Business Acquisitions

9 Months Ended

May 31, 2016

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

BUSINESS ACQUISITIONS

Citadel

On June 1, 2015, the Company acquired all of the issued and outstanding shares of privately held Citadel, a portfolio company of certain private equity firms, for $801.6 million. Citadel is a plastics materials science business that produces engineered composites and engineered plastics for specialty product applications spanning multiple industries including transportation, industrial & construction, consumer, electrical, energy and healthcare & safety. The acquisition expands the Company's presence, especially in the North America engineered plastics markets as well as balances the global geographic footprint and gives A. Schulman a second growth platform with its added-value specialty engineered composites business. The business enhances the Company's existing portfolio and presents expansion opportunities in other sectors such as aerospace, medical, LED lighting and oil & gas. Through this acquisition the Company's portfolio becomes more specialized, which enables the Company to better serve its global customer base with comprehensive solutions to address their needs such as light-weighting, material replacement, and high temperature strength.

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 using discounted cash flow and comparative market multiple approaches, quoted market prices and estimates made by management.

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

	As of June 1, 2015
	(In thousands)
Accounts receivable	$	71,767
Inventories	40,942
Prepaid expenses and other current assets	14,556
Property, plant and equipment	78,112
Intangible assets	325,000
Other long-term assets	3,606
Total assets acquired	$	533,983
Accounts payable	28,854
Accrued liabilities	19,853
Deferred income taxes, long-term	111,507
Other long-term liabilities	3,121
Total liabilities assumed	$	163,335
Identifiable net assets acquired	$	370,648
Goodwill	430,912
Net assets acquired	$	801,560

The Company recorded acquired intangible assets of $325.0 million, with an estimated weighted-average useful life of 14.1 years. These intangible assets include customer related intangibles of $230.5 million, developed technology of $75.3 million, and trademarks and trade names of $19.2 million, with estimated weighted-average useful lives of 14.0 years, 16.3 years and 8.1 years, respectively. In addition, the estimated fair value of accounts receivable acquired was $71.8 million with the gross contractual amount being $72.1 million.

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 Citadel acquisition is primarily the result of anticipated synergies resulting from the consolidation and centralization of manufacturing and global purchasing activities, insurance savings, elimination of duplicate corporate administrative costs and the previously discussed market expansion. The Company allocated the goodwill to its USCAN engineered plastics and global engineered composites reporting units. Except for certain pre-acquisition tax-deductible goodwill, none of the goodwill associated with this transaction is deductible for income tax purposes.

A. Schulman's fiscal year ends on August 31 while Citadel's fiscal year ended on December 31. The pro forma information in the table below for the three and nine months ended May 31, 2015 includes (1) A. Schulman’s three and nine months ended May 31, 2015 and (2) Citadel’s three and nine months ended June 30, 2015. The following pro forma information represents the consolidated results of the Company as if the Citadel acquisition occurred on September 1, 2013:

	Three months ended May 31, 2015		Nine months ended May 31, 2015
	(In thousands, except per share data)
Net sales	$	688,823	$	2,095,541
Net income (loss) available to A. Schulman, Inc. common stockholders	$	6,393	$	2,504
Net income (loss) per share of common stock available to A. Schulman, Inc. - diluted	$	0.22	$	0.08

The unaudited pro forma information has been adjusted with respect to certain aspects of the acquisition to reflect the following:

• Citadel acquired The Composites Group (“TCG”) in November of 2014. For purposes of the pro forma information disclosed above, the TCG acquisition was included as if the acquisition date was on September 1, 2013.

• Additional depreciation and amortization expenses that would have been recognized assuming fair value adjustments to the existing Citadel assets acquired and liabilities assumed, including intangible assets, fixed assets and expense associated with the fair value step-up of inventory acquired.

• Increased interest expense due to additional borrowings to fund the acquisition.

• Adjustment of valuation allowances associated with US deferred tax assets.

• Acquisition-related costs of $14.1 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.

• Costs associated with acquisition bridge financing of $18.8 million, which were incurred during fiscal 2015, are reflected as if incurred during the three months ended November 30, 2013.

The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of the acquired business. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on September 1, 2013, nor are they indicative of the future operating results of the Company.

The following table summarizes the Company's other business acquisitions for the periods presented:

Transaction Description	Date of Transaction	Purchase Consideration (In millions)		Segment
Compco Pty. Ltd.	September 2, 2014	$	6.7	APAC

Total acquisition and integration related costs were $1.5 million and $7.6 million during the three and nine months ended May 31, 2016, respectively, and $3.6 million and $8.0 million during the three and nine months ended May 31, 2015, respectively. Acquisition and integration related costs are primarily included in selling, general and administrative expenses.