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Spartech Corp. Reports Operating Results (10-Q)

March 05, 2009 | About:

Spartech Corp. (SEH) filed Quarterly Report for the period ended 2009-01-31.

SPARTECH CORP. is in the plastics processing business with its two lines of business being: Extruded Sheet & Rollstock - which sells its products to various manufacturers who use plastic components in their industrial products. Merchant Compounding - which sells specialty alloys compounds and color concentrates principally to manufacturers of specialized footwear shutters loose-leaf binders cosmetic packaging products and numerous other custom plastic applications. Spartech Corp. has a market cap of $109.51 million; its shares were traded at around $2.2 with a P/E ratio of 14.4 and P/S ratio of 0.08. The dividend yield of Spartech Corp. stocks is 5.63%. Spartech Corp. had an annual average earning growth of 0.3% over the past 10 years.

Highlight of Business Operations:

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.

This segments 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.

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.

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.

Read the The complete ReportSEH is in the portfolios of Arnold Schneider of Schneider Capital Management, Charles Brandes of Brandes Investment.

Rating: 4.0/5 (1 vote)

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