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
Wednesday, February 9, 2005
SPARTECH ESTIMATES LOWER EARNINGS FOR FIRST QUARTER
AND OUTLINES PLANT RESTRUCTURING PLAN
ST. LOUIS, February 9, 2005 -- Spartech Corporation (NYSE:SEH)
announced today thatit expects sales for its fiscal first quarter ended
January 29, 2005 will exceed the Company's prior year first quarter
revenues ($241 Million) by 20-25%, however diluted earnings per share for
the quarter are estimated to be only 30-40% of last year's 26 cents per
diluted share as the result of unprecedented raw material and other
conversion cost related increases.
in July 2001.
Spartech's Chairman, President & CEO, Bradley B. Buechler, stated,
"These results reflect the impact of (1) the continuedSales during the
first three months of our fiscal 2005 remained fairly strong despite
persistently high prices for most thermoplastic materials. However, our
margins suffered due to: 1) the speed and magnitude of the implementation
of these thermoplastic resin increases and 2) certain other cost increases
including healthcare, freight, and utilities. Therefore, we are projecting
our earnings for the first quarter of fiscal 2005 to be in the 8 -10 cents
per diluted share range, and announce the following plan for improving
operating results for the remainder of the year.
* Plant Restructuring Plan & Updated Fiscal 2005 Guidance - Based upon
our unacceptable first quarter results, and our ongoing drive to generate
shareholder value, we are initiating some comprehensive operational
changes to enhance our results for both short term performance and longer
term operating efficiencies. Our plan, which involves the closing of
certain plant operations, can be broken down into three categories:
(1) the elimination of non-core operations, (2) the consolidation of
capacity for similar operations, and (3) the transfer of synergistic or
new business to new operations. The net effect from these actions will
be to reduce our operations by four facilities. This plan, outlined in
more detail below, is designed to eliminate approximately $9 million
of annual costs and generate more efficient operations for our 47
remaining facilities to more effectively serve our growing customer base.
The cost of implementing these actions over the next two quarters may
total as much as $5 to $6 million, and therefore we are modifying our
guidance for full fiscal 2005 diluted earnings per share from the $1.50
- $1.60 given in December to a new range of $1.30 - $1.40 per share."
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SPARTECH CORPORATION
GUIDANCE AND PLANT RESTRUCTURING PLAN
ADD 1
A further discussion of the operational changes being implemented to
improve our production efficiencies in today's global marketplace follows -
* Non-Core Businesses - Currently, two of our facilities house
operations that are not "core" to our business and do not offer synergies
for other Spartech locations. The first of these two, located in
Cornwall, Ontario, produces corrugated specialty niche products for
the Custom Sheet market, serving primarily automotive packaging and
distribution markets. While the business has grown from $7 million
in 1999 to nearly $10 million in 2004, it does not fit well with our
other operations. This business will be prepared for sale to a third
party. The second facility, in El Monte, California, is in the custom
profile extrusion business and during the last three years has not had
adequate volume to support the cost structure or technical expertise to
profitably grow the business. This operation with approximately $5
million in annual sales will be sold or closed down as we work with
customers to transition their business. These changes will eliminate
the periodic operating losses experienced by these two locations and
allow more management and investment focus on our growing
core operations.
* Capacity Consolidation - Two of our less productive operations will
be combined with other existing facilities and eliminate many of the
fixed costs associated with separate plant operations. These plants
have identical capabilities to other operations within Spartech's
Custom Sheet & Rollstock Group and will allow us to be more
competitive and cost effective when the volume is combined with like
production elsewhere. These changes will enhance our ability to serve
customers from more competitive locations, and to manage rising costs
and strengthen the skill sets of the facility accepting the new volume.
* Synergistic/New Businesses - And finally three plants will be replaced
by new facilities, two of which were acquired from VPI on
October 1, 2004 and one which is currently ramping up production in
Reynosa, Mexico. The transition of our calendered film business from
Conshohocken, Pennsylvania to our recently acquired facility in
Salisbury, Maryland is nearly complete. And we have also begun
producing engineered wheels in a Reynosa, Mexico facility which will
replace our operation inRancho Cucamonga, California. The remaining
transition involves business
that will be transferred into our Compounding operation in Manitowoc,
Wisconsin which was also acquired from VPI. In conjunction with our
acquisition of VPI in October 2004, we noted that the current facilities
were operating at less than 65% capacity. These changes allow us to
better utilize the capacity of operations now part of Spartech as well
as gain production efficiencies by producing similar products in a
combined operation.
Mr. Buechler added, "We believe these changes, while assisting us to
better manage the current short term cost environment, will be even more
important to the ongoing growth and profitability of our consolidated
operations longer term. Coupled with our growth and improvement
initiatives that focus on our Investments in People, Products, Technology,
and Globalization, we believe these changes will assist us in meeting long
term goals."
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SPARTECH CORPORATION
GUIDANCE AND PLANT RESTRUCTURING PLAN
ADD 2
We will report our full fiscal 2005 first quarter results on March 8,
2005 followed by a Conference Call with investors and analysts. Spartech
Corporation is a leading producer of engineered thermoplastic materials,
polymeric compounds, and molded & profile products with annual production
capacity and sales of more than 1.4 billion pounds and $1.2 billion,
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 October 30, 2004, which is on file with
the Securities and Exchange Commission.
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