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 November 2, 2002
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 $469,163,561 on December 31, 2002.
There were 29,246,204 total shares of common stock outstanding as of
December 31, 2002.
Documents incorporated by reference
1) Portions of the 2002 Annual Report to Shareholders are incorporated
by reference into Parts I, II and IV.
2) Portions of the Definitive Proxy Statement for the 2003 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
7,000 original equipment manufacturers and other customers in a wide
range of end markets. The Company operates 42 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 food/medical packaging, signs, spas,
bathtubs & shower surrounds, burial vault liners, automotive &
recreational vehicle components, airplanes, boats, security
windows, and refrigerators. The Company is North America's
largest extruder of custom rigid plastic sheet and rollstock,
operating 23 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, roofing, lawn & garden equipment, wallcoverings, and
other end markets. The Company produces and distributes these
products from 13 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: thermoplastic tires and wheels for the medical,
lawn & garden, refuse container, and toy markets and window frames
and fencing for the building & construction market as well as
other custom profile extruded products for a variety of
industries. The Company manufactures these molded and profile
products from 7 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 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 Extrusion - Plastic sheet is produced by forcing
melted plastic through wide, flat die,
between polished or textured
metal rollers and onto a flat cooling
bed for cutting to the desired
width and length.
" Rollstock Extrusion - Similar to sheet extrusion, except
that the plastic is wound
onto rolls rather than cut into flat
pieces of a specific length.
" Calendering - Plastic film is produced by drawing a
heated extruded sheet of resin between
two counter-rotating rollers under
pressure.
" Cell Cast Acrylics - Acrylic sheet is produced by pouring
a reactive mixture of
liquid monomers, additives and
catalysts between two polished glass
sheets held together at a desired
thickness, and allowing the mixture to
polymerize with time, heat, and
pressure in an oven or water bath
until solid.
" Specialty Compounding - Basic plastic resins are melted and
mixed with additives,
fillers, or other plastics in order to
impart specific properties such as
gloss, strength or moldability to the
resulting mixture, which is typically
sold and shipped in pellet form.
" Color Concentrates - Basic plastic resins are melted and
mixed with pigments in order to produce
colored pellets, which
plastics compounders or fabricators blend
with natural color plastics
to make products of desired colors.
" Profile Extrusion - Products having a desired two-
dimensional cross-section, such as plastic
fence rails or window
frames, are produced by forcing melted plastic
through a die of
various shapes, cooling it in air or in a water
bath, and cutting it
to the desired length.
" Cast Acrylic Rods & Tubes - Rods are produced from reactive
mixtures similar to those used for cell cast
acrylics by curing the
mixture in a vertical, tubular mold and then
grinding and polishing
the rod to the desired length and diameter.
Tubes are produced by
curing a similar mixture against the inside
of a drum-shaped mold of
the desired length and diameter while it revolves
on a horizontal axis.
" Injection Molding - Three-dimensional products such as
wheels are formed by forcing melted plastic
into a mold cavity under
pressure so that when cooled the plastic
reflects the shape of the cavity.
There are various other processes used within the plastics
processing industry in which we do not compete, such as film
extrusion, continuous cast acrylics, pipe and tube extrusion,
thermoforming, blow molding and rotational molding.
Each of these processing methods has unique competitive and
economic characteristics and 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 processors in the United
States are 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 revenue
and fixed cost synergies;
" 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, we believe we are
well positioned to increase our business through new product
developments, the continuing substitution of thermoplastics for wood,
metal and fiberglass applications, and selective acquisitions.
Competitive Strengths
Our competitive strengths include:
" Market Position. According to the Plastics News Market Data Book,
December 31, 2002, we are the largest producer of custom sheet and
rollstock in North America, and we are one of the leading producers of
color and specialty compounds in North America.
" New Product Development. Our diversity of product capabilities
and experienced operating personnel have provided a consistent means
for identifying and developing new product applications through both
the use of our proprietary Alloy Plastics and the acceleration of
Product Transformation ideas.
" Benefits from Acquisitions. We have completed 12 acquisitions
over the past five years. Our successful integration of these
acquisitions into our business has enabled us to achieve synergies and
operating leverage through:
- Centralized purchasing of raw materials and other cost synergies;
- Improved resource utilization by way of manufacturing
optimization; and
- Greater absorption of fixed costs over an increased revenue base.
These factors enable us to broaden our product capabilities and
enhance customer service while maintaining our cost competitiveness.
* Commitment to Customer Service. We seek to differentiate
ourselves from our competitors by emphasizing our wide range of
product offerings, consistent product quality, outstanding customer
service, and innovative technical solutions for our customers.
* Diversified Customer Base. We sell our products to over 7,000
customers in a broad range of end markets, with no single customer
accounting for more than 2% of our 2002 sales. Our top 20 customers
represented 23% of our 2001 sales. Based on our classification of end
markets, packaging is our largest single market, accounting for
approximately 25% of our 2001 sales. The packaging market generally
experiences faster growth and less cyclicality than the other major
markets served by plastics processors.
* Geographic Presence. Our 43 plants are strategically located in
37 cities throughout the United States as well as in eastern Canada
and France. The close proximity of our plants to our customers saves
shipping costs and reduces delivery times.
* Decentralized Management Structure. Our day-to-day operating
decisions are made at each of our operating locations. This promotes
operating efficiency, timely decision making and effective integration
of the businesses we acquire.
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
August 1997 Preferred Plastic Sheet Extruded Sheet &
Division Rollstock
of Echlin Inc and Profile
Products
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 Extruded Sheet &
L.L.C. Rollstock
May 1999 Alltrista Plastic Packaging Extruded Sheet &
Company Rollstock
Division of Alltrista
Corporation
October 1999 Accura Molding Company Ltd. Injection Molded
Products
October 1999 OS Plastics, Division of Extruded Sheet &
Innocan Rollstock
Capital Inc.
October 1999 Geoplast PVC Division of RAE Profile Products
Capital Corp.
February 2000 Uniroyal Technology Extruded Sheet &
Corporation's Rollstock
High Performance Plastics and Cell Cast
Acrylic
October 2000 Alshin Tire Corporation Injection Molded
Products
June 2002 GWB Plastics Holding Co. Color & Specialty
Compounds
In November 2001 we acquired an 85.7% equity interest in X-Core,
LLC, a manufacturer of injection molded wheels for the wheelchair
and bicycle markets, in exchange for a cash investment of up to $2.8
million over the next four years.
As a result of our acquisitions, we have been able to enhance
our market position, aggressively develop new and diverse products,
achieve synergies and operating leverage, expand our geographic
presence into 43 plants in 37 cities, and diversify our customer
base, all of which help us to serve our customers better by being
able to offer them broader product capabilities while being more
cost-competitive.
Further information with respect to Spartech's recent acquisition
activity is set forth in Note (2) to the Consolidated Financial
Statements on page 23 of the 2002 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.
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. Product Transformations are
applications that result from the ongoing transition of products
previously manufactured from traditional materials (such as wood,
metal or fiberglass) into higher performing and less expensive
recyclable thermoplastics. Product Transformations are a key element
of our internal growth. Since 1995, the Company has participated in
over 250 Product Transformations. In 2002, the Company had over 50
new 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 fillers 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 continuous 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 43 operations.
Over 120 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.
In addition to these Focused Growth and Continuous Improvement
Strategies, we recently implemented our Pillars of Leadership effort
and our Creating Positive Change initiative. Under our Pillars of
Leadership effort, we are training employees to be creative, decisive,
and motivational. The Creating Positive Change initiative relied upon
these skills in implementing several distinct phases during fiscal
2000 and 2001 to improve certain aspects of our business and
streamline our operations. These three phases included the closing of
nine operating facilities, the sale of three molded & profile
operating plants, and S, G & A cost reduction measures. We believe
that our continuing Pillars of Leadership effort and our Pyramid of
Productivity teams will drive additional improvements and positive
changes in our operations and production process.
Operating Segments
The Company operates its 43 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 2002, 2001 and 2000
were as follows:
Fiscal Year
2002 2001 2000
(Dollars in
millions)
Net Sales $600.5 $621.9 $639.6
Operating $ 62.3 $ 66.6 $ 74.8
Earnings
" 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 include 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 35 such Alloy
Plastics, eight of which were introduced in April 2002.
" Manufacturing and Production. This segment operates 23
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 a product that
is considered to have a higher quality than acrylic sheet
produced by 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 2002, the Company sold
products of the Custom Sheet & Rollstock segment to over 3,500
customers, including Sub-Zero Freezer Company, The Procter &
Gamble Company, Jacuzzi Incorporated, Igloo Corporation, Textron,
Inc. and Hormel Foods.
" Competition. The Custom Sheet & Rollstock processing segment is
highly competitive. Since the Company manufactures a wide variety of
products, the Company competes in different areas with many other
companies. The Company competes generally on the basis of price,
product performance and customer service. Important competitive
factors include the ability to manufacture consistently to required
quality levels, meet demanding delivery times, exercise skill in raw
material purchasing, achieve production efficiencies to process the
products profitably, and provide new product solutions to customer
applications. Some of our primary competitors in the Custom Sheet &
Rollstock segment are CYRO Industries, Kama Corp., Primex Plastics
Corporation, VPI, LLC, and Witt Plastics Inc. We believe we compete
effectively with these companies in each of these key areas.
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 2002, 2001 and 2000 were as follows:
Fiscal Year
2002 2001 2000
(Dollars in
millions)
Net Sales $235.7 $227.8 $249.0
Operating $ 25.7 $ 24.8 $ 30.8
Earnings
" 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, food
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
fillers 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. The ReinForce GRPP (glass-reinforced polypropylene)
product introduced in 2001 was the first new product of the Color &
Specialty Compound group that was marketed as an Alloy Plastic.
" Manufacturing and Production. This segment operates 13
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,
TPO's, 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 2002,
the Company sold products of the Color & Specialty Compounds segment
to over 2,100 customers, including the Solo Cup Company,
DaimlerChrysler, Igloo Corporation and Pactiv Corporation.
" Competition. The Color & Specialty Compounds processing segment
is highly competitive. The Company competes with some companies which
are much larger and have more extensive production facilities, larger
sales and marketing staffs and substantially greater financial
resources than the Company does. The Company competes generally on
the basis of price, product performance and customer service.
Important competitive factors in each of our businesses include the
ability to manufacture consistently to required quality levels, meet
demanding delivery times, provide technical support, and achieve
production efficiencies to process the products profitably. Some of
our primary competitors in the Color & Specialty Compounds segment are
Ampacet Corporation, AMETEK Westchester Plastics, A. Schulman, Inc.,
Ferro Corp., PolyOne Corporation, ReTech Industries, Inc., and
Washington Penn Plastic Co., Inc. We believe we compete effectively
with these companies in each of these key areas.
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 2002, 2001 and 2000
were as follows:
Fiscal Year
2002 2001 2000
(Dollars in
millions)
Net Sales $62.1 $87.4 $99.0
Operating $ 3.5 $ 8.6 $ 12.3
Earnings
" Products. Our Molded & Profile Products segment manufactures
injection molded and profile extruded products for a large group of
intermediate and end-user customers. The segment operates under four
business names:
Spartech Industries produces plastic tire and wheel assemblies
for the medical, lawn & garden, refuse container and toy markets and
high performance molded urethane tires for the medical, material
handling, lawn & garden, and recreational product applications. The
company also produces various injection molded and profile extruded
products that complement the wheels & tire offerings.
Spartech Profiles manufactures products for various industries,
including the window frames and fencing for the building 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 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 seven
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 processes.
" Marketing, Sales and Distribution. Spartech Industries-Custom
Engineered Wheels operations market their 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 2002, the Company sold products of the Molded &
Profile Products segment to approximately 1,400 customers, including
MTD Products, Honda, Invacare and Brentwood Industries.
" Competition. - The Molded & Profile Products processing segment
is highly competitive and highly fragmented. Since the Company
manufactures a wide variety of products, we compete in different areas
with many other companies, some of which are much larger than the
Company is and have more extensive production facilities, larger sales
and marketing staffs and substantially greater financial resources
than we do. The Company competes generally on the basis of price,
product performance and customer service. Important competitive
factors in each of our businesses include the ability to manufacture
consistently to required quality levels, meet demanding delivery
times, and provide new product offerings. Some of our primary
competitors in the Molded & Profile Products segment are Ace Products,
Inc., Bunzl Extrusion, Inc., Kik Tire, Inc., Flex Technologies, Inc.,
Royal Group Technologies Limited, and Trintex Corporation. We believe
we compete effectively with these companies in each of these key
areas.
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. Variability in
pricing and changes in supply and demand of particular resins at any
given time are risks that the Company has to manage in maintaining its
operating profitability.
The Company manages our principal purchasing contracts through our
corporate headquarters in St. Louis in order to realize the benefits
of volume purchasing and centralized management of the effects of
supplier price changes to be a low-cost producer for our customers.
Since the Company is a custom manufacturer, we do not typically hedge
our purchases of materials, build little product for inventory, and
have a short backlog of orders at any point in time. The Company has
also implemented a centralized program to aggressively manage our
inventory levels.
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.
Backlog
The Company estimates that the total dollar volume of its backlog
as of November 2, 2002 and November 3, 2001 was approximately $83.3
million and $69.6 million, respectively, which represents
approximately five weeks and four weeks of production for 2002 and
2001, respectively.
Employees
The Company's total employment approximates 3,475. There are 2,650
production personnel at the Company's 43 facilities, approximately 37%
of whom are union employees covered by several collective bargaining
agreements. The Company considers its employee relations to be good.
Management personnel total approximately 825 supervisory/clerical
employees, none of whom are unionized.
Government Regulation and Environmental Matters
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 2003 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. The ability to obtain permits in order to
conduct our business and the need to maintain the various laws and
regulations related to our business are risks that require constant
monitoring from our operating managers.
International Operations
Information regarding the Company's operations in its three
geographic segments -- United States, Canada and Europe (France) -- is
located in Note (14) to the Consolidated Financial Statements on page
32 of the 2002 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. 54 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.
George A. Abd 39 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.
Randy C. Martin 40 Executive Vice President (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 41 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.
Jeffrey D. 54 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.
Phillip M. 46 Vice President-Purchasing and Supply
Karig Chain Management (since September 2001),
Director of Purchasing from February 2000
to September 2001. Mr. Karig was with
Uniroyal Technology Corporation for 12
years in various purchasing, logistics,
and materials management positions before
joining the Company in February 2000.
William F. 55 Vice President - National Sales Accounts
Phillips (since December 2002), Director of
Marketing from July 1998 to December
2002. Mr. Phillips also held various
sales management positions with the
Company from March 1989 to July 1998.
Jeffrey C. 32 Corporate Controller (since August 2000),
Blessing Assistant Corporate Controller from
December 1998 to August 2000, Division
Controller Spartech Plastics - Central
Region from 1996 to 1998. Mr. Blessing,
a CPA, also held various corporate office
accounting positions for the Company from
1993 to 1996.
Item 2. PROPERTIES
The Company operates in plants and offices aggregating
approximately 3,520,000 square feet of space. Approximately
1,5200,000 square feet of plant and office space is leased with the
remaining 2,000,000 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/Leas
Feet ed
Arlington, TX Extrusion plant & 120,000 Leased
offices
Atlanta, GA Extrusion plant & 85,000 Leased
offices
Cape Extrusion plant & 100,000 Owned
Girardeau, MO offices
Clare, MI Extrusion plant & 31,000 Owned
offices
Evanston, IL Extrusion plant & 135,000 Leased
offices
Greenville, OH Extrusion plant & 60,000 Owned
offices
24,000 Leased
Hackensack, NJ Acrylic 81,000 Leased
processing plant
& offices
La Mirada, CA Extrusion plant & 64,000 Leased
offices
Mankato, MN Extrusion plant & 36,000 Owned
offices
54,000 Leased
McMinnville, Extrusion plant & 40,000 Owned
OR offices
Muncie, IN Extrusion plant 202,000 Owned
& offices
Paulding, OH Extrusion plant 68,000 Owned
& offices
67,000 Leased
Phoenix, AZ Acrylic 25,000 Leased
processing plant
& 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
42,000 Leased
Stamford, CT Acrylic cell- 80,000 Leased
casting plant &
offices
7,000 Leased
Taylorville, Extrusion plant & 40,000 Owned
IL offices
5,000 Leased
Warsaw, IN Extrusion plant & 229,000 Owned
offices
Wichita, KS Extrusion plant & 62,000 Owned
offices
134,000 Leased
Cornwall #1, Extrusion plant & 38,000 Leased
Ontario offices
Cornwall #2, Extrusion plant & 64,000 Leased
Ontario offices
Granby, Quebec Extrusion plant & 65,000 Owned
offices
2,232,000
Color & Specialty Compounds
Location Description Size in Square Owned/Lease
Feet d
Arlington, TX Compounding plant & 56,000 Leased
offices
Atlanta, GA Compounding sales 5,000 Leased
offices
Cape Compounding plant & 56,000 Owned
Girardeau, MO offices
60,000 Leased
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
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 & 66,000 Owned
Ontario offices
Donchery, Compounding plant & 30,000 Owned
France offices
867,000
Molded & Profile Products
Location Description Size in Owned/Lease
Square Feet d
Des Moines, IA Acrylic rod & tube 53,000 Leased
casting plant
El Monte, CA Profile plant & 63,000 Leased
offices
Rancho Injection molding 17,000 Leased
Cucamonga, CA plant
Rockledge, FL Profile Plant 112,000 Leased
Tupelo, MS Profile Plant 54,000 Leased
Warsaw, Indiana Injection molding 41,000 Owned
plant & offices
Winnipeg, Profile plant & 53,000 Owned
Manitoba offices
393,000
In addition, the Company leases office facilities for its world
headquarters in St. Louis, Missouri and for administrative offices in
Washington, Pennsylvania, the aggregate square footage of which is
approximately 28,000.
The plants located at the premises listed above are equipped with
114 sheet extrusion lines, 75 of which run multi-layered materials, 28
casting machines, 35 profile extrusion lines, 46 general compounding
lines, 9 color compounding lines, 28 injection 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 approximately
$25 million in fiscal 2003) are adequate for the level of business
anticipated in fiscal 2003.
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 November 2,
2002.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information on pages 34, 35, and 37 of the 2002 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 37 present the cash dividends declared in fiscal 2001
consisting of four quarterly payments at nine and one-half cents per
share and the cash dividends declared in fiscal 2002 consisting of
four quarterly payments at nine and one-half cents per share. On
December 12, 2002, the Company declared a dividend of ten cents per
share payable on January 16, 2003. 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 pages 34 and 35 of the 2002 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 11, 12, 13, 14, 15, 16, and 17 of the 2002
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 new products and markets
benefits, 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 9 and 10, 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. An inability to meet debt obligations when due could
impair our ability to finance operations and could result in default;
(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. If we are unable to achieve the
anticipated synergies, the interest an other expenses from our
acquisitions could exceed the net income we derive from the acquired
operations, which could reduce our net income. 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in interest rates primarily as a result
of our borrowing activities. Our earnings and cash flows are subject
to fluctuations in interest rates on our floating rate debt
facilities. At November 2, 2002, we had approximately $15.3 million
of debt subject to variable short-term interest rates. Based upon the
November 2, 2002 balance, a change of one percent in interest rates
would cause a change in net income of approximately $97,000 on an
annual basis. We had $373.1 million of fixed rate financings
outstanding as of November 2, 2002, including $125.0 million of
floating rate debt hedged for two years by an interest rate swap.
Interest expense on these fixed rate financings will not be materially
affected by changes in interest rates over the next 12 months. In
addition, the information on page 22, 23, and 32 of the 2002 Annual
Report to Shareholders, attached hereto as Exhibit 13, is incorporated
by reference in response to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information entitled "Quarterly Financial Information" on page
32 of the 2002 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 15 and included in Part IV of this
Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Effective April 30, 2002, the Board of Directors of the Registrant,
upon recommendation of its audit committee, dismissed Arthur Andersen
LLP ("Andersen") as the Registrant's independent public accountants
and engaged Ernst & Young LLP ("Ernst & Young ") to serve as the
principal accountant to audit the Registrant's financial statements
for the fiscal year ending June 30, 2002. Andersen audited the
Registrant's financial statements for fiscal years 1999, 2000 and
2001, and had been as the Registrant's principal accountant since
1989.
In connection with its audit for fiscal years 2000 and 2001, and
during the subsequent interim period preceding the engagement of Ernst
& Young, there were no disagreements with Andersen on any matter of
accounting principles or practices, financial statement disclosure or
auditing scope or procedure. Andersen's report on the financial
statements for fiscal years 2000 and 2001 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified
as to uncertainty, audit scope or accounting principles. During the
last two fiscal years, and during the subsequent interim period
preceding the engagement of Ernst & Young LLP, Andersen did not
advise, and has not indicated to the Registrant that it had reason to
advise, the Registrant of any reportable event, as defined in Item
304(a) of Regulation S-K of the Exchange Act. The Registrant requested
that Andersen furnish it with a letter addressed to the Securities and
Exchange Commission stating whether or not it agrees with the
statements made in the Form 8-K filed on May 3, 2002. A copy of the
letter from Andersen dated June 11, 2002, stating its agreement with
the foregoing disclosures is filed as Exhibit 16.1 to the Form 8-K
filed on May 3, 2002.
During the last two fiscal years, and during the subsequent interim
period preceding the engagement of Ernst & Young, the Registrant had
not consulted Ernst & Young regarding the application of accounting
principles to a specified transaction, either contemplated or
proposed, or the type of audit opinion that might be rendered on the
Registrant's financial statements or any other matter that would be
required to be reported.
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 2003 Annual Meeting of Shareholders, to be filed
with the Commission on or about January 24, 2003, is incorporated
herein by reference in response to this item.
Information concerning the Executive Officers of the Company is
contained on page 13 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 2003 Annual Meeting of
Shareholders, to be filed with the Commission on or about January 24,
2003, 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 2003 Annual
Meeting of Shareholders, to be filed with the Commission on or about
January 24, 2003, 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 2003 Annual Meeting of Shareholders, to be filed with the
Commission on or about January 24, 2003, is incorporated herein by
reference in response to this item.
Item 14. CONTROLS AND PROCEDURES
Based upon an evaluation performed within 90 days of the date of
this report, the registrant's certifying officers have concluded that
the Company's disclosure controls and procedures were effective.
There have been no significant changes in internal controls or
other factors that significantly affect these controls subsequent to
the date of the evaluation.
..
PART IV
Item 15. 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 2002 Annual Report to Shareholders, to
be filed with the Commission on or about January 24, 2003, and/or filed as
part of this Form 10-K:
Page
Annual
Report
Form 10-K to
Shareholder
s
Report of Independent Public Accountants F-1 33
Financial Statements
Consolidated Balance Sheet - 18
Consolidated Statement of Operations - 19
Consolidated Statement of - 20
Shareholders' Equity
Consolidated Statement of Cash Flows - 21
Notes To Consolidated Financial Statements - 22-32
Financial
Statement Schedules
Schedule
Number Description
II Valuation and F-2
Qualifying Accounts
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(2) Amended and Restated By-Laws
4(3) Rights Agreement dated April 2, 2001 between Spartech Corporation
and Mellon Investor Services LLC, as Rights Agent
10.1 Amended and Restated Employment Agreement dated November 1, 2002,
between Bradley B. Buechler and Spartech Corporation
10.2(4) Transition Agreement and Consulting Agreement dated August
3, 2000, between David B. Mueller and Spartech Corporation
10.3 Employment Agreement dated January 1, 2003 between Randy C.
Martin and Spartech Corporation
10.4 Employment Agreement dated January 1, 2003 between David G.
Pocost and Spartech Corporation
10.6(5) Employment Agreement dated January 1, 2000 between George A.
Abd and Spartech Corporation
10.7 (6) Employment Agreement dated July 1, 2000 between Phillip
Karig and Spartech Corporation
10.8(7) Spartech Corporation 2001 Stock Option Plan dated December
6, 2000
10.9 Employment Agreement dated July 1, 2002 between William F. Phillips
and Spartech Corporation
10.10 Form of Indemnification Agreement entered into between Spartech
Corporation and each of its officers and directors as of November 1, 2002
(December 12, 2002 as to William F. Phillips).
13 Pages 11 through 35 and 37 of 2002 Annual Report to Shareholders
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors
23.2 Information Regarding Consent of Arthur Andersen LLP.
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 3.2 to the Company's Form 10-K/A filed with the
Commission on January 24, 2001 and incorporated herein by reference
(3) Filed as Exhibit 99.1 to the Company's Form 8-K filed with the
Commission on April 5, 2001 and incorporated herein by reference.
(4) Filed as Exhibit 10.4 to the Company's Form 10-K filed with the
Commission on January 19, 2001 and incorporated herein by reference.
(5) Filed as Exhibit 10 to the Company's quarterly report on Form 10-Q for
the quarter ended August 4, 2001, filed with the Commission on August 29,
2001 and incorporated herein by reference..
(6) Filed as Exhibit 10.7 to the Company's annual report on Form 10-K for
the fiscal year ended November 2, 2002 and incorporated herein by
reference.
(7) Filed as Exhibit 4 to the Company's Form S-8 filed with the Commission
on May 7, 2001 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 17, 2003 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 17, 2003 /s/Bradley B. Buechler Chairman, President,
Chief Executive Officer,
and Director
(Principal Executive Officer)
Bradley B. Buechler
January 17, 2003 /s/ Randy C. Martin Executive Vice President and
Chief Financial Officer and
Director
(Principal Financial and
Accounting Officer)
Randy C. Martin
January 17, 2003 /S/ Ralph B. Andy* Director
Ralph B. Andy
January 17, 2003 Director
Lloyd E. Campbell
January 17, 2003 /S/ Calvin J. O'Connor* Director
Calvin J. O'Connor
January 17, 2003 Director
Jackson W. Robinson
January 17, 2003 /S/ Richard B. Scherrer* Director
Richard B. Scherrer
January 17, 2003 /S/Craig A. Wolfanger* Director
Craig A. Wolfanger
* 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
CERTIFICATIONS
I, Bradley B. Buechler, Chairman, President, and Chief Executive Officer of
Spartech Corporation, certify that:
1. I have reviewed this annual report on Form 10-K of Spartech
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statement were made, not misleading with respect to the period covered
by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the period presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
auditors any material weakness in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
January 17, 2003 By: /s/Bradley B. Buechler
(Date) Bradley B. Buechler
Chairman, President and Chief
Executive Officer
Spartech Corporation
CERTIFICATIONS
I, Randy C. Martin, Executive Vice President and Chief Financial Officer of
Spartech Corporation, certify that:
1. I have reviewed this annual report on Form 10-K of Spartech
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statement were made, not misleading with respect to the period covered
by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the period presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
auditors any material weakness in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
January 17, 2003 By: /s/Randy C. Martin
(Date) Randy C. Martin
Executive Vice President and
Chief Financial Officer
Spartech Corporation
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned certifies that this periodic report fully complies with the
requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934 and that the information contained in this quarterly
report on Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of Spartech Corporation.
Date: January 17, 2003
/s/ Bradley B. Buechler
Bradley B. Buechler
Chairman, President and Chief
Executive Officer
/s/Rancy C. Martin
Randy C. Martin
Executive Vice President and Chief
Financial Officer
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Spartech Corporation:
We have audited the consolidated financial statements of Spartech
Corporation as of November 2, 2002, and for the year then ended, and have
issued our report thereon dated December 12, 2002 (included in Spartech
Corporation's 2002 Annual Report to Shareholders and incorporated by
reference in this Form 10-K). Our audit also included the financial
statement schedule for the year ended November 2, 2002 listed in Item 15(a)
of this Form 10-K. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our
audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
/s/ Ernst & Young LLP
St. Louis, Missouri
December 12, 2002
The following is a copy of the audit report previously issued by Arthur
Andersen LLP in connection with Spartech Corporation's filing on Form 10-K
for the year ended November 3, 2001. This audit report has not been
reissued by Arthur Andersen LLP in connection with this filing on Form 10-
K. See Exhibit 23.2 for further discussion.This is a copy of the audit
report previously issued by Arthur Andersen LLP in connection with Spartech
Corporation's filing on Form 10-K for the year ended November 3, 2001.
This audit report has not been reissued by Arthur Andersen LLP in
connection with this filing on Form 10-K. See Exhibit 23.2 for further
discussion.
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 2001 Annual Report to Shareholders incorporated by reference
in this Form 10-K, and have issued our report thereon dated December 6,
2001. 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 6, 2001
F-1
SPARTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED 2002, 2001, AND 2000.
(Dollars in thousands)
BALANCE AT ADDITIONS AND
BEGINNING OF CHARGES TO COSTS BALANCE AT
DESCRIPTION PERIOD AND EXPENSES WRITE-OFFS END OF
PERIOD
November 2,
2002: $ 3,957 $ 2,935 $ (2,834) $ 4,058
Allowance for
Doubtful
Accounts
November 3,
2001: $ 3,627 $ 2,801 $ (2,471) $ 3,957
Allowance for
Doubtful
Accounts
October 28,
2000: $ 3,016 $ 1,634 $ (1,023) $ 3,627
Allowance for
Doubtful
Accounts
Fiscal year 2000, 2001, and 2002 additions and write-offs include
activity relating to the acquisition of certain of the businesses and
assets of Uniroyal Technology Corporation's High Performance Plastics Group
in February 2000, Alshin Tire Corporation in October 2000, and GWB Plastics
Holding Co. in June 2002.
F-2