UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

1-5911
(Commission File Number)

SPARTECH CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware		43-0761773
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)

(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 þ NO o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer þ  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company o 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

30,562,027 shares of Common Stock, $.75 par value per share, outstanding as of March 3, 2009.

SPARTECH CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 2009
TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets — As of: January 31, 2009 and November 1, 2008	1
Consolidated Condensed Statements of Operations — For the three months ended January 31, 2009 and February 2, 2008	2
Consolidated Condensed Statements of Cash Flows — For the three months ended January 31, 2009 and February 2, 2008	3
Notes To Consolidated Condensed Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Cautionary Statements Concerning Forward-Looking Statements	13
Item 3. Quantitative and Qualitative Disclosures about Market Risk	15
Item 4. Controls and Procedures	15
PART II OTHER INFORMATION
Item 5. Other Information	16
Item 6. Exhibits	16
Signatures	16
Certifications	17
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

SPARTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands, except share data)

	January 31, 2009			November 1,
	(Unaudited)			2008
Assets
Current assets
Cash and cash equivalents	$	2,159		$	2,118
Trade receivables, net of allowances of $5,820 and $4,550, respectively		131,512			176,108
Inventories		90,968			96,721
Prepaid expenses and other current assets		27,214			24,665
Total current assets		251,853			299,612
Property, plant and equipment, net of accumulated depreciation of $307,271 and $297,876, respectively		272,211			280,202
Goodwill		145,498			145,498
Other intangible assets, net of accumulated amortization of $14,288 and $13,148, respectively		31,588			32,722
Other long-term assets		4,145			4,385
Total assets	$	705,295		$	762,419
Liabilities and Shareholders’ Equity
Current liabilities
Current maturities of long-term debt	$	20,076		$	20,428
Accounts payable		106,207			155,594
Accrued liabilities		34,892			42,676
Total current liabilities		161,175			218,698
Long-term debt, less current maturities		261,341			254,226
Other long-term liabilities
Deferred taxes		56,373			56,516
Other long-term liabilities		6,074			6,189
Total liabilities		484,963			535,629
Shareholders’ equity
Preferred stock (authorized: 4,000,000, par value $1.00) Issued: None		—			—
Common stock (authorized: 55,000,000, par value $0.75) Issued: 33,131,846; Outstanding: 30,562,027 and 30,563,605, respectively		24,849			24,849
Contributed capital		203,381			202,656
Retained earnings		46,968			53,588
Treasury stock, at cost, 2,569,819 shares and 2,568,241, respectively		(56,389	)		(56,389	)
Accumulated other comprehensive income		1,523			2,086
Total shareholders’ equity		220,332			226,790
Total liabilities and shareholders’ equity	$	705,295		$	762,419

See accompanying notes to consolidated condensed financial statements.

1

SPARTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited and dollars in thousands, except per share data)

	Three Months Ended
	January 31,			February 2,
	2009			2008
Net sales	$	249,150		$	335,106
Costs and expenses
Cost of sales		226,668			311,997
Selling, general and administrative expenses		23,089			23,139
Amortization of intangibles		1,168			1,333
Restructuring and exit costs		827			224
Total costs and expenses		251,752			336,693
Operating loss		(2,602	)		(1,587	)
Interest, net of interest income of $37 and $121, respectively		4,712			5,146
Loss before income taxes		(7,314	)		(6,733	)
Income tax benefit		(2,222	)		(3,243	)
Net loss	$	(5,092	)	$	(3,490	)
Net loss per common share
Basic	$	(.17	)	$	(.12	)
Diluted	$	(.17	)	$	(.12	)
Dividends declared per common share	$	.050		$	.135

See accompanying notes to consolidated condensed financial statements.

2

SPARTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited and dollars in thousands)

	Three Months Ended
	January 31,			February 2,
	2009			2008
Cash flows from operating activities
Net loss	$	(5,092	)	$	(3,490	)
Adjustments to reconcile net loss to cash (used for) provided by operating activities:
Depreciation and amortization expense		11,143			11,885
Provision for bad debt expense		2,492			1,614
Deferred taxes		(1,832	)		(1,153	)
Stock-based compensation expense		725			1,383
Other, net		392			194
Change in current assets and liabilities		(9,875	)		(3,896	)
Net cash (used for) provided by operating activities		(2,047	)		6,537
Cash flows from investing activities
Capital expenditures		(2,895	)		(5,241	)
Business acquisitions		—			(708	)
Net cash used for investing activities		(2,895	)		(5,949	)
Cash flows from financing activities
Bank credit facility borrowings, net		6,360			12,376
Borrowings on bonds and leases, net		155			177
Cash dividends on common stock		(1,529	)		(4,144	)
Issuance of common stock		—			2,812
Stock options exercised		—			15
Treasury stock acquired		—			(9,667	)
Net cash provided by financing activities		4,986			1,569
Effect of exchange rate changes on cash and cash equivalents		(3	)		144
Increase in cash and cash equivalents		41			2,301
Cash and cash equivalents at beginning of year		2,118			3,409
Cash and cash equivalents at end of quarter	$	2,159		$	5,710

See accompanying notes to consolidated condensed financial statements.

3

SPARTECH CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited and dollars in thousands, except per share amounts)

1) Basis of Presentation

     The consolidated financial statements include the accounts of Spartech Corporation and its controlled affiliates (“Spartech” or “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 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 November 1, 2008 Annual Report on Form 10-K.

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation. The Company’s fiscal year ends on the Saturday closest to October 31 and fiscal years generally contain 52 weeks. In addition, years presented are fiscal years unless noted otherwise.

2) Inventories

     Inventories are valued at the lower of cost or market. Inventories at January 31, 2009 and November 1, 2008 are comprised of the following components:

	January 31,		November 1,
	2009		2008
Raw materials	$	50,153	$	54,052
Production supplies		8,655		8,725
Finished goods		32,160		33,944
	$	90,968	$	96,721

3) Restructuring and Exit Costs

     Restructuring and exit costs were recorded in the consolidated condensed statements of operations for the three months ended January 31, 2009 and February 2, 2008 as follows:

	Three Months Ended
	January 31,			February 2,
	2009			2008
Restructuring and exit costs:
Custom Sheet and Rollstock	$	182		$	224
Packaging Technologies		336			—
Color and Specialty Compounds		292			—
Corporate		17			—
Total restructuring and exit costs		827			224
Impact on income tax benefit		(295	)		(68	)
Impact on net loss	$	532		$	156

     As part of the Company’s cost optimization strategy, the Company announced a restructuring initiative reducing the number of jobs at the Company and optimizing the use of flex time in the operations. As part of this initiative, the Company also shut down a Packaging Technologies production facility in Mankato, Minnesota and a Color and Specialty Compound production facility in St. Clair, Michigan and relocated this business to other Spartech production facilities. The Company has also announced initiatives to consolidate its procurement function and further optimize its manufacturing cost footprint.

4

SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)

3) Restructuring and Exit Costs (continued)

     Due to current economic conditions, the Company continues to take actions to maximize cash flows and reduce its cost structure. These cost optimization initiatives include additional plant consolidations, manufacturing cost reduction efforts, manufacturing and administrative organizational restructuring plans, and other improvements. For certain restructuring and exit activities initiated after January 31, 2009, see Note 10, Subsequent Events.

     The following table summarizes the restructuring and exit costs incurred in the first quarter:

			Three Months
	Cumulative		Ended		Cumulative
	through 2008		January 31, 2009		to Date
Accelerated depreciation	$	667	$	198	$	865
Facility restructuring and exit costs		1,175		629		1,804
Total	$	1,842	$	827	$	2,669

     Accelerated depreciation represents the impact from the reduced life on property, plant and equipment primarily associated with the Mankato and St. Clair facilities. Facility restructuring and exit costs represent employee severance, equipment moving and installation costs. For restructuring initiatives announced through January 31, 2009, the Company expects to incur approximately $2,100 of additional restructuring costs, primarily cash-related severance, equipment moving and installation expenses. Future severance costs relating to organizational restructuring plans are expected to be ongoing through 2010. The Mankato and St. Clair consolidations were substantially completed in the fourth quarter of 2008 excluding certain future moving and installation costs which should be completed by 2010.

     The Company’s total restructuring liability representing severance and moving costs was $222 at January 31, 2009 and $138 at November 1, 2008. Cash payments were $545 in the first three months of 2009.

4) Long-Term Debt

     Long-term debt consisted of the following at January 31, 2009 and November 1, 2008:

	January 31,		November 1,
	2009		2008
2006 Senior Notes	$	50,000	$	50,000
2004 Senior Notes		150,000		150,000
Bank credit facilities		48,000		41,600
Bank term loan		19,310		19,113
Other		14,107		13,941
		281,417		274,654
Less current maturities		20,076		20,428
	$	261,341	$	254,226

     In 2008, the Company amended its revolving credit facility, 2006 Senior Notes, 2004 Senior Notes and Euro bank term loan. On an annual basis, the Company is required to offer an early principal payment based on a ratable percentage of its excess cash flow (as defined in these amended agreements) to the 2006 senior noteholders, the 2004 senior noteholders and the Euro bank term loan noteholder. Based on the Company’s results in the fourth quarter of 2008, it made payments of $18,912 in the second quarter of 2009 and this amount is classified as current maturities of long-term debt.

     The Company is not required to make any other principal payments on its bank credit facility, the 2006 Senior Notes, the 2004 Senior Notes, or the Euro bank term loan within the next year except the annual excess cash flow payments discussed above. Borrowings under these facilities are classified as long term because the Company has the ability and intent to keep the balances outstanding over the next 12 months.

     While the Company was in compliance with its covenants during the first quarter of 2009 and currently expects to be in compliance with its covenants during the next twelve months, the Company’s failure to comply with its covenants or other requirements of its financing arrangements is an event of default and could, among other things, accelerate the payment of indebtedness, which could adversely impact the Company’s business, financial condition and results of operations.

5

SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)

5) Income Taxes

     The difference between the U.S. federal statutory rate and the Company’s effective tax rate in the first quarter is largely attributable to the negative impact of a valuation allowance on current period losses related to our France operations.  

6) Fair Value of Financial Instruments

     Effective November 2, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”), with the exception of the application of the statement to non-recurring, nonfinancial assets and liabilities which has been deferred by FASB Staff Position 157-2, Effective Date of Statement 157, and will be effective on the first day of fiscal year 2010. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. There was no impact to the Company’s consolidated financial statements upon adoption of SFAS No. 157.

     In addition, effective November 2, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS 159”). This statement permits entities to choose to measure many financial instruments and certain other items at fair value.  The Company has elected not to measure any financial instruments or certain other items at fair value.

7) Commitments and Contingencies

     In September 2003, the New Jersey Department of Environmental Protection issued a directive, and the United States Environmental Protection Agency (“USEPA”) initiated an investigation, related to over 70 companies, including a Spartech subsidiary, regarding the Lower Passaic River. The subsidiary subsequently agreed to participate in a group of over 40 companies in funding an environmental study by the USEPA to determine the extent and source of contamination at this site. As of January 31, 2009, the Company had approximately $500 accrued related to its share of the funding and related legal expenses. The Company expects the group’s commitment to be funded for the next five years, the expected remaining timeframe of the study. Due to uncertainties inherent in this matter, management is unable to estimate the Company’s potential exposure, including possible remediation or other environmental responsibilities that may result from this matter, which is not expected to occur for a number of years. These uncertainties primarily include the completion and outcome of the environmental study and the percentage of contamination attributable to the subsidiary and other parties. It is possible that the ultimate liability resulting from this issue could materially differ from the current accrual balance. In the event of one or more adverse determinations related to this issue, the impact on the Company’s results of operations could be material to any specific period. However, the Company’s opinion is that future expenditures for compliance with these laws and regulations, as they relate to the Lower Passaic River issue and other potential issues, will not have a material effect on the Company’s capital expenditures, financial position, or competitive position.

     The Company is also subject to various other 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 other matters will not have a material adverse effect on the Company’s financial position or results of operations.

8) Net Loss Per Share

     Basic loss per share excludes any dilution and is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For the three months ended January 31, 2009 and February 2, 2008, all outstanding equity compensation instruments were excluded from the calculation of diluted earnings per share because they were antidilutive.

6

SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)

8) Net Loss Per Share (continued)

     The reconciliation of the net loss and weighted average number of common shares used in the computations of basic and diluted loss per share for the three months ended January 31, 2009 and February 2, 2008 is as follows (shares in thousands):

	Three Months Ended
	January 31,			February 2,
	2009			2008
Basic and diluted net loss	$	(5,092	)	$	(3,490	)
Basic and diluted weighted average common shares outstanding		30,306			30,138
Basic and diluted net loss per share	$	(.17	)	$	(.12	)

9) Segment Information

     Spartech is organized into three reportable segments and one group of operating segments based on the products the Company manufactures. The three reportable segments are Custom Sheet and Rollstock, Packaging Technologies and Color and Specialty Compounds, with the remaining businesses grouped together in Engineered Products. The Company utilizes operating earnings (loss) excluding the impact of foreign exchange to evaluate business segment and group performance.

     Corporate operating losses include corporate office expenses, information technology costs, professional fees, and the impact of foreign currency exchange that are not allocated to the reportable segments and group.

     The following presents the Company’s net sales and operating earnings (loss) by reportable segment and group and the reconciliation to consolidated operating loss:

	Three Months Ended
	January 31,			February 2,
	2009			2008
Net sales
Custom Sheet and Rollstock	$	113,616		$	147,350
Packaging Technologies		55,029			65,745
Color and Specialty Compounds		68,356			104,816
Engineered Products		12,149			17,195
Net sales (1)	$	249,150		$	335,106
Operating earnings (loss)
Custom Sheet and Rollstock	$	(38	)	$	(1,804	)
Packaging Technologies		6,178			4,787
Color and Specialty Compounds		(378	)		2,169
Engineered Products		1,112			1,629
Corporate expenses		(9,476	)		(8,368	)
Operating loss	$	(2,602	)	$	(1,587	)

(1) Excludes inter-segment sales of $8,563 and $14,311, respectively, primarily from the Color and Specialty Compounds segment.

7

SPARTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited and dollars in thousands, except per share amounts)

10) Comprehensive Loss

     Comprehensive loss is the Company’s change in equity during the period related to transactions, events and circumstances from non-owner sources. The reconciliation of net loss to comprehensive loss for the three months ended January 31, 2009 and February 2, 2008 is as follows:

	Three Months Ended
	January 31,			February 2,
	2009			2008
Net loss	$	(5,092	)	$	(3,490	)
Foreign currency translation adjustments		(563	)		(1,797	)
Total comprehensive loss	$	(5,655	)	$	(5,287	)

11) Subsequent Events

     Subsequent to January 31, 2009, the Company eliminated approximately 260 jobs in response to current economic conditions. In addition, on March 4, 2009, the Company announced the closure of a portion of our Donchery Sheet extrusion operation in France.

8

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

     The first quarter of 2009 was challenging as we continue to operate in a very weak demand environment. Our underlying volume decreased 32% in the first quarter of 2009 compared to the same period in the prior year due to weak demand and industry-wide inventory reductions. Accordingly, we generated an operating loss of $2.6 million during the first quarter of 2009 compared to a $1.6 million loss during the same period of the prior year. The lower sales volume occurred in all of our segments and major end markets with the most significant declines occurring in our end markets which are more sensitive to discretionary spending, including the transportation and recreation and leisure markets, as well as the residential sector of the building and construction market.

     The adverse impact of our lower sales volume was largely offset by the positive impact of our financial improvement initiatives including our manufacturing cost optimization and margin enhancement initiatives. Our manufacturing cost optimization initiative includes our labor reduction efforts and plant consolidations. Our margin enhancement initiative is comprised of activities associated with improving margins on unprofitable customers, improving our commercial practices to reflect changes in resin costs in customer selling prices in a timely manner and consolidation of our procurement function. As a result of these initiatives, we earned higher gross margins per pound sold in the first quarter of 2009 when compared to the same period in the prior year.

     Our fiscal year ends on the Saturday closest to October 31 and fiscal years generally contain 52 weeks. In addition, years presented are fiscal years unless noted otherwise.

Outlook

     We are experiencing weak end market demand in all major markets, particularly the transportation, recreation and leisure, and residential construction markets. We will continue to execute on our structural cost reduction actions and financial improvement initiatives to reduce costs and maximize cash flows. We expect a turbulent economic environment for the foreseeable future and we are prepared to adjust actions as conditions warrant. Our operating plans assume the recessionary effects will continue through 2009 and that volumes will be weak through this period. Our aggressive cost reduction efforts and financial discipline are focused on effectively managing through this challenging market. We expect to emerge from this environment a stronger and better positioned company to support future long-term profitable growth.

Consolidated Results

     Net sales were $249.2 million in the three month period ended January 31, 2009 compared to $335.1 million in the same period of the prior year representing a 26% decrease. This decrease was caused by the following factors:

Underlying volume	(32	)%
Price/Mix	6
	(26	)%

     Our decrease in underlying volume was caused by lower end market demand and decreases in discretionary spending in the economy. The lower volumes occurred across all of our segments and major end markets with the most significant declines occurring in our end markets which are more sensitive to discretionary spending, including the transportation and recreation and leisure markets, as well as the residential sector of the building and construction market. Our sales comparison was favorably impacted by higher average selling prices in the first quarter of 2009 when compared to the same period in the prior year.

     The following table presents net sales, cost of sales, and the resulting gross margin in dollars and on a per pound sold basis for the first three months of 2009 compared to the same period in 2008. Cost of sales presented in the consolidated condensed statements of operations includes material and conversion costs and excludes amortization of intangible assets and restructuring and exit costs. Cost of sales are presented in the following table, and we have not presented it as a percentage of net sales because a comparison of this measure is distorted by changes in resin costs that are generally passed through to customers as changes to selling prices. These changes can materially affect the percentages but do not present accurate performance measures of the business.

9

	Three Months Ended
	January 31,		February 2,
	2009		2008
Dollars and Pounds (in millions)
Net sales	$	249.2	$	335.1
Cost of sales		226.7		312.0
Gross margin	$	22.5	$	23.1
Pounds Sold		213.7		315.5
Dollars per Pound Sold
Net sales	$	1.166	$	1.062
Cost of sales		1.061		.989
Gross margin	$	.105	$	.073

     The increase in net sales per pound in the first three months of 2009 compared to the same period in the prior year was caused by higher selling prices. The 3.2 cent per pound increase in gross margin reflects price increases and substantial conversion cost reductions. Our conversion cost dollars decreased 21% due to the volume decline and the impact of our manufacturing cost optimization initiative on reducing our labor-related costs. Labor-related costs represent approximately half of our total conversion costs, and our cost optimization initiative resulted in approximately $8.5 million of lower labor costs in the first quarter of 2009 compared to the same period in the prior year.

     Selling, general and administrative expenses were $23.1 million in the first three months of 2009 and 2008. During the first quarter of 2009, the benefits associated with our cost optimization strategy were offset by the impact from higher professional fees to support our initiatives and higher bad debt expense.

     Amortization of intangibles was $1.2 million in the first three months of 2009 compared to $1.3 million in the same period of the prior year. The decrease reflects the benefit derived from intangibles which were fully amortized by the end of 2008. The reduction in amortization from the impairment of certain other intangible assets in the fourth quarter of 2008 was offset by the amortization on a trademark that was converted from an indefinite life intangible to a definite life intangible asset during the fourth quarter of 2008.

     Restructuring and exit costs were $0.8 in the first three months of 2009 compared to $0.2 million in the same period of the prior year. The costs during the first quarter of 2009 are mostly comprised of employee severance, equipment moving expenses and accelerated depreciation resulting from our manufacturing cost optimization initiative. For restructuring initiatives announced through January 31, 2009, we expect to incur approximately $2.1 million of additional restructuring costs, primarily cash-related severance, equipment moving and installation expenses. Due to current economic conditions, the Company continues to take actions to maximize cash flows and reduce its cost structure. These cost optimization initiatives include additional plant consolidations, manufacturing cost reduction efforts, manufacturing and administrative organizational restructuring plans, and other improvements.

     Interest expense, net of interest income, was $4.7 million in the first three months of 2009 compared to $5.1 million in the same period of 2008. This decrease was due to the benefit realized from our focused efforts on debt reduction in 2008. Our weighted average interest rates were consistent during the first three month periods of 2009 and 2008 as the decrease in the weighted average interest rate of our variable rate financings offset the increase in the interest rates on our fixed rate debt, as amended in September 2008.

     Our effective tax rate was a 31% benefit in the first three months of 2009 compared to a 48% benefit in the same period of the prior year.  The first quarter 2009 tax benefit was negatively impacted by a valuation allowance on current period losses related to our France operations.  In addition, the 2008 tax benefit was positively impacted by domestic state tax law changes and the retroactive reinstatement of a research and development tax credit.  Excluding these items, our effective tax rate would have been approximately 39% during the first quarter of both fiscal periods.

     We reported a net loss of $5.1 million for the first three months of 2009 compared to a $3.5 million net loss in the same period of the prior year. These decreases reflect the impact of the items previously discussed.

10

Segment Results

Custom Sheet and Rollstock Segment

     Net sales were $113.6 million in the three month period ended January 31, 2009 compared to $147.4 million in the same period of the prior year, representing a 23% decrease. This decrease was caused by the following factors:

Underlying volume	(27	)%
Price/Mix	4
	(23	)%

     Most of our underlying volume decrease in this segment occurred in the transportation, recreation and leisure and building and construction markets. Volume sold to the transportation market decreased 44% reflecting lower sales to the automotive market. The segment’s volume to the recreation and leisure market was lower by 58%, reflecting lower sales of recreational vehicles, spas, pools and marine products. We experienced a 37% decline in volume to the building and construction market from decreases in sales of residential construction-related products. The price/mix benefit was mostly from selling price increases.

     This segment’s operating earnings were break-even in the first three months of 2009 compared to a $1.8 million loss in the same period of the prior year. The $1.8 million improvement was primarily attributable to lower costs from our manufacturing cost optimization initiative and higher margins from our margin enhancement initiative, partially offset by the impact from the significant decline in sales volume.

Packaging Technologies

     Net sales were $55.0 million in the three month period ended January 31, 2009 compared to $65.7 million in the same period of the prior year representing a 16% decrease. This decrease was caused by the following factors:

Underlying volume	(21	)%
Price/Mix	5
	(16	)%

     The decrease in underlying volume reflected a 7% decline to packaging-related markets, which represents approximately 84% of this segment’s total sales volume in the first quarter of 2009, and a 14% decrease in underlying volume is attributable to the portion of this segment which sells to non-packaging related markets. The price/mix benefit was mostly from selling price increases.

     This segment’s operating earnings were $6.2 million in the first three months of 2009 compared to $4.8 million in the same period of the prior year. The increase in operating earnings was due to the positive benefits of our margin enhancement initiative, partially offset by lower sales volumes.

Color and Specialty Compounds Segment

     Net sales were $68.4 million in the three month period ended January 31, 2009 compared to $104.8 million in the same period of the prior year, representing a 35% decrease. This decrease was caused by the following factors:

Underlying volume	(40	)%
Price/Mix	5
	(35	)%

     The decrease in underlying volume is due to lower sales of compounds across all of our end markets including a 56% and 24% decline in sales to the transportation and construction markets, respectively, which represented approximately half of this segment’s sales in 2008. The price/mix impact for both period comparisons reflects improved mix due to the reduction in sales of less profitable business and higher selling prices.

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     This segment’s operating loss was $0.4 million in the first three months of 2009 compared to $2.2 million of operating earnings in the same period of the prior year. This decrease was primarily caused by a decrease in sales volume, partially offset by lower costs from our manufacturing cost optimization initiative and higher margins from our margin enhancement initiative including the favorable impact from a reduced mix of lower margin products serving the automobile market.

Engineered Products Group

     Net sales were $12.1 million in the three-month period ended January 31, 2009, compared to $17.2 million in the same period of the prior year, representing a 29% decrease. This decrease was caused by the following factors:

Underlying volume	(36	)%
Price/Mix	7
	(29	)%

     The decrease in underlying volume was largely caused by lower sales volume of lawn mower wheels and sales to the marine market due to decreases in discretionary spending in the economy. The price/mix impact reflects a larger mix of higher margin profile sales and higher selling prices.

     This group’s operating earnings were $1.1 million in the first three months of 2009 compared to $1.6 million in the same period of the prior year. The decrease in operating earnings was largely caused by the decline in sales volume of wheels to the lawn and garden market and reduced sales to the marine market, partially offset by the improved margin generated by our Wheels business.

Corporate

     Corporate expenses are reported as selling, general and administrative expenses in the consolidated condensed statement of operations and include corporate office expenses, information technology costs, professional fees and the impact of foreign currency exchange. Corporate expenses were $9.5 million in first three months of 2009 compared to $8.4 million in the same period of the prior year. Corporate expenses increased in the first three months of 2009 due to the timing of the hiring of senior executives in 2008, higher professional fees to support our initiatives and a net loss on foreign exchange compared to a prior year net gain, partially offset by lower information technology related costs associated with our company-wide Oracle /Business Process Improvement information system implementation.

Liquidity and Capital Resources

Cash Flow

     Our primary sources of liquidity have been cash flows from operating activities and borrowings from third parties. Historically, our principal uses of cash have been to support our operating activities, invest in capital improvements, reduce outstanding indebtedness, finance strategic business and outsourcing acquisitions, acquire treasury shares and pay dividends on our common stock. The following summarizes the major categories of our changes in cash and cash equivalents for the three months ended January 31, 2009 and February 2, 2008:

	Three Months Ended
	January 31,			February 2,
	2009			2008
Cash Flows (in millions)
Net cash (used for) provided by operating activities	$	(2.0	)	$	6.5
Net cash used for investing activities		(3.0	)		(5.9	)
Net cash provided by financing activities		5.0			1.6
Effect of exchange rate changes		0.0			0.1
Increase in cash and cash equivalents	$	0.0		$	2.3

     Net cash used for operating activities was $2.0 million in the first three months of 2009, compared to net cash provided by operating activities of $6.5 million in the same period of the prior year. The decrease is largely attributable to the decline in operating results and a larger increase in the seasonal build of working capital in the current period.

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     Capital expenditures were our only investing activity in 2009. They were primarily incurred to maintain our facilities and amounted to $3.0 million, compared to $5.2 million in same period of 2008. The $2.2 million decrease was largely attributable to decreases in capital spending for our information systems implementation and the completion of the expansion of our Mexico operation in 2008.

     Net cash provided by financing activities was $5.0 million in the first three months of 2009, compared to $1.6 million for the same period of 2008. The cash provided by financing activities in the current period reflects $6.5 million of borrowings, partially offset by $1.5 million to pay dividends. The cash provided by financing activities in the same period of the prior year reflects $12.6 million of borrowings and $2.8 million received from director purchases of common stock, partially offset by $9.7 million of treasury share purchases and $4.1 million to pay dividends.

Financing Arrangements

     As of January 31, 2009, we had $281.4 million of outstanding debt with a weighted average interest rate of 5.7%, of which 73% represented fixed rate instruments with a weighted average interest rate of 6.6%. In addition, as of January 31, 2009, we used $8.5 million of cash held in Canada to pay down debt. Under Internal Revenue Service regulations, we can use this cash to fund U.S. operations or pay down U.S. debt for 60 consecutive days or 180 total days during our fiscal year without incurring income tax. If we were to permanently transfer this cash to the U.S., we may be required to pay additional income tax.

     In 2008, we amended our revolving credit agreement, the 2006 Senior Notes, the 2004 Senior Notes and the Euro bank term loan. On an annual basis, we are required to offer an early principal payment based on a ratable percentage of our excess cash flow (as defined in these agreements) to the 2006 senior noteholders, the 2004 senior noteholders and the Euro bank term loan noteholders. Based on our results in the fourth quarter of 2008, we made $18.9 million of payments in the second quarter of 2009 and this amount is classified as current maturities of long-term debt at January 31, 2009.

     We are not required to make any other principal payments on our bank credit facility, the 2006 Senior Notes, the 2004 Senior Notes, or the Euro bank term loan within the next year except the annual excess cash flow payments discussed above. Borrowings under these facilities are classified as long term because we have the ability and intent to keep the balances outstanding over the next 12 months.

     Under the amendments, each facility is secured with collateral, which includes our accounts receivable, inventory, machinery and equipment, and intangible assets. Capacity under the revolving credit agreement is $145 million as of January 31, 2009. After we made the excess cash flow payment in the second quarter of 2009, capacity on our revolving credit facility was permanently reduced by $9.9 million.

     As of January 31, 2009, we had $28.7 million of borrowing availability under our most restrictive financial covenant, which was not be impacted by the 2009 excess cash flow payment mentioned above. Under the amendments, our maximum leverage ratio covenant decreased from 4.25 to 4.00 as of January 31, 2009.

     Our net working capital is generally at its highest level in the first quarter of the fiscal year and trends down to its lowest level near the end of the fiscal year due to seasonality in the business. As expected, our borrowing availability decreased in the first quarter of 2009 from our prior year end due to our seasonal net working capital build and the decline in the maximum leverage ratio.

     While we were in compliance with our covenants during the first quarter of 2009 and currently expect to be in compliance with our covenants in the next twelve months, our failure to comply with our covenants or other requirements of our financing arrangements is an event of default and could, among other things, accelerate the payment of indebtedness, which could adversely impact our business, financial condition and results of operations.

     We anticipate that cash flows from operations, together with the financing and borrowings under our bank credit facilities, will provide the resources necessary for reinvestment in our existing business and managing our capital structure on a short and long-term basis.

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Cautionary Statements Concerning Forward-Looking Statements

     Statements in this Form 10-Q that are not purely historical, including statements which express the Company’s belief, anticipation or expectation about future events, are forward-looking statements. “Forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relate to future events and expectations and include statements containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors which have impacted and could impact our operations and results include, but are not limited to:

(a)	further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products of the types we produce;
(b)	our ability to compete effectively on product performance, quality, price, availability, product development, and customer service;
(c)	material 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;
(d)	further adverse changes in the domestic automotive markets, including potential bankruptcies of one or more of the major domestic automobile manufacturers or suppliers.
(e)	our inability to achieve the level of cost savings, productivity improvements, gross margin enhancements, growth or other benefits anticipated from our planned improvement initiatives;
(f)	our inability to achieve the level of productivity improvements, synergies, growth or other benefits anticipated from acquired businesses and their integration;
(g)	volatility of prices and availability of supply of energy and of the raw materials that are critical to the manufacture of our products, particularly plastic resins derived from oil and natural gas, including future effects of natural disasters;
(h)	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;
(i)	restrictions imposed on us by instruments governing our indebtedness, the possible inability to comply with requirements of those instruments, and inability to access capital markets;
(j)	possible asset impairment charges;
(k)	our inability to predict accurately the costs to be incurred, time taken to complete, operating disruptions therefrom, or savings to be achieved in connection with production plant restructurings;
(l)	adverse findings in significant legal or environmental proceedings or our inability to comply with applicable environmental laws and regulations;
(m)	adverse developments with work stoppages or labor disruptions, particularly in the automotive industry;
(n)	our inability to develop and launch new products successfully;
(o)	possible weaknesses in internal controls; and
(p)	our ability to successfully complete the implementation of a new enterprise resource planning computer system and to obtain expected benefits from our system.

     We assume no duty to update our forward-looking statements, except as required by law.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for disclosures about market risk. In addition, refer to Part I — Item 1A “Risk Factors” of our 2008 Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on January 14, 2009, for additional disclosures about market risk.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Spartech maintains a system of disclosure controls and procedures which are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Company’s certifying officers, as appropriate to allow timely decisions regarding required disclosure. Based on an evaluation performed, the Company’s certifying officers have concluded that the disclosure controls and procedures were effective as of January 31, 2009, to provide reasonable assurance of the achievement of these objectives.

     Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company’s reports.

Changes in Internal Control Over Financial Reporting

     The Company is in the process of implementing an Oracle/Business Process Improvement enterprise resource planning (“ERP”) system. Implementation began in 2006 and is scheduled to be substantially complete in 2009. As the Company continues to implement the new ERP system, it expects that there will be future improvements in internal control over financial reporting as a result of this implementation. As of January 31, 2009, 27 manufacturing facilities had implemented the new ERP system, which resulted in certain changes and enhancements to the Company’s internal controls. This ERP system, along with the internal control over financial reporting impacted by the implementation, were appropriately tested for design effectiveness. While some processes and controls will continue to evolve as the implementation progresses, existing controls and the controls affected by the implementation of the new system were evaluated as appropriate and effective. There were no other changes to internal control over financial reporting during the quarter ended January 31, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

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PART II — OTHER INFORMATION

Item 5. OTHER INFORMATION

     There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors implemented since the filing of the Company’s Annual Report on Form 10-K for the year ended November 1, 2008.

Item 6. EXHIBITS

Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-K)

31.1	Section 302 Certification of CEO
31.2	Section 302 Certification of CFO
32.1	Section 1350 Certification of CEO
32.2	Section 1350 Certification of CFO

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: March 3, 2009	/s/ Myles S. Odaniell Myles S. Odaniell
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Randy C. Martin
	Randy C. Martin
	Executive Vice President Corporate
	Development and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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