A. Schulman, Inc. DEFA14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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The following press release was issued by A. Schulman, Inc.
A. SCHULMAN ADVISES SHAREHOLDERS TO ELECT A. SCHULMANS EXPERIENCED
SLATE OF DIRECTORS AND REJECT RAMIUS OPPOSITION SLATE
AKRON, Ohio, December 26, 2007 A. Schulman Inc. (Nasdaq: SHLM) today mailed the following letter
to shareholders in connection with the January 10, 2008 Annual Meeting. The letter from Will
Holland, lead independent director of the Company, on behalf of A. Schulmans Board strongly urges
shareholders to reelect new CEO and current Board member, Joseph M. Gingo, as well as James A.
Karman, James A. Mitarotonda, and additional independent Board nominee, Stanley W. Silverman to the
Board by voting the WHITE proxy card by Internet, telephone or mail today.
A. Schulman has made great progress in implementing key strategic initiatives and these are
beginning to show results. In seeking to replace two of our most experienced Board members, Mr.
Gingo and Mr. Karman, Ramius would simply hinder this value-creating process, said Mr. Holland.
If the Companys slate is elected, 11 of 12 board seats will be held by independent directors with
five of the directors being added since 2005. This clearly demonstrates the Companys commitment
and openness to listening to shareholder concerns.
With the reinvigorated leadership, extensive operating experience and turnaround knowledge of
Joseph M. Gingo as CEO, A. Schulman is poised to build on the progress that has been made across
the business. We are focused on the future and our priority of delivering value for all
shareholders, continued Mr. Holland.
The full text of A. Schulmans letter follows:
Dear Fellow Shareholder:
For the past two years, A. Schulmans Board of Directors has listened to shareholder concerns and
taken a number of significant actions to address them. We have also made great strides in
transforming our business, even in the face of difficult industry-wide market conditions.
This is a time of great change and opportunity at A. Schulman. We recently announced that our
long-serving CEO, Terry Haines, is retiring and that Joseph M. Gingo, an A. Schulman Board member,
has been appointed as his replacement. Mr. Gingo most recently served as Executive Vice President,
Quality Systems and Chief Technical Officer for The Goodyear Tire & Rubber Company, a $20 billion
public company. The Company will benefit from his international operational experience and
technical background, as well as his intimate knowledge of the workings of A. Schulman. Mr. Gingo
operated four divisions during his career at Goodyear (three of which were global) with revenues of
up to $1.2 billion, and was a key participant on a strategic turnaround team project which
ultimately resulted in the divestiture of significant business lines for substantial value. He is
the ideal candidate to lead A. Schulman, building on the progress we have made across our business
and bringing fresh perspective that will allow this Company to continue to enhance shareholder
value.
In addition, the Company has already agreed to nominate Stanley W. Silverman, another experienced,
independent director to join the Board, and to establish a special director committee, chaired by
an independent director new to the board, to consider all strategic options available to the
Company. Mr. Silverman will enhance both the independence and the
expertise of the board through his significant previous operational experience as the President and
CEO of a public company in the specialty chemicals industry. Further, the business plan we have
put in place is beginning to pay dividends and we are well-positioned for the next phase of A.
Schulmans growth. We are committed to delivering value for our shareholders and have shown
openness to considering all options that will accomplish this.
As you may be aware, Ramius Capital has nominated a competing slate of directors to stand for
election at the 2008 annual meeting, seeking to replace two of our experienced board members, James
Karman and the Companys new CEO, Mr. Gingo. Removing them from the Board would hinder the
implementation of the Companys ongoing strategic initiatives that are beginning to show results.
Ramius is taking this step despite the significant operational progress we have made to date and
the meaningful actions we have taken to address shareholder concerns including Ramius. Ramius
fails to explain how adding its two director nominees will improve shareholder value.
A. Schulmans Board already has fresh perspective in place and has and will continue to hold
management accountable. Since 2005, the company has added four new directors independent of the
Company, including James A. Mitarotonda, the Chairman, President and Chief Executive Officer of
Barington Capital Group, L.P., one of our largest shareholders. The company has worked closely
with Mr. Mitarotonda and Barington in good faith to comply with our past agreements and in the
pursuit of additional measures in our efforts to be responsive to shareholder interests and to
enhance shareholder value. Mr. Mitarotonda was a key member of a three-member special committee of
our board which helped craft and implement our significant cost-cutting initiatives and
restructuring plans in 2007. As our meeting on January 10, 2008 draws near, we wanted to provide
you with the most up-to-date and accurate information regarding our long-term plans so that you can
make an informed decision.
THE BOARD BELIEVES IT HAS IMPLEMENTED THE RIGHT OPERATIONAL BUSINESS PLAN, COST STRUCTURE,
STRATEGIC REVIEW PROCESS, MANAGEMENT TEAM AND BOARD COMPOSITION TO CREATE SIGNIFICANT ONGOING VALUE
FOR SHAREHOLDERS. RAMIUS NARROWLY FOCUSED ACTIONS WOULD ONLY DISTRACT FROM THIS PROCESS.
COMMITTED TO TRANSFORMING OUR BUSINESS
We believe we have implemented the right business plan to grow and enhance shareholder value. Our
main objectives are to return North America to profitability, grow Europe profitably and maximize
the successful launch of our key new product, Invision.
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In North America, we have successfully streamlined our business units
to focus on three growth areas: polybatch; engineered compounds; and
merchant, distribution and rotomolding. For the last quarter of 2007,
excluding the investment costs for Invision and corporate spending,
our North American business generated operating profit. |
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In Europe, we are working on the integration of the Deltaplast Color
Business and are continuing to grow our business in Asia. We will
also continue to maintain vigilance on cost controls while growing in
strategic markets worldwide. |
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Inventory reduction initiatives helped drive cash flow from operations
to $65 million in 2006, up from $19 million in 2005. |
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We recently launched Invision, a new multi-layered sheet product that
leverages A. Schulmans manufacturing base and technical abilities.
It already shows strong promise of providing high-growth opportunities
in many markets globally, and we believe that Invision will add
significant value going forward as customer acceptance grows. |
With innovations like Invision and the successful streamlining of our North American business, we
believe we are well on our way to making our growth goals a reality and delivering enhanced value
for shareholders.
REALIGNING OUR COST STRUCTURE TO DELIVER SHAREHOLDER VALUE
Over the past year, we have implemented a number of cost-cutting initiatives and a restructuring
plan aimed at promoting profitability in the Companys North American business segment and the
Companys overall long-term success. We expect to save an annual $18 million through cost
reductions affecting all lines of the A. Schulman P&L.
Examples of these cost-cutting initiatives include selling, general and admin reductions, headcount
and capacity.
Since 2000 we have:
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Improved North American operations by eliminating 35% of manufacturing capacity and 33% of headcount. |
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Closed 10 sales offices and consolidated order management in Akron. |
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Consolidated all freight and warehousing with a single service provider. |
In addition, last year a special committee of the Board was formed that resulted in $8 million in
cost savings. The committee was a well-balanced effort by the Board, comprised of one significant
shareholder representative (James Mitarotonda), one new independent board member (David Birney) and
one experienced board member (John Yasinsky).
Going forward, management and the Board will work closely together to rigorously review and control
expenses.
LISTENING TO OUR SHAREHOLDERS AND TAKING ACTION TO ADDRESS THEIR CONCERNS
A. Schulmans Board is diverse, experienced, highly qualified, and independent and we believe our
shareholders benefit from this broad perspective. We have instituted several steps to improve
corporate governance and address shareholder concerns:
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Added four outside independent directors to the Board since 2005. |
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Nominating an additional independent director, Stanley W. Silverman, as recommended by our third largest shareholder,
Barington, for election at this annual meeting, bringing the total number of outside directors to 11, of which 5 have
either been directly recommended or approved by Barington. Mr. Silverman will bring valuable expertise to the board, as
he has served as President and CEO of PQ Corporation, a public company which is a leading global producer of specialty
chemicals and engineered glass materials. He also has served as a business advisor to private equity firms, performing
due diligence on acquisition targets in the manufacturing and manufacturing services industries, and currently serves on
the board of directors of C&D Technologies, Inc. (NYSE: CHP) and as executive in residence at the Krall Center for
Corporate and Executive Education at the Lebow College of Business of Drexel University. |
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Created a Lead Independent Director position. |
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Terminated a poison pill in 2007 and adopted a policy consistent with ISS guidelines. |
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Amended the corporate certificate of incorporation to remove supermajority voting for approval of business
combinations . |
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Linked management bonuses to key performance metrics of cash flow, return on invested capital and operating profit. |
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Adopted new internal management standards and initiated a new internal audit function. |
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Established a new special committee of the board, including Mr. Mitarotonda and two of the recently added independent
directors, to consider all strategic options for the company, addressing Ramius primary concerns as expressed in its
shareholder proposal. |
It is important to note that Barington and Ramius were originally partners in advocating for change
at A. Schulman. However, while our management and Board have been working cooperatively with
Barington since 2005, Ramius ended its affiliation with Barington apparently in order to agitate
and push its Board nominees instead of supporting our strategic plan, which addresses the same
issues Ramius has raised.
Barington has made valuable contributions to the Company and we look forward to continuing to work
with them. We believe the Companys slate of directors will allow us to focus on the Companys
future and whats best for all shareholders.
A. SCHULMAN BOARD IS OFFERING THE BEST COURSE OF ACTION TO DELIVER VALUE FOR SHAREHOLDERS
The Companys proposed slate is committed to a course of action that will deliver value for
shareholders:
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Special committee formed to consider all strategic alternatives |
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Share repurchase program approval increased to 5 million |
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Positioned to turn around financial performance in North America |
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Completing restructuring and cost-cutting initiatives |
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Maximizing value of Invision |
A. SCHULMANS BOARD IS INDEPENDENT, ENGAGED AND HOLDING MANAGEMENT ACCOUNTABLE:
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If the A. Schulman slate is elected, 11 of 12 board seats will be held
by independent outside directors. |
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James Karman has extensive experience in the specialty chemical
industry, including service as Vice-Chairman of RPM International,
Inc., a manufacturer of coatings, sealants, and specialty chemicals
with more than $3.4 billion in revenue. |
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As CEO, Mr. Gingo will provide reinvigorated Company leadership. Mr.
Gingo has excellent knowledge of all aspects of the polymer business,
as well as the workings of A. Schulman, particularly the Invision
technology, and will be instrumental in taking this Company to the
next level. Mr. Gingo has operated four public company divisions (of
which three were global) with revenues of up to $1.2 billion, and
played a key role as part of a strategic turnaround team for a $20
billion public company which ultimately resulted in the divestiture of
significant business lines. |
Ramius and its nominees are not offering a different strategy for the company they are simply
distracting from our ongoing value-creating process.
MAKE THE RIGHT CHOICE
We strongly recommend that you vote FOR the A. Schulman nominees and AGAINST Proposal No. 3 by
voting the WHITE proxy card by Internet, telephone or mail. We urge you not to sign any other
proxy cards that may be sent to you by other shareholders. If you have previously returned another
proxy card, you can automatically revoke it by signing, dating
and returning the enclosed WHITE proxy card in the accompanying envelope. If you need assistance
or have any questions, please call Georgeson, which is assisting A. Schulman with the proxy
solicitation, at 877-668-1646.
In closing this letter, I want to express our thanks to our employees for their hard work and
diligence and thank you, our shareholders, for your loyalty and support as we continue to execute
our long-term strategic plan.
Sincerely,
Will
Holland
Lead Independent Director
A. Schulman
Contacts
Paul DeSantis
CFO and Treasurer of A. Schulman Inc.
330-666-3751
Nina Devlin/Giovanna Konicke
Brunswick Group
212-333-3810
About A. Schulman, Inc.
Headquartered in Akron, Ohio, A. Schulman is a leading international supplier of high-performance
plastic compounds and resins. These materials are used in a variety of consumer, industrial,
automotive and packaging applications. The Company employs about 2,500 people and has 17
manufacturing facilities in North America and Europe (including Asia). Revenues for the fiscal year
ended August 31, 2007, were $1.8 billion. Additional information about A. Schulman can be found at
http://www.aschulman.com.
Forward-Looking Statements
Certain statements in this release may constitute forward-looking statements within the
meaning of the Federal securities laws. These statements can be identified by the fact that they do
not relate strictly to historic or current facts. They use such words as anticipate, estimate,
expect, project, intend, plan, believe, and other words and terms of similar meaning in
connection with any discussion of future operating or financial performance. These forward-looking
statements are based on currently available information, but are subject to a variety of
uncertainties, unknown risks and other factors concerning the Companys operations and business
environment, which are difficult to predict and are beyond the control of the Company. Important
factors that could cause actual results to differ materially from those suggested by these
forward-looking statements, and that could adversely affect the Companys future financial
performance, include, but are not limited to, the following:
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Worldwide and regional economic, business and political conditions, including continuing
economic uncertainties in some or all of the Companys major product markets; |
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Fluctuations in the value of currencies in major areas where the Company operates,
including the U.S. dollar, euro, U.K. pound sterling, Canadian dollar, Mexican peso,
Chinese yuan and Indonesian rupiah; |
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Fluctuations in the prices of sources of energy or plastic resins and other raw
materials; |
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Changes in customer demand and requirements; |
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Escalation in the cost of providing employee health care; |
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The outcome of any legal claims known or unknown; and |
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The performance of the North American auto market. |
Additional risk factors that could affect the Companys performance are set forth in the Companys
Annual Report on Form 10-K. In addition, risks and uncertainties not presently known to the Company
or that it believes to be immaterial also may adversely affect the Company. Should any known or
unknown risks or uncertainties develop into actual events, or underlying assumptions prove
inaccurate, these developments could have material adverse effects on the Companys business,
financial condition and results of operations.
This release contains time-sensitive information that reflects managements best analysis only as
of the date of this release. A. Schulman does not undertake an obligation to publicly update or
revise any forward-looking statements to reflect new events, information or circumstances, or
otherwise. Further information concerning issues that could materially affect financial performance
related to forward-looking statements can be found in A. Schulmans periodic filings with the
Securities and Exchange Commission.