? Summary of our business and the markets in which we operate;

? Key trends, developments and challenges; and

? Significant events during the current fiscal year.

• Results of Operations: An analysis of our results of operations as reflected in our consolidated financial statements.

• Liquidity and Capital Resources: An analysis of our cash flows, working capital, debt structure, contractual obligations and other commercial commitments.

Overview
Business Summary
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. The Company's customers span a wide range of markets such as packaging, consumer products, industrial and automotive, among others. The Chief Operating Decision Maker makes decisions, assesses performance and allocates resources by the following regions which represent our reportable segments:
• Europe, Middle East and Africa ("EMEA"),

• Americas, and

• Asia Pacific ("APAC").

The Company has approximately 3,100 employees and 35 manufacturing facilities worldwide. Globally, the Company operates primarily in four product families:
(1) masterbatch, (2) engineered plastics, (3) specialty powders, and
(4) distribution services. The Company offers tolling services to customers in all product families except for distribution services. Throughout this Management's Discussion and Analysis, the Company provides operating results exclusive of certain items such as costs related to acquisitions, restructuring related expenses and asset write-downs, which are considered relevant to aid analysis and understanding of the Company's results and business trends.
Key Trends, Developments and Challenges
The following developments and trends present opportunities, challenges and risks as we work toward our goal of providing attractive returns for all of our stakeholders:
• Continuous Improvement. We are focused on improving our operations worldwide including the training of approximately 60 employees in Six Sigma Black Belt and Green Belt certification programs. As we continue to further integrate our recent acquisitions, we are constantly examining certain synergies that can be utilized to optimize our processes and performance. We are also controlling our selling, general and administrative expenses, especially in developed markets.

• Development of New Products. In each of our product families, we are dedicated to the development of new, higher-margin products and applications that optimize the appearance, performance, and processing of plastics to meet the most demanding requirements. We strive to maintain a balanced position between low-cost production and technological leadership with focused research and development. We are also committed to continuing our growth in high value-added markets and reducing our exposure to commodity markets.

• Purchasing and Pricing. We are seeking opportunities to continue our savings on purchasing and to establish smart pricing strategies to align with our purchasing strategies. We continue to leverage our global volume base to enhance savings and are searching for alternate sourcing from the Middle East and Asia.

• Volume Improvement. We remain focused on organic and geographic growth including acquisitions to deliver steady volume improvement.

Fiscal Year 2012 Significant Events
In addition to the items discussed above, the following items represent significant events during fiscal year 2012:
1. Increase in dividend. In October 2011, the Company increased its regular quarterly cash dividend by approximately 10% to $0.17 per common share from the prior quarter's dividend of $0.155 per common share. In March 2012, the Company increased its regular quarterly cash dividend to $0.19 per common share, which represented a total increase of approximately 23% compared to fiscal 2011. This reflects the Company's confidence in its ability to generate cash and its long-term growth prospects, along with a continued commitment to shareholders.

2. Share Repurchases. The Company repurchased approximately 1.2 million shares of its common stock under the 2011 Repurchase Program in the first quarter of fiscal 2012 at an average price of $17.60 per share for a total cost of approximately $21.4 million.

3. India Plant. The Company continues with the construction of its plant in India with expected completion by the end of calendar year 2012.

4. Worldwide Production Expansion. To address increasing regional demand, the Company strategically added new engineered plastics manufacturing lines in China and Mexico, a new masterbatch line in Brazil and new specialty powders equipment in Mexico, France, Holland, and Italy. In fiscal 2012, the Company plans to invest approximately $7 million in its Akron, Ohio plant to add engineered plastics compounding capabilities to the facility as part of the optimization of capacity in the United States, of which approximately $6 million was invested in the first nine months of fiscal 2012.

5. EMEA and Americas Restructuring. In November 2011, the Company initiated a restructuring plan of EMEA's operations and back-office functions to better leverage savings from its Shared Service Center located in Belgium. Additionally, the Americas Nashville, Tennessee facility ceased production at the end of February 2012 and has transferred production to the Akron and Bellevue, Ohio plants to optimize the use of existing capacity and capitalize on growth opportunities.

6. Business Acquisition. On January 31, 2012, the Company acquired Elian SAS for approximately $66.5 million. Elian provides specialty formulated color concentrates to end markets such as packaging, cosmetics, personal hygiene, healthcare, and pipes and tubing products that require demanding customer 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.

7. Corporate Headquarters. In April 2012, the Company announced it will move its corporate headquarters to a new leased location in Fairlawn, Ohio in calendar year 2013. The new facility will also serve as the Company's U.S. headquarters which includes relocating certain associates from its Product Technology Center in Akron, Ohio.

8. Joint Venture Agreement. On June 9, 2012, the Company entered into a joint venture agreement with National Petrochemical Industrial Company ("NATPET") of Jeddah, Saudi Arabia ("KSA"), a subsidiary of Alujain Corporation, a Saudi Stock Exchange listed company. The 50-50 venture, expected to be named NATPET-Schulman Engineering Plastic Compounds, will produce and globally sell polypropylene compounds. The venture is planning to build a polypropylene compounding plant in Yanbu, KSA, where production is expected to begin by the end of calendar year 2014.

9. Global Innovation Centers. In June 2012, the Company announced the opening of two global innovation centers in Germany and Mexico as part of our continuing focus on market-driven innovation. These centers will help us strengthen our relationships with customers, suppliers and other technical partners by further aligning our global technology and product development efforts with the current requirements and emerging needs of our customers and end-markets.

Results of Operations
Segment Information
EMEA
                                      Three months ended May 31,                                 Nine months ended May 31,
                            2012          2011          Increase (decrease)          2012            2011           Increase (decrease)
                                                         (In thousands, except for %'s and per pound data)
Net sales                $ 383,852     $ 435,982     $   (52,130 )    (12.0 )%   $ 1,069,304     $ 1,139,197     $   (69,893 )     (6.1 )%
Segment gross profit     $  49,612     $  54,742     $    (5,130 )     (9.4 )%   $   133,926     $   150,314     $   (16,388 )    (10.9 )%
Segment operating income $  23,413     $  25,726     $    (2,313 )     (9.0 )%   $    57,953     $    66,850     $    (8,897 )    (13.3 )%
Pounds sold                309,200       338,233         (29,033 )     (8.6 )%       882,292         969,073         (86,781 )     (9.0 )%
Price per pound          $   1.241     $   1.289     $    (0.048 )     (3.7 )%   $     1.212     $     1.176     $     0.036        3.1  %
Gross profit per pound   $   0.160     $   0.162     $    (0.002 )     (1.2 )%   $     0.152     $     0.155     $    (0.003 )     (1.9 )%
Gross profit percentage       12.9 %        12.6 %                                      12.5 %          13.2 %

Three months ended May 31, 2012
EMEA net sales for the three months ended May 31, 2012 were approximately $383.9 million, a decrease of approximately $52.1 million, or 12.0%, compared with the prior-year period. Foreign currency translation negatively impacted net sales by approximately $20.4 million. The decrease in net sales was significantly impacted by reduced volume across all product families due to the economic environment in Europe, partially offset by approximately $9.3 million in incremental net sales from the Elian acquisition. Excluding foreign currency translation, price per pound increased approximately 1.4% to $1.307 per pound compared with the prior-year period primarily due to the masterbatch product family.
EMEA gross profit was approximately $49.6 million for the three months ended May 31, 2012, a decrease from approximately $54.7 million for the same three-month period last year. Foreign currency translation negatively impacted EMEA gross profit by approximately $2.5 million, which was partially offset by a contribution from the Elian acquisition. Excluding the foreign currency impact, gross profit per pound increased approximately 4.0% primarily in the engineered plastics and specialty powders product families offset by an overall decrease in volume of approximately 8.6% compared with the prior-year period.
EMEA operating income for the three months ended May 31, 2012 was approximately $23.4 million, a decrease of approximately $2.3 million compared with the same period last year. The decrease in operating income was primarily due to the decrease in gross profit offset by a positive contribution from the Elian acquisition and a reduction of approximately $2.8 million in selling, general and administrative expense as a result of realization of savings from restructuring initiatives. Foreign currency translation negatively impacted operating income by approximately $1.2 million. Nine months ended May 31, 2012
EMEA net sales for the nine months ended May 31, 2012 were approximately $1,069.3 million, a decrease of approximately $69.9 million, or 6.1%, compared with the prior-year period. Foreign currency translation negatively impacted net sales by approximately $43.4 million. The decrease in net sales was also attributable to reduced volume across all product families as a result of the economic environment in Europe partially offset by an increase of approximately 3.1% in price per pound primarily in the masterbatch and engineered plastics product families and approximately $13.0 million in incremental net sales from the Elian acquisition. Excluding the impact of foreign currency, price per pound increased approximately 7.2% to $1.261 per pound.
EMEA gross profit was approximately $133.9 million for the nine months ended May 31, 2012, a decrease from approximately $150.3 million for the same nine-month period last year primarily as a result of reduced volume across all product families and a decrease in gross profit per pound primarily in the specialty powders and distribution services product families. Foreign currency translation adversely impacted EMEA gross profit by approximately $5.1 million, which was partially offset by a positive contribution from the Elian acquisition. Excluding the foreign currency impact, gross profit per pound increased approximately 1.6%.
EMEA operating income for the nine months ended May 31, 2012 was approximately $58.0 million, a decrease of approximately $8.9 million compared with the same period last year. The decrease in operating income was primarily due to the decrease in gross profit partially offset by a decrease of approximately $7.5 million in selling, general and administrative expenses compared with the prior year. Selling, general and administrative expenses were reduced as a result of EMEA's successful restructuring initiatives and its continued aggressive actions to control costs. Foreign currency translation adversely impacted EMEA operating income by

approximately $2.3 million.

Americas
                                Three months ended May 31,                                Nine months ended May 31,
                     2012          2011          Increase (decrease)           2012           2011          Increase (decrease)
                                                  (In thousands, except for %'s and per pound data)
Net sales         $ 147,059     $ 137,940     $    9,119          6.6  %   $  404,685     $  371,611     $    33,074         8.9  %
Segment gross
profit            $  21,273     $  19,363     $    1,910          9.9  %   $   60,796     $   51,749     $     9,047        17.5  %
Segment operating
income            $   7,869     $   4,892     $    2,977         60.9  %   $   19,323     $   12,091     $     7,232        59.8  %
Pounds sold         155,705       164,586         (8,881 )       (5.4 )%      439,415        468,716         (29,301 )      (6.3 )%
Price per pound   $   0.944     $   0.838     $    0.106         12.6  %   $    0.921     $    0.793     $     0.128        16.1  %
Gross profit per
pound             $   0.137     $   0.118     $    0.019         16.1  %   $    0.138     $    0.110     $     0.028        25.5  %
Gross profit
percentage             14.5 %        14.0 %                                      15.0 %         13.9 %

Three months ended May 31, 2012
Net sales for the Americas for the three months ended May 31, 2012 were approximately $147.1 million, an increase of approximately $9.1 million or 6.6% compared with the prior-year period. The increase in net sales was a result of the approximate 12.6% increase in price per pound, which was primarily attributable to the specialty powders and masterbatch product families, as well as approximately $4.1 million of incremental fiscal 2012 net sales from a fiscal 2011 acquisition. The decrease in volume of approximately 8.9 million pounds was primarily related to the masterbatch product family partially offset by increased volume in the specialty powders and engineered plastics product families. Foreign currency translation negatively impacted net sales by approximately $3.8 million. Excluding the foreign currency impact, price per pound increased approximately 15.6% to $0.969 per pound compared with the prior-year period.
Gross profit for the Americas was approximately $21.3 million for the three months ended May 31, 2012, an increase of approximately $1.9 million from the comparable period last year. The increases in gross profit and gross profit per pound of approximately 9.9% and 16.1%, respectively, were primarily in the engineered plastics product family. The Company was able to increase margins by improving product mix and implementing operational efficiencies from the Americas restructuring initiatives. In addition, a fiscal 2011 acquisition positively contributed incremental fiscal 2012 gross profit. Foreign currency translation negatively impacted gross profit by approximately $0.6 million. Excluding the impact of foreign currency, gross profit per pound increased approximately 19.0% compared with the prior-year period.
Operating income for the Americas for the three months ended May 31, 2012 was approximately $7.9 million compared with approximately $4.9 million last year. Operating income increased primarily due to improved gross profit per pound and a decrease of approximately $1.1 million in selling, general and administrative expenses. The decline in selling, general and administrative expenses was primarily due to successful restructuring initiatives and cost control efforts realized as a result of the Nashville, Tennessee facility shutdown, partially offset by incremental expenses from a fiscal 2011 acquisition. Foreign currency translation negatively impacted operating income by approximately $0.3 million. Nine months ended May 31, 2012
Net sales for the Americas for the nine months ended May 31, 2012 were approximately $404.7 million, an increase of approximately $33.1 million or 8.9% compared with the prior-year period. The increase in net sales was a result of the approximate 16.1% increase in price per pound, which was spread across all product families, as well as approximately $16.4 million of incremental fiscal 2012 net sales from fiscal 2011 acquisitions. The decrease in volume of approximately 29.3 million pounds was primarily related to the masterbatch product family. Foreign currency translation negatively impacted net sales by approximately $10.6 million. Excluding the foreign currency impact, price per pound increased approximately 19.2% to $0.945 per pound compared with the prior-year period.
Gross profit for the Americas was approximately $60.8 million for the nine months ended May 31, 2012, an increase of approximately $9.0 million from the comparable period last year. The increases in gross profit and gross profit per pound of approximately 17.5% and 25.5%, respectively, were primarily in the masterbatch, specialty powders and engineered plastics product families. The Company was able to improve margins in light of rising raw material costs by improving product mix and implementing operational efficiencies. In addition, the fiscal 2011 acquisitions positively contributed incremental fiscal 2012 gross profit. Foreign currency translation negatively impacted gross profit by approximately $2.0 million. Excluding the impact of foreign currency, gross profit per pound increased approximately 29.9% compared with the prior-year period.

Operating income for the Americas for the nine months ended May 31, 2012 was approximately $19.3 million compared with approximately $12.1 million last year. Operating income increased primarily due to improved gross profit per pound offset by an increase of approximately $1.8 million in selling, general and administrative expenses. The increase in selling, general and administrative expenses was primarily a result of incremental expenses from fiscal 2011 acquisitions. Foreign currency translation negatively impacted operating income by approximately $0.9 million.

APAC
                                        Three months ended May 31,                                 Nine months ended May 31,
                            2012         2011           Increase (decrease)             2012           2011          Increase (decrease)
                                                         (In thousands, except for %'s and per pound data)
Net sales                $ 38,196     $ 37,220     $       976              2.6 %   $  108,318     $  104,060     $    4,258         4.1  %
Segment gross profit     $  5,784     $  4,783     $     1,001             20.9 %   $   16,589     $   12,721     $    3,868        30.4  %
Segment operating income $  2,913     $  1,698     $     1,215             71.6 %   $    7,976     $    3,890     $    4,086       105.0  %
Pounds sold                33,264       32,595             669              2.1 %       91,460         98,845         (7,385 )      (7.5 )%
Price per pound          $  1.148     $  1.142     $     0.006              0.5 %   $    1.184     $    1.053     $    0.131        12.4  %
Gross profit per pound   $  0.174     $  0.147     $     0.027             18.4 %   $    0.181     $    0.129     $    0.052        40.3  %
Gross profit percentage      15.1 %       12.9 %                                          15.3 %         12.2 %

Three months ended May 31, 2012
Net sales for APAC for the three months ended May 31, 2012 were approximately $38.2 million, an increase of approximately $1.0 million compared with the same prior-year period due to increased volume and the favorable impact of foreign currency translation. The increase in volume of approximately 2.1% was primarily related to the masterbatch and engineered product families partially offset by the specialty powders product family.
Gross profit for APAC for the three months ended May 31, 2012 was approximately $5.8 million, an increase of approximately 20.9% compared with last year. The increase in gross profit and gross profit per pound were primarily due to successful restructuring initiatives with the Braeside, Australia plant closure and consolidation which improved the cost structure. In addition, APAC continued its focus on products with higher technical requirements. Foreign currency translation had a minimal impact on gross profit.
APAC operating income for the three months ended May 31, 2012 was approximately $2.9 million compared with approximately $1.7 million last year. The increase in profitability was principally due to the increase in gross profit and a slight decrease in selling, general and administrative expenses. Foreign currency translation did not have a significant impact on operating income. Nine months ended May 31, 2012
Net sales for APAC for the nine months ended May 31, 2012 were approximately $108.3 million, an increase of approximately $4.3 million compared with the same prior-year period. Net sales increased as a result of improved selling price per pound of approximately 12.4% partially offset by a decrease in volume of approximately 7.5%. Foreign currency translation favorably impacted net sales by approximately $1.9 million. The increase in net sales was primarily related to the masterbatch and engineered plastics product families partially offset by decreased net sales in the specialty powders product family. The reduction in volume was primarily attributable to a decline in specialty powders export net sales due to the general economic climate in Europe.
Gross profit for APAC for the nine months ended May 31, 2012 was approximately $16.6 million, an increase of approximately $3.9 million or 30.4% compared with last year. The increase in gross profit and gross profit per pound were primarily due to Braeside, Australia plant closure and consolidation in connection with successful restructuring initiatives that have improved the cost structure. In addition, APAC continued its focus on products with higher technical requirements. Foreign currency translation had a favorable impact on gross profit of approximately $0.3 million.
APAC operating income for the nine months ended May 31, 2012 was approximately $8.0 million compared with approximately $3.9 million last year. The increase in profitability was principally due to the increase in gross profit. Foreign currency translation favorably impacted operating income by approximately $0.2 million.