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 28, 2000
Commission file number 1-5911
SPARTECH CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 43-0761773
(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification Number)
120 S. CENTRAL AVENUE; SUITE 1700, CLAYTON, MISSOURI 63105-1705
(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 $264,577,544 on December 31, 2000.
There were 26,627,435 total shares of common stock outstanding as of December
31, 2000.
Documents incorporated by reference
1) Portions of the 2000 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV.
2) Portions of the Definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders are incorporated by reference into Part III.
PART I
Item 1. BUSINESS
General
Spartech Corporation ("The Company"), together with its subsidiaries, is an
intermediary processor of thermoplastics. The Company converts base polymers,
or resins, from commodity suppliers into extruded plastic sheet and rollstock,
acrylic products, color concentrates and blended resin compounds, and injection
molded and profile extruded products. The Company's products are sold to over
7,600 original equipment manufacturers and other customers in a wide range of
end markets. The Company operates 50 production facilities in North America and
one in Europe, and is organized into three reportable segments, based on the
products manufactured: Custom Sheet & Rollstock; Color & Specialty Compounds;
and Molded & Profile Products.
Custom Sheet & Rollstock sells its products to various manufacturers who use
plastic components in their industrial products. The Company's custom sheet
and rollstock is utilized in several end markets including transportation,
food/medical packaging, signs, spas, bathtubs & shower surrounds, burial
vault liners, automotive & truck components, airplanes, boats and
refrigerators. The Company is North America's largest extruder of custom
rigid plastic sheet and rollstock, operating 27 facilities in the United
States and Canada under the names Spartech Plastics and Spartech Polycast.
Color & Specialty Compounds sells custom designed plastic alloys, compounds,
color concentrates and calendered film for utilization by a large group of
manufacturing customers servicing the food & medical packaging, automotive
equipment, consumer electronics & appliances, lawn & garden equipment, loose
leaf binders and other end markets. The Company produces and distributes
these products from 12 facilities under the names Spartech Polycom, Spartech
Color and Spartech Vy-Cal in the United States, Canada and France.
Molded & Profile Products manufactures a number of proprietary items
including: (1) thin-walled, printed plastic food packaging and industrial
containers, (2) thermoplastic tires and wheels for the medical, lawn &
garden, refuse container and toy markets, (3) water purification system
components, and (4) custom profile extruded products for a variety of
industries. The Company manufactures these molded and profile products from
12 facilities in the United States and Canada under the names Spartech
Industries, Spartech Profiles, Spartech Alshin, Spartech Townsend and
Spartech Marine.
The Company's principal executive office is located at 120 S. Central Avenue,
Suite 1700, Clayton, Missouri 63105-1705, telephone (314) 721-4242. The Company
was incorporated in the State of Delaware in 1968, succeeding a business which
had commenced operations in 1960.
Industry Overview
The American Plastics Council estimates that the U.S. plastics industry
produced over 97 billion pounds of plastic in 1999 and grew at a 5% compound
annual growth rate from 1994 to 1999, due partly to the continuing substitution
of plastics for traditional materials such as metal, fiberglass and wood. The
intermediary processor segment of the plastics industry is fragmented, with over
2,000 plastic processing companies that generally operate in one or more of the
following areas:
* Sheet and film extrusion,
* Cast Acrylics,
* Specialty compounding,
* Color concentrates,
* Pipe, profile and tube extrusion,
* Injection molding,
* Thermoforming,
* Blow molding, and
* Rotational molding.
Each of these processing methods involves different production capabilities,
operating costs and equipment, and requires a different level of capital
expenditure and operating expertise. A large percentage of the plastics
processing industry in the United States is represented by small to mid-size
regional operations that generate less than $50 million in annual sales and the
industry is continuing to undergo consolidation. Current trends contributing to
this consolidation include:
* Greater focus on management transition issues by plastics entrepreneurs;
* The potential to achieve economies of scale and obtain synergies for fixed
cost savings;
* Increased capital and technical capabilities necessary to increase
production efficiencies and expand capacity; and
* Customers seeking to deal with fewer suppliers.
Due to the size and breadth of our operations, the Company believes it is well
positioned to increase its business through new product developments, the
continuing substitution of thermoplastics for wood, metal and fiberglass
applications, and selective acquisitions. The Company calls its new products
Alloy Plastics and the substitution process Product Transformations, and
additional information on these items is covered under the Operating Philosophy
section that follows on the next page. Acquisitions completed over the last
five years are summarized below:
Date
Acquired Business Acquired Products / Segments
May 1996 Portage Industries Extruded Sheet & Rollstock
September 1996 Hamelin Group Extruded Sheet & Rollstock,
Color Concentrates and
Molded Products
August 1997 Preferred Plastic Extruded Sheet & Rollstock
Sheet Division and Profile Products
of Echlin Inc.
March 1998 Polycom Huntsman, Inc. Specialty Compounds
April 1998 Prismaplast Canada, Ltd. Color Concentrates
October 1998 Anjac-Doran Plastics, Inc. Profile Products
January 1999 Lustro Plastics, Company
L.L.C. Extruded Sheet & Rollstock
May 1999 Alltrista Plastic Packaging Extruded Sheet & Rollstock
Company Division of
Alltrista Corporation
October 1999 Accura Molding Company Ltd. Injection Molded Products
October 1999 OS Plastics, Division of Extruded Sheet & Rollstock
Innocan Capital Inc.
October 1999 Geoplast PVC Division of RAE Profile Products
Capital Corp
February 2000 Uniroyal Technology Extruded Sheet & Rollstock
Corporation's High and Cell Cast Acrylic
Performance Plastics
October 2000 Alshin Tire Corporation Injection Molded Products
Further information with respect to Spartech's recent acquisition activity
is set forth in Note (2) to the Consolidated Financial Statements on page 19 of
the 2000 Annual Report to Shareholders, attached as Exhibit 13.
Operating Philosophy
Spartech introduced its current strategic vision in the early 1990's, as the
Company began to capitalize on its core manufacturing competencies and take
advantage of the growth opportunities in the consolidating plastics industry.
Today, our "Focused Growth" and "Continuous Improvement" strategies support our
commitment to generate value for our customers, shareholders and employees.
SPARTECH's "Four Cornerstones for Volume Growth" initiatives continue to provide
a strong foundation for our Focused Growth strategy. In early fiscal 1999, the
Company introduced SPARTECH's "Pyramids of Productivity" initiative and has now
expanded its "Continuous Improvement" strategy to include three "Pyramids of
Performance."
Focused Growth Strategy-Spartech's volume growth strategy is known as 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. 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 position in the plastics
intermediary
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)
or new markets served; (ii) increase geographic presence or market
penetration; and (iii) provide operational synergies in purchasing,
production and customer service.
* 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 custom sheet and rollstock, where the
transformation process has been accelerating. Sizable metal, glass and
fiberglass specialty components are being replaced by thermoplastics
in the sign
& advertising 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. Penetration of plastics into
the appliance & electronics, automotive, building & construction,
recreation & leisure, and packaging markets continues to expand
the opportunities for Product Transformations.
* 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, which
we call "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.
Continuous Improvement Strategy-Spartech's Continuous Improvement strategy,
under the Company's Pyramids of Performance initiatives, focuses Spartech on
consistent improvement in production efficiency, communication, and training.
The three components of this strategy are:
* Pyramid of Productivity. Combines Supply Chain Management, Lean
Manufacturing, and Results-Driven Communication efforts to enhance earnings
through continuous improvements at each of our 51 operations. Over 200 cross-
functional teams throughout all our facilities work on generating productivity
improvements, eliminating waste, and identifying process efficiencies.
Annually, we recognize our five best "Champion Teams" at our Annual Awards
Meeting.
* Pyramid of Communication. Focuses on the effective use of information
technology to drive business growth, improve customer satisfaction, and
enhance
shareholder relations. Our new Growth Focused Communication program was
implemented in 2000 to install the policy and procedure changes needed to
continually improve in the areas of (1) Customer, Sales, Marketing and
Manufacturing Information Integration, (2) Electronic Commerce and Product
Development Technology, (3) Enterprise-Wide Communication Systems, and (4)
Internet-Enabled Applications.
* Pyramid of Training. Builds upon our Total Transaction Quality and Total
Customer Satisfaction programs to further develop properly motivated and well-
trained employees through our Growth Through Training effort. This training
initiative is designed to support our Creating Positive Change effort by
strengthening our employees knowledge and skills in (1) Business Fundamentals,
(2) Personal Development, (3) Process Improvement, and
(4) Effective Management & Leadership.
Operating Segments
The Company operates its 51 production facilities in North America and Europe
in three segments: Custom Sheet & Rollstock; Color & Specialty Compounds; and
Molded & Profile Products.
Custom Sheet & Rollstock-Net sales and operating earnings (consisting of
earnings before interest, taxes and corporate operations) of the Custom Sheet &
Rollstock segment for fiscal years 2000, 1999 and 1998 were as follows:
Fiscal Year
(Dollars in millions)
2000 1999 1998
Net Sales $623.7 $494.1 $ 455.1
Operating Earnings $ 74.8 $ 57.6 $ 50.5
* Products. This segment, operating under the names Spartech Plastics and
Spartech Polycast, processes a variety of materials into single/multilayer
sheets or rollstock and cell cast acrylic on a custom basis for end product
manufacturers. The segment's products are utilized in several end markets
including aerospace, transportation, building & construction, packaging,
recreation and sign/advertising. Most of the segment's customers form, cut,
stretch or trim their plastic sheet for these various end uses.
* New Product Development. This segment is actively involved in the
development of Alloy Plastics. These products are engineered sheets and
rollstock using multiple layers of materials, often of different plastics and
often using proprietary mixtures of plastic compounds. They offer end-product
manufacturers a variety of solutions to design high performance and
environmentally-friendly products with cost effective benefits. The Company
currently offers 20 such alloy plastics, five of which were introduced
in April 2000.
* Manufacturing and Production. This segment operates 27 facilities in North
America. The principal raw materials used in manufacturing sheet and rollstock
are plastic resins in pellet form. The Company extrudes a wide variety of
plastic resins, including ABS (acrylonitrile butadiene styrene),
polycarbonate,
polypropylene, acrylic, PET (polyethylene terephthalate), polystyrene,
polyethylene, PVC (polyvinyl chloride) and PETG (polyethylene terephthalate
glycol).
* Spartech Plastics produces extruded plastic sheet and rollstock of up to
seven layers using a multi-extrusion process. This process combines the
materials in distinct layers as they are extruded through a die into sheet
form,
providing improved and sometimes unique properties compared to single layer
extrusions. More than half of our 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 a plastic
sheet or laminate sheets together to achieve performance characteristics
desired
by customers for particular applications.
* Spartech Polycast manufactures acrylic products through cell cast
manufacturing, in more than 60 colors and in gauges ranging from 0.030 to 6.00
inches. Acrylic sheet manufactured by the cell cast process, which is more
labor intensive than continuous cast, extrusion or calender processes,
generally
yields higher margins than acrylic sheet produced by such other processes.
* 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 production facility.
This is due to shipping costs for rigid plastic material and the need for
prompt
response to customer requirements and specifications. The cell cast acrylic,
outdoor sign and spa markets, however, are more national in scope.
* The Company sells sheet and rollstock products principally through our own
sales force, but also uses a limited number of independent sales
representatives. During 2000, the Company sold products of the Custom Sheet &
Rollstock segment to over 3,000 customers, including Sub-Zero Freezer Company,
The Procter & Gamble Company, Jacuzzi Incorporated, Igloo Corporation,
Textron,
Inc. and Hormel Foods.
Color & Specialty Compounds-Net sales and operating earnings (consisting of
earnings before interest, taxes and corporate operations) of the Color &
Specialty Compounds segment for fiscal years 2000, 1999 and 1998 were as
follows:
Fiscal Year
(Dollars in millions)
2000 1999 1998
Net Sales $240.5 $217.6 $158.2
Operating Earnings $ 30.8 $ 28.6 $ 18.1
* Products - The Color & Specialty Compounds segment manufactures color
concentrates, proprietary or custom-designed plastic compounds, and calendered
film for a large group of manufacturing customers who produce consumer
appliance
components, lawn and garden equipment, cosmetic and medical packaging, vehicle
components and numerous other products. The segment operates under three
business names:
Spartech Polycom produces its own line of proprietary compounds
and also provides toll compounding services for engineered
resins, flame retardants and other specialty compounds.
Spartech Color, the largest color supplier in Canada, is focused
on service-oriented color concentrate applications for film and
molding.
Spartech Vy-Cal Plastics operates a vinyl calender, supplying
finished PVC
film to manufacturers of such products as loose-leaf binders,
decorator-grade
wallcoverings and packaging products for the medical industry.
* Customers of the Color & Specialty Compounds segment range from major
integrated manufacturers to sole-proprietor subcontractors that use injection
molding, extrusion, blow molding and blown and cast film processes.
* New Product Development. This segment has well-equipped laboratory
facilities, particularly the Spartech Polycom Technical Center in Donora,
Pennsylvania. 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. The Company creates new
specialty compounds by adding reinforcements and other additives to the base
resins, in order to offer end-product manufacturers a variety of solutions for
the design of high-performance and environmentally-friendly products
on a cost-
efficient basis. In addition to compounding technology, the segment has
developed enhanced capabilities to produce color concentrates and additives.
* Manufacturing and Production. This segment operates 11 manufacturing
facilities in North America and one in Europe. The principal
raw materials used
in manufacturing specialty plastic compounds and color concentrates
are plastic
resins in powder and pellet form, primarily polypropylene, polyethylene,
polystyrene, ABS and PVC. The Company also uses colorants, mineral and glass
reinforcements and other additives to impart specific performance
and appearance
characteristics to the compounds. The raw materials are mixed in a blending
process and then normally fed into an extruder and formed into pellets.
* Marketing, Sales and Distribution. The Company generates most of the Color
& Specialty Compounds segment's sales in the United States and Canada but also
sells to customers in Europe and Mexico. The Company sells the segment's
products principally through our own sales force, but also uses independent
sales representatives. During 2000, the Company sold products of the Color &
Specialty Compounds segment to over 2,000 customers, including the Solo Cup
Company, DaimlerChrysler, Igloo Corporation and Tenneco Inc.
Molded & Profile Products-Net sales and operating earnings (consisting of
earnings before interest, taxes, and corporate operations) of the Molded and
Profile Products segment for fiscal 2000, 1999 and 1998 were as follows:
Fiscal Year
(Dollars in millions)
2000 1999 1998
Net Sales $97.3 $56.2 $40.6
Operating Earnings $12.3 $ 7.8 $ 5.7
* Products. Our Molded & Profile Products segment manufactures a wide range
of injection molded and profile extruded products for a large group of
intermediate and end-user customers. The segment operates under five business
names:
- Spartech Industries produces thin-walled, printed plastic food packaging
and industrial containers for a large group of dairy, deli and
industrial supply companies; plastic tire and wheel assemblies for the
medical, lawn & garden, refuse container and toy markets; and water
purification systems for Brita.
Alshin Tire Corporation manufactures high performance
molded urethane tires
for the medical, material handling, lawn & garden, and
recreational product applications.
Spartech Profiles manufactures products for various industries,
including
the bedding and construction markets.
Spartech Marine specializes in the fabrication of acrylic
products used in
high end marine applications.
Spartech Townsend manufactures acrylic rods and tubes used primarily in
display, household and medical applications.
* New Product Development. This segment brings unique, recognized
capabilities to our customers such as print graphics and package design,
patented tread-cap wheel technologies and special fabrication of profile
products. In addition, this segment's creativity, engineering and design
principles enable us to effectively respond to customer needs in the niche
markets in which the Company participates.
* Manufacturing and Production. This segment operates twelve manufacturing
facilities in North America. The principal raw materials used in our
manufacturing of molded and profile products are acrylics, polyethylene,
polypropylene and PVC. Our products in this segment are generally manufactured
either through injection molding or profile extrusion.
* Marketing, Sales and Distribution. Spartech Industries - Thin Wall
Containers markets most of its products to customers located in North America,
as well as the Caribbean. Spartech Industries - Custom Engineered Wheels and
Alshin Tire Corporation market their products throughout North America.
Spartech Industries - Custom Molded Products sells water purification systems
and various custom molded products throughout North America.
Spartech Profiles
markets its custom profile products throughout North America. Spartech Marine
markets its fabricated acrylic products throughout North America. Spartech
Townsend markets its acrylic rods and tubes throughout North America. The
Company sells the segment's products principally through our own sales force,
but also uses independent sales representatives and wholesale distributors.
During 2000, the Company sold products of the Molded & Profile Products
segment
to approximately 1,300 customers, including MTD Products, Brita GmbH,
Dannon and J&J Snack Foods Corp.
Raw Materials
The Company uses large amounts of various plastic 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.
The Company seeks to maintain operating margins by matching cost increases with
corresponding price increases and has generally been successful in doing so.
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 the
foreseeable future.
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 Custom Sheet & Rollstock, Color & Specialty Compounds, and Molded &
Profile Products processing segments 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 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 manufacture consistently to required quality levels, meet demanding
delivery times, exercise skill in raw material purchasing, and achieve
production efficiencies to process the products profitably. The Company
believes it is competitive in each of these key areas.
Backlog
The Company estimates that the total dollar volume of its backlog as of
October 28, 2000 and October 30, 1999 was approximately $80.4 million and $75.6
million, respectively, which represents approximately four weeks of production
for 2000 and five weeks of production for 1999.
Employees
The Company's total employment approximates 4,070. There are 3,220 production
personnel at the Company's 51 facilities, approximately 38% of whom are union
employees covered by several collective bargaining agreements. The Company
considers its employee relations to be good. Management personnel total
approximately 850 supervisory/clerical employees, none of whom are unionized.
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 2001 to
comply with any applicable regulations. The Company is subject to federal,
state, local and non-U.S. 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. The Company has not incurred significant
expenditures in order to comply with such laws and regulations, nor does it
anticipate continued compliance 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 France -- is located in Note (13) to the
Consolidated Financial Statements on page 27 of the 2000 Annual Report to
Shareholders, attached hereto as Exhibit 13 and incorporated by reference. The
Company's Canadian and French operations may be affected periodically by foreign
political and economic developments, laws and regulations, and currency
fluctuations.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides certain information about the Company's
executive officers, their positions with the Company, and their prior business
experience and employment for at least the past five years
Name Age Current Office, and Prior Positions and
Employment
Bradley B. 52 Chairman of the Board (since March 1999),
Buechler President (since 1987) and Chief
Executive Officer (since 1991). Mr.
Buechler, a CPA, was with Arthur Andersen
LLP before the commencement of his
employment with the Company in 1981.
Randy C. Martin 38 Executive Vice President, Acrylic
Products (since September 2000) and Chief
Financial Officer (since May 1996);
Corporate Controller from 1995 to May
1996; Vice President, Finance from May
1996 to September 2000. Mr. Martin, a
CPA and CMA, was with KPMG Peat Marwick
LLP for eleven years before joining the
Company in 1995.
David G. Pocost 39 Executive Vice President, Extruded Sheet
and Profile Products (since September
2000); Director of Quality &
Environmental Affairs from 1994 to
December 1996; Vice President, Quality &
MIS from December 1996 to September 1998,
and Vice President, Engineering, Quality
& MIS from September 1998 to September
2000. Mr. Pocost was previously with
Moog Automotive as Division Quality
Assurance Manager and Senior Materials
Engineer for eight years.
George A. Abd 37 Executive Vice President, Color &
Specialty Compounds (since September
2000); Vice President of Compounding for
the Company's Spartech Polycom Division
from March 1998 to September 2000. Mr.
Abd held various positions with Polycom
Huntsman, Inc for eleven years prior to
its acquisition by the Company in March
1998.
Jeffrey D. 52 Vice President and General Counsel (since
Fisher July 1999); and Secretary (since
September 2000). Mr. Fisher, an
attorney, was with the law firm of
Armstrong Teasdale LLP for 24 years, the
last 17 years as a partner, before
joining the Company in July 1999.
Item 2. PROPERTIES
The Company operates in plants and offices aggregating approximately
4,226,000 square feet of space. Approximately 1,700,000 square feet of plant
and office space is leased with the remaining 2,526,000 square feet owned by the
Company. A summary of the Company's principal operating facilities follows:
Extruded Sheet & Rollstock
Location Description Size in Square Owned/Leased
Feet
Arlington, TX Extrusion plant & 120,000 Leased
offices
Atlanta, GA Extrusion plant & 84,000 Leased
offices
Cape Extrusion plant & 100,000 Owned
Girardeau, MO offices
Clare, MI Extrusion plant & 27,000 Owned
offices
Conneaut, OH Extrusion plant & 86,000 Owned
offices
7,000 Leased
Evanston, IL Extrusion plant & 135,000 Leased
offices
Greenville, OH Extrusion plant & 60,000 Owned
offices
10,000 Leased
Greensboro, GA Extrusion plant & 42,000 Owned
offices
10,000 Leased
Hackensack, NJ Acrylic plant & 81,000 Leased
offices
La Mirada, CA Extrusion plant & 99,000 Leased
offices
Mankato, MN Extrusion plant & 36,000 Owned
offices
54,000 Leased
McMinnville, Extrusion plant & 40,000 Owned
OR offices
McPherson, KS Extrusion plant 102,000 Owned
& offices
Muncie, IN Extrusion plant 202,000 Owned
& offices
Oxnard, CA Extrusion plant 74,000 Leased
& offices
Paulding, OH Extrusion plant 68,000 Owned
& offices
20,000 Leased
Phoenix, AZ Acrylic plant & 25,000 Owned
offices
Portage, WI Extrusion plant & 115,000 Owned
offices
47,000 Leased
Redlands, CA Extrusion plant & 60,000 Owned
offices
Richmond, IN Extrusion plant & 52,000 Owned
offices
29,000 Leased
Stamford, CT Acrylic Plant & 80,000 Leased
offices
7,000 Leased
Taylorville, Extrusion plant & 40,000 Owned
IL offices
5,000 Leased
Warsaw, IN Extrusion plant & 231,000 Owned
offices
170,000 Leased
Wichita, KS Extrusion plant & 62,000 Owned
offices
143,000 Leased
Cornwall #1, Extrusion plant & 38,000 Leased
Ontario offices
Cornwall #2, Extrusion plant & 64,000 Leased
Ontario offices
Granby, Quebec Extrusion plant & 75,000 Owned
offices
2,700,000
Color & Specialty Compounds
Location Description Size in Square Owned/Leased
Feet
Cape Compounding plant & 56,000 Owned
Girardeau, MO offices
60,000 Leased
Charleston, SC Compounding plant & 97,000 Leased
offices
Conneaut, OH Compounding plant & 94,000 Owned
offices
Conshohocken, Calendering plant & 42,000 Owned
PA offices
Donora #1, PA Compounding plant & 142,000 Owned
offices
Donora #2, PA Compounding plant & 88,000 Owned
offices
Kearny, NJ Compounding plant & 57,000 Owned
offices
3,000 Leased
Lake Charles, Compounding plant & 55,000 Owned
LA offices
Lockport, NY Compounding plant & 45,000 Owned
offices
St. Clair, MI Compounding plant & 71,000 Owned
offices
Stratford, Color plant & 65,000 Owned
Ontario offices
Donchery, Compounding plant & 30,000 Owned
France offices
905,000
Molded & Profile Products
Location Description Size in Owned/Leased
Square Feet
Des Moines, IA Acrylic Products 53,000 Leased
El Monte, CA Profile Plant & 63,000 Leased
Offices
Greensboro, GA Profile Plant -*
McPherson, KS Profile Plant -*
Melbourne, FL Acrylic Products 52,000 Leased
Rockledge, FL Acrylic Products 38,000 Leased
Rancho Injection Molding 17,000 Leased
Cucamonga, CA plant & offices
Warsaw, Indiana Injection Molding 41,000 Owned
plant & offices 28,000 Leased
Brampton, Injection Molding 100,000 Leased
Ontario plant & offices
Cookshire, Injection Molding 140,000 Owned
Quebec plant & offices
Toronto, Injection Molding 73,000 Leased
Ontario plant & offices
Winnipeg, Profile Plant & 16,000 Owned
Manitoba Offices
621,000
*Profile production conducted in same facility as the Extruded
Sheet & Rollstock plant noted above.
In addition, the Company leases office facilities for its corporate
headquarters in St. Louis, Missouri and for administrative offices in
Washington, Pennsylvania, the aggregate square footage of which is approximately
25,000.
The plants located at the premises listed above are equipped with 124 sheet
extrusion lines, 84 of which run multi-layered materials, 29 casting machines,
45 profile extrusion lines, 38 general compounding lines, 18 color compounding
lines, 98 injection molding machines, 22 printing 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
approximately $20 million in fiscal 2001) are adequate for the level of business
anticipated in fiscal 2001.
Item 3. LEGAL PROCEEDINGS
The Company is subject to various claims, lawsuits and administrative
proceedings arising in the ordinary course of business with respect to
commercial, product liability, employment and other matters, several of 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 matters will not have a material adverse effect on the
Company's financial position or results of operations. The Company currently
has no material 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 28, 2000.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information on page 29 and 31 of the 2000 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 31 present the cash dividends
declared in fiscal 1999 consisting of four quarterly payments at seven cents per
share and the cash dividends declared in fiscal 2000 consisting of four
quarterly payments at eight and one-half cents per share. On December 6,
2000, the Company declared a dividend of nine and one-half cents per share
payable on January 17, 2001. 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 2000 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 9, 10, 11, 12, and 13 of the 2000 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 description 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, 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 8 and 9, other important
factors which have impacted 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; (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; and (3) our products are sold in a number of end markets which tend
to be cyclical in nature, including transportation, building and construction,
bath/pool and spa, and electronics and appliances. A downturn in one or more of
these end markets could have a material adverse effect on our sales and
operating profit.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information entitled "Quarterly Financial Information" on page 27 of the
2000 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 2001
Annual Meeting of Shareholders, to be filed with the Commission on or about
January 22, 2001, is incorporated herein by reference in response to this item.
Information concerning the Executive Officers of the Company is contained on
page 11 in Part I of this Report.
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 2001 Annual Meeting of Shareholders, to be filed with the Commission on or
about January 22, 2001, 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 2001 Annual Meeting of Shareholders, to be
filed with the Commission on or about January 22, 2001, 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 Business Relationships and Transactions"
of the Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders,
to be filed with the Commission on or about January 22, 2001, is incorporated
herein by reference in response to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
The following financial statements and financial statement schedules are
incorporated by reference from the 2000 Annual Report to Shareholders, to be
filed with the Commission on or about January 22, 2001, 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 Balance Sheet - 14
Consolidated Statement of Operations - 15
Consolidated Statement of Shareholders'
Equity - 16
Consolidated Statement of Cash Flows - 17
Notes To Consolidated
Financial Statements - 18-27
Financial Statement Schedules
Schedule
Number Description
II Valuation and
Qualifying Accounts F-2 -
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.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
(c) Exhibits
The Exhibits required to be filed by Item 601(a) of Regulation S-K are
included as follows:
3.1(1) Restated Certificate of Incorporation
3.2 Amended and Restated By-Laws
10.1(2) Asset Purchase Agreement between Spartech Corporation, High
Performance Plastics, Inc., Uniroyal HPP Holdings, Inc. and Uniroyal
Technology Corporation, dated December 24, 1999
10.2(3) Amended and Restated Employment Agreement dated November 1, 1999,
between Bradley B. Buechler and Spartech Corporation
10.3(4) Amended and Restated Employment Agreement dated November 1, 1999,
between David B. Mueller and Spartech Corporation
10.4 Transition Agreement and Consulting Agreement dated August 3, 2000,
between David B. Mueller and Spartech Corporation
10.5(5) Employment Agreement dated January 1, 2000 between Randy C.
Martin and Spartech Corporation
10.6(6) Employment Agreement dated January 1, 2000 between David G.
Pocost and Spartech Corporation
10.7(7) Employment Agreement dated April 30, 1999 between Jeffrey D.
Fisher and Spartech Corporation
10.8(8) Spartech Corporation Incentive Stock Option Plan dated July 26,
1991 as amended November 1, 1997
10.9(9) Spartech Corporation Amended and Restated Restricted Stock Option
Plan
11 Statement re Computation of Per Share Earnings
13 Pages 9 through 29 and 31 of 2000 Annual Report to Shareholders
21 Subsidiaries of Registrant
23 Consent of Independent Public Accountants
24 Powers of Attorney
Notes to Exhibits
(1)Filed as Exhibit 3.1 to the Company's Form S-8 (File No. 333-60381),
filed with the Commission on July 31, 1998 and incorporated herein by
reference.
(2)Filed as Exhibit 2 to the Company's Form 8-K filed with the Commission
on March 14, 2000 and incorporated herein by reference.
(3)Filed as Exhibit 10(A) to the Company's annual report on Form 10-K
for the fiscal year ended October 30, 1999, filed with the
Commission on January 13, 2000 and incorporated herein by
reference.
(4) Filed as Exhibit 10(B) to the Company's annual report on
Form 10-K for the fiscal year ended October 30, 1999, filed
with the Commission on January 13, 2000 and incorporated
herein by reference.
(5) Filed as Exhibit 10(G) to the Company's annual report on
Form 10-K for the fiscal year ended October 30, 1999, filed
with the Commission on January 13, 2000 and incorporated
herein by reference.
(6) Filed as Exhibit 10(H) to the Company's annual report on
Form 10-K for the fiscal year ended October 30, 1999, filed
with the Commission on January 13, 2000 and incorporated
herein by reference.
(7)Filed as Exhibit 10 to the Company's quarterly report on Form 10-Q for
the quarter ended July 31, 1999, filed with the Commission on August 31,
1999 and incorporated herein by reference.
(8)Filed as Exhibit 4.1 to the Company's Form S-8 (File No. 333-
60381), filed with the Commission on July 31, 1998 and incorporated
herein by reference.
(9)Filed as Exhibit 4.1 to the Company's Form 8-K filed with the Commission
on December 6, 1999 and incorporated herein by reference.
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 18, 2001 By: /s/ Bradley B. Buechler______
(Date) Bradley B. Buechler
Chairman, 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 18, 2001 /s/ Bradley B. Buechler______Chairman, President, Chief
Bradley B. Buechler Executive Officer, and
Director (Principal
Executive Officer)
January 18, 2001 /s/ Randy C. Martin ______Executive Vice President and
Randy C. Martin Chief Financial Officer
(Principal Financial and
Accounting Officer)
January 18, 2001 /s/ Ralph B. Andy Director
Ralph B. Andy*
January 18, 2001 Director
W. R. Clerihue*
January 18, 2001 /s/ Roy Dobson Director
Roy Dobson*
January 18, 2001 /s/John R. Kennedy Director
John R. Kennedy*
January 18, 2001 /s/ Calvin J. O'Connor Director
Calvin J. O'Connor*
January 18, 2001 /s/ Jackson W. Robinson Director
Jackson W. Robinson*
January 18, 2001 /s/ Richard B. Scherrer Director
Richard B. Scherrer *
* By Bradley B. Buechler as Attorney-in-Fact pursuant to Powers of Attorney
executed by the Directors listed above, which Powers of Attorney are filed
herewith.
/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 auditing standards generally accepted in the
United States, the financial statements included in SPARTECH Corporation's 2000
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated December 5, 2000. 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
St. Louis, Missouri
December 5, 2000
F-1
SPARTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED 2000, 1999, AND 1998.
(Dollars in thousands)
BALANCE AT ADDITIONS AND
BEGINNING OF CHARGES TO COSTS BALANCE AT
DESCRIPTION PERIOD AND EXPENSES WRITE-OFFS END OF
PERIOD
October 28, 2000:
Allowance for
Doubtful Accounts $ 3,016 $ 1,634 $ (1,023) $ 3,627
October 30, 1999:
Allowance for
Doubtful Accounts $ 2,430 $ 1,467 $ (881) $ 3,016
October 31, 1998:
Allowance for
Doubtful Accounts $ 2,212 $ 1,912 $ (1,694) $ 2,430
Fiscal year 1998, 1999 and 2000 additions and write-offs include activity
relating to the acquisition of certain of the businesses and assets of Polycom
Huntsman, Inc. in March 1998, Prismaplast Canada Ltd. in April 1998, Anjac-Doron
Plastics, Inc. in October 1998, Lustro Plastics, Company, L.L.C. in January
1999, Alltrista Plastic Packaging Company Division of Alltrista Corporation in
May 1999, Accura Molding Company Ltd. in October 1999, OS Plastics Division of
Innocan Capital Inc. in October 1999, Geoplast PVC Division of RAE Capital Corp.
in October 1999, Uniroyal Technology Corporation's High Performance Plastics
Group in February 2000, and Alshin Tire Corporation in October 2000.
F-2