##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended October 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(State or other jurisdiction 
of incorporation or organization)
    
    (SPARTECH LOGO)
    
    43-0761773(I.R.S. Employer
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)
  Common Stock, $.75 par value 
Series Z Preferred Stock, $1.00 par value
    
    New York Stock ExchangeTitle of each class
    
    Name of each exchange on which registered
  o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer oAccelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



SPARTECH CORPORATION
FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2009
TABLE OF CONTENTS
 Cautionary Statements Concerning Forward-Looking Statements
    
    1PART IItem 1.
    
    Business
    
    2Item 1A.
    
    Risk Factors
    
    5Item 1B.
    
    Unresolved Staff Comments
    
    6Item 2.
    
    Properties
    
    6Item 3.
    
    Legal Proceedings
    
    7Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    7PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    8Item 6.
    
    Selected Financial Data
    
    8Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    10Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    20Item 8.
    
    Financial Statements and Supplementary Data
    
    21Managements Responsibilities for Financial Statements and Managements
Report on Internal Control over Financial Reporting
    
    21Report of Independent Registered Public Accounting Firm on Consolidated
Financial Statements
    
    22Report of Independent Registered Public Accounting Firm on Internal
Control Over Financial Reporting
    
    23Consolidated Balance Sheets
    
    24Consolidated Statements of Operations
    
    25Consolidated Statements of Shareholders Equity
    
    26Consolidated Statements of Cash Flows
    
    27Notes to Consolidated Financial Statements
    
    28Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    48Item 9A.
    
    Controls and Procedures
    
    48Item 9B.
    
    Other Information
    
    48PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    49Item 11.
    
    Executive Compensation
    
    51Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    51Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    51Item 14.
    
    Principal Accounting Fees and Services
    
    51PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    52SIGNATURES
    
    56FINANCIAL STATEMENT SCHEDULESchedule II  Valuation and Qualifying Accounts
    
    F-1EX-10.34EX-21EX-23EX-24.1EX-24.2EX-24.3EX-24.4EX-24.5EX-24.6EX-24.7EX-24.8EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
  (a)
    
    further adverse changes in economic or industry conditions, including global supply and
demand conditions and prices for products of the types the Company produces;(b)
    
    the Companys ability to compete effectively on product performance, quality, price,
availability, product development, and customer service;(c)
    
    adverse changes in the markets the Company serves, including the packaging,
transportation, building and construction, recreation and leisure, and other markets, some
of which tend to be cyclical;(d)
    
    adverse changes in the domestic automotive markets, including the bankruptcy filings by
the automobile original equipment manufacturers which could have a cascading effect on the
Companys customers and adversely impact the Companys business;(e)
    
    the Companys inability to achieve the level of cost savings, productivity
improvements, gross margin enhancements, growth or other benefits anticipated from the
Companys planned improvement initiatives;(f)
    
    volatility of prices and availability of supply of energy and of the raw materials that
are critical to the manufacture of the Companys products, particularly plastic resins
derived from oil and natural gas, including future effects of natural disasters;(g)
    
    the Companys inability to manage or pass through to customers an adequate level of
increases in the costs of materials, freight, utilities, or other conversion costs;(h)
    
    restrictions imposed on the Company by instruments governing its indebtedness, the
possible inability to comply with requirements of those instruments, and inability to
access capital markets;(i)
    
    possible asset impairment charges;(j)
    
    the Companys inability to predict accurately the costs to be incurred, time taken to
complete, operating disruptions therefrom, or savings to be achieved in connection with
announced production plant restructurings;(k)
    
    adverse findings in significant legal or environmental proceedings or the Companys
inability to comply with applicable environmental laws and regulations;(l)
    
    the Companys inability to develop and launch new products successfully; and(m)
    
    possible weaknesses in internal controls.
  1




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##### Table of Contents



PART I
 
 Item 1. BUSINESS
 General
    Custom Sheet and Rollstock
  Packaging Technologies
  Color and Specialty Compounds
  Raw Materials
  2




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Production
  Intellectual Property and Trademarks
  Customer Base
  2009
    
    2008Packaging
    
    
    34
    %
    
    
    28
    %Building and construction
    
    
    18
    
    
    
    18Transportation
    
    
    16
    
    
    
    20Recreation and leisure
    
    
    8
    
    
    
    10Sign and advertising
    
    
    8
    
    
    
    8Appliance and electronics
    
    
    7
    
    
    
    7Lawn and garden
    
    
    2
    
    
    
    3Other
    
    
    7
    
    
    
    6100
    %
    
    
    100
    %
 Distribution
  Backlog
  2009
    
    
    2008Custom Sheet and Rollstock
    
    $
    51.9
    
    
    $
    45.1Packaging Technologies
    
    
    18.9
    
    
    
    26.9Color and Specialty Compounds
    
    
    17.8
    
    
    
    28.2$
    88.6
    
    
    $
    100.2
 Competition
  3




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Seasonality
  Environment
  Employees
  Geographic Areas
  Available Information
 www.spartech.com
  4




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##### Table of Contents



Item 1A. RISK FACTORS
  Recessions, adverse market conditions or downturns in the end markets served by the Company may
negatively impact the Companys sales, profitability, operating results and cash flows.
  Price increases in raw materials and energy costs could adversely affect the Companys
operating results and financial condition.
  The Companys credit facility, senior notes and term loan agreements contain a number of
restrictive covenants; breaches of these covenants are events of default and cause the acceleration
of debt beyond the Companys ability to fund such debt.
  Access to funding through capital markets is essential to execution of the Companys future
business plans. If the Company is unable to maintain such access, it could have a material adverse
effect on its business and financial results.
  The Company operates in a highly competitive marketplace, which could adversely affect its sales
and financial condition.
  A limited number of customers account for a significant percentage of the Companys revenues and
the loss of several significant customers could adversely impact the Companys sales, operating
results and cash flows.
  5




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A major failure to the Companys information systems could harm its business.
  The Companys foreign operations subject it to economic risk because results of operations are
affected by foreign currency fluctuations, changes in local government regulations and other
political, economic and social conditions.
  The Company is part of an environmental investigation initiated by the New Jersey Department of
Environmental Protection (NJDEP) and the United States Environmental Protection Agency (USEPA)
as well as associated litigation initiated by the NJDEP, and if the Companys liability is
materially different from the amount accrued, it could impact the Companys results of operations.
  
 Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
   6




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Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  7




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PART II
 Item 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Common Stock Data (per share)
    
    1stQtr.
    
    2ndQtr.
    
    3rdQtr.
    
    4thQtr.2009High
    
    $
    7.37
    
    
    $
    4.35
    
    
    $
    12.93
    
    
    $
    14.17Low
    
    
    3.16
    
    
    
    1.29
    
    
    
    3.91
    
    
    
    9.22Dividends declared
    
    $
    .05
    
    
    $
    
    
    
    $
    
    
    
    $
    2008High
    
    $
    16.35
    
    
    $
    16.43
    
    
    $
    11.89
    
    
    $
    14.51Low
    
    
    9.90
    
    
    
    7.51
    
    
    
    8.27
    
    
    
    4.34Dividends declared
    
    $
    .135
    
    
    $
    .135
    
    
    $
    .05
    
    
    $
    .05
  
 Item 6. SELECTED FINANCIAL DATA
  Year Ended2009
    
    2008
    
    2007 (a)
    
    2006
    
    2005(in thousands, except per share, per pound, and employee data)Statement of Operations Data:Net Sales:In Dollars
    
    $
    926,777
    
    
    $
    1,321,169
    
    
    $
    1,363,931
    
    
    $
    1,395,190
    
    
    $
    1,307,572In Volume (pounds) (b)
    
    
    860,437
    
    
    
    1,166,282
    
    
    
    1,346,916
    
    
    
    1,373,368
    
    
    
    1,380,474Gross Margin (c)
    
    $
    116,308
    
    
    $
    116,237
    
    
    $
    150,117
    
    
    $
    165,114
    
    
    $
    148,399Depreciation and Amortization
    
    
    41,302
    
    
    
    43,279
    
    
    
    39,050
    
    
    
    36,830
    
    
    
    35,621Operating Earnings (Loss) (d)
    
    
    26,135
    
    
    
    (206,234
    )
    
    
    63,750
    
    
    
    87,911
    
    
    
    62,893Interest Expense
    
    
    15,379
    
    
    
    19,403
    
    
    
    16,393
    
    
    
    19,339
    
    
    
    23,162Net Earnings (Loss) from continuing operations (d) (e)
    
    
    3,305
    
    
    
    (171,649
    )
    
    
    28,765
    
    
    
    37,238
    
    
    
    24,310Net Earnings (Loss) from
discontinued operations
    
    
    5,046
    
    
    
    (20,463
    )
    
    
    5,081
    
    
    
    1,560
    
    
    
    (6,047
    )Net Earnings (Loss) (f)
    
    
    8,351
    
    
    
    (192,112
    )
    
    
    33,846
    
    
    
    38,798
    
    
    
    18,263
 8




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##### Table of Contents



Year Ended2009
    
    2008
    
    2007 (a)
    
    2006
    
    2005Per Share Information:Earnings (Loss) per Share-Diluted
from continuing operations
    
    $
    .11
    
    
    $
    (5.67
    )
    
    $
    .89
    
    
    $
    1.15
    
    
    $
    .75Earnings (Loss) per Share-Diluted
from discontinued operations
    
    
    .16
    
    
    
    (0.68
    )
    
    
    .16
    
    
    
    .05
    
    
    
    (.18
    )Earnings (Loss) per Share-Diluted
    
    
    .27
    
    
    
    (6.35
    )
    
    
    1.05
    
    
    
    1.20
    
    
    
    .57Dividends Declared per Share
    
    
    .05
    
    
    
    .37
    
    
    
    .54
    
    
    
    .50
    
    
    
    .48Book Value per Share (b)
    
    
    7.71
    
    
    
    7.42
    
    
    
    14.37
    
    
    
    13.78
    
    
    
    12.93Balance Sheet Data:Working Capital (g)
    
    $
    86,513
    
    
    $
    99,224
    
    
    $
    131,835
    
    
    $
    136,544
    
    
    $
    171,459Working Capital as a percentage
of Net Sales (b)
    
    
    9.3
    %
    
    
    7.5
    %
    
    
    9.7
    %
    
    
    9.8
    %
    
    
    13.1
    %Total Debt
    
    $
    216,434
    
    
    $
    274,654
    
    
    $
    334,283
    
    
    $
    289,223
    
    
    $
    379,955Total Assets
    
    
    653,688
    
    
    
    762,419
    
    
    
    1,110,871
    
    
    
    1,041,794
    
    
    
    1,071,826Shareholders Equity
    
    
    236,879
    
    
    
    226,790
    
    
    
    439,280
    
    
    
    442,693
    
    
    
    413,760Ratios/Other Data:Cash Flow from Operations
    
    $
    65,265
    
    
    $
    96,612
    
    
    $
    104,011
    
    
    $
    127,543
    
    
    $
    105,018Capital Expenditures
    
    
    8,098
    
    
    
    17,276
    
    
    
    34,743
    
    
    
    23,966
    
    
    
    39,265Operating Earnings (Loss)
per pound sold (b)
    
    
    3.0 ¢
    
    
    
    (17.7) ¢
    
    
    
    4.7 ¢
    
    
    
    6.4 ¢
    
    
    
    4.6 ¢Total Debt to
Total Debt and Equity (b)
    
    
    47.7
    %
    
    
    54.8
    %
    
    
    43.2
    %
    
    
    39.5
    %
    
    
    47.9
    %Number of Employees (b)
    
    
    2,350
    
    
    
    3,150
    
    
    
    3,600
    
    
    
    3,425
    
    
    
    3,500Common Shares:Outstanding at Year-End
    
    
    30,719
    
    
    
    30,564
    
    
    
    30,565
    
    
    
    32,124
    
    
    
    31,988Weighted Average-Diluted
    
    
    30,470
    
    
    
    30,264
    
    
    
    32,180
    
    
    
    32,297
    
    
    
    32,311
 Notes to table:
 (a)
    
    The Companys fiscal year ends on the Saturday closest to October 31. Because of this
convention, every fifth or sixth fiscal year has an additional week, and 2007 was reported as
a 53-week year. On September 14, 2007, the Company acquired Creative Forming, Inc.,
(Creative) based in Ripon, Wisconsin. See Note 3 to the consolidated financial statements
for further details on this acquisition.(b)
    
    Amounts are unaudited.(c)
    
    Calculated as net sales less cost of sales. Gross margin excludes the impact of amortization
expense.(d)
    
    2009 operating earnings were impacted by fixed asset impairments of $2.6 million ($2.4
million net of tax) and restructuring and exit costs of $5.2 million ($3.2 million net of
tax). 2008 operating loss and net loss were impacted by charges of $229.2 million ($176.5
million net of tax) relating to goodwill impairments of $218.0 million ($168.8 million net of
tax), fixed asset and other intangible asset impairments of $9.0 million ($6.2 million net of
tax), and restructuring and exit costs of $2.2 million ($1.5 million net of tax). 2007
operating earnings and net earnings were impacted by charges of $4.7 million ($2.9 million net
of tax) relating to a separation agreement with the Companys former Chief Executive Officer
of $1.9 million ($1.1 million net of tax), an intangible asset impairment of $1.6 million
($1.0 million net of tax) and restructuring and exit costs of $1.3 million ($0.8 million net
of tax). 2006 operating earnings and net earnings were reduced by restructuring and exit
costs of $1.9 million ($1.2 million net of tax) and goodwill impairment of $3.2 million ($3.2
million net of tax). 2005 operating earnings and net earnings were reduced by charges of
$15.0 million ($10.1 million net of tax) related to restructuring and exit costs of $8.2
million ($5.0 million net of tax), a retirement settlement with the Companys former Chief
Executive Officer of $3.6 million ($2.3 million net of tax), fixed asset charges of $1.2
million ($0.8 million net of tax) and goodwill impairment of $2.0 million ($2.0 million net of
tax).(e)
    
    2006 net earnings were reduced by a $5.5 million ($3.4 million net of tax) charge related to
the early extinguishment of the Companys convertible subordinated debentures.(f)
    
    2009 net earnings includes a gain of $6.2 million relating to the sale of the wheels and
profiles businesses.(g)
    
    Calculated as total current assets excluding cash and cash equivalents less total current
liabilities excluding current maturities of long-term debt.
 9




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Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
contains forward-looking statements. You should read the following discussion of our financial
condition and results of operations with Selected Financial Data and our consolidated financial
statements and related notes thereto. We have based our forward-looking statements about our
markets and demand for our products and future results on assumptions that we consider reasonable.
Actual results may differ materially from those suggested by our forward-looking statements for
various reasons including those discussed in Cautionary Statements Concerning Forward-Looking
Statements and Item 1A.
 Business Overview
  % of2009 SalesCustom Sheet and Rollstock
    
    
    51
    %Packaging Technologies
    
    
    23Color and Specialty Compounds
    
    
    26
   Executive Summary
  Outlook
  10




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Results of Operations
 Comparison of 2009 and 2008
 Consolidated Summary
  Underlying volume
    
    
    (26
    )%Price/mix
    
    
    (4
    )(30
    )%
   2009
    
    
    2008Dollars and Pounds (in millions)Net sales
    
    $
    926.8
    
    
    $
    1,321.2Cost of sales
    
    
    810.5
    
    
    
    1,205.0Gross margin
    
    $
    116.3
    
    
    $
    116.2Pounds sold
    
    
    860
    
    
    
    1,166Dollars per Pound SoldNet sales
    
    $
    1.077
    
    
    $
    1.133Cost of sales
    
    
    0.942
    
    
    
    1.033Gross margin
    
    $
    0.135
    
    
    $
    0.100
      11




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Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (17
    )%Price/mix
    
    
    (9
    )(26
    )%
   Packaging Technologies Segment
  Underlying volume
    
    
    (16
    )%Price/mix
    
    
    (6
    )(22
    )%
  12




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Color and Specialty Compounds Segment
  Underlying volume
    
    
    (38
    )%Price/mix
    
    
    (3
    )(41
    )%
   Corporate
  Comparison of 2008 and 2007
 Consolidated Summary
  Underlying volume
    
    
    (13
    )%Prior year additional week
    
    
    (2
    )Creative acquisition
    
    
    4Price/mix
    
    
    8(3
    )%
   13




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2008
    
    
    2007Dollars and Pounds (in millions)Net sales
    
    $
    1,321.2
    
    
    $
    1,363.9Cost of sales
    
    
    1,205.0
    
    
    
    1,213.8Gross margin
    
    $
    116.2
    
    
    $
    150.1Pounds sold
    
    
    1,166
    
    
    
    1,347Dollars per Pound SoldNet sales
    
    $
    1.133
    
    
    $
    1.013Cost of sales
    
    
    1.033
    
    
    
    0.902Gross margin
    
    $
    0.100
    
    
    $
    0.111
        14




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Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (11
    )%Prior year additional week
    
    
    (2
    )Price/mix
    
    
    8(5
    )%
   Packaging Technologies Segment
  Underlying volume
    
    
    (8
    )%Prior year additional week
    
    
    (2
    )Creative acquisition
    
    
    13Price/mix
    
    
    58
    %
   15




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Color and Specialty Compounds Segment
  Underlying volume
    
    
    (16
    )%Prior year additional week
    
    
    (2
    )Price/mix
    
    
    11(7
    )%
   Corporate
  Liquidity and Capital Resources
 Cash Flow
  2009
    
    
    2008
    
    
    2007Cash Flows (in millions)Net cash provided by operating activities
    
    $
    65.3
    
    
    $
    96.6
    
    
    $
    104.0Net cash provided by (used for) investing activities
    
    
    24.5
    
    
    
    (17.5
    )
    
    
    (96.0
    )Net cash used for financing activities
    
    
    (65.0
    )
    
    
    (80.4
    )
    
    
    (10.0
    )Increase (decrease) in cash and cash equivalents
    
    $
    24.8
    
    
    $
    (1.3
    )
    
    $
    (2.0
    )
    16




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Financing Arrangements
       Contractual Obligations
  (in millions)
    
    
    
    
    
    Less Than
    
    
    Years
    
    
    Years
    
    
    Greater thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    2 and 3
    
    
    4 and 5
    
    
    5 YearsLong-term debt
    
    $
    270.2
    
    
    $
    48.6
    
    
    $
    88.6
    
    
    $
    64.7
    
    
    $
    68.3Capital lease obligations
    
    
    5.5
    
    
    
    0.7
    
    
    
    1.4
    
    
    
    1.3
    
    
    
    2.1Operating lease obligations
    
    
    9.3
    
    
    
    3.8
    
    
    
    3.6
    
    
    
    1.3
    
    
    
    0.6Purchase obligations
    
    
    59.2
    
    
    
    58.6
    
    
    
    0.6
    
    
    
    
    
    
    
    Other obligations
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    344.5
    
    
    $
    112.0
    
    
    $
    94.2
    
    
    $
    67.3
    
    
    $
    71.0
  17




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Critical Accounting Policies and Estimates
  Revenue Recognition
 Allowance for Doubtful Trade Receivables
 Inventory Valuation and Obsolescence
 Goodwill
 18




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Long-Lived Assets
 Income Taxes
   Contingencies
  19




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Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    20




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Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Managements Responsibility for Financial Statements
     Managements Report on Internal Control over Financial Reporting
   21




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Report of Independent Registered Public Accounting Firm
      
 22




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Report of Independent Registered Public Accounting Firm
        
 23




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SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 October 31,
    
    
    November 1,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    26,925
    
    
    $
    2,118Trade receivables, net of allowance of $2,470 and $4,550, respectively
    
    
    130,355
    
    
    
    176,108Inventories
    
    
    62,941
    
    
    
    96,721Prepaids and other current assets
    
    
    24,916
    
    
    
    22,970Assets held for sale
    
    
    2,907
    
    
    
    1,695Total Current Assets
    
    
    248,044
    
    
    
    299,612Property, plant and equipment, net
    
    
    229,003
    
    
    
    280,202Goodwill
    
    
    144,345
    
    
    
    145,498Other intangible assets, net
    
    
    28,404
    
    
    
    32,722Other long-term assets
    
    
    3,892
    
    
    
    4,385Total Assets
    
    $
    653,688
    
    
    $
    762,419LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    36,079
    
    
    $
    20,428Accounts payable
    
    
    103,484
    
    
    
    155,594Accrued liabilities
    
    
    31,122
    
    
    
    42,676Total Current Liabilities
    
    
    170,685
    
    
    
    218,698Long-Term Debt:Long-term debt, less current maturities
    
    
    180,355
    
    
    
    254,226Other Long-Term Liabilities:Deferred taxes
    
    
    58,736
    
    
    
    56,516Other long-term liabilities
    
    
    7,033
    
    
    
    6,189Total Liabilities
    
    
    416,809
    
    
    
    535,629Shareholders 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: 30,719,277 and 30,563,605 shares, respectively
    
    
    24,849
    
    
    
    24,849Contributed capital
    
    
    204,183
    
    
    
    202,656Retained earnings
    
    
    60,411
    
    
    
    53,588Treasury stock, at cost, 2,412,569 and 2,568,241 shares, respectively
    
    
    (54,860
    )
    
    
    (56,389
    )Accumulated other comprehensive income
    
    
    2,296
    
    
    
    2,086Total Shareholders Equity
    
    
    236,879
    
    
    
    226,790Total Liabilities and Shareholders Equity
    
    $
    653,688
    
    
    $
    762,419
 See accompanying notes to consolidated financial statements.
 24




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
 2009
    
    
    2008
    
    
    2007Net Sales
    
    $
    926,777
    
    
    $
    1,321,169
    
    
    $
    1,363,931Costs and Expenses:Cost of sales
    
    
    810,469
    
    
    
    1,204,932
    
    
    
    1,213,814Selling, general, and administrative expenses
    
    
    77,868
    
    
    
    88,082
    
    
    
    79,092Amortization of intangibles
    
    
    4,479
    
    
    
    5,163
    
    
    
    4,463Goodwill impairments
    
    
    
    
    
    
    217,965
    
    
    
    Fixed asset and other intangible asset impairments
    
    
    2,592
    
    
    
    9,031
    
    
    
    1,550Restructuring and exit costs
    
    
    5,234
    
    
    
    2,230
    
    
    
    1,262900,642
    
    
    
    1,527,403
    
    
    
    1,300,181Operating Earnings (Loss)
    
    
    26,135
    
    
    
    (206,234
    )
    
    
    63,750Interest expense (net of interest income: 2009,
$28; 2008, $395; 2007, $501)
    
    
    15,379
    
    
    
    19,403
    
    
    
    16,393Earnings (loss) from continuing operations before
income taxes
    
    
    10,756
    
    
    
    (225,637
    )
    
    
    47,357Income tax expense (benefit)
    
    
    7,451
    
    
    
    (53,988
    )
    
    
    18,592Net earnings (loss) from continuing operations
    
    
    3,305
    
    
    
    (171,649
    )
    
    
    28,765Earnings (loss) of discontinued operations,
net of tax
    
    
    5,046
    
    
    
    (20,463
    )
    
    
    5,081Net earnings (loss)
    
    $
    8,351
    
    
    $
    (192,112
    )
    
    $
    33,846Basic earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    .11
    
    
    $
    (5.67
    )
    
    $
    .90Earnings (loss) of discontinued operations
    
    
    .16
    
    
    
    (.68
    )
    
    
    .16Net earnings (loss)
    
    $
    .27
    
    
    $
    (6.35
    )
    
    $
    1.06Diluted earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    .11
    
    
    $
    (5.67
    )
    
    $
    .89Earnings (loss) of discontinued operations
    
    
    .16
    
    
    
    (.68
    )
    
    
    .16Net earnings (loss)
    
    $
    .27
    
    
    $
    (6.35
    )
    
    $
    1.05
 See accompanying notes to consolidated financial statements.
 25




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Dollars in thousands)
 AccumulatedOtherComprehensive
    
    
    TotalCommon
    
    
    Contributed
    
    
    Retained
    
    
    Treasury
    
    
    Income
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance, October 28, 2006
    
    $
    24,849
    
    
    $
    198,661
    
    
    $
    240,398
    
    
    $
    (22,845
    )
    
    $
    1,630
    
    
    $
    442,693Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    33,846
    
    
    
    
    
    
    
    
    
    
    
    33,846Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,736
    
    
    
    7,736Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,582Stock-based compensation
    
    
    
    
    
    
    1,824
    
    
    
    
    
    
    
    10,225
    
    
    
    
    
    
    
    12,049Dividends declared
    
    
    
    
    
    
    
    
    
    
    (17,133
    )
    
    
    
    
    
    
    
    
    
    
    (17,133
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,911
    )
    
    
    
    
    
    
    (39,911
    )Balance, November 3, 2007
    
    $
    24,849
    
    
    $
    200,485
    
    
    $
    257,111
    
    
    $
    (52,531
    )
    
    $
    9,366
    
    
    $
    439,280Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (192,112
    )
    
    
    
    
    
    
    
    
    
    
    (192,112
    )Other comprehensive loss:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,280
    )
    
    
    (7,280
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199,392
    )Issuance of common stock
    
    
    
    
    
    
    (1,282
    )
    
    
    
    
    
    
    4,094
    
    
    
    
    
    
    
    2,812Stock-based compensation
    
    
    
    
    
    
    3,453
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    3,631Dividends declared
    
    
    
    
    
    
    
    
    
    
    (11,291
    )
    
    
    
    
    
    
    
    
    
    
    (11,291
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,130
    )
    
    
    
    
    
    
    (8,130
    )Adjustment to initially
apply FASB guidance for
income tax uncertainties
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    (120
    )Balance, November 1, 2008
    
    $
    24,849
    
    
    $
    202,656
    
    
    $
    53,588
    
    
    $
    (56,389
    )
    
    $
    2,086
    
    
    $
    226,790Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    8,351
    
    
    
    
    
    
    
    
    
    
    
    8,351Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    210Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,561Stock-based compensation
    
    
    
    
    
    
    1,527
    
    
    
    
    
    
    
    1,529
    
    
    
    
    
    
    
    3,056Dividends declared
    
    
    
    
    
    
    
    
    
    
    (1,528
    )
    
    
    
    
    
    
    
    
    
    
    (1,528
    )Balance, October 31, 2009
    
    $
    24,849
    
    
    $
    204,183
    
    
    $
    60,411
    
    
    $
    (54,860
    )
    
    $
    2,296
    
    
    $
    236,879
 See accompanying notes to consolidated financial statements.
 26




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 2009
    
    
    2008
    
    
    2007Cash Flows From Operating ActivitiesNet earnings (loss)
    
    $
    8,351
    
    
    $
    (192,112
    )
    
    $
    33,846Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    44,030
    
    
    
    47,201
    
    
    
    43,069Stock-based compensation expense
    
    
    3,070
    
    
    
    3,634
    
    
    
    2,884Goodwill impairment
    
    
    
    
    
    
    238,641
    
    
    
    Fixed asset and other intangible asset impairments
    
    
    2,592
    
    
    
    15,846
    
    
    
    1,550Restructuring and exit costs
    
    
    2,114
    
    
    
    659
    
    
    
    573Net gain on the disposition of assets
    
    
    (6,242
    )
    
    
    
    
    
    
    Provision for bad debt expense
    
    
    4,321
    
    
    
    4,763
    
    
    
    2,099Deferred taxes
    
    
    2,499
    
    
    
    (59,100
    )
    
    
    2,792Changes in current assets and liabilities, net of effects of
acquisitions and divestitures:Trade receivables
    
    
    36,271
    
    
    
    31,326
    
    
    
    (6,172
    )Inventories
    
    
    29,354
    
    
    
    19,026
    
    
    
    10,291Prepaid expenses and other current assets
    
    
    (4,879
    )
    
    
    1,727
    
    
    
    (664
    )Accounts payable
    
    
    (47,506
    )
    
    
    (11,691
    )
    
    
    16,761Accrued liabilities
    
    
    (9,509
    )
    
    
    (2,766
    )
    
    
    (6,078
    )Other, net
    
    
    799
    
    
    
    (542
    )
    
    
    3,060Net cash provided by operating activities
    
    
    65,265
    
    
    
    96,612
    
    
    
    104,011Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (8,098
    )
    
    
    (17,276
    )
    
    
    (34,743
    )Business acquisitions
    
    
    
    
    
    
    (792
    )
    
    
    (61,371
    )Proceeds from dispositions of assets
    
    
    32,677
    
    
    
    584
    
    
    
    94Net cash provided by (used for) investing activities
    
    
    24,579
    
    
    
    (17,484
    )
    
    
    (96,020
    )Cash Flows From Financing ActivitiesBank credit facility borrowings (payments), net
    
    
    (41,600
    )
    
    
    (49,903
    )
    
    
    36,823Payments on notes and bank term loan
    
    
    (18,936
    )
    
    
    (7,876
    )
    
    
    Borrowings (payments) on bonds and leases
    
    
    (1,183
    )
    
    
    573
    
    
    
    (580
    )Debt issuance costs
    
    
    (215
    )
    
    
    (2,424
    )
    
    
    Cash dividends on common stock
    
    
    (3,057
    )
    
    
    (13,926
    )
    
    
    (17,006
    )Issuance of common stock
    
    
    
    
    
    
    2,812
    
    
    
    Stock-based compensation exercised
    
    
    (15
    )
    
    
    16
    
    
    
    8,449Treasury stock acquired
    
    
    
    
    
    
    (9,667
    )
    
    
    (38,374
    )Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    716Net cash used by financing activities
    
    
    (65,006
    )
    
    
    (80,395
    )
    
    
    (9,972
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (31
    )
    
    
    (24
    )
    
    
    18Increase (decrease) in cash and cash equivalents
    
    
    24,807
    
    
    
    (1,291
    )
    
    
    (1,963
    )Cash and cash equivalents at beginning of year
    
    
    2,118
    
    
    
    3,409
    
    
    
    5,372Cash and cash equivalents at end of year
    
    $
    26,925
    
    
    $
    2,118
    
    
    $
    3,409
 See accompanying notes to consolidated financial statements
 27




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 1) Significant Accounting Policies
 Basis of Presentation
   Principles of Consolidation
 Segments
 Revenue Recognition Revenue Recognition
 Cash Equivalents
 Allowance for Doubtful Accounts
 Inventories
 Property, Plant and Equipment
 YearsBuildings and leasehold improvements
    
    
    20-25Machinery and equipment
    
    
    12-16Furniture and fixtures
    
    
    5-10Computer equipment and software
    
    
    3-7
 Goodwill
 28




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Other Intangible Assets
 Long-Lived Assets 
 Fair Values of Financial Instruments
 
    
    Cash, accounts receivable, accounts payable, and accrued liabilities  The carrying
value of these instruments approximates fair value due to their short-term nature;
    
    Long-term debt (including bank credit facilities)  The estimated fair value of the
long-term debt is based on estimated borrowing rates to discount the cash flows to their
present value as provided by a broker, or otherwise, quoted, current market prices for same
or similar issues. See Note 15 for further details.
 Stock-Based Compensation
 Foreign Currency Translation
 Income Taxes
 29




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Comprehensive Income
 Recently Adopted Accounting Pronouncements
   Recently Issued Accounting Standards
  2) Discontinued Operations
 Wheels Business Divestiture
 Profiles Business Divestiture
 30




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Other Closures
  2009
    
    
    2008
    
    
    2007Net sales
    
    $
    48,857
    
    
    $
    77,724
    
    
    $
    88,052Costs and expenses
    
    
    50,495
    
    
    
    100,993
    
    
    
    80,599(1,638
    )
    
    
    (23,269
    )
    
    
    7,453Gain on the sale of discontinued operations
    
    
    10,768
    
    
    
    
    
    
    
    Earnings (loss) of discontinued operations before income taxes
    
    
    9,130
    
    
    
    (23,269
    )
    
    
    7,453Provision (benefit) for income taxes
    
    
    4,084
    
    
    
    (2,806
    )
    
    
    2,372Earnings (loss) of discontinued operations, net of tax
    
    $
    5,046
    
    
    $
    (20,463
    )
    
    $
    5,081
   3) Acquisition
   4) Inventories
  2009
    
    
    2008Raw materials
    
    $
    34,288
    
    
    $
    54,052Production supplies
    
    
    7,055
    
    
    
    8,725Finished goods
    
    
    21,598
    
    
    
    33,944$
    62,941
    
    
    $
    96,721
 31




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 5) Property, Plant and Equipment
  2009
    
    
    2008Land
    
    $
    11,211
    
    
    $
    11,408Buildings and leasehold improvements
    
    
    102,155
    
    
    
    104,830Machinery and equipment
    
    
    376,360
    
    
    
    418,418Computer equipment and software
    
    
    38,456
    
    
    
    37,208Furniture and fixtures
    
    
    5,245
    
    
    
    6,214533,427
    
    
    
    578,078Accumulated depreciation
    
    
    (304,424
    )
    
    
    (297,876
    )$
    229,003
    
    
    $
    280,202
  6) Goodwill and Identifiable Intangible Assets
  Color andCustom Sheet
    
    
    Packaging
    
    
    Specialty
    
    
    Engineeredand Rollstock
    
    
    Technologies
    
    
    Compounds
    
    
    Products
    
    
    TotalBalance, November 3, 2007
    
    $
    125,320
    
    
    $
    103,628
    
    
    $
    122,927
    
    
    $
    32,113
    
    
    $
    383,988Transfer of businesses
    
    
    9,143
    
    
    
    (9,143
    )
    
    
    
    
    
    
    
    
    
    
    Creative acquisition
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151Impairment  continuing operations
    
    
    (113,440
    )
    
    
    
    
    
    
    (104,525
    )
    
    
    
    
    
    
    (217,965
    )Impairment  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,676
    )
    
    
    (20,676
    )Balance, November 1, 2008
    
    $
    21,023
    
    
    $
    94,636
    
    
    $
    18,402
    
    
    $
    11,437
    
    
    $
    145,498Transfer of businesses
    
    
    10,284
    
    
    
    
    
    
    
    
    
    
    
    (10,284
    )
    
    
    Wheels divestiture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,153
    )
    
    
    (1,153
    )Balance, October 31, 2009
    
    $
    31,307
    
    
    $
    94,636
    
    
    $
    18,402
    
    
    $
    
    
    
    $
    144,345
   32




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   Gross
    
    
    AccumulatedCarrying Amount
    
    
    Amortization2009
    
    
    2008
    
    
    2009
    
    
    2008Non-compete agreements
    
    $
    980
    
    
    $
    980
    
    
    $
    711
    
    
    $
    560Customer contracts/relationships
    
    
    21,587
    
    
    
    21,505
    
    
    
    7,942
    
    
    
    5,558Product formulations/trademarks
    
    
    23,570
    
    
    
    23,385
    
    
    
    9,080
    
    
    
    7,030$
    46,137
    
    
    $
    45,870
    
    
    $
    17,733
    
    
    $
    13,148
  IntangibleYear Ended
    
    Amortization2010
    
    $
    3,7792011
    
    
    3,2732012
    
    
    3,2732013
    
    
    3,2732014
    
    
    3,206
   7) Restructuring
  2009
    
    
    2008
    
    
    2007Restructuring and exit costs:Custom Sheet and Rollstock
    
    $
    2,711
    
    
    $
    636
    
    
    $
    1,117Packaging Technologies
    
    
    623
    
    
    
    762
    
    
    
    Color and Specialty Compounds
    
    
    1,593
    
    
    
    821
    
    
    
    145Corporate
    
    
    307
    
    
    
    11
    
    
    
    Total restructuring and exit costs
    
    
    5,234
    
    
    
    2,230
    
    
    
    1,262Income tax benefit
    
    
    (1,986
    )
    
    
    (753
    )
    
    
    (478
    )Impact on net earnings (loss) from continuing operations
    
    $
    3,248
    
    
    $
    1,477
    
    
    $
    784
 2008 Restructuring Plan
  33




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   Cumulative2009
    
    
    2008
    
    
    To-DateEmployee severance
    
    $
    3,150
    
    
    $
    827
    
    
    $
    3,977Facility consolidation and shutdown costs
    
    
    1,667
    
    
    
    258
    
    
    
    1,925Accelerated depreciation
    
    
    417
    
    
    
    667
    
    
    
    1,084Total
    
    $
    5,234
    
    
    $
    1,752
    
    
    $
    6,986
  2006 Restructuring Plan
  2008
    
    
    2007
    
    
    2006
    
    
    CumulativeAccelerated depreciation
    
    $
    
    
    
    $
    501
    
    
    $
    126
    
    
    $
    627Facility restructuring and exit costs
    
    
    478
    
    
    
    561
    
    
    
    74
    
    
    
    1,113$
    478
    
    
    $
    1,062
    
    
    $
    200
    
    
    $
    1,740
   8) Stock-Based Compensation
  34




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 General
  2009
    
    
    2008
    
    
    2007Cost of sales
    
    $
    160
    
    
    $
    253
    
    
    $
    266Selling, general and administrative
    
    
    2,878
    
    
    
    3,284
    
    
    
    2,508Total stock-based compensation expense included in operating
earnings (loss)
    
    
    3,038
    
    
    
    3,537
    
    
    
    2,774Income taxes benefit
    
    
    (1,187
    )
    
    
    (1,076
    )
    
    
    (766
    )Impact on net earnings (loss) from continuing operations
    
    $
    1,851
    
    
    $
    2,461
    
    
    $
    2,008Effect on basic and diluted earnings (loss) from continuing operations
    
    $
    .06
    
    
    $
    .08
    
    
    $
    .06
  SARs
  2009
    
    
    2008
    
    
    2007Weighted average fair value
    
    $
    1.69
    
    
    $
    4.08
    
    
    $
    9.85Assumptions used:Expected dividend yield
    
    
    2
    %
    
    
    3
    %
    
    
    2
    %Expected volatility
    
    
    55
    %
    
    
    40
    %
    
    
    40
    %Risk-free interest rates
    
    
    1.61.8
    %
    
    
    2.53.7
    %
    
    
    4.6
    %Expected lives
    
    5.5 years
    
    5.5 years
    
    5.5 years
  WeightedAverageExerciseShares
    
    
    PriceOutstanding, beginning of the year
    
    
    593
    
    
    $
    16.38Granted
    
    
    451
    
    
    
    3.88Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (88
    )
    
    
    12.99Outstanding, end of year
    
    
    956
    
    
    $
    10.80Exercisable, end of year
    
    
    170
    
    
    $
    18.31
 35




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Remaining
    
    
    
    
    
    AverageOutstanding
    
    Exercise
    
    Contractual
    
    Exercisable
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Price
    
    Life
    
    Shares
    
    Price$2.33  9.92
    
    
    480
    
    
    $
    4.59
    
    
    9.2 years
    
    
    14
    
    
    $
    9.92$10.84
 29.12
    
    
    476
    
    
    
    17.05
    
    
    7.9 years
    
    
    156
    
    
    
    19.06956
    
    
    
    
    
    
    
    
    
    
    
    170
  Restricted Stock and Performance Shares
   2009
    
    
    2008
    
    
    2007Weighted average fair value
    
    $
    3.51
    
    
    $
    9.08
    
    
    $
    32.90Assumptions used:Volatility
    
    
    71
    %
    
    
    40
    %
    
    
    40
    %Risk-free interest rates
    
    
    1.2
    %
    
    
    3.1
    %
    
    
    4.6
    %
  Restricted Stock
    
    
    
    Performance SharesWeighted
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    AverageGrant Date
    
    
    
    
    
    
    
    Grant DateShares
    
    
    Fair Value
    
    
    
    Shares
    
    
    Fair ValueNonvested, beginning of the year
    
    
    284
    
    
    $
    14.44
    
    
    
    
    123
    
    
    $
    11.92Granted
    
    
    185
    
    
    
    3.98
    
    
    
    
    120
    
    
    
    3.51Vested
    
    
    (78
    )
    
    
    14.66
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (27
    )
    
    
    10.54
    
    
    
    
    (29
    )
    
    
    19.44Nonvested, end of year
    
    
    364
    
    
    $
    9.37
    
    
    
    
    214
    
    
    $
    6.14
   36




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Restricted Stock Units
  Stock Options
   WeightedAverageExerciseShares
    
    
    PriceOutstanding, beginning of the year
    
    
    1,276
    
    
    $
    21.94Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (243
    )
    
    
    25.10Outstanding, end of year
    
    
    1,033
    
    
    $
    21.19Exercisable, end of year
    
    
    994
    
    
    $
    21.18
  Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Remaining
    
    
    
    
    
    AverageOutstanding
    
    Exercise
    
    Contractual
    
    Exercisable
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Price
    
    Life
    
    Shares
    
    Price$11.19  21.10
    
    
    411
    
    
    $
    17.48
    
    
    2.1 years
    
    
    411
    
    
    $
    17.48$21.19  22.90
    
    
    309
    
    
    
    21.63
    
    
    5.0 years
    
    
    275
    
    
    
    21.68$23.18  28.63
    
    
    313
    
    
    
    25.63
    
    
    4.6 years
    
    
    308
    
    
    
    25.671,033
    
    
    
    
    
    
    
    
    
    
    
    994
  2009
    
    2008
    
    2007Stock options exercised:Intrinsic value
    
    $
    
    
    
    $
    6
    
    
    $
    3,281Cash received
    
    
    
    
    
    
    17
    
    
    
    8,449Actual tax benefit realized
    
    
    
    
    
    
    
    
    
    
    856
  37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  9) Long-Term Debt
  2009
    
    
    20082006 Senior Notes
    
    $
    45,684
    
    
    $
    50,0002004 Senior Notes
    
    
    137,054
    
    
    
    150,000Bank credit facilities
    
    
    
    
    
    
    41,600Euro bank term loan
    
    
    20,292
    
    
    
    19,113Other
    
    
    13,404
    
    
    
    13,941216,434
    
    
    
    274,654Less current maturities
    
    
    36,079
    
    
    
    20,428$
    180,355
    
    
    $
    254,226
      38




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
      Year Ended
    
    Maturities2010
    
    $
    36,0792011
    
    
    42,3712012
    
    
    25,6592013
    
    
    25,5922014
    
    
    25,552Thereafter
    
    
    61,181$
    216,434
  10) Shareholders Equity
    39




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  11) Income Taxes
  2009
    
    
    2008
    
    
    2007United States
    
    $
    12,627
    
    
    $
    (219,918
    )
    
    $
    45,439Non-U.S. operations
    
    
    (1,871
    )
    
    
    (5,719
    )
    
    
    1,918$
    10,756
    
    
    $
    (225,637
    )
    
    $
    47,357
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    (76
    )
    
    $
    (881
    )
    
    $
    12,932State and local
    
    
    (743
    )
    
    
    (1,303
    )
    
    
    1,908Foreign
    
    
    432
    
    
    
    1,131
    
    
    
    2,179Total current
    
    
    (387
    )
    
    
    (1,053
    )
    
    
    17,019Deferred:Federal
    
    
    6,059
    
    
    
    (43,646
    )
    
    
    966State and local
    
    
    1,629
    
    
    
    (7,249
    )
    
    
    89Foreign
    
    
    150
    
    
    
    (2,040
    )
    
    
    518Total deferred
    
    
    7,838
    
    
    
    (52,935
    )
    
    
    1,573Provision for (benefit from) income taxes
    
    $
    7,451
    
    
    $
    (53,988
    )
    
    $
    18,592
  2009
    
    
    2008
    
    
    2007Federal income tax provision (benefit) at statutory rate
    
    $
    3,764
    
    
    $
    (78,973
    )
    
    $
    16,575State income taxes, net of applicable federal income
tax benefit
    
    
    546
    
    
    
    (4,471
    )
    
    
    1,313Impairment of nondeductible goodwill
    
    
    
    
    
    
    31,229
    
    
    
    Foreign valuation allowance
    
    
    1,648
    
    
    
    680
    
    
    
    1,153Nondeductible foreign currency expense
    
    
    189
    
    
    
    
    
    
    
    Net changes in uncertain tax positions
    
    
    84
    
    
    
    (1,764
    )
    
    
    Net change due to change in rates
    
    
    625
    
    
    
    985
    
    
    
    Expensing of stock options
    
    
    22
    
    
    
    184
    
    
    
    260Domestic manufacturing deduction
    
    
    
    
    
    
    (66
    )
    
    
    (432
    )Research and development tax credit
    
    
    (250
    )
    
    
    (500
    )
    
    
    (989
    )Return to provision adjustment
    
    
    663
    
    
    
    (452
    )
    
    
    (260
    )Other
    
    
    160
    
    
    
    (840
    )
    
    
    972$
    7,451
    
    
    $
    (53,988
    )
    
    $
    18,592
  40




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   2009
    
    
    2008Deferred tax assets:Employee benefits and compensation
    
    $
    3,414
    
    
    $
    5,118Workers compensation
    
    
    1,147
    
    
    
    1,385Inventory capitalization and reserves
    
    
    1,261
    
    
    
    1,414Reserve for product returns
    
    
    650
    
    
    
    950Deferred compensation benefit plans
    
    
    935
    
    
    
    732Bad debt reserves
    
    
    838
    
    
    
    1,831Foreign net operating loss
    
    
    4,466
    
    
    
    3,034Installment note
    
    
    685
    
    
    
    Other
    
    
    3,096
    
    
    
    2,707Total deferred tax assets
    
    $
    16,492
    
    
    $
    17,171Valuation allowance
    
    
    (7,579
    )
    
    
    (5,332
    )Net deferred tax assets
    
    $
    8,913
    
    
    $
    11,839Deferred tax liabilities:Property, plant and equipment
    
    $
    (46,951
    )
    
    $
    (51,038
    )Goodwill and other intangibles
    
    
    (9,466
    )
    
    
    (4,230
    )Inventory capitalization and reserves
    
    
    (537
    )
    
    
    (1,339
    )Other
    
    
    (2,451
    )
    
    
    (93
    )Total deferred tax liabilities
    
    $
    (59,405
    )
    
    $
    (56,700
    )Net deferred income tax liability
    
    $
    (50,492
    )
    
    $
    (44,861
    )
     41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 2009
    
    
    2008Unrecognized tax benefits, beginning of year
    
    $
    774
    
    
    $
    2,465Additions based on current year tax positions
    
    
    63
    
    
    
    239Additions for prior year tax positions
    
    
    84
    
    
    
    290Reductions for prior year tax positions
    
    
    (128
    )
    
    
    (623
    )Settlements with tax authorities
    
    
    (104
    )
    
    
    (342
    )Lapses in statutes of limitations
    
    
    68
    
    
    
    (1,255
    )Unrecognized tax benefits, end of year
    
    $
    757
    
    
    $
    774
    12) Earnings (Loss) Per Share
   2009
    
    
    2008
    
    
    2007Earnings (loss) from continuing operations
    
    $
    3,305
    
    
    $
    (171,649
    )
    
    $
    28,765Earnings (loss) from discontinued operations
    
    
    5,046
    
    
    
    (20,463
    )
    
    
    5,081Earnings (loss)
    
    $
    8,351
    
    
    $
    (192,112
    )
    
    $
    33,846Weighted average number of common shares
    
    
    30,382
    
    
    
    30,264
    
    
    
    31,966Dilutive potential common shares
    
    
    88
    
    
    
    
    
    
    
    214Shares for diluted earnings (loss) per share
    
    
    30,470
    
    
    
    30,264
    
    
    
    32,180
  13) Employee Benefits
  42




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 14) Cash Flow and Other Information
  2009
    
    
    2008
    
    
    2007Cash paid during the year for:Interest
    
    $
    16,222
    
    
    $
    18,829
    
    
    $
    16,586Income taxes
    
    
    6,598
    
    
    
    257
    
    
    
    21,838Schedule of business acquisitions:Fair value of assets acquired
    
    $
    
    
    
    $
    187
    
    
    $
    78,033Liabilities assumed
    
    
    
    
    
    
    605
    
    
    
    (16,662
    )Purchase price adjustments
    
    
    
    
    
    
    
    
    
    
    Total cash paid
    
    $
    
    
    
    $
    792
    
    
    $
    61,371
 15) Fair Value of Financial Instruments
    16) Commitments and Contingencies
  OperatingYear Ended
    
    Leases2010
    
    $
    3,8412011
    
    
    2,4532012
    
    
    1,2002013
    
    
    6982014
    
    
    557Thereafter
    
    
    557$
    9,306
  43




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   17) Segment Information
    Custom Sheet and Rollstock
 Packaging Technologies
 Color and Specialty Compounds
 2009
    
    
    2008
    
    
    2007Net sales (a)(b):Custom Sheet and Rollstock
    
    $
    472,498
    
    
    $
    636,313
    
    
    $
    668,390Packaging Technologies
    
    
    212,683
    
    
    
    274,363
    
    
    
    253,718Color and Specialty Compounds
    
    
    241,596
    
    
    
    410,493
    
    
    
    441,823$
    926,777
    
    
    $
    1,321,169
    
    
    $
    1,363,931
 44




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 2009
    
    
    2008
    
    
    2007Operating earnings (loss) (b):Custom Sheet and Rollstock
    
    $
    25,035
    
    
    $
    (89,849
    )
    
    $
    46,925Packaging Technologies
    
    
    30,556
    
    
    
    18,808
    
    
    
    26,121Color and Specialty Compounds
    
    
    7,353
    
    
    
    (99,526
    )
    
    
    21,320Corporate
    
    
    (36,809
    )
    
    
    (35,667
    )
    
    
    (30,616
    )$
    26,135
    
    
    $
    (206,234
    )
    
    $
    63,750Assets:Custom Sheet and Rollstock
    
    $
    244,992
    
    
    $
    293,948
    
    
    $
    419,039Packaging Technologies
    
    
    196,221
    
    
    
    207,427
    
    
    
    239,377Color and Specialty Compounds
    
    
    155,743
    
    
    
    190,196
    
    
    
    357,115Corporate and Other (c)
    
    
    56,732
    
    
    
    70,848
    
    
    
    95,340$
    653,688
    
    
    $
    762,419
    
    
    $
    1,110,871Depreciation and amortization (b):Custom Sheet and Rollstock
    
    $
    14,605
    
    
    $
    14,660
    
    
    $
    14,557Packaging Technologies
    
    
    8,885
    
    
    
    9,172
    
    
    
    5,780Color and Specialty Compounds
    
    
    12,902
    
    
    
    14,317
    
    
    
    14,427Corporate
    
    
    4,910
    
    
    
    5,130
    
    
    
    4,286$
    41,302
    
    
    $
    43,279
    
    
    $
    39,050Capital expenditures (b):Custom Sheet and Rollstock
    
    $
    2,555
    
    
    $
    5,455
    
    
    $
    14,706Packaging Technologies
    
    
    1,054
    
    
    
    2,073
    
    
    
    4,048Color and Specialty Compounds
    
    
    1,930
    
    
    
    4,337
    
    
    
    4,391Corporate
    
    
    1,931
    
    
    
    4,262
    
    
    
    9,895$
    7,470
    
    
    $
    16,127
    
    
    $
    33,040
  Net Sales By Destination (a)(b)
    
    
    Property, Plant and Equipment, Net2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007United States
    
    $
    762,481
    
    
    $
    1,089,875
    
    
    $
    1,124,376
    
    
    $
    200,202
    
    
    $
    236,400
    
    
    $
    272,506Mexico
    
    
    73,800
    
    
    
    104,154
    
    
    
    89,895
    
    
    
    16,633
    
    
    
    20,414
    
    
    
    18,537Canada
    
    
    59,783
    
    
    
    75,253
    
    
    
    93,327
    
    
    
    9,850
    
    
    
    14,087
    
    
    
    20,731Europe
    
    
    21,745
    
    
    
    40,624
    
    
    
    44,467
    
    
    
    2,318
    
    
    
    9,301
    
    
    
    12,251Asia and other
    
    
    8,968
    
    
    
    11,263
    
    
    
    11,866
    
    
    
    
    
    
    
    
    
    
    
    $
    926,777
    
    
    $
    1,321,169
    
    
    $
    1,363,931
    
    
    $
    229,003
    
    
    $
    280,202
    
    
    $
    324,025
 Notes to table:
 (a)
    
    In addition to external sales to customers, intersegment sales were $44,554, $57,041, and
$52,987 in 2009, 2008, and 2007, respectively. Most intersegment sales were generated from
the Color and Specialty Compounds segment.(b)
    
    Excludes discontinued operations.(c)
    
    Includes assets of discontinued operations relating to wheels, profiles and marine businesses
that were previously reported in the Companys Engineered Products group. 18) Comprehensive Income
  45




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 19) Quarterly Financial Information (Unaudited)
  Quarter1st
    
    2nd
    
    3rd
    
    4th
    
    Year2009Net sales
    
    $
    237,301
    
    
    $
    216,412
    
    
    $
    230,506
    
    
    $
    242,558
    
    
    $
    926,777Gross profit (a)
    
    
    19,887
    
    
    
    29,963
    
    
    
    31,096
    
    
    
    30,883
    
    
    
    111,829Operating earnings (loss)
    
    
    (2,988
    )
    
    
    8,554
    
    
    
    11,301
    
    
    
    9,268
    
    
    
    26,135Net earnings (loss) from continuing operations
    
    
    (4,942
    )
    
    
    2,148
    
    
    
    3,910
    
    
    
    2,189
    
    
    
    3,305Net earnings (loss) from discontinued operations (b)
    
    
    (149
    )
    
    
    1,616
    
    
    
    (2,418
    )
    
    
    5,997
    
    
    
    5,046Net earnings (loss)
    
    
    (5,091
    )
    
    
    3,764
    
    
    
    1,492
    
    
    
    8,186
    
    
    
    8,351Basic and diluted earnings (loss) per share:Net earnings (loss) from continuing operations
    
    
    (.16
    )
    
    
    .07
    
    
    
    .13
    
    
    
    .07
    
    
    
    .11Net earnings (loss) from discontinued operations
    
    
    
    
    
    
    .09
    
    
    
    (.12
    )
    
    
    .20
    
    
    
    .16Net earnings (loss)
    
    
    (.16
    )
    
    
    .16
    
    
    
    .01
    
    
    
    .27
    
    
    
    .27Dividends declared per common share
    
    
    .05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .052008Net sales
    
    $
    315,181
    
    
    $
    341,743
    
    
    $
    333,298
    
    
    $
    330,947
    
    
    $
    1,321,169Gross profit (a)
    
    
    19,442
    
    
    
    30,961
    
    
    
    31,385
    
    
    
    29,286
    
    
    
    111,074Operating earnings (loss) (c)
    
    
    (2,794
    )
    
    
    9,188
    
    
    
    9,635
    
    
    
    (222,263
    )
    
    
    (206,234
    )Net earnings (loss) from continuing operations (c)
    
    
    (4,207
    )
    
    
    2,436
    
    
    
    3,920
    
    
    
    (173,798
    )
    
    
    (171,649
    )Net earnings (loss) from discontinued operations (c)
    
    
    717
    
    
    
    1,929
    
    
    
    490
    
    
    
    (23,599
    )
    
    
    (20,463
    )Net earnings (loss)
    
    
    (3,490
    )
    
    
    4,365
    
    
    
    4,410
    
    
    
    (197,397
    )
    
    
    (192,112
    )Basic and diluted earnings (loss) per share:Net earnings (loss) from continuing operations
    
    
    (.14
    )
    
    
    .08
    
    
    
    .13
    
    
    
    (5.73
    )
    
    
    (5.67
    )Net earnings (loss) from discontinued operations
    
    
    .02
    
    
    
    .06
    
    
    
    .02
    
    
    
    (.78
    )
    
    
    (.68
    )Net earnings (loss)
    
    
    (.12
    )
    
    
    .14
    
    
    
    .15
    
    
    
    (6.51
    )
    
    
    (6.35
    )Dividends declared per common share
    
    
    .135
    
    
    
    .135
    
    
    
    .05
    
    
    
    .05
    
    
    
    .37
 Notes to table:
 (a)
    
    Gross profit is calculated as net sales less cost of sales and amortization expense.(b)
    
    Net earnings from discontinued operations and net earnings in the fourth quarter of 2009
included an after-tax gain of $6,242 from sales of businesses.(c)
    
    Operating loss and net loss in the first quarter of 2008 were impacted by a charge of $2,681
($1,651 net of tax) for an inventory valuation reserve due to managements decision to
liquidate certain inventory to accelerate cash. Operating loss and net loss from continuing
operations in the fourth quarter of 2008 were impacted by charges of $217,965 for goodwill
impairments ($168,828 net of tax) and $9,031 ($6,206 net of tax) for fixed asset and other
intangible asset impairments. 20) Former Chief Executive Officers Arrangement
   
    
    Severance compensation in accordance with the terms of the Companys Severance and
Noncompetition Policy and Agreement with Mr. Abd which is based on a multiple of his former
annual salary and the average of his bonus payments earned during the prior three fiscal
years, totaling $2,224. Of this amount, $1,112 was paid in 2008, and the remaining $1,112
was paid in 2009.
    
    Compensation of $62 for the period between the Effective Date through the Termination
Date at a rate of one-third of Mr. Abds former annual salary.
 46




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 
 
    
    In accordance with the terms of the applicable stock option plans and agreements,
168,687 vested stock options were exercisable until the Termination Date, and an additional
32,250 vested stock options will expire within three years of
the Termination Date and will remain exercisable until their stated expiration dates. All
stock-based compensation awards that were not vested as of the Termination Date were
forfeited. As a result, $368 of stock-based compensation expense was reversed as income
during 2007 for awards that were previously expected to vest but were forfeited.
  21) Subsequent Events
  47




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 
 Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
  
 Item 9A.
    
    CONTROLS AND PROCEDURES
  a)
    
    Ensure that information required to be disclosed in the reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within time periods specified in Securities and Exchange Commission rules and forms; andb)
    
    Ensure that information is accumulated and communicated to the Companys management,
including the Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosures.
    
 Item 9B.
    
    OTHER INFORMATION
  48




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 
 PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors
  Audit Committee
  Code of Ethics
   Section 16(a) Beneficial Ownership Reporting Compliance
  Recommendation of Director Nominees by Shareholders
  Executive Officers of the Registrant
  Name
    
    Age
    
    Current Office, Prior Positions and EmploymentMyles S. Odaniell
    
    
    50
    
    
    President and Chief Executive Officer (since
January 2008). From June 2003 to February
2006, Mr. Odaniell was an Executive Vice
President of Chemtura Corporation (formerly
Crompton Corporation), a marketer of specialty
chemicals. From 1999 to 2002, Mr. Odaniell
was President, Coatings and Performance
Chemicals, of Cytec Industries, Inc. and
President, Cytec, Latin America.
 49




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##### Table of Contents



Name
    
    Age
    
    Current Office, Prior Positions and EmploymentRandy C. Martin
    
    
    47
    
    
    Executive Vice President (since September
2000) and Chief Financial Officer (since May
1996); Interim President and Chief Executive
Officer from July 2007 to January 2008; Vice
President, Finance from May 1996 to September
2000; Corporate Controller from September 1995
to May 1996. Mr. Martin, a CPA and CMA, was
with KPMG Peat Marwick LLP for 11 years before
joining the Company in 1995.Steven J. Ploeger
    
    
    48
    
    
    Executive Vice President Custom Sheet and
Rollstock (since May 2004); Vice President
Spartech Plastics from 2000 to 2004; General
Manager Spartech Plastics  North Region from
1996 to 2000. Mr. Ploeger also held various
sales management positions with the Company
from 1985 to 1996.Michael L. Marcum
    
    
    61
    
    
    Senior Vice President, Color and Specialty
Compounds (since April 2006) Supply Chain
(since March 2009) and International Business
Development (since April 2006). Mr. Marcum
was most recently President and Chief
Executive Officer of American Decorative
Surfaces Inc. from 2001 to 2006 and was with
Monsanto Company for 29 years in various
general management, corporate strategic
planning, and sales and marketing executive
positions, both domestically as well as
internationally, before joining the Company in
2006.Janet E. Mann
    
    
    55
    
    
    Senior Vice President of Marketing, Technology
and Commercial Development (since June 2008).
Prior to joining the Company, Ms. Mann was
General Manager, Industrial Chemicals at
Archer Daniels Midland Corporation in Decatur,
Illinois. Prior to Archer Daniels Midland
Corporation, Ms. Mann held various executive
roles at Chemtura Corporation, Dow Chemical
Company, and ANGUS Chemicals, Inc.Rosemary L. Klein
    
    
    42
    
    
    Senior Vice President, General Counsel and
Corporate Secretary (since March 2009). Prior
to joining the Company, Ms. Klein was Senior
Vice President, General Counsel and Corporate
Secretary at Solutia Inc. (2004 to 2008). Prior
to Solutia in June 2003, Ms. Klein held
various senior level legal roles at Premcor
Inc. and Arch Coal, Inc.Michael L. Roane
    
    
    54
    
    
    Senior Vice President of Human Resources
(since June 2008). Prior to joining the
Company, Mr. Roane was the Senior Vice
President of Human Resources at the Sage
Software Healthcare Division. Prior to Sage,
Mr. Roane spent 10 years at Greif Brothers
Corporation where he held the position of
Senior Vice President of Global Human
Resources and Communications. Mr. Roane
previously held various vice president and
human resource roles at Owens & Minor, Inc.,
and Philip Morris, Inc.Marc A. Roberts
    
    
    47
    
    
    Senior Vice President, Operations (since
October 2008), Vice President of Sheet
Operations (2006 to 2008). Mr. Roberts
previously held positions as a manufacturing
consultant with a private equity group
(2005 to 2006), President and Director of
Aerostructures at Precision Castparts
Corporation (2001 to 2005), and various
positions at Johnson Controls, Inc. and Price
Corporation (1993 to 2001).Michael G. Marcely
    
    
    42
    
    
    Senior Vice President of Planning and
Controller (Since July 2009). Vice President
of Financial Planning and Analysis (April 2008
to July 2009), Vice President and Corporate
Controller (July 2004 to April 2008), Director
of Internal Audit (January 2003 to July 2004).
Mr. Marcely, a CPA, was with Ernst & Young
LLP for four years, Emerson Electric for four
years and KPMG LLP for six years before
joining the Company in 2003.Robert J. Byrne
    
    
    51
    
    
    Vice President and Chief Information Officer
(Since December 2008). Prior to joining the
Company, Mr. Byrne spent more than 25 years in
various plant operations and information
technology positions with Anheuser-Busch
Companies Inc., including six years as Vice
President and Chief Information Officer.
 50




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 
 Item 11.
    
    EXECUTIVE COMPENSATION
  
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  51




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##### Table of Contents



PART IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial Statements and Financial Statement Schedules
  Managements Report on Internal Control over Financial Reporting
    
    
    21Reports of Independent Registered Public Accounting Firm
    
    
    22Financial StatementsConsolidated Balance Sheets
    
    
    24Consolidated Statements of Operations
    
    
    25Consolidated Statements of Shareholders Equity
    
    
    26Consolidated Statements of Cash Flows
    
    
    27Notes to Consolidated Financial Statements
    
    
    28Schedule II  Valuation and Qualifying Accounts
    
    
    F-1
  (b)
    
    The Exhibits required to be filed as part of this annual report on Form 10-K are listed
under (c) below.(c)
    
    Exhibits
  ExhibitNumber
    
    Description
    
    Location3.1
    
    Certificate of Incorporation, as
currently in effect
    
    Incorporated by
reference to
Exhibit 3.3 to the
Companys Form 8-K
filed with the
Commission on
September 30, 20093.2
    
    Bylaws, as currently in effect
    
    Incorporated by
reference to
Exhibit 3.1 to the
Companys Form 8-K
filed with the SEC
on September 30,
20094
    
    Rights Agreement dated April 2, 2001
between Spartech Corporation and
Mellon Investor Services LLC, as
Rights Agent
    
    Incorporated by
reference to
Exhibit 99.1 to the
Companys Form 8-K
filed with the
Commission on April
5, 200110.1
    
    Separation Agreement and Release
dated July 16, 2007 between the
Company and George A. Abd
    
    Incorporated by
reference to
Exhibit 1.01 of the
Companys Form 8-K
filed with the
Commission on July
16, 200710.2
    
    Form of Indemnification Agreement
entered into between the Company and
each of its officers and directors
    
    Incorporated by
reference to
Exhibit 10.1 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.3
    
    Spartech Corporation 2006 Executive
Bonus Plan
    
    Incorporated by
reference to
Exhibit 1.01(a) to
the Companys Form
8-K filed with the
Commission on
December 21, 200510.4
    
    Spartech Corporation 2004 Equity
Compensation Plan, as amended
    
    Incorporated by
reference to
Exhibit 4.1 to the
Companys Form S-8
filed with the
Commission on July
17, 200910.5
    
    Spartech Corporation Long-Term Equity
Incentive Program
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
December 7, 2006
 52




---



##### Table of Contents



ExhibitNumber
    
    Description
    
    Location10.6
    
    Form of Incentive Stock Option
    
    Incorporated by
reference to
Exhibit 1.01(2) to
the Companys Form
8-K filed with the
Commission on
December 14, 200410.7
    
    Form of Nonqualified Stock Option
    
    Incorporated by
reference to
Exhibit 1.01(3) to
the Companys Form
8-K filed with the
Commission on
December 14, 200410.8
    
    Form of Restricted Stock Unit Award
(directors)
    
    Incorporated by
reference to
Exhibit 1.01(4) to
the Companys Form
8-K filed with the
Commission on
December 14, 200410.9
    
    Form of Restricted Stock Award
(directors)
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys Form 10-Q
filed with the
Commission on March
12, 200710.10
    
    Form of Restricted Stock Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.11
    
    Form of Stock-Settled Stock
Appreciation Right Award
    
    Incorporated by
reference to
Exhibit 5.02(2) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.12
    
    Form of Performance Share Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
November 21, 200710.13
    
    Performance Share Award Performance
Criteria for 20072009 Performance
Period
    
    Incorporated by
reference to
Exhibit 5.02(4) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.14
    
    Performance Share Award Performance
Criteria for 20082010 Performance
Period
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
November 21, 200710.15
    
    Separation Agreement and Release
effective July 25, 2008 between the
Company and Jeffrey D. Fisher
    
    Incorporated by
reference to
Exhibit 10.3 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.16
    
    Third Amendment to the Fourth Amended
and Restated Credit Agreement dated
September 10, 2008
    
    Incorporated by
reference to
Exhibit 10.4 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.17
    
    Note Purchase Agreement dated June 5,
2006 between the Company and
purchasers of $50 million of the
Companys 5.78% Senior Notes
    
    Incorporated by
reference to
Exhibit 10.5 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.18
    
    Amended and Restated Note Purchase
Agreement (initially dated June 5,
2006) dated September 10, 2008 6.82%
Senior Notes due 2011
    
    Incorporated by
reference to
Exhibit 10.6 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.19
    
    Note Purchase Agreement dated
September 15, 2004 between the
Company and purchasers of $150
million of the Companys 5.54% Senior
Notes
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 2008
 53




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location10.20
    
    Amended and Restated Note Purchase
Agreement (Initially Dated as of
September 15, 2004) dated September
10, 2008
6.58% Senior Notes due 2016
    
    Incorporated by
reference to
Exhibit 10.8 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.21
    
    Term Loan Agreement dated February
16, 2005 between the Company and
Calyon New York Branch
    
    Incorporated by
reference to
Exhibit 10.9 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.22
    
    Third Amendment to Term Loan
Agreement dated September 10, 2008
between the Company and Calyon New
York Branch
    
    Incorporated by
reference to
Exhibit 10.10 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.23
    
    Intercreditor and Collateral Agency
Agreement dated as of September 10,
2008 by and among Bank of America,
N.A., as Collateral Agent, and Bank
of America, N.A., as Administrative
Agent, The Lenders Party Hereto, the
Noteholders Party Hereto, and the
Term Loan Lender Party Hereto, as
Creditors
    
    Incorporated by
reference to
Exhibit 10.11 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.24
    
    Security Agreement dated as of
September 10, 2008, by and among Bank
of America, N.A., as Collateral Agent
for the Secured Parties
    
    Incorporated by
reference to
Exhibit 10.12 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.25
    
    Form of Stock Appreciation Right Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.26
    
    Form of Restricted Stock Award
    
    Incorporated by
reference to
Exhibit 5.02(2) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.27
    
    Form of Performance Share Award
    
    Incorporated by
reference to
Exhibit 5.02(3) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.28
    
    Waiver and Amendment Agreement to
Fourth Amended and Restated Credit
Agreement dated as of July 30, 2008
    
    Incorporated by
reference to
Exhibit 10.1 to the
Companys Form 8-K
filed with the
Commission on
August 6, 200810.29
    
    Fourth Amended and Restated Credit
Agreement dated as of June 2, 2006
    
    Incorporated by
reference to
Exhibit 10.2 to the
Companys Form 8-K
filed with the
Commission on
August 6, 200810.30
    
    Fourth Amendment to Fourth Amended
and Restated Credit Agreement
    
    Incorporated by
reference to
Exhibit 10.1 to the
Companys Form 8-K
filed with the
Commission on July
23, 200910.31
    
    Amendment No. 1 to Amended and
Restated Note Purchase Agreement 
2004 Senior Notes
    
    Incorporated by
reference to
Exhibit 10.2 to the
Companys Form 8-K
filed with the
Commission on July
23, 200910.32
    
    Amendment No. 1 to Amended and
Restated Note Purchase Agreement 
2006 Senior Notes
    
    Incorporated by
reference to
Exhibit 10.3 to the
Companys Form 8-K
filed with the
Commission on July
23, 200910.33
    
    Consent to Release the Collateral
Agents Security Interest in All
Assets of Certain Subsidiaries in
Connection with a Sale
    
    Incorporated by
reference to
Exhibit 10.4 to the
Companys Form 8-K
filed with the
Commission on July
23, 200910.34
    
    Spartech Corporation Deferred
Compensation Plan, as amended
    
    Filed herewith21
    
    Subsidiaries of Registrant
    
    Filed herewith
 54




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location23
    
    Consent of Independent Registered
Public Accounting Firm
    
    Filed herewith24.1
    
    Power of Attorney
    
    Filed herewith24.2
    
    Power of Attorney
    
    Filed herewith24.3
    
    Power of Attorney
    
    Filed herewith24.4
    
    Power of Attorney
    
    Filed herewith24.5
    
    Power of Attorney
    
    Filed herewith24.6
    
    Power of Attorney
    
    Filed herewith24.7
    
    Power of Attorney
    
    Filed herewith24.8
    
    Power of Attorney
    
    Filed herewith31.1
    
    Section 302 Certification of Chief
Executive Officer
    
    Filed herewith31.2
    
    Section 302 Certification of Chief
Financial Officer
    
    Filed herewith32.1
    
    Section 1350 Certification of Chief
Executive Officer
    
    Filed herewith32.2
    
    Section 1350 Certification of Chief
Financial Officer
    
    Filed herewith
 55




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##### Table of Contents



SIGNATURES
  SPARTECH CORPORATION/s/ Myles S. OdaniellMyles S. OdaniellJanuary 14, 2010
    President and Chief Executive Officer  Date
    
    Signature
    
    TitleJanuary 14, 2010
    
    /s/ Myles S. Odaniell

Myles S. Odaniell
    
    President and Chief Executive Officer (Principal
Executive
Officer)January 14, 2010
    
    /s/ Randy C. Martin

Randy C. Martin
    
    Executive Vice President and Chief Financial
Officer
(Principal Financial and
Accounting Officer)January 14, 2010
    
    /s/ Michael G. Marcely

Michael G. Marcely
    
    Senior Vice President of Planning and Controller
(Principal Accounting
Officer)January 14, 2010
    
    *Ralph
B. Andy
    
    DirectorJanuary 14, 2010
    
    *Lloyd
E. Campbell
    
    DirectorJanuary 14, 2010
    
    *Edward
J. Dineen
    
    DirectorJanuary 14, 2010
    
    *Victoria
M. Holt
    
    DirectorJanuary 14, 2010
    
    *Walter
J. Klein
    
    DirectorJanuary 14, 2010
    
    *Pamela
F. Lenehan
    
    DirectorJanuary 14, 2010
    
    *Jackson
W. Robinson
    
    DirectorJanuary 14, 2010
    
    *Craig
A. Wolfanger
    
    Director
 
 *
    
    Rosemary L. Klein, by signing her name hereto, does sign this document on
behalf of the above noted individuals, pursuant to powers of attorney duly
executed by such individuals which have been filed as an Exhibit to this Form
10-K. /s/ Rosemary L. KleinRosemary L. KleinAttorney-in-Fact 56




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED 2009, 2008, AND 2007
(Dollars in thousands)
 ADDITIONS ANDBALANCE AT
    
    CHARGES TOBEGINNING OF
    
    COSTS AND
    
    
    
    
    
    BALANCE ATDESCRIPTION
    
    PERIOD
    
    EXPENSES (1)
    
    WRITE-OFFS (2)
    
    END OF PERIODOctober 31, 2009Allowance forDoubtful Accounts
    
    $
    4,550
    
    
    $
    4,321
    
    
    $
    (6,401
    )
    
    $
    2,470November 1, 2008Allowance forDoubtful Accounts
    
    $
    1,572
    
    
    $
    4,763
    
    
    $
    (1,785
    )
    
    $
    4,550November 3, 2007Allowance forDoubtful Accounts
    
    $
    1,514
    
    
    $
    2,099
    
    
    $
    (2,041
    )
    
    $
    1,572
 
 (1)
    
    Includes provision for bad debt expense related to discontinued operations of $644, $67
and $74 in 2009, 2008 and 2007, respectively.(2)
    
    Includes write-offs related to discontinued operations of $129, $124 and $170 in 2009,
2008 and 2007, respectively. F-1