Delaware | 1-5911 | 43-0761773 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
Exhibit | ||
Number | Description | |
99.1 | Press release of Spartech Corporation dated September 12, 2012 |
SPARTECH CORPORATION | |||
Date: September 12, 2012 | By: | /s/ Randy C. Martin | |
Randy C. Martin | |||
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Victoria M. Holt | Randy C. Martin |
President and Chief Executive Officer | Executive Vice President and Chief Financial Officer |
(314) 721-4242 | (314) 721-4242 |
• | Net sales decreased by 3% from the prior year quarter to $282.4 million on lower volume. |
• | Operating earnings decreased to $5.1 million from $8.3 million in the prior year period. Operating earnings excluding special items decreased to $6.0 million from $8.5 million in the prior year period. A $2.2 million change in bad debt expense from a reversal in the prior year period accounted for the principal difference in the quarterly comparison. |
• | The Custom Sheet and Rollstock segment operating earnings excluding special items improved by 24% over the prior period, primarily from an increased mix of higher margin products and operational improvements during the quarter. |
• | Diluted earnings per share from continuing operations were $0.06 per share compared to $0.10 per share in the prior year period. Diluted earnings per share from continuing operations excluding special items (restructuring and exit costs) were $0.08 per share, compared to $0.10 per share in the prior year period. The current year third quarter earnings per share measures benefited from a lower effective tax rate (6%) compared to a higher effective tax rate (46%) in the previous period. These rates compare to our statutory rate of 35%. |
• | Generated $20.3 million of cash flow from operations which was used to pay down $15.1 million of debt. |
(a) | Adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products of the types we produce; |
(b) | Restrictions imposed on us by instruments governing our indebtedness, the possible inability to comply with requirements and covenants of those instruments and inability to access capital markets; |
(c) | Our ability to compete effectively on product performance, quality, price, availability, product development, and customer service; |
(d) | Adverse changes in the markets we serve, including the packaging, transportation, building and construction, recreation and leisure, and other markets, some of which tend to be cyclical; |
(e) | Volatility of prices and availability of supply of energy and raw materials that are critical to the manufacture of our products, particularly plastic resins derived from oil and natural gas, including future impacts of natural disasters; |
(f) | Our inability to manage or pass through to customers an adequate level of increases in the costs of materials, freight, utilities, or other conversion costs; |
(g) | Our inability to achieve and sustain the level of cost savings, productivity improvements, gross margin enhancements, growth or other benefits anticipated from our improvement initiatives; |
(h) | Our inability to collect all or a portion of our receivables with large customers or a number of customers; |
(i) | Loss of business with a limited number of customers that represent a significant percentage of our revenues; |
(j) | Significant changes in or termination of major contracts with customers or suppliers; |
(k) | Possible asset impairments; |
(l) | Our inability to predict accurately the costs to be incurred, time taken to complete, operating disruptions therefrom, potential loss of business or savings to be achieved in connection with announced production plant consolidations and line moves; |
(m) | Adverse findings in significant legal or environmental proceedings or our inability to comply with applicable environmental laws and regulations; |
(n) | Our inability to develop and launch new products successfully; |
(o) | Possible weaknesses in internal controls; and |
Three Months Ended | Nine Months Ended | |||||||||||||||
August 4, | July 30, | August 4, | July 30, | |||||||||||||
(Unaudited and dollars in thousands, except per share data) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net sales | $ | 282,447 | $ | 291,716 | $ | 862,551 | $ | 809,050 | ||||||||
Costs and expenses | ||||||||||||||||
Cost of sales | 255,315 | 265,051 | 783,924 | 736,902 | ||||||||||||
Selling, general and administrative expenses | 20,673 | 17,744 | 63,302 | 55,730 | ||||||||||||
Amortization of intangibles | 422 | 422 | 1,267 | 1,265 | ||||||||||||
Restructuring and exit costs | 897 | 174 | 897 | 1,550 | ||||||||||||
Total costs and expenses | 277,307 | 283,391 | 849,390 | 795,447 | ||||||||||||
Operating earnings | 5,140 | 8,325 | 13,161 | 13,603 | ||||||||||||
Interest expense, net of interest income | 3,181 | 2,784 | 9,129 | 8,041 | ||||||||||||
Earnings from continuing operations before income taxes | 1,959 | 5,541 | 4,032 | 5,562 | ||||||||||||
Income tax expense | 121 | 2,553 | 791 | 1,566 | ||||||||||||
Net earnings from continuing operations | 1,838 | 2,988 | 3,241 | 3,996 | ||||||||||||
Net earnings from discontinued operations, net of tax | — | 19 | 18 | 2,664 | ||||||||||||
Net earnings | $ | 1,838 | $ | 3,007 | $ | 3,259 | $ | 6,660 | ||||||||
Basic earnings per share: | ||||||||||||||||
Earnings from continuing operations | $ | 0.06 | $ | 0.10 | $ | 0.10 | $ | 0.13 | ||||||||
Earnings from discontinued operations, net of tax | — | — | — | 0.09 | ||||||||||||
Net earnings per share | $ | 0.06 | $ | 0.10 | $ | 0.10 | $ | 0.22 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Earnings from continuing operations | $ | 0.06 | $ | 0.10 | $ | 0.10 | $ | 0.13 | ||||||||
Earnings from discontinued operations, net of tax | — | — | — | 0.08 | ||||||||||||
Net earnings per share | $ | 0.06 | $ | 0.10 | $ | 0.10 | $ | 0.21 |
(Unaudited) | |||||||
August 4, | October 29, | ||||||
(Dollars in thousands, except share data) | 2012 | 2011 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 933 | $ | 877 | |||
Trade receivables, net of allowances of $2,955 and $2,437, respectively | 146,857 | 156,432 | |||||
Inventories, net of inventory reserves of $9,461 and $9,152, respectively | 98,248 | 91,186 | |||||
Prepaid expenses and other current assets, net | 27,122 | 26,367 | |||||
Assets held for sale | 2,624 | 2,744 | |||||
Total current assets | 275,784 | 277,606 | |||||
Property, plant and equipment, net | 197,722 | 208,074 | |||||
Goodwill | 47,466 | 47,466 | |||||
Other intangible assets, net | 11,604 | 12,872 | |||||
Other long-term assets | 4,566 | 3,684 | |||||
Total assets | $ | 537,142 | $ | 549,702 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Current maturities of long-term debt | $ | 22,610 | $ | 25,211 | |||
Accounts payable | 134,210 | 140,628 | |||||
Accrued liabilities | 34,482 | 30,919 | |||||
Total current liabilities | 191,302 | 196,758 | |||||
Long-term debt, less current maturities | 119,931 | 132,000 | |||||
Other long-term liabilities: | |||||||
Deferred taxes | 41,668 | 41,676 | |||||
Other long-term liabilities | 6,800 | 6,336 | |||||
Total liabilities | 359,701 | 376,770 | |||||
Shareholders’ equity | |||||||
Preferred stock (authorized: 4,000,000 shares, par value $1.00) Issued: None | — | — | |||||
Common stock (authorized: 55,000,000 shares, par value $0.75) Issued: 33,131,846 shares; outstanding: 30,795,692 and 30,831,919 shares, respectively | 24,849 | 24,849 | |||||
Contributed capital | 202,172 | 201,945 | |||||
Accumulated loss | (7,770 | ) | (11,031 | ) | |||
Treasury stock, at cost, 2,336,154 and 2,299,927 shares, respectively | (48,210 | ) | (49,286 | ) | |||
Accumulated other comprehensive income | 6,400 | 6,455 | |||||
Total shareholders’ equity | 177,441 | 172,932 | |||||
Total liabilities and shareholders’ equity | $ | 537,142 | $ | 549,702 |
Nine Months Ended | |||||||
August 4, | July 30, | ||||||
(Unaudited and dollars in thousands) | 2012 | 2011 | |||||
Cash flows from operating activities | |||||||
Net earnings | $ | 3,259 | $ | 6,660 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 23,838 | 23,868 | |||||
Stock-based compensation expense | 1,406 | 2,200 | |||||
Restructuring and exit costs | 897 | 510 | |||||
Loss on disposition of assets, net | 161 | 67 | |||||
Provision for bad debt expense | 627 | (1,154 | ) | ||||
Change in current assets and liabilities | (1,479 | ) | (8,938 | ) | |||
Other, net | 388 | 1,998 | |||||
Net cash provided by operating activities | 29,097 | 25,211 | |||||
Cash flows from investing activities | |||||||
Capital expenditures | (13,281 | ) | (19,191 | ) | |||
Proceeds from the disposition of assets | 115 | 420 | |||||
Net cash used by investing activities | (13,166 | ) | (18,771 | ) | |||
Cash flows from financing activities | |||||||
Bank credit facility borrowings, net | (11,345 | ) | (7,504 | ) | |||
Payments on notes and bank term loan | (2,467 | ) | (378 | ) | |||
Payments on bonds and leases | (372 | ) | (395 | ) | |||
Debt issuance costs | (1,597 | ) | (1,558 | ) | |||
Sale of treasury stock | 2 | — | |||||
Stock-based compensation exercised | (103 | ) | (299 | ) | |||
Net cash used by financing activities | (15,882 | ) | (10,134 | ) | |||
Effect of exchange rates on cash and cash equivalents | 7 | 2 | |||||
Increase (decrease) in cash and cash equivalents | 56 | (3,692 | ) | ||||
Cash and cash equivalents at beginning of period | 877 | 4,900 | |||||
Cash and cash equivalents at end of period | $ | 933 | $ | 1,208 |
Three Months Ended | Nine Months Ended | ||||||||||||||
August 4, | July 30, | August 4, | July 30, | ||||||||||||
(unaudited and in thousands, except per share data) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Operating earnings (GAAP) | $ | 5,140 | $ | 8,325 | $ | 13,161 | $ | 13,603 | |||||||
Restructuring and exit costs | 897 | 174 | 897 | 1,550 | |||||||||||
Operating earnings excluding special items (Non-GAAP) | $ | 6,037 | $ | 8,499 | $ | 14,058 | $ | 15,153 | |||||||
Net earnings from continuing operations (GAAP) | $ | 1,838 | $ | 2,988 | $ | 3,241 | $ | 3,996 | |||||||
Restructuring and exit costs, net of tax | 628 | 110 | 628 | 976 | |||||||||||
Net earnings from continuing operations excluding special items (Non-GAAP) | $ | 2,466 | $ | 3,098 | $ | 3,869 | $ | 4,972 | |||||||
Net earnings from continuing operations per diluted share (GAAP) | $ | 0.06 | $ | 0.10 | $ | 0.10 | $ | 0.13 | |||||||
Restructuring and exit costs, net of tax | 0.02 | — | 0.02 | 0.03 | |||||||||||
Net earnings from continuing operations per diluted share excluding special items (Non-GAAP) | $ | 0.08 | $ | 0.10 | $ | 0.12 | $ | 0.16 |
Three Months Ended | Three Months Ended | ||||||||||||||||||||||
August 4, 2012 | July 30, 2011 | ||||||||||||||||||||||
Operating Earnings (Loss) (GAAP) | Special Items | Operating Earnings (Loss) Excluding (Non-GAAP) Special Items | Operating Earnings (Loss) (GAAP) | Special Items | Operating Earnings (Loss) Excluding (Non-GAAP) Special Items | ||||||||||||||||||
Segment | |||||||||||||||||||||||
Custom Sheet and Rollstock | $ | 6,871 | $ | 897 | $ | 7,768 | $ | 6,366 | $ | (86 | ) | $ | 6,280 | ||||||||||
Packaging Technologies | 4,031 | — | 4,031 | 6,855 | — | 6,855 | |||||||||||||||||
Color and Specialty Compounds | 2,077 | — | 2,077 | 2,854 | 260 | 3,114 | |||||||||||||||||
Corporate | (7,839 | ) | — | (7,839 | ) | (7,750 | ) | — | (7,750 | ) | |||||||||||||
Total | $ | 5,140 | $ | 897 | $ | 6,037 | $ | 8,325 | $ | 174 | $ | 8,499 |
Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||
August 4, 2012 | July 30, 2011 | ||||||||||||||||||||||
Operating Earnings (Loss) (GAAP) | Special Items | Operating Earnings (Loss) Excluding (Non-GAAP) Special Items | Operating Earnings (Loss) (GAAP) | Special Items | Operating Earnings (Loss) Excluding (Non-GAAP) Special Items | ||||||||||||||||||
Segment | |||||||||||||||||||||||
Custom Sheet and Rollstock | $ | 18,680 | $ | 897 | $ | 19,577 | $ | 19,058 | $ | 372 | $ | 19,430 | |||||||||||
Packaging Technologies | 12,911 | — | 12,911 | 17,855 | 247 | 18,102 | |||||||||||||||||
Color and Specialty Compounds | 6,074 | — | 6,074 | 264 | 925 | 1,189 | |||||||||||||||||
Corporate | (24,504 | ) | — | (24,504 | ) | (23,574 | ) | 6 | (23,568 | ) | |||||||||||||
Total | $ | 13,161 | $ | 897 | $ | 14,058 | $ | 13,603 | $ | 1,550 | $ | 15,153 |
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