ST. LOUIS, June 10 /PRNewswire-FirstCall/ -- Spartech Corporation
(NYSE: SEH), a leading producer of plastic sheet, compounds, and
packaging products, announced today operating results for its 2009
second quarter. Second Quarter 2009 Financial Highlights -- Net
sales were $234.3 million, down 36% from the prior year second
quarter, reflecting weak end-market demand. Sales volumes increased
6% in comparison to the first quarter of 2009 reflecting
seasonality. -- Operating earnings excluding restructuring and exit
costs increased to $15.3 million from $12.5 million in the second
quarter of 2008. Gross margin per pound sold increased to 15.7
cents from 10.7 cents for the quarter primarily from the impact of
our improvement initiatives. Both comparisons for the quarter
reflect a $4.1 million one-time benefit related to a change in our
vacation policy. -- Diluted earnings per share excluding
restructuring and exit costs were $0.20 compared to $0.16 in the
prior year second quarter. -- Cash flow from operations of $21.3
million more than doubled from the prior year second quarter,
funding debt pay down of $17.9 million in the quarter. In the last
four quarters, the Company has generated $85.7 million of free cash
flow and paid down $76.9 million of debt. -- Spartech continues to
execute on its company-wide improvement initiatives which represent
more than $80 million of anticipated annual benefits directed at
improving the current cost structure and profitability while also
leveraging the Company's cost footprint for future market recovery
and growth. Note: Please see reconciliation tables and the
narrative below for adjustments to GAAP and discussion of items
affecting results. Consolidated Results Net sales for the second
quarter of 2009 were $234.3 million compared to $367.3 million in
the second quarter of 2008 representing a decrease of 36%. This
change was caused by a decline in underlying sales volume (33%
decline), and a decrease from price/mix changes (3% decrease). The
underlying volume decline related largely to lower demand across a
broad group of end markets including automotive, recreation and
leisure, and residential construction. The reported operating
earnings for the second quarter of 2009 were $11.6 million compared
to $11.9 million in the prior year second quarter. Operating
earnings excluding restructuring and exit costs were $15.3 million
for the second quarter of 2009 compared to $12.5 million in the
prior year second quarter, benefiting from our improvement
initiatives which more than offset the decline in sales volume.
Gross margin per pound sold was 15.7 cents in the second quarter of
2009 compared to 10.7 cents in the second quarter of 2008,
reflecting the benefits from our cost reduction activities focused
on building a low cost-to-serve model and other margin enhancement
activities. Selling, general and administrative expenses were
reduced to $19.0 million for the second quarter of 2009 from $22.4
million in the prior year quarter, benefiting from both structural
cost reductions and short-term spending controls. Interest expense
decreased to $4.2 million in our second quarter of 2009 compared to
$5.1 million in 2008 due to lower average debt levels from the debt
pay down in the last four quarters. Our effective tax rate of 49%
for the quarter was impacted by operating losses from non-U.S.
operations for which we have not recorded a tax benefit, resulting
in a higher effective tax rate than the 36% reflected in the prior
year second quarter. Cash flow from operations in the second
quarter of 2009 of $21.3 million more than doubled the prior year
period allowing debt pay down of $17.9 million in the quarter and
borrowing availability at the end of the second quarter of $52.2
million. Free cash flow totaled $19.1 million (cash flow from
operations of $21.3 million less capital expenditures of $2.2
million) in the second quarter of 2009. We have generated $85.7
million of free cash flow (cash flow from operations of $99.2
million less capital expenditures of $13.5 million) in our last
four quarters and paid down $76.9 million of debt resulting in
total debt of $264.2 million at the end of the second quarter of
2009. Strategic and Operational Overview The Company continues to
make substantive progress on its strategic plan that was developed
early in 2008. This road map resulted in new business strategies,
asset restructurings, organizational enhancements, business process
reengineering, improvements in margin and mix, and a reduction in
our cost footprint focused on facilitating a low cost-to-serve
model. Our results in the second quarter of 2009 reflected cost
reductions and other improvement initiatives which included $50
million of annualized benefits implemented in 2008 plus additional
structural cost reduction and earnings improvement actions
initiated in 2009. In addition, we implemented several shorter term
improvement initiatives in the second quarter, including: (i)
temporary across-the-board salary reductions, (ii) suspension of
our 401k match and deferred compensation contributions, (iii)
modification of our vacation policy to eliminate the cash
settlement of earned vacation, and (iv) cost containment
initiatives to flex work schedules and reduce the number of days
worked per week. The change in vacation policy resulted in $4.1
million of one-time earnings in the quarter. We expect that the
benefit of our shorter term actions will be replaced with the full
quarter impact of other initiatives that were implemented
throughout the second quarter of 2009. We intend to maintain these
shorter term actions until we make further progress on the
additional structural cost reductions or the external environment
improves. Spartech's President and Chief Executive Officer, Myles
S. Odaniell stated, "We continue to execute our improvement plans
and have now initiated more than $80 million in anticipated
annualized structural cost reductions and other earnings
improvement initiatives. As a result, we have substantially
improved our operating profits and cash flow despite
recession-level demand and made significant progress on leveraging
our cost structure to support higher earnings potential when
volumes increase. We will continue to take additional actions to
further reduce our cost structure both in response to current
market conditions, but also to capitalize on additional improvement
opportunities existing at Spartech. We are very proud of our
dedicated employees who have stayed focused on serving the needs of
our customers and executing substantial cost reductions while we
work through this challenging economic environment and better
position Spartech for the future." Segment Results The results of
our three segments are discussed below and presented in the table
at the end of this release to reconcile to amounts excluding
restructuring and exit costs to comparable GAAP measures. Custom
Sheet & Rollstock -- Net sales of $106.4 million in the second
quarter of 2009 reflected a decrease of 36%, a 29% decrease in
volume and 7% decrease from price/mix changes compared to the prior
year second quarter. The volume decline was primarily due to lower
demand in the residential construction, automotive, and
recreational vehicles sectors of our end markets. Operating
earnings excluding restructuring and exit costs were $5.7 million
in the second quarter of 2009 compared to $8.0 million in the prior
year second quarter, reflecting the lower demand partially offset
by benefits from our improvement initiatives. Packaging
Technologies -- Net sales of $52.3 million in the second quarter of
2009 reflected a decrease of 25%, consisting of a 5% decrease in
packaging-related volume, 13% decrease from non-packaging related
volume (largely related to automotive customers served by the
Packaging Technologies operations), and a 7% decrease from
price/mix compared to the prior year second quarter. Operating
earnings excluding restructuring and exit costs were $10.2 million
in the second quarter of 2009 compared to $5.0 million in the prior
year second quarter, primarily reflecting benefits of our
improvement initiatives. Color & Specialty Compounds -- Net
sales of $56.9 million in the second quarter of 2009 reflected a
decrease of 47%, a 43% decrease in volume and 4% decrease from
price/mix changes compared to the prior year second quarter. The
volume decline was primarily due to lower demand in the automotive,
construction, and film packaging end markets. Operating earnings
excluding restructuring and exit costs were $3.5 million in the
second quarter of 2009 compared to $5.0 million in the prior year
second quarter, primarily reflecting the lower demand partially
offset by benefits from our improvement initiatives. Outlook While
end-market demand continues to be weak, volumes in many of the
markets we serve started to stabilize during the second quarter,
albeit at very low levels. We are encouraged by improved customer
sentiment, but our operating plans assume the recessionary effects
will continue through 2009 and that end-market demand will remain
weak. Our operating plans also reflect specific actions we have
taken to manage through the automotive crisis, related
bankruptcies, and summer shutdowns which will result in
particularly weak demand for this market, but the impact of these
developments are uncertain. We will continue to execute our
improvement initiatives and focus on maximizing cash flows. These
initiatives have included the implementation of many structural
cost reductions as well as shorter term measures that have allowed
us to continue to support appropriate investments in technology,
resources focused on future growth, and other organizational
improvements. We expect to emerge from this recessionary
environment as a stronger company that is better able to leverage
its cost structure and positioned to generate profitable growth and
enhanced shareholder returns. Restructuring and Exit Activities
Restructuring and exit costs totaled $3.7 million in the second
quarter of 2009 and $0.6 million in the prior year second quarter.
These costs (primarily comprised of employee severance and facility
consolidation and shutdown costs) were related to the structural
reductions in labor across the organization and the consolidation
and shutdown of facilities. We have substantially completed the
consolidations of our packaging facility in Mankato, Minnesota and
compounding facility in St. Clair, Michigan into other existing
facilities, and shutdown our underperforming sheet operation in
Donchery, France. During our second quarter we initiated the
consolidation of our sheet facility in Atlanta, Georgia and early
in our third quarter we initiated the shutdown of our specialty
compounding production facility in Arlington, Texas and a business
which manufactured products for the marine industry in Rockledge,
Florida. We expect these consolidations and shutdowns to be
substantially complete by the end of 2009. Spartech Corporation is
a leading producer of engineered thermoplastic sheet materials,
thermoformed packaging, polymeric compounds and concentrates, and
engineered product solutions. The Company has facilities located
throughout the United States, Canada, Mexico, and Europe. Safe
Harbor For Forward-Looking Statements This press release contains
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. "Forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 relate to future events and expectations,
include statements containing such words as "anticipates,"
"believes," "estimates," "expects," "would," "should," "will,"
"will likely result," "forecast," "outlook," "projects," and
similar expressions. Forward-looking statements are based on
management's current expectations and include known and unknown
risks, uncertainties and other factors, many of which management is
unable to predict or control, that may cause actual results,
performance or achievements to differ materially from those
expressed or implied in the forward-looking statements. Important
factors which have impacted and could impact our operations and
results include, but are not limited to: (a) further adverse
changes in economic or industry conditions, including global supply
and demand conditions and prices for products of the types we
produce; (b) our ability to compete effectively on product
performance, quality, price, availability, product development, and
customer service; (c) adverse changes in the markets we serve,
including the packaging, transportation, building and construction,
recreation and leisure, and other markets, some of which tend to be
cyclical; (d) adverse changes in the domestic automotive markets,
including the bankruptcy filings by the automobile original
equipment manufacturers which could have a cascading effect on our
customers and adversely impact our business; (e) our inability to
achieve the level of cost savings, productivity improvements, gross
margin enhancements, growth or other benefits anticipated from our
planned improvement initiatives; (f) volatility of prices and
availability of supply of energy and of the raw materials that are
critical to the manufacture of our products, particularly plastic
resins derived from oil and natural gas, including future effects
of natural disasters; (g) our inability to manage or pass through
to customers an adequate level of increases in the costs of
materials, freight, utilities, or other conversion costs; (h)
restrictions imposed on us by instruments governing our
indebtedness, the possible inability to comply with requirements of
those instruments, and inability to access capital markets; (i)
possible asset impairment charges; (j) our inability to predict
accurately the costs to be incurred, time taken to complete,
operating disruptions therefrom, or savings to be achieved in
connection with announced production plant restructurings; (k)
adverse findings in significant legal or environmental proceedings
or our inability to comply with applicable environmental laws and
regulations; (l) our inability to develop and launch new products
successfully; (m) possible weaknesses in internal controls; and (n)
our ability to successfully complete the implementation of a new
enterprise resource planning computer system and to obtain expected
benefits from our system. We assume no responsibility to update our
forward-looking statements except as required by law. SPARTECH
CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (Unaudited and dollars in thousands, except per share
data) Three Months Ended Six Months Ended ------------------
---------------- May 2, May 3, May 2, May 3, 2009 2008 2009 2008
---- ---- ---- ---- Net sales $234,334 $367,347 $483,484 $702,453
Costs and expenses: Cost of sales 198,855 331,140 425,523 643,137
Selling, general and administrative expenses 19,036 22,371 42,125
45,510 Amortization of intangibles 1,161 1,308 2,329 2,641
Restructuring and exit costs 3,688 617 4,515 841 ----- --- -----
--- 222,740 355,436 474,492 692,129 ------- ------- ------- -------
Operating earnings 11,594 11,911 8,992 10,324 Interest, net of
interest income of $0, $92, $22 and $213, respectively 4,180 5,078
8,892 10,224 ----- ----- ----- ------ Earnings before income taxes
7,414 6,833 100 100 Income tax expense (benefit) 3,650 2,468 1,428
(775) ----- ----- ----- ----- Net earnings (loss) $3,764 $4,365
$(1,328) $875 ========= ========== ========= ========= Net earnings
(loss) per common share: Basic $.12 $.14 $(.04) $.03 ==== ====
====== ==== Diluted $.12 $.14 $(.04) $.03 ==== ==== ====== ====
Dividends declared per common share $.00 $.135 $.05 $.27 =========
========= ========= ========= SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands, except
share data) May 2, 2009 November 1, (Unaudited) 2008 -----------
---- Assets Current assets: Cash and cash equivalents $1,950 $2,118
Trade receivables, net of allowances of $4,882 and $4,550,
respectively 122,422 176,108 Inventories 77,599 96,721 Prepaid
expenses and other current assets 26,305 24,665 ------ ------ Total
current assets 228,276 299,612 Property, plant and equipment, net
of accumulated depreciation of $328,674 and $297,876, respectively
264,163 280,202 Goodwill 145,498 145,498 Other intangible assets,
net of accumulated amortization of $15,490 and $13,148,
respectively 30,343 32,722 Other long-term assets 3,845 4,385 -----
----- Total assets $672,125 $762,419 ======== ======== Liabilities
and Shareholders' Equity Current liabilities: Current maturities of
long-term debt $19,011 $20,428 Accounts payable 87,622 155,594
Accrued liabilities 31,419 42,676 ------ ------ Total current
liabilities 138,052 218,698 Long-term debt, less current maturities
245,222 254,226 Other long-term liabilities: Deferred taxes 57,154
56,516 Other long-term liabilities 6,232 6,189 ----- ----- Total
liabilities 446,660 535,629 Shareholders' equity Preferred stock
(authorized: 4,000,000 shares, par value $1.00) Issued: None - -
Common stock (authorized: 55,000,000 shares, par value $0.75)
Issued: 33,131,846; Outstanding: 30,715,982 and 30,563,605 shares,
respectively 24,849 24,849 Contributed capital 203,931 202,656
Retained earnings 50,732 53,588 Treasury stock, at cost, 2,415,864
and 2,568,241 shares, respectively (56,390) (56,389) Accumulated
other comprehensive income 2,343 2,086 ----- ----- Total
shareholders' equity 225,465 226,790 ------- ------- Total
liabilities and shareholders' equity $672,125 $762,419 ========
======== SPARTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and dollars in
thousands) Six Months Ended ---------------- May 2, May 3, 2009
2008 ---- ---- Cash flows from operating activities Net earnings
(loss) $(1,328) $875 Adjustments to reconcile net earnings (loss)
to cash provided by operating activities: Depreciation and
amortization expense 22,294 23,628 Provision for bad debt expense
3,595 1,818 Stock-based compensation expense 1,275 2,280 Other, net
1,769 (753) Change in current assets and liabilities (8,325)
(11,140) ------- -------- Net cash provided by operating activities
19,280 16,708 ------ ------ Cash flows from investing activities
Capital expenditures (5,096) (8,916) Business acquisitions - (774)
Proceeds from disposition of assets 61 - ----- ----- Net cash used
for investing activities (5,035) (9,690) ------- ------- Cash flows
from financing activities Bank credit facility borrowings, net
8,105 8,249 Payments on notes and bank term loan (18,912) -
(Payments) / borrowings on bonds and leases, net (528) 82 Cash
dividends on common stock (3,057) (8,271) Issuance of common stock
- 2,812 Stock options exercised - 16 Treasury stock acquired -
(9,667) -------- ------- Net cash used for financing activities
(14,392) (6,779) -------- ------- Effect of exchange rate changes
on cash and cash equivalents (21) 223 (Decrease) / increase in cash
and cash equivalents (168) 462 Cash and cash equivalents at
beginning of year 2,118 3,409 Cash and cash equivalents at end of
---------- ----------- period $1,950 $3,871 ========== ===========
SPARTECH CORPORATION AND SUBSIDIARIES (Unaudited and dollars in
thousands, except share data) Within this press release we have
included operating earnings and net earnings (loss) per dilutive
share excluding restructuring and exit costs and free cash flow,
which are non-GAAP measurements. We use these measurements to
assess our ongoing operating results without the effect of these
adjustments and compare such results to our planned operating
results. We believe these measurements are useful to investors
because they help them compare our results to previous periods and
provide an indication of underlying trends in the business. Such
non-GAAP measurements are not recognized in accordance with
generally accepted accounting principles (GAAP) and should not be
viewed as an alternative to GAAP measures of performance. The free
cash flow is reconciled within the narrative of the release. The
following reconciles GAAP to non-GAAP measures: Three Months Ended
Six Months Ended ------------------ ---------------- May 2, May 3,
May 2, May 3, 2009 2008 2009 2008 ---- ---- ---- ---- Operating
Earnings (GAAP) $11,594 $11,911 $8,992 $10,324 Restructuring and
exit costs 3,688 617 4,515 841 ----- --- ----- --- Operating
earnings excluding restructuring and exit costs (non-GAAP) $15,282
$12,528 $13,507 $11,165 ======= ======= ======= ======= Net
earnings (loss) (GAAP) $3,764 $4,365 $(1,328) $875 Restructuring
and exit costs, net of tax 2,426 443 2,958 599 ----- --- ----- ---
Net earnings excluding restructuring and exit costs (non-GAAP)
$6,190 $4,808 $1,630 $1,474 ====== ====== ====== ====== Net
earnings (loss) per diluted share (GAAP) $.12 $.14 $(0.04) $.03
Restructuring and exit costs, net of tax .08 .02 .09 .02 --- ---
--- --- Net earnings per diluted share excluding restructuring and
exit costs (non-GAAP) $.20 $.16 $.05 $.05 ==== ==== ==== ==== Three
Months Ended Three Months Ended May 2, 2009 May 3, 2008
----------------------------- -----------------------------
Operating Operating Earnings Earnings Excluding Excluding
Restructuring Restruc- Restructuring Restruc- and Operating turing
and Operating turing Exit Earnings and Exit Exit Costs Earnings and
Exit Costs (GAAP) Costs (non-GAAP) (GAAP) Costs (non-GAAP) Custom
Sheet & Rollstock $4,030 $1,675 $5,705 $7,737 $214 $7,951
Packaging Technologies 9,422 780 10,202 4,857 123 4,980 Color &
Specialty Compounds 2,548 919 3,467 4,766 277 5,043 Engineered
Products 4,000 25 4,025 3,477 - 3,477 Corporate (8,406) 289 (8,117)
(8,926) 3 (8,923) ------- --- ------ ------- --- ------- Total
$11,594 $3,688 $15,282 $11,911 $617 $12,528 ======= ====== =======
======= ==== ====== DATASOURCE: Spartech Corporation CONTACT: Myles
S. Odaniell, President and Chief Executive Officer,
+1-314-721-4242, or Randy C. Martin, Executive VP and Chief
Financial Officer, +1-314-721-4242, both of Spartech Corporation
Web Site: http://www.spartech.com/
Copyright