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Spartech Corp. Reports Operating Results (10-Q)

September 08, 2010 | About:
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10qk

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Spartech Corp. (SEH) filed Quarterly Report for the period ended 2010-07-31.

Spartech Corp. has a market cap of $281 million; its shares were traded at around $9.09 with a P/E ratio of 14.7 and P/S ratio of 0.3. SEH is in the portfolios of Chuck Royce of Royce& Associates, Paul Tudor Jones of The Tudor Group, Charles Brandes of Brandes Investment, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Selling, general and administrative expenses were $26.7 million and $65.6 million in the third quarter and first nine months of 2010 compared to $18.9 million and $58.8 million in the same periods of the prior year. Bad debt expense of $7.9 million for the quarter was $7.6 million higher than the same period in the prior year as we provided a reserve for two large customers. Year-to-date bad debt expense was $4.4 million higher than the same period in the prior year due to the aforementioned specific reserves. Employee compensation costs of $7.9 million and $23.1 million for the quarter and nine months ended July 31, 2010 were $1.0 million and $0.9 million higher than the same periods in the prior year. For the third quarter and first nine months of 2010, the increase is due to the Companys implementation of mandatory wage reductions during 2009, which were reinstated at the beginning of fiscal 2010. Selling, general and administrative expenses include foreign currency gains of $0.1 million and foreign currency losses of $2.4 million in the third quarter and first nine months of 2010, and foreign currency losses of $1.3 million

Amortization of intangibles was $1.0 million and $2.9 million in the third quarter and first nine months of 2010 compared to $1.1 and $3.4 million in the same periods of the prior year. The decreases in both period comparisons reflect intangibles which became fully amortized in 2009.

Restructuring and exit costs were $2.9 million and $5.2 million in the third quarter and first nine months of 2010 compared to $0.9 million and $5.3 million in the same periods of the prior year. For both period comparisons, restructuring and exit costs are comprised of employee severance, facility consolidation and shut-down costs and accelerated depreciation. We expect to incur approximately $1.5 million of additional restructuring expenses for initiatives announced through July 31, 2010, which will include employee severance and facility consolidation and shut-down costs. The Companys announced facility consolidations and shut-downs are expected to be substantially complete by the end fiscal 2010.

Interest expense, net of interest income, was $2.8 million and $9.6 million in the third quarter and first nine months of 2010 compared to $3.6 million and $11.7 million in the same periods of the prior year. These decreases were primarily driven by the $73.7 million reduction in debt during the last 12 months.

Corporate expenses include selling, general and administrative expenses, corporate office expenses, shared services costs, information technology costs, professional fees and the impact of foreign currency exchange. Corporate operating expenses were $8.2 million and $26.3 million in the third quarter and first nine months of 2010, respectively, compared to $9.7 million and $27.6 million in the same periods of the prior year. The decrease in expense during the third quarter was mostly caused by a decrease in foreign currency expense of $1.4 million compared to the same period in the prior year. For the nine months ended July 31, 2010, the decrease in expense was mostly caused by a decrease in selling, general and administrative expense of $2.3 million, partially offset by an increase in foreign currency expense of $0.7 million compared to the same period in the prior year.

At July 31, 2010, the Company had $98.0 million of total capacity and $39.1 million of outstanding loans under the credit facility at a weighted average interest rate of 3.41%. In addition to the outstanding loans, the credit facility borrowing capacity was partially reduced by several standby letters of credit totaling $12.9 million. Under the Companys most restrictive covenant, the Leverage Ratio, the Company had $77.1 million of availability on its credit facility as of July 31, 2010. The Companys credit facility borrowings are classified as long-term because the Company has the ability and intent to keep the balances outstanding over the next 12 months.

Read the The complete Report

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