[SPARTECH LOGO]
Company Contacts:
Bradley B. Buechler Randy C. Martin
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(314) 721-4242 (314) 721-4242
For Immediate Release
Thursday, August 28, 2003
SPARTECH CORPORATION REPORTS
THIRD QUARTER FISCAL 2003 SALES AND EARNINGS
Third Quarter Highlights:
* Net Sales increased by 1% to $238.9 million
* Operating Earnings declined by 22% to $19.3 million
* Financing Costs were $6.5 million or 3% lower than last year
* Net Earnings declined by 29% to $8.1 million
* Earnings Per Diluted Share was $.28 vs. $.39 per share last year
Financial Summary (Unaudited)
(Dollars in thousands, except per share data)
Quarter Ended %
08/02/03 08/03/02 Change
OPERATING RESULTS
Net Sales $238,870 $237,242 1%
Operating Earnings $ 19,309 $ 24,745 (22%)
Net Earnings $ 8,147 $ 11,486 (29%)
Earnings Per Share:
Basic $ 0.28 $ 0.40 (30%)
Diluted $ 0.28 $ 0.39 (28%)
PERFORMANCE RATIOS
Gross Margin 13.9% 16.1%
Operating Return on Net Sales 8.1% 10.4%
Debt to Total Capitalization 34.5% 36.5%
Return on Average Equity 10.6% 17.3%
"Spartech's third quarter proved to be a very difficult one. The
sluggish economic environment and near record high resin costs resulted
in weak product demand in several industries we serve and intense
pressure on our margins. On a positive note, we initiated several
changes in our operations early in the fourth quarter, representing
approximately $12 million in annual cost savings which should help return
our margins to more traditional levels in the future."
-Bradley B. Buechler, Chairman, President & Chief Executive Officer-
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SPARTECH CORPORATION
THIRD QUARTER 2003 EARNINGS
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SPARTECH CORPORATION ANNOUNCES
THIRD QUARTER FISCAL 2003 RESULTS
ST. LOUIS, August 28, 2003 - Spartech Corporation (NYSE:SEH) announced
today sales and earnings for its third quarter ended August 2, 2003.
Spartech's Chairman, President and CEO, Bradley B. Buechler, reported
that sales for the third quarter of fiscal 2003 were $238.9 million, an
increase of 1% from the $237.2 million reported in 2002. The Company's
fiscal 2003 third quarter operating earnings were $19.3 million or 22%
lower than the $24.7 million reported for the same quarter last year.
Third quarter 2003 net earnings, in line with our guidance given earlier
this month, were $8.1 million, or $0.28 per diluted share, compared to the
$11.5 million, or $0.39 per diluted share, reported in 2002.
Commenting on the results, Mr. Buechler stated, "Spartech's third
quarter proved to be a very difficult one. The sluggish economic
environment and near record high resin costs resulted in weak product
demand in several industries we serve and intense pressure on our margins
overall. We initiated several changes in our operations early in the
fourth quarter which should help return our margins to more traditional
levels in the future. These changes are targeted to reduce our annual
manufacturing costs by $12 million and assist the Company in returning to
an operating margin of 11% or more on sales. This difficult, but needed,
action should prepare us for full implementation of the 'Lean Manufacturing
Process' throughout Spartech over the next few years."
SEGMENT RESULTS
Custom Sheet & Rollstock - Spartech's Custom Sheet & Rollstock group
recorded an approximate 3% drop in volume (pounds), while sales (in
dollars) actually increased by 1%, primarily the result of our second
quarter acquisition of Polymer Extruded Products and higher resin
costs. New "Product Transformations" and the sale of certain
engineered products also continued to accelerate in fiscal 2003. The
group received solid performances from our packaging, home
improvement, and sign related customers while manufactured housing and
recreation & leisure product sales declined during the period.
Operating margin for the group dropped by 2.0% in the quarter to 10.1%
of net sales. Higher margins from the sales of our Alloy Plastics
were offset by the intense competitive pressures on the selling prices
of our standard products and the overall effect of our lower
capacity utilization rate. We expect a gradual improvement in the
group's operating margin during the next 12 months as the benefits of
our new "Lean Process" initiative, including an $8.5 million reduction
in the group's annual manufacturing costs, are fully realized.
(In Millions)
Third Quarter First Nine Months
2003 2002 2003 2002
Net Sales $159.0 $157.6 $462.0 $443.9
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Operating $ 16.0 $ 19.1 $ 46.6 $ 46.4
Earnings
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SPARTECH CORPORATION
THIRD QUARTER 2003 EARNINGS
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Color & Specialty Compounds - Sales volume in the Company's Color &
Specialty Compounds group declined by 5% (in pounds) while similar to
our Sheet group, sales (in dollars) saw a modest 2% increase. This
group was hit the hardest by slowdowns in the transportation and
electronics markets, with demand weakening from product price
increases related to the record high resin prices. In addition, color
concentrates sold to several of our thin-gauge film packaging
customers was weaker than normal during the summer months primarily
due to plant closedowns for inventory realignment. The group
generated an operating margin on sales of only 7.3% in the third
quarter, due to the sharply higher resin costs and capacity
utilization rates that were only in the mid 70% range for the period.
Our new "Lean Process" initiative, including a "preparatory step"
which resulted in an approximate 12% reduction in this group's
personnel ($3.5 million in anticipated savings) should begin
benefiting our margins by the middle of the fourth quarter.
(In Millions)
Third Quarter First Nine Months
2003 2002 2003 2002
Net Sales $ 64.3 $ 63.1 $192.2 $169.4
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Operating $ 4.7 $ 6.9 $ 15.2 $ 18.5
Earnings
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Molded & Profile Products - Our Molded & Profile Products group
recorded a 5% decline in sales, primarily the result of lower volumes
shipped to a couple profile customers in the building & construction
industry. However, the group's operating margin actually increased to
8.6% of sales as the positive effect of our prior year "Creating
Positive Change" actions began to pay off.
(In Millions)
Third Quarter First Nine Months
2003 2002 2003 2002
Net Sales $ 15.6 $ 16.5 $ 48.9 $ 47.8
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Operating $ 1.3 $ 1.2 $ 3.8 $ 3.7
Earnings
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Finally, Mr. Buechler stated, "As we look ahead to the final quarter
of this year, and more importantly the commencement of our Fiscal 2004 in
November, we are beginning to see occasional signs of individual market
recoveries that hopefully will expand into a more comprehensive economic
rebound. In addition, our new drive to increase volume through our '40
Million Pounds in 2004' dual Sheet & Compound growth programs, coupled with
the projected $12 million in savings from our 'Lean Process' preparatory
step, give us confidence that we are prepared for better times in the
future as the worst part of the economic slowdown now appears to be behind
us. As a result, depsite the fact that our fiscal fourth quarter earnings
have been typically lower than our third, we currently believe that there
is a gradual improvement developing in certain markets and this, combined
with our cost savings efforts, should generate fourth quarter earnings
per share at or slightly better than our third quarter of 2003."
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SPARTECH CORPORATION
THIRD QUARTER 2003 EARNINGS
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Spartech Corporation is a leading producer of engineered thermoplastic
materials, polymeric compounds, and molded & profile products, which has 46
facilities located throughout North America and Europe, with annual
production capacity and sales of more than 1.2 billion pounds and $950
million, respectively.
Safe Harbor For Forward-Looking Statements
Statements contained herein which are not historical facts are forward-
looking statements within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934 which are intended to be covered by the
safe harbors created thereby. For a summary of important facts which could
cause the Company's actual results to differ materially from those included
in, or inferred by, the forward-looking statements, refer to the Company's
Form 10-K for the fiscal year ended November 2, 2002, which is on file with
the Securities and Exchange Commission.
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SPARTECH CORPORATION
THIRD QUARTER 2003 EARNINGS
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SPARTECH CORPORATION
(In Thousands, Except Per Share Amounts)
Operating Results
Three Months Ended Nine Months Ended
(Unaudited) (Unaudited)
Aug. 2, Aug. 3, Percent Aug. 2, Aug. 3, Percent
2003 2002 Change 2003 2002 Change
Net Sales $238,870 $237,242 1% $703,058 $661,114 6%
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Operating Earnings $ 19,309 $ 24,745 (22%) $ 57,508 $ 60,677 (5%)
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Interest Expense
& Distributions
On Preferred Securities $ 6,487 $ 6,657 ( 3%) $ 18,858 $ 20,440 (8%)
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Income Tax Provision $ 4,675 $ 6,602 (29%) $ 13,804 $ 14,815 (7%)
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Net Earnings $ 8,147 $ 11,486 (29%) $ 24,846 $ 25,422 (2%)
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Earnings Per Common
Share - Diluted $ .28 $ .39 (28%) $ .84 $ .91 (8%)
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Weighted Average
Common Shares
Outstanding - Diluted 29,622 33,890 29,530 27,984
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SPARTECH CORPORATION
THIRD QUARTER 2003 EARNINGS
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SPARTECH CORPORATION
(In Thousands, Unaudited)
As Of
August 2, Nov. 2, Percent
2003 2002 Change
Select Balance Sheet Data
Receivables, net $136,754 $124,966 9%
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Inventories $101,052 $ 95,190 6%
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Property, Plant and $282,852 $280,474 1%
Equipment, net
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Accounts Payable & Accrued $128,232 $117,841 9%
Liabilities
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Total Debt $243,957 $238,332 2%
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Shareholders' Equity $312,633 $290,698 8%
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Three Months Ended Nine Months Ended
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
2003 2002 2003 2002
Select Cash Flow Information
Cash Flow From Operations $35,479 $26,434 $ 41,585 $ 63,430
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Capital Expenditures $ 5,729 $ 8,660 $ 17,742 $ 17,236
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Depreciation & Amortization $ 7,970 $ 7,174 $ 23,376 $ 20,715
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Debt Repayments, Excluding
Acquisition $30,483 $17,461 $ 18,091 $ 42,852
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Dividends on Common Stock $ 2,927 $ 2,790 $ 8,776 $ 7,886
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Treasury Stock Acquired,
Net of Option (Proceeds) $ (834) $ 1,765 $ 612 $ (518)
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