Results of Operations
Net sales for the three months and nine months ended May 31, 2009 declined significantly as compared with last year's same period's sales. The decline in sales, excluding the translation effect, was primarily a result of the deterioration of the global markets and demand. The Company noted some improvement in volume and profitability in the third quarter of fiscal 2009 compared with the second quarter of fiscal 2009. In addition, the effect of the strategic decisions made in fiscal 2008 to reduce exposure to some unprofitable markets, such as North American automotive and North American tolling, through plant closures and capacity reductions in North America reduced sales. A comparison of consolidated sales by segment for the three and nine months ended May 31, 2009 and 2008 is as follows:

                                                   Total increase                                              % Due to
             Three months ended May 31,              (decrease)            % Due to        % Due to         price/ product
Sales           2009               2008            $             %         tonnage        translation            mix
                                                    (In thousands, except for %'s)
Europe     $      220,337       $  379,163     $ (158,826 )     -41.9 %        -20.8 %           -10.9 %              -10.2 %
NAMB               26,922           33,202         (6,280 )     -18.9 %        -20.4 %           -14.6 %               16.1 %
NAEP               26,137           52,009        (25,872 )     -49.7 %        -54.5 %            -3.3 %                8.1 %
NADS               11,443           34,050        (22,607 )     -66.4 %        -57.4 %            -0.1 %               -8.9 %
Asia               12,805           13,244           (439 )      -3.3 %          1.3 %             1.4 %               -6.0 %
Invision               55               99            (44 )     -44.4 %           NM                NM                   NM

           $      297,699       $  511,767     $ (214,068 )     -41.8 %        -26.9 %            -9.3 %               -5.6 %




                                                  Total increase                                              % Due to
             Nine months ended May 31,              (decrease)            % Due to        % Due to         price/ product
Sales          2009              2008             $             %         tonnage        translation            mix
                                                   (In thousands, except for %'s)
Europe     $    699,829       $ 1,089,547     $ (389,718 )     -35.8 %        -21.8 %            -8.2 %               -5.8 %
NAMB             78,212           100,078        (21,866 )     -21.8 %        -26.8 %           -10.7 %               15.7 %
NAEP             95,783           164,665        (68,882 )     -41.8 %        -56.4 %            -3.0 %               17.6 %
NADS             53,798            97,652        (43,854 )     -44.9 %        -41.7 %            -0.3 %               -2.9 %
Asia             30,987            35,900         (4,913 )     -13.7 %        -19.5 %             1.9 %                3.9 %
Invision            183               310           (127 )     -41.0 %           NM                NM                   NM

           $    958,792       $ 1,488,152     $ (529,360 )     -35.6 %        -28.1 %            -7.1 %               -0.4 %

NM=Not meaningful.
The two largest markets served by the Company are the packaging and automotive markets. Other markets include appliances, construction, medical, consumer products, electrical/electronics, office equipment and agriculture. The approximate percentage of net consolidated sales by market for the three and nine months ended May 31, 2009 and 2008 are as follows:

                     Three months ended May 31,             Nine months ended May 31,
                      2009                 2008             2009                 2008

     Packaging              46 %                 37 %             43 %                 37 %
     Automotive             12 %                 15 %             12 %                 15 %
     Other                  42 %                 48 %             45 %                 48 %

                           100 %                100 %            100 %                100 %

The Company's sales to the automotive market continue to decline as a percent of total sales reflecting management's objective to reduce its exposure to this market as well as a significant market decline.

The majority of the Company's sales for the three and nine months ended May 31, 2009 and 2008 can be classified into five primary product families. The amount and percentage of consolidated sales for these product families are as follows:

                                                      Three months ended
        Product Family                       May 31, 2009            May 31, 2008
                                                (In thousands, except for %'s)
        Color and additive concentrates   $ 145,065        49 %   $ 186,782        36 %
        Polyolefins                          70,846        24       169,392        33
        Engineered compounds                 60,350        20       108,915        21
        Polyvinyl chloride (PVC)              7,967         3        15,373         3
        Tolling                               4,081         1         4,003         1
        Other                                 9,390         3        27,302         6

                                          $ 297,699       100 %   $ 511,767       100 %




                                                       Nine months ended
       Product Family                       May 31, 2009             May 31, 2008
                                                (In thousands, except for %'s)
       Color and additive concentrates   $ 413,442        43 %   $   532,778        36 %
       Polyolefins                         270,513        28         492,766        33
       Engineered compounds                199,352        21         317,601        21
       Polyvinyl chloride (PVC)             28,814         3          43,994         3
       Tolling                              10,543         1          16,178         1
       Other                                36,128         4          84,835         6

                                         $ 958,792       100 %   $ 1,488,152       100 %

A comparison of gross profit dollars and percentages by segment for the three and nine months ended May 31, 2009 and 2008 is as follows:

                           Three months ended May 31,           Increase (decrease)
                            2009                2008               $              %
                                        (In thousands, except for %'s)
       Gross profit $
       Europe           $      38,634       $      50,808     $    (12,174 )     (24.0 )%
       NAMB                     2,167               2,299             (132 )      (5.7 )
       NAEP                     1,540               3,340           (1,800 )     (53.9 )
       NADS                     1,634               2,902           (1,268 )     (43.7 )
       Asia                     2,558               1,657              901        54.4
       Invision                  (796 )            (1,145 )            349        30.5

       Consolidated     $      45,737       $      59,861     $    (14,124 )     (23.6 )%


       Gross profit %
       Europe                    17.5 %              13.4 %
       NAMB                       8.0 %               6.9 %
       NAEP                       5.9 %               6.4 %
       NADS                      14.3 %               8.5 %
       Asia                      20.0 %              12.5 %
       Invision                     -                   -
       Consolidated              15.4 %              11.7 %

                           Nine months ended May 31,          Increase (decrease)
                             2009               2008             $              %
                                       (In thousands, except for %'s)
        Gross profit $
        Europe           $      99,582       $  143,230     $    (43,648 )     (30.5 )%
        NAMB                     4,687            9,988           (5,301 )     (53.1 )
        NAEP                     4,869           10,610           (5,741 )     (54.1 )
        NADS                     4,779            7,126           (2,347 )     (32.9 )
        Asia                     3,891            3,796               95         2.5
        Invision                (2,584 )         (3,912 )          1,328        33.9

        Consolidated     $     115,224       $  170,838     $    (55,614 )     (32.6 )%


        Gross profit %
        Europe                    14.2 %           13.1 %
        NAMB                       6.0 %           10.0 %
        NAEP                       5.1 %            6.4 %
        NADS                       8.9 %            7.3 %
        Asia                      12.6 %           10.6 %
        Invision                     -                -
        Consolidated              12.0 %           11.5 %

The gross profit percentages for Europe for the three months ended May 31, 2009 increased to 17.5% compared with 13.4% for the same period in the prior year. For the nine months ended May 31, 2009, the gross profit percentage was 14.2% compared with 13.1% for the same period prior year. The Company was able to maintain gross profit percentage in the Europe segment in the third quarter of fiscal 2009 primarily through favorable product mix and cost reduction programs. The Company was also encouraged by these results considering they were achieved during a period of significant decline in demand. In addition, European gross profits were negatively impacted by foreign currency translation losses of $6.3 million and $12.0 million for the three and nine months ended May 31, 2009, respectively. The Company implemented measures to reduce fixed manufacturing costs by temporarily reducing capacity and headcount during the second quarter of fiscal 2009 and scheduling some manufacturing facilities on a four-day work week as necessary.
The gross profit dollars for the NAMB business have declined $0.1 million and $5.3 million, or 5.7% and 53.1%, for the three and nine months ended May 31, 2009, respectively, compared with the same periods last year. The decrease in gross profit dollars for NAMB is primarily the result of demand declines. In addition, the effect of foreign currency translation losses decreased NAMB gross profit by $1.0 million and $1.9 million for the three and nine months ended May 31, 2009, respectively. For the three months ended May 31, 2009, the NAMB gross profit percentage increased to 8.0% compared with 6.9% for the same period in the prior year. The gross profit percentage for the nine-month period ended May 31, 2009 declined to 6.0% from 10.0% for the same period in the prior year. The Company was not able to reduce fixed costs as quickly as the decline in demand, which negatively impacted the gross profit primarily in the second quarter of fiscal 2009. The gross profit for NAMB also includes approximately $0.9 million for the nine months ended May 31, 2009 of start-up costs without sales related to the Company's new masterbatch facility in Akron, Ohio primarily in the first six months of fiscal 2009.

The gross profit dollars for the NAEP business have declined $1.8 million and $5.7 million, or 53.9% and 54.1%, for the three and nine months ended May 31, 2009, respectively, compared with the same periods last year. A portion of this decline was planned as a result of the restructuring announced in fiscal 2008 which included the shutdown the St. Thomas, Ontario, Canada facility and the sale of the Orange, Texas facility. The decline in gross profit dollars and percentages for NAEP are primarily related to significant declines in demand as well as the planned tonnage declines. The lower demand resulted in the inability to absorb the majority of the overhead costs. In order to offset the effects of weakening markets, in December 2008, the Company announced further restructuring efforts that plan to reduce capacity and headcount in this segment. These restructuring plans included the closing of a production line in this segment which resulted in $0.7 million and $1.2 million for the three and nine months ended May 31, 2009, respectively, of accelerated depreciation which is included in cost of sales. This contributed to the decline in gross profit for NAEP. The gross profit dollars for the NADS business have declined $1.3 million and $2.3 million, or 43.7% and 32.9%, for the three and nine months ended May 31, 2009, respectively, compared with the same periods last year. The NADS segment gross profit dollars declined, however, it was able to increase margins in the weak market primarily as a result of favorable product mix.
The Company's Asia segment gross profit dollars increased 54.4% and 2.5% for the three and nine months ended May 31, 2009, respectively. The increase in gross profit dollars and percentage is primarily a result of reduced manufacturing costs and improved supply chain management. The Asia segment sells primarily to the packaging market.
The Invision gross profit loss is due to the start-up nature of this business line. The Company reduced spending on Invision as it refocused the business to non-automotive markets and considered strategic alternatives for the segment. A comparison of capacity utilization levels for the three months ended May 31, 2009 and 2008 is as follows:

                     Three months ended May 31,             Nine months ended May 31,
                     2009                   2008            2009                2008
     Europe                81 %                   88 %           73 %                  92 %
     NAMB                  55 %                   94 %           62 %                 102 %
     NAEP                  50 %                   75 %           61 %                  75 %
     Asia                  73 %                   73 %           54 %                  67 %
     Worldwide             73 %                   85 %           69 %                  87 %

Europe capacity utilization declined for the three and nine months ended May 31, 2009, compared with the same periods in the prior year primarily as a result of the significant global economic slowdown and the Company's working capital initiatives to reduce inventory. The volumes were especially low during the second quarter of fiscal 2009 as some customers shutdown plants for extended periods of time.
The capacity utilization for NAMB declined significantly for the three and nine months ended May 31, 2009 compared with the same periods in the prior year due to the weak North America marketplace. In addition, the start-up of the Akron, Ohio plant in the second quarter of fiscal 2009 and efforts to reduce inventory have impacted the utilization of the plants. Capacity utilization for the NAEP segment decreased for the quarter and year-to-date period as a result of the weak marketplace. However, the restructuring efforts announced in fiscal 2008 and fiscal 2009 to close the Company's St. Thomas, Ontario, Canada facility, the sale of the Company's Orange, Texas facility and a line shutdown in the Bellevue, Ohio facility helped mitigate the decline. As a result of the reductions, capacity in the North America segments declined from approximately 293.3 million pounds for the nine months ended May 31, 2008 to approximately 167.6 million pounds for the nine months ended May 31, 2009.
The Company's Asia segment is experiencing lower capacity utilization for the year-to-date period as a result of the weakened global markets and the initiatives to reduce inventory.
The Company's overall worldwide utilization declined compared with the prior year due to a dramatic decrease in demand resulting from the challenging marketplace. Worldwide capacity utilization of 73% for the third quarter of fiscal 2009 was an improvement from the second quarter of fiscal 2009 utilization of 59% as the Company has realized some increase in demand. The capacity utilization figures exclude production for the Invision product as this business was in a start-up phase. Capacity utilization is calculated by dividing actual production pounds by practical capacity at each plant.

The changes in selling, general and administrative expenses for the third quarter of fiscal 2009 compared with the same period in the prior year are summarized as follows:

                                                                    Three months ended May 31, 2009
                                                         $ Increase (decrease)           % Increase (decrease)
                                                                    (In thousands, except for %'s)
Total change in selling, general and administrative
expenses                                                $                (7,608 )                         (18.8 )%
Less the effect of foreign currency translation                          (4,102 )                         (10.1 )

Total change in selling, general and administrative
expenses, excluding the effect of foreign currency
translation                                             $                (3,506 )                          (8.7 )%

Selling, general and administrative expenses for the three months ended May 31, 2009 declined $3.5 million, excluding the effect of foreign currency exchange, compared with the same period last fiscal year. This was partially attributable to a decline of $1.2 million in stock-based compensation costs, primarily driven by a decline in the Company's common stock price and a change in the estimated forfeiture rate. The decline was also attributable to a reduction of the Company's qualified retirement plan costs as well as various cost cutting measures initiated in fiscal 2008 and 2009 including headcount reductions, a reduction in the retiree health care coverage and changes in the employee health care programs. These cost saving initiatives were partially offset by $1.4 million of incremental costs related to the consolidation of back-office operations to the Company's shared service center in Europe.
The changes in selling, general and administrative expenses for the nine months ended May 31, 2009 compared with the same period in the prior year are summarized as follows:

                                                                   Nine months ended May 31, 2009
                                                         $ Increase (decrease)         % Increase (decrease)
                                                                   (In thousands, except for %'s)
Total change in selling, general and administrative
expenses                                                $               (20,810 )                       (16.5 )%
Less the effect of foreign currency translation                          (8,965 )                        (7.1 )

Total change in selling, general and administrative
expenses, excluding the effect of foreign currency
translation                                             $               (11,845 )                        (9.4 )%

Selling, general and administrative expenses for the nine months ended May 31, 2009 declined $11.8 million, excluding the effect of foreign currency exchange, compared with the same period last fiscal year. The nine month ended May 31, 2008 included CEO transition costs of $3.6 million. Excluding the CEO transition costs from fiscal 2008 and the effect of foreign currency translation, selling, general and administrative expenses declined $8.2 million. Similar to the three month period discussed above, this was partially attributable to the decline in stock-based compensation costs of $3.7 million, primarily driven by a decline in the Company's common stock price, and cost cutting measures initiated in fiscal 2008 and fiscal 2009 including headcount reductions, the elimination of the Company airplane, a reduction in the retiree health care coverage and changes in the employee health care programs. Costs are generally lower as a result of restructuring activities that have taken place over the past year which were offset by approximately $3.0 million of incremental costs related to the consolidation of back-office operations to the Company's shared service center in Europe and $3.2 million of incremental consulting costs related to strategic planning.
Minority interest represents a 30% equity position of Mitsubishi Chemical MKV Company in a partnership with the Company and a 35% equity position of P.T. Prima Polycon Indah in an Indonesian joint venture with the Company. Interest expense declined by approximately $1.1 million and $2.3 million, respectively, for the three and nine months ended May 31, 2009, respectively, as compared with the same period last year, due to lower borrowing rates and overall lower debt levels.

Foreign currency transaction gains or losses represent changes in the value of currencies in major areas where the Company operates. The Company experienced $2.4 million in foreign currency transaction losses and $6.2 million in foreign currency transaction gains for the three and nine months ended May 31, 2009, respectively. The nine-month period includes gains of $1.9 million and $3.8 million related to the changes in the value of the U.S. dollar compared to the Canadian dollar and Mexican peso, respectively. The Company experienced foreign currency transaction losses of $1.0 million and $1.6 million for the three and nine months ended May 31, 2008, respectively. Generally, the foreign currency transaction gains or losses relate to the changes in the value of the U.S. dollar compared with the Canadian dollar and the Mexican peso and changes between the Euro and other non-Euro European currencies. From time to time, the Company enters into forward foreign exchange contracts to reduce the impact of changes in foreign exchange rates on the consolidated income statements. These contracts reduce exposure to currency movements affecting existing foreign currency denominated assets and liabilities resulting primarily from trade . . .