-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F/3KykND72hDMGlHwHp4bF+Z/bQLop4TQmWCIsZGaqPZmoqkjrxNQ7gdEwRZ5XDN mIhcB95bOUgYJE693uWftw== 0000077597-95-000009.txt : 19950224 0000077597-95-000009.hdr.sgml : 19950224 ACCESSION NUMBER: 0000077597-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARTECH CORP CENTRAL INDEX KEY: 0000077597 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 430761773 STATE OF INCORPORATION: DE FISCAL YEAR END: 1103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05911 FILM NUMBER: 95514560 BUSINESS ADDRESS: STREET 1: 7733 FORSYTH BLVD STE 1450 CITY: CLAYTON STATE: MO ZIP: 63105-1817 BUSINESS PHONE: 3147214242 FORMER COMPANY: FORMER CONFORMED NAME: SPARTAN MANUFACTURING CORP DATE OF NAME CHANGE: 19830621 FORMER COMPANY: FORMER CONFORMED NAME: PERMANEER CORP DATE OF NAME CHANGE: 19781019 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 28, 1995 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 No.) 7733 Forsyth Boulevard, Suite 1450, Clayton, Missouri, 63105 (address of principal executive offices) (314) 721-4242 (Registrant's telephone number, including area code) Indicate by checkmark 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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of January 28, 1995 Common Stock, $.75 par value 8,708,177 per share SPARTECH CORPORATION AND SUBSIDIARIES INDEX January 28, 1995 PART I. FINANCIAL INFORMATION PAGE CONSOLIDATED CONDENSED BALANCE SHEET - January 28, 1995 and October 29, 1994 3 CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS - for the thirteen weeks ended January 28, 1995 and January 29, 1994 4 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS - for the thirteen weeks ended January 28, 1995 and January 29, 1994 5 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 PART II. OTHER INFORMATION 13 SIGNATURES 14 SPARTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (Dollars in thousands, except per share amounts) ASSETS Jan. 28, 1995 October 29, (unaudited) 1994 Current Assets Cash $ 1,776 $ 1,752 Accounts and notes receivable, net 45,627 40,493 Inventories 31,989 22,936 Prepayments and other 1,717 1,112 Total Current Assets 81,109 66,293 Plant and Equipment, Net 60,153 46,656 Goodwill 24,262 21,044 Other Assets 1,518 1,727 $ 167,042 $ 135,720 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ 3,000 $ 2,750 Accounts payable 32,700 28,403 Accrued liabilities 10,961 8,789 Total Current Liabilities 46,661 39,942 Senior Long-Term Debt, Less Current Maturities 47,606 26,285 9% Convertible Subordinated Debentures 10,134 10,134 Other Liabilities 1,048 1,126 Total Long-Term Liabilities 58,788 37,545 Shareholders' Equity 6% Cumulative Convertible Preferred Stock, 776,700 shares issued and outstanding ($50 per share liquidation value) 777 777 Common stock, 8,709,947 shares issued in 1995 and 8,629,947 shares issued in 1994 6,532 6,472 Contributed capital 75,165 74,438 Retained deficit (20,873) (23,449) Treasury stock, at cost, 1,770 shares in 1995 and 1,324 shares in 1994 (8) (5) Total Shareholders' Equity 61,593 58,233 $ 167,042 $ 135,720 The accompanying notes are an integral part of this financial statement. SPARTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (Unaudited and dollars in thousands, except per share amounts) THIRTEEN WEEKS ENDED January 28, January 29, 1995 1994 Net Sales $ 79,258 $ 49,158 Costs and Expenses Cost of sales 67,271 41,222 Selling and administrative 5,084 4,009 Depreciation and amortization 1,486 983 73,841 46,214 Operating Earnings 5,417 2,944 Interest 1,242 671 Earnings Before Income Taxes 4,175 2,273 Provision for Income Taxes 1,050 170 Net Earnings 3,125 2,103 Preferred Stock Accretion 549 518 Net Earnings Applicable to Common Shares $ 2,576 $ 1,585 Net Earnings Per Common Share: Primary $ .27 $ .17 Fully diluted $ .13 $ .09 The accompanying notes are an integral part of this financial statement. SPARTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Unaudited and dollars in thousands) THIRTEEN WEEKS ENDED Jan. 28, Jan. 29, 1995 1994 CASH FLOW FROM OPERATING ACTIVITIES Net earnings $ 3,125 $ 2,103 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,486 983 Change in current assets and liabilities, net of effects of acquisitions 991 (817) Other, net (152) 452 Net cash provided by operating activities 5,450 2,721 CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (2,737) (2,496) Retirement of assets, net 21 3 Business acquisition (24,516) - Net cash used for investing activities (27,232) (2,493) CASH FLOW FROM FINANCING ACTIVITIES Net borrowings (payments) on revolving loan 17,071 (463) Term loan additions 5,000 - Principal payments on term loan (500) - Stock options exercised 238 273 Other, net (3) - Net cash provided by (used for) financing activities 21,806 (190) INCREASE IN CASH 24 38 CASH AT BEGINNING OF PERIOD 1,752 1,449 CASH AT END OF PERIOD $ 1,776 $ 1,487 The accompanying notes are an integral part of this financial statement. SPARTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited and dollars in thousands, except per share amounts) NOTE A - Basis of Presentation The accompanying consolidated financial statements include the accounts of Spartech Corporation and its wholly-owned subsidiaries (the "Company"). These financial statements have been prepared on a condensed basis and, accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the financial statements contain all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary to make the information presented therein not misleading. These financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes thereto included in the Company's October 29, 1994 Annual Report on Form 10-K. The Company manufactures products for specific customer orders and for standard stock inventory. Revenues are recognized and billings are rendered as the product is shipped to the customer. Operating results for the thirteen weeks ended January 28, 1995 and January 29, 1994 are seasonal in nature and are not necessarily indicative of the results expected for the full year. NOTE B - Inventories Inventories are valued at the lower of cost (first-in, first- out) or market. Inventories at January 28, 1995 and October 29, 1994 are comprised of the following components: 1995 1994 Raw materials $ 22,255 $ 16,171 Finished goods 9,734 6,765 $ 31,989 $ 22,936 NOTE C - Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for credit carryforwards. Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. SFAS No. 109 requires an assessment, which includes anticipating future income, in determining the likelihood of realizing deferred tax assets. SPARTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited and dollars in thousands, except per share amounts) NOTE D - Senior Long-Term Debt On November 1, 1994, the Company acquired certain divisions of Pawnee Industries, Inc. (see Note I, Acquisition, for a discussion of this purchase). To facilitate the funding of this purchase, the Company amended its Credit Facility effective November 1, 1994, by increasing its Revolving Credit Loan commitment from $37,000 to $47,000 and its Term Loan commitment from $13,000 to $18,000. The Term Loan is due in quarterly payments of $500 to $1,000, commencing on November 1, 1994, with the remaining principal balance to be paid in full on April 30, 1998. Both the Revolving Credit Loan and Term Loan are secured by receivables, inventories and all of the property of the Company. Interest on these loans is payable at a rate chosen by the Company of either Chemical's Prime rate plus 0.25% or the Adjusted LIBO rate plus 1.75%. As of January 28, 1995, Chemical's Prime rate was 8.5% and the six month Adjusted LIBO rate was 6.75% NOTE E - Earnings Per Share Primary net earnings per common share are computed based upon the weighted average number of common shares outstanding during each period after consideration of the dilutive effect of stock options and warrants. Such average shares were: Period Ended Thirteen Weeks January 28, 1995 9,529,000 January 29, 1994 9,314,000 Fully diluted net earnings per common share assumes conversion of securities when the earnings per share result is dilutive. Assumed conversions increased the weighted average number of common shares outstanding by 14,275,000 for the thirteen weeks ended January 28, 1995 and January 29, 1994. For the computation of primary net earnings per common share, net earnings have been increased for an after-tax interest expense reduction as computed under the modified treasury stock method. For the computation of fully diluted net earnings per common share, net earnings have been further increased for the elimination of preferred stock accretion resulting from the assumed conversion of preferred stock. Net earnings increases for the thirteen weeks ended January 28, 1995 and January 29, 1994 were as follows: Thirteen Weeks 1995 1994 Primary $ 6 $ 70 Fully Diluted $ 549 $ 518 SPARTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited and dollars in thousands, except per share amounts) NOTE F - Cash Flow Information Supplemental information on cash flows and noncash transactions for the thirteen weeks ended January 28, 1995 and January 29, 1994 is as follows: 1995 1994 Cash paid for: Interest (net of amounts capitalized) $ 965 $ 484 Income taxes $ 106 $ 109 Schedule of noncash transactions: Business acquisition-- Fair value of assets acquired $26,031 $ - Liabilities assumed (1,515) - Total cash paid for the net assets acquired $24,516 $ - NOTE G - Shareholders' Equity The authorized capital stock of the Company consists of 35 million shares of $.75 par value common stock and 4 million shares of $1 par value preferred stock. Preferred stock outstanding as of January 28, 1995 and October 29, 1994 consisted of the following series of 6% Cumulative Convertible Preferred Stock, which are convertible into the shares of common stock indicated and which carry the equivalent common share voting rights indicated prior to conversion: Preferred Number of Common Stock Equivalent Common Stock Preferred Shares Issuable Upon Share Voting Series Outstanding Conversion Rights Series L 373,500 6,884,987 1,721,247 Series M 343,200 6,289,998 1,572,500 Series N 60,000 1,099,650 274,913 These series of preferred stock were issued at an equivalent price of $50 per share as part of a debt-to-equity restructuring completed April 30, 1992. In total, the restructuring resulted in the exchange of $30,163 of the Company's subordinated debt for these issues of preferred and common stock. Dividends are payable on each series of preferred stock commencing April 30, 1995 at an annual rate of $3.00 per share; provided however, that in the event a cash dividend is not declared by the Company's Board of Directors, dividends shall be payable in shares of common stock based on a price of $5.00 per share of common stock. These series of preferred stock are not subject to mandatory redemption; however, they may be redeemed at the option of the Company for $50 per share from and after December 1, 1994 if certain conditions with respect to the market price of the Company's common stock have been met and, in any event, from and after December 1, 1999. The holders of these series of preferred stock are entitled to receive $50 per share, plus accrued but SPARTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited and dollars in thousands, except per share amounts) unpaid dividends, in the event of liquidation, dissolution or winding up of the Company. In December, 1994, the holders of such preferred stock indicated that they intend to convert their preferred securities into common stock, effective May 1995. The dividend terms of each series of preferred stock provide that dividends will not begin accruing until April 30, 1995. Due to the absence of a dividend requirement on these series of preferred stock, a noncash charge for the accretion of the preferred stock has been recognized. Such charges were: Period Ended Thirteen Weeks January 28, 1995 $ 549 January 29, 1994 $ 518 The charge results in no net change in shareholders' equity, as the same amount charged to retained earnings each quarter is added back to contributed capital. This accretion will not be required in the future if the above conversion takes place in May. NOTE H - Commitments and Contingencies On June 2, 1992, Mr. Lawrence M. Powers, a former Director and former Chairman of the Board and Chief Executive Officer of the Company, filed a lawsuit in the United States District Court for the Southern District of New York against the Company and certain of its Directors and major shareholders. In the suit, Mr. Powers claims that, by reason of the Company's April 30, 1992 debt-to- equity restructuring (which he had previously, on April 13, 1992, voted in favor of as a Director), the Company should adjust his existing stock options, provide for the issuance of 167,744 additional shares of common stock to him, and award to him attorney's fees and interest. Mr. Powers seeks judgment against the Company and the other defendants: (1) in excess of $13,000 plus punitive damages, (2) requiring the Company to issue him an additional 167,744 shares of common stock, (3) requiring an adjustment increasing his then outstanding options to purchase the Company's common stock from 1,871,201 shares to 4,080,000 shares, and (4) for attorney's fees and interest. In June, 1993, in responding to the Company's request for summary judgment, the Court ruled the Board of Directors' decision to not adjust Mr. Powers' options was "final, binding and conclusive" unless Mr. Powers can establish the Board was not acting independently and that it could not have acted appropriately. Discovery has concluded in the litigation, and the Company, together with the other defendants, have moved for summary judgment dismissing the complaint. The Company believes Mr. Powers' litigation is without merit and will continue defending against it vigorously. The Company currently has no litigation with respect to any environmental matters. SPARTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited and dollars in thousands, except per share amounts) NOTE I - Acquisition On November 1, 1994, the Company acquired Pawnee Industries, Inc.'s ("Pawnee") Extrusion and Color Divisions. The purchase included two rigid plastic sheet & rollstock manufacturing plants (Extrusion Division), located in Wichita, Kansas and Paulding, Ohio, along with a color concentrate manu-facturing plant (Color Division), located in Goddard, Kansas. The purchase price for Pawnee's net assets, exclusive of working capital purchased, totaled $15,000, subject to post-closing adjustments. In addition, the Company paid approximately $10,000 for working capital assets (inventory and receivables). The acquisition has been accounted for by the purchase method, and accordingly, the results of operations of Pawnee are included in the Company's Consolidated Statement of Operations from the date of acquisition. The excess cost over the fair value of net assets acquired is being amortized over a forty year period on a straight line basis. On February 2, 1994, the Company acquired certain assets of Product Components, Inc. ("ProCom"). The purchase included two rigid plastic sheet & rollstock manufacturing plants, located in Richmond, Indiana and Clare, Michigan, along with various other assets of ProCom. The purchase price for ProCom's net assets totaled $8,160, subject to post-closing adjustments. Approximately $6,800 of this purchase price was paid in cash, while the remaining balance represented the net liabilities assumed by the Company. The acquisition has been accounted for by the purchase method, and accord-ingly, the results of operations of ProCom are included in the Company's Consolidated Statement of Operations from the date of acquisition. The excess cost over the fair value of net assets acquired is being amortized over a forty year period on a straight line basis. The following summarizes unaudited pro forma consolidated results of operations for the thirteen weeks ended January 29, 1994, assuming the Pawnee and ProCom acquisitions had occurred at the beginning of fiscal year 1994. The results are not necessarily indicative of what would have occurred had these transactions been consummated as of the beginning of the fiscal year presented, or of future operations of the consolidated companies. PRO FORMA THIRTEEN WEEKS ENDED January 29, 1994 Net Sales $ 68,458 Earnings Before Income Taxes $ 3,023 Net Earnings $ 2,673 Net Earnings Per Common Share: Primary $ .23 Fully diluted $ .11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the thirteen weeks ended January 28, 1995, increased from the similar period in 1994, primarily the result of sizable gains in pounds sold by the Company's rigid sheet & rollstock group. This group experienced sales volume increases of approximately 56% for the thirteen weeks ended January 28, 1995, over the similar period of 1994. The majority of the gains in sales volume during this period were obtained from our February 2, 1994, acquisition of certain assets of Product Components, Inc. ("ProCom") and our November 1, 1994, acquisition of Pawnee Industries, Inc.'s ("Pawnee") Extru-sion Division (see "Financial Condition - Investing Activities" below for a further discussion of these acquisitions) and from the sign/advertising, home improvement and material handling markets. In addition, sales volume increases of approximately 33% were achieved by our merchant compounding group during the thirteen weeks ended January 28, 1995, from the similar period in 1994. These increases were primarily the result of stronger demand from the specialty medical, office product and footwear industries and the group's newly acquired color concentrate facility. Cost of sales showed a sizable increase from the prior year but remained consistent when stated as a percentage of net sales. This consistency was achieved, despite higher material costs caused by the increase in worldwide demand for plastic resins, as production efficiencies offset that portion of the raw material increases not absorbed by customers. Selling and administrative expense increased by nearly 27%, a direct result of the ProCom and Pawnee acquisitions. However, through the Company's cost containment efforts, selling and administrative costs as a percentage of net sales actually decreased by nearly 2%. The increase in depreciation and amortization is the result of the ProCom and Pawnee acquisitions and the capital expenditures incurred by the Company during the last three quarters of fiscal 1994 and the first quarter of fiscal 1995 (approximately $8.4 million). Operating earnings for the thirteen weeks ended January 28, 1995, also increased from the similar period in 1994. The gains in operating earnings were achieved through the increased sales volumes discussed above, cost containment efforts and the initial benefits of our ProCom and Pawnee acquisitions. Interest expense for the thirteen weeks ended January 28, 1995, increas-ed from the similar period in 1994, reflecting the additional borrowings incurred by the Company for the acquisition of certain divisions of Pawnee. In addition, the Company's borrowing rate was approximately 2 percentage points higher during the thirteen weeks ended January 28, 1995, compared to the similar period of 1994, as a result of the Federal Reserve Board's desire to keep inflation under control by increasing interest rates during 1994. The income tax provision was substantially higher during the first quarter of fiscal year 1995, compared to the similar period in 1994, as a result of the utilization of substantially all of the Company's book net operating loss carryforwards during fiscal year 1994. The Company is pro-jecting a 25% tax provision for fiscal year 1995, with a full tax provision anticipated for fiscal year 1996. Actual tax payments will only be 50-60% of the book provision due to the tax net operating loss carryforwards. Financial Condition Operations The improvement in cash flow from operations reflects the Company's increase in profitability and the better management of working capital. The Company anticipates that it should be in a position to declare a cash dividend after the close of the second quarter of fiscal 1995. The Board currently intends to pay a special dividend of three cents (3) per share in May and then begin paying regular quarterly dividends in June, 1995. Investing Activities Capital expenditures for the thirteen weeks ended January 28, 1995 increased slightly as compared to the same period of 1994. The Company anticipates total capital expenditures for fiscal year 1995 to be approximately $6.5 to $7.0 million. The primary component of these capital expenditures will include the upgrading of all facilities, in particular those operations obtained through our recent acquisitions of ProCom and Pawnee. Reference is made to Note I, Acquisition, in Item 1 of this report, which is incorporated herein by reference, for a discussion of the Company's February 2, 1994, acquisition of certain assets of ProCom and November 1, 1994, acquisition of certain divisions of Pawnee. The Company has not incurred any significant capital expenditures in order to comply with the Clean Air Act Amendments of 1990. In addition, the Company does not anticipate such capital expenditures to be material in the future. Financing Activities The Company renegotiated its senior credit facility with Chemical Bank on November 1, 1994. This new facility increased the Company's borrowing capacity from $37.0 to $47.0 million and its Term Loan commitment from $13.0 to $18.0 million. Reference is made to Note D, Senior Long-Term Debt, in Item 1 of this report, which is incorporated herein by reference, for a further discussion of the Company's Senior Long-Term Debt refinancing. The Company anticipates that cash flow from operations and the additional borrowing capacity provided under the Company's refinanced senior credit facility will be adequate to provide necessary funds for the balance of fiscal year 1995. PART II - OTHER INFORMATION Responses to Part II, Items 1, 2, 3, 4, and 5, are omitted because the requested information has been previously reported, the items are inapplicable or the answer is negative. Item 6 (a). Exhibits 10 Spartech Corporation Non-Qualified Deferred Compensation Plan 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule Item 6 (b). Reports on Form 8-K A report on Form 8-K, dated November 1, 1994, relating to the acquisition of Pawnee Industries, Inc.'s ("Pawnee") Extrusion and Color Divisions, was filed on November 16, 1994. In addition, a Form 8-K/A, an amendment to the above Form 8-K, was filed with the Securities and Exchange Commission on January 13, 1995. This amendment was filed to submit certain financial statements and pro forma financial statements concerning Spartech Corporation's November 1, 1994 acquisition of Pawnee. SIGNATURES Pursuant to the requirements 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 (Registrant) Date: February 22, 1995 /s/ Bradley B. Buechler Bradley B. Buechler President and Chief Executive Officer (Principal Executive Officer) /s/ David B. Mueller David B. Mueller Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-10 2 Exhibit 10 SPARTECH CORPORATION NON-QUALIFIED DEFERRED COMPENSATION PLAN This plan document executed as of December , 1994 by Spartech. WITNESSETH: WHEREAS, Spartech wants to provide certain Key Executive Employees through the Plan with additional retirement benefits to encourage their continued employment with Spartech. WHEREAS, the adoption and execution of this Plan has been approved by board of directors of Spartech. NOW, THEREFORE, Spartech adopts this Plan effective January 1, 1994, to wit: Article 1. DEFINITIONS 1.1 Affiliated Company: Any corporation which is a member of the same controlled group of corporations, as determined by Section 1563(a) [without regard to Sections 1563(a)(4) and (4)(3)(C)] of the Internal Revenue Code of 1986, as amended, of which Spartech is a member. 1.2 Beneficiary: Any person, corporation or trust last designated by a Participant in writing to receive benefits provided under this Plan. If no designation is made, or if such person predeceases the Participant, the Beneficiary shall be the Participant's Spouse, if such Spouse survives the Participant. If the Spouse does not survive the Participant, the benefits shall pass to the Participant's descendants, per stirpes (including adopted children). If no descendants survive the Participant, such benefits shall pass to the Participant's estate. 1.3 Compensation: With respect to any Participant, the total amount shown as Internal Review Services Form W-2 for a calendar year as compensation for Federal income tax purposes; however, a Participant's Compensation for calendar year in excess of $150,000 shall be disregarded. 1.4 Deferred Compensation Account: The balance credited to the Deferred Compensation Account, as described in Section 5.1 as of any date. 1.5 Board: The board of directors of Spartech Corporation, a Delaware corporation. 1.6 Key Executive Employee: A person who serves as a managerial Employee of Spartech. 1.7 Participant: A Key Executive Employee recommended and approved to receive the benefits pursuant to this Plan as set forth in Article 6 hereof. 1.8 Permanent Disability: A physical or mental condition of a Participant resulting from injury, disease, or mental disorder which renders him incapable of continuing his usual and customary employment with Spartech. The disability of a Participant shall be determined by a licensed physician chosen by the Board. The determination shall be applied uniformly to all Participants. 1.9 Plan: This Spartech Corporation Non-Qualified Deferred Compensation Plan. 1.10 Spouse: The person, if any, to whom the Participant is legally married at the time of his death. 1.11 Spartech: Spartech Corporation, a Delaware corporation. 1.12 Trustee: The person or entity named as trustee under the Trust. 1.13 Trust: The Spartech Corporation Non Qualified Deferred Compensation Trust. 1.14 Year of Service: A Key Executive Employee's anniversary year of employment with Spartech or an Affiliated Company during which he was employed for six months or more; provided, however, that a Key Executive's anniversary year of employment commencing before January 1, 1994 shall not be considered a Year of Service. Article 2. ADMINISTRATION 2.1 The Board shall administer this Plan. The Board shall adopt such uniform and nondiscriminatory regulations as it shall deem necessary or appropriate for the administration of this Plan. The Board shall have the full power and authority to resolve all questions and issues interpreting the terms and conditions of this Plan which may arise hereunder. The Board may delegate one or more of its duties or responsibilities to other individuals. 2.2 The Board shall determine the facts required in the administration of this Plan from information certified to the Board by the Secretary of Spartech. 2.3 The Board shall compute the benefit payable, as provided in this Plan, to Participants or their Beneficiaries under this Plan. 2.4 Any denial, in whole or in part, by the Board of a claim for benefits under the Plan by a Participant or a Beneficiary shall be by written notice, stating the specific reasons for the denial which must be referable to a particular provision of this Plan, said notice to be delivered or mailed to the Participant or, if no Participant is living, to his Beneficiary. The Board shall afford a reasonable opportunity to any Participant or Beneficiary whose claim for benefits has been denied, in whole or in part, for a hearing concerning any decision denying the claim. 2.5 The Board shall keep a record of all proceedings and shall maintain or cause to be maintained all books of accounts, records or other data as may be necessary or advisable in the Board's judgment for the proper administration of the Plan. Article 3. ELIGIBILITY FOR PARTICIPATION IN THE PLAN. 3.1 Any Key Executive Employee is eligible for recommendation by the Board to participate in the Plan. The Board may provide that a Key Executive Employee becomes a Participant in the Plan effective as of any date and such Key Executive Employee shall become a Participant as of such date. 3.2 Each Participant shall complete and execute an Agreement Schedule, in the form attached hereto, upon becoming a Participant or at such other time as the Board may require. Article 4. FUNDING 4.1 Spartech will fund the Plan in such a manner as shall be approved, from time to time, by the Board. The determination of the Board as whether to fund the Plan in advance or as benefits are due, and if in advance, the amount thereof, shall be conclusive and binding upon all parties in interest. 4.2 Contributions by Participants are not required nor permitted under this Plan. 4.3 The Board may direct Spartech to contribute any funding under the Plan to the Trust. Article 5. ACCOUNTING 5.1 The Board shall establish a Deferred Compensation Account to which it shall credit no later than December 31 of each calendar year, commencing with the calendar year ending December 31, 1994, an amount equal to ten percent of each Participant's Compensation for the immediately preceding calendar year. A Participant's or Beneficiary's Deferred Compensation Account shall be reduced to reflect payments to such Participant or Beneficiary. 5.2 Forfeitures arising under Sections 6.2, 6.5 or 6.6, to the extent attributable to funded Deferred Compensation Accounts, shall be allocated to the Deferred Compensation Accounts of remaining Participants. Spartech's obligation to credit accounts for a calendar year shall be reduced by the amount of funded forfeitures for such year. 5.3 To the extent the Plan is funded, either through investments owned by Spartech, which are reserved for funding of the Plan, or through the Trust, Deferred Compensation Accounts shall be adjusted as of each December 31 to reflect any increase or decrease in the investment experience for that year. Any increase or decrease shall be allocated to a Deferred Compensation Account based upon the value of such Account on January 1 of the calendar year in proportion to the value of all such Accounts on January 1 of the year. For purposes of allocating increases or decreases in the funding to an Account for a year, the value of an Account shall be appropriately adjusted to reflect additions to, charges against or distributions from the Account during the year. If a life insurance contract is purchased on the life of a Participant for purposes of funding his benefits under the Plan, such contract shall be credited directly to the Deferred Compensation Account of the insured Participant. In this event, the value of the Participant's Deferred Compensation Account shall be reduced by the value of the life insurance contract for purposes of allocating the annual increase or decrease in the funding of the Plan under this Section 5.3. Death benefits paid pursuant to a life insurance contract shall be credited directly to the Deferred Compensation Account of the Participant whose life is insured under such contract. 5.3 The balance credited to a Participant's or Beneficiary's Deferred Compensation Account, as adjusted for investment experience and other appropriate credits and charges, shall represent the proportionate interest under the Plan of such Participant or Beneficiary. Article 6. BENEFITS 6.1 In the event a Participant terminates employment with Spartech on account of Permanent Disability or on or after attaining age sixty-five, payment of the full value of the Participant's Deferred Compensation Account to the Participant shall commence as of the first day of the month immediately following the Participant's termination of employment. In the event a Participant dies while in the employment of Spartech, payment of the full value of his Deferred Compensation Account to his Beneficiary shall commence as of the first day of the month immediately following his death. 6.2 In the event a Participant terminates employment with Spartech before attaining age sixty-five for a reason other than Permanent Disability or death, he shall be entitled to the Vested Portion of his Deferred Compensation Account. The Vested Portion of a Participant's Deferred Compensation Account is determined as follows: Participant's Years of Service Vested Portion Less than one 10% More than one but less than two 20% More than two but less than three 30% More than three but less than four 40% More than four but less than five 50% More than five but less than six 60% More than six but less than seven 70% More than seven but less eight 80% More than eight but less than nine 90% More than nine 100% The amount of the Deferred Compensation Account to which the Participant is not entitled shall be forfeited. The forfeited portion, to the extent it is funded either through the Trust or with investments owned by Spartech and reserved for funding the Plan, shall be a credit against Spartech's obligation to fund Deferred Compensation Accounts as provided under Section 5.2. Payment of the Vested Portion of a Participant's Deferred Compensation Account to the Participant shall commence as of the first day of the month immediately following his sixty-fifth birthday. In the event of the Participant's death prior to attaining age sixty-five, payment of the Vested Portion of his Deferred Compensation Account to his Beneficiary shall commence as of the first day of the month immediately following the Participant's death. 6.3 The Vested Portion of Participant's Deferred Compensation Account which is payable shall be paid, in the sole discretion of the Board, in one of the following ways: A. A single payment; or B. Substantially equal or monthly or annual installments for a period not to exceed five years. If payments to a Participant or Beneficiary have commenced and the recipient of such payments dies, the balance of the Vested Portion of the Deferred Compensation Account shall be paid in a single payment to the Beneficiary of the Participant or Beneficiary who was receiving payments. For this purpose, each Beneficiary who is receiving payments under Section 6.3.B. shall designate a Beneficiary in accordance with Section 1.3. If no Beneficiary designation can be located, the balance of the Vested Portion of the Participant's Deferred Compensation Account shall be paid to the Beneficiary's estate. 6.4 Payments under this Article 6 shall be suspended upon a Participant's return to full employment with Spartech or an Affiliated Company. Such payments shall again commence upon the Participant's subsequent termination of employment. 6.5 Notwithstanding any provision in the Plan, if a Participant's employment with Spartech or an Affiliated Company is terminated for cause, neither the Participant nor his Beneficiary shall be entitled to any benefits under this Plan and the balance of his Deferred Compensation Account shall be forfeited under Section 5.2. "Cause", for purposes of this Section 6.5 means, in the sole discretion of the Board, proven dishonesty or theft, conviction of a felony, habitual drunkenness or drug abuse or material breach of the Participant's employment contract with Spartech or an Affiliated Company. 6.6 A Participant shall not, during the continuance of the employment relationship with Spartech or an Affiliated Company and for the period of two years following the termination of his employment with Spartech or an Affiliated Company, regardless of who initiated the termination: (i) Directly or indirectly, on his own behalf, or on behalf of any other person, firm, partnership or corporation, transact any business, which is the same as or similar to the business then conducted by Spartech or an Affiliated Company, within a 200 mile radius of any facility owned and/or operated by Spartech or an Affiliated Company. (ii) Divulge to others or use for his own benefit or for the benefit of others any confidential information, including correspondence and other records, whether or not reduced to writing, which he may have acquired from Spartech, an Affiliated Company or others by reason of his employment with Spartech or an Affiliated Company. It is expressly understood that all such information, lists, correspondence and other writings are confidential and shall remain the sole property of Spartech or an Affiliated Company, and shall not be removed or transcribed for removal by the Participant upon termination of employment. (iii) Divert or solicit any of the business of Spartech or an Affiliated Company away from Spartech or an Affiliated Company, or enter into any agreements with or solicit the employment of employees of Spartech or an Affiliated Company nor will he directly or indirectly attempt to induce any employees of Spartech or an Affiliated Company to leave Spartech or an Affiliated Company or to take employment with a competitor of Spartech or an Affiliated Company. Any violation of the provisions of this Section 6.6 by a Participant shall cause a total forfeiture of all rights and payments of benefits payable under this Plan and the balance of such Participant's Deferred Compensation Account shall be forfeited under Section 5.2. Article 7. MISCELLANEOUS PROVISIONS 7.1 The Board reserves the right to amend or terminate this Plan; however, any amendment or termination permitted under this Section 7.1 shall not reduce or cancel the Deferred Compensation Account of a Participant, as of the date of such amendment or termination, or the manner of payment of such benefits which are payable to a Participant or his Beneficiary. Notwithstanding anything in this Plan to the contrary, assets reserved for the Plan are subject to market risk and nothing in this Plan constitutes a guarantee that said assets will not lose market value causing the Deferred Compensation Accounts of Participants or Beneficiaries to be reduced. 7.2 Construction of this Plan shall be governed by the laws of Missouri. 7.3 The annual accounting period for the Plan shall be the annual period ending on December 31. 7.4 Nothing in this Plan, or any amendment thereto, shall give a Participant, Key Executive Employee, Spouse, employee or other person, a right unless it is specifically provided or is accorded by Spartech pursuant to this Plan. Nothing in this Plan or any amendment thereto shall be construed as giving a Participant or Beneficiary the right to remain in the employment of Spartech or an Affiliated Company and all persons shall remain subject to discharge at any time to the same extent as if this Plan had not been adopted. 7.5 The terms of this Plan shall be binding upon the heirs, executors, administrators, successors and assigns of all parties in interest. 7.6 Terms in the masculine shall be deemed to include the feminine, and terms in the singular shall be deemed to include the plural and vice versa, wherever the context so admits or requires. 7.7 Any amount payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge Spartech and the Board with respect thereto. 7.8. Neither a Participant nor any other person shall acquire any right, title, or interest in or to any amount outstanding to the Participant's credit under the Plan other than the actual payment of such portions thereof in accordance with the terms of the Plan. This Plan shall not be deemed to constitute or create a trust, or an escrow agreement or any type of fiduciary relationship between Spartech and a Participant and his Spouse; nor shall the benefits provided herein be deemed in any way to be secured by any particular assets of Spartech. The Participant's interest and that of his Spouse shall be only the unsecured contractual right to receive the benefits provided for herein. 7.9 No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or change, and any attempt to anticipate, alienate, sell, assign, pledge encumber or change the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. If a Participant or Spouse shall become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or change any right or benefit hereunder, then such right or benefit shall, in the discretion of the Board, cease and terminate; and in such event, Spartech may hold or apply the same or any part thereof for the benefit of such Participant or his Spouse at any time and in such proportion as the Board may deem proper. 7.10 The cost of administering the Plan shall be paid by Spartech. 7.11 The Plan shall become operative and in effect as of January 1, 1994. 7.12 The headings have been inserted for convenience only and shall not affect the meaning or interpretation of the Plan. 7.13 The parties hereto agree that Spartech shall, without prejudice to any other remedies, be entitled to injunctive relief for any breach of covenant contained in this Plan. 7.14 In the event a Key Executive Employee is also a member of the Board, such Employee shall not be eligible to participant in any determination reserved to the Board under this Plan as it relates such Employee. 7.15 The Participant and his Beneficiary shall submit to Spartech his current mailing address. It shall be the duty of the Participant and his Beneficiary to notify Spartech promptly of any change of address. In absence of such notice, Spartech shall be entitled, for all purposes, to rely on the last known address of the Participant or Beneficiary. 7.16 The Board shall make all determinations concerning right to benefits under this Plan. Any decision by the Board denying a claim by a Key Executive Employee, Participant or his Beneficiary for benefits under this Plan shall be stated in writing and delivered or mailed to the Key Executive Employee, Participant or such Beneficiary. Such decision shall set forth the specific reasons for the denial, written to the best of Spartech's ability in a manner that may be understood without legal or actuarial counsel. In addition, Spartech shall afford a reasonable opportunity to the Participant or such Beneficiary for a full and fair review of the decision denying such claim. Any decision of the Board with respect to the Plan shall be final, binding and conclusive. 7.17 If any provision of this Plan is found to be invalid, it will not render the remainder of the Plan invalid. IN WITNESS WHEREOF, Spartech has caused this Spartech Non- Qualified Deferred Compensation Agreement to be executed and attested by its President thereto duly authorized as of the day and year first above written. SPARTECH CORPORATION By: ATTEST: Secretary AGREEMENT SCHEDULE SPARTECH CORPORATION NON-QUALIFIED DEFERRED COMPENSATION PLAN , (the "Participant"), an employee of Spartech Corporation ("Spartech"), has been selected and is hereby designated pursuant to a resolution adopted by the Board of Directors of Spartech to participate in the Spartech Corporation Non-Qualified Deferred Compensation Plan effective , 199 . If you wish to accept the benefits of the Spartech Corporation Non-Qualified Deferred Compensation Plan, please execute a copy of this schedule at the place indicated below. By: I hereby acknowledge my designation as a Participant in the Spartech Corporation Non-Qualified Deferred Compensation Plan and acknowledge that I have read and understand the Spartech Corporation Non-Qualified Deferred Compensation Plan and the Spartech Corporation Non-Qualified Deferred Compensation Trust. I hereby designate the following as my Beneficiary (name and relationship) under the Plan: . Dated this day of , 199 . Participant STATE OF MISSOURI ) ) SS. OF ST. LOUIS ) On this day of , in the year 19 , before me, , a Notary Public in and for said state, personally appeared , known to me to be the person who executed the within , and acknowledged to me that executed the same for the purposes therein stated. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the and said State aforesaid, the day and year first above written. Notary Public My Commission Expires: EX-11 3 EXHIBIT 11 SPARTECH CORPORATION AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts) THIRTEEN WEEKS ENDED January 28, January 29, 1995 1994 NET EARNINGS Net Earnings $ 3,125 $ 2,103 Preferred stock accretion (549) (518) Add: Interest savings, net of tax effect, on retirement of debt from the proceeds received from the exercise of options and warrants in excess of 20% limitation 6 70 Primary net earnings applicable to common shares 2,582 1,655 Add: Preferred stock accretion elimination resulting from the assumed conversion of preferred stock 549 518 Fully diluted net earnings applicable to common shares $ 3,131 $ 2,173 WEIGHTED AVERAGE SHARES OUTSTANDING Weighted average common shares outstanding 8,681 7,906 Add: Shares issuable from assumed exercise of options and warrants in excess of 20% limitation 848 1,408 Primary weighted average shares outstanding 9,529 9,314 Add: Shares issuable from assumed conversion of preferred stock 14,275 14,275 Fully diluted weighted average shares outstanding 23,804 23,589 NET EARNINGS PER SHARE Primary $ .27 $ .17 Fully Diluted $ .13 $ .09
EX-27 4
5 1,000 3-MOS OCT-28-1995 JAN-28-1995 1,776 0 47,319 1,692 31,989 1,717 85,227 25,074 167,042 46,661 0 6,532 0 777 54,284 167,042 79,028 79,258 67,271 73,841 0 0 1,242 4,175 1,050 3,125 0 0 0 3,125 .27 .13
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