SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K Filed with the
Securities and Exchange Commission on November 14, 1994.
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) November 1, 1994
SPARTECH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-5911 43-0761773
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7733 Forsyth Boulevard, Suite 1450, Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(314) 721-4242
<PAGE>
SPARTECH CORPORATION
FORM 8-K/A
AMENDMENT NO. 1
This amendment to Form 8-K, filed with the Securities and
Exchange Commission on November 14, 1994, is submitted to file
certain financial statements and Pro forma financial statements
concerning Spartech Corporation's November 1, 1994 acquisition of
Pawnee Industries, Inc's ("Pawnee") Extrusion and Color Divisions.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
(i) The Extrusion and Color Divisions of Pawnee
Industries, Inc. audited balance sheet as of
September 30, 1994, and the related consolidated
statements of operations, equity and cash flows for
the year then ended.
(b) Pro Forma Financial Information.
(i) Spartech Corporation Pro forma consolidated balance
sheet as of October 29, 1994 and Pro forma
consolidated statement of operations for the fiscal
year ending October 29, 1994.
(2)<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SPARTECH CORPORATION
Date 01/13/95 By /s/ David B. Mueller
David B. Mueller
Vice President of Finance and
Chief Financial Officer
(3)<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1994
TOGETHER WITH AUDITORS' REPORT<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Extrusion and Color Divisions of
Pawnee Industries, Inc.:
We have audited the accompanying consolidated balance sheet of the
Extrusion and Color Divisions of Pawnee Industries, Inc., as of
September 30, 1994, and the related consolidated statements of
operations, equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of the Extrusion and Color Divisions of Pawnee Industries,
Inc. as of September 30, 1994, and the results of their operations
and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
St. Louis, Missouri
December 20, 1994
<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 1994
ASSETS
CURRENT ASSETS:
Cash $ 2,676
Accounts receivable, less allowance
for doubtful accounts of $104,596 6,689,514
Inventories 3,203,165
Notes receivable 66,653
Prepaid expenses 61,476
Total current assets 10,023,484
PROPERTY, PLANT AND EQUIPMENT:
Land 188,467
Buildings and improvements 1,856,916
Machinery and equipment 15,470,499
Transportation equipment 120,536
Furniture and fixtures 390,695
18,027,113
Less - Accumulated depreciation (11,537,469)
6,489,644
OTHER ASSETS 17,621
Total assets $ 16,530,749
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,126,896
Accrued liabilities 723,630
Total current liabilities 6,850,526
INVESTMENT BY PAWNEE INDUSTRIES, INC. 9,680,223
Total liabilities and equity $ 16,530,749
The accompanying notes are an integral part
of this financial statement.<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
NET SALES $ 59,163,821
COST OF SALES 52,760,840
Gross profit 6,402,981
OPERATING EXPENSES:
Warehouse 1,311,971
Shipping 1,975,456
Selling 1,606,728
General and administrative 1,498,317
Other 1,253,167
7,645,639
Operating loss (1,242,658)
INTEREST INCOME/(EXPENSE):
Interest income 41,117
Interest expense (818,927)
(777,810)
PROVISION FOR INCOME TAXES 0
Net loss $ (2,020,468)
The accompanying notes are an integral part
of this financial statement.<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1994
INVESTMENT BY PAWNEE INDUSTRIES, INC.,
September 30, 1993 $ 10,228,035
Net Loss (2,020,468)
Advance from Pawnee Industries, Inc. 1,472,656
INVESTMENT BY PAWNEE INDUSTRIES, INC.,
September 30, 1994 $ 9,680,223
The accompanying notes are an integral part
of this financial statement.<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,020,468)
Adjustments to reconcile net loss
to net cash used in operating activities-
Depreciation 1,498,735
Change in assets and liabilities-
Accounts receivable (369,440)
Inventory 2,163,611
Current assets (120,010)
Accounts payable (2,172,706)
Accrued liabilities (22,258)
Net cash used in operating activities (1,042,536)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (722,495)
Retirement of assets, net 292,271
Net cash used in investing activities (430,224)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Pawnee 1,472,656
Net increase (decrease) in cash (104)
CASH, beginning of year 2,780
CASH, end of year $ 2,676
The accompanying notes are an integral part
of this financial statement.<PAGE>
EXTRUSION AND COLOR DIVISIONS OF
PAWNEE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
1. BASIS OF PRESENTATION AND ORGANIZATION:
Basis of Presentation
The accompanying consolidated financial statements include the
Extrusion and Color Divisions of Pawnee Industries, Inc. (the
Company). Because the Company's operations were substantially
conducted through divisions of Pawnee Industries, Inc. (Pawnee),
the Company had no separately identifiable equity other than an
amount equal to its net assets captioned as "Investment by Pawnee
Industries, Inc." All significant intercompany balances and
transactions have been eliminated in consolidation.
Organization
The Company's Extrusion Division manufactures and sells extruded
rigid plastic sheet and rollstock produced from various plastic
resins. The Company's Color Division formulates, manufactures and
sells color compounds, concentrates and additives used in the
manufacture of plastics products. The Company's products are sold
primarily to manufacturers for applications in the recreation,
transportation, and other consumer product industries. These
customers are located throughout the United States with
concentrations of customers in Texas, Kansas, Ohio, and surrounding
states in those areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Inventories
Inventories are stated at the lower of last-in, first-out (LIFO)
cost or net realizable value.
Property, Plant and Equipment
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets.
Revenue Recognition
The Company manufactures products for specific customer orders and
for standard stock inventory. Revenues are recognized and billings
are rendered as the product is shipped to the customer.
Research and Development
The cost of research and product development is charged to expense
as incurred. Such costs have not been significant.<PAGE>
Corporate Allocations
Pawnee allocated corporate costs to each division based upon the
individual division's gross revenues. These costs are considered
appropriate for each division and in the opinion of management, the
method of allocation is reasonable.
Income Taxes
Pawnee is in a net operating loss position and no tax benefit was
allocated to the divisions.
3. INVENTORIES:
Inventories at September 30, 1994, consist of the following:
Raw material and purchased parts $ 3,889,776
Work in process and finished goods 608,672
Supplies 123,203
4,621,651
Reserve for LIFO (1,418,486)
Total inventories $ 3,203,165
4. LONG-TERM DEBT:
The Company did not receive debt allocations from Pawnee, however,
interest expense is allocated based upon the average investment by
Pawnee multiplied by the average interest rate on Pawnee's debt.
5. LEASE COMMITMENTS:
The Company leases certain buildings, vehicles and equipment. Net
rental expense pursuant to all operating leases for the year ended
September 30, 1994, was $238,832.
The aggregate minimum annual rental payments for noncancelable
operating leases as of September 30, 1994, are as follows: 1995-
$100,709; 1996-$3,605; 1997-$672; 1998-$672; and 1999-$672.
6. EMPLOYEE BENEFIT PLANS:
Pawnee has a 401(k) thrift plan which covers substantially all
officers and employees of the Company. Provisions of the plan
allow the Company to contribute up to 4% of the employee's actual
monthly compensation. The amount provided for contributions for
the year ended September 30, 1994 was $142,486.
7. SUBSEQUENT EVENT:
On November 1, 1994, Spartech Corporation acquired the Company.
The purchase included the Extrusion Divisions, located in Wichita,
Kansas and Paulding, Ohio, along with the Color Division, located
in Goddard, Kansas. The purchase price for the Company's net
assets, exclusive of working capital purchased, totaled
$15,000,000, subject to post-closing adjustments. In addition,
Spartech Corporation paid approximately $11,000,000 for working
capital assets (inventory and receivables).<PAGE>
SPARTECH CORPORATION
PRO FORMA FINANCIAL STATEMENTS<PAGE>
SPARTECH CORPORATION
PRO FORMA FINANCIAL STATEMENTS
On November 1, 1994, Spartech Corporation (the "Company")
completed the acquisition of Pawnee Industries, Inc.'s ("Pawnee")
Extrusion and Color Divisions.
The following statements represent the unaudited Pro forma
consolidated condensed balance sheet as of October 29, 1994 and the
unaudited Pro forma consolidated condensed statement of operations
for the fiscal year ended October 29, 1994. The Pro forma
consolidated condensed balance sheet was prepared under the
assumption that the acquisition occurred on October 29, 1994, while
the Pro forma consolidated condensed statement of operations assume
that the acquisition occurred at the beginning of the period
presented.<PAGE>
<TABLE>
<CAPTION>
SPARTECH CORPORATION
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
OCTOBER 29, 1994
(Unaudited and dollars in thousands, except per share amounts)
<C>
Pawnee
<C> Extrusion &
Spartech Color <C> <C>
Corporation Divisions Pro Forma Consolidated
<S> (Historical) (Historical) Adjustments Pro Forma
ASSETS
Current Assets
Cash $ 1,752 $ - $ - $ 1,752
Accounts and notes receivable, net 40,493 6,756 - 47,249
Inventories 22,936 3,081 1,418 B 26,635
(800)A
Prepayments and other 1,112 161 - 1,273
Total current assets 66,293 9,998 618 76,909
Property, plant & equipment 70,429 17,233 (5,148) 82,514
Accumulated depreciation (23,773) (10,952) 10,952 (23,773)
Property, plant & equipment, net 46,656 6,281 5,804 A 58,741
Goodwill 21,044 - 3,400 A 24,444
Other assets 1,727 - - 1,727
$135,720 $ 16,279 $ 9,822 $161,821
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 2,750 $ - - $ 2,750
Accounts payable 28,403 6,028 (6,028)C 28,403
Accrued liabilities 8,789 926 300 A 10,015
Total current liabilities 39,942 6,954 (5,728) 41,168
Senior long-term debt, less current
maturities 26,285 - 24,875 A 51,160
9% Convertible subordinated debentures 10,134 - - 10,134
Other liabilities 1,126 - - 1,126
Total long-term liabilities 37,545 - 24,875 62,420
Shareholders' equity
6% Cumulative convertible preferred stock,
776,700 shares issued and outstanding
($50 per share liquidation value) 777 - - 777
Common stock, 8,629,947 shares issued 6,472 - - 6,472
Contributed capital 74,438 - - 74,438
Retained deficit (23,449) 9,325 (9,325)A (23,449)
Treasury stock, at cost, 1,324 shares (5) - - (5)
Total shareholders' equity 58,233 9,325 (9,325) 58,233
$135,720 $ 16,279 $ 9,822 $161,821
The accompanying notes are an integral part of the pro forma consolidated condensed financial
statement.
A- See the accompanying notes to the pro forma consolidated condensed financial
statements - Basis of Presentation
B- Amount represents LIFO inventory reserve recorded by Pawnee. The amount is added back
into inventory since Spartech values its inventory at the lower of cost (first-in,
first-out) or market.
C- Pawnee's accounts payable were not assumed by Spartech.<PAGE>
SPARTECH CORPORATION
</TABLE>
<TABLE>
<CAPTIONS>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 29, 1994
(Unaudited and dollars in thousands, except per share amounts)
<C>
Pawnee
<C> Extrusion &
Spartech Color <C> <C>
Corporation Divisions Pro Forma Consolidated
(Historical) (Historical) Adjustments Pro Forma
<S>
Revenues $256,593 $ 61,565 - $318,158
Costs and expenses
Costs of sales 216,417 56,463 (1,220)A 270,560
(900)B
(200)C
Selling and administrative 19,344 4,305 (1,450)D 22,336
137 E
Depreciation and amortization 4,422 1,697 (797)F 5,407
85 F
240,183 62,465 (4,345) 298,303
Operating earnings 16,410 (900) 4,345 19,855
Interest 3,125 - 1,600 G 4,725
Earnings before income taxes 13,285 (900) 2,745 15,130
Provision for income taxes 2,450 - 350 H 2,800
Net earnings 10,835 (900) 2,395 12,330
Preferred stock accretion (2,133) - - (2,133)
Net earnings applicable to
common shares $ 8,702 $ (900) $ 2,395 $ 10,197
Net earnings per common share:
Primary $ 0.97 $ 1.14
Fully diluted $ 0.46 $ 0.53
Weighted average shares
outstanding:
Primary 8,985,000 8,985,000
Fully diluted 23,434,000 23,434,000
The accompanying notes are an integral part of the pro forma consolidated condensed
financial statement.
A- See the accompanying notes to the pro forma consolidated condensed financial
statements - Cost of Sales
B- Spartech has estimated that it will receive material cost savings of
approximately $900 due to Spartech's substantial buying power of plastic resins
used in the manufacture of rigid sheet and rollstock.
C- Subsequent to the acquisition, Spartech has merged and/or eliminated production
functions, saving the Company approximately $200 in salary and fringes.
D- See the accompanying notes to the pro forma consolidated condensed financial
statements - Centralized Corporate Office
E- See the accompanying notes to the pro forma consolidated condensed financial
statements - Fixed Asset Sale
F- See the accompanying notes to the pro forma consolidated condensed financial
statements - Depreciation and Amortization
G- See the accompanying notes to the pro forma consolidated condensed financial
statements - Interest Expense
H- See the accompanying notes to the pro forma consolidated condensed financial
statements - Income Taxes<PAGE>
</TABLE>
SPARTECH CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands)
Basis of Presentation
Spartech Corporation's (the "Company") historical amounts
shown for the consolidated condensed balance sheet as of October
29, 1994 and for the consolidated condensed statement of operations
for the fiscal year ended October 29, 1994 represent its audited
results for that period. Pawnee's Extrusion and Color Divisions'
historical amounts shown for the consolidated condensed balance
sheet as of October 29, 1994 and for the consolidated condensed
statement of operations for the fiscal year ended October 29, 1994
represent its unaudited results for those periods.
The acquired assets of Pawnee's Extrusion and Color Divisions
have been recorded at their estimated fair market values or net
realizable values with the excess purchase price over the fair
market values and net realizable values recorded as goodwill. The
purchase price for Pawnee's assets totaled approximately $26
million (subject to post-closing adjustments), approximately $11
million of which represented the purchase of working capital
assets, accounts receivable and inventory. Approximately $24,875
of this purchase price was paid in cash, while the remaining
balance represented primarily employee related liabilities assumed
by Spartech of approximately $926 and accrued transaction costs
estimated to be $300. The cash portion of the purchase price was
financed through the Company's amended credit arrangement with
Chemical Bank and was recorded as a Pro forma adjustment to the
consolidated condensed balance sheet as senior long-term debt.
Pawnee's equity has been eliminated through a Pro forma adjustment
since the acquisition was an asset purchase.
Cost of Sales
Pawnee's historical financial statements included an obsolete
inventory adjustment of $1,220 during the fiscal year ended October
29, 1994. Spartech has adjusted Pawnee's inventory value to its
net realizable value and does not anticipate such adjustments in
the future.
Centralized Corporate Office
Prior to the acquisition, Pawnee maintained a centralized
corporate office designed to fully support its operations.
Subsequent to acquisition, the Company merged or eliminated several
of the office functions, thereby reducing salary and overhead
expenses. The pro forma consolidated condensed statement of
operations for the fiscal year ended October 29, 1994 reflects
reductions in selling and administrative expenses related to these
items of $1,450.<PAGE>
SPARTECH CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands)
Fixed Asset Sale
The pro forma consolidated condensed statement of operations
for the fiscal year ended October 29, 1994 reflects the elimination
of the gain recorded by Pawnee during fiscal year 1994 on the sale
of fixed assets of $137.
Depreciation and Amortization
The pro forma consolidated condensed statement of operations
for the fiscal year ended October 29, 1994 reflects a decrease of
approximately $797 (over historical amounts recorded) in deprec-
iation resulting from the write-down of property, plant and equip-
ment to its estimated fair market value. The statements also
include additional amortization expense of $85 incurred from the
Goodwill purchased with this acquisition.
Interest Expense
The pro forma consolidated condensed statement of operations
for the fiscal year ended October 29, 1994 reflects additional
interest expense of $1,600 related to the debt incurred to finance
the acquisition. The Company's average borrowing rate was
approximately 6.5% during fiscal 1994.
Income Taxes
Income taxes have been provided on the incremental increase in
income at a rate of approximately 18.5%, which represents the rate
incurred by the Company for the fiscal year ended October 29, 1994.
