Business Acquisitions

12 Months Ended

Aug. 31, 2012

BUSINESS ACQUISITIONS [Abstract]

Business Combination Disclosure [Text Block]

BUSINESS ACQUISITIONS

Elian SAS

On January 31, 2012, the Company acquired all of the issued share capital of Elian SAS (“Elian”), a French portfolio company of British Vita plc, for $66.5 million, which included the repayment of $4.3 million in Elian debt. The results of Elian’s operations have been included in the consolidated financial statements since the date of acquisition, January 31, 2012.

Elian provides specialty formulated color concentrates to over 1,000 customers in end markets such as packaging, cosmetics, personal hygiene, healthcare, and pipes and tubing products that require demanding specifications. Elian offers superior quality, technology and responsiveness to its diversified customer base. The acquisition of Elian moves the Company into France’s color masterbatch market and improves the Company's product mix in the EMEA region.

The information included herein has been prepared based on the preliminary 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 using discounted cash flow and comparative market multiple approaches, 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, goodwill, other long-term liabilities and deferred income tax assets and liabilities acquired are fully evaluated by the Company.

The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

(In thousands)
Cash and cash equivalents	$	1,624
Accounts receivable	6,897
Inventories	3,427
Prepaid expenses and other current assets	434
Property, plant and equipment	5,111
Intangible assets	27,779
Other long-term assets	20
Total assets acquired	$	45,292
Accounts payable	$	4,907
Other accrued liabilities	3,106
Deferred income taxes	10,598
Pension plans	711
Other long-term liabilities	143
Total liabilities assumed	$	19,465
Net identifiable assets acquired	$	25,827
Goodwill	40,718
Net assets acquired	$	66,545

The Company preliminarily recorded acquired intangible assets of $27.8 million. These intangible assets include customer related intangibles of $18.3 million with estimated useful lives of 9 years, developed technology of $8.6 million with estimated useful lives of 10 years, and trademarks and tradenames of $0.9 million with estimated useful lives of 5 years. As noted earlier, the fair values and assigned useful lives of the acquired identifiable intangible assets are preliminary pending the final valuations for those assets.

Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The amount allocated to goodwill associated with the Elian acquisition is primarily the result of anticipated synergies and market expansion. Goodwill associated with this transaction was included in the EMEA segment and none of the goodwill is deductible for income tax purposes.

The estimated fair value of accounts receivable acquired was $6.9 million with the gross contractual amount being $7.3 million.

Net sales, income before taxes and net income attributable to A. Schulman, Inc. from Elian included in the Company’s results since the January 31, 2012 acquisition are as follows:

	January 31, 2012 to August 31, 2012
	(In thousands)
Net sales	$	20,306
Income before taxes	$	640
Net income attributable to A. Schulman, Inc.	$	402

Income before taxes for Elian from January 31, 2012 to August 31, 2012 includes pretax depreciation and amortization costs of $2.3 million due to the increased value of fixed assets and intangibles, and $0.7 million of pretax purchase accounting inventory step-up charges.

The following pro forma information represents the consolidated results of the Company as if the acquisition of Elian occurred as of September 1, 2010: 

	For the Years Ended August 31,
	2012		2011
	Unaudited
	(In thousands, except per share data)
Net sales	$	2,122,525	$	2,232,715
Net income attributable to A. Schulman, Inc.	$	52,423	$	43,376
Net income per share of common stock attributable to A. Schulman, Inc. - diluted	$	1.77	$	1.39

The pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on assets acquired from Elian resulting from the valuation of assets acquired, increased interest expense due to additional borrowings to fund the acquisition of Elian partially offset by the repayment of Elian debt, and decreased interest income from lower cash levels which were also used to fund the acquisition. The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of Elian. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed as of September 1, 2010, nor are they indicative of the future operating results of the consolidated Company.

ICO, Inc.

On April 30, 2010, the Company acquired ICO, Inc. (“ICO”) for $237.7 million in total consideration. 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. The results of ICO’s operations have been included in the consolidated financial statements since the date of acquisition, April 30, 2010.

Net sales, loss from continuing operations before taxes and net loss from the ICO acquired businesses included in the Company’s results since the April 30, 2010 acquisition are as follows (in thousands): 

	April 30, 2010 to August 31, 2010
Net sales	$	134,166
Loss from continuing operations before taxes	$	(2,030	)
Net loss attributable to A. Schulman, Inc.	$	(1,163	)

The loss from continuing operations before taxes for ICO from April 30, 2010 to August 31, 2010 includes pretax depreciation and amortization costs of $9.6 million. This amount includes $3.4 million of additional costs due to the increased value of fixed assets and intangibles, and $3.9 million of pretax purchase accounting inventory step-up adjustments.

The following unaudited, pro forma information represents the consolidated results of the Company as if the ICO acquisition occurred at the beginning of the period presented (in thousands, except per share data): 

	Year ended August 31, 2010
	Unaudited
	(In thousands, except per share data)
Net sales	$	1,828,339
Net income attributable to A. Schulman, Inc.	$	45,948
Net income per share of common stock attributable to A. Schulman, Inc. - diluted	$	1.47

The unaudited pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on assets acquired from ICO resulting from the valuation of assets acquired, decreased interest expense due to the repayment of debt and the impact of the issuance of the Company’s common stock used as consideration for the purchase of ICO. The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of ICO. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the dates indicated, nor are they indicative of the future operating results of the combined company.

Other Business Transactions

The following table summarizes the Company's other business transactions for the periods presented as well as the ECM Plastics, Inc. acquisition completed in the first quarter of fiscal 2013:

Transaction Description	Date of Transaction	Purchase Consideration (In millions)		Segment
McCann Color, Inc.	March 1, 2010	$	8.8	Americas
An Ohio producer of high-quality color concentrates whose products are used in end markets such as packaging, lawn and garden, furniture, consumer products and appliances
Mash Indústria e Comércio de Compostos Plásticos LTDA	November 3, 2010	$	15.2	Americas
A Brazilian masterbatch additive producer and engineered plastics compounder whose products are used in end markets such as film and packaging, automotive and appliances
Surplast S.A.	June 30, 2011	$	1.1	Americas
A 51% ownership interest in an Argentinean venture, further expanding the Company’s specialty powders presence in South America
ECM Plastics, Inc.	September 4, 2012	$	36.5	Americas
A Massachusetts producer of custom color, specialty additive masterbatch and niche engineered plastics products, with a strong presence in personal care and cosmetics