SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
Commission File Number 1-5911
SPARTECH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 43-0761773
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
7733 Forsyth Boulevard, Suite 1450, Clayton, Missouri, 63105
(Address of principal executive offices)
(314) 721-4242
(Registrant's telephone number, including area code)
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Number of common shares outstanding as of August 2, 1997:
Common Stock, $.75 par value per share 26,428,339
SPARTECH CORPORATION AND SUBSIDIARIES
INDEX
August 2, 1997
PART I. FINANCIAL INFORMATION PAGE
CONSOLIDATED CONDENSED BALANCE SHEET -
as of November 2, 1996 and August 2, 1997 3
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS - for the quarter and nine months
ended August 3, 1996 and August 2, 1997 4
CONSOLIDATED CONDENSED STATEMENT OF
CASH FLOWS - for nine months ended
August 3, 1996 and August 2, 1997 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION 13
SIGNATURES 14
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in thousands, except share amounts)
ASSETS
Aug. 2, 1997
Nov. 2, 1996 (unaudited)
Current Assets
Cash and equivalents $ 4,685 $ 3,930
Receivables, net 66,176 63,309
Inventories 53,981 53,695
Prepayments and other 3,315 2,300
Total Current Assets 128,157 123,234
Property, Plant and Equipment 146,948 153,589
Less accumulated depreciation 34,593 41,934
Net Property, Plant and Equipment 112,355 111,655
Goodwill 46,348 45,007
Other Assets 2,100 3,913
$288,960 $283,809
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 995 $ 975
Accounts payable 40,178 39,009
Accrued liabilities 23,022 21,321
Due to Hamelin Group Inc. 9,701 -
Total Current Liabilities 73,896 61,305
Long-Term Debt, Less Current Maturities 97,471 92,936
Other Liabilities 5,198 5,635
Total Long-Term Liabilities 102,669 98,571
Shareholders' Equity
Common stock, 26,609,554 shares issued
in 1996 and 26,619,154 shares issued
in 1997 19,957 19,964
Contributed capital 90,708 89,004
Retained earnings 2,703 17,628
Treasury stock, at cost, 209,100 shares
in 1996 and 190,815 shares in 1997 (2,061) (2,259)
Cumulative translation adjustments 1,088 (404)
Total Shareholders' Equity 112,395 123,933
$288,960 $283,809
See accompanying notes to consolidated financial statements.
SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited and amounts in thousands, except per share data)
QUARTER ENDED NINE MONTHS ENDED
Aug. 3, Aug. 2, Aug. 3, Aug. 2,
1996 1997 1996 1997
Net Sales $ 101,223 $123,170 $287,019 $366,372
Costs and Expenses
Cost of sales 85,029 102,735 242,954 306,671
Selling and administrative 6,550 7,473 18,139 22,327
Amortization of intangibles 238 337 619 983
91,817 110,545 261,712 329,981
Operating Earnings 9,406 12,625 25,307 36,391
Interest 1,376 1,771 3,577 5,774
Earnings Before Income Taxes 8,030 10,854 21,730 30,617
Income Taxes 3,010 4,123 8,149 11,732
Net Earnings $ 5,020 $ 6,731 $ 13,581 $ 18,885
Net Earnings Per Common Share:
Primary $ .20 $ .24 $ .55 $ .68
Fully diluted $ .20 $ .24 $ .55 $ .68
Weighted Average Number of
Shares Used in Computing Net
Earnings per Common Share:
Primary 24,792 27,988 24,536 27,822
Fully diluted 24,792 28,173 24,777 27,972
Dividends Per Common Share $ .04 $ .05 $ .11 $ .15
See accompanying notes to consolidated financial statements.
SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited and dollars in thousands)
NINE MONTHS ENDED
Aug. 3, 1996 Aug. 2, 1997
Cash Flows From Operating Activities
Net earnings $ 13,581 $ 18,885
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 5,065 8,488
Change in current assets and
liabilities, net of effects of
acquisitions (6,557) 367
Other, net 1,626 (65)
Net cash provided by operating
activities 13,715 27,675
Cash Flows From Investing Activities
Capital expenditures (6,295) (8,522)
Business acquisitions, net of cash
acquired (17,562) (9,701)
Retirement of assets 30 256
Net cash used for investing activities (23,827) (17,967)
Cash Flows From Financing Activities
Net borrowings (payments) on revolving
credit facilities 13,440 (4,200)
Payments on bonds and leases - (324)
Cash dividends on common stock (2,580) (3,959)
Stock options exercised 184 1,431
Treasury stock acquired (1,306) (3,326)
Net cash provided by (used for)
financing activities 9,738 (10,378)
Effect of exchange rate changes on cash
and equivalents - (85)
Increase (Decrease) In Cash and Equivalents (374) (755)
Cash and Equivalents At Beginning Of Period 3,505 4,685
Cash and Equivalents At End Of Period $ 3,131 $ 3,930
See accompanying notes to consolidated financial statements.
SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)
NOTE A - Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Spartech Corporation and its wholly-owned subsidiaries (the "Company"). These
financial statements have been prepared on a condensed basis and, accordingly,
certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) and disclosures necessary to make the information presented therein
not misleading. These financial statements should be read in conjuction with
the consolidated financial statements and accompanying footnotes thereto
included in the Company's November 2, 1996 Annual Report on Form 10-K.
The Company's fiscal year ends on the Saturday closest to October 31. Fiscal
year 1996 included 53 weeks compared to 52 weeks for fiscal 1997. As a result,
the first quarter and nine months ended August 3, 1996 consisted of 14 and 40
weeks, compared to the 13 and 39 weeks for the respective 1997 periods.
Operating results for any quarter are traditionally seasonal in nature and are
not necessarily indicative of the results expected for the full year.
NOTE B - Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market.
Inventories at November 2, 1996 and August 2, 1997 are comprised of the
following components:
1996 1997
Raw materials $ 34,778 $ 36,075
Finished goods 19,203 17,620
$ 53,981 $ 53,695
SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)
NOTE C - Cash Flow Information
Supplemental information on cash flows and noncash transactions for the nine
months ended August 3, 1996 and August 2, 1997 is as follows:
1996 1997
Cash paid for:
Interest $ 2,352 $ 2,989
Income taxes $ 6,205 $ 7,786
NOTE D - Commitments and Contingencies
The Company currently has no litigation with respect to any environmental
matters.
Note E - Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - "Earnings per Share" ("SFAS 128") which
specifies the computation, presentation and disclosure requirements for EPS.
SFAS 128 replaces the presentation of primary and fully diluted EPS pursuant to
Accounting Principles Board Opinion No. 15 - "Earnings per Share" ("APB 15")
with the presentation of basic and diluted EPS. Basic EPS excludes dilution and
is computed by dividing net income available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity. The Company is required to adopt SFAS 128 beginning
with its financial statements for the first quarter ending January 31, 1998 and
restate all prior-period EPS data. The Company will continue to account for EPS
under APB 15 until that time. Under SFAS 128, the Company's basic EPS for the
three months ended August 2, 1997 and August 2, 1996 was .25 and .21 per share,
respectively, and the Company's diluted EPS for the three months ended August 2,
1997 and August 3, 1996 was .24 and .20 per share, respectively. For the nine
months ended August 2, 1997 and August 3, 1996 basic EPS was .72 and .58 per
share, respectively and diluted EPS was .68 and .55 per share, respectively.
SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)
Note F - Subsequent Event--Acquisition
On August 22, 1997, Spartech Corporation ("the Company") completed the
acquisition of the net assets of the Preferred Plastic Sheet Division of
Echlin Inc. ("Preferred") Extrusion Division. The purchase included four
manufacturing facilities that produce rigid plastic sheet & rollstock, as well
as profile extruded products, with combined annual sales of approximately $75
million. The purchase price for Preferred's net assets, was approximately $65
million. The acquisition was primarily financed by a $60 million private
placement of debt at fixed interest rate of 7.0%.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Company's fiscal year ends on the Saturday closest to October 31. Fiscal
year 1996 included 53 weeks compared to 52 weeks for fiscal 1997. As a result,
the first quarter and nine months ended August 3, 1996 consisted of 14 and 40
weeks, compared to the 13 and 39 weeks for the respective 1997 periods. The
operating results presented below include discussions as a percentage of sales,
and where indicated, certain 1996 amounts have been adjusted to reflect a 39-
week period for more meaningful comparisons.
Net sales were $123.2 million and $366.4 million for the quarter and nine
months ended August 2, 1997, representing a 22% and 30% increase from the
similar periods in 1996. These results include an increase in pounds sold by
each of the Company's industry group's and the effects of the second-half 1996
acquisitions of Portage Industries and the Hamelin Group Inc. For the nine month
period, the consolidated increase resulted from a 6% increase in overall pounds
shipped and a 27% increase in net sales related to the second-half 1996
acquisitions, net of a 3% decline related to changes in prices an mix of
products sold in the period.
Net sales of the Extruded Sheet & Rollstock Group increased approximately 8%
for the quarter ended August 2, 1997 and 17% for the nine months ended August 2,
1997 over the 1996 periods. The increase in Extruded Sheet & Rollstock sales
for the nine months resulted from a 7% increase in pounds shipped as a result of
strong sales to the packaging and sign/advertising markets and a 13% increase in
net sales related to the second-half 1996 acquisitions of Portage and
GM-Plastics, while price and product mix changes had a negative 3% impact on
sales. Net sales in the Color & Specialty Compounds Group increased by 33% for
the quarter and 28% for the nine month period in 1997 versus the comparable 1996
periods. The increase in Color & Specialty Compound sales for the nine months
resulted from a 4% increase in pounds shipped and a 30% increase in net sales
related to the 1996 Korlin acquisition, net of a 6% decline related to changes
in prices and mix of products sold in the period. The Molded Products Group
added approximately $9.6 million and $32.5 milion in net sales for the quarter
and nine months ended August 2, 1997.
Cost of sales increased to $102.7 million for the quarter ended August 2, 1997
compared with $85.0 million for the same period of 1996, but decreased to 83.4%
of net sales for 1997 from 84.0% for 1996. The cost of sales percentages were
83.7% and 84.6% for the nine months ended August 2, 1997 and August 3, 1996,
respectively. The more favorable cost of sales percentages in 1997 reflect
improved production efficiencies and a decline in certain raw material prices,
partially offset by an increase in depreciation as a result of capital
expenditures incurred by the company during the last 12 months.
Selling and administrative expenses were $7.5 million and $22.3 million for the
quarter and nine months ended August 2, 1997 compared to $6.6 million and $18.1
million for the similar periods in 1996. On a percentage of net sales basis,
selling and administrative costs for the quarter decreased to 6.1% in 1997 from
6.5% for the same quarter in 1996. The percentage for the nine months of 1997
of 6.1% decreased from 6.3% for the prior year as a result of continued cost
containment efforts and the effect of the increased sales volume on the fixed
portion of the costs.
Operating earnings for the quarter ended August 2, 1997 were $12.6 million
(10.3% of net sales) compared to $9.4 million (9.3% of net sales) for the
corresponding period in 1996. Operating earnings for the nine months ended
August 2, 1997 were $36.4 million (9.9% of net sales) compared to $25.3 million
(8.8% of net sales) for the nine months in 1996. These gains in operating
earnings were achieved through increased sales levels, improved production
efficiencies, cost containment efforts, and the declines in raw material prices
discussed above.
Interest expense for the quarter and nine months ended August 2, 1997 of $1.8
million and $5.8 million increased from the same periods in 1996 as a result of
the additional borrowings related to the Portage and Hamelin Group acquisitions
completed in the last half of 1996. However, interest expense for the third
quarter was down 15% from the $2.1 million level in the immediately preceding
quarter, due to the paydown of nearly $14 million of the revolving credit
facility within the third quarter of 1997.
The Company's effective tax rate was 38.3% for the nine months of 1997 which is
up nearly one percentage point from 1996.
Environmental and Inflation
The Company is subject to various laws governing employee safety and federal,
state, & local laws, and regulations governing the quantities of certain
specified substances that may be emitted into the air, discharged into
interstate and intrastate waters, and otherwise disposed of on and off the
properties of the Company. The Company does not anticipate that future
expenditures for the compliance with such laws and regulations will have a
material effect on its capital expenditures, earnings, or competitive position.
The plastic resins used by the Company in its production process are crude oil
or natural gas derivatives and are available from a number of domestic and
foreign suppliers. Accordingly, the Company's raw materials are only somewhat
affected by supply, demand and price trends of the petroleum industry; pricing
of the resins tends to follow its own supply and demand equation except in
periods of anticipated or actual shortages of crude oil or natural gas. The
Company is not aware of any trends in the petroleum industry which will
significantly affect its sources of raw materials in 1997.
The effects of inflation have not been significant on the overall operations of
the Company during the last few years. No material amount of the Company's
sales are made pursuant to fixed price, long-term contracts. The Company has
historically been successful in compensating for inflationary costs through
increased selling prices and/or increased productivity and related efficiencies.
The Company anticipates this trend will continue in the future.
Liquidity and Capital Resources
Cash Flow
The Company's primary sources of liquidity have been cash flows from operating
activities and borrowings from third parties. The Company's principal uses of
cash have been to support its operating activities, invest in capital
improvements, and finance strategic acquisitions. The Company's cash flows for
the periods indicated are summarized as follows:
Nine Months
1996 1997
(Dollars in millions)
Net cash provided by
operating activities $ 13.7 $ 27.7
Net cash used for
investing activities $(23.8) $ (18.0)
Net cash provided by (used for)
financing activities $ 9.7 $ (10.4)
The Company continues to generate strong cash flows from operations, resulting
from the 39% increase in net earnings in the first nine months of 1997 compared
to the corresponding period of the prior year. Nine month operating cash flows
provided by changes in working capital were a positive $.4 million as a result
of improved management of accounts receivables and inventories in the third
quarter.
The Company's primary investing activities are capital expenditures and
acquisitions of businesses in the plastics industry. Capital expenditures are
primarily incurred to maintain and improve productivity, as well as to modernize
and expand facilities. Capital expenditures for the nine months ended August 2,
1997 and August 3, 1996 were $8.5 million and $6.3 million, respectively. The
Company anticipates total capital expenditures of approximately $12 million for
fiscal 1997, reflecting an increase for additional equipment at facilities
acquired in 1996, which will comprise over 50% of the 1997 total. Also impacting
the first half 197 cash used for investing activities was the final payment, in
late November 1996, on the Hamelin Group acquisition. The amount ($9.7 million)
was reflected as a current payable at fiscal year end November 2, 1996.
The cash flows used by financing activities were $10.4 million for the first
nine months of 1997. The primary uses of funds were revolving credit facility
repayments of $4.2 million (net of the impact of funding the $9.7 million final
installment due Hamelin), cash dividend payments of $4.0 million, and purchases
of treasury stock, net of stock options exercised, of $1.9 million.
Financing Arrangements
In August 1995, the Company completed a $50 million private placement of senior
unsecured notes at a fixed rate of 7.21% and finalized a $40 million unsecured
bank credit facility. The acquisition of Portage in May 1996 was funded by the
bank credit facility. In September 1996, the Company completed a simultaneous
public offering of 3 million shares of common stock for $25.9 million in net
proceeds and a $30 million private placement of 7.62% guaranteed senior notes to
finance the acquisition of the Hamelin Group. On August 22, 1997 the Company
completed a $60 million private placement of 7.0% senior notes to finance the
Preferred Plastics acquisition.
The Company anticipates that cash flow from operations, together with the
financing and borrowings under the Company's bank credit facility, will satisfy
its working capital needs, regular quarterly dividends, and planned capital
expenditures for the next year.
Other
The information presented herein contains certain forward-looking statements,
as defined in the Private Securities Litigation Reform Act (PSLRA) of 1995,
which are based on current expectations and are subject to risk and
uncertainties. The Company desires to take advantage of the "safe harbor"
provisions of the PSLRA by cautioning that numerous important factors, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause its consolidated results to differ materially from those
expressed in or implied by the forward-looking statments or related assumptions.
Investors are directed to the discussion of risks and uncertainties associated
with forward-looking statements contained in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Comission.
PART II - OTHER INFORMATION
Item 6 (a). Exhibits
10 Employment Agreement Between David G. Pocost and
Spartech Corporation dated as of February 1, 1997
10 Employment Agreement Between Randy C. Martin and
Spartech Corporation dated as of March 31, 1997
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
Item 6 (b). Reports on Form 8-K
A report on form 8-K, dated July 28, 1997, announcing
the signing of an Asset Purchase and Sale Agreement to
purchase the net assets of the Preferred Plastic Sheet
Division of Echlin, Inc. was filed on August 12, 1997.
A report on form 8-K, dated August 22, 1997, announcing
the completion of the purchase of net assets of the Preferred
Plastic Sheet Division of Echlin, Inc. was filed on September 2,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPARTECH CORPORATION
(Registrant)
Date: September 2, 1997 /s/ Bradley B. Buechler
Bradley B. Buechler
President and Chief
Executive Officer
(Principal Executive Officer)
/s/ Randy C. Martin
Randy C. Martin
Vice President - Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT 11
SPARTECH CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
QUARTER ENDED NINE MONTHS ENDED
Aug. 3, Aug. 2, Aug. 3, Aug. 2,
1996 1997 1996 1997
NET EARNINGS
Primary and Fully diluted
net earnings $ 5,020 $ 6,731 $ 13,581 $ 18,885
WEIGHTED AVERAGE SHARES
OUTSTANDING
Weighted average common
shares outstanding 23,481 26,403 23,387 26,386
Add: Shares issuable from
assumed exercise of option 1,311 1,585 1,149 1,436
Primary weighted average 24,792 27,988 24,536 27,822
shares outstanding
Add: Additional shares
issuable from assumed
exercise of options due to
the difference in the share
repurchase price under the
fully diluted computation - 185 241 150
Fully diluted weighted average
shares outstanding 24,792 28,173 24,777 27,972
NET EARNINGS PER SHARE
Primary $ .20 $ .24 $ .55 $ .68
Fully diluted $ .20 $ .24 $ .55 $ .68
Securities and Exchange Commission
Washington, D.C. 20549
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EMPLOYMENT AGREEMENT
AGREEMENT entered into this 1st day of February, 1997 by and between David G.
Pocost (the "Employee") and Spartech Corporation, a Delaware corporation
(the "Employer").
WITNESSETH:
WHEREAS, Employer desires to employ Employee, and Employee is willing to accept
such employment on the terms hereinafter set forth,
NOW, THEREFORE, the parties agree as follows:
1. Employment. Employer hereby employs Employee and Employee agrees to accept
such employment on the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall commence February 1, 1997 and,
unless earlier terminated as provided herein, continue through January 31, 1999.
3. Duties. Employer employs Employee to act in an executive capacity, as
Vice President of Quality and Environmental Affairs for Employer, on all aspects
of its business, as and when requested, and at such times and places as
Employer shall reasonably request, subject always to the control and direction
of Employer's Board of Directors. During the term of this Agreement, Employee
(a) will serve Employer faithfully, diligently and to the best of his ability,
and (b) will devote his best efforts and his entire working time, attention and
skill to the performance of his duties hereunder and to promoting and furthering
the interests of Employer. While he is so employed, Employee will not, without
the prior written consent of employer render any services to any other business
concern; provided, however, that nothing herein shall prevent Employee from (i)
engaging in additional activities in connection with personal investments
which do not interfere or conflict with his duties hereunder, or (ii) making any
investment in any publicly traded company so long as such investment does not
exceed one percent of the outstanding securities of any class.
4. Compensation. Subject to periodic review for cost of living and/or merit
and other increases, Employer agrees to compensate Employee at the rate of
$105,000 annually. Employer shall further advance or reimburse to Employee such
other monies as Employer determines for credit cards, costs and other reasonable
expenses incurred by Employee in the discharge of Employer's instructions
hereunder, and consistent with the necessities of the operation of the business.
Employee may also participate in all stock option and stock purchase plans,
insurance, medical and other employee benefit programs currently established and
hereafter instituted by Employer which are generally available to other
employees of comparable position. For the term of this Agreement, Employer
shall maintain term life insurance for Employee's designated beneficiaries
equivalent to $250,000.
5. Bonuses. Employee shall be eligible for an annual discretionary bonus
based upon his performance, and based upon the overall results of the Employer's
operations at the end of each year, paid in accordance with the terms and
conditions of Employer's Bonus Program. Any such Bonus shall be subject to
approval by the CEO, and the Compensation Committee of the Board of Directors
of Employer.
6. Non-Disclosure. Employee acknowledges that as a result of his employment
by Employer he has acquired, and in the future, will use and acquire knowledge
and information utilized by Employer in its business which may not be generally
available to the public or to other persons in the plastics business
("Confidential Information"), including, without limitation, Employer's systems,
procedures, formulas, processes, confidential reports, lists of customers,
pricing structure, margins with respect to its products and similar information.
As a material inducement to Employer to enter into this Agreement and to pay
Employee the compensation set forth herein, Employee agrees that he will not, at
any time, directly or indirectly, divulge or disclose to any person, for any
purpose, any Confidential Information, except to those persons authorized by
Employer to receive Confidential Information and except for information which
becomes publicly available through no fault of Employee.
7. Covenant Not To Compete; No Solicitation of Employees. Employee agrees as
follows: (a) For as long as he is employed by Employer and for one year after
any termination of employment, Employee agrees that he will not, directly or
indirectly, except as a passive investor in publicly held companies in which he
has less than a one percent interest, engage in, own or control any interest in
or act as director, officer or employee of, or consultant to, any firm or
corporation, directly or indirectly engaged, as these terms may be reasonably
construed, in a business substantially similar to that operated by Employer on
the date of termination, in the territories where Employer manufactures or
distributes its products. If the Employee is terminated without cause pursuant
to Paragraph 12(a) hereof, the non-competition provisions of this Paragraph 7(a)
shall apply only so long as Employer continues to pay Employee his base salary.
(b) Employee agrees that for one year after any termination of his employment
with Employer he will not, directly or indirectly, induce, or attempt to induce,
any of the employees of Employer to leave the employment of Employer, or to
employ any such employees within 90 days after any termination of their
employment with Employer.
8. Inventions. Employee acknowledges that all inventions, production
processes, techniques, programs, patents, discoveries, formulas and improvements
invented, discovered or learned by Employee during employment hereunder, and
relating to Employer's business, will be disclosed to Employer and will be the
sole property of Employer.
Employee further acknowledges that information imparted to him by Employer,
relating to Employer's production and business methods, techniques, customer
lists, statistics, credit, customers and suppliers is secret and confidential.
Therefore, Employee shall, upon termination of his employment hereunder and as a
prior condition to receiving final wages, return to Employer all books, records
and notes containing customer lists and addresses, all duplicate invoices, all
statements and correspondence pertaining to such customers, and all information
and documents (including all copies thereof) relating to customers, their needs,
products of Employer used by them, schedules of discussions with them, all
formulas, code books, price lists, products, manuals and equipment, production
or processing information or instructions, data applicable to methods of
manufacture, types, kinds, suppliers and costs of raw materials, and all other
information of confidential or secret nature applicable to Employer,
its customers and the manner of conducting its business. Employer agrees,
however, to provide Employee, upon request, with copies of whatever documents he
may reasonably require. As a prior condition to his receiving final wages,
Employee, if requested, shall also execute an affidavit to the effect that he
has complied with the provisions in this Paragraph 8.
The restraints on Employee, as set forth in this Paragraph 8, however, shall
not apply to those inventions for which no equipment, supplies, facility or
trade secret information of Employer was used and which was developed entirely
on Employee's own time and which does not relate to the business of the Employer
, to Employer's actual or demonstrably anticipated research or development, or
which did not result from any work performed by Employee for Employer.
9. Remedies. By reason of the fact that irreparable harm would be sustained
by Employer if there is any breach by Employee of the provisions of Paragraphs 6
, 7 and 8 hereof, it is agreed that, in addition to any other rights which
Employer may have under this Agreement or at law or in equity, Employer shall
be entitled to apply to any court of competent jurisdiction for, and obtain,
injunctive relief against Employee or against any third party, in order to
prevent any breach or threatened breach of the provisions of such paragraph.
10. Death During Employment. If Employee should die during the term of this
Agreement, Employer's only obligation shall be to pay Employee's spouse, or his
estate if he has no spouse, his base monthly salary to the month in which death
occurs.
11. Disability. Employer, at its option, may terminate this Agreement upon
written notice to Employee if the Employee, because of physical or mental
incapacity or disability, fails in any material respect to perform the services
required of him hereunder for a continuous period of 120 days, or for shorter
periods aggregating 180 days or more in any consecutive period of 240 days.
Upon such termination, all obligations hereunder of the Employer shall cease.
12. Termination. Anything herein to the contrary notwith- standing, Employer
shall have the right to terminate this Agreement as follows: (a) Employer may
terminate this Agreement without cause upon written notice to Employee. In the
event of such termination, Employee will be entitled to receive the unpaid
portion of base salary for the remaining term of this Agreement, paid out over
the remaining term of this Agreement.
(b) Employer may terminate this Agreement at any time for cause. "Cause" as
used herein shall mean dishonesty, theft, conviction of a felony, drunkenness or
a material breach of this Agreement. "Cause" shall also include the failure of
Employee, within ten days after receipt of written notice thereof from Employer,
for any reason, to correct, cease or otherwise alter any failure to comply with
the lawful instructions of the corporation's Board of Directors or other act or
omission which, in the sole opinion of the Board of Directors, will materially
adversely affect Employer's business. In the event of termination for cause,
Employer shall have no obligation to pay any compensation except to the
extent the Employee's base salary has been accrued but is unpaid at the time of
termination.
13. Severability. If any part of this Agreement is found to be void or
unenforceable for any reason, the remainder of this Agreement shall be
severable and may be enforced accordingly.
14. Benefit. This Agreement shall inure to the benefit of and be binding upon
Employee, his heirs, executors and administrators, and upon the Employer and its
successors, but this Agreement may not be assigned by either party except by
operation of law by a merger of the Employer into another corporation or by
Employer in connection with any sale of its business or parts thereof.
15. Headings. These headings have been inserted in this Agreement for
convenience only and shall not affect the interpretation hereof.
16. Entire Agreement. This Agreement contains the entire understanding of the
parties and may not be amended or changed except by an agreement in writing
signed by the parties.
17. Notices. Any notices required or permitted hereunder shall be addressed to
Employer at its principal office and to Employee at his address as it appears in
the records of the Employer, or at such other address as either party may have
furnished to the other for such purpose in writing.
18. Applicable Law. This Agreement has been entered into in, and shall be
construed under the laws of, the State of Missouri.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
EMPLOYER:
SPARTECH CORPORATION
By:
Bradley B. Buechler
President and CEO
EMPLOYEE:
David G. Pocost
EMPLOYMENT AGREEMENT
AGREEMENT entered into this 31st day of March, 1997 by and between Randy C.
Martin (the "Employee") and Spartech Corporation, a Delaware corporation (the
"Employer").
WITNESSETH:
WHEREAS, Employer desires to employ Employee, and Employee is willing to accept
such employment on the terms hereinafter set forth,
NOW, THEREFORE, the parties agree as follows:
1. Employment. Employer hereby employs Employee and Employee agrees to accept
such employment on the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall commence March 31, 1997 and, unless
earlier terminated as provided herein, continue through March 30, 1999.
3. Duties. Employer employs Employee to act in an executive capacity, as Vice
President-Finance and Chief Financial Officer for Employer, on all aspects of
its business, as and when requested, and at such times and places as Employer
shall reasonably request, subject always to the control and direction of
Employer's Board of Directors. During the term of this Agreement, Employee (a)
will serve Employer faithfully, diligently and to the best of his ability, and
(b) will devote his best efforts and his entire working time, attention and
skill to the performance of his duties hereunder and to promoting and furthering
the interests of Employer. While he is so employed, Employee will not, without
the prior written consent of employer render any services to any other business
concern; provided, however, that nothing herein shall prevent Employee from (i)
engaging in additional activities in connection with personal investments which
do not interfere or conflict with his duties hereunder, or (ii) making any
investment in any publicly traded company so long as such investment does not
exceed one percent of the outstanding securities of any class.
4. Compensation. Subject to periodic review for cost of living and/or merit
and other increases, Employer agrees to compensate Employee at the rate of
$120,000 annually. Employer shall further advance or reimburse to Employee such
other monies as Employer determines for credit cards, costs and other reasonable
expenses incurred by Employee in the discharge of Employer's instructions
hereunder, and consistent with the necessities of the operation of the business.
Subject to any applicable waiting period, Employee may also participate in all
stock option and stock purchase plans, insurance, medical and other employee
benefit programs currently established and hereafter instituted by Employer
which are generally available to other employees of comparable position.
For the term of this agreement, Employer shall maintain term life insurance for
Employee's designated beneficiaries equivalent to $250,000.
5. Bonuses. Employee shall be eligible for an annual discretionary bonus
based upon his performance, and based upon the overall results of the Employer's
operations at the end of each year, paid in accordance with the terms and
conditions of Employer's Bonus Program. Any such Bonus shall be subject to
approval by the CEO, and the Compensation Committee of the Board of Directors of
Employer.
6. Non-Disclosure. Employee acknowledges that as a result of his employment
by Employer he has acquired, and in the future, will use and acquire knowledge
and information utilized by Employer in its business which may not be generally
available to the public or to other persons in the plastics business
("Confidential Information"), including, without limitation, Employer's systems,
procedures, formulas, processes, confidential reports, lists of customers,
pricing structure, margins with respect to its products and similar information.
As a material inducement to Employer to enter into this Agreement and to pay
Employee the compensation set forth herein, Employee agrees that he will not, at
any time, directly or indirectly, divulge or disclose to any person, for any
purpose, any Confidential Information, except to those persons authorized by
Employer to receive Confidential Information and except for information which
becomes publicly available through no fault of Employee.
7. Covenant Not To Compete; No Solicitation of Employees. Employee agrees as
follows:
(a) For as long as he is employed by Employer and for one year after any
termination of employment, Employee agrees that he will not, directly or
indirectly, except as a passive investor in publicly held companies in which he
has less than a one percent interest, engage in, own or control any interest in
or act as director, officer or employee of, or consultant to, any firm
or corporation, directly or indirectly engaged, as these terms may be reasonably
construed, in a business substantially similar to that operated by Employer on
the date of termination, in the territories where Employer manufactures
or distributes its products. If the Employee is terminated without cause
pursuant to Paragraph 12(a) hereof, the non-competition provisions of this
Paragraph 7(a) shall apply only so long as Employer continues to pay
Employee his base salary.
(b) Employee agrees that for one year after any termination of his employment
with Employer he will not, directly or indirectly, induce, or attempt to induce,
any of the employees of Employer to leave the employment of Employer, or to
employ any such employees within 90 days after any termination of their
employment with Employer.
8. Inventions. Employee acknowledges that all inventions, production
processes, techniques, programs, patents, discoveries, formulas and improvements
invented, discovered or learned by Employee during employment hereunder, and
relating to Employer's business, will be disclosed to Employer and will be the
sole property of Employer.
Employee further acknowledges that information imparted to him by Employer,
relating to Employer's production and business methods, techniques, customer
lists, statistics, credit, customers and suppliers is secret and confidential.
Therefore, Employee shall, upon termination of his employment hereunder and as a
prior condition to receiving final wages, return to Employer all books, records
and notes containing customer lists and addresses, all duplicate invoices, all
statements and correspondence pertaining to such customers, and all information
and documents (including all copies thereof) relating to customers, their needs,
products of Employer used by them, schedules of discussions with them, all
formulas, code books, price lists, products, manuals and equipment, production
or processing information or instructions, data applicable to methods of
manufacture, types, kinds, suppliers and costs of raw materials, and all other
information of confidential or secret nature applicable to Employer, its
customers and the manner of conducting its business.
Employer agrees, however, to provide Employee, upon request, with copies of
whatever documents he may reasonably require. As a prior condition to his
receiving final wages, Employee, if requested, shall also execute an affidavit
to the effect that he has complied with the provisions in this Paragraph 8.
The restraints on Employee, as set forth in this Paragraph 8, however, shall not
apply to those inventions for which no equipment, supplies, facility or trade
secret information of Employer was used and which was developed entirely on
Employee's own time and which does not relate to the business of the Employer,
to Employer's actual or demonstrably anticipated research or development, or
which did not result from any work performed by Employee for Employer.
9. Remedies. By reason of the fact that irreparable harm would be sustained
by Employer if there is any breach by Employee of the provisions of Paragraphs 6
, 7 and 8 hereof, it is agreed that, in addition to any other rights which
Employer may have under this Agreement or at law or in equity, Employer shall
be entitled to apply to any court of competent jurisdiction for, and obtain,
injunctive relief against Employee or against any third party, in order to
prevent any breach or threatened breach of the provisions
of such paragraph.
10. Death During Employment. If Employee should die during the term of this
Agreement, Employer's only obligation shall be to pay Employee's spouse, or his
estate if he has no spouse, his base monthly salary to the month in which death
occurs.
11. Disability. Employer, at its option, may terminate this Agreement upon
written notice to Employee if the Employee, because of physical or mental
incapacity or disability, fails in any material respect to perform the services
required of him hereunder for a continuous period of 120 days, or for shorter
periods aggregating 180 days or more in any consecutive period of 240 days.
Upon such termination, all obligations hereunder of the Employer shall cease.
12. Termination. Anything herein to the contrary notwith- standing, Employer
shall have the right to terminate this Agreement as follows:
(a) Employer may terminate this Agreement without cause upon written notice to
Employee. In the event of such termination, Employee will be entitled to
receive the unpaid portion of base salary for the remaining term of this
Agreement, paid out over the remaining term of this Agreement.
(b) Employer may terminate this Agreement at any time for cause. "Cause"
as used herein shall mean dishonesty, theft, conviction of a felony, drunkenness
or a material breach of this Agreement. "Cause" shall also include the failure
of Employee, within ten days after receipt of written notice thereof from
Employer, for any reason, to correct, cease or otherwise alter any failure to
comply with the lawful instructions of the corporation's Board of Directors or
other act or omission which, in the sole opinion of the Board of
Directors, will materially adversely affect Employer's business. In the event
of termination for cause, Employer shall have no obligation to pay any
compensation except to the extent the Employee's base salary has been accrued
but is unpaid at the time of termination.
13. Severability. If any part of this Agreement is found to be void or
unenforceable for any reason, the remainder of this Agreement shall be severable
and may be enforced accordingly.
14. Benefit. This Agreement shall inure to the benefit of and be binding upon
Employee, his heirs, executors and administrators, and upon the Employer and its
successors, but this Agreement may not be assigned by either party except by
operation of law by a merger of the Employer into another corporation or by
Employer in connection with any sale of its business or parts thereof.
15. Headings. These headings have been inserted in this Agreement for
convenience only and shall not affect the interpretation hereof.
16. Entire Agreement. This Agreement contains the entire understanding of the
parties and may not be amended or changed except by an agreement in writing
signed by the parties. An Agreement for a succeeding two-year period, beginning
at the end of the term of this Agreement, shall be entered into between Employer
and Employee at least six months prior to the term of this Agreement.
Alternatively, compensation under this Agreement shall continue through term of
this Agreement without a requirement for full-time services from such date to
the completion of this Agreement.
17. Notices. Any notices required or permitted hereunder shall be addressed to
Employer at its principal office and to Employee at his address as it appears in
the records of the Employer, or at such other address as either party may have
furnished to the other for such purpose in writing.
18. Applicable Law. This Agreement has been entered into in, and shall be
construed under the laws of, the State of Missouri.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
EMPLOYER:
SPARTECH CORPORATION
By:
Bradley B. Buechler
President and CEO
EMPLOYEE:
Randy C. Martin
