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Executives

Jennifer K. Beeman - Director of Corporate Communications & Investor Relations and Director of Corporate Communications and Investor Relations

Joseph M. Gingo - Chairman, Chief Executive Officer, President and Member of Executive Committee

Joseph J. Levanduski - Chief Financial Officer, Vice President and Treasurer

Analysts

Kevin Hocevar - Northcoast Research

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Dmitry Silversteyn - Longbow Research LLC

Summit Roshan - KeyBanc Capital Markets Inc., Research Division

Christopher W. Butler - Sidoti & Company, LLC

A. Schulman (SHLM) Q1 2013 Earnings Call January 4, 2013 10:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the A. Schulman Fiscal 2013 First Quarter Earnings Conference Call. My name is Shaquanna, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Jennifer Beeman. Please proceed, ma'am.

Jennifer K. Beeman

Thank you, Shaquanna. Good morning, and welcome to A. Schulman's First Quarter 2013 Conference Call. I am Jennifer Beeman, Director of Corporate Communications and Investor Relations for A. Schulman. By now you all should have received a copy of our press release, which was issued last night.

Joining me today is Joe Gingo, Chairman, President and Chief Executive Officer; and Joe Levanduski, Chief Financial Officer of A. Schulman.

Before we begin, I'd like to remind you that statements made during this conference call which are not historical facts may be considered forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied. In addition, this conference call contains time-sensitive information that reflects management's best analysis only as of the date of this live call. A. Schulman does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this call. For further information concerning issues that could materially affect financial performance related to forward-looking statements, please refer to A. Schulman's quarterly earnings releases and periodic filings with the Securities and Exchange Commission.

I'd also like to remind you that for purposes of this phone call, we use non-GAAP measures of net income excluding certain items or adjusted net income, as well as net income per diluted share excluding certain items. These financial measures are used by management to monitor and evaluate the ongoing performance of the company and to allocate resources. You can find a reconciliation of these non-GAAP measures to the nearest comparable GAAP results as an attachment to our first quarter earnings release.

Before we begin, you all may have noticed that the release we issued yesterday reflects a new format. As we talk with investors, we continually solicit feedback regarding our communications. Based on those comments, our intent in the release was to provide a simplified summary with a combination of tables and text followed by the more detailed financial table that we traditionally provide at the back of the release. Of course, we will still provide detailed information in our filings with the SEC. We hope you find the release easier to understand, and we welcome any feedback that you may have.

Now we'd like to begin with comments from Joe Gingo; then, Joe Levanduski will review our results in detail and we'll open up the call for your questions. With that, I'd like to turn the call over to Joe Gingo.

Joseph M. Gingo

Thank you, Jennifer, and happy New Year to all of you joining us today. During the fiscal 2013 first quarter, we experienced a difficult global economic environment yet still saw volume improvement. Our 2 most recent acquisitions, Elian and ECM, contributed as anticipated to our first quarter 2013 results. On a consolidated basis excluding acquisitions and foreign currency impact, volume increased 3% and sales improved by 4%.

I believe it's too early to determine if the volume improvements are sustainable, but we are definitely encouraged by what we saw in the quarter and appreciate the hard work of our teams. The first quarter of fiscal 2013 included a few highlights that I'd like to note. Similar to fiscal 2012, we continue to take actions to combat pressures from sluggish global economies. In Europe, we initiated further restructuring activities to align with market needs.

In September, we completed our acquisition of ECM Plastics, a leading plastics compounder located in Worcester, Massachusetts. ECM has expanded our North American capabilities in a number of markets, especially personal care and cosmetics. Their robust technical organization will enhance our ability to introduce new and innovative products. They have been a great addition to our team, and we look forward to their continued contribution.

In the U.S., we completed the sale of our Bellevue, Ohio facility in November. This marks the completion of our transformation away from legacy plants that primarily serve the commodity automotive market. Our focus, especially in the U.S., will be to continue to improve our product mix as we shift to niche and specialty products.

As a result of our prior restructuring activities in Australia, we've significantly improved the profitability of our Asian Pacific region. This region has the highest operating profit per pound, an increase of 17% over prior year.

During the first quarter, we introduced a global initiative to improve our return on invested capital. This initiative will enable all of our global associates to better understand the components of ROIC through web-based trainings and hands-on simulations. As some of you may recall, we used this successful approach a few years ago to improve our working capital. This ROIC program will allow our associates to drive increased returns through their daily activities. We look forward to updating you on our progress and ROIC improvements.

As we've mentioned last quarter, we continue to elevate our focus on marketing and issues including further understanding of our existing markets as well as adjacent markets. We are also upgrading our global strategic pricing tools to ensure we're obtaining maximum value for both our products and services.

In October, our board approved a 2.6% increase of our regular quarterly cash dividend. This action reflects our continued confidence in our ability to generate cash and our long-term growth prospects. It also represents our unbroken track record, going back when we went public in 1972, to consistently providing dividends to our shareholders. Additionally, the board declared early payment of the company's regular dividend to a payable to shareholders on December 31, 2012, in light of the fiscal cliff discussions.

Currently, we are seeing raw materials trend flat to slightly up. And going forward, if demand remains weak, we do not expect these patterns to drastically change during the first half of the calendar year.

Our strong balance sheet allows us to continue to seek bolt-on acquisitions that are within our core capabilities and fit our strategic goals. We've been successful thus far and believe we will continue to identify solid businesses that contribute quickly to our bottom line.

Controlling what we can control remains our mantra. While we anticipated that our 2013 first quarter financials would not be as strong as our exceptional first quarter of 2012, I am very pleased with our results and remain confident that we can achieve our guidance range of $2.14 to $2.19 per share for fiscal 2013. This would mark the fourth consecutive year of adjusted earnings per share growth for the company.

In conclusion, I am very proud that my team has been able to execute on our proven strategy to shift to higher-value products, implement difficult restructuring initiatives and successfully integrate bolt-on acquisitions.

Now I'd like to turn the call over to Joe, who will provide you with more detail.

Joseph J. Levanduski

Thanks, Joe, and I'd also like to wish you all a very happy New Year.

Turning to our fiscal first quarter results, net income attributable to A. Schulman for the quarter was $11.8 million, or $0.40 per diluted share on a GAAP basis, compared with $13.6 million or $0.46 per diluted share for the prior year period. Excluding noncash asset impairment charges, restructuring-related and acquisition-related costs, net income for the fiscal 2013 first quarter was $14.6 million or $0.50 per diluted share compared with $15.3 million or $0.52 per diluted share for the prior year period. The translation effect of foreign currencies negatively impacted net income for the quarter by approximately $0.02 per diluted share, while increased pension expense in Europe impacted net income by approximately $0.01 per diluted share.

Net sales for the quarter increased $23.3 million or 4% compared with the prior year period. As Joe mentioned, this improvement was the result of volume increases in all of our regions. Despite competitive pricing pressures and excluding foreign currency impact, our sales price per pound increased 2.2%.

Gross profit for the quarter, excluding certain items, was $71.3 million compared with $69.5 million a year ago. When the impact of foreign currency translation is excluded, gross profit increased by $3.9 million compared with last year's first quarter. Our acquisitions of Elian and ECM contributed approximately $3.1 million of incremental gross profit in the first quarter of 2013.

Additionally, we continue to benefit from prior restructuring initiatives in our ongoing commitment to control costs wherever possible. SG&A expenses, excluding certain items, increased by $3 million compared with the same period in the prior year. Excluding the impact of foreign currency, SG&A increased by $4.4 million. Our recent acquisitions added approximately $2.1 million of incremental SG&A expenses during the fiscal 2013 first quarter. The remaining increase of approximately $2.3 million was used to support our various strategic initiatives. These include initiatives such as our implementation of our global ERP project; a detailed review of our strategy in Asia; and our enhanced focus on marketing. Also impacting SG&A was an increase in incentive compensation and bad debt expense.

Operating income, excluding certain items, was $21.1 million for the first quarter of fiscal 2013, which was a $1.2 million decrease from the prior-year period. Foreign currency translation negatively impacted operating income by $700,000. The balance of the decline was attributable to SG&A.

Turning now to our first quarter results by business segment. In EMEA, net sales for the quarter were $351.5 million, relatively consistent with the prior year period. However, excluding negative impact of foreign currency translation of $16.5 million, net sales actually increased $15.1 million, which includes $9.6 million in incremental net sales from the Elian acquisition. Volume increased 1.5%, which included $2.9 million of incremental pounds sold from Elian. Excluding foreign currency translation, price per pound increased 2.7% compared with the prior year period, primarily due to the custom performance color and distribution services product families.

EMEA gross profit was $44.1 million, which was relatively unchanged from the same 3-month period last year. Foreign currency translation adversely impacted EMEA's gross profit by $2.1 million, which was offset by a positive contribution from Elian and the impact of prior restructuring efforts. Excluding the impact of foreign currency, gross profit actually increased by 4.4%. EMEA's operating income for the quarter was $16.1 million, a decrease of $3.1 million compared with the same period last year. The decrease in operating income was primarily due to a $2.8 million increase in SG&A, which was primarily due to incremental expenses from Elian and increased bad debt expense of roughly $600,000. This was partially offset by a favorable impact of $1.3 million from foreign currency translation.

Operating income per pound decreased 16.4%, while foreign currency translation adversely impacted operating income by $800,000.

In the Americas, overall volume increased 13.8% across all product families. The Americas experienced an increase in price per pound in the custom performance color, masterbatch solutions and specialty powders products families. Incremental net sales from our ECM acquisition were $8.7 million during the quarter. Foreign currency translation negatively impacted net sales by $900,000. Excluding the foreign currency impact, price per pound increased 3.3%.

Gross profit for the Americas was $21 million for the first quarter, an increase of $1.1 million compared with last year. The increase in gross profit of 5.6% was primarily in the engineered plastics product family. Gross profit was favorably impacted by increased net sales, which was partially offset by increased manufacturing employee health care cost.

Operating income was $7.8 million compared with $6.1 million last year. Operating income increased primarily due to the increase in gross profit and a $600,000 decrease in SG&A. The decline in SG&A expense was primarily due to successful restructuring initiatives and our cost control efforts. Operating income per pound increased 14%, driven primarily by the engineered plastics product family.

Net sales for APAC were $39.5 million, an increase of $3.1 million compared with the same prior year period. During the quarter, we saw increased volume in engineered plastics and specialty powders product families as well as the favorable impact of foreign currency translation. Additionally, excluding foreign currency translation, the selling price per pound increased 3.8%. Gross profit for APAC was $6.2 million, an increase of 15.5% compared with last year, and was primarily due to continued focus on improving our product mix. APAC's operating income was $3.1 million compared with $2.5 million last year. The increase in profitability was principally due to the increase in gross profit and partially offset by a slight increase of $300,000 in SG&A. Operating per pound increased 17.4%.

Now let's turn to our cash position and balance sheet. Net cash provided from operations was $10.3 million, and net cash used in operations was $21.3 million for the 3 months ended November 30, 2012 and 2011 respectively. The $31.6 million improvement in cash provided by operations was primarily due to improved working capital management, mostly in the area of accounts payable. The company's cash and cash equivalents decreased $16.9 million from August 31, 2012. This increase was driven primarily by the acquisition of ECM for $36.4 million in cash consideration, capital expenditures of $4.8 million and dividend payments of $5.8 million. Combined, these 3 uses of cash and cash equivalents totaled $47 million and were partially offset by the improved net cash provided from operations, borrowings on the company's revolving credit facilities of $9.1 million and proceeds of $7.7 million primarily from the sale of the company's Bellevue, Ohio facility.

Working capital was 61 days at November 30, 2012, compared with 71 days at November 30, 2011. The improvement in principle -- the improvement was principally due to better inventory management.

Our net availability under our credit lines is approximately $216 million. Our financial strength and flexibility continues to allow us to pursue strategic acquisition targets. The company's effective tax rate on a GAAP basis for the 3 months ended November 30, 2012, was 22.1% compared with 16% for the prior-year period. The change in the GAAP effective tax rate compared with a year ago was driven primarily by an adjustment of the Italian valuation allowance. On a non-GAAP basis, the effective tax rate for both periods was approximately 22%.

During the first quarter of fiscal 2013, we increased the quarterly cash dividend by approximately 2.6% to $0.195 per diluted share. This increase reflects the board's continued commitment to provide value to shareholders, along with confidence in the company's growth prospects and its ability to continue to generate cash. The company also repurchased roughly 20,000 shares of common stock during the first quarter at an average price of $23.83 per share.

In terms of our guidance, as Joe previously indicated, we expect fiscal 2013 net income on a non-GAAP basis to range from $2.14 to $2.19 per diluted share. This range overcomes an expected increase of pension expense in fiscal 2013 related primarily to our EMEA operations, which will negatively impact our earnings by roughly $0.05 per share.

That concludes my prepared remarks. Now I'd like to open the call for questions.

Jennifer K. Beeman

Thank you, Joe. Can we open up the call now at this point?

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Kevin Hocevar representing Northcoast Research.

Kevin Hocevar - Northcoast Research

I wanted to -- I was wondering, how did the demand progress throughout the quarter, and what are you seeing now at the beginning of the fiscal second quarter?

Joseph M. Gingo

Well, I think that demand was generally up modestly in all 3 months. I don't think there was any specific trend that we saw. Obviously, December in Western Europe and the United States are not the greatest months that you're going to have. So I don't think we can look at December demand and say where things are. As we look into January and February -- but I think we are continuing, at this point, to reflect modest increases in demand.

Kevin Hocevar - Northcoast Research

Okay. And which end markets would you say are performing well, and which might be underperforming at this time?

Joseph M. Gingo

Well for us, packaging continues to perform very well. Our masterbatch businesses, the -- also, I think our niche automotive continues to do well. I think the area that we're seeing a little bit of problems with is in the roto-compounding area. That's a little softer than we saw last year. I'd say those are about the big 3 things. Joe, would you have anything to add to that?

Joseph J. Levanduski

No, I think you covered that.

Kevin Hocevar - Northcoast Research

Okay. And in terms of for America, the gross profit per pound was down a little bit from last year on a year-over-year basis. And I was wondering, I know you mentioned that there was some increased manufacturing and employee health costs -- health care cost, but I know you exited the legacy assets. You had really strong volume. You brought on the high-margin ECM business. So I was just wondering why that was down on a per-pound basis. Is it all because of those additional costs that Joe mentioned earlier in the call, or is there some other reason as well?

Joseph J. Levanduski

No, I think it's primarily the reasons that we pointed out in the release, Kevin.

Kevin Hocevar - Northcoast Research

Okay. And then the final question. For Elian, you expected to have $2.5 million in synergies by the end of this year. So I was just wondering, how is that progressing compared to your plan, and do you still expect to achieve those synergies?

Joseph J. Levanduski

Yes. I think the Elian acquisition has been operating as expected, and I think the synergies that we reported on are being achieved. I think there's -- there was a combination of different areas that we were going to achieve those synergies: Sourcing and also some cross-selling opportunities. Some of that is obviously ahead of schedule and some are being worked on as we speak, but we still feel confident that we'll achieve those goals.

Operator

Your next question comes from the line of Rosemarie Morbelli representing Gabelli & Company.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Could you give us a better feel for the bad debt level, where it is coming from? I mean, it is in EMEA. Have you seen any potential bad debt to be added in North America or Asia Pacific? Could you -- and do you think that this is just about it for Europe?

Joseph J. Levanduski

Well, you can never say that in absolute terms that, that's it. But I think our receivables have always been of very high quality given the nature of our customer base. I think, in situations like in Europe, it was a unique incidence of a situation with a customer that we tried to work with them. We'll continue to work with it, so there's still a possibility of us getting collected the bad debt. But obviously for accounting purposes, we treat that as a reserve. So I don't think there's anything out there that is overly concerning with the quality of our receivables. I think it's still of very high quality.

Joseph M. Gingo

Rosemarie, I'd add that at this point in time, there's nothing to indicate to us, in any region, that it's going to get worse. As Joe said, nothing is ever for sure. But there's at least no signs right now that it looks to get worse than it is today.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Okay, I appreciate that. And Joe, could you talk about whether or not you have seen any change in order pattern? I mean, if my memory serves me right, the last quarter, you saw the window of visibility, so to speak, come down versus the previous quarter. What are you seeing now?

Joseph M. Gingo

Well, actually, I sort of answered that previously. We're out there at about a 2-month level. My people were talking to me about January and February now. So I'd have to say there's, again, a degree of confidence in our customer base. A little more of a surety of what's happening in their order patterns.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Did you see any increase in the amount of time plants were shut down in Europe versus expectations and versus last year? I know it's probably the holidays...

Joseph M. Gingo

I think they were a little better than last year, Rosemarie, and they were basically as planned. We didn't see an increase in shutdown over what was expected, at least in our customer base.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Right, right. So when you look at Europe, do you think they are kind of bumping along the bottom, at least as far as your markets are concerned, or are you still seeing -- well, the potential of an additional decline?

Joseph M. Gingo

Well, I was very encouraged, as I said, by the results that we got out of Europe, because not only the acquisition of Elian but our traditional markets improved, as we announced in our press release. Right now, it seems fairly level to me and probably equal upside, equal downside. And it's probably the most encouraged I've been by Europe in over a year. Of course, Rosemarie, you know the economic world. So it could all change tomorrow afternoon if Greece leaves the euro. But right now I think we're seeing Europe as steady as we've seen it since the crisis started.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

All right, well, we know that the media loves all of those very down stories. So I thought that by talking to someone who actually is operating in some of those markets we could get a better feel.

Joseph M. Gingo

Yes, but you do have to remember, in all fairness, I'm really not very involved in Southern Europe. Most of my markets are in Northern Europe, although we do have the plant in Italy and it's doing very well. Our plant in Northern Italy is doing very well.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

And Germany, I mean, it was slowing down. Have they stopped doing that -- going through that trend, then, based on what you just said?

Joseph M. Gingo

I think it's fairly steady. I mean, right now, I would say that almost all of our markets in Europe, including automotive, are steady. Again, you read a lot about the downturn in the European market. Well, we're very fortunate in that most of our business is actually with German automotive customers. And they are still exporting. And they're still selling. The real problems are occurring in the Italian and the French markets where I guess I could say to you, fortunately, I don't have much position.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Are you -- when you say the Italian and French markets, are you referring to the automotive industry in particular?

Joseph M. Gingo

Yes. Yes, absolutely, Rosemarie. There -- I mean, if you look at the automotive market in Europe, there's obviously overcapacity, and there's going to be downsizing in that market. And I suspect that most of it will come in the 2 countries that I've just said to you.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Okay. And one last question, if I may, still on Europe. Regarding the euro, we seem to be at par with where the translation was last year. Is that going to give you a boost there?

Joseph M. Gingo

Well, I think what it's going to do for us is our comparables, if it stays where it is, are going to be better as we go through the year. The worst quarter for us, obviously, was the first quarter, where we had an $0.08 differential. And at least if it would stay at this level, we're going to be fairly comparable for the rest of the year, which will make our comparisons a little easier to achieve than the first quarter.

Joseph J. Levanduski

Yes, that's exactly right, Rosemarie. And as you recall, in the fourth quarter of our last fiscal year's call, we talked about the fact that the comparability was going to be the toughest in the first quarter because of the exchange rate.

Operator

Your next question comes from the line of Dmitry Silversteyn representing Longbow Research.

Dmitry Silversteyn - Longbow Research LLC

A lot of my questions have been answered, but just a couple of follow-ups, perhaps. On the raw material side, you talked about raw materials being flat to up, I believe. And I think you meant that on a year-over-year basis. Can you talk about which raw materials are giving you still the inflationary pressures? Since it seems like at least kind of the basic polys, polyethylene, polypropylene, have been easing a little bit. And can you comment on your raw material behavior sequentially quarter-to-quarter?

Joseph M. Gingo

Okay, Dmitry, what I actually said was flat to slightly up. And what we're seeing is this. Look, and you know this as well as I do. The resin manufacturers are trying like mad to get a price increase in. And I don't know how successful they will, but demand still governs the equation. If things stay flat, they're probably going to get a little bit, but they're not going to get what they think. This is my opinion, obviously. I think in the other markets like flame retardants, additives, things of that sort, I think if anything we'll see downward pressure on pricing. And the reason I believe that is because they go to a lot more markets. It's just not going into plastics. Flame retardants goes so many different places, for example; pigments goes so many different places. And as long as the overall markets are down, I don't see how those suppliers are going to be able to get any kind of increase. So if I expect pressure going into the new year, I think it's going to be coming out of my resin suppliers, and I don't think it's going to be huge. If anything, I think it will be slightly up. And I think that's about what we're looking at over the next 6 months, Dmitry. Unless demand would really pick up, which won't be that bad, that's what I'm seeing right now.

Dmitry Silversteyn - Longbow Research LLC

Got it. That's helpful, Joe, thank you. Obviously, with raw materials being flat to up and you continuing to upmix your business, it's not surprising to see your pricing being up a little bit year-over-year: low single digits, looks like. Do you expect the pricing trend to continue or if your -- if your raw materials flatten out or perhaps decline, is it getting more competitive out there with the lack of raw material pressure where people are, perhaps, willing to take up business at a lower price, a lower margin? Can you talk a little bit about the pricing environment that you're seeing?

Joseph M. Gingo

Dmitry, that's an excellent question, because I've been thinking about it a lot. And I think as we go forward, we're going to see more pricing pressure. I think there's 2 reasons for this. Demand is flat and this is particularly -- let's use Europe as an example, okay? A lot of the people in the Southern Europe really are hurting. They're going to try to put pricing pressure on us across our Northern Europe atmosphere. Now we'll hold to a great extent because of proximity and service and all those things, but we're going to see some pricing pressure. I think the ability to raise prices in this flat market is going to be very difficult. I think the way we're going to get any price increase is our mix. Improving our mix is going to be how we're going to do that, Dmitry. We're not going to get it through being able to use inflationary raw material pressure to go to our customers and get a price increase. I think it's going to be very difficult in this flat environment.

Dmitry Silversteyn - Longbow Research LLC

That's very helpful, Joe, I appreciate the color. Switching to volumes, you guys had a pretty good volume performance year over year in every region, especially, obviously, Americas was up 30%. The economy really hasn't picked up all that much, certainly not in Europe. We're talking about kind of bouncing along the bottom here from all the commentary I'm hearing. Is it share gains? Is it new products, obviously stripping out the acquisition contribution? I'm just wondering what the source of your volume growth in what I would consider to be a weak- to no-growth environment -- where is it coming from other than sort of execution and share gains?

Joseph M. Gingo

Well I think it's different per region. I think Europe, we are -- we have to be seeing some share gain. There's no question in my mind that we're seeing some. Of course that's modest, but we're seeing some. I think Asia is still growing because we're primarily 100% niche. And that niche market in Asia is still solid. We just added a line in China, Dmitry. We're supposed to be up next quarter in India. We've converted a line in Malaysia. Pretty much, Dmitry, I'd have to tell you, we're sold out. So then you come to the U.S.A. and the thing there, Dmitry, is we just never participated in the market. And now that we have masterbatch plants and now that we have EP plants, we are taking share, but it's off of a very, very low base if you consider like comparing the U.S.A. to Europe. And in addition, because of the demand we've seen, we've increased our capacity in Mexico. So it's a little different in each region, but I think in the U.S.A., we have the most upside short-term in our company even in this economic environment in the U.S.A. because of where we were, Dmitry. I mean, we are now in the product lines that we historically have been in Europe; historically have been in Latin America; actually started in, in Asia. And now we are positioned in those product lines in the U.S., and I think you're going to see continued growth. Primarily, our big growth is going to come in the U.S.A.

Dmitry Silversteyn - Longbow Research LLC

Got it, got it, Joe. And then one final question on the Asia Pacific business. You talked about the pounds per -- or profit per pound being the highest, I believe, in your company. Is that a function of mix of products that you're selling in Asia Pacific, or is that a level that other businesses in other regions can aspire to? Can you talk a little bit about why Asia leads your profitability metrics?

Joseph J. Levanduski

Yes, I think it has a lot to do with the mix in the product families. There's less distribution business in the Asia Pacific region, and we've really focused to develop the business model in Asia to be focused on the high-end niche business from the get-go. So their mix is very solid.

Joseph M. Gingo

Now Dmitry, but as Joe mentioned, in particular, one of our SG&A initiatives is an in-depth study of Asia. As we grow Asia, I think we are going to have to go a little bit downstream, and I think their margins will probably -- price per pound, et cetera, more approach Europe and the States versus the other way around. Because right now, we are fundamentally just at the top end of the niche in masterbatch and in EP and really have not even broad market things. And -- but the good thing, of course, Dmitry, as I said, is we're sold out. But if we really want to grow our volume, I think, in Asia is we're going to have to go more into broad market. And I think that's actually going to put pressure on our price per pound. I don't think that we're going to be able to sustain that, although, we will increase our profits.

Dmitry Silversteyn - Longbow Research LLC

Right, right. It's okay, I got it. So this is just the way you penetrate the market. You start from the top so your margins are high and then, as you build volume, you go downmarket. I understand.

Joseph M. Gingo

That's right, Dmitry.

Operator

Your next question comes from the line of Summit Roshan representing KeyBanc.

Summit Roshan - KeyBanc Capital Markets Inc., Research Division

Most of my questions have been answered here. So just a point of clarification, I guess. As a result of the sale of the Bellevue plant, were there any sales that were lost in the quarter?

Joseph J. Levanduski

No, there really wasn't. The transaction concluded at the end of the fiscal year. And so there really wasn't any lost revenue of any substance.

Operator

[Operator Instructions] Your next question comes from the line of Christopher Butler representing Sidoti & Company.

Christopher W. Butler - Sidoti & Company, LLC

Just staying on the subject of Asia, it definitely looks like you've turned the corner there. Could you remind us or quantify in some way what the headwind was that you faced out of the Australia portion of that in the rotomolding?

Joseph M. Gingo

Yes, we have taken -- give us a second, okay, Chris?

Joseph J. Levanduski

The Australia restructuring plant really had -- we had forecasted about $2 million in savings coming out of the restructuring initiative, and that's going back a ways. It's all been kind of in our numbers for some time now. So as we're looking at it, we're at kind of the current run rate with all the Australia restructuring behind us.

Christopher W. Butler - Sidoti & Company, LLC

The -- and I guess, if we're looking at rotomolding overall, you had mentioned some softness there. Is that directly attributed to Australia, or is that more global in nature?

Joseph M. Gingo

It's actually more global in nature. We've seen it in Europe and we've seen it in the Americas as well. And -- but at the opposite end of that, especially powders, which is some of the more unique products, has been very strong for us. These are the products that go into a lot of other markets.

Christopher W. Butler - Sidoti & Company, LLC

And just finally, uses of cash as we enter a new year here, you did buy back a small number of shares. I know you've talked to acquisitions and I know we've got some changes to tax rate, et cetera. Could you talk about how you view uses of cash this year?

Joseph J. Levanduski

We view it the same way as we've been viewing it for the last several years. We're going to be very strategic, very opportunistic. We continue to support our dividend program with the recent increase from the past year. I think that continues a long track record, so that is obviously something that we will continue to support. The share repurchase program, again, is going to be an opportunistic one. We took a few shares off, but it's very small in nature at this point. As far as the acquisition side, we continue to remain very active. The pipeline remains very active beyond the fiscal year end, so we continue to explore options and opportunities. And so we're excited about the potential there, but there's nothing -- everything is early in the discussion at this point. And then lastly, the capital spending -- maybe not lastly, but capital spending and marketing initiatives. The capital spending this first quarter is just under $5 million. Our expectation is that it's going to be around $35 million for the full year. That was the guidance that we put out, and we still feel comfortable with that range for the balance of the year. The marketing initiatives we continue to support, and some of the redeployment that we've talked about in terms of our SG&A savings. As you know, we managed that very tightly last year, and as we go into this year, we continue to support the marketing as well those global -- the ERP system that we're developing as well.

Christopher W. Butler - Sidoti & Company, LLC

And just one more on that note. As we look at the added cost in this quarter, are any of those not going to reoccur or end relatively soon? You'd mentioned sort of a strategic review in Asia, those consulting costs, for instance, that might stop at some point.

Joseph J. Levanduski

Well, some of these projects will continue on into the second quarter and beyond, especially with the global ERP system. The strategy project is still ongoing. Eventually, that will subside, but for the near term, it will still be an SG&A expenditure for us. We -- you have to remember, our SG&A is roughly, average, around 9% of our revenue. It's still around that range in the first quarter, even with the increased or redeployed spending that we have in some of these strategic initiatives. So we've never felt that we are out of control in our SG&A spending. What we tried to do is reduce the cost that were less value-added and increase the spending on more value-added projects.

Operator

You have a follow-up question from the line of Rosemarie Morbelli.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

I was wondering if you could bring us up to date as to what your new Chief of Marketing has discovered in terms of new markets that you have not been getting -- going into at the moment, or some that you should exit? Could you give us a feel as to what has transpired so far?

Joseph M. Gingo

Yes, actually, we've made quite a bit of progress in 2 areas, Rosemarie. The number one area that we've made some progress in is actually the identification of the markets we're in. And shortly, I hope to be in a position where we're going to be sharing that data with you. We've done a first cut for ourselves, but we want to refine it and make sure that, before we put it out, that we're very comfortable with it. Although, I would have to say to you, I'm 80% confident of what I've seen personally. So we are defining those markets. The next step in that process is we're defining the profitability of those markets so that we understand a little bit better of where we are making our profits and which would be the more attractive areas to look for, not only in terms of new products, but potentially acquisitions. So that's the process we're in right now, and we're well along in that. I'm very comfortable that in the short term, we're going to be able to share with people what markets that we are in and where we expect to be going. Now we've also, and I alluded to it, we've just started a pricing initiative. And I'm very excited about this. This is an initiative that will be looking at really making sure that we are getting the right price for not only the products we supply, but the services we supply. And we've engaged a company that's been very involved with us over the years and we are working with them. And we've also recently hired someone with a great deal of experience in pricing processes. So both of those initiatives, led by our Chief Marketing Officer and with the cooperation of our 3 COOs, really are progressing on a schedule that I'm pleased with, Rosemarie.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Are you being -- are you able to see where certain areas are because of your ERP system, or is that not helping yet because it is not installed on a global...

Joseph M. Gingo

The ERP -- no, the ERP system, unfortunately, one of the reasons it's taking time, we have 12 ERP systems. So to get this data, we actually have to go into all of these individual ERP systems that -- to pool the data. And that's why I said I have 80% confidence, my people would like to have a little more confidence than that. And that's why it's difficult also to get the profit per market. Same reason, again, having to go through 12 systems to get there. But at the same time, as I said, 80% confidence can give you a lot of decision-making ability. So I'm not upset by that. We won't be where we need to be until we have the global ERP system, Rosemarie. And that's really 3 to 5 years off before it would be implemented across the board everywhere in the company. Now I'm more 3, and then my chief IT officer is more 5.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Wow, I was thinking that 3 was quite a lot myself.

Operator

At this time, I would like to turn the call back over to Ms. Jennifer Beeman for closing remarks.

Jennifer K. Beeman

Okay, well, if we don't have any further questions, I thank you for joining us today, and that concludes our call.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.

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