
    1,698
    
    
    $
    764
    
    
    $
    934
    
    
    
    122.3
    %
    
    $
    3,890
    
    
    $
    2,443
    
    
    $
    1,447
    
    
    
    59.2
    %Pounds sold
    
    
    32,595
    
    
    
    22,294
    
    
    
    10,301
    
    
    
    46.2
    %
    
    
    98,845
    
    
    
    47,281
    
    
    
    51,564
    
    
    
    109.1
    %Price per pound
    
    $
    1.142
    
    
    $
    1.027
    
    
    $
    0.115
    
    
    
    11.2
    %
    
    $
    1.053
    
    
    $
    1.098
    
    
    $
    (0.045
    )
    
    
    -4.1
    %Gross profit per pound
    
    $
    0.147
    
    
    $
    0.120
    
    
    $
    0.027
    
    
    
    22.5
    %
    
    $
    0.129
    
    
    $
    0.158
    
    
    $
    (0.029
    )
    
    
    -18.4
    %Gross profit
percentage
    
    
    12.9
    %
    
    
    11.6
    %
    
    
    
    
    
    
    
    
    
    
    12.2
    %
    
    
    14.3
    %
 Three months ended May 31, 2011
    Nine months ended May 31, 2011
     - 27 -




---



##### Table of Contents



Consolidated Results of Operations
 Three months ended May 31,
    
    
    Nine months ended May 31,Consolidated
    
    2011
    
    
    2010
    
    
    Increase (decrease)
    
    
    2011
    
    
    2010
    
    
    Increase (decrease)(In thousands, except for %s and per pound data)Net sales
    
    $
    611,142
    
    
    $
    420,335
    
    
    $
    190,807
    
    
    
    45.4
    %
    
    $
    1,614,868
    
    
    $
    1,114,218
    
    
    $
    500,650
    
    
    
    44.9
    %Total segment gross
profit
    
    $
    78,888
    
    
    $
    61,421
    
    
    $
    17,467
    
    
    
    28.4
    %
    
    $
    214,784
    
    
    $
    175,984
    
    
    $
    38,800
    
    
    
    22.0
    %Pounds sold
    
    
    535,414
    
    
    
    418,264
    
    
    
    117,150
    
    
    
    28.0
    %
    
    
    1,536,634
    
    
    
    1,062,492
    
    
    
    474,142
    
    
    
    44.6
    %Price per pound
    
    $
    1.141
    
    
    $
    1.005
    
    
    $
    0.136
    
    
    
    13.5
    %
    
    $
    1.051
    
    
    $
    1.049
    
    
    $
    0.002
    
    
    
    0.2
    %Gross profit per pound
    
    $
    0.147
    
    
    $
    0.147
    
    
    $
    
    
    
    
    0.0
    %
    
    $
    0.140
    
    
    $
    0.166
    
    
    $
    (0.026
    )
    
    
    -15.7
    %Gross profit percentage
    
    
    12.9
    %
    
    
    14.6
    %
    
    
    
    
    
    
    
    
    
    
    13.3
    %
    
    
    15.8
    %
 Three months ended May 31, 2011
   Nine months ended May 31, 2011
    - 28 -




---



##### Table of Contents



Three months ended
    
    
    Nine months endedMay 31, 2011
    
    
    May 31, 2011$ Increase
    
    
    % Increase
    
    
    $ Increase
    
    
    % Increase(decrease)
    
    
    (decrease)
    
    
    (decrease)
    
    
    (decrease)(In thousands, except for %s)Total change in selling, general and
administrative expenses
    
    $
    8,215
    
    
    
    18.9
    %
    
    $
    21,035
    
    
    
    15.8
    %Less the effect of foreign currency translation
    
    
    (2,607
    )
    
    
    
    
    
    
    253Total change in selling, general and
administrative expenses, excluding the
effect of foreign currency translation
    
    $
    5,608
    
    
    
    12.9
    %
    
    $
    21,288
    
    
    
    16.0
    %
       - 29 -




---



##### Table of Contents



Product Markets
 .
 Three months ended May 31, 2011
    
    
    Three months ended May 31, 2010Packaging
    
    
    Automotive
    
    
    Other
    
    
    Packaging
    
    
    Automotive
    
    
    OtherEMEA
    
    
    31
    %
    
    
    11
    %
    
    
    58
    %
    
    
    43
    %
    
    
    8
    %
    
    
    49
    %Americas
    
    
    21
    %
    
    
    18
    %
    
    
    61
    %
    
    
    33
    %
    
    
    28
    %
    
    
    39
    %APAC
    
    
    45
    %
    
    
    0
    %
    
    
    55
    %
    
    
    79
    %
    
    
    0
    %
    
    
    21
    %Worldwide
    
    
    30
    %
    
    
    12
    %
    
    
    58
    %
    
    
    39
    %
    
    
    11
    %
    
    
    50
    %
 Nine months ended May 31, 2011
    
    
    Nine months ended May 31, 2010Packaging
    
    
    Automotive
    
    
    Other
    
    
    Packaging
    
    
    Automotive
    
    
    OtherEMEA
    
    
    31
    %
    
    
    10
    %
    
    
    59
    %
    
    
    43
    %
    
    
    8
    %
    
    
    49
    %Americas
    
    
    20
    %
    
    
    19
    %
    
    
    61
    %
    
    
    33
    %
    
    
    30
    %
    
    
    37
    %APAC
    
    
    45
    %
    
    
    0
    %
    
    
    55
    %
    
    
    78
    %
    
    
    0
    %
    
    
    22
    %Worldwide
    
    
    30
    %
    
    
    11
    %
    
    
    59
    %
    
    
    41
    %
    
    
    12
    %
    
    
    47
    %
  - 30 -




---



##### Table of Contents



Product Family
  Three months ended May 31,2011
    
    
    2010(In thousands, except for %s)Masterbatch
    
    $
    243,556
    
    
    
    40
    %
    
    $
    182,708
    
    
    
    43
    %Engineered plastics
    
    
    154,175
    
    
    
    25
    
    
    
    115,992
    
    
    
    28Specialty powders
    
    
    102,927
    
    
    
    17
    
    
    
    32,514
    
    
    
    8Distribution
    
    
    110,484
    
    
    
    18
    
    
    
    89,121
    
    
    
    21$
    611,142
    
    
    
    100
    %
    
    $
    420,335
    
    
    
    100
    %
 Nine months ended May 31,2011
    
    
    2010(In thousands, except for %s)Masterbatch
    
    $
    647,933
    
    
    
    40
    %
    
    $
    488,711
    
    
    
    44
    %Engineered plastics
    
    
    401,228
    
    
    
    25
    
    
    
    342,180
    
    
    
    31Specialty powders
    
    
    279,289
    
    
    
    17
    
    
    
    44,883
    
    
    
    4Distribution
    
    
    286,418
    
    
    
    18
    
    
    
    238,444
    
    
    
    21$
    1,614,868
    
    
    
    100
    %
    
    $
    1,114,218
    
    
    
    100
    %
 Capacity
  Three months ended
    
    
    Nine months endedMay 31,
    
    
    May 31,2011
    
    
    2010
    
    
    2011
    
    
    2010EMEA
    
    
    85
    %
    
    
    91
    %
    
    
    79
    %
    
    
    91
    %Americas
    
    
    67
    %
    
    
    69
    %
    
    
    64
    %
    
    
    70
    %APAC
    
    
    81
    %
    
    
    88
    %
    
    
    86
    %
    
    
    83
    %Worldwide
    
    
    78
    %
    
    
    84
    %
    
    
    74
    %
    
    
    85
    %
   - 31 -




---



##### Table of Contents



Restructurings
 Italy and Australia Plans
   ASI United Kingdom Plan
  ICO Merger Plan
  North America Masterbatch Fiscal 2010 Plan
  Fiscal 2009 Plan
   - 32 -




---



##### Table of Contents



Fiscal 2008 Plan
     Accrual Balance
    
    
    Fiscal 2011
    
    
    Fiscal 2011
    
    
    Accrual BalanceAugust 31, 2010
    
    
    Charges
    
    
    Paid
    
    
    May 31, 2011(In thousands)Employee-related
costs
    
    $
    2,011
    
    
    $
    3,840
    
    
    $
    (3,559
    )
    
    $
    2,292Other costs
    
    
    267
    
    
    
    1,939
    
    
    
    (2,095
    )
    
    
    111Translation effect
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    70Restructuring charges
    
    $
    2,231
    
    
    $
    5,779
    
    
    $
    (5,654
    )
    
    $
    2,473
  - 33 -




---



##### Table of Contents



Asset Impairment
   Income Tax
  Three months ended
    
    
    Three months endedMay 31, 2011
    
    
    May 31, 2010(In thousands, except for %s)Statutory U.S. tax rate
    
    $
    8,802
    
    
    
    35.0
    %
    
    $
    4,562
    
    
    
    35.0
    %Amount of foreign taxes at less than U.S.
statutory tax rate
    
    
    (3,915
    )
    
    
    (15.6
    )
    
    
    (4,476
    )
    
    
    (34.3
    )U.S. and foreign losses with no tax
benefit
    
    
    1,320
    
    
    
    5.3
    
    
    
    2,601
    
    
    
    19.9U.S. restructuring and other U.S. unusual
charges with no benefit
    
    
    (147
    )
    
    
    (0.6
    )
    
    
    835
    
    
    
    6.4Establishment (resolution) of uncertain
tax
positions
    
    
    34
    
    
    
    0.1
    
    
    
    43
    
    
    
    0.3ICO historical tax attributes
    
    
    
    
    
    
    
    
    
    
    2,733
    
    
    
    21.0U.S. valuation allowance reversal
    
    
    
    
    
    
    
    
    
    
    (19,466
    )
    
    
    (149.3
    )Other
    
    
    131
    
    
    
    0.6
    
    
    
    278
    
    
    
    2.1Total income tax expense (benefit)
    
    $
    6,225
    
    
    
    24.8
    %
    
    $
    (12,890
    )
    
    
    (98.9
    )%
  Nine months ended
    
    
    Nine months endedMay 31, 2011
    
    
    May 31, 2010(In thousands, except for %s)Statutory U.S. tax rate
    
    $
    17,239
    
    
    
    35.0
    %
    
    $
    10,942
    
    
    
    35.0
    %Amount of foreign taxes at less than U.S.
statutory tax rate
    
    
    (10,945
    )
    
    
    (22.2
    )
    
    
    (13,116
    )
    
    
    (41.9
    )U.S. and foreign losses with no tax
benefit
    
    
    5,655
    
    
    
    11.5
    
    
    
    8,133
    
    
    
    26.0U.S. restructuring and other U.S. unusual
charges with no benefit
    
    
    1,061
    
    
    
    2.2
    
    
    
    4,187
    
    
    
    13.4Italy valuation allowance
    
    
    
    
    
    
    
    
    
    
    984
    
    
    
    3.2Establishment (resolution) of uncertain
tax
positions
    
    
    21
    
    
    
    
    
    
    
    66
    
    
    
    0.2ICO historical tax attributes
    
    
    
    
    
    
    
    
    
    
    2,733
    
    
    
    8.7U.S. valuation allowance reversal
    
    
    
    
    
    
    
    
    
    
    (19,466
    )
    
    
    (62.3
    )Other
    
    
    644
    
    
    
    1.3
    
    
    
    553
    
    
    
    1.8Total income tax expense (benefit)
    
    $
    13,675
    
    
    
    27.8
    %
    
    $
    (4,984
    )
    
    
    (15.9
    )%
   - 34 -




---



##### Table of Contents



Reconciliation of GAAP and Non-GAAP Financial Measures
   Three months ended
    
    
    
    
    
    Asset Write-
    
    
    Costs Related
    
    
    Restructuring
    
    
    Inventory Step-
    
    
    Tax Benefits
    
    
    Before CertainMay 31, 2011
    
    As Reported
    
    
    downs
    
    
    to Acquisitions
    
    
    Related
    
    
    up
    
    
    (Charges)
    
    
    Items(in thousands, except per share data)Net sales
    
    $
    611,142
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    611,142Cost of sales
    
    
    532,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532,254Selling, general and
administrative expenses
    
    
    51,746
    
    
    
    
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,065Interest expense, net
    
    
    1,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,602Foreign currency transaction
(gains) losses
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Other (income) expense
    
    
    (1,637
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,637
    )Asset impairment
    
    
    125
    
    
    
    (125
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring expense
    
    
    1,843
    
    
    
    
    
    
    
    
    
    
    
    (1,843
    )
    
    
    
    
    
    
    
    
    
    
    585,993
    
    
    
    (125
    )
    
    
    319
    
    
    
    (1,843
    )
    
    
    
    
    
    
    
    
    
    
    584,344Income from continuing
operations before taxes
    
    
    25,149
    
    
    
    125
    
    
    
    (319
    )
    
    
    1,843
    
    
    
    
    
    
    
    
    
    
    
    26,798Provision for U.S. and foreign
income taxes
    
    
    6,225
    
    
    
    
    
    
    
    37
    
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    6,357Income from continuing
operations
    
    
    18,924
    
    
    
    125
    
    
    
    (356
    )
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    20,441Income (loss) from
discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    18,924
    
    
    
    125
    
    
    
    (356
    )
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    20,441Noncontrolling interests
    
    
    (170
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (170
    )Net income attributable to
A. Schulman, Inc.
    
    $
    18,754
    
    
    $
    125
    
    
    $
    (356
    )
    
    $
    1,748
    
    
    $
    
    
    
    $
    
    
    
    $
    20,271Diluted EPS
    
    $
    0.60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.65Weighted-average number of
shares outstanding -diluted
    
    
    31,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,061
  - 35 -




---



##### Table of Contents



Three months ended
    
    
    
    
    
    Asset Write-
    
    
    Costs Related
    
    
    Restructuring
    
    
    Inventory Step-
    
    
    Tax Benefits
    
    
    Before CertainMay 31, 2010
    
    As Reported
    
    
    downs
    
    
    to Acquisitions
    
    
    Related
    
    
    up
    
    
    (Charges)
    
    
    Items(in thousands, except per share data)Net sales
    
    $
    420,335
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    420,335Cost of sales
    
    
    361,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,536
    )
    
    
    
    
    
    
    358,914Selling, general and
administrative expenses
    
    
    43,531
    
    
    
    
    
    
    
    (1,629
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,902Interest expense, net
    
    
    958
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    958Foreign currency transaction
(gains) losses
    
    
    468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    468Other (income) expense
    
    
    (269
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (311
    )Asset impairment
    
    
    300
    
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring expense
    
    
    862
    
    
    
    
    
    
    
    
    
    
    
    (862
    )
    
    
    
    
    
    
    
    
    
    
    407,300
    
    
    
    (300
    )
    
    
    (1,629
    )
    
    
    (904
    )
    
    
    (2,536
    )
    
    
    
    
    
    
    401,931Income from continuing operations
before taxes
    
    
    13,035
    
    
    
    300
    
    
    
    1,629
    
    
    
    904
    
    
    
    2,536
    
    
    
    
    
    
    
    18,404Provision for (benefit from) U.S. and
foreign income taxes
    
    
    (12,890
    )
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    621
    
    
    
    16,733
    
    
    
    4,603Income from continuing
operations
    
    
    25,925
    
    
    
    300
    
    
    
    1,629
    
    
    
    765
    
    
    
    1,915
    
    
    
    (16,733
    )
    
    
    13,801Income (loss) from discontinued
operations
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )Net income (loss)
    
    
    25,902
    
    
    
    300
    
    
    
    1,629
    
    
    
    765
    
    
    
    1,915
    
    
    
    (16,733
    )
    
    
    13,778Noncontrolling interests
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )Net income (loss) attributable to
A. Schulman, Inc.
    
    $
    25,761
    
    
    $
    300
    
    
    $
    1,629
    
    
    $
    765
    
    
    $
    1,915
    
    
    $
    (16,733
    )
    
    $
    13,637Diluted EPS
    
    $
    0.91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.48Weighted-average number of
shares outstanding -diluted
    
    
    28,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,275
  Nine months ended
    
    
    
    
    
    Asset Write-
    
    
    Costs Related
    
    
    Restructuring
    
    
    Inventory Step-
    
    
    Tax Benefits
    
    
    Before CertainMay 31, 2011
    
    As Reported
    
    
    downs
    
    
    to Acquisitions
    
    
    Related
    
    
    up
    
    
    (Charges)
    
    
    Items(in thousands, except per share data)Net sales
    
    $
    1,614,868
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,614,868Cost of sales
    
    
    1,400,367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (283
    )
    
    
    
    
    
    
    1,400,084Selling, general and
administrative expenses
    
    
    154,081
    
    
    
    
    
    
    
    (876
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,205Interest expense, net
    
    
    4,138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,138Foreign currency transaction
(gains) losses
    
    
    1,398
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,398Other (income) expense
    
    
    (2,074
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,074
    )Asset impairment
    
    
    1,925
    
    
    
    (1,925
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring expense
    
    
    5,779
    
    
    
    
    
    
    
    
    
    
    
    (5,779
    )
    
    
    
    
    
    
    
    
    
    
    1,565,614
    
    
    
    (1,925
    )
    
    
    (876
    )
    
    
    (5,779
    )
    
    
    (283
    )
    
    
    
    
    
    
    1,556,751Income from continuing
operations before taxes
    
    
    49,254
    
    
    
    1,925
    
    
    
    876
    
    
    
    5,779
    
    
    
    283
    
    
    
    
    
    
    
    58,117Provision for U.S. and foreign
income taxes
    
    
    13,675
    
    
    
    
    
    
    
    37
    
    
    
    824
    
    
    
    99
    
    
    
    65
    
    
    
    14,700Income from continuing
operations
    
    
    35,579
    
    
    
    1,925
    
    
    
    839
    
    
    
    4,955
    
    
    
    184
    
    
    
    (65
    )
    
    
    43,417Income (loss) from
discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    35,579
    
    
    
    1,925
    
    
    
    839
    
    
    
    4,955
    
    
    
    184
    
    
    
    (65
    )
    
    
    43,417Noncontrolling interests
    
    
    (441
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (441
    )Net income attributable to
A. Schulman, Inc.
    
    $
    35,138
    
    
    $
    1,925
    
    
    $
    839
    
    
    $
    4,955
    
    
    $
    184
    
    
    $
    (65
    )
    
    $
    42,976Diluted EPS
    
    $
    1.12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1.37Weighted-average number of
shares outstanding -diluted
    
    
    31,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,289
  - 36 -




---



##### Table of Contents



Nine months ended
    
    
    
    
    
    Asset Write-
    
    
    Costs Related to
    
    
    Restructuring
    
    
    Inventory Step-
    
    
    Tax Benefits
    
    
    Before CertainMay 31, 2010
    
    As Reported
    
    
    downs
    
    
    Acquisitions
    
    
    Related
    
    
    up
    
    
    (Charges)
    
    
    Items(in thousands, except per share data)Net sales
    
    $
    1,114,218
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,114,218Cost of sales
    
    
    940,839
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (2,536
    )
    
    
    
    
    
    
    938,234Selling, general and
administrative expenses
    
    
    133,046
    
    
    
    
    
    
    
    (5,316
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,730Interest expense, net
    
    
    2,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,697Foreign currency transaction
(gains) losses
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Other (income) expense
    
    
    (2,155
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (2,197
    )Asset impairment
    
    
    5,631
    
    
    
    (5,631
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring expense
    
    
    2,509
    
    
    
    
    
    
    
    
    
    
    
    (2,509
    )
    
    
    
    
    
    
    
    
    
    
    1,082,956
    
    
    
    (5,700
    )
    
    
    (5,316
    )
    
    
    (2,551
    )
    
    
    (2,536
    )
    
    
    
    
    
    
    1,066,853Income from continuing
operations before taxes
    
    
    31,262
    
    
    
    5,700
    
    
    
    5,316
    
    
    
    2,551
    
    
    
    2,536
    
    
    
    
    
    
    
    47,365Provision for (benefit from) U.S. and
foreign income taxes
    
    
    (4,984
    )
    
    
    116
    
    
    
    
    
    
    
    420
    
    
    
    621
    
    
    
    14,481
    
    
    
    10,654Income from continuing
operations
    
    
    36,246
    
    
    
    5,584
    
    
    
    5,316
    
    
    
    2,131
    
    
    
    1,915
    
    
    
    (14,481
    )
    
    
    36,711Income (loss) from discontinued
operations
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Net income
    
    
    36,232
    
    
    
    5,584
    
    
    
    5,316
    
    
    
    2,131
    
    
    
    1,915
    
    
    
    (14,481
    )
    
    
    36,697Noncontrolling interests
    
    
    (211
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (211
    )Net income attributable to
A. Schulman, Inc.
    
    $
    36,021
    
    
    $
    5,584
    
    
    $
    5,316
    
    
    $
    2,131
    
    
    $
    1,915
    
    
    $
    (14,481
    )
    
    $
    36,486Diluted EPS
    
    $
    1.34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1.36Weighted-average number of
shares outstanding -diluted
    
    
    26,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,901
  - 37 -




---



##### Table of Contents



Liquidity and Capital Resources
   May 31, 2011
    
    
    August 31, 2010
    
    
    May 31, 2010Days in receivables
    
    
    55
    
    
    
    53
    
    
    
    62Days in inventory
    
    
    54
    
    
    
    47
    
    
    
    56Days in payables
    
    
    44
    
    
    
    39
    
    
    
    46Total working capital days
    
    
    65
    
    
    
    61
    
    
    
    72
  May 31, 2011
    
    
    August 31, 2010
    
    
    $ Change
    
    
    % Change(In millions, except for %s)Cash and cash equivalents
    
    $
    106.0
    
    
    $
    122.8
    
    
    $
    (16.8
    )
    
    
    -14
    %Working capital, excluding cash
    
    $
    332.0
    
    
    $
    169.4
    
    
    $
    162.6
    
    
    
    96
    %Long-term debt
    
    $
    195.4
    
    
    $
    93.8
    
    
    $
    101.6
    
    
    
    108
    %Total debt
    
    $
    204.7
    
    
    $
    154.7
    
    
    $
    50.0
    
    
    
    32
    %Net debt (net cash)*
    
    $
    98.7
    
    
    $
    31.9
    
    
    $
    66.8
    
    
    
    209
    %Total A. Schulman, Inc.
stockholders equity
    
    $
    541.3
    
    
    $
    488.0
    
    
    $
    53.3
    
    
    
    11
    %
 *
    
    Total debt less cash and cash equivalents     - 38 -




---



##### Table of Contents




    
    $30.0 million of Senior Notes in the United States, maturing on March 1, 2013, with a
variable interest rate of LIBOR plus 80 bps (Dollar Notes). Although there are no plans
to do so, the Company may, at its option, prepay all or part of the Dollar Notes.
 
    
    50.3 million of Senior Notes in Germany, maturing on March 1, 2016, with a fixed
interest rate of 4.485% (Euro Notes). The carrying value of the Euro Notes was $72.4
million as of May 31, 2011. The fair market value of the Euro
Notes was $73.9 million as of
May 31, 2011.
     - 39 -




---



##### Table of Contents



May 31, 2011
    
    
    August 31, 2010(In millions)Revolving/Credit Facility
    
    $
    310.4
    
    
    $
    260.0Uncollateralized short-term lines of credit  U.S.
    
    
    
    
    
    
    Uncollateralized short-term lines of credit 
Foreign
    
    
    77.8
    
    
    
    37.2Total gross available funds from credit lines
    
    $
    388.2
    
    
    $
    297.2Revolving/Credit Facility
    
    $
    212.2
    
    
    $
    204.1Uncollateralized short-term lines of credit  U.S.
    
    
    
    
    
    
    Uncollateralized short-term lines of credit 
Foreign
    
    
    71.0
    
    
    
    29.9Total net available funds from credit lines
    
    $
    283.2
    
    
    $
    234.0
       Contractual Obligations
   - 40 -




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Critical Accounting Policies
  New Accounting Pronouncements
  Cautionary Statements
  
    
    worldwide and regional economic, business and political conditions, including continuing
economic uncertainties in some or all of the Companys major product markets;
 
    
    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 major 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 and restructuring
initiatives;
 
    
    escalation in the cost of providing employee health care;
  - 41 -




---



##### Table of Contents




    
    uncertainties regarding the resolution of pending and future litigation and other
claims;
 
    
    the performance of the North American auto market; and
 
    
    further adverse changes in economic or industry conditions, including global supply and
demand conditions and prices for products.
  
 Item 3
 Quantitative and Qualitative Disclosure about Market Risk
  
 Item 4
 Controls and Procedures
    
   
 Item 1A
 Risk Factors
   - 42 -




---



##### Table of Contents



Item 2
 Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
       Total number of shares
    
    
    Maximum number ofTotal number of
    
    
    Average price paid
    
    
    purchased as part of a
    
    
    shares that may yet beshares repurchased
    
    
    per share
    
    
    publicly announced plan
    
    
    purchased under the planBeginning shares available
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,281,966March 1-31, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,281,966April 1-30, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,281,966May 1-31, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
  Total number of shares
    
    
    Maximum dollar value ofTotal number of
    
    
    Average price paid
    
    
    purchased as part of a
    
    
    shares that may yet beshares repurchased
    
    
    per share
    
    
    publicly announced plan
    
    
    purchased under the planBeginning shares available
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1-31, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    April 1-30, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    May 1-31, 2011
    
    
    37,900
    
    
    $
    24.64
    
    
    
    37,900
    
    
    
    99,066,195Total
    
    
    37,900
    
    
    $
    
    
    
    
    37,900
    
    
    
    99,066,195
  - 43 -




---



##### Table of Contents



Item 6
 Exhibits
 Exhibits
 Exhibit Number
    
    Exhibit3.1
    
    
    Amended and Restated Certificate of Incorporation of the Company (for purposes of
Commission reporting compliance only) (incorporated by reference from Exhibit
3(a) to the Companys Annual Report on Form 10-K for the fiscal year ended August
31, 2009).3.2
    
    
    Amended and Restated By-laws of the Company (incorporated by reference from
Exhibit 3.2 to the Companys Current Report on Form 8-K filed with the Commission
on June 27, 2011).10.1
    
    
    Amended and Restated Employment Agreement, by and between A. Schulman, Inc. and
Joseph M. Gingo, dated May 19, 2011 (incorporated by reference from Exhibit 10.1
to the Companys Current Report on Form 8-K filed with the Commission on May 23,
2011).10.2
    
    
    Form of A. Schulman, Inc. Change-in-Control Agreement (incorporated by reference
from Exhibit 10.2 to the Companys Current Report on Form 8-K filed with the
Commission on May 23, 2011).31.1
    
    
    Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).32
    
    
    Certifications of Principal Executive and Principal Financial Officer pursuant to
18 U.S.C. 1350.
  - 44 -




---



##### Table of Contents



A. Schulman, Inc. (Registrant)/s/ Joseph J. Levanduski
    
    
    
    /s/ Donald B. McMillanJoseph J. Levanduski, Vice President, Chief Financial Officer,
and Treasurer of A. Schulman, Inc. (Signing on behalf of Registrant
as a duly authorized officer of Registrant and signing as the Principal Financial Officer of Registrant)
    
    
    
    Donald B. McMillan, Chief
Accounting Officer and Corporate Controller of A. Schulman, Inc.
(Signing as the Chief Accounting Officer of Registrant)Date: July 6, 2011
    
    
    
    Date: July 6, 2011
  - 45 -