18
United States Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities and Exchange Act of 1934, we are
transmitting the attached Form 10-K.
Sincerely,
SPARTECH CORPORATION
/s/Randy C. Martin
Randy C. Martin
Vice President-Finance and Chief
Financial Officer
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998
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 Identification
incorporation or organization) Number)
7733 FORSYTH, SUITE 1450, CLAYTON, MISSOURI 63105-1817
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 721-4242
Securities registered pursuant to Section 12(d) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.75 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $273,354,840 on December 31, 1998.
There were 26,871,350 total shares of common stock outstanding as of December
31, 1998.
Documents incorporated by reference
1) Portions of the 1998 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV.
2) Portions of the Definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III.
3)
PART I
Item 1. BUSINESS
General
Spartech Corporation, together with its subsidiaries ("Spartech" or the
"Company"), operates in one industry segment as a leading producer of engineered
thermoplastic materials, polymeric compounds, molded and profile products for a
wide spectrum of customers in the plastics industry. The Company's 38
facilities throughout North America and Europe operate in the following three
lines of business:
Extruded Sheet & Rollstock - which sells its products to various
manufacturers who use plastic components in their industrial products. The
Company's extruded sheet & rollstock is utilized in several end markets
including transportation, building & construction, packaging, recreation,
and sign/advertising. The Company is North America's largest extruder of
custom rigid plastic sheet & rollstock, operating 17 facilities in the
United States and Canada under the name Spartech Plastics.
Color & Specialty Compounds - which sells custom designed plastic alloys,
compounds, color concentrates, and calendered film for utilization by a
large group of manufacturing customers servicing the packaging, electronics
& appliance, transportation, building & construction and other end markets.
The Company produces and distributes these products from 15 facilities under
the names Spartech Polycom, Spartech Color, and Spartech Vy-Cal Plastics in
the United States, Canada and France.
Molded & Profile Products - which manufactures custom and proprietary
products including: (1) thin-walled, printed plastic food packaging and
industrial containers, (2) thermoplastic tires and wheels for the lawn and
garden, refuse container, and toy markets, and (3) profile extruded products
for a variety of industries. The Company produces these molded and profile
products from 6 facilities in the United States and Canada under the names
GenPak, Hamelin Industries, and Spartech Profiles.
The Company's principal executive office is located at 7733 Forsyth
Boulevard, Suite 1450, Clayton, Missouri 63105-1817, telephone (314) 721-4242.
The Company was incorporated in the State of Delaware in 1968, succeeding a
business which had commenced operations in 1960. The Company primarily
operates as a leading intermediary plastics processor in the North American
plastics market. This segment of the plastics industry is
fragmented with over 2,000 plastic processing companies. The plastics
intermediary segment continues to experience significant consolidation driven
primarily by the desire of customers and suppliers to have fewer, stronger
intermediaries and the potential for companies to achieve economies of scale. A
key element of the Company's acquisition strategy is to continue to acquire
plastics intermediary companies with profitable operations. Acquisitions
completed over the last five years are summarized below:
Date
Acquired Business Acquired Principal Products
February 1994 Product Components Extruded Sheet & Rollstock
November 1994 Pawnee Industries (a) Extruded Sheet & Rollstock
and Color Concentrates
May 1996 Portage Industries (b) Extruded Sheet & Rollstock
September 1996 Hamelin Group (b) Extruded Sheet & Rollstock,
Color Concentrates, and
Molded Products
August 1997 Preferred Plastic Sheet Extruded Sheet & Rollstock
Division of Echlin Inc. (b) and Profile Products
March 1998 Polycom Huntsman, Inc. (b) Specialty Compounds & Color
Concentrates
April 1998 Prismaplast Canada, Ltd. (b) Color Concentrates
October 1998 Anjac-Doron Plastics, Inc. Profile Products
(b)
(a) Includes only Pawnee's Extrusion and Color Divisions.
(b) Information with respect to Spartech's recent acquisition activity is
set forth in Note (2) to the Consolidated Financial Statements on page 21 of
the 1998 Annual Report to Shareholders, attached as Exhibit 13.
Growth Strategy
In 1991, management began to develop and implement the Company's growth
strategy, known as the "Four Cornerstones for Growth," which focuses on balanced
revenue growth both through internal means - new product developments, product
transformation initiatives and business partnerships - and through strategic
acquisitions. Additionally, the Company's operating plan emphasizes ongoing
cost containment and productivity improvement efforts to increase operating
earnings and further enhance stockholder returns. The four elements of this
growth strategy are:
Business Partnerships. The Company is committed to building business
partnerships that provide long-term growth opportunities and enhance customer
relationships. Such partnerships offer direct and indirect benefits to the
Company and its customers by broadening product lines, lowering the cost of
technological efforts and increasing geographic presence. The Company regularly
partners with customers and resin suppliers to develop improvements in order to
offer customers state-of-the-art products, and have significantly contributed to
strengthening the Company's leading market position in the custom extruded sheet
and rollstock segment. In an effort to exceed customer expectations, the
Company has designed several continuous improvement initiatives such as the
"Total Transaction Quality", "Growth Through Training", and "Total Customer
Satisfaction" programs. These programs involve customer contact and survey
processes, ISO9000 and QS9000 quality system certifications, customer training
offerings, and quality management reviews.
Strategic Expansions. As a result of the Company's size and breadth of
operations, management believes that it is well positioned for continued
expansion through selective acquisitions in the consolidating plastics
intermediary segment. In evaluating acquisition opportunities, management
targets acquisition candidates that: (i) add complementary product lines (with
emphasis on companies producing specialty or value-added thermoplastic
products): (ii) increase geographic presence: and (iii) provide operational
synergies in purchasing, production and customer service. For example, the
Company's acquisition of Polycom Huntsman expanded two product lines
(polypropylene compounds and black concentrates), added eight state-of-the-art
manufacturing facilities in the U.S. and a manufacturing facility in France (the
Company's first outside North America), and provided additional cost saving
opportunities in purchasing and administrative expenses.
Product Transformations. A key element of the Company's internal growth is the
ongoing transition of products previously made from wood, metal, or fiberglass
to higher performing and less expensive recyclable thermoplastics. The Company
is the market leader in extruded sheet and rollstock, where the transformation
process is still in the early stages. Sizable metal, glass and fiberglass
specialty components have recently begun to be replaced by thermoplastics in the
agricultural equipment and transportation markets. The Company utilizes the
experience of its sales and production personnel, partnerships with suppliers,
and relationships with customers to identify and develop new applications for
its products. Product transformations have been a key contributor to the
Company's internal growth rates.
Alloy Plastics. The Company aggressively develops new proprietary products that
combine advanced-engineered thermoplastic compounds and additives with new
manufacturing techniques implemented by experienced operating personnel ("Alloy
Plastics"). Alloy Plastics represent advancements in formulation and production
technologies, such as the ability to extrude new products that combine the
virtues of several polymers into a single sheet or to create new specialty
compounds by adding reinforcements such as talc, calcium carbonate and glass
fibers to base resins. All of the Company's Alloy Plastics represent new
proprietary products which offer end-product manufacturers a variety of
solutions for the design of high performance and environmentally-friendly
products with cost efficient benefits.
Extruded Sheet & Rollstock
Net sales and operating earnings (consisting of earnings before interest, taxes
and corporate operations/allocations) of the extruded sheet & rollstock group
for fiscal years 1998, 1997, and 1996 were as follows:
Fiscal Year
(Dollars in millions)
1998 1997 1996
Net Sales $455.1 $375.8 $319.2
Operating Earnings $50.5 $39.6 $31.6
Products - Spartech Plastics produces both single and multilayer extruded
plastic sheet and rollstock on a custom basis for end product manufacturers.
The group's extruded sheet & rollstock is utilized in several end markets
including transportation, building & construction, packaging, recreation and
sign/advertising. Most of the group's customers thermoform, cut, and trim their
plastic sheet for these various end uses.
New Product Development - The extruded sheet & rollstock group is actively
involved in development of new Alloy Plastics, which offer end-product
manufacturers a variety of solutions to design high performance and
environmentally-friendly products with cost effective benefits. Spartech
Plastics currently offers nine such new products, five of which were introduced
in the second half of fiscal 1998.
Manufacturing and Production - The principal raw materials used in
manufacturing extruded sheet & rollstock are plastic resins in pellet form,
which are crude oil or natural gas derivatives. The Company extrudes a wide
variety of plastic resins, including acrylonitrile butadiene styrene ("ABS"),
polycarbonate ("PC"), polypropylene ("PP"), acrylic, polyethylene terephthalate
("PET"), polystyrene ("PS"), polyethylene ("PE"), and polyvinyl chloride
("PVC").
The Company produces plastic sheet of up to seven distinct layers using a
multi-extrusion process, as it is extruded through the die into a sheet form.
More than half of the Company's plastic sheet is produced using this multi-
extrusion process. The remainder is produced in a single layer using
conventional extrusion processes. In some cases, the Company will coat the
plastic sheet or laminate sheets together in order to achieve performance
characteristics desired by customers for particular applications.
Marketing, Sales and Distribution - The custom sheet and rollstock extrusion
business has generally been a regional business supplying manufacturers within
an estimated 500 mile radius of each of the group's 17 facilities because of
shipping costs for rigid plastic material and the need for prompt response to
customer requirements and specifications. The outdoor sign and spa markets,
however, are slightly more national in scope.
The Company sells its extruded sheet & rollstock products principally through
its own sales force, but also uses a limited number of independent sales
representatives. The Company generally does not sell products of the extruded
sheet & rollstock group under long-term contracts. During fiscal 1998, the
extruded sheet & rollstock group sold its products to approximately 2,300
customers.
Color & Specialty Compounds
Net sales and operating earnings (consisting of earnings before interest,
taxes and corporate operations/allocations) of the color & specialty compound
group for fiscal years 1998, 1997, and 1996 were as follows:
Fiscal Year
(Dollars in millions)
1998 1997 1996
Net Sales $158.2 $84.0 $68.2
Operating Earnings $18.1 $7.1 $5.4
Products - The color and specialty compounds group manufactures plastic
compounds, alloys and color concentrates for end product manufacturers.
Spartech Polycom both produces its own line of proprietary compounds and
provides toll compounding services for engineered resins, flame retardant and
other specialty compounds. Spartech Color, the largest color concentrate
supplier in Canada -with a sister plant in Goddard Kansas, is focused on service
oriented color concentrate applications for film and molding as well as
supplying nearly $10 million worth of color concentrates internally to the
Company's extruded sheet and rollstock group. Spartech Vy-Cal Plastics operates
a vinyl calender, supplying finished PVC film to manufacturers of loose-leaf
binders, decorator grade wallcoverings and packaging products for the medical
industry. Customers of the color and specialty compound group range from major
integrated OEMs to sole proprietary subcontractors that utilize injection
molding, extrusion, blow molding and blown and cast film processes.
New Product Development - The color and specialty compounds group has well-
equipped laboratory facilities, particularly with the newly acquired Spartech
Polycom Technical Center in Donora, PA. These laboratories operate testing and
simulated end use process equipment as well as small scale versions of our
production equipment to ensure accurate scale-up from development to production.
In addition to compounding technology, the group has developed enhanced
capabilities to produce color concentrates and additives.
Manufacturing and Production - The principal raw materials used in
manufacturing specialty plastic alloys, compounds and color concentrates are
plastic resins in powder and pellet form, primarily PP, PE, PS, ABS, and PVC
with colorants, mineral and glass reinforcements, and additives to impart
specific performance and appearance characteristics to the compounds.
Marketing, Sales and Distribution - The color & specialty compounds group
generates the majority of its sales in the United States and Canada but also has
a presence in Europe and Mexico. The group's sales are primarily managed by its
own internal sales force, but also uses independent agents and both local and
national distributors. During fiscal 1998, the color and specialty compound
group sold products to approximately 1,800 customers.
Molded & Profile Products
The group's net sales and operating earnings (consisting of earnings before
interest, taxes, and corporate operations/allocations) for the fiscal years
1998, 1997, and 1996 periods were as follows:
Fiscal Year
(Dollars in millions)
1998 1997 1996
Net Sales $40.6 $ 42.9 $ 3.9
Operating Earnings $5.7 $ 5.9 $ .4
Products - The molded & profile products group manufactures custom and
proprietary items for a large group of intermediate and end-user customers.
GenPak is a producer of thin-walled, printed plastic food packaging and
industrial containers for a large group of dairy, deli, and industrial supply
companies; Hamelin Industries manufacturers thermoplastic tire and wheel
assemblies for the lawn and garden, refuse container, and toy markets; and
Spartech Profiles manufactures products for various industries, including the
bedding and construction markets.
New Product Development - The molded and profile products group brings
unique, recognized capabilities to its customers such as print graphics and
package design, patented tread-cap wheel technologies and special fabrication of
profile products. In addition, this group's creativity, sound engineering and
design principles enable it to effectively respond to customer needs in the
niche markets in which the Company operates.
Manufacturing and Production - The principal raw materials used in the
Company's manufacturing of its molded and profile products are PE, PP, and PVC.
The group manufactures products under three major lines -- containers, wheels,
and profile extruded products.
Marketing, Sales and Distribution - GenPak markets most of its products to
customers located in North America, as well as, the Caribbean; Hamelin
Industries markets its products throughout North America from a centrally
located plant in Warsaw, Indiana; and Spartech Profiles markets its products
throughout the United States. The group sells its products principally through
its own sales force, but also uses independent sales representatives. During
fiscal 1998, the molded & profile products group sold its products to
approximately 400 customers.
Raw Materials
The Company uses large amounts of thermoplastic resins in its manufacturing
processes. Such resins are crude oil or natural gas derivatives and are to some
extent affected by supply, demand, and price trends in the petroleum industry.
While the Company seeks to match cost increases with corresponding price
increases, large increases in the costs of these raw materials could adversely
affect the Company's operating margins. In addition, any major disruptions in
the availability of crude oil or natural gas to the Company's suppliers could
adversely impact the availability of the resins. However, the Company does
business with most of the major resin manufacturers and has enjoyed good
relationships with such suppliers over the past several years. The Company has
been able to adequately obtain all of its required raw materials to date and
expects to be able to continue to satisfy its requirements in fiscal 1999 and
beyond.
Seasonality
The Company's sales are somewhat seasonal in nature. Fewer orders are placed
and less manufacturing activity occurs during the November through January
period. This seasonal variation tends to track the manufacturing activities of
the Company's various customers in each region.
Competition
The extruded sheet & rollstock, color & specialty compounds, and molded &
profile products markets are highly competitive. Since the Company manufactures
a wide variety of products, it competes in different areas with many other
companies, some of which are much larger than the Company and have more
extensive production facilities, larger sales and marketing staffs, and
substantially greater financial resources than the Company. The markets in
which the Company competes are also periodically characterized by excess supply
and intense price competition. The Company competes generally on the basis of
price, product performance, and customer service. Important competitive factors
in each of the Company's businesses include the ability to: (1) manufacture
consistently to required quality levels, (2) meet demanding delivery times, (3)
exercise skill in raw material purchasing, and (4) achieve production
efficiencies to process the products profitably. In addition, the Company may
experience competition from new entrants into the markets that it serves and
increased competition from companies offering products based on advanced
technologies or processes. The Company believes it is competitive in these key
areas.
The extruded sheet & rollstock group is an intermediate processor of plastics
which manufactures sheet & rollstock for customers who shape it for their end
use with thermoforming equipment. Several of these customers have, or upon
expansion may acquire, extrusion machinery. Moreover, some customers are large
enough to justify building their own molds and shifting from thermoforming to an
injection molding process. Injection molding techniques become competitive
whenever large quantities are produced or fine detailing or contouring is
required on the end product. However, thermoforming techniques have been
improved in recent years and are generally less expensive than other
manufacturing methods due to equipment costs and other associated start-up
expenses. Any material reduction in orders to the Company by its customers as a
result of a shift to in-house processing facilities could adversely affect the
Company's business. In addition, several customers of the Company's color &
specialty compounds division have the capability to formulate their own alloys,
compounds and color concentrates. However, the Company expects to benefit from
a growing trend of outsourcing of specialized semi-finished materials by many
manufacturers. Finally, the Company's molded & profile products group operates
in selective niches within highly-competitive markets.
Backlog
The Company estimates that the total dollar volume of its backlog as of
October 31, 1998 and November 1, 1997 was approximately $66.5 million and $39.2
million, respectively, which represents approximately four to five weeks of
production for each year.
Employees
The Company's total employment approximates 2,700. There are 2,150 production
personnel at the Company's 38 facilities, approximately 28% of whom are union
employees covered by several collective bargaining agreements. There have been
no strikes in the past three years. Management personnel total approximately
550 supervisory/clerical employees, none of whom is unionized. The Company
believes that all of its employee and union relations are satisfactory.
Government Regulation
The Company is subject to various laws governing employee safety and
environmental matters. The Company believes it is in material compliance with
all such laws and does not anticipate large expenditures in fiscal 1999 to
comply with any applicable regulations. The Company is subject to federal,
state, and local laws (including Canadian provincial laws) and regulations
governing the quantity 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. Modifications of
existing environmental regulations, the adoption of new environmental
regulations, or unanticipated enforcement actions, could require material
capital expenditures or otherwise have a material adverse effect on the
Company's businesses. The Company has not incurred significant expenditures
in order to comply with such laws and regulations, nor does it anticipate
continued compliance therewith to materially affect its earnings or competitive
position.
International Operations
Information regarding the Company's operations in its three geographic
segments -- United States, Canada and Europe -- is located in Note (12) to the
Consolidated Financial Statements on page 26 of the 1998 Annual Report to
Shareholders, attached hereto as Exhibit 13. The Company's Canadian and French
operations may be affected periodically by foreign political and economic
developments, laws and regulations, and currency fluctuations.
Other
The Company has already modified substantially all of its computer systems to
be Year 2000 compliant. The Company does not anticipate any significant costs,
problems, or uncertainties associated with becoming Year 2000 compliant. The
Company could potentially experience disruption to some aspects of its
operations as a result of noncompliant systems utilized by unrelated third party
governmental and business entities. The Company continues to communicate with
others with whom it does significant business to determine their Year 2000
compliance readiness and the extent to which the Company is vulnerable to any
third party Year 2000 issues.
Item 2. PROPERTIES
The Company operates in plants and offices aggregating approximately
2,862,000 square feet of space. Approximately 1,078,000 square feet of plant
and office space is leased with the remaining 1,784,000 square feet owned by the
Company. A summary of the Company's principal operating facilities follows:
Extruded Sheet & Rollstock
Location Description Size in Square Feet Owned/
Leased
Arlington, TX Extrusion plant & offices 126,000 Leased
Atlanta, GA Extrusion plant & offices 75,000 Leased
Cape Girardeau, MO Extrusion plant & offices 100,000 Owned
Clare, MI Extrusion plant & offices 27,000 Owned
Greenville, OH Extrusion plant & offices 60,000 Owned
10,000 Leased
Greensboro, GA Extrusion plant & offices 28,000 Owned
4,000 Leased
La Mirada, CA Extrusion plant & offices 98,000 Leased
Mankato, MN Extrusion plant & offices 36,000 Owned
54,000 Leased
McMinnville, OR Extrusion plant & offices 40,000 Owned
McPherson, KS Extrusion plant & 51,000 Owned
offices
Paulding, OH Extrusion plant & offices 68,000 Owned
20,000 Leased
Portage, WI Extrusion plant & offices 115,000 Owned
54,000 Leased
Richmond, IN Extrusion plant & offices 52,000 Owned
29,000 Leased
Taylorville, IL Extrusion plant & offices 40,000 Owned
Wichita, KS Extrusion plant & offices 63,000 Owned
128,000 Leased
Cornwall, Ontario Extrusion plant & offices 38,000 Leased
Granby, Quebec Extrusion plant & offices 75,000 Owned
10,000 Leased
1,401,000
Color & Specialty Compounds
Location Description Size in Square Owned/
Feet Leased
Cape Girardeau, MO Compounding plant & offices 57,000 Owned
60,000 Leased
Charleston, SC Compounding plant & offices 97,000 Leased
Conneaut, OH Compounding plant & offices 94,000 Owned
Conshohocken, PA Calendering plant & offices 39,000 Owned
Donora #1, PA Compounding plant & offices 142,000 Owned
Donora #2, PA Compounding plant & offices 88,000 Owned
Goddard, KS Color plant & offices 38,000 Owned
Kearny, NJ Compounding plant & offices 59,000 Owned
Lake Charles, LA Compounding plant & offices 55,000 Owned
Lockport, NY Compounding plant & offices 45,000 Owned
Oxnard, CA Compounding plant & offices 73,000 Leased
St. Clair, MI Compounding plant & offices 71,000 Owned
Montreal, Quebec Color plant & offices 39,000 Leased
Stratford, Ontario Color plant & offices 65,000 Owned
Donchery, France Compounding plant & offices 30,000 Owned
1,052,000
Molded & Profile Products
Location Description Size in Square Owned/
Feet Leased
El Monte, CA Profile Plant & Offices 63,000 Leased
Greensboro, GA Profile Plant & Offices 14,000 Owned
6,000 Leased
McPherson, KS Profile Plant & Offices 51,000 Owned
Warsaw, Indiana Injection Molding plant & 41,000 Owned
offices
Cookshire, Quebec Injection Molding plant & 140,000 Owned
offices
Toronto, Ontario Injection Molding plant & 73,000 Leased
offices
388,000
In addition, the Company leases office facilities for its Corporate
Headquarters in St. Louis, Missouri and for administrative offices in Montreal,
Quebec and Washington, Pennsylvania, the aggregate square footage of which
approximates 21,500.
The plants located at the premises listed above are equipped with 90 sheet
extrusion lines, 63 supplementary co-extruders, 31 profile extrusion lines, 40
general compounding lines, 17 color compounding lines, 63 injection molding
machines, 20 printing machines, 5 compression molding machines, a calendering
line, cutting and grinding machinery, resin storage facilities, warehouse
equipment, and quality laboratories at all locations. The Company believes that
its present facilities along with anticipated capital expenditures (estimated to
be over $20 million in 1999) are adequate for the level of business anticipated
in fiscal year 1999.
Item 3. LEGAL PROCEEDINGS
In 1992 and 1996, a former Director, Chairman of the Board, and Chief
Executive Officer of the Company, filed lawsuits against the Company and certain
of its Directors and major shareholders. In the suits, it was claimed that the
Company should adjust his existing stock options, provide for the issuance of
additional shares of common stock, and award to him attorney's fees and
interest. In February 1997, the Company settled both lawsuits. The settlement
resolved all claims and terminated all disputes between the respective parties
and general releases were executed to prevent further action on such disputes.
The settlement was reflected in the Company's 1997 financial statements and,
after consideration of amounts previously accrued, did not result in a net
charge to earnings.
The Company is also subject to various other claims, lawsuits, and
administrative proceedings arising in the ordinary course of business with
respect to commercial, product liability, employment, and other matters, several
which claim substantial amounts of damages. While it is not possible to
estimate with certainty the ultimate legal and financial liability with respect
to these claims, lawsuits, and administrative proceedings, the Company believes
that the outcome of these other matters will not have a material adverse effect
on the Company's financial position or results of operations. The Company
currently has no litigation with respect to any environmental matters.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal
year ended October 31, 1998.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information on page 29 and 32 of the 1998 Annual Report to Shareholders,
attached hereto as Exhibit 13, is incorporated by reference in response to this
item. The common stock dividend amounts on page 29 present the cash dividends
declared in 1997 consisting of four quarterly payments at five cents per share
and the cash dividends declared in 1998 consisting of four quarterly payments at
six cents per share. On December 8, 1998, the Company declared a dividend of
seven cents per share payable on January 5, 1999. The Company's Board of
Directors reviews the dividend policy each December based on the Company's
business plan and cash flow projections for the next fiscal year.
Item 6. SELECTED FINANCIAL DATA
The information on page 29 of the 1998 Annual Report to Shareholders,
attached hereto as Exhibit 13, is incorporated by reference in response to this
item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information on pages 13, 14 and 15 of the 1998 Annual Report to
Shareholders, attached hereto as Exhibit 13, is incorporated by reference in
response to this item.
Safe Harbor Statement - Statements in this Annual Report that are not purely
historical, including statements which express the Company's belief,
anticipation or expectation about future events, are forward-looking statements.
These statements may be found in the descriptions of the Company's business in
Item 1 and legal proceedings in Item 3, and include statements in "Management's
Discussion and Analysis," incorporated herein by reference, about future capital
expenditures, expenditures for environmental compliance, year 2000 compliance,
and anticipated cash flow and borrowings.
Forward looking statements involve certain risks and uncertainties that could
cause actual results to differ materially from such statements. In addition to
the risk factors discussed in Item 1 (Business, under the headings Raw
Materials, Seasonality, Competition, Government Regulation, and International
Operations) included herein on pages 7 through 8, other important factors which
have and could impact the Company's operations and results, include: (1) the
Company's financial leverage and the operating and financial restrictions
imposed by the instruments governing its indebtedness may limit or prohibit its
ability to incur additional indebtedness, create liens, sell assets, engage in
mergers, acquisitions or joint ventures, pay cash dividends, or make certain
other payments; the Company's leverage and such restrictions could limit its
ability to respond to changing business or economic conditions; and (2) the
successful expansion through acquisitions, in which Spartech looks for
candidates that can complement its existing product lines, expand geographic
coverage, and provide superior shareholder returns, is not assured. Acquiring
businesses that meet these criteria continues to be an important element of the
Company's business strategy. Some of the Company's major competitors have
similar growth strategies. As a result, competition for qualifying acquisition
candidates is increasing and there can be no assurance that such future
candidates will exist on terms agreeable to the Company. Furthermore,
integrating acquired businesses requires significant management time and skill
and places additional demands on Company operations and financial resources.
However, the Company continues to seek value-added acquisitions which meet its
stringent acquisition criteria and complement its existing businesses.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information entitled "Quarterly Financial Information" on page 27 of the
1998 Annual Report to Shareholders, attached hereto as Exhibit 13, is
incorporated by reference in response to this item.
In addition, the financial statements of the Registrant filed herewith are
set forth in Item 14 and included in Part IV of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning Directors of the Company contained in the section
entitled "Election of Directors" of the Definitive Proxy Statement for the 1999
Annual Meeting of Shareholders to be filed with the Commission on or about
January 15, 1999, is incorporated herein by reference in response to this item.
In addition, the following table sets forth certain information with respect
to the Company's executive officers:
Position with the Company
Name Age and Date Appointed
Bradley B. Buechler 50 President (April 1987), Chief
Executive Officer (October 1991),
and Director (February 1984)
David B. Mueller 45 Executive Vice President and
Chief Operating Officer (May
1996), Secretary (October 1991),
and Director (March 1994)
Daniel J. Yoder 57 Vice President of Materials
(September 1998) and Technology
(May 1990)
Randy C. Martin 36 Vice President-Finance and Chief
Financial Officer (May 1996)
David G. Pocost 37 Vice President of Engineering
(September 1998), Quality and MIS
(December 1996)
Mr. Buechler, a CPA, was with Arthur Andersen LLP for ten years before the
commencement of his employment with the Company in 1981. Prior to the positions
currently held, he was the Company's Corporate Controller and Vice President -
Finance from 1981-1984, Chief Financial Officer from 1983 - 1987 and Chief
Operating Officer from 1985 - 1996.
Mr. Mueller, a CPA, was previously with Arthur Andersen LLP for seven years
(1974 - 1981). More recently he was Corporate Controller of Apex Oil Company, a
large independent oil company, from 1981-1988. Prior to the positions currently
held, he was the Company's Vice President of Finance, Chief Financial Officer
from 1988 - 1996.
Mr. Yoder was General Manager of the Company's Spartech Plastics Central
Region from 1986-1990. From 1983-1986 he was Vice President of Manufacturing
for Atlas Plastics, Corp., prior to its acquisition by the Company.
Mr. Martin, a CPA and CMA, was previously with KPMG Peat Marwick LLP for
eleven years before joining the Company in 1995. Prior to the positions
currently held, he was the Company's Corporate Controller from 1995 to 1996.
Mr. Pocost was previously with Moog Automotive as Division Quality Assurance
Manager and Senior Materials Engineer for eight years. Prior to the position
currently held, he was the Company's Director of Quality & Environmental Affairs
from 1994-1996.
Item 11. EXECUTIVE COMPENSATION
The information contained in the sections entitled "Executive Compensation"
and "Board Committees and Compensation" of the Definitive Proxy Statement for
the 1999 Annual Meeting of Shareholders to be filed with the Commission on or
about January 15, 1999 is incorporated herein by reference in response to this
item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the section entitled "Security Ownership" of
the Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders to be
filed with the Commission on or about January 15, 1999 is incorporated herein by
reference in response to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the sections entitled "Election of Directors",
"Executive Compensation" and "Certain Transactions" of the Definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders to be filed with the
Commission on or about January 15, 1999 is incorporated herein by reference in
response to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
The following financial statements, financial statement schedules and
exhibits are incorporated by reference from the 1998 Annual Report to
Shareholders and/or filed as part of this Form 10-K:
Page
Annual Report
Form 10-K to Shareholders
Report of Independent Public Accountants F-1 28
Financial Statements
Consolidated Statement of Operations - 16
Consolidated Balance Sheet - 17
Consolidated Statement of Shareholders' Equity - 18
Consolidated Statement of Cash Flows - 19
Notes To Consolidated Financial Statements - 20-27
Financial Statement Schedules
Schedule
Number Description
II. Valuation and Qualifying Accounts F-2 -
Exhibits
Exhibits required to be filed by Item 601(a) of Regulation S-K are included
as Exhibits to this report as follows:
2(A)(1) Asset Purchase and Sale Agreement between Spartech Corporation,
Preferred Technical Group, Inc. and Echlin Inc. dated August 22, 1997
2(B)(2) Asset Purchase and Sale Agreement between Spartech Corporation,
Polycom Huntsman, Inc., and Spartech Polycom, Inc. dated March 31,
1998
3(A)(3) Amended and Restated Articles of Incorporation
3(B) Amended and Restated By-Laws
10(A)(4) Amended and Restated Employment Agreement dated November 1, 1997,
between Bradley B. Buechler and Spartech Corporation
10(B)(4) Amended and Restated Employment Agreement dated November 1, 1997,
between David B. Mueller and Spartech Corporation
10(C) Amended and Restated Employment Agreement dated June 30, 1998,
between Daniel J. Yoder and Spartech Corporation
10(D)(5) Spartech Corporation Incentive Stock Option Plan dated July 26, 1991
as amended
November 1, 1997
10(E)(6) Spartech Corporation Restricted Stock Option Plan dated July 26, 1991
as amended November 1, 1997
10(F)(7) Employment Agreement between Randy C. Martin and Spartech Corporation
dated as of March 31, 1997
10(G)(7) Employment Agreement between David G. Pocost and Spartech Corporation
dated as of February 1, 1997
11 Statement re Computation of Per Share Earnings
13 Pages 13 through 29 and 32 of 1998 Annual Report to Shareholders
21 Subsidiaries of Registrant
23 Consent of Independent Public Accountants
24 Powers of Attorney
27 Financial Data Schedule
(1) Filed as an exhibit to the Company's Form 8-K, dated July 28,
1997, filed with the Commission on August 12, 1997, and incorporated
herein by reference.
(2) Filed as an exhibit to the Company's Form 8-K, dated March 31,
filed with the Commission on April 14, 1998, and incorporated herein
by reference.
(3) Filed as an exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended May 2, 1998, filed with the Commission on June
1, 1998 and incorporated herein by reference.
(4) Filed as an exhibit to the Company's annual report on Form 10-K
for the fiscal year ended November 1, 1997, filed with the
Commission on January 12, 1998, and incorporated herein by
reference.
(5) Filed as an exhibit to the Company's S-8, filed with the
Commission on July 31, 1998 and incorporated herein by
reference.
(6) Filed as an exhibit to the Company's proxy statement filed with the
Commission on January 27, 1998 and incorporated herein by reference.
(7) Filed as an exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended August 2, 1997, filed with the Commission on
September 2, 1997, and incorporated herein by reference.
All other financial statements and schedules not listed have been omitted
since the required information is included in the consolidated financial
statements or the notes thereto, or is not applicable or required.
Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
January 06, 1999 By: /S/ Bradley B. Buechler
(Date) Bradley B. Buechler
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
DATE SIGNATURES TITLE
January 06, 1999 /S/ Bradley B. Buechler President, Chief Executive
Bradley B. Buechler Officer, and Director
(Principal Executive Officer)
January 06, 1999 /S/ David B. Mueller Executive Vice President,
David B. Mueller Chief Operating Officer, and
Director
January 06, 1999 /S/ Randy C. Martin Vice President-Finance and
Randy C. Martin Chief Financial Officer
(Principal Financial and
Accounting Officer)
January 06, 1999 /S/ Ralph B. Andy Director
Ralph B. Andy*
January 06, 1999 /S/ Thomas L. Cassidy Director
Thomas L. Cassidy*
January 06, 1999 /S/ W. R. Clerihue Chairman of the Board and
W. R. Clerihue* Director
January 06, 1999 /S/John R. Kennedy Director
John R. Kennedy*
January 06, 1999 /S/ Calvin J. O'Connor Director
Calvin J. O'Connor*
January 06, 1999 /S/ Jackson W. Robinson Director
Jackson W. Robinson*
January 06, 1999 /S/ Alan R. Teague Director
Alan R. Teague*
* By Bradley B. Buechler as Attorney-in-Fact pursuant to Powers of Attorney
executed by the Directors listed above, which Powers of Attorney have been filed
with the Securities and Exchange Commission.
/S/ Bradley B. Buechler
Bradley B. Buechler
As Attorney-in-Fact
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SPARTECH CORPORATION
We have audited in accordance with generally accepted auditing standards, the
financial statements included in SPARTECH Corporation's 1998 Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated December 4, 1998. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. Schedule II included
in this Form 10-K is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri
December 4, 1998
F-1
SPARTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED 1998, 1997, AND 1996
(Dollars in thousands)
BALANCE AT ADDITIONS AND BALANCE
BEGINNING OF CHARGES TO COSTS AT END OF
DESCRIPTION PERIOD AND EXPENSES WRITE-OFFS PERIOD
October 31, 1998:
Allowance for $ 2,212 $ 1,912 $ (1,694) $ 2,430
Doubtful Accounts
November 1, 1997:
Allowance for $ 1,946 $ 985 $ (719) $ 2,212
Doubtful Accounts
November 2, 1996:
Allowance for $ 1,592 $ 578 $ (224) $ 1,946
Doubtful Accounts
Fiscal year 1996, 1997, and 1998 additions and write-offs include activity
relating to the acquisition of certain of the businesses and assets of Portage
Industries Corporation in May 1996, the Hamelin Group, Inc. in September 1996,
the Preferred Plastics Sheet Division of Echlin Inc. in August 1997, Polycom
Huntsman Inc. in March 1998, Prismaplast Canada Ltd. In April 1998, and Anjac-
Doron Plastics, Inc. in October 1998.
F-2
SPARTECH CORPORATION
BY-LAWS
Amended and Restated As of June 11, 1998
Current As of June 19, 1998
___________________________________________________________
ARTICLE I
Offices
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held in St. Louis
County, Missouri at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors or the
officer calling the meeting and stated in the notice of the meeting.
Section 2. Annual meetings of stockholders shall be held on the second
Wednesday of March if not a legal holiday, and if a legal holiday, then on the
next Business Day following, at 10:00 a.m. or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a Board
of Directors, and transact such other business as may properly be brought before
the meeting. "Business Day" means any day on which the banks in New York City
are not authorized or required to remain closed and on which the New York Stock
Exchange is not closed.
Section 3. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 4. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chief executive officer and shall be called
by the chief executive officer or the secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 5. Written notice of every meeting of the stockholders stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 6. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 8. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provisions of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 9. Each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after three years from its date, unless the proxy provides for a longer
period.
Section 10. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, by any provision of the statutes, the meeting and vote of stockholders
may be dispensed with if all of the stockholders who would have been entitled to
vote upon the action of such meeting were held shall consent in writing to such
corporate action being taken; or if the certificate of incorporation authorizes
the action to be taken with the written consent of the holders of less than all
of the stock who would have been entitled to vote upon the action if a meeting
were held, then on the written consent of the stockholders having not less than
such percentage of the total number of votes as may be authorized in the
certificate of incorporation; provided that in no case shall the written consent
be by the holders of stock having less than the minimum percentage of the total
vote required by statute for the proposed corporate action, and provided that
prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous written consent.
ARTICLE III
Directors
Number, Qualification, Term of Office
Section 1. The number of directors shall not be less than four nor more
than 15, the exact number of directors to be fixed from time to time only by the
vote of a majority of the entire Board. No decrease in the number of directors
shall shorten the term of any incumbent director.
The directors shall be divided into three classes: Class A, Class B and
Class C. Such classes shall be as nearly equal in number as possible. At each
annual election, the directors chosen to succeed those whose terms then expire
shall be identified as being of the same class as the directors they succeed and
shall be elected for a term expiring at the third succeeding annual meeting or
thereafter when their respective successors in each case are elected and have
qualified. If the number of directors is changed, any increase or decrease in
directors shall be apportioned among the classes so as to maintain all classes
as nearly equal in number as possible and any individual director elected to any
class shall hold office for a term which shall coincide with the term of such
class.
The Board may, by the vote of a majority of the entire Board, prescribe
qualifications of candidates for the office of director of the Corporation, but
no director then in office shall be disqualified from office as a result of the
adoption of such qualifications.
Notwithstanding the foregoing, whenever the holders of any preferred stock
issued by the Corporation shall have the right, voting as a class or otherwise,
to elect directors at the annual meeting of stockholders, the then authorized
number of directors of the Corporation shall be increased by the number of the
additional directors so to be elected, and at such meeting the holder of such
preferred stock shall be entitled, as a class or otherwise, to elect such
additional directors. Any directors so elected shall hold office until the next
annual meeting of stockholders or until their rights to hold such office
terminate pursuant to the provisions of such preferred stock, whichever is
earlier. The provisions of this paragraph shall apply notwithstanding the
maximum number of directors hereinabove set forth.
Removal of Directors
Section 2. Directors of the Corporation may be removed solely in
accordance with the provisions of Article FOURTEENTH of the Certificate of
Incorporation.
Vacancies
Section 3. If the office of any director becomes vacant at any time by
reason of death, resignation, retirement, disqualification, removal from office
or otherwise, or if any new directorship is created by any increase in the
authorized number of directors, a majority of the directors then in office,
although less than a quorum, or the sole remaining director, may choose a
successor or fill the newly created directorship, and the director so chosen
shall hold office, subject to the provisions of these By-laws, until the
expiration of the term of the class to which he has been chosen and until his
successor shall be duly elected and qualified.
Powers
Section 4. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these By-laws directed or required to be exercised or done
by the stockholders.
Meetings of the Board of Directors
Section 5. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 7. Notice of any meeting of the Board of Directors shall be
given to all directors in the manner hereinafter provided not less than fourteen
(14) Business Days prior to such meeting, provided that, when necessary or
appropriate, notice may be given not less than 72 hours prior to any such
meeting so long as such notice shall be given by facsimile transmission or
telephone. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice of such meeting.
Section 8. Special meetings of the Board may be called by the chief
executive officer on three day's notice to each director, either personally or
by facsimile or by telegram or telephone; special meetings shall be called by
the chief executive officer or secretary in like manner and on like notice on
the written request of any two directors.
Section 9. At all meetings of the Board, a majority of the membership
of the whole Board shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the certificate of incorporation, or as
otherwise provided in this Article. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 10. Any transaction requiring a vote by the Board of Directors
must not only satisfy the requirements as set forth in this Article, but also
must satisfy any and all requirements contained in the certificate of
incorporation of the corporation and all statutory requirements.
Board Action Without A Meeting
Section 11. Unless otherwise restricted by the certificate of
incorporation or these By-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committees.
Committees of Directors
Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the corporation, and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; provided, however, that in the absence or disqualification of any
member of such committee or committees, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 13. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
Compensation of Directors
Section 14. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
Notice
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these By-laws, notice is required to be given
to any stockholder, it shall not be construed to mean personal notice unless
expressly stated, but such notice may be given in writing, by mail, addressed to
such stockholder at his address as it appears on the records of the corporation,
with postage hereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail.
Notices to directors may be given by telephone or facsimile transmission.
Notice by telephone shall be deemed to be given when the call is either received
personally by the director or received in the director's personal mailbox in a
voice mail system at a number furnished by the director for such purpose.
Notice by facsimile transmission shall be deemed to be given upon confirmation
by the sending machine of a completed transmission to a number furnished by the
director for such purpose; provided that if the receiving location is at a place
other than the director's residence and is either sent on a Saturday, Sunday or
federal holiday or confirmed after 5:00 p.m. local time at the place of receipt
it shall be deemed to be given on the next business day.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. The attendance of a person at any meeting shall constitute
a waiver of notice of such meeting, except where the person attends such meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened and so objects at the beginning
of the meeting.
ARTICLE V
Officers
Section 1. The officers of the corporation shall be elected by the
Board of Directors and shall be a chairman of the board (who shall also be a
director of the corporation), a president, an executive vice president, a vice
president-finance or treasurer, and a secretary. The Board of Directors may
also elect a vice chairman of the board (who shall also be a director of the
corporation), additional vice presidents (who may be designated as executive or
senior vice presidents or given such additional designations as the Board may
determine), assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these By-laws otherwise provide.
Section 2. The Board of Directors shall elect the above officers
annually at its first meeting after the annual meeting of stockholders. If the
election of such officers shall not be held at such meeting, such election shall
be held as soon thereafter as conveniently may be. Vacancies may be filled or
new offices created and filled at any meeting of the Board of Directors.
Section 3. The Board of Directors may appoint or authorize the
appointment of such other officers and agents as it shall deem necessary who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify or until their death, resignation or
removal. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
Section 6. The officers of the corporation shall each have the
following powers and duties generally pertaining to their respective offices, as
well as such powers and duties as from time to time may be conferred by the
Board of Directors:
a. CHAIRMAN OF THE BOARD (AND VICE CHAIRMAN OF THE BOARD). The
chairman of the board shall preside at all meetings of the Board of
Directors. In the absence of the chairman of the board or in the event of
his inability or refusal to act, the vice chairman of the board (if any)
shall exercise the powers and perform the duties of the chairman of the
board.
b. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The president shall be
the chief executive officer of the corporation. He shall preside at all
meetings of the stockholders; shall have general and active management of
the business of the corporation; shall see that all orders and resolutions
of the Board of Directors are carried into effect; and in general shall
have all powers and authority and perform all duties as are usually vested
in the president and chief executive officer of a corporation, as well as
such other powers, authority and duties as may be prescribed by the Board
of Directors from time to time. In the absence of the chairman of the
board and the vice chairman of the board or in the event of their inability
or refusal to act, the president shall exercise the powers and perform the
duties of the chairman of the board. The president may execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law or these By-laws to
be otherwise signed and executed.
c. EXECUTIVE VICE PRESIDENT. The executive vice president (or if
there shall be more than one, an executive vice president designated by the
Board of Directors), shall be the chief operating officer of the
corporation. He shall preside at all meetings of the stockholders at which
the president is not present, and at all meetings of the Board of Directors
at which neither the chairman nor the vice chairman of the board nor the
president is present; shall have operating management authority over the
corporation; and in general shall have all powers and authority and perform
all duties as are usually vested in the chief operating officer of a
corporation, as well as such other powers, authority and duties as may be
prescribed by the Board of Directors or the president from time to time.
In the absence of the president or his inability or refusal to act, the
executive vice president (or if there shall be more than one, the executive
vice president designated as chief operating officer) shall exercise the
powers and perform the duties of the president. The executive vice
president may execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted
by law or these By-laws to be otherwise signed and executed.
If there is more than one executive vice president, an executive vice
president who has not been designated as chief operating officer shall have
such powers, authority and duties as may be prescribed by the Board of
Directors or the president from time to time, and in the absence of the
executive vice president designated as chief operating officer or in the
event of his inability or refusal to act, the other executive vice
presidents, if any, in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election)
shall exercise the powers and perform the duties of the chief operating
officer.
d. OTHER VICE PRESIDENTS. The other vice presidents, if any, shall
each possess powers and perform such duties, in addition to those
prescribed in these By-laws, as the Board of Directors and/or the president
may from time to time determine, and each shall have supervision over such
department or division of the corporation's business as the chairman of the
board or the president may from time to time assign to him. In the absence
of the executive vice presidents or in the event of their inability or
refusal to act, the senior vice presidents, and after them the other vice
presidents, if any, in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election)
shall exercise the powers and perform the duties of the executive vice
presidents.
e. SECRETARY AND ASSISTANT SECRETARY. The secretary shall attend
all meetings of the Board of Directors and all meetings of the stockholders
and record all the proceedings of the meetings of the corporation and of
the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors, the chief executive
officer, the chairman of the board, the vice chairman of the board, or the
president, under whose supervision he shall be. He shall have custody of
the corporate seal of the corporation and he, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and
when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing of his signature.
The assistant secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board of Directors (or if there
be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
f. TREASURER OR VICE PRESIDENT-FINANCE AND ASSISTANT TREASURER. The
treasurer or vice president-finance shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation and shall deposit
all monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the chief executive officer, chairman of the board, vice
chairman of the board, and president, and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of
all his transactions in his office and of the financial condition of the
corporation.
If required by the Board of Directors, he shall give the corporation a
bond in such sum and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate certifying the number of shares owned by him in the
corporation, signed by, or in the name of the corporation by, (1) the chairman
or vice chairman of the Board of Directors, the president or a vice president,
and (2) the treasurer or vice president-finance, the secretary, an assistant
treasurer or an assistant secretary.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificates
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Where a certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or (2) by a registrar other than the
corporation or its employee, the signatures of the officers of the corporation
may be facsimiles. In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representatives, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Transfers of Stock
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its book.
Fixing Record Date
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or any
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock of for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Registered Stockholders
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Annual Statement
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
Checks
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Fiscal Year
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Seal
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
Amendments
Sections 1, 2 and 3 of Article III and this Article VIII of the By-laws may
not be amended, modified or rescinded except by the affirmative vote of the
holders of at least 80 percent of the outstanding shares of capital stock of the
corporation entitled to vote generally in the election of directors, considered
for such purpose as one class, and, in addition, the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of the
corporation entitled to vote generally in the election of directors, considered
for such purpose as one class, which are not beneficially owned, directly or
indirectly, by any corporation, person or other entity which is the beneficial
owner (as defined in Article THIRTEENTH of the Certificate of Incorporation),
directly or indirectly, of 10 percent or more of the outstanding shares of such
capital stock, considered for such purpose as one class. To the extent not
inconsistent with the foregoing, all other provisions of the By-laws may be
amended, modified and rescinded and new By-laws may be adopted, (i) by the
affirmative vote of the holders of at least a majority of the outstanding shares
of capital stock of the corporation entitled to vote thereon, or (ii) by the
Board of Directors; provided, that any By-law adopted, amended or modified by
the Board of Directors may be amended, modified or rescinded by the vote of the
stockholders prescribed in clause (i) above.
EMPLOYMENT AGREEMENT
AGREEMENT entered into this 30th day of June, 1998 by and between Daniel J.
Yoder (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 June 30, 1998 and,
unless earlier terminated as provided herein, continue through June 29, 2001.
3. Duties. Employer employs Employee to act in an executive capacity, as
Vice President-Engineering and Technology 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
$162,500 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.
5. Bonuses. Employee shall be eligible for an annual 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, but
will be a minimum of $25,000 per year.
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 notwithstanding, 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:
Daniel J. Yoder
EXHIBIT 11
SPARTECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
Fiscal Year Ended
Oct 31, Nov. 1, Nov. 2,
1998 1997 1996
NET EARNINGS
Basic and Diluted net earnings applicable to
common shares $ 33,720 $ 25,493 $ 18,317
WEIGHTED AVERAGE SHARES OUTSTANDING
Weighted average common shares outstanding 26,807 26,418 23,714
Add: Shares issuable from assumed exercise of
options and warrants 1,802 1,420 1,160
Diluted weighted average common shares
outstanding 28,609 27,838 24,874
NET EARNINGS PER COMMON SHARE
Basic $ 1.26 $ .96 $ .77
Diluted $ 1.18 $ .92 $ .74
SPARTECH CORPORATION
1998 Annual ReportManagement's Discussion and Analysis
RESULTS OF OPERATIONS
Comparison of Fiscal Years 1998 and 1997
Net sales increased 30% in 1998 to $653.9 million from $502.7 million in 1997.
These results benefited from 1998 pounds shipped of 902 million compared to 535
million in 1997. This growth in sales volume included a 10% increase in pounds
sold excluding acquisitions (internal growth), and the effect of the late-1997
acquisition of Preferred Plastic Sheet, and the 1998 acquisitions of Polycom
Huntsman, Inc. ("Polycom") and Prismaplast Canada Ltd. ("Plasticolour").
Our Extruded Sheet & Rollstock group's net sales increased 21%, to $455.1
million in 1998, resulting from a 10% increase in pounds shipped and a 15%
increase for the August 1997 acquisition of Preferred Plastics. The increase in
Extruded Sheet & Rollstock pounds sold represented strong sales of
sign/advertising and specialty packaging products. Price and product mix changes
had a negative 4% impact on sales for the year. The Color & Specialty Compounds
group sales of $158.2 million increased by 88% from 1997, as a result of the
$75.0 million in revenues generated and approximately 240 million pounds sold by
our 1998 acquisitions. The nearly 14% growth in base volume for the Color &
Specialty Compounds group was offset by price/mix declines due to the increase
in tolling business (value-added conversion and processing of customer-owned
material). Molded & Profile Products group sales totaled $40.6 million in 1998
reflecting a slight decrease related to the sale of its housewares business
early in the year.
Cost of sales increased to $542.6 million for 1998 compared with $420.5 million
for 1997, but decreased to 83.0% of net sales for 1998 from 83.6% for 1997. The
more favorable cost of sales percentage in 1998 represents a mix of higher
margin product sales generated by our new Alloy Plastics and Product
Transformations and improved production efficiencies, partially offset by an
increase in depreciation as a result of capital expenditures incurred by the
Company during the last 24 months.
Selling, general, and administrative expenses were $38.3 million for 1998
compared to $31.0 million in 1997. On a percentage of net sales basis selling,
general, and administrative costs decreased to 5.9% in 1998 from 6.2% in 1997
primarily as a result of continued cost containment efforts in 1998, ongoing
synergies from acquisitions, and the effect of the overall increase in sales
volume on the fixed portion of the costs.
Operating earnings for 1998 were $69.7 million (10.7% of net sales) compared to
$49.7 million (9.9% of net sales) for 1997. These gains in operating earnings
were achieved through increased sales levels, improved production efficiencies,
cost containment efforts, and the new product sales discussed above.
Interest expense in 1998 of $13.6 million increased from $8.4 million in 1997 as
a result of borrowings related to the Preferred Plastics and Polycom Huntsman
acquisitions completed in August 1997 and March 1998, respectively.
The Company's effective tax rate was 39.9% for 1998 compared to 38.3% in 1997.
The increase reflects the impact of non-deductible goodwill resulting from the
Polycom Huntsman acquisition.
Sidebar 3-D bar chartSG&A Expenses
As % of Sales
1998 = 5.9%
1997 = 6.2%
1996 = 6.4%
Sidebar 3-D bar chart
Operating Earnings
In Millions of Dollars
1998 = $69.7
1997 = $49.7
1996 = $34.5
<PAGE>
Sidebar 3-D bar chart
Operating Cash Flow
In Millions of Dollars
1998 = $64.5
1997 = $48.4
1996 = $23.2
Sidebar 3-D bar chart
Capital Expenditures
In Millions of Dollars
1998 = $17.9
1997 = $12.2
1996 = $9.6
Comparison of Fiscal Years 1997 and 1996
The Company's fiscal year ends on the Saturday closest to October 31. Fiscal
year 1998 and 1997 each represented 52 weeks while fiscal 1996 consisted of 53
weeks. The discussions below describe the affect of the extra week in 1996,
where appropriate.
Net sales were $502.7 million in 1997 representing a 28% increase from $391.3
million in 1996. Excluding acquisitions, this growth in sales represented a 7%
increase in pounds sold offset by a 3% decrease from changes in prices and mix
of products sold and a 2% decline related to the extra week in 1996. The
Extruded Sheet & Rollstock group's sales increased approximately 18% in 1997
representing an 8% increase in pounds shipped and a 15% increase in sales
related to acquisitions, while price and product mix changes and the extra week
in 1996 had a negative impact on sales. Net sales in the Color & Specialty
Compounds group increased 23% resulting from a 5% increase in pounds shipped and
a 27% increase in sales from the late-1996 acquisition of Korlin Concentrates,
net of declines from changes in prices, mix of products sold, and the extra week
in 1996. The Molded & Profile Products group contributed net sales of $42.9
million in its first full year as a market segment for the Company and benefited
from the late-1997 acquisition of Preferred's profile extruded products
operation.
Cost of sales decreased to 83.6% of net sales for 1997 from 84.5% for 1996. The
more favorable cost of sales percentage in 1997 reflects 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 18 months.
Selling, general, and administrative expenses decreased to 6.2% of net sales in
1997 from 6.4% in 1996. The decrease in 1997 reflects continued cost containment
efforts and the economies of scale obtained through acquisitions and sales
growth of the Company.
Operating earnings for 1997 were $49.7 million (9.9% of net sales) compared to
$34.5 million (8.8% of net sales) in 1996. The gains in operating earnings were
achieved through the increased sales levels, improved production efficiencies,
and cost containment efforts.
Interest expense in 1997 increased from 1996, reflecting additional borrowings
related to the Portage, Hamelin, and Preferred acquisitions, net of $15.4
million in paydowns on the 1996 balance of the bank credit facility. In
addition, the Company borrowed, and subsequently paid down, the $9.7 million due
to Hamelin Group Inc. during 1997.
The Company's effective tax rate was 38.3% for 1997 which was up from 37.8% in
1996.
Environmental Matters
The Company is subject to various laws & regulations governing employee safety
and the quantities of certain specified substances that may be emitted into the
air, discharged into waterways, 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 processes are crude oil
or natural gas derivatives which 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; the
pricing of 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 1999.
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 continues to generate strong cash flows from operations, $64.5
million in 1998, resulting from the 32% increase in net earnings in 1998
compared to the prior year. Operating cash flows provided by changes in working
capital were a positive $1.1 million as a result of consistent management of
accounts receivables and inventories during periods of revenue growth and higher
days payables outstanding.
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. The Company anticipates capital expenditures of nearly
$20 million in fiscal 1999 to support future growth, to assist in developing new
Alloy Plastics, and to maintain its facilities.
<PAGE>
On March 31, 1998, the Company completed its acquisition of all the stock of
Polycom, a manufacturer of color & specialty compounds. The net cash purchase
price was approximately $129 million (including estimated costs of the
transaction and net of cash acquired of $3 million). The acquisition was funded
through the Company's bank credit facility and the issuance of $10 million in
SPARTECH common stock to Polycom shareholders. For its fiscal year ended March
31, 1998, Polycom's color, specialty, and toll compounding businesses generated
annual sales of approximately $115 million. In addition, the Company completed
two other acquisitions in fiscal 1998 which, when combined with the Polycom
purchase, totaled $132.6 million of cash paid for acquired businesses. The
Company continues to evaluate value-added acquisition opportunities that meet
its stringent acquisition criteria, which are premised on achieving returns in
excess of its weighted average cost of capital.
The cash flows provided by financing activities were $82.9 million for 1998. The
primary activities were bank borrowings of $132.6 million for acquisitions,
repayment of debt of $33.5 million, purchases of treasury stock of $13.2
million, and proceeds from stock options exercised of $4.3 million. The Company
paid common stock dividends of $6.4 million or 24 cents per share in 1998 and at
its December 1998 meeting the Company's Board of Directors raised the dividend
to an annual rate of 28 cents per share.
Financing Arrangements
In conjunction with the Polycom acquisition, the Company amended its bank credit
facility to an aggregate availability of $150 million. The bank credit facility
has a five-year term, with interest payable at a rate chosen by the Company of
either prime or LIBOR plus .5% to 1.0%. The bank credit facility consists of a
$50 million term loan, which has equal quarterly payments due of $2.5 million
that reduce this availability over the five-year term, and a $100 million
revolving facility. At October 31, 1998, the Company had total borrowings under
the bank credit facility of $100.7 million at a weighted average interest rate
of 6.4%.
The Company anticipates that cash flow from operations, together with available
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 Company has already modified substantially all of its computer systems to be
Year 2000 compliant. The Company does not anticipate any significant costs,
problems, or uncertainties associated with becoming Year 2000 compliant. The
Company could potentially experience disruption to some aspects of its
operations as a result of noncompliant systems utilized by unrelated third party
governmental and business entities. The Company continues to communicate with
others with whom it does significant business to determine their Year 2000
compliance readiness and the extent to which the Company is vulnerable to any
third party Year 2000 issues. The Company is also implementing a conversion of
its financial software to an Oracle enterprise-wide financial package that will
be put in place during 1999. This system will provide significant additional
functionality to the Company's financial capabilities.
This Annual Report contains certain forward-looking statements, as defined in
the Private Securities Litigation Reform Act of 1995, which are based on current
expectations and are subject to risks and uncertainties. The Company cautions
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 statements 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 Commission.
Sidebar 3-D bar chart
Cash Paid For Acquisitions
In Millions of Dollars
1998 = $132.6
1997 = $71.9
1996 = $67.3
Sidebar 3-D bar chart
Debt Repayments
In Millions of Dollars
1998 = $33.5
1997 = $27.7
1996 = $16.1
<PAGE>
SPARTECH CORPORATION
Consolidated Statement of Operations
(Amounts in thousands, except per share amounts)
Fiscal Year
1998 1997 1996
Net Sales $653,855 $502,715 $391,348
Costs and Expenses
Cost of sales 542,640 420,500 330,776
Selling, general and administrative 38,257 31,019 25,184
Amortization of intangibles 3,230 1,495 896
584,127 453,014 356,856
Operating Earnings 69,728 49,701 34,492
Interest 13,602 8,393 5,062
Earnings Before Income Taxes 56,126 41,308 29,430
Income taxes 22,406 15,815 11,113
Net Earnings $33,720 $25,493 $18,317
Net Earnings Per Common Share
Basic $1.26 $.96 $.77
Diluted $1.18 $.92 $.74
Weighted Average Number of
Common Shares
Basic 26,807 26,418 23,714
Diluted 28,609 27,838 24,874
See accompanying notes to consolidated financial statements.
<PAGE>
1998 Annual ReportConsolidated Balance Sheet (Dollars in thousands, except share
amounts)
OCTOBER 31, NOVEMBER 1,
1998 1997
ASSETS
Current Assets
Cash and equivalents $7,247 $6,058
Receivables, net of allowances of
$2,430 in 1998 and $2,212 in 1997 91,631 74,271
Inventories 64,859 55,851
Prepayments and other 9,459 4,517
Total Current Assets 173,196 140,697
Property, Plant and Equipment, Net 206,887 129,362
Goodwill 148,668 83,565
Other Assets 4,558 5,179
$533,309 $358,803
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 8,948 $ 921
Accounts payable 59,578 47,221
Accrued liabilities 32,466 29,126
Total Current Liabilities 100,992 77,268
Long-Term Debt, Less Current Maturities 245,272 141,693
Other Liabilities 33,449 11,453
Total Long-Term Liabilities 278,721 153,146
Shareholders' Equity
Common stock, 27,550,107 and 26,628,154 shares
issued in 1998 and 1997, respectively 20,663 19,971
Contributed capital 99,407 89,301
Retained earnings 50,185 22,912
Treasury stock, at cost, 688,917 shares
in 1998 and 147,691 shares in 1997 (11,875) (2,127)
Cumulative translation adjustments (4,784) (1,668)
Total Shareholders' Equity 153,596 128,389
$533,309 $358,803
See accompanying notes to consolidated financial statements.
<PAGE>
SPARTECH CORPORATION
Consolidated Statement of Shareholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Retained Cumulati Total
ve
Common Contribu Earnings Treasur Translat Shareholde
ted y ion rs'
Stock Capital (Deficit) Stock Adjustme Equity
nts
<S> <C> <C> <C> <C> <C> <C>
Balance, October $17,523 $66,771 $(12,099) $(67) - $72,128
28, 1995
Common stock 2,250 23,632 - - - 25,882
issuance
Stock options 184 305 - 2,127 - 2,616
exercised
Cash dividends - - (3,515) - - (3,515)
Treasury stock - - - (4,121) - (4,121)
purchases
Net earnings - - 18,317 - - 18,317
Translation - - - - 1,088 1,088
adjustments
Balance, November $19,957 $90,708 $2,703 $(2,061) $1,088 $112,395
2, 1996
Stock options 14 (1,407) - 4,335 - 2,942
exercised
Cash dividends - - (5,284) - - (5,284)
Treasury stock - - - (4,401) - (4,401)
purchases
Net earnings - - 25,493 - - 25,493
Translation - - - - (2,756) (2,756)
adjustments
Balance, November $19,971 $89,301 $22,912 $(2,127) $(1,668) $128,389
1, 1997
Common stock 476 9,524 - - - 10,000
issuance
Stock options 216 582 - 3,459 - 4,257
exercised
Cash dividends - - (6,447) - - (6,447)
Treasury stock - - - (13,207) - (13,207)
purchases
Net earnings - - 33,720 - - 33,720
Translation - - - - (3,116) (3,116)
adjustments
Balance, October $20,663 $99,407 $50,185 $(11,875)$(4,784) $153,596
31, 1998
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
1998 Annual ReportConsolidated Statement of Cash Flows
(Dollars in thousands)
Fiscal Year
1998 1997 1996
Cash Flows From
Operating Activities
Net earnings $ 33,720 $ 25,493 $ 18,317
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 18,530 11,548 7,211
Change in current assets and liabilities, net
of effects of acquisitions
Receivables (2,383) 1,072 365
Inventories (2,268) 1,296 (8,458)
Prepayments and other 1,314 538 (21)
Accounts payable 4,257 2,902 (3,034)
Accrued liabilities 151 (311) 6,146
Other, net 11,225 5,852 2,634
Net cash provided by operating 64,546 48,390 23,160
activities
Cash Flows From Investing Activities
Capital expenditures (17,859) (12,172) (9,566)
Business acquisitions (132,590) (71,920) (67,285)
Dispositions of assets 4,264 215 346
Net cash used for investing (146,185) (83,877) (76,505)
activities
Cash Flows From Financing Activities
Bank borrowings for business 132,590 11,920 21,104
acquisitions
Net borrowings (payments) on bank (32,190) (27,320) (14,914)
credit facility
Payments on bonds and leases (1,272) (409) (1,210)
Issuance of 7.0% Senior Notes - 60,000 -
Issuance of 7.62% Guaranteed - - 30,000
Senior Notes
Issuance of common stock - - 25,882
Debt issuance costs (801) (451) (444)
Cash dividends on common stock (6,447) (5,284) (3,515)
Stock options exercised 4,257 2,942 1,704
Treasury stock acquired (13,207) (4,401) (4,121)
Net cash provided by financing 82,930 36,997 54,486
activities
Effect of exchange rate changes on (102) (137) 39
cash and equivalents
Increase In Cash And Equivalents 1,189 1,373 1,180
Cash And Equivalents At Beginning Of 6,058 4,685 3,505
Year
Cash And Equivalents At End Of Year $ 7,247 $ 6,058 $ 4,685
See accompanying notes to consolidated financial statements.
<PAGE>
SPARTECH CORPORATIONNotes To Consolidated Financial Statements(Dollars in
thousands, except per share amounts)
(1) Significant Accounting Policies
Basis of Presentation - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts and related disclosures.
Actual results could differ from those estimates. Certain prior year amounts
have been reclassified to conform to the current year presentation. The
Company's fiscal year ends on the Saturday closest to October 31. Fiscal year
1998 and 1997 each consisted of 52 weeks, while 1996 included 53 weeks.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of SPARTECH Corporation and its wholly-owned
subsidiaries (the "Company"). All significant intercompany transactions and
balances have been eliminated.
Foreign Currency Translation - Assets and liabilities of the Company's Non-U.S.
operations are translated from their functional currency to U.S. dollars using
exchange rates in effect at the balance sheet date. Results of operations are
translated using average rates during the period. Adjustments resulting from the
translation process are included as a separate component of shareholders'
equity. The Company may periodically enter into foreign currency contracts to
manage exposures to market risks from prospective changes in exchange rates. No
such contracts were outstanding as of October 31, 1998.
Cash Equivalents - Cash equivalents consist of highly liquid investments with
original maturities of three months or less.
Inventories - Inventories are valued at the lower of cost (first-in, first-out)
or market. Finished goods include the costs of material, labor, and overhead.
Property, Plant and Equipment - Property, plant and equipment are carried at
cost. Depreciation is provided on a straight-line basis over the estimated
useful lives of the related assets as follows:
Years
Buildings and leasehold improvements 25
Machinery and equipment 12-16
Furniture and fixtures 5-10
Major renewals and betterments are capitalized. Maintenance and repairs are
expensed as incurred. Upon disposition, the net book value is eliminated from
the accounts, with the resultant gain or loss reflected in operations.
Goodwill - Goodwill, representing the excess of the purchase price over the
fair value of net assets acquired, is charged against operations on a straight-
line basis over the periods estimated to be benefited, not exceeding 40 years.
Goodwill amortization totaled $3,230, $1,495, and $896 in 1998, 1997, and 1996,
respectively. Accumulated amortization at October 31, 1998 totaled $10,472.
Financial Instruments - The Company uses the following methods and assumptions
in estimating the fair value of financial instruments:
Cash, accounts receivable, accounts payable, and accrued liabilities - the
carrying value of these instruments approximates fair value due to their short-
term nature; and
Long-term debt (including bank credit facility) - based on borrowing rates
currently available for debt instruments with similar terms and maturities, the
carrying value of these instruments approximates fair value.
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.
Income Taxes - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying
<PAGE>
amounts of assets and liabilities and their respective tax bases. Deferred tax
assets are also recognized for credit carryforwards - based on an assessment
(which includes anticipating future income) in determining the likelihood of
realization. Deferred tax assets and liabilities are measured using the rates
expected to apply to taxable income in the years in which the temporary
differences are expected to reverse and the credits are expected to be used. The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the enactment date.
(2) Acquisitions
On March 31, 1998, the Company completed its acquisition of all the stock of
Polycom Huntsman, Inc. ("Polycom"), a manufacturer of color & specialty
compounds. The net cash purchase price was approximately $129,000 (including
estimated costs of the transaction and net of cash acquired of $3,000). The
acquisition was funded through the Company's bank credit facility and the
issuance of $10,000 in Spartech common stock to Polycom shareholders. The fair
value of the assets acquired (including approximately $65,000 in goodwill) and
liabilities assumed (consisting of accounts payable, accrued liabilities, lease
liabilities, and industrial revenue bonds) were $171,000 and $39,000,
respectively. For its fiscal year ended March 31, 1998, Polycom's color,
specialty, and toll compounding businesses generated annual sales of
approximately $115,000.
On April 26, 1998, the Company completed the purchase of the net assets of
Prismaplast Canada Ltd. of Montreal. Prismaplast, commonly known as
Plasticolour, produces color concentrates and specialty compounds with net sales
for 1997 of approximately $10,000. The acquisition price for Plasticolour
approximated $5,000, which was financed through operating cash flow and our bank
credit facility.
On October 30, 1998, the Company completed its purchase of all the stock of
Anjac-Doron Plastics, Inc. ("Anjac"), a custom profile extruder with annual
sales of approximately $9,000. The acquisition price of approximately $6,700 was
financed through our bank credit facility.
On August 22, 1997, the Company completed the acquisition of the net assets of
the Preferred Plastic Sheet Division of Echlin Inc. ("Preferred"). The purchase
of the extruded plastic sheet and profile extruded product operations included
four manufacturing facilities with annual sales of approximately $75,000. The
purchase price for the net assets acquired from Preferred was $65,074 in cash,
including costs of the transaction. The fair value of assets acquired (including
$39,199 of goodwill) and liabilities assumed (including accounts payable and
accrued liabilities) was $73,517 and $8,443, respectively. The purchase price
and related costs of the acquisition were funded by a $60,000 private placement
of debt with a fixed interest rate of 7.0% and borrowings on the Company's
existing bank credit facility.
On May 9, 1996, the Company completed its acquisition of Portage Industries
Corporation ("Portage") and pursuant to the Agreement and Plan of Merger, each
share of Portage common stock was converted into the right to receive $6.60 in
cash. The price for all outstanding shares of Portage's stock (including
exercisable options) totaled approximately $17,600 in cash, including estimated
costs of the transaction. The fair value of assets acquired (including $9,500 of
goodwill) and liabilities assumed were $27,200 and $9,600, respectively. The
purchase price was funded by the Company's existing bank credit facility.
On September 27, 1996, the Company completed the purchase of substantially all
of the net assets of the extrusion, color, and molding divisions of Hamelin
Group Inc. ("Hamelin") in accordance with an Asset Purchase and Sale Agreement.
Hamelin was a leading manufacturer of extruded plastic sheet, color concentrate
materials, molded food packaging products, and injection molded wheels, based in
Montreal, Canada. Consolidated sales for the seven facilities were approximately
$80,000 for Hamelin's fiscal year ended April 30, 1996. The purchase price for
the net assets acquired from Hamelin was $59,400 in cash, including costs of the
transaction. The fair value of assets acquired (including $13,500 of goodwill)
and liabilities assumed (consisting of lease liabilities, accounts payable, and
accrued liabilities) were $70,900 and $11,500, respectively. The purchase price
was financed through a combination of a common stock offering of 3 million
shares and a private placement of $30,000 in debt.
<PAGE>
All these acquisitions have been accounted for by the purchase method, and
accordingly, the results of operations were included in the Company's
Consolidated Statement of Operations from their respective date of acquisition.
The purchase price has been allocated to the assets and liabilities (on a
preliminary basis for the 1998 acquisitions), and the excess of cost over the
fair value of net assets acquired is being amortized over a forty-year period on
a straight-line basis.
The following summarizes unaudited pro forma consolidated results of operations
for fiscal year 1998 assuming the Polycom, Plasticolour, and Anjac acquisitions
had occurred at the beginning of the fiscal year. The results are not
necessarily indicative of what would have occurred had these transactions been
consummated as of the beginning of the fiscal year presented, or of future
operations of the consolidated companies.
Pro Forma (Unaudited)
Fiscal Year
1998
Net Sales $712,999
Earnings Before Income Taxes $60,257
Net Earnings $36,252
Net Earnings Per Common Share -
Diluted $1.26
(3) Inventories
Inventories at October 31, 1998 and November 1, 1997 are comprised of the
following components:
1998 1997
Raw materials $42,016 $37,832
Finished goods 22,843 18,019
$64,859 $55,851
4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at October 31, 1998 and
November 1, 1997:
1998 1997
Land $ 6,369 $ 5,264
Buildings and leasehold
improvements 45,312 31,825
Machinery and equipment 205,124 132,895
Furniture and fixtures 6,821 3,759
263,626 173,743
Less accumulated
depreciation 56,739 44,381
Property, plant and
equipment, net $206,887 $129,362
5) LONG-TERM DEBT
Long-term debt is comprised of the following at October 31, 1998 and November 1,
1997:
1998 1997
7.0% Senior Notes $ 60,000 $ 60,000
7.62% Guaranteed
Senior Notes 30,000 30,000
7.21% Senior
Unsecured Notes 50,000 50,000
Bank Credit Facility 100,700 300
Other 13,520 2,314
254,220 142,614
Less current maturities 8,948 921
Total long-term debt $245,272 $141,693
On March 31, 1998, the Company amended its unsecured bank credit facility to an
aggregate availability of $150,000 for a new five-year term (the "Bank Credit
Facility"). The Bank Credit Facility consists of a $50,000 term loan, which has
equal quarterly payments due of $2,500 that reduce this availability over the
five-year term, and a $100,000 revolving facility. At October 31, 1998, total
availability under the bank credit facility was $145,000. Of the $100,700
outstanding, $45,000 was under the facility's term loan and $55,700 was under
the facility's revolver, all of which is classified as long term as no paydowns
of the aggregate facility are required within the next year. Interest on the
Bank Credit Facility is payable at a rate chosen by the Company of either prime
or LIBOR plus .5% to 1.0%.
<PAGE>
At October 31, 1998, the Company had fixed LIBOR loans outstanding under the
Bank Credit Facility of $88,500 at 6.19% for a one-month period. The remaining
Bank Credit Facility was at the current prime rate which at October 31, 1998 and
November 1, 1997, was 8.00% and 8.50%, respectively.
On August 22, 1997, the Company completed a Private Placement of 7.0% Senior
Notes (the "1997 Notes") consisting of $45,000 designated as Series A and
$15,000 designated as Series B. The Series A 1997 Notes require equal annual
principal payments of approximately $6,429 commencing on August 22, 2001 and the
Series B 1997 Notes do not require principal payments before becoming due on
August 22, 2004. Interest on the 1997 Notes is payable semiannually on February
22 and August 22 of each year.
On September 27, 1996, the Company completed a $30,000 Private Placement of
7.62% Guaranteed Senior Notes (the "1996 Notes") over a ten-year term. The 1996
Notes require equal annual principal payments of approximately $4,286 commencing
on September 27, 2000. Interest on the 1996 Notes is payable semiannually on
March 27 and September 27 of each year.
On August 15, 1995, the Company completed a $50,000 Private Placement of 7.21%
Senior Unsecured Notes (the "1995 Notes") over a ten-year term. The 1995 Notes
require equal annual principal payments of approximately $7,143 commencing on
August 15, 1999. Interest on the 1995 Notes is payable semiannually on February
15 and August 15 of each year.
The other debt consists of industrial revenue bonds, capital leases, and other
term notes utilized to finance capital expenditures. These financings mature
between 1999 and 2015 and have interest rates ranging from 2.00% to 9.38%.
Scheduled maturities of long-term debt for the next five fiscal years are: 1999
- -$8,948; 2000 -$13,008; 2001 -$18,733; 2002 -$18,524; and 2003 -$78,770.
The long-term debt contains certain covenants which, among other matters,
require the Company to restrict the incurrence of additional indebtedness,
satisfy certain ratios and net worth levels, and limit both the sale of assets
and merger transactions.
6) INCOME TAXES
The provision for income taxes for fiscal years 1998, 1997, and 1996 is
comprised of the following:
1998 1997 1996
Federal:
Current $14,844 $8,698 $7,758
Deferred 3,483 3,631 1,480
State 2,697 1,819 1,760
Foreign 1,382 1,667 115
Provision for income taxes $22,406 $15,815 $11,113
Earnings before income taxes for 1998, 1997, and 1996 include $4,383, $4,924,
and $384, respectively from Non-U.S. operations. The income tax provision on
earnings of the Company differs from the amounts computed by applying the U.S.
Federal tax rate of 35% as follows:
1998 1997 1996
Federal income taxes at
statutory rate $19,644 $14,458 $10,301
State income taxes, net
of applicable Federal
income tax benefits 1,753 1,182 1,144
Other 1,009 175 (332)
$22,406 $15,815 $11,113
At October 31, 1998 and November 1, 1997, the Company's principal components of
deferred tax assets and liabilities consisted of the following:
1998 1997
Deferred tax assets:
Tax carryforwards $486 $1,019
Bad debt reserves 675 712
Inventories 780 445
Accrued liabilities 6,571 4,137
$8,512 $6,313
Deferred tax liabilities:
Depreciation $34,531 $13,705
Other 1,295 520
$35,826 $14,225
At October 31, 1998 and November 1, 1997, the net current deferred tax asset was
$5,969 and $3,541, respectively, and the net noncurrent deferred tax liability
was $33,283 and $11,453, respectively.
<PAGE>
7) SHAREHOLDERS' EQUITY & STOCK OPTIONS
The authorized capital stock of the Company consists of 45 million shares of
$.75 par value common stock and 4 million shares of $1 par value preferred
stock.
The Company has an Incentive Stock Option Plan ("Incentive Plan") and Restricted
Stock Option Plan ("Restricted Plan") for executive officers and key employees.
The minimum option price is the fair market value per share at the date of
grant, which may be paid upon exercise in Company shares. The Incentive Plan has
598,040 shares outstanding at October 31, 1998. The maximum number of shares
issuable annually under the Restricted Plan is limited to 10% of the Company's
outstanding common shares (excluding treasury shares) at each year end through
2001. Notwithstanding the foregoing, the Board of Directors has resolved that at
no time will the total unexercised options issued to employees be in excess of
10% of the then outstanding common shares. The options granted and common shares
purchased under the Restricted Plan may not be sold or disposed of for a period
of three years from the date of option grant. Subject to the limitations
discussed above, the number of shares issued, or options granted, pursuant to
these plans is at the discretion of the Compensation Committee of the Board of
Directors. The Restricted Plan has 2,460,600 shares outstanding at October 31,
1998. Additional options, which have been issued outside the Incentive and
Restricted plans discussed above, totaled 234,000 at October 31, 1998.
A summary of the combined activity for the Company's stock options for
fiscal years 1998, 1997, and 1996 follows (shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
Shares Weighte Shares Weighte Shares Weighte
d d d
Under Average Under Average Under Average
Option Exercis Option Exercis Option Exercis
e Price e Price e Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning 3,015 $6.88 2,074 $4.37 2,267 $3.85
of year
Granted 793 $16.11 * 1,414 $9.84 315 $7.07
Exercised (515) $5.29 $4.74 (508) $3.70
(473)
Outstanding, end of 3,293 $9.36 3,015 $6.88 2,074 $4.37
year
Weighted average fair
value of options $5.00 $3.95 $2.49
granted
<FN>
* - Amount includes an option for 900 shares issued in conjunction with
the settlement of litigation with a former employee -see note (11).
</FN>
</TABLE>
Information with respect to options outstanding at October 31, 1998, all of
which are presently exercisable, follows (shares in thousands):
Weighted Average Weighted
Shares Under Remaining Average
Range of Exercise Prices Option Contractual Life Exercise Price
$1.25 -5.38 956 3.1 years $3.90
$6.75 -9.00 1,125 5.7 years $8.55
$10.88 -13.50 414 5.8 years $11.12
$15.88 -21.94 798 8.0 years $16.11
3,293
<PAGE>
The Company follows Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" ("APB 25"), in accounting for its employee stock
options. Under APB 25, if the exercise price of the stock option equals the
market price of the underlying stock on the issuance date, no compensation
expense is recognized. The Company is required by Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" to
provide pro forma disclosures under an alternative fair value method of
accounting. The weighted average fair values of options granted were estimated
using the Black-Scholes option-pricing model with the following assumptions:
1998 1997 1996
Expected Dividend
Yield 1.30% 1.25% 1.25%
Expected Volatility 31% 35% 35%
Risk-Free Interest
Rates 4.52-4.83% 5.77-5.81% 5.77-5.81%
Expected Lives 5 Years 5 Years 5 Years
Had compensation expense been recognized based on these hypothetical values the
Company's net income for 1998, 1997, and 1996 would have been $31,330, $23,020,
and $17,830, respectively, and diluted earnings per share for 1998, 1997, and
1996 would have been $1.10, $.83, and $.72, respectively. As a result of
changing assumptions, these hypothetical calculations are not necessarily
representative of future results.
8) 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 earnings
per share. Basic earnings per share excludes any dilution and is computed by
dividing net income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to 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. All earnings per share data have been calculated in accordance with SFAS
128.
Earnings used in the computations of both basic and diluted earnings per share
represents net earnings as reported. The weighted average number of common
shares used in the computations of basic and diluted earnings per share for
1998, 1997, and 1996 follows:
1998 1997 1996
Basic earnings
per share 26,807 26,418 23,714
Effect of
stock options 1,802 1,420 1,160
Diluted earnings
per share 28,609 27,838 24,874
The effect of stock options represents the shares resulting from the assumed
exercise of outstanding stock options calculated using the treasury stock
method.
9) EMPLOYEE BENEFITS
The Company sponsors or contributes to various retirement benefit and savings
plans covering substantially all employees. The total cost of such plans for
fiscal years 1998, 1997, and 1996 was $1,856, $1,057, and $698, respectively.
10) CASH FLOW INFORMATION
Supplemental information on cash flows for fiscal years 1998, 1997, and 1996 was
as follows:
1998 1997 1996
Cash paid during
the year for:
Interest $14,535 $7,470 $4,558
Income taxes $15,642 $11,245 $10,846
1998 1997 1996
Schedule of
business
acquisitions:
Fair value of
assets acquired $183,073 $73,517 $98,062
Liabilities assumed (43,434) (8,443) (21,076)
Non-cash
consideration/
holdback payments (7,049) 6,846 (9,701)
Total cash paid for
the net assets
acquired $132,590 $71,920 $67,285
<PAGE>
11) COMMITMENTS AND CONTINGENCIES
The Company conducts certain of its operations in facilities under operating
leases. Rental expense for 1998, 1997, and 1996 was $5,408, $3,780, and $2,807,
respectively.
Future minimum lease payments under non-cancelable operating leases, by fiscal
year, are: 1999 -$3,979; 2000 -$3,113; 2001 -$2,507; 2002 -$1,084; 2003 -$944;
and $1,289 thereafter.
In 1992 and 1996, a former Director, Chairman of the Board, and Chief Executive
Officer of the Company, filed lawsuits against the Company and certain of its
Directors and major shareholders. In the suits, it was claimed that the Company
should adjust his existing stock options, provide for the issuance of additional
shares of common stock, and award to him attorney's fees and interest. In
February 1997, the Company settled both lawsuits. The settlement resolved all
claims and terminated all disputes between the respective parties and general
releases were executed to prevent further action on such disputes. The
settlement was reflected in the Company's 1997 financial statements and, after
consideration of amounts previously accrued, did not result in a net charge to
earnings.
At October 31, 1998, there were no other known contingent liabilities (including
guarantees, pending litigation, and environmental claims) that, in the opinion
of management, are expected to be material in relation to the Company's
financial position or results of operations, nor were there any material
commitments outside the normal course of business.
12) SEGMENT INFORMATION
The Company operates in one industry segment as a producer of engineered
thermoplastics, polymeric compounds, and molded and profile products for a wide
spectrum of manufacturing customers. The Company operates from 38 plants in 35
cities throughout the United States, Canada, and Europe and its customer base is
diverse--no one customer represents greater than 5% of total sales. The
Company's customers supply product to a broad range of markets (including
sign/advertising, transportation, recreation & leisure, building & construction,
medical, and packaging).
The Company operates in three reportable geographic areas--the United States,
Canada, and Europe. Geographic financial information for fiscal years 1998,
1997, and 1996 was as follows:
<TABLE>
<CAPTION>
Operating Total
Net Sales Earnings Assets
1998 1997 1996 1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United $572,676 $427,530 $384,334 $61,807 $41,957 $33,856 $460,811 $295,511 $221,542
States
Canada 75,970 75,185 7,014 7,506 7,744 636 63,898 63,292 67,418
Europe 5,209 - - 415 - - 8,514 - -
$653,855 $502,715 $391,348 $69,728 $49,701 $34,492 $533,309 $358,803 $288,960
</TABLE>
<PAGE>
13) QUARTERLY FINANCIAL INFORMATION
Certain unaudited quarterly financial information for the fiscal years ended
October 31, 1998 and November 1, 1997 was as follows:
<TABLE>
<CAPTION>
Quarter Ended Fiscal
Jan April July Oct Year
<S> <C> <C> <C> <C> <C>
1998
Net Sales $133,081 $165,707 $177,702 $177,365 $653,855
Gross Profit 22,480 27,918 30,190 30,627 111,215
Net Earnings 7,021 8,863 9,020 8,816 33,720
Net Earnings Per Share:
Basic .27 .33 .33 .33 1.26
Diluted .25 .31 .31 .31 1.18
1997
Net Sales $113,387 $129,815 $123,170 $136,343 $502,715
Gross Profit 18,079 21,187 20,435 22,514 82,215
Net Earnings 5,479 6,675 6,731 6,608 25,493
Net Earnings Per Share:
Basic .21 .25 .25 .25 .96
Diluted .20 .24 .24 .23 .92
</TABLE>
<PAGE>
SPARTECH CORPORATIONManagement Report
TO OUR SHAREHOLDERS
The financial statements of SPARTECH Corporation and subsidiaries were prepared
under the direction of management, which is responsible for their integrity and
objectivity. The statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgment of management.
Management has developed a system of internal controls, which is designed to
assure that the books and records accurately reflect the transactions of the
Company, and that its established policies and procedures are followed properly.
This system is augmented by written policies and procedures, and the selection
and training of qualified personnel.
Arthur Andersen LLP, independent public accountants, are engaged to provide an
objective audit of the financial statements of SPARTECH Corporation and issue
reports thereon. Their audit is conducted in accordance with generally accepted
auditing standards.
The Board of Directors, acting upon the advice and recommendations of the Audit
Committee, is responsible for assuring that management fulfills its
responsibilities in preparing the financial statements and for engaging the
independent public accountants with whom the Committee reviews the scope of the
audits and the accounting principles to be applied in financial reporting. The
Committee meets regularly with the independent public accountants and
representatives of management to review their activities and ensure that each is
properly discharging its responsibilities.
/s/Bradley B. Buechler
President and
Chief Executive Officer
/s/David B. Mueller
Executive Vice President
and Chief Operating Officer
/s/Randy C. Martin
Vice President -Finance
and Chief Financial Officer
Report of Independent Accountants
TO SPARTECH CORPORATION
We have audited the accompanying consolidated balance sheet of SPARTECH
Corporation (a Delaware Corporation) and subsidiaries as of October 31, 1998 and
November 1, 1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three fiscal years in the
period ended October 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SPARTECH Corporation and
subsidiaries as of October 31, 1998 and November 1, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended October 31, 1998 in conformity with generally accepted accounting
principles.
/s/Arthur Andersen LLP
St. Louis, Missouri
December 4, 1998
<PAGE>
Five Year Summary
(Dollars in thousands, except per share amounts)
The following table sets forth selected financial data for each of the most
recent five fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR
1998 1997 1996 1995 1994
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net Sales $653,855 $502,715 $391,348 $352,273 $256,593
Gross Profit $111,215 $82,215 $60,572 $49,879 $36,998
Depreciation and $18,530 $11,548 $7,211 $5,798 $4,422
Amortization
Operating Earnings $69,728 $49,701 $34,492 $24,604 $16,410
Interest Expense $13,602 $8,393 $5,062 $4,960 $3,125
Net Earnings $33,720 $25,493 $18,317 $14,534 $10,835
PER SHARE INFORMATION
Earnings Per Share - $ 1.18 $ .92 $ .74 $ .60 $ .46
Diluted
Dividends Declared Per Share $ .24 $ .20 $.15 $ .09 $ -
Book Value Per Share $ 5.72 $ 4.85 $4.26 $ 3.09 $2.54
BALANCE SHEET INFORMATION
Working Capital $72,204 $63,429 $54,261 $45,108 $ 26,351
Total Debt $254,220 $ $98,466 $59,510 $ 39,169
142,614
Total Assets $533,309 $358,803 $288,960 $178,329 $135,720
Cash Flow from Operations $64,546 $ 48,390 $23,160 $16,487 $ 13,358
Capital Expenditures $17,859 $ 12,172 $9,566 $10,015 $ 8,152
Shareholders' Equity $153,596 $128,389 $112,395 $72,128 $ 58,233
Market Value of Equity $483,501 $420,377 $290,405 $148,876 $131,694
Ratios / Other Data
Gross Margin 17.0% 16.4% 15.5% 14.2% 14.4%
Operating Margin 10.7% 9.9% 8.8% 7.0% 6.4%
Effective Tax Rate 39.9% 38.3% 37.8% 26.0% 18.4%
Total Debt to Capitalization 62.3% 52.6% 46.7% 45.2% 38.5%
Return on Average Equity 23.9% 21.2% 20.0% 22.3% 20.8%
Number of Employees 2,700 2,125 1,800 1,200 925
Weighted Average Shares 28,609 27,838 24,874 24,111 23,434
Outstanding - Diluted
</TABLE>
<PAGE>
SPARTECH CORPORATION
Investor Information
Sidebar 3-D bar chart
1998 Quarterly
Common Stock Price
1st Quarter = $14 3/4 to $17 9/16
2nd Quarter = $16 3/8 to $23 1/8
3rd Quarter = $19 1/16 to $22 7/8
4th Quarter = $14 3/4 to $19
Sidebar 3-D bar chart
1997 Quarterly
Common Stock Price
1st Quarter = $9 3/8 to $11 1/2
2nd Quarter = $10 5/8 to $13 3/4
3rd Quarter = $11 1/2 to $16
4th Quarter = $15 to $18
Sidebar 3-D bar chart
1995-1998 Year-End
Common Stock Price
1995 = $ 6 3/8
1996 = $11
1997 = $15 7/8
1998 = $18
Sidebar 3-D bar chart
1995-1998 Common Stock Dividends
1995 = 9 cents
1996 = 15 cents
1997 = 20 cents
1998 = 24 cents
Annual Shareholders' Meeting
SPARTECH's Annual Shareholders' Meeting will be held on Wednesday, March 10,
1999 at the Pierre Laclede Center (Saint Louis Club) 7701 Forsyth Boulevard,
Clayton, Missouri 63105 at 10:00 a.m. A formal notice of the Meeting, together
with a Proxy Statement, will be mailed before the Meeting to shareholders
entitled to vote.
Common Stock and Transfer Agent
As of January 1, 1999, there were approximately 5,500 shareholders of the
Company's common stock. The Company's Registrar and Transfer Agent is
ChaseMellon Shareholder Services LLC, 85 Challenger Overpeck Center, Ridgefield
Park, New Jersey 07660. SPARTECH Corporation's common stock is traded on the New
York Stock Exchange under the symbol "SEH." Quarterly stock price trading ranges
for fiscal years 1997 and 1998 and fiscal year-end closing prices for 1995-1998
are shown to the left.
Dividend Reinvestment Plan and Report on Form 10-K
A Dividend Reinvestment Plan is available to shareholders of the Company,
allowing for the automatic investment of cash dividends and direct cash
purchases of SPARTECH common stock. For details on the Plan, please contact the
Company's Registrar and Transfer Agent, ChaseMellon Shareholder Services at
(888) 213-0965. In addition, the Company will provide, without charge to any
shareholder, a copy of its 1998 Report on Form 10-K as filed with the Securities
and Exchange Commission. Requests should be directed to SPARTECH Investor
Relations at (314) 721-4242 or via internet at http://www.spartech.com.
Research and Informational Reports
Research and informational reports on SPARTECH Corporation are available
from the following companies and individuals by calling SPARTECH Investor
Relations at (314) 721-4242 or the listed companies direct at the numbers shown
below:
A.G. Edwards-Mike Braig (314) 289-5894
Cleary Gull-Gary Prestopino (312) 466-4869
EVEREN Securities-Shawn Severson (312) 574-5905
First Analysis-Allan Cohen (312) 258-1400
Huntleigh Securities-Derek Falb (314) 236-2285
Safe Harbor Statements
This Annual Report contains various forward-looking statements that involve
certain risks and uncertainties that could cause actual results to differ
materially from such statements. Potential risks and uncertainties include such
factors as continued economic growth, the successful integration of acquired
operations, and the pricing stability of resins. Investors are directed to
consider other risks and uncertainties discussed in documents filed by the
Company with the Securities and Exchange Commission.
The Company has also provided additional Year 2000 Readiness Disclosures in
conjunction with the Federal Year 2000 Information and Disclosure Act on page 15
of this Report.
<PAGE>
EXHIBIT 21
SPARTECH CORPORATION
SUBSIDIARIES OF REGISTRANT
Legal Entity DBA Incorporation
Atlas Alchem Plastics, Inc. Spartech Plastics DE
Spartech Compounding
Spartech Color
The Resin Exchange, Inc. Spartech Compounding MO
Spartech Polycom
Franklin-Burlington Plastics, Inc. Spartech Compounding DE
Spartech Vy-Cal Plastics
Spartech Polycom
Alchem Plastics, Inc. Spartech Plastics DE
Alchem Plastics Corporation Spartech Plastics GA
Anjac-Doran Plastics, Inc. Spartech Profiles DE
Spartech Polycom, Inc. Spartech Polycom DE
P.H. Chemicals, Inc. Spartech Polycom DE
Spartech Polycom, S.A. Spartech Polycom DE
Spartech Plastics, Inc. Spartech Plastics DE
Portage Industries
Preferred Plastics
Spartech Profiles
Spartech Industries, Inc. Hamelin Industries DE
Spartech Canada, Inc. GM Plastics New Brunswick,
Canada
Genpak
Spartech Enterprises
Korlin
Spartech Color
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included or incorporated by reference in this Form 10-K for the
year ended October 31, 1998 into the Company's previously filed Registration
Statements on Form S-8 (File Numbers 33-20437 and 33-61322) and Form S-3 (File
Number 333-24527).
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri
January 6, 1999
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/ Ralph B. Andy
Ralph B. Andy
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/Alan R. Teague
Alan R. Teague
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/Calvin O'Connor
Calvin O'Connor
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/Jackson W. Robinson
Jackson W. Robinson
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/Thomas L. Cassidy
Thomas L. Cassidy
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/W. R. Clerihue
W. R. Clerihue
Director
EXHIBIT 24
SPARTECH CORPORATION AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Bradley B. Buechler his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign this annual report on Form 10-K of SPARTECH
Corporation and Subsidiaries for fiscal year ending October 31, 1998, and
any and all amendments thereto and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Dated: January 6, 1999 /s/John R. Kennedy
John R. Kennedy
Director
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-02-1997
<PERIOD-END> OCT-31-1998
<CASH> 7247
<SECURITIES> 0
<RECEIVABLES> 94061
<ALLOWANCES> 2430
<INVENTORY> 64859
<CURRENT-ASSETS> 173196
<PP&E> 263626
<DEPRECIATION> 56739
<TOTAL-ASSETS> 533309
<CURRENT-LIABILITIES> 100992
<BONDS> 0
0
0
<COMMON> 20663
<OTHER-SE> 132933
<TOTAL-LIABILITY-AND-EQUITY> 533309
<SALES> 653855
<TOTAL-REVENUES> 653855
<CGS> 542640
<TOTAL-COSTS> 584127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13602
<INCOME-PRETAX> 56126
<INCOME-TAX> 22406
<INCOME-CONTINUING> 33720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33720
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.18
</TABLE>
