##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K/A
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended October 29, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 1-5911  (Commission File Number)
 SPARTECH CORPORATION
 (Exact name of Registrant as specified in its charter)
 
 Delaware
    
    43-0761773(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105
(314) 721-4242  (Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)
  Common Stock, $.75 par value
    
    New York Stock ExchangeTitle of Each Class
    
    Name of Exchange of Which Registered
 None
 o o
 o o
 þ o
 þ
  o þ o
 o þ
 $620,813,936 32,045,270
 Documents incorporated by reference




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##### 



SPARTECH CORPORATION
FORM 10-K/A FOR THE YEAR ENDED OCTOBER 29, 2005
TABLE OF CONTENTS
 Explanatory Note
    
    
    1Cautionary Statements Concerning Forward-Looking Statements
    
    
    2PART IItem 1. Business
    
    
    3Item 2. Properties
    
    
    11Item 3. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    13Item 6. Selected Financial Data
    
    
    14Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 8. Financial Statements and Supplementary Data
    
    
    26Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Consolidated Financial Statements
    
    
    27Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
    
    
    28Consolidated Balance Sheets
    
    
    29Consolidated Statements of Operations
    
    
    30Consolidated Statements of Shareholders Equity
    
    
    31Consolidated Statements of Cash Flows
    
    
    32Notes to Consolidated Financial Statements
    
    
    33Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    54Item 9A. Controls and Procedures
    
    
    54Item 9B. Other Information
    
    
    54PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    55Item 11. Executive Compensation
    
    
    56Item 12. Security Ownership and Certain Beneficial Owners and Management
    
    
    56Item 13. Certain Relationships and Related Transactions
    
    
    56Item 14. Principal Accounting Fees and Services
    
    
    56PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    57SIGNATURES
    
    
    59FINANCIAL STATEMENT SCHEDULESSchedule II  Valuation and Qualifying Accounts
    
    
    F-1Consent of Independent Registered Public Accounting FirmCertificationCertificationCertifications




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EXPLANATORY NOTE
   
    
    Item 1 (Business) to reflect changes to operating earnings by reporting segment.
    
    Item 6 (Selected Financial Data) to reflect changes to Statement of Operations Data,
Per Share Information, Balance Sheet Data and Ratios/Other Data.
    
    Item 7 (Managements Discussion and Analysis of Financial Condition and Results of
Operations) to reflect the changes to Executive Summary, Results of Operations and Cash
Flow.
    
    Item 8 (Financial Statements and Supplementary Data) to reflect changes to the
Companys financial statements and notes thereto, including changes to the Consolidated
Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of
Shareholders Equity, Consolidated Statements of Cash Flows, the addition of Note 1 to
the Consolidated Financial Statements Restatement of Historical Financial Statements,
changes to Note 20 to the Consolidated Financial Statements Quarterly Financial
Information as well as other Notes which present restated financial information, and
the reissued report of the Companys independent registered public accounting firm.
    
    Item 9A (Controls and Procedures) to reflect changes to the disclosure of the
internal control impact of our fixed asset charge.
   1




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##### Table of Contents



CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
   (a)
    
    adverse changes in economic or industry conditions generally, including global supply and
demand conditions and prices for products of the types produced by Spartech;(b)
    
    material adverse changes in the markets we serve, including the transportation,
packaging, building and construction, recreation and leisure, and other markets, some of
which tend to be cyclical;(c)
    
    our inability to achieve the level of cost savings, productivity improvements, synergies,
growth or other benefits anticipated from acquired businesses and their integration;(d)
    
    volatility of prices and availability of supply of energy and of the raw materials that
are critical to the manufacture of our products, particularly plastic resins derived from
oil and natural gas, including future effects of natural disasters;(e)
    
    our inability to manage or pass through an adequate level of increases to customers in
the costs of materials, freight, utilities, or other conversion costs;(f)
    
    our inability to predict accurately the costs to be incurred or savings to be achieved in
connection with announced production plant restructurings;(g)
    
    adverse findings in significant legal or environmental proceedings or our inability to
comply with applicable environmental laws and regulations;(h)
    
    adverse developments with work stoppages or labor disruptions, particularly in the
automotive industry;(i)
    
    our inability to achieve operational efficiency goals or cost reduction initiatives;(j)
    
    our inability to develop and launch new products successfully;(k)
    
    restrictions imposed on us by instruments governing our indebtedness, and the possible
inability to comply with requirements of those instruments; and(l)
    
    weaknesses in internal controls.
  2




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PART I
 
 Item 1. BUSINESS
 General
  Custom Sheet and Rollstock
  Color and Specialty Compounds
  Engineered Products
     
    
    Sheet Extrusion
    
    Plastic sheet is produced by
forcing melted plastic through
a wide, flat die between
polished or textured metal
rollers and onto a flat
cooling bed for cutting to the
desired width and length.
    
    Rollstock Extrusion
    
    This production process is
similar to sheet extrusion,
except that the plastic is
wound onto rolls rather than
cut into flat pieces of a
specific length.
    
    Cell Cast Acrylics
    
    Acrylic sheet is produced by
pouring a reactive mixture of
liquid monomers, additives and
catalysts between two polished
glass sheets held together at
a desired thickness, and
allowing the mixture to
polymerize with time, heat,
and pressure in an oven or
water bath until solid.
 3




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##### Table of Contents




    
    Specialty Compounding
    
    Basic plastic resins are
melted and mixed with
additives, fillers, or other
plastics in order to impart
specific properties such as
gloss, strength or moldability
to the resulting mixture,
which is typically sold and
shipped in pellet form.
    
    Color Concentrates
    
    Basic plastic resins are
melted and mixed with pigments
in order to produce colored
pellets, which plastics
compounders or fabricators
blend with natural color
plastics to make products of
desired colors.
    
    Calendering
    
    Plastic film is produced by
drawing molten polymer between
two counter-rotating rollers
under pressure.
    
    Profile Extrusion
    
    Products having a desired
two-dimensional cross-section,
such as plastic fence rails or
window frames, are produced by
forcing melted plastic through
a die of the desired shape,
cooling it in air or in a
water bath, and cutting it to
the desired length.
    
    Injection Molding
    
    Three-dimensional products
such as wheels are formed by
forcing melted plastic into a
mold cavity under pressure so
that when cooled the plastic
reflects the shape of the
cavity.
    
    Cast Acrylic Rods and Tubes
    
    Rods are produced from
reactive mixtures similar to
those used for cell cast
acrylics by curing the mixture
in a vertical, tubular mold
and then grinding and
polishing the rod to the
desired length and diameter.
Tubes are produced by curing a
similar mixture against the
inside of a drum shaped mold
of the desired length and
diameter while it revolves on
a horizontal axis.
   
    
    Greater focus on management transition issues by plastics entrepreneurs;
    
    The potential to achieve economies of scale, leverage, and fixed cost synergies;
    
    Processors seeking to focus on fewer core competencies and outsourcing non-core operations;
    
    Increased capital and technical capabilities necessary to increase production efficiencies and expand capacity; and
    
    Customers seeking to work with fewer suppliers.
 Our Competitive Strengths
  Market Position
  New Product Development
  Benefits From Acquisitions
  
    
    Greater geographic presence to service customers and respond to certain concentrated markets;
    
    Broader product capabilities offered to our customers;
    
    Centralized purchasing of raw materials and other cost synergies;
    
    Improved resource utilization through manufacturing optimization; and
    
    Greater absorption of fixed costs over an increased revenue base.
 4




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Commitment to Customer Service
  Diversified Customer Base
  Geographic Presence
   Date Acquired
    
    Business Acquired
    
    Business TypeJune 2002
    
    GWB Plastics Holding Co.
    
    Color and Specialty CompoundsMarch 2003
    
    Polymer Extruded Products
    
    Film and Extruded SheetSeptember 2003
    
    TriEnda Division of Wilbert, Inc.
    
    Extruded SheetOctober 2004
    
    VPI Divisions -Sheet Products Division
    
    Extruded Sheet and RollstockContract Manufacturing Division
    
    Flexible Thick-gauge SheetFilm and Converting Division
    
    Calendered Film and Converting
  Business Segments
  Custom Sheet and Rollstock
  Fiscal Year2005
    
    2004
    
    2003(in millions)Net Sales
    
    $
    884.3
    
    
    $
    729.8
    
    
    $
    617.7Operating Earnings (Restated)
    
    
    65.1
    
    
    
    71.3
    
    
    
    62.3
 Products
 5




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##### Table of Contents



New Product Development
 Manufacturing and Production
   Marketing, Sales and Distribution
  Competition
 Color and Specialty Compounds
  Fiscal Year2005
    
    2004
    
    2003(in millions)Net Sales
    
    $
    430.9
    
    
    $
    323.4
    
    
    $
    273.8Operating Earnings (Restated)
    
    
    15.3
    
    
    
    27.2
    
    
    
    22.8
 6




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Products
  New Product Development
 Manufacturing and Production
    Marketing, Sales and Distribution
 Competition
 7




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##### Table of Contents



Engineered Products
  Fiscal Year2005
    
    
    2004
    
    
    2003(in millions)Net Sales
    
    $
    81.7
    
    
    $
    68.6
    
    
    $
    64.6Operating Earnings (Restated)
    
    
    (3.5
    )
    
    
    5.8
    
    
    
    5.0
 Products.
 
    
    Spartech Industries produces plastic tire and wheel assemblies for the
medical, lawn and garden, refuse container and toy markets, and high-performance
molded urethane tires for the medical, material handling, lawn and garden, and
recreational product applications. We also produce various injection molded and
profile extruded products that complement the wheels and tire offerings and serve
other industries, including window frames and fencing for the building and
construction markets.
    
    Spartech Marine specializes in the fabrication of acrylic and other
custom products used in high-end marine applications.
    
    Spartech Townsend manufactures acrylic rods and tubes used primarily in
display, household and medical applications.
 New Product Development
 Manufacturing and Production
 Marketing, Sales and Distribution
 Competition
 Raw Materials
  8




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Seasonality
  Backlog
  Employees
  Government Regulation and Environmental Matters
  9




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International Operations
  Internet Access
  10




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Item 2. PROPERTIES
  Custom Sheet and Rollstock
 Location
    
    Descriptions
    
    Size in Square Feet
    
    Owned/LeasedArlington, TX
    
    Extrusion plant & offices
    
    
    135,000
    
    
    LeasedAtlanta, GA
    
    Extrusion plant & offices
    
    
    85,000
    
    
    LeasedCape Girardeau, MO
    
    Extrusion plant & offices
    
    
    100,000
    
    
    Owned14,000
    
    
    LeasedClare, MI
    
    Extrusion plant & offices
    
    
    31,000
    
    
    OwnedEvanston, IL
    
    Extrusion plant & offices
    
    
    123,000
    
    
    LeasedGreenville, OH
    
    Extrusion plant & offices
    
    
    80,000
    
    
    Owned21,000
    
    
    LeasedHackensack, NJ
    
    Cast acrylic plant & offices
    
    
    81,000
    
    
    LeasedLa Mirada, CA
    
    Extrusion plant & offices
    
    
    64,000
    
    
    LeasedMankato, MN
    
    Extrusion plant & offices
    
    
    38,000
    
    
    Owned57,000
    
    
    LeasedMcMinnville, OR
    
    Extrusion plant & offices
    
    
    40,000
    
    
    OwnedMuncie, IN
    
    Extrusion plant & offices
    
    
    152,000
    
    
    OwnedPaulding, OH
    
    Extrusion plant  & offices
    
    
    71,000
    
    
    Owned69,000
    
    
    LeasedPhoenix, AZ
    
    Cast acrylic plant & offices
    
    
    33,000
    
    
    LeasedPortage #1, WI
    
    Extrusion plant & offices
    
    
    113,000
    
    
    Owned47,000
    
    
    LeasedPortage #2, WI
    
    Extrusion plant
    
    
    54,000
    
    
    LeasedRamos Arizpe,
Mexico *
    
    Extrusion plant & offices
    
    
    55,000
    
    
    OwnedRichmond, IN
    
    Extrusion plant & offices
    
    
    54,000
    
    
    Owned41,000
    
    
    LeasedSheboygan Falls, WI
    
    Extrusion plant & offices
    
    
    30,000
    
    
    Owned30,000
    
    
    LeasedStamford, CT
    
    Cast acrylic plant & offices
    
    
    87,000
    
    
    LeasedWarsaw, IN
    
    Extrusion plant & offices
    
    
    187,000
    
    
    Owned93,000
    
    
    LeasedWichita, KS
    
    Extrusion plant & offices
    
    
    62,000
    
    
    Owned110,000
    
    
    LeasedCornwall, Ontario
    
    Extrusion plant & offices
    
    
    48,000
    
    
    LeasedDonchery, France *
    
    Extrusion plant & offices
    
    
    92,000
    
    
    OwnedGranby, Quebec
    
    Extrusion plant & offices
    
    
    70,000
    
    
    OwnedSubtotal
    
    
    
    
    2,367,000
 Color and Specialty Compounds
 Location
    
    Descriptions
    
    Size in Square Feet
    
    Owned/LeasedArlington #1, TX
    
    Compounding plant & offices
    
    
    70,000
    
    
    LeasedArlington #2, TX
    
    Compounding plant & offices
    
    
    63,000
    
    
    LeasedCape Girardeau, MO
    
    Compounding plant & offices
    
    
    56,000
    
    
    Owned60,000
    
    
    LeasedDonora #1, PA
    
    Compounding plant & offices
    
    
    142,000
    
    
    OwnedDonora #2, PA
    
    Compounding plant & offices
    
    
    88,000
    
    
    OwnedKearny, NJ
    
    Compounding plant & offices
    
    
    57,000
    
    
    OwnedLake Charles, LA
    
    Compounding plant & offices
    
    
    55,000
    
    
    OwnedLockport, NY
    
    Compounding plant & offices
    
    
    45,000
    
    
    OwnedManitowoc, WI
    
    Compounding plant & offices
    
    
    95,000
    
    
    OwnedNewark, NJ
    
    Extrusion plant & offices
    
    
    61,000
    
    
    Owned
 11




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Location
    
    Descriptions
    
    Size in Square Feet
    
    Owned/LeasedRamos Arizpe,
Mexico *
    
    Compounding plant & offices
    
    
    50,000
    
    
    OwnedSalisbury, MD
    
    Calendering plant & offices
    
    
    130,000
    
    
    OwnedSt. Clair, MI
    
    Compounding plant & offices
    
    
    72,000
    
    
    OwnedStratford, Ontario
    
    Color plant & offices
    
    
    72,000
    
    
    OwnedDonchery, France *
    
    Compounding plant & offices
    
    
    25,000
    
    
    Leased30,000
    
    
    OwnedSubtotal
    
    
    
    
    1,171,000
 Engineered Products
 Location
    
    Descriptions
    
    Size in Square Feet
    
    Owned/LeasedDes Moines, IA
    
    Cast acrylic plant & offices
    
    
    72,000
    
    
    OwnedReynosa, Mexico
    
    Injection molding plant
    
    
    32,000
    
    
    LeasedRockledge, FL
    
    Marine products plant
    
    
    112,000
    
    
    LeasedTupelo, MS
    
    Injection molding plant
    
    
    104,000
    
    
    LeasedWarsaw, IN
    
    Injection molding plant & offices
    
    
    41,000
    
    
    OwnedWinnipeg, Manitoba
    
    Profile plant & offices
    
    
    47,000
    
    
    OwnedSubtotal
    
    
    
    
    408,000Total
    
    
    
    
    3,946,000
 
 *
    
    These plant locations represent joint production facilities for the Custom Sheet and
Rollstock and Color and Specialty Compounds segments.   
 Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  12




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PART II
 
 Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Common Stock Data (per share)
    

1stQtr.
    
    
    2ndQtr.
    
    
    3rdQtr.
    
    
    4th Qtr.2005High
    
    $
    28.31
    
    
    $
    23.54
    
    
    $
    21.16
    
    
    $
    21.73Low
    
    
    23.03
    
    
    
    17.83
    
    
    
    16.00
    
    
    
    17.50Dividends declared
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .122004High
    
    $
    26.00
    
    
    $
    25.41
    
    
    $
    26.30
    
    
    $
    25.95Low
    
    
    21.58
    
    
    
    22.55
    
    
    
    21.36
    
    
    
    21.85Dividends declared
    
    $
    .11
    
    
    $
    .11
    
    
    $
    .11
    
    
    $
    .11
   Total Number of
    
    
    MaximumShares Purchased
    
    
    Number ofas Part of
    
    
    Shares That MayPublicly
    
    
    Yet Be PurchasedTotal Number
    
    
    
    
    
    
    Announced Plans
    
    
    Under the PlansOf Shares
    
    
    Average Price
    
    
    or
    
    
    orPeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Programs
    
    
    ProgramsAugust 2005
    
    
    
    
    
    $
    n/a
    
    
    
    
    
    
    
    656,700September 2005
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    656,700October 2005
    
    
    102,300
    
    
    
    18.16
    
    
    
    102,300
    
    
    
    554,400Total
    
    
    102,300
    
    
    $
    18.16
    
    
    
    102,300
    
    
    
    554,400
  13




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Item 6. SELECTED FINANCIAL DATA
   Restated (a)Fiscal Year Ended(Unaudited)2005
    
    2004
    
    2003
    
    2002
    
    2001(in thousands, except per share data)Statement of Operations Data:Net Sales:In Dollars
    
    $
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    956,160
    
    
    $
    898,308
    
    
    $
    937,059In Pounds
    
    
    1,472,000
    
    
    
    1,383,000
    
    
    
    1,207,000
    
    
    
    1,179,000
    
    
    
    1,170,000Gross Profit
    
    
    153,477
    
    
    
    155,947
    
    
    
    135,149
    
    
    
    136,259
    
    
    
    152,931Depreciation & Amortization
    
    
    39,380
    
    
    
    33,704
    
    
    
    30,336
    
    
    
    26,964
    
    
    
    34,024Operating Earnings (b)
    
    
    57,869
    
    
    
    90,854
    
    
    
    78,544
    
    
    
    81,699
    
    
    
    80,200Interest Expense
    
    
    25,195
    
    
    
    25,436
    
    
    
    24,965
    
    
    
    26,816
    
    
    
    34,821Net Earnings
    
    
    18,263
    
    
    
    40,857
    
    
    
    34,263
    
    
    
    34,778
    
    
    
    28,556Per Share Information:Earnings per Share-Diluted
    
    $
    .57
    
    
    $
    1.28
    
    
    $
    1.16
    
    
    $
    1.23
    
    
    $
    1.07Dividends Declared per Share
    
    
    .48
    
    
    
    .44
    
    
    
    .40
    
    
    
    .38
    
    
    
    .38Book Value per Share
    
    
    12.93
    
    
    
    12.81
    
    
    
    10.84
    
    
    
    9.78
    
    
    
    7.93Balance Sheet Data:Working Capital (c)
    
    $
    171,459
    
    
    $
    198,253
    
    
    $
    127,496
    
    
    $
    110,082
    
    
    $
    123,804Working Capital as a
percentage of Net Sales
    
    
    12.3
    %
    
    
    17.7
    %
    
    
    13.3
    %
    
    
    12.3
    %
    
    
    13.2
    %Total Debt
    
    $
    379,955
    
    
    $
    474,091
    
    
    $
    383,819
    
    
    $
    392,971
    
    
    $
    443,353Total Assets
    
    
    1,075,548
    
    
    
    1,133,284
    
    
    
    917,237
    
    
    
    865,618
    
    
    
    814,183Shareholders Equity
    
    
    413,760
    
    
    
    412,374
    
    
    
    318,206
    
    
    
    286,386
    
    
    
    211,726Ratios/Other Data:Cash Flow from Operations
    
    $
    105,018
    
    
    $
    31,647
    
    
    $
    69,485
    
    
    $
    85,688
    
    
    $
    69,022Capital Expenditures
    
    
    39,265
    
    
    
    35,003
    
    
    
    22,009
    
    
    
    28,217
    
    
    
    16,237Operating Earnings
per pound sold (actual)
    
    
    3.9
    ¢
    
    
    6.6
    ¢
    
    
    6.5
    ¢
    
    
    6.9
    ¢
    
    
    6.9
    ¢Total Debt to
Total Debt and Equity
    
    
    47.9
    %
    
    
    53.5
    %
    
    
    54.7
    %
    
    
    57.8
    %
    
    
    67.7
    %Number of Employees (actual)
    
    
    3,500
    
    
    
    3,750
    
    
    
    3,325
    
    
    
    3,475
    
    
    
    3,300Common Shares:Outstanding at Year-End
    
    
    31,988
    
    
    
    32,180
    
    
    
    29,352
    
    
    
    29,285
    
    
    
    26,700Weighted Average-Diluted
    
    
    32,311
    
    
    
    33,468
    
    
    
    29,567
    
    
    
    28,379
    
    
    
    28,696
 Notes to table:
 (a)
    
    Amounts in the table have been restated as disclosed in Note 1 to the Consolidated Financial
Statements. This restatement increased/ (decreased) previously reported operating earnings by
$9,801, $(1,947), $258, $820 and $2,174 in fiscal 2005, 2004, 2003, 2002 and 2001,
respectively.
 (b)
    
    Fiscal 2005 operating earnings were reduced by pre-tax charges of $20.1 million related to
restructuring and exit costs ($10.1 million), a retirement settlement with our former CEO
($3.6 million), fixed asset charges ($1.9 million) and goodwill impairment ($4.5 million).
Fiscal 2004, 2003 and 2002 operating earnings were reduced by pre-tax fixed asset charges of
$3.5 million, $1.0 million and $0.3 million, respectively. Fiscal 2001 operating earnings
were reduced by pre-tax charges of $12.2 million related to restructuring and exit costs ($3.5
million), the impairment of long-lived assets ($5.6 million) and fixed asset charges ($3.1
million).
 (c)
    
    Calculated as total current assets excluding cash and cash equivalents less total current
liabilities excluding current maturities of long-term debt.
 14




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##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The Company has restated its previously issued Consolidated Statements of Operations and
Consolidated Statements of Cash Flows for fiscal years ended 2005, 2004 and 2003 and Consolidated
Balance Sheets as of October 29, 2005 and October 30, 2004. This restatement excludes $8.8 million
of a fixed asset charge and related depreciation and tax impacts previously reported in the fiscal
2005 financial statements and includes these impacts in prior fiscal years as detailed in Note 1 to
the Consolidated Financial Statements. All affected amounts and period-to-period comparisons
described herein have been restated.
 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 included elsewhere in this Form 10-K/A . 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 on page 1 of this Form 10-K/A .
 Business Overview
  % of Fiscal2005 SalesCustom Sheet and Rollstock
    
    
    63
    %Color and Specialty Compounds
    
    
    31
    %Engineered Products *
    
    
    6
    %
 
 *
    
    The group formerly referred to as the Molded and Profile Products group was renamed the
Engineered Products group effective in the second quarter of fiscal 2005.   Executive Summary
   15




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##### Table of Contents



Results of Operations
 Comparison of Fiscal Years 2005 and 2004
 Consolidated Summary
  Underlying volume
    
    
    (1
    )%VPI Acquisition
    
    
    9Price/Mix
    
    
    1725
    %
   2005
    
    
    2004Dollars and Pounds (in millions)Net sales
    
    $
    1,396.9
    
    
    $
    1,121.7Material costs
    
    
    900.6
    
    
    
    665.9Material margin
    
    
    496.3
    
    
    
    455.8Conversion costs
    
    
    342.8
    
    
    
    299.9Gross margin
    
    $
    153.5
    
    
    $
    155.9Pounds Sold
    
    
    1,472
    
    
    
    1,383Dollars per Pound SoldNet sales
    
    $
    .949
    
    
    $
    .811Material costs
    
    
    .612
    
    
    
    .481Material margin
    
    
    .337
    
    
    
    .330Conversion costs
    
    
    .233
    
    
    
    .217Gross margin
    
    $
    .104
    
    
    $
    .113
  16




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Special Items
     17




---



##### Table of Contents



Custom
    
    
    Color andSheet and
    
    
    Specialty
    
    
    Engineered(in millions)
    
    Rollstock
    
    
    Compounds
    
    
    Products
    
    
    Corporate
    
    
    TotalTotal Restructuring and Exit Costs
    
    $
    
    
    
    $
    7.4
    
    
    $
    1.9
    
    
    $
    0.8
    
    
    $
    10.1Total Former CEO Retirement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    3.6Total Fixed Asset Charge
    
    
    0.6
    
    
    
    0.5
    
    
    
    0.8
    
    
    
    
    
    
    
    1.9Total Goodwill Impairment
    
    
    
    
    
    
    2.0
    
    
    
    2.5
    
    
    
    
    
    
    
    4.5Total Special Items
    
    $
    0.6
    
    
    $
    9.9
    
    
    $
    5.2
    
    
    $
    4.4
    
    
    $
    20.1
     Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (1
    )%VPI Acquisition
    
    
    6Price/Mix
    
    
    1621
    %
   18




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##### Table of Contents



Color and Specialty Compounds Segment
  Underlying volume
    
    
    (4
    )%VPI Acquisition
    
    
    19Price/Mix
    
    
    1833
    %
  %2005
    
    2004
    
    ChangePounds Sold (in millions)Tolling and Resale Products
    
    
    167.5
    
    
    
    226.1
    
    
    
    (26
    )%Proprietary Products
    
    
    435.8
    
    
    
    401.3
    
    
    
    9Acquired Pounds (proprietary products)
    
    
    81.2
    
    
    
    7.2
    
    
    
    n/aTotal Pounds Sold
    
    
    684.5
    
    
    
    634.6
    
    
    
    8
    %
   Engineered Products Group
  Underlying volume
    
    
    24
    %Price/Mix
    
    
    (5
    )19
    %
   19




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##### Table of Contents



Comparison of Fiscal Years 2004 and 2003
 Consolidated Summary
         Custom Sheet and Rollstock Segment
  20




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##### Table of Contents



Color and Specialty Compounds Segment
  Engineered Products Group
  Other Matters
   21




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flow
  2005
    
    
    2004
    
    
    2003Cash Flows (in millions)Net cash provided by operating activities
    
    $
    105.0
    
    
    $
    31.6
    
    
    $
    69.5Net cash used in investing activities
    
    
    (31.4
    )
    
    
    (131.1
    )
    
    
    (49.3
    )Net cash (used for)/ provided by financing activities
    
    
    (110.3
    )
    
    
    137.5
    
    
    
    (21.6
    )Effect of exchange rate changes
    
    
    
    
    
    
    0.2
    
    
    
    0.2(Decrease) / increase in cash and equivalents
    
    $
    (36.7
    )
    
    $
    38.2
    
    
    $
    (1.2
    )
     Financing Arrangements
   22




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##### Table of Contents



Contractual Obligations
  (in millions)
    
    
    
    
    
    Less Than
    
    
    Years
    
    
    Years
    
    
    Greater thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    2 and 3
    
    
    4 and 5
    
    
    5 YearsLong-term Debt
    
    $
    550.7
    
    
    $
    32.7
    
    
    $
    49.2
    
    
    $
    89.5
    
    
    $
    379.3Capital Lease Obligations
    
    
    1.1
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.2Operating Lease
Obligations
    
    
    24.4
    
    
    
    7.2
    
    
    
    8.8
    
    
    
    4.2
    
    
    
    4.2Purchase Obligations
    
    
    126.2
    
    
    
    124.5
    
    
    
    1.7
    
    
    
    
    
    
    
    Other Long-Term
Liabilities
    
    
    8.7
    
    
    
    0.6
    
    
    
    1.3
    
    
    
    1.1
    
    
    
    5.7Total
    
    $
    711.1
    
    
    $
    165.3
    
    
    $
    61.4
    
    
    $
    95.0
    
    
    $
    389.4
  Significant Accounting Policies, Estimates and Judgments
  Revenue Recognition
 23




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##### Table of Contents



Accounts Receivable
 Inventories
 Acquisition Accounting
 Valuation of Long-Lived Assets
 Valuation of Goodwill
 Contingencies
  24




---



##### Table of Contents



Recently Issued Accounting Standards
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     25




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##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Managements Responsibility for Financial Statements
    Managements Report on Internal Control over Financial Reporting
   26




---



##### Table of Contents



Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
 
       
 27




---



##### Table of Contents



Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
 
     .
   
 28




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 RestatedOctober 29,
    
    
    October 30,2005
    
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    4,601
    
    
    $
    41,272Receivables, net of allowance of $2,557 in 2005 and $2,997 in 2004
    
    
    213,996
    
    
    
    188,427Inventories
    
    
    119,401
    
    
    
    142,035Prepaids and other
    
    
    16,970
    
    
    
    20,718Total Current Assets
    
    
    354,968
    
    
    
    392,452Property, plant, and equipment, net
    
    
    307,386
    
    
    
    320,944Goodwill
    
    
    353,558
    
    
    
    363,110Other intangible assets, net
    
    
    40,710
    
    
    
    43,967Other assets
    
    
    18,926
    
    
    
    12,811Total Assets
    
    $
    1,075,548
    
    
    $
    1,133,284LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    11,175
    
    
    $
    18,027Accounts payable
    
    
    121,682
    
    
    
    108,704Accrued liabilities
    
    
    57,226
    
    
    
    44,223Total Current Liabilities
    
    
    190,083
    
    
    
    170,954Long-Term Debt:Convertible subordinated debentures
    
    
    154,639
    
    
    
    154,639Other long-term debt, less current maturities
    
    
    214,141
    
    
    
    301,425Total Long-Term Debt
    
    
    368,780
    
    
    
    456,064Long-Term Liabilities:Deferred taxes
    
    
    92,044
    
    
    
    91,535Other liabilities
    
    
    10,881
    
    
    
    2,357Total Long-Term Liabilities
    
    
    471,705
    
    
    
    549,956Shareholders Equity:Common stock, 33,131,846 shares issued in 2005 and 2004
    
    
    24,849
    
    
    
    24,849Contributed capital
    
    
    196,811
    
    
    
    196,264Retained earnings
    
    
    217,642
    
    
    
    214,778Treasury stock, at cost, 1,143,701 shares in 2005 and 952,073
shares in 2004
    
    
    (26,019
    )
    
    
    (23,653
    )Accumulated other comprehensive income
    
    
    477
    
    
    
    136Total Shareholders Equity
    
    
    413,760
    
    
    
    412,374Total Liabilities and Shareholders Equity
    
    $
    1,075,548
    
    
    $
    1,133,284
 See accompanying notes to consolidated financial statements.
 29




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share amounts)
 RestatedFiscal Year
    
    2005
    
    
    2004
    
    
    2003Net Sales
    
    $
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    956,160Costs and Expenses:Cost of sales
    
    
    1,243,383
    
    
    
    965,778
    
    
    
    821,011Selling, general, and administrative
    
    
    70,598
    
    
    
    58,731
    
    
    
    53,446Amortization of intangibles
    
    
    4,939
    
    
    
    2,840
    
    
    
    2,187Restructuring and exit costs
    
    
    10,088
    
    
    
    
    
    
    
    Former CEO retirement
    
    
    3,645
    
    
    
    
    
    
    
    Fixed asset charge
    
    
    1,870
    
    
    
    3,522
    
    
    
    972Goodwill impairment
    
    
    4,468
    
    
    
    
    
    
    
    1,338,991
    
    
    
    1,030,871
    
    
    
    877,616Operating Earnings
    
    
    57,869
    
    
    
    90,854
    
    
    
    78,544Interest expense (net of interest income: 2005, $488;
2004, $269; 2003, $146)
    
    
    25,195
    
    
    
    25,436
    
    
    
    24,965Earnings Before Income Taxes
    
    
    32,674
    
    
    
    65,418
    
    
    
    53,579Income taxes
    
    
    14,411
    
    
    
    24,561
    
    
    
    19,316Net Earnings
    
    $
    18,263
    
    
    $
    40,857
    
    
    $
    34,263Net Earnings Per Common Share:Basic
    
    $
    .57
    
    
    $
    1.30
    
    
    $
    1.17Diluted
    
    $
    .57
    
    
    $
    1.28
    
    
    $
    1.16
 See accompanying notes to consolidated financial statements.
 30




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (Dollars in thousands)
 Accumulated
    
    
    TotalOther Compre-
    
    
    Share-Common
    
    
    Contributed
    
    
    Retained
    
    
    Treasury
    
    
    hensive Income
    
    
    holdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    (Loss)
    
    
    Equity(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Balance, November 2, 2002
    
    $
    22,846
    
    
    $
    140,213
    
    
    $
    165,206
    
    
    $
    (28,701
    )
    
    $
    (13,178
    )
    
    $
    286,386Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    34,263
    
    
    
    
    
    
    
    
    
    
    
    34,263Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,038
    
    
    
    6,038Cash flow hedge adjustments,
net of tax of $(1,633)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,639
    
    
    
    2,639Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,940Stock options exercised
    
    
    
    
    
    
    (970
    )
    
    
    
    
    
    
    4,275
    
    
    
    
    
    
    
    3,305Cash dividends
    
    
    
    
    
    
    
    
    
    
    (11,709
    )
    
    
    
    
    
    
    
    
    
    
    (11,709
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,716
    )
    
    
    
    
    
    
    (2,716
    )Balance, November 1, 2003
    
    $
    22,846
    
    
    $
    139,243
    
    
    $
    187,760
    
    
    $
    (27,142
    )
    
    $
    (4,501
    )
    
    $
    318,206Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    40,857
    
    
    
    
    
    
    
    
    
    
    
    40,857Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    941
    
    
    
    941Cash flow hedge adjustments,
net of tax of $(2,170)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,696
    
    
    
    3,696Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,494Common stock issuance
    
    
    2,003
    
    
    
    58,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,922Restricted stock grant
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180Stock options exercised
    
    
    
    
    
    
    (2,078
    )
    
    
    
    
    
    
    6,144
    
    
    
    
    
    
    
    4,066Cash dividends
    
    
    
    
    
    
    
    
    
    
    (13,839
    )
    
    
    
    
    
    
    
    
    
    
    (13,839
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,655
    )
    
    
    
    
    
    
    (2,655
    )Balance, October 30, 2004
    
    $
    24,849
    
    
    $
    196,264
    
    
    $
    214,778
    
    
    $
    (23,653
    )
    
    $
    136
    
    
    $
    412,374Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    18,263
    
    
    
    
    
    
    
    
    
    
    
    18,263Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260
    
    
    
    260Cash flow hedge adjustments,
net of tax of $(50)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    81Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,604Restricted stock grant
    
    
    
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217Stock options exercised
    
    
    
    
    
    
    330
    
    
    
    
    
    
    
    6,339
    
    
    
    
    
    
    
    6,669Cash dividends
    
    
    
    
    
    
    
    
    
    
    (15,399
    )
    
    
    
    
    
    
    
    
    
    
    (15,399
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,705
    )
    
    
    
    
    
    
    (8,705
    )Balance, October 29, 2005
    
    $
    24,849
    
    
    $
    196,811
    
    
    $
    217,642
    
    
    $
    (26,019
    )
    
    $
    477
    
    
    $
    413,760
 See accompanying notes to consolidated financial statements.
 31




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SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 RestatedFiscal Year
    
    2005
    
    
    2004
    
    
    2003Cash Flows From Operating ActivitiesNet earnings
    
    $
    18,263
    
    
    $
    40,857
    
    
    $
    34,263Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    39,380
    
    
    
    33,704
    
    
    
    30,336Restructuring and exit costs
    
    
    7,198
    
    
    
    
    
    
    
    Former CEO retirement
    
    
    831
    
    
    
    
    
    
    
    Fixed asset charge
    
    
    1,870
    
    
    
    3,522
    
    
    
    972Goodwill impairment
    
    
    4,468
    
    
    
    
    
    
    
    Change in current assets and liabilities, net of
effects of acquisitions and divestitures:Receivables
    
    
    (24,632
    )
    
    
    (21,599
    )
    
    
    (18,472
    )Inventories
    
    
    23,050
    
    
    
    (32,771
    )
    
    
    (713
    )Prepaids and other
    
    
    3,762
    
    
    
    (7,538
    )
    
    
    (2,192
    )Accounts payable
    
    
    14,883
    
    
    
    3,987
    
    
    
    13,468Accrued liabilities
    
    
    9,736
    
    
    
    2,914
    
    
    
    (3,881
    )Other, net
    
    
    6,209
    
    
    
    8,571
    
    
    
    15,704Net cash provided by operating activities
    
    
    105,018
    
    
    
    31,647
    
    
    
    69,485Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (39,265
    )
    
    
    (35,003
    )
    
    
    (22,009
    )Business acquisitions
    
    
    (1,224
    )
    
    
    (87,952
    )
    
    
    (27,589
    )Outsourcing acquisitions
    
    
    
    
    
    
    (8,141
    )
    
    
    Dispositions of assets
    
    
    9,116
    
    
    
    
    
    
    
    293Net cash used in investing activities
    
    
    (31,373
    )
    
    
    (131,096
    )
    
    
    (49,305
    )Cash Flows From Financing ActivitiesBank credit facility (payments)/borrowings, net
    
    
    (76,370
    )
    
    
    (27,204
    )
    
    
    8,530Borrowings from issuance of notes
    
    
    
    
    
    
    150,000
    
    
    
    Payments on notes
    
    
    (17,857
    )
    
    
    (32,857
    )
    
    
    (17,857
    )Payments on bonds and leases
    
    
    (671
    )
    
    
    (133
    )
    
    
    (150
    )Issuance of common stock
    
    
    
    
    
    
    60,922
    
    
    
    Cash dividends on common stock
    
    
    (11,547
    )
    
    
    (13,839
    )
    
    
    (11,709
    )Stock options exercised
    
    
    4,083
    
    
    
    3,234
    
    
    
    2,993Treasury stock acquired
    
    
    (7,982
    )
    
    
    (2,655
    )
    
    
    (3,436
    )Net cash (used) provided by financing
activities
    
    
    (110,344
    )
    
    
    137,468
    
    
    
    (21,629
    )Effect of exchange rate changes on cash and
equivalents
    
    
    28
    
    
    
    199
    
    
    
    210(Decrease) increase in cash and equivalents
    
    
    (36,671
    )
    
    
    38,218
    
    
    
    (1,239
    )Cash and Equivalents at Beginning of Year
    
    
    41,272
    
    
    
    3,054
    
    
    
    4,293Cash and Equivalents at End of Year
    
    $
    4,601
    
    
    $
    41,272
    
    
    $
    3,054
 See accompanying notes to consolidated financial statements
 32




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 1) Restatement of Historical Financial Statements
   Impact on Consolidated Balance Sheets as of October 29, 2005 and October 30, 2004
 Reported
    
    
    
    
    
    Restated
    
    
    Reported
    
    
    
    
    
    RestatedOctober 29,
    
    Adjust-
    
    October 29,
    
    
    October 30,
    
    Adjust-
    
    October 30,2005
    
    ment
    
    2005
    
    
    2004
    
    ment
    
    2004Property, plant, and equipment, net
    
    $
    307,386
    
    
    $
    
    
    
    $
    307,386
    
    
    
    $
    330,745
    
    
    $
    (9,801
    )
    
    $
    320,944Goodwill
    
    
    352,405
    
    
    
    1,153
    
    
    
    353,558
    
    
    
    
    361,957
    
    
    
    1,153
    
    
    
    363,110Total Assets
    
    
    1,074,395
    
    
    
    1,153
    
    
    
    1,075,548
    
    
    
    
    1,141,932
    
    
    
    (8,648
    )
    
    
    1,133,284Deferred taxes
    
    
    91,605
    
    
    
    439
    
    
    
    92,044
    
    
    
    
    94,825
    
    
    
    (3,290
    )
    
    
    91,535Total Long-Term Liabilities
    
    
    471,266
    
    
    
    439
    
    
    
    471,705
    
    
    
    
    553,246
    
    
    
    (3,290
    )
    
    
    549,956Retained earnings
    
    
    216,928
    
    
    
    714
    
    
    
    217,642
    
    
    
    
    220,136
    
    
    
    (5,358
    )
    
    
    214,778Total Shareholders Equity
    
    
    413,046
    
    
    
    714
    
    
    
    413,760
    
    
    
    
    417,732
    
    
    
    (5,358
    )
    
    
    412,374Total Liabilities and Shareholders Equity
    
    
    1,074,395
    
    
    
    1,153
    
    
    
    1,075,548
    
    
    
    
    1,141,932
    
    
    
    (8,648
    )
    
    
    1,133,284
 33




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Impact on Fiscal 2005, 2004 and 2003 Consolidated Statements of Operations
 Reported
    
    
    Adjust-
    
    
    Restated
    
    
    
    Reported
    
    
    Adjust-
    
    
    Restated
    
    
    
    Reported
    
    
    Adjust-
    
    
    Restated2005
    
    
    ment
    
    
    2005
    
    
    
    2004
    
    
    ment
    
    
    2004
    
    
    
    2003
    
    
    ment
    
    
    2003Cost of sales
    
    $
    1,244,276
    
    
    $
    (893
    )
    
    $
    1,243,383
    
    
    
    $
    966,963
    
    
    $
    (1,185
    )
    
    $
    965,778
    
    
    
    $
    822,147
    
    
    $
    (1,136
    )
    
    $
    821,011Selling, general,
and
administrative
    
    
    70,712
    
    
    
    (114
    )
    
    
    70,598
    
    
    
    
    58,898
    
    
    
    (167
    )
    
    
    58,731
    
    
    
    
    53,540
    
    
    
    (94
    )
    
    
    53,446Fixed asset charge
    
    
    10,664
    
    
    
    (8,794
    )
    
    
    1,870
    
    
    
    
    223
    
    
    
    3,299
    
    
    
    3,522
    
    
    
    
    
    
    
    
    972
    
    
    
    972Operating Earnings
    
    
    48,068
    
    
    
    9,801
    
    
    
    57,869
    
    
    
    
    92,801
    
    
    
    (1,947
    )
    
    
    90,854
    
    
    
    
    78,286
    
    
    
    258
    
    
    
    78,544Earnings Before
Income Taxes
    
    
    22,873
    
    
    
    9,801
    
    
    
    32,674
    
    
    
    
    67,365
    
    
    
    (1,947
    )
    
    
    65,418
    
    
    
    
    53,321
    
    
    
    258
    
    
    
    53,579Income taxes
    
    
    10,682
    
    
    
    3,729
    
    
    
    14,411
    
    
    
    
    25,302
    
    
    
    (741
    )
    
    
    24,561
    
    
    
    
    19,218
    
    
    
    98
    
    
    
    19,316Net Earnings
    
    
    12,191
    
    
    
    6,072
    
    
    
    18,263
    
    
    
    
    42,063
    
    
    
    (1,206
    )
    
    
    40,857
    
    
    
    
    34,103
    
    
    
    160
    
    
    
    34,263Net Earnings Per
Common Share:Basic
    
    $
    .38
    
    
    $
    .19
    
    
    $
    .57
    
    
    
    $
    1.34
    
    
    $
    (.04
    )
    
    $
    1.30
    
    
    
    $
    1.17
    
    
    $
    
    
    
    $
    1.17Diluted
    
    $
    .38
    
    
    $
    .19
    
    
    $
    .57
    
    
    
    $
    1.32
    
    
    $
    (.04
    )
    
    $
    1.28
    
    
    
    $
    1.15
    
    
    $
    .01
    
    
    $
    1.16Impact on Fiscal 2005, 2004 and 2003 Consolidated Statements of Cash FlowsReported
    
    Adjust-
    
    Restated
    
    
    Reported
    
    Adjust-
    
    Restated
    
    
    Reported
    
    Adjust-
    
    Restated2005
    
    ment
    
    2005
    
    
    2004
    
    ment
    
    2004
    
    
    2003
    
    ment
    
    2003Net earnings
    
    $
    12,191
    
    
    $
    6,072
    
    
    $
    18,263
    
    
    
    $
    42,063
    
    
    $
    (1,206
    )
    
    $
    40,857
    
    
    
    $
    34,103
    
    
    $
    160
    
    
    $
    34,263Depreciation and
amortization
    
    
    40,387
    
    
    
    (1,007
    )
    
    
    39,380
    
    
    
    
    35,056
    
    
    
    (1,352
    )
    
    
    33,704
    
    
    
    
    31,566
    
    
    
    (1,230
    )
    
    
    30,336Fixed asset charge
    
    
    10,664
    
    
    
    (8,794
    )
    
    
    1,870
    
    
    
    
    223
    
    
    
    3,299
    
    
    
    3,522
    
    
    
    
    
    
    
    
    972
    
    
    
    972Other, net
    
    
    2,480
    
    
    
    3,729
    
    
    
    6,209
    
    
    
    
    9,312
    
    
    
    (741
    )
    
    
    8,571
    
    
    
    
    15,606
    
    
    
    98
    
    
    
    15,704Net cash provided
by operating
activities
    
    
    105,018
    
    
    
    
    
    
    
    105,018
    
    
    
    
    31,647
    
    
    
    
    
    
    
    31,647
    
    
    
    
    69,485
    
    
    
    
    
    
    
    69,485
 Impact on unaudited quarter end and audited fiscal year end Consolidated Balance Sheets
 Reported
    
    Adjust-
    
    Restated
    
    
    Reported
    
    Adjust-
    
    Restated2005
    
    ment
    
    2005
    
    
    2004
    
    ment
    
    2004Property, Plant and Equipment1st Quarter (Jan.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    $
    335,257
    
    
    $
    (9,297
    )
    
    $
    325,960
    
    
    
    $
    283,601
    
    
    $
    (7,516
    )
    
    $
    276,0852nd Quarter (Apr.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    320,234
    
    
    
    
    
    
    
    320,234
    
    
    
    
    281,883
    
    
    
    (7,178
    )
    
    
    274,7053rd Quarter (Jul.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    316,507
    
    
    
    
    
    
    
    316,507
    
    
    
    
    285,447
    
    
    
    (6,840
    )
    
    
    278,607Fiscal Year (Oct.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    307,386
    
    
    
    
    
    
    
    307,386
    
    
    
    
    330,745
    
    
    
    (9,801
    )
    
    
    320,944Goodwill1st Quarter (Jan.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    $
    361,029
    
    
    $
    1,153
    
    
    $
    362,182
    
    
    
    $
    334,392
    
    
    $
    1,153
    
    
    $
    335,5452nd Quarter (Apr.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    358,159
    
    
    
    1,153
    
    
    
    359,312
    
    
    
    
    334,392
    
    
    
    1,153
    
    
    
    335,5453rd Quarter (Jul.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    358,382
    
    
    
    1,153
    
    
    
    359,535
    
    
    
    
    334,392
    
    
    
    1,153
    
    
    
    335,545Fiscal Year (Oct.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    352,405
    
    
    
    1,153
    
    
    
    353,558
    
    
    
    
    361,957
    
    
    
    1,153
    
    
    
    363,110Deferred Taxes1st Quarter (Jan.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    $
    95,396
    
    
    $
    (3,098
    )
    
    $
    92,298
    
    
    
    $
    80,191
    
    
    $
    (2,420
    )
    
    $
    77,7712nd Quarter (Apr.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    89,478
    
    
    
    439
    
    
    
    89,917
    
    
    
    
    81,336
    
    
    
    (2,291
    )
    
    
    79,0453rd Quarter (Jul.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    90,525
    
    
    
    439
    
    
    
    90,964
    
    
    
    
    84,542
    
    
    
    (2,162
    )
    
    
    82,380Fiscal Year (Oct.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    91,605
    
    
    
    439
    
    
    
    92,044
    
    
    
    
    94,825
    
    
    
    (3,290
    )
    
    
    91,535Retained Earnings1st Quarter (Jan.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    $
    219,089
    
    
    $
    (5,046
    )
    
    $
    214,043
    
    
    
    $
    196,388
    
    
    $
    (3,943
    )
    
    $
    192,4452nd Quarter (Apr.)
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    215,161
    
    
    
    714
    
    
    
    215,875
    
    
    
    
    206,376
    
    
    
    (3,734
    )
    
    
    202,6423rd Quarter (Jul.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    215,619
    
    
    
    714
    
    
    
    216,333
    
    
    
    
    214,553
    
    
    
    (3,525
    )
    
    
    211,028Fiscal Year (Oct.)
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    216,928
    
    
    
    714
    
    
    
    217,642
    
    
    
    
    220,136
    
    
    
    (5,358
    )
    
    
    214,778
 34




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Impact on unaudited quarterly periods and audited Fiscal 2005 and 2004 Consolidated Statements
of Operations
 Reported
    
    
    Adjust-
    
    
    Restated
    
    
    
    Reported
    
    
    Adjust-
    
    
    Restated2005
    
    
    ment
    
    
    2005
    
    
    
    2004
    
    
    ment
    
    
    2004Cost of sales1st Quarter
    
    $
    276,096
    
    
    $
    (447
    )
    
    $
    275,649
    
    
    
    $
    208,040
    
    
    $
    (296
    )
    
    $
    207,7442nd Quarter
    
    
    333,046
    
    
    
    (446
    )
    
    
    332,600
    
    
    
    
    243,879
    
    
    
    (296
    )
    
    
    243,5833rd Quarter
    
    
    308,839
    
    
    
    
    
    
    
    308,839
    
    
    
    
    247,078
    
    
    
    (296
    )
    
    
    246,7824th Quarter
    
    
    326,295
    
    
    
    
    
    
    
    326,295
    
    
    
    
    267,966
    
    
    
    (297
    )
    
    
    267,669Fiscal Year
    
    $
    1,244,276
    
    
    $
    (893
    )
    
    $
    1,243,383
    
    
    
    $
    966,963
    
    
    $
    (1,185
    )
    
    $
    965,778Selling, General and
Administrative1st Quarter
    
    $
    16,875
    
    
    $
    (57
    )
    
    $
    16,818
    
    
    
    $
    14,030
    
    
    $
    (42
    )
    
    $
    13,9882nd Quarter
    
    
    18,941
    
    
    
    (57
    )
    
    
    18,884
    
    
    
    
    15,055
    
    
    
    (42
    )
    
    
    15,0133rd Quarter
    
    
    16,923
    
    
    
    
    
    
    
    16,923
    
    
    
    
    15,274
    
    
    
    (42
    )
    
    
    15,2324th Quarter
    
    
    17,973
    
    
    
    
    
    
    
    17,973
    
    
    
    
    14,539
    
    
    
    (41
    )
    
    
    14,498Fiscal Year
    
    $
    70,712
    
    
    $
    (114
    )
    
    $
    70,598
    
    
    
    $
    58,898
    
    
    $
    (167
    )
    
    $
    58,731Fixed Asset Charge1st Quarter
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2nd Quarter
    
    
    10,386
    
    
    
    (8,794
    )
    
    
    1,592
    
    
    
    
    
    
    
    
    
    
    
    
    3rd Quarter
    
    
    206
    
    
    
    
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    
    4th Quarter
    
    
    72
    
    
    
    
    
    
    
    72
    
    
    
    
    223
    
    
    
    3,299
    
    
    
    3,522Fiscal Year
    
    $
    10,664
    
    
    $
    (8,794
    )
    
    $
    1,870
    
    
    
    $
    223
    
    
    $
    3,299
    
    
    $
    3,522Operating Earnings1st Quarter
    
    $
    10,283
    
    
    $
    504
    
    
    $
    10,787
    
    
    
    $
    18,799
    
    
    $
    338
    
    
    $
    19,1372nd Quarter
    
    
    6,252
    
    
    
    9,297
    
    
    
    15,549
    
    
    
    
    28,050
    
    
    
    338
    
    
    
    28,3883rd Quarter
    
    
    13,156
    
    
    
    
    
    
    
    13,156
    
    
    
    
    24,934
    
    
    
    338
    
    
    
    25,2724th Quarter
    
    
    18,377
    
    
    
    
    
    
    
    18,377
    
    
    
    
    21,018
    
    
    
    (2,961
    )
    
    
    18,057Fiscal Year
    
    $
    48,068
    
    
    $
    9,801
    
    
    $
    57,869
    
    
    
    $
    92,801
    
    
    $
    (1,947
    )
    
    $
    90,854Earnings before
Income Taxes1st Quarter
    
    $
    3,809
    
    
    $
    504
    
    
    $
    4,313
    
    
    
    $
    12,469
    
    
    $
    338
    
    
    $
    12,8072nd Quarter
    
    
    (126
    )
    
    
    9,297
    
    
    
    9,171
    
    
    
    
    21,875
    
    
    
    338
    
    
    
    22,2133rd Quarter
    
    
    6,794
    
    
    
    
    
    
    
    6,794
    
    
    
    
    18,953
    
    
    
    338
    
    
    
    19,2914th Quarter
    
    
    12,396
    
    
    
    
    
    
    
    12,396
    
    
    
    
    14,068
    
    
    
    (2,961
    )
    
    
    11,107Fiscal Year
    
    $
    22,873
    
    
    $
    9,801
    
    
    $
    32,674
    
    
    
    $
    67,365
    
    
    $
    (1,947
    )
    
    $
    65,418Income Taxes1st Quarter
    
    $
    991
    
    
    $
    192
    
    
    $
    1,183
    
    
    
    $
    4,763
    
    
    $
    129
    
    
    $
    4,8922nd Quarter
    
    
    (46
    )
    
    
    3,537
    
    
    
    3,491
    
    
    
    
    8,356
    
    
    
    129
    
    
    
    8,4853rd Quarter
    
    
    2,505
    
    
    
    
    
    
    
    2,505
    
    
    
    
    7,241
    
    
    
    129
    
    
    
    7,3704th Quarter
    
    
    7,232
    
    
    
    
    
    
    
    7,232
    
    
    
    
    4,942
    
    
    
    (1,128
    )
    
    
    3,814Fiscal Year
    
    $
    10,682
    
    
    $
    3,729
    
    
    $
    14,411
    
    
    
    $
    25,302
    
    
    $
    (741
    )
    
    $
    24,561Net Earnings1st Quarter
    
    $
    2,818
    
    
    $
    312
    
    
    $
    3,130
    
    
    
    $
    7,706
    
    
    $
    209
    
    
    $
    7,9152nd Quarter
    
    
    (80
    )
    
    
    5,760
    
    
    
    5,680
    
    
    
    
    13,519
    
    
    
    209
    
    
    
    13,7283rd Quarter
    
    
    4,289
    
    
    
    
    
    
    
    4,289
    
    
    
    
    11,712
    
    
    
    209
    
    
    
    11,9214th Quarter
    
    
    5,164
    
    
    
    
    
    
    
    5,164
    
    
    
    
    9,126
    
    
    
    (1,833
    )
    
    
    7,293Fiscal Year
    
    $
    12,191
    
    
    $
    6,072
    
    
    $
    18,263
    
    
    
    $
    42,063
    
    
    $
    (1,206
    )
    
    $
    40,857
 35




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Impact on unaudited quarterly periods and audited Fiscal 2005 and 2004 Consolidated Statements
of Cash Flows
 Reported
    
    Adjust-
    
    Restated
    
    
    Reported
    
    Adjust-
    
    Restated2005
    
    ment
    
    2005
    
    
    2004
    
    ment
    
    2004Net Earnings1st Quarter
    
    $
    2,818
    
    
    $
    312
    
    
    $
    3,130
    
    
    
    $
    7,706
    
    
    $
    209
    
    
    $
    7,9152nd Quarter Year-to-Date
    
    
    2,738
    
    
    
    6,072
    
    
    
    8,810
    
    
    
    
    21,225
    
    
    
    418
    
    
    
    21,6433rd Quarter Year-to-Date
    
    
    7,027
    
    
    
    6,072
    
    
    
    13,099
    
    
    
    
    32,937
    
    
    
    627
    
    
    
    33,564Fiscal Year
    
    
    12,191
    
    
    
    6,072
    
    
    
    18,263
    
    
    
    
    42,063
    
    
    
    (1,206
    )
    
    
    40,857Depreciation and Amortization1st Quarter
    
    $
    10,296
    
    
    $
    (504
    )
    
    $
    9,792
    
    
    
    $
    8,335
    
    
    $
    (338
    )
    
    $
    7,9972nd Quarter Year-to-Date
    
    
    20,739
    
    
    
    (1,007
    )
    
    
    19,732
    
    
    
    
    16,968
    
    
    
    (676
    )
    
    
    16,2923rd Quarter Year-to-Date
    
    
    30,633
    
    
    
    (1,007
    )
    
    
    29,626
    
    
    
    
    25,484
    
    
    
    (1,014
    )
    
    
    24,470Fiscal Year
    
    
    40,387
    
    
    
    (1,007
    )
    
    
    39,380
    
    
    
    
    35,056
    
    
    
    (1,352
    )
    
    
    33,704Fixed Asset Charge1st Quarter
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2nd Quarter Year-to-Date
    
    
    10,386
    
    
    
    (8,794
    )
    
    
    1,592
    
    
    
    
    
    
    
    
    
    
    
    
    3rd Quarter Year-to-Date
    
    
    10,592
    
    
    
    (8,794
    )
    
    
    1,798
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal Year
    
    
    10,664
    
    
    
    (8,794
    )
    
    
    1,870
    
    
    
    
    223
    
    
    
    3,299
    
    
    
    3,522Other, net1st Quarter
    
    $
    1,059
    
    
    $
    192
    
    
    $
    1,251
    
    
    
    $
    592
    
    
    $
    129
    
    
    $
    7212nd Quarter Year-to-Date
    
    
    (3,503
    )
    
    
    3,729
    
    
    
    226
    
    
    
    
    104
    
    
    
    258
    
    
    
    3623rd Quarter Year-to-Date
    
    
    (2,263
    )
    
    
    3,729
    
    
    
    1,466
    
    
    
    
    2,181
    
    
    
    387
    
    
    
    2,568Fiscal Year
    
    
    2,480
    
    
    
    3,729
    
    
    
    6,209
    
    
    
    
    9,312
    
    
    
    (741
    )
    
    
    8,571Net cash provided by operating
activities1st Quarter
    
    $
    (12,084
    )
    
    $
    
    
    
    $
    (12,084
    )
    
    
    $
    (3,268
    )
    
    $
    
    
    
    $
    (3,268
    )2nd Quarter Year-to-Date
    
    
    10,184
    
    
    
    
    
    
    
    10,184
    
    
    
    
    (1,750
    )
    
    
    
    
    
    
    (1,750
    )3rd Quarter Year-to-Date
    
    
    62,334
    
    
    
    
    
    
    
    62,334
    
    
    
    
    16,649
    
    
    
    
    
    
    
    16,649Fiscal Year
    
    
    105,018
    
    
    
    
    
    
    
    105,018
    
    
    
    
    31,647
    
    
    
    
    
    
    
    31,647
 2) Significant Accounting Policies
 Basis of Presentation
 Principles of Consolidation
 Foreign Currency Translation
 Cash Equivalents
 Allowance for Doubtful Accounts
 36




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Inventories
 Property, Plant, and Equipment
 YearsBuildings and leasehold improvements
    
    
    20-25Machinery and equipment
    
    
    12-16Furniture and fixtures
    
    
    5-10
  Valuation of Goodwill and Intangible Assets
  Financial Instruments
  37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  
    
    Cash, accounts receivable, accounts payable, and accrued liabilities  the carrying
value of these instruments approximates fair value due to their short-term nature;
    
    Derivative financial instruments  based upon quoted market prices or market prices for
instruments with similar terms and maturities; and
    
    Long-term debt (including bank credit facilities and convertible subordinated
debentures)  based on quoted, current market prices for the same or similar issues. As of
October 29, 2005, the fair value of the convertible subordinated debentures was
approximately $156,082 compared to the carrying amount of $154,639 and the fair value of
other long-term debt was $213,678 compared to the carrying amount of $214,141.
 Stock-Based Compensation
 Restated2005
    
    
    2004
    
    
    2003Net Earnings as Reported
    
    $
    18,263
    
    
    $
    40,857
    
    
    $
    34,263Add: Stock-based compensation included in net
earnings as reported, net of tax
    
    
    649
    
    
    
    112
    
    
    
    Deduct: Total stock-based compensation, net of tax
    
    
    (2,535
    )
    
    
    (1,873
    )
    
    
    (2,089
    )Pro Forma Net Earnings
    
    $
    16,377
    
    
    $
    39,096
    
    
    $
    32,174Earnings Per ShareAs Reported:Basic
    
    $
    .57
    
    
    $
    1.30
    
    
    $
    1.17Diluted
    
    
    .57
    
    
    
    1.28
    
    
    
    1.16Pro Forma:Basic
    
    $
    .51
    
    
    $
    1.24
    
    
    $
    1.10Diluted
    
    
    .51
    
    
    
    1.23
    
    
    
    1.09Using the Black-Scholes option-pricing model, the estimated weighted-average fair value of
options granted during fiscal 2005, 2004, and 2003 is as follows:2005
    
    2004
    
    2003Weighted Average Fair Value
    
    $
    7.65
    
    
    $
    6.94
    
    
    $
    5.58Assumptions:Expected Dividend Yield
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Expected Volatility
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Risk-Free Interest Rates
    
    
    3.59-3.79
    %
    
    
    2.95-3.70
    %
    
    
    2.52-3.50
    %Expected Lives
    
    5.5 years
    
    5.5 years
    
    5.0 years
  38




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2005
    
    2004Fair value per share granted
    
    $
    26.02
    
    
    $
    23.70Compensation expense recognized
    
    $
    217
    
    
    $
    180
  Revenue Recognition
 Income Taxes
 3) Acquisitions
    39




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 4) Restructuring
      2005Fixed asset impairment, net
    
    $
    6,624Goodwill write-offs
    
    
    1,419Facility restructuring
    
    
    1,295Airplane lease buy-out
    
    
    750$
    10,088
   2005Custom Sheet and Rollstock
    
    $
    (1,077
    )Color and Specialty Compounds
    
    
    6,655Engineered Products
    
    
    1,046$
    6,624
 40




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2005Custom Sheet and Rollstock
    
    $
    896Color and Specialty Compounds
    
    
    Engineered Products
    
    
    523$
    1,419
  2005Custom Sheet and Rollstock
    
    $
    187Color and Specialty Compounds
    
    
    733Engineered Products
    
    
    375$
    1,295
   5) Former CEO Retirement
   
    
    A cash settlement paid June 3, 2005, based upon a multiple of Mr. Buechlers former
annual salary plus his previous deferred compensation arrangement, totaling $2,711.
    
    A bonus to be paid based on the Companys fiscal 2005 results pro-rated for Mr.
Buechlers employment through the effective date of the Retirement Agreement.
    
    An amendment to the terms of Mr. Buechlers vested stock options to permit him to
retire before having reached the minimum retirement age of 60 specified in his option
agreements, resulting in a new measurement of the options for accounting purposes and a
non-cash expense of $831.
  41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 6) Fixed Asset Charge
    Restated2005
    
    
    2004
    
    
    2003Custom Sheet and Rollstock
    
    $
    547
    
    
    $
    2,306
    
    
    $
    130Color and Specialty Compounds
    
    
    533
    
    
    
    419
    
    
    
    Engineered Products
    
    
    790
    
    
    
    589
    
    
    
    411Corporate
    
    
    
    
    
    
    208
    
    
    
    431$
    1,870
    
    
    $
    3,522
    
    
    $
    972
 7) Inventories
  2005
    
    
    2004Raw materials
    
    $
    64,262
    
    
    $
    73,228Production supplies
    
    
    9,479
    
    
    
    9,343Finished goods
    
    
    45,660
    
    
    
    59,464$
    119,401
    
    
    $
    142,035
 42




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 8) Property, Plant, and Equipment
  2005
    
    
    2004(Restated)Land
    
    $
    11,615
    
    
    $
    14,167Buildings and leasehold improvements
    
    
    78,735
    
    
    
    84,912Machinery and equipment
    
    
    412,903
    
    
    
    404,671Furniture and fixtures
    
    
    7,475
    
    
    
    9,088510,728
    
    
    
    512,838Less: Accumulated depreciation
    
    
    203,342
    
    
    
    191,894$
    307,386
    
    
    $
    320,944
 9) Goodwill and Identifiable Intangible Assets
  RestatedColor andCustom Sheet
    
    
    Specialty
    
    
    Engineeredand Rollstock
    
    
    Compounds
    
    
    Products
    
    
    TotalBalance, November 1, 2003
    
    $
    202,057
    
    
    $
    95,737
    
    
    $
    37,751
    
    
    $
    335,545Acquisition
    
    
    11,088
    
    
    
    8,650
    
    
    
    478
    
    
    
    20,216Reclassifications
    
    
    721
    
    
    
    6,628
    
    
    
    
    
    
    
    7,349Balance, October 30, 2004
    
    $
    213,866
    
    
    $
    111,015
    
    
    $
    38,229
    
    
    $
    363,110Impairments
    
    
    
    
    
    
    (2,034
    )
    
    
    (2,434
    )
    
    
    (4,468
    )Business divestitures
    
    
    (896
    )
    
    
    
    
    
    
    (523
    )
    
    
    (1,419
    )Reclassifications
    
    
    (17,611
    )
    
    
    13,946
    
    
    
    
    
    
    
    (3,665
    )Balance, October 29, 2005
    
    $
    195,359
    
    
    $
    122,927
    
    
    $
    35,272
    
    
    $
    353,558
    Gross
    
    
    AccumulatedCarrying Amount
    
    
    Amortization2005
    
    
    2004
    
    
    2005
    
    
    2004Non-compete agreements
    
    $
    3,680
    
    
    $
    3,960
    
    
    $
    2,122
    
    
    $
    1,242Customer contracts/relationships
    
    
    21,571
    
    
    
    18,981
    
    
    
    5,321
    
    
    
    2,380Product formulations
    
    
    17,476
    
    
    
    17,811
    
    
    
    3,474
    
    
    
    2,063$
    42,727
    
    
    $
    40,752
    
    
    $
    10,917
    
    
    $
    5,685
  43




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  IntangibleFiscal Year Ended
    
    Amortization2006
    
    $
    4,4802007
    
    
    4,0862008
    
    
    3,0082009
    
    
    2,5932010
    
    
    2,345$
    16,512
  10) Convertible Subordinated Debentures
  
    
    Are convertible along with the trusts preferred securities, at the option of the
preferred security holders, into shares of the Companys common stock at a conversion
price equivalent to $30.55 per share of common stock, for a total of 1,636,661 shares;
    
    Are redeemable along with the trusts preferred securities, at the Companys option,
at a price equal to 102.6% of the principal amount plus accrued interest through March
1, 2006. This amount declines annually to a price equal to the principal amount plus
accrued and unpaid interest after March 1, 2009; and
    
    Mature and are payable, along with the trusts preferred securities, on March 31,
2014, if they have not been previously redeemed or converted.
  
    
    Are convertible along with the trusts preferred securities, at the option of the
preferred security holders, into shares of the Companys common stock at a conversion
price equivalent to $34.00 per share of common stock, for a total of 2,941,176 shares;
    
    Are redeemable along with the trusts preferred securities, at the Companys option,
at a price equal to 103.5% of the principal amount plus accrued interest through March
1, 2006. This amount declines annually to a price equal to the principal amount plus
accrued and unpaid interest after March 1, 2010; and
    
    Mature and are payable, along with the trusts preferred securities, on March 31,
2015, if they have not been previously redeemed or converted.
 44




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 11) Other Long-Term Debt
  2005
    
    
    20045.54% Senior Unsecured 2004 Notes
    
    $
    150,000
    
    
    $
    150,0007.0% Senior Unsecured 1997 Notes
    
    
    12,857
    
    
    
    19,2867.62% Guaranteed Senior Unsecured 1996 Notes
    
    
    4,286
    
    
    
    8,5717.21% Senior Unsecured 1995 Notes
    
    
    
    
    
    
    7,143Bank Credit Facilities
    
    
    24,200
    
    
    
    125,000Bank Term Loan
    
    
    24,126
    
    
    
    Other
    
    
    9,847
    
    
    
    9,452225,316
    
    
    
    319,452Less current maturities
    
    
    11,175
    
    
    
    18,027$
    214,141
    
    
    $
    301,425
     45




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   Fiscal Year Ended
    
    Maturities2006
    
    $
    11,1752007
    
    
    6,6162008
    
    
    1552009
    
    
    24,3662010
    
    
    24,285Thereafter
    
    
    158,719$
    225,316
  12) Shareholders Equity and Equity Compensation
      46




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedShares
    
    
    Average
    
    
    Shares
    
    
    Average
    
    
    Shares
    
    
    AverageUnder
    
    
    Exercise
    
    
    Under
    
    
    Exercise
    
    
    Under
    
    
    ExerciseOption
    
    
    Price
    
    
    Option
    
    
    Price
    
    
    Option
    
    
    PriceOutstanding, beginning
of year
    
    
    2,677
    
    
    $
    20.38
    
    
    
    2,522
    
    
    $
    19.50
    
    
    
    2,382
    
    
    $
    19.23Granted
    
    
    577
    
    
    
    24.46
    
    
    
    453
    
    
    
    22.08
    
    
    
    461
    
    
    
    18.74Exercised
    
    
    (280
    )
    
    
    15.80
    
    
    
    (298
    )
    
    
    15.03
    
    
    
    (250
    )
    
    
    15.25Canceled/Expired
    
    
    (797
    )
    
    
    22.70
    
    
    
    
    
    
    
    
    
    
    
    (71
    )
    
    
    20.78Outstanding, end of year
    
    
    2,177
    
    
    
    21.21
    
    
    
    2,677
    
    
    
    20.38
    
    
    
    2,522
    
    
    
    19.50Exercisable, end of year
    
    
    1,313
    
    
    
    
    
    
    
    1,606
    
    
    
    
    
    
    
    1,443
  Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Remaining
    
    
    
    
    
    AverageOutstanding
    
    Exercise
    
    Contractual
    
    Exercisable
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Price
    
    Life
    
    Shares
    
    Price$10.88 - 17.01
    
    
    491
    
    
    $
    14.10
    
    
    5.1 years
    
    
    391
    
    
    $
    13.35$18.00 - 21.00
    
    
    324
    
    
    
    18.20
    
    
    6.3 years
    
    
    193
    
    
    
    18.27$21.10 - 21.90
    
    
    535
    
    
    
    21.47
    
    
    6.6 years
    
    
    292
    
    
    
    21.27$21.94 - 28.94
    
    
    827
    
    
    
    26.45
    
    
    6.7 years
    
    
    437
    
    
    
    26.982,177
    
    
    
    
    
    
    
    
    
    
    
    1,313
  13) Income Taxes
  Restated2005
    
    
    2004
    
    
    2003United States
    
    $
    31,769
    
    
    $
    59,422
    
    
    $
    49,817Non-U.S. operations
    
    
    905
    
    
    
    5,996
    
    
    
    3,762$
    32,674
    
    
    $
    65,418
    
    
    $
    53,579
 47




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Restated2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    9,474
    
    
    $
    13,269
    
    
    $
    8,614State and Local
    
    
    611
    
    
    
    1,866
    
    
    
    1,430Foreign
    
    
    2,482
    
    
    
    2,376
    
    
    
    1,268Total Current
    
    
    12,567
    
    
    
    17,511
    
    
    
    11,312Deferred:Federal
    
    
    3,084
    
    
    
    5,928
    
    
    
    7,074State and Local
    
    
    367
    
    
    
    824
    
    
    
    1,053Foreign
    
    
    (1,607
    )
    
    
    298
    
    
    
    (123
    )Total Deferred
    
    
    1,844
    
    
    
    7,050
    
    
    
    8,004Provision for Income Taxes
    
    $
    14,411
    
    
    $
    24,561
    
    
    $
    19,316
  Restated2005
    
    
    2004
    
    
    2003Federal income taxes at statutory rate
    
    $
    11,436
    
    
    $
    22,896
    
    
    $
    18,753Impairment of goodwill
    
    
    1,454
    
    
    
    
    
    
    
    Foreign valuation allowance
    
    
    1,133
    
    
    
    
    
    
    
    State income taxes, net of applicable
Federal income tax benefits
    
    
    636
    
    
    
    1,728
    
    
    
    1,616Research and development tax credit
    
    
    (524
    )
    
    
    (624
    )
    
    
    (649
    )Other
    
    
    276
    
    
    
    561
    
    
    
    (404
    )$
    14,411
    
    
    $
    24,561
    
    
    $
    19,316
   Restated2005
    
    
    2004Deferred tax assets:Employee benefits and compensation
    
    $
    3,398
    
    
    $
    2,507Workers compensation
    
    
    1,668
    
    
    
    1,474Deferred compensation benefit plans
    
    
    1,266
    
    
    
    973Bad debt reserves
    
    
    1,068
    
    
    
    955Other
    
    
    441
    
    
    
    590Foreign net operating loss
    
    
    2,443
    
    
    
    Valuation allowance
    
    
    (1,133
    )
    
    
    Total deferred tax assets
    
    $
    9,151
    
    
    $
    6,499Deferred tax liabilities:Property, plant and equipment
    
    $
    (54,929
    )
    
    $
    (56,101
    )Goodwill and other intangibles
    
    
    (38,673
    )
    
    
    (36,534
    )Inventory capitalization and reserves
    
    
    (2,279
    )
    
    
    (970
    )Total deferred tax liabilities
    
    $
    (95,881
    )
    
    $
    (93,605
    )Net deferred income tax liability
    
    $
    (86,730
    )
    
    $
    (87,106
    )
 48




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
    14) Earnings Per Share
   2005
    
    
    2004
    
    
    2003Earnings
    
    
    Shares
    
    
    Earnings
    
    
    Shares
    
    
    Earnings
    
    
    Shares(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)Basic Earnings Per Share Computation
    
    $
    18,263
    
    
    
    32,074
    
    
    $
    40,857
    
    
    
    31,426
    
    
    $
    34,263
    
    
    
    29,268Effect of stock options
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    406
    
    
    
    
    
    
    
    299Effect of convertible subordinated
debentures
    
    
    
    
    
    
    
    
    
    
    2,010
    
    
    
    1,636
    
    
    
    
    
    
    
    Diluted Earnings Per Share Computation
    
    $
    18,263
    
    
    
    32,311
    
    
    $
    42,867
    
    
    
    33,468
    
    
    $
    34,263
    
    
    
    29,567
  15) Employee Benefits
  49




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 16) Cash Flow and Other Information
  2005
    
    
    2004
    
    
    2003Cash paid during the year for:Interest
    
    $
    26,328
    
    
    $
    25,524
    
    
    $
    26,690Income taxes
    
    
    8,182
    
    
    
    20,647
    
    
    
    8,896Schedule of business and outsourcing acquisitions:Fair value of assets acquired
    
    $
    
    
    
    $
    107,712
    
    
    $
    37,937Liabilities assumed
    
    
    
    
    
    
    (10,146
    )
    
    
    (10,348
    )Purchase price adjustments/(holdback payments)
    
    
    1,224
    
    
    
    (1,473
    )
    
    
    Total cash paid
    
    $
    1,224
    
    
    $
    96,093
    
    
    $
    27,589
 17) Commitments and Contingencies
  OperatingFiscal Year ended
    
    Leases2006
    
    $
    7,1772007
    
    
    4,9092008
    
    
    3,8822009
    
    
    2,8712010
    
    
    1,364Thereafter
    
    
    4,186$
    24,389
   50




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   18) Segment and Group Information
  Custom Sheet and Rollstock
 Color and Specialty Compounds
 Engineered Products
  Restated*2005
    
    
    2004
    
    
    2003Net Sales:Custom Sheet and Rollstock
    
    $
    884,312
    
    
    $
    729,754
    
    
    $
    617,734Color and Specialty Compounds
    
    
    430,893
    
    
    
    323,396
    
    
    
    273,835Engineered Products
    
    
    81,655
    
    
    
    68,575
    
    
    
    64,591$
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    956,160Operating Earnings:Custom Sheet and Rollstock
    
    $
    65,129
    
    
    $
    71,271
    
    
    $
    62,303Color and Specialty Compounds
    
    
    15,295
    
    
    
    27,180
    
    
    
    22,775Engineered Products
    
    
    (3,492
    )
    
    
    5,782
    
    
    
    4,992Corporate
    
    
    (19,063
    )
    
    
    (13,379
    )
    
    
    (11,526
    )$
    57,869
    
    
    $
    90,854
    
    
    $
    78,544Assets:Custom Sheet and Rollstock
    
    $
    576,194
    
    
    $
    628,821
    
    
    $
    551,991Color and Specialty Compounds
    
    
    399,311
    
    
    
    359,998
    
    
    
    264,135Engineered Products
    
    
    83,918
    
    
    
    88,256
    
    
    
    84,154Corporate
    
    
    16,125
    
    
    
    56,209
    
    
    
    16,957$
    1,075,548
    
    
    $
    1,133,284
    
    
    $
    917,237
 51




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Restated*2005
    
    
    2004
    
    
    2003Depreciation and Amortization:Custom Sheet and Rollstock
    
    $
    19,917
    
    
    $
    17,462
    
    
    $
    16,688Color and Specialty Compounds
    
    
    14,004
    
    
    
    11,893
    
    
    
    10,393Engineered Products
    
    
    3,391
    
    
    
    3,227
    
    
    
    3,011Corporate
    
    
    2,068
    
    
    
    1,122
    
    
    
    244$
    39,380
    
    
    $
    33,704
    
    
    $
    30,336Capital Expenditures:Custom Sheet and Rollstock
    
    $
    15,858
    
    
    $
    20,573
    
    
    $
    10,218Color and Specialty Compounds
    
    
    12,353
    
    
    
    8,059
    
    
    
    6,825Engineered Products
    
    
    5,483
    
    
    
    3,658
    
    
    
    2,565Corporate
    
    
    5,571
    
    
    
    2,713
    
    
    
    2,401$
    39,265
    
    
    $
    35,003
    
    
    $
    22,009
 
 *
    
    Previously reported operating earnings increased/ (decreased) due to the restatement
discussed in Note 1 to these Consolidated Financial Statements by segment and group as
follows: 2005
    
    
    2004
    
    
    2003Custom Sheet and Rollstock
    
    $
    6,650
    
    
    $
    (1,471
    )
    
    $
    475Color and Specialty Compounds
    
    
    1,376
    
    
    
    102
    
    
    
    521Engineered Products
    
    
    1,043
    
    
    
    (537
    )
    
    
    (401
    )Corporate
    
    
    732
    
    
    
    (41
    )
    
    
    (337
    )$
    9,801
    
    
    $
    (1,947
    )
    
    $
    258
    Net Sales By Destination
    
    
    Property, Plant and Equipment, Net2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003(Restated)
    
    
    (Restated)United States
    
    $
    1,145,643
    
    
    $
    935,321
    
    
    $
    815,009
    
    
    $
    261,582
    
    
    $
    273,962
    
    
    $
    232,352Canada
    
    
    116,197
    
    
    
    99,996
    
    
    
    79,023
    
    
    
    19,780
    
    
    
    25,699
    
    
    
    26,119Mexico
    
    
    70,605
    
    
    
    43,167
    
    
    
    31,400
    
    
    
    13,749
    
    
    
    14,465
    
    
    
    14,192Europe
    
    
    50,026
    
    
    
    29,452
    
    
    
    19,382
    
    
    
    12,275
    
    
    
    6,818
    
    
    
    3,407Asia and Other
    
    
    14,389
    
    
    
    13,789
    
    
    
    11,346
    
    
    
    
    
    
    
    
    
    
    
    $
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    956,160
    
    
    $
    307,386
    
    
    $
    320,944
    
    
    $
    276,070
 19) Comprehensive Income
  52




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 20) Quarterly Financial Information
  Restated(a)Quarter Ended
    
    FiscalJan.
    
    Apr.
    
    Jul.
    
    Oct.
    
    Year2005Net Sales
    
    $
    304,512
    
    
    $
    377,658
    
    
    $
    348,672
    
    
    $
    366,018
    
    
    $
    1,396,860Gross Profit
    
    
    28,863
    
    
    
    45,058
    
    
    
    39,833
    
    
    
    39,723
    
    
    
    153,477Operating Earnings (b)
    
    
    10,787
    
    
    
    15,549
    
    
    
    13,156
    
    
    
    18,377
    
    
    
    57,869Net Earnings (b)
    
    
    3,130
    
    
    
    5,680
    
    
    
    4,289
    
    
    
    5,164
    
    
    
    18,263Net Earnings Per Share  Basic
    
    
    .10
    
    
    
    .18
    
    
    
    .13
    
    
    
    .16
    
    
    
    .57 Diluted
    
    
    .10
    
    
    
    .18
    
    
    
    .13
    
    
    
    .16
    
    
    
    .57Dividends declared per common share
    
    
    .12
    
    
    
    .12
    
    
    
    .12
    
    
    
    .12
    
    
    
    .482004Net Sales
    
    $
    241,463
    
    
    $
    287,591
    
    
    $
    288,035
    
    
    $
    304,636
    
    
    $
    1,121,725Gross Profit (c)
    
    
    33,719
    
    
    
    44,008
    
    
    
    41,253
    
    
    
    36,967
    
    
    
    155,947Operating Earnings (c)
    
    
    19,137
    
    
    
    28,388
    
    
    
    25,272
    
    
    
    18,057
    
    
    
    90,854Net Earnings
    
    
    7,915
    
    
    
    13,728
    
    
    
    11,921
    
    
    
    7,293
    
    
    
    40,857Net Earnings Per Share  Basic
    
    
    .27
    
    
    
    .43
    
    
    
    .37
    
    
    
    .21
    
    
    
    1.30 Diluted
    
    
    .27
    
    
    
    .42
    
    
    
    .37
    
    
    
    .21
    
    
    
    1.28Dividends declared per common share
    
    
    .11
    
    
    
    .11
    
    
    
    .11
    
    
    
    .11
    
    
    
    .44
 Notes to table:
 (a)
    
    Amounts presented in the table have been restated as disclosed in Note 1 to the Consolidated
Financial Statements.(b)
    
    Operating earnings and net earnings were impacted by restructuring and exit costs, the former
CEO retirement, fixed asset charge, goodwill impairment and the establishment of a tax
valuation allowance for each of the fiscal 2005 quarters as follows:
 Quarter Ended
    
    
    FiscalJan.
    
    
    Apr.
    
    
    Jul.
    
    
    Oct.
    
    
    2005(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)Reduction to operating earnings:Restructuring and exit costs
    
    $
    
    
    
    $
    7,619
    
    
    $
    4,639
    
    
    $
    (2,170
    )
    
    $
    10,088Former CEO retirement
    
    
    
    
    
    
    
    
    
    
    3,645
    
    
    
    
    
    
    
    3,645Fixed asset charge
    
    
    
    
    
    
    1,592
    
    
    
    206
    
    
    
    72
    
    
    
    1,870Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,468
    
    
    
    4,468$
    
    
    
    $
    9,211
    
    
    $
    8,490
    
    
    $
    2,370
    
    
    $
    20,071Reduction to net earnings:Restructuring and exit costs
    
    $
    
    
    
    $
    5,085
    
    
    $
    2,862
    
    
    $
    (1,313
    )
    
    $
    6,634Former CEO retirement
    
    
    
    
    
    
    
    
    
    
    2,250
    
    
    
    
    
    
    
    2,250Fixed asset charge
    
    
    
    
    
    
    986
    
    
    
    128
    
    
    
    45
    
    
    
    1,159Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,976
    
    
    
    3,976Tax valuation allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,133
    
    
    
    1,133$
    
    
    
    $
    6,071
    
    
    $
    5,240
    
    
    $
    3,841
    
    
    $
    15,152
 (c)
    
    In the fourth quarter of fiscal 2004, gross profit and operating earnings were impacted by
approximately $1.8 million of pre-tax, out-of-period charges to correct account balances
identified from the implementation of information technology systems. In addition, operating
earnings was impacted by a $3.5 million per-tax fixed asset charge.
 53




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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.
    Restatement of Prior Year Financial Statements
   
 Item 9B. OTHER INFORMATION
  54




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##### Table of Contents



PART III
 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
      Executive Officers of the Registrant
  Name
    
    Age
    
    Current Office, and Prior Positions and EmploymentGeorge A. Abd
    
    
    42
    
    
    Chief Executive Officer and President (since May
2005), Executive Vice President, Color and
Specialty Compounds (September 2000 to May 2005)
and Engineered Products (May 2004 to May 2005);
Vice President of Compounding for the Companys
Spartech Polycom Division from March 1998 to
September 2000. Mr. Abd held various positions
with Polycom Huntsman, Inc. for eleven years
prior to its acquisition by the Company in March
1998. Mr. Abd is also a member of the board of
directors of the Company.Randy C. Martin
    
    
    43
    
    
    Executive Vice President (since September 2000)
Corporate Development (since May 2004) and Chief
Financial Officer (since May 1996); Corporate
Controller from September 1995 to May 1996; Vice
President, Finance from May 1996 to September
2000. Mr. Martin, a CPA and CMA, was with KPMG
Peat Marwick LLP for eleven years before joining
the Company in 1995. Mr. Martin is also a member
of the board of directors of the Company.Steven J. Ploeger
    
    
    44
    
    
    Executive Vice President Custom Sheet and
Rollstock and Engineered Products (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.
 55




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##### Table of Contents



Name
    
    Age
    
    Current Office, and Prior Positions and EmploymentJeffrey D. Fisher
    
    
    57
    
    
    Senior Vice President and General Counsel
(since July 1999); and Secretary (since
September 2000). Mr. Fisher, an attorney, was
with the law firm of Armstrong Teasdale LLP
for 24 years, the last 17 years as a partner,
before joining the Company in July 1999.Darrell W. Betz
    
    
    42
    
    
    Senior Vice President of Global Human
Resources (since April 2005). Mr. Betz was
with Emerson Electric for 16 years in various
human resource positions prior to joining the
Company in April 2005.Michael G. Marcely
    
    
    38
    
    
    Vice President (since December 2004) and
Corporate Controller (since July 2004),
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.Phillip M. Karig
    
    
    49
    
    
    Vice President-Purchasing and Supply Chain
Management (since September 2001), Director of
Purchasing from February 2000 to September
2001. Mr. Karig was with Uniroyal Technology
Corporation for 12 years in various
purchasing, logistics, and materials
management positions before joining the
Company in February 2000.
 
 Item 11. EXECUTIVE COMPENSATION
  
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  56




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##### Table of Contents



PART IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   Reports of Independent Registered Public Accounting Firm
    
    
    27Financial StatementsConsolidated Balance Sheets
    
    
    29Consolidated Statements of Operations
    
    
    30Consolidated Statements of Shareholders Equity
    
    
    31Consolidated Statements of Cash Flows
    
    
    32Notes to Consolidated Financial Statements
    
    
    33Schedule II  Valuation and Qualifying Accounts
    
    
    F-1
 (c) Exhibits
  3.1 (a)
    
    Restated Certificate of Incorporation3.2 (b)
    
    Amended and Restated By-Laws, as amended4 (c)
    
    Rights Agreement dated April 2, 2001 between Spartech
Corporation and Mellon Investor Services LLC, as Rights Agent10.1 (d)
    
    Retirement Agreement and Release dated May 6, 2005, between
Bradley B. Buechler and Spartech Corporation10.2 (e)
    
    Employment Agreement dated December 10, 2003 between George A. Abd and Spartech Corporation10.3 (f)
    
    Employment Agreement dated July 1, 2004 between William F. Phillips and Spartech Corporation10.4 (g)
    
    Employment Agreement dated December 1, 2003 between Jeffrey D. Fisher and Spartech Corporation10.5 (h)
    
    Employment Agreement dated May 1, 2004 between Steven J. Ploeger and Spartech Corporation10.6 (i)
    
    Form of Indemnification Agreement entered into between Spartech
Corporation and each of its officers and directors10.7 (j)
    
    Spartech Corporation 2004 Equity Compensation Plan dated December 11, 200310.8 (k)
    
    Form of Incentive Stock Option10.9 (l)
    
    Form of Nonqualified Stock Option10.10 (m)
    
    Form of Restricted Stock Unit Award10.11 (n)
    
    Spartech Corporation 2006 Executive Bonus Plan10.12 (o)
    
    Spartech Corporation Deferred Compensation Plan, as amended21
    
    Subsidiaries of Registrant *23.1
    
    Consent of Independent Registered Public Accounting Firm24
    
    Powers of Attorney *31
    
    Certifications pursuant to Exchange Act Rule 13a-14(a)32
    
    Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350
 
 *
    
    Filed as Exhibits 21 and 24, respectively, to the Companys Form 10-K filed
with the Commission on January 11, 2006 and incorporated herein by reference 57




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##### Table of Contents



Notes to Exhibits
 (a)
    
    Filed as Exhibit 3.1 to the Companys Form S-8 (File No. 333-60381), filed with
the Commission on July 31, 1998 and incorporated herein by reference.(b)
    
    Filed as Exhibit 3.2 to the Companys Form 10-K filed with the Commission on
January 13, 2005 and incorporated herein by reference.(c)
    
    Filed as Exhibit 99.1 to the Companys Form 8-K filed with the Commission on
April 5, 2001 and incorporated herein by reference.(d)
    
    Filed as Exhibit 10.1 to the Companys Form 10-Q filed with the Commission on
September 8, 2005 and incorporated herein by reference.(e)
    
    Filed as Exhibit 10.6 to the Companys Form 10-K filed with the Commission on
January 16, 2004 and incorporated herein by reference.(f)
    
    Filed as Exhibit 10.7 to the Companys Form 10-K filed with the Commission on
January 13, 2005 and incorporated herein by reference.(g)
    
    Filed as Exhibit 10.11 to the Companys Form 10-K filed with the Commission on
January 16, 2004 and incorporated herein by reference.(h)
    
    Filed as Exhibit 10.9 to the Companys Form 10-K filed with the Commission on
January 13, 2005 and incorporated herein by reference.(i)
    
    Filed as Exhibit 10.10 to the Companys Form 10-K filed with the Commission on
January 17, 2003 and incorporated herein by reference.(j)
    
    Filed as Exhibit 4.1 to the Companys Form S-8 (File No. 333-113752) filed with
the Commission on March 19, 2004 and incorporated herein by reference.(k)
    
    Filed as Exhibit 1.01(2) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(l)
    
    Filed as Exhibit 1.01(3) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(m)
    
    Filed as Exhibit 1.01(4) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(n)
    
    Filed as Exhibit 1.01(a) to the Companys Form 8-K filed with the Commission on
December 21, 2005 and incorporated herein by reference.(o)
    
    Filed as Exhibit 1.01(b) to the Companys Form 8-K filed with the Commission on
December 21, 2005 and incorporated herein by reference.
 58




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##### Table of Contents



SIGNATURES
  SPARTECH CORPORATION/s/ George A. AbdGeorge A. AbdOctober 27, 2006
    President and Chief Executive Officer  Date
    
    Signature
    
    TitleOctober 27, 2006
    
    /s/ George A. Abd

George A. Abd
    
    President and Chief
Executive Officer and
Director (Principal
Executive Officer)October 27, 2006
    
    /s/ Randy C. Martin

Randy C. Martin
    
    Executive Vice President,
Corporate Development and
Chief Financial Officer
(Principal Financial and
Accounting Officer)October 27, 2006
    
    /s/ Ralph B. Andy *
    
    DirectorRalph B. AndyOctober 27, 2006
    
    /s/ Lloyd E. Campbell *
    
    DirectorLloyd E. CampbellDirectorEdward J. DineenOctober 27, 2006
    
    /s/ Victoria M. Holt *
    
    DirectorVictoria M. HoltOctober 27, 2006
    
    /s/ Walter J. Klein *
    
    DirectorWalter J. KleinOctober 27, 2006
    
    /s/ Pamela F. Lenehan *
    
    DirectorPamela F. LenehanOctober 27, 2006
    
    /s/ Jackson W. Robinson *
    
    DirectorJackson W. RobinsonOctober 27, 2006
    
    /s/ Craig A. Wolfanger *
    
    DirectorCraig A. Wolfanger
 * By:
    
    /s/ George A. Abd

George A. Abd, Attorney-in-Fact
 59




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SPARTECH CORPORATION AND SUBSIDIARIES
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 FOR FISCAL YEARS ENDED 2005, 2004, AND 2003.
 (Dollars in thousands)
 ADDITIONS ANDBALANCE AT
    
    CHARGES TOBEGINNING OF
    
    COSTS AND
    
    
    
    
    
    BALANCE ATDESCRIPTION
    
    PERIOD
    
    EXPENSES
    
    WRITE-OFFS
    
    END OF PERIODOctober 29, 2005Allowance for
Doubtful Accounts
    
    $
    2,997
    
    
    $
    1,705
    
    
    $
    (2,145
    )
    
    $
    2,557October 30, 2004Allowance for
Doubtful Accounts
    
    $
    3,737
    
    
    $
    1,372
    
    
    $
    (2,112
    )
    
    $
    2,997November 1, 2003Allowance for
Doubtful Accounts
    
    $
    4,058
    
    
    $
    1,133
    
    
    $
    (1,454
    )
    
    $
    3,737
  F-1